International Journal of Government Auditing – January 2013
Editor's Note: In this article, the author discusses the role of audit committees in Irish government departments and also the interaction between the Irish SAI and these audit committees. SAIs may find this discussion of the Irish experience helpful as they consider the role and benefits of audit committees in their countries.
Audit committees are an integral part of the corporate governance framework of today’s public sector and have been established in Irish government departments in recent years, especially since a 2003 Department of Finance report recommended their introduction for all departments. In Ireland, a secretary general is the civil service department head for each of the 15 government departments. Under his/her minister, the secretary general is responsible for a wide range of functions, including managing the department and implementing government policy. This article, which draws from the author’s 2010 doctoral thesis, concludes that there is a strong consensus among secretaries general that their audit committees provide valuable benefits in the assurance they provide, their independence, their support and oversight of internal audit, their provision of early warning on issues, the resources they make available, and their impact on department managers. As public sector audit committees in the United Kingdom and Ireland are an under-researched area, this article contributes to an understanding of the role the committees play in government departments.
As Irish government departments do not have a board to appoint an audit committee or to hold the secretary general accountable, the secretary general establishes an advisory audit committee that reports to him/her. The secretaries general support the committees’ work and independence to ensure they have an impact on their departments. They encourage their committees to act independently, manage themselves, and carry out their remit. To underpin the committees’ independence and contributions, the secretaries general appoint members who bring their knowledge, skills, and background to focus on issues such as audit, controls, and risk management.
The following sections discuss the involvement of the secretaries general with their committees, committee membership, and the benefits of the committees to the secretaries general. There is also a discussion of the interaction between the audit committees, secretaries general, and the Irish comptroller and auditor general and the committees’ role in the oversight of moneys from the European Commission.
Audit committees in government departments are generally involved with reviews of internal controls, support and monitoring of internal audit, and risk management, and some committees request internal audits to carry out value for money studies. The secretaries general approve the charters/terms of reference of their committees and any changes to them, provide input into the content of the internal audit units’ work plans, and maintain a high level of interest in the work of their audit committees. The secretaries general meet with the committee chairs at least once a year to review the preceding year and plan for the coming year. They can also arrange to meet if an issue of concern arises during the year. They keep up to date on the committees’ work during the year by receiving briefings from senior officials they appoint as internal committee members and the heads of internal audit, who attend their meetings, and also by receiving the committees’ papers, minutes and reports.
The secretaries general place great importance on recruiting the chair and members of their audit committees. They are personally active in sourcing members and approve the appointment of new members. They also appoint internal members from their own departments and invite the participation of external members from other government departments, the wider public sector, and the private sector. They see the role of committee chair as critical to the committee’s success and look for candidates with such qualifications as authority, integrity, externality, independent-mindedness, questioning, and familiarity with the public sector. This latter issue is particularly important when considering the experience of both the chairs and the external members.
The secretaries general believe that appointing internal members to the committees from senior officials in their own departments provides the perspective and experience of officials familiar with departmental workings. They also appoint external members, including an external chair, to their committees to introduce an external perspective and expertise as well as credibility to support the committees’ standing within and outside their departments and to strengthen the position of the internal audit unit. For most audit committees, external members comprise the majority.
While the secretaries general have the prerogative to appoint committee members, they make an effort to ensure that members, and particularly the external members, have independence, credibility, and experience to contribute to the committee work. This indicates their recognition of the importance of their committees’ independence.
The secretaries general see their committees as providing assurance through the work they and internal audit carry out in reviewing the department’s systems and procedures. The audit committee’s independence arises from its being outside the department’s normal reporting structure and chaired by an individual who is not an official of the department. This structure coupled with the members’ backgrounds gives it credibility and supports the committee’s independence.
The secretaries general consider their audit committees as having a major role in supporting and overseeing their internal audit units. By their nature, these units have a high degree of independence within a government department—they report to the secretaries general on their work but are not subject to their direct supervision. The secretaries general rely on their audit committees to support their internal audits by giving advice and guidance, overseeing the units’ development and delivery of the annual audit plan and the quality of their work, and monitoring line management’s implementation of the recommendations in internal audit reports received by the committees.
Several secretaries general see the chairs of their audit committees as a personal resource available to them to provide advice and assistance in relation to audit, risk, and corporate governance matters generally. The secretaries general encourage the committees to take an active and visible role in their departments by supporting their inviting officials to attend committee meetings as required to either provide briefings on their areas of responsibility or account for their implementation of recommendations arising from internal audit reports affecting their areas. The secretaries general regard the committees as making an impact through their influence on governance, programs, and processes within their departments.
In Ireland, the Office of the Comptroller and Auditor General (C&AG) is the statutory external auditor of the financial statements of most public sector organizations, including government departments. Thus, government departments do not have any influence over the appointment of their external auditor nor does a department audit committee have a role in the selection or performance review of the external auditor, as is commonly done in the private sector. However, several secretaries general spoke about the importance of the audit committee maintaining good relations with the C&AG auditor. Department audit committees usually invite the C&AG auditor to meet with them annually to exchange views and discuss any observations the auditor has as a result of undertaking the audit.
The secretary general is also the accounting officer for his/her department and, as such, is accountable to the Public Accounts Committee (PAC) of Dáil Éireann (the lower house of the Irish Parliament). The accounting officer signs the department’s annual financial statements, known as the appropriation accounts. C&AG staff audit these accounts and report to Dáil Éireann, via the PAC, on their findings. The secretaries general see the audit committee as a mechanism to provide an early warning of issues in their departments so that action can be taken internally. The secretaries general believe that if their departments discover an issue and take action on it, then—depending on its materiality and significance—the C&AG may choose to recognize that the departments have taken the necessary corrective actions to resolve an issue rather than leaving it to the external auditor to highlight it. As a result, the C&AG may choose not to pursue it any further in its annual report to Dáil Éireann.
The committees provide a benefit to the secretaries general through their involvement with the audits of the expenditure of moneys from the European Commission. Several secretaries general described the importance of their accountability to the European Commission for spending the moneys received from this source. The Irish Exchequer spends its own funds on some commission projects. If the commission is not satisfied, it can decline the refund, leaving the Irish Exchequer to foot the bill. While secretaries general do not personally appear in front of the commission, as they do with the Public Accounts Committee, their accountability for the use of this body’s resources is nonetheless treated as a very important issue for those secretaries general affected. This parallel accountability framework has a significant implication for the role and work of audit committees in those departments. Those committees give a great deal of attention to audit work undertaken in this area so they can provide assurance to the secretaries general on the expenditure of the funds from the European Commission in addition to their other areas of focus in the department. Also, several secretaries general saw the European Commission as having a strong influence on the establishment of audit committees in their department in the first place as part of the discipline of spending moneys allocated by the commission.
The Secretaries General support the work and independence of their audit committees to ensure they have an impact on their departments. They allow and encourage their committees to act independently, manage themselves, and carry out their remit. They are very involved with and interested in committee work and appoint members who will underpin the independence of and contribute to the committees. The membership of audit committees in government departments consists of individuals who bring their knowledge, skills, and background to focus on departmental governance. These members can have a significant influence because their appointment has been personally approved by the secretaries general. Audit committees in government departments bring an increased focus on issues such as audit, controls, and risk management. While audit committees in departments are advisory in nature, they can have an impact as an independent structure within the departments whose members focus on these issues on behalf of the secretaries general.
For additional information, contact the author at firstname.lastname@example.org.