Transparency data

FCDO Audit and Risk Assurance Committee: terms of reference

Published 11 June 2021

1. Purpose

The FCDO Supervisory Board (referred to as ‘the Board’) has established an Audit and Risk Assurance Committee (ARAC) as an advisory sub-committee of the Board. The ARAC supports the Board and Accounting Officer in their responsibilities for issues of risk, control and governance, by reviewing the comprehensiveness of assurances in meeting the Board and Accounting Officer’s assurance needs and reviewing the reliability and integrity of the FCDO’s risk assurance framework.

The ARAC does not have any executive responsibilities nor is charged with making or endorsing executive decisions. It takes care to maintain its independence.

2. Responsibilities

The ARAC advises the Board and Accounting Officer on:

i) the strategic processes for risk, control and governance and the Governance Statement

ii) the accounting policies, the accounts, and the annual report of the organisation, including the process for review of the accounts prior to submission for audit, levels of error identified, and management’s letter of representation to the external auditors

iii) the planned activity and results of both internal and external audit iv) the adequacy of management response to issues identified by audit activity, including external audit’s management letter

v) assurances relating to the management of risk and corporate governance requirements for the organisation

vi) assurances on information handling

vii) assurances on health and safety

viii) (where appropriate) proposals for tendering for either Internal or External Audit services or for purchase of non-audit services from contractors who provide audit services

ix) assurances on cyber security arrangements

x) any value for money issues arising

xi) counter-fraud and safeguarding reports and investigations (via a closed, private session)

xii) whistle-blowing reports

xiii) any other reports as appropriate or delegated by the Board

3. Membership

Members of the ARAC are appointed by the Permanent Under Secretary. Membership of the ARAC shall comprise:

i) a non-executive Chair who is a member of the Board

ii) a second non-executive director who is a member of the Board

iii) 4 independent external members

The ARAC may co-opt additional members for a period not exceeding one year to provide specialist skills, knowledge, and experience. It may also procure specialist ad-hoc advice at the expense of the organisation, subject to budgets agreed by the Accounting Officer and Board.

4. In attendance

The external auditors, the heads of internal audit, counter-fraud and safeguarding will attend all ARAC meetings.

The following FCDO officials will also attend the ARAC meetings:

i) Director General Finance and Corporate

ii) Director(s) Finance

iii) Head of risk

iv) Heads of Assurance and Governance as appropriate

v) Director General Transformation

vi) Director General Delivery

vii) by invitation, staff invited to present to the ARAC in relation to subjects for which they are responsible (no more than 2 people)

5. Standing invitations

i) Permanent Under-Secretary

ii) 5 Directors-General: Middle East and North Africa; Africa; Political; Indo-Pacific; Americas and Overseas Territories

6. Access

The Head of Internal Audit and the representative of External Audit will have free and confidential access to the Chair and members of the ARAC.

7. Arm’s Length Bodies (ALBs) and similar material organisations

The ARAC will meet annually with the ARAC chairs of the FCDO ALBs to discuss any issues relating to risk or accounting / disclosure matters that are material to the FCDO.

8. Meetings

i) the ARAC meets five times per year

ii) the Chair of the ARAC may convene additional meetings as they deem necessary

iii) for the meeting to be quorate, a minimum of three members of the ARAC must be present, including at least one non-executive director and two other members

iv) additional focused meetings (or deep dives) can be arranged to explore specific issues that the members deem appropriate

v) the ARAC may ask any other officials of the organisation to attend and/or provide it with a written report to assist it with its discussions on any particular matter

vi) the ARAC may ask any or all of those who normally attend but who are not members to withdraw to facilitate open and frank discussion of particular matters

vii) a formal agenda and papers are circulated at least seven days before each meeting and an action tracker is reviewed at the start of each meeting

viii) where appropriate, papers may be circulated to members out of committee meetings for information

9. Information requirements

For each meeting, the ARAC will be provided with:

i) a report summarising any significant changes to the organisation’s strategic risks and a copy of the strategic/corporate Risk Register

ii) a financial report including a quarterly financial summary or update on the financial position

iii) a progress report from the Head of Internal Audit summarising:

• work performed (and a comparison with work planned)
• key issues emerging from the work of internal audit
• management response to audit recommendations
• changes to the agreed internal audit plan; and any resourcing issues affecting the delivery of the objectives of internal audit
• progress against internal audit agreed management actions

iv) a progress report (written/oral) from the External Audit representative summarising work done and emerging findings (this may include, where relevant to the organisation, aspects of the wider work carried out by the NAO, for example Value for Money reports and good practice findings)

v) management assurance reports as set out in the annual agenda

vi) a progress report on the Departmental merger

vii) reports on the management of major incidents, “near misses” and lessons learned

As and when appropriate, the ARAC will be provided with:

i) proposals for the terms of reference of internal audit / the internal audit charter

ii) the internal audit strategy

iii) the Head of Internal Audit’s Annual Opinion and Report

iv) the draft accounts of the organisation

v) the draft Governance Statement

vi) a report on any changes to accounting policies

vii) external audits’ management letters

viii) a report on any proposals to tender for audit functions

ix) a report on co-operation between internal and external audit

x) the organisation’s Risk Management strategy

10. Standing agenda

The standing agenda comprises the following items:

i) declaration of interests

ii) minutes and tracker

iii) departmental transformation

iv) internal control: control and assurance update

v) finance update [financial accounting update]

vi) Atlas update

vii) risk management update including principal risk register

viii) internal audit update including summary report and recent reports

ix) counter fraud and safeguarding update

x) National Audit Office (NAO) update

xi) cyber security update

11. Reporting

The ARAC will provide the following reports/ outputs:

i) a note for the Board summarising the key points arising at each meeting

ii) an annual report to the Board and Accounting Officer, timed to support the finalisation of the accounts and the Governance Statement, summarising its conclusions from the work done during the year

iii) minutes of the meetings, including those present and in attendance, will be circulated to ARAC members, attendees, and the Board

12. Committee effectiveness

The ARAC will periodically review its own effectiveness and report the results of the reviews to the Board.

13. Annual agenda

The annual agenda may be modified during the course of the year.

14. Secretariat responsibilities

There will be a Secretariat function provided to the ARAC by the Risk Management team.