Audit Committee 2010 Annual Report - Agriculture
Transcript of Audit Committee 2010 Annual Report - Agriculture
Audit Committee 2010 Annual Report
Department ofAgriculture, Fisheries and Food
Department of
\\ ji Agriculture, yi# Fisheries and Food
A n Roinn
Talmhafochta, Iascaigh agus Bia
April 2011
Audit Committee 2010 Annual Report
Department of Agriculture, Fisheries and Food
Contents
Section 1 Membership o f tlie Audit Committee
Page
2
Section 2 Chairman's Statement 3-4
Section 3 Role of the Audit Committee 5
Section 4 Operation of the Audit Committee 6
Section 5 Audit (Committee Objectives for 2010 and Related Outcomes 7
Decentrahsation
The Integration of Fisheries
The Impact of Budget Cuts on Priorities and Standards o f
Control
Reviewing the work of l A U and the Risk Management Process
Section 6 Audit Environment of the Department 8-9
Section 7 Review o f Internal Audit Unit Work in 2010
Programme of Work
Strucmral Funds
Scrutiny
Staffing and Training
10-11
Section 8 Priorities for 2011 12
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Section 1: Membersiiip of tiie Audit Committee
The Audi t (x)mmittee o f the Department o f Agricuhure, Fisheries and Food
consists o f six members. Five o f tliese members are external to the Department
itself. The composition of the (Committee at the end of 2010 was as follows:
Ms Helen Nolan, Chairman of the Committee. Ms Nolan is a Chartered
Accountant and is the Group Secretary with Bank of Ireland.
Mr Bill Cunningham. M r Cunningham is a (Tiartered Accountant and is a former
partner o f PricewaterhouseCoopers Ireland.
Ms Grainne McGucldn. M s M c G u c k i n is a Principal Off icer in the Department
of P'inance, Sectoral Pohcy Division. She has responsibihty for the Agriculmre
Vote.
Ms Claire O'Connor. Ms O'Connor is Chief Operating Off icer and Chief Finance
Off icer o f E A i \ Covered Bond Bank pic. She is a former Director of the National
Disabihty Authority, ICCBank pic, and the Sustainable Energy Authoiity of
Ireland.
Mr Paddy O'Shaughnessy. M r O'Shaughnessy is a Principal Off icer m the Off ice
of the Revenue Commissioners, l i e has responsibihty for the administrative budget
o f the Revenue Commissioners.
Mr Martin Heraghty. M r Heraghty is an Assistant Secretary General in the
L^cpartmcnt o f Agriculmre, Fisheries and Food ( D A F F ) with responsibihty for
Livestock Products, Corporate Affairs, Food Safety and State Body Coordination.
Mr Tony Burke, Assistant Secretary General in D A F F with responsibility for
Finance, attends the Committee meetings as an observer.
Mr Mark Quinlan, Higher FLxecutive Off icer , D A F F , is the Secretary of the (Committee.
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Section 2: Cliairman's Statement
Statement by the Chairman of the Audit Committee of the Department of
Agriculture, Fisheries and Food
It gives me great pleasure to present the Annual Report o f the Audit Committee of
the Department of Agriculmre, Fisheries and Food for the year to 31" December
2010.
It is the role o f the Audit Committee to advise on the operation o f the internal
audit function witltin the Department and to examine and monitor the
implementation of the Department's risk management strategy.
In line with those of most other (jovernment Departments the Audi t (Committee
Charter clearly states that the Audit (Committee has no executive role and is not
responsible for any executive functions. It therefore does not have any
responsibility or involvement in the review and approval (on behalf of
management) of annual financial statements (either national or F U ) . The Audit
Committee conducted a self-assessment performance review during the year, using
a template pubhshed by the Off ice o f the Auditor-General, N e w 'Zealand, for self
assessment by public sector audit committees and was satisfied that the role as set
out in the Audit Committee Charter was fulfilled.
The Audi t Committee is satisfied with the controls operated by the Department ot
Agriculture, Fisheries and Food. A n effective Internal vVudit Unit supports the
management o f the Department's programmes. I am satisfied that the Internal
Audit Uni t is making a significant contribution to the evaluation and improvement
of controls in the Department.
The Certifying Body in its latest report has issued an unqualified audit opinion m
relation to the administration of the F A G F and E A F R D funds, with no major
findings. This demonstrates that the financial controls within the Department arc
operating in a generally satisfactory manner. The Committee notes that the
Certifying Body found weaknesses in the control environment in the Farm
Improvement Scheme. The Department has put in place a comprehensive action
plan to address die issues raised.
The Audit Comntittee set out a number o f priorities for its work in 2010. These
included:
• Reviewing the management o f budget cuts and the moratoiium on staff
recruitment.
• Monitoring the management o f the risk o f E U disallowances.
• Reviewing the work of the Internal Audit Unit including the implementation
o f the recommendations o f the External Quahty Assessment
The Audi t Committee addressed these objectives during the year and Section 5 of
this report outhnes the outcomes in relation to these priorities.
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The Audi t Committee continues to receive presentations f rom various key units o f
the Department at its meetings. These presentations form a verv-̂ important
contribution to the Committee's work and assist appropriate oversight o f best
practice throughout the Department.
I would like to pay tribute to my fellow members o f the Audit Committee. T'heir
commitment, knowledge and expert advice were essential to the effective discharge
of the Audit Committee's functions during the course o f the year.
lkA:^_A^:^!^
Flelen Nolan
Chairman
^iO''" A p r i l 2011
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Section 3: Role of the Audit Committee
The Audit Committee was estabhslied to advise the Secretary General and the
Minister on the internal audit pohcies and the management o f risk, appropriate to
the functioning of the Department of Agriculmre, Fisheries and Food. T'he Charter
o f the Audit Committee sets out its role and terms of reference. The Committee
has two main roles, namely:
• T o advise on the operation of the internal audit function within the
Department.
• T o examine and monitor die implementation of the Department's risk
management strategy.
The Committee has responsibihty for the following:
• Approving, and periodically reviewing, a charter for Internal Audit wliich
clearly defines the purpose, authority, roles, responsibihties and reporting
relationships o f the Audit Committee, Internal Audit and management of
the Department.
• Reviewing and advising on the proposed programme of work for Internal
iVudit within the Department.
• Monitoring the implementabon of the audit plan.
• Assessing the results of completed internal audit reports, evaluating the
effectiveness o f internal control and advising the Secretary General and the
Minister o f its conclusions thereon.
• Advis ing the Secretary General and the Minister on the effectiveness of the
Internal Audit function.
• Requesting special reports f rom internal audit as considered appropriate.
• Assessing the implementation of agreed corrective actions by management
having regard to follow-up audits.
• Advising on whether adequate resources and sldlls arc available for the
internal audit function of the Department and making recommendations on
the allocation o f resources where it considers this desirable.
• T'ostering the development of best practice in the internal audit function.
• Monitoring the implementation o f the Department's risk management
strategy and advising the Secretary General and the Alinister on the
effectiveness o f this process.
The Audit Committee has no executive role and accordingly is not responsible for
any executive functions. It has no role in the detailed audit process or in the signing
o f f o f audit reports. Neither does it have any responsibihty or involvement in the
review and approval (on behalf of management) o f annual financial statements
(either national or E U ) .
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Section 4: Operation of the Audit Committee
The Committee met five times during 2010. The Committee received presentations
during the year in relation to: Departmental response to the dioxin contamination
incident; IT audit activities; IT developments in the Department, the Veterinary
and Agriculmral inspectorate audit units; Departmental staffing and local office
reorganisation; the agri-environment schemes; the corporate procurement plan;
Fisheries issues; and E U audit developments. Representatives f rom the Certifying
Body and the Off ice o f the Comptroller and Auditor General also made
presentations to the Committee during the year. These presentations were m
addition to the quarterly reports, plans and other information received from the
Internal Audit Unit.
In November the Comntittee and the Internal Audit Uni t joindy hosted an Audit
Seminar. T'he seminar was attended by Internal Audit Unit staff, members of the
Committee, Departmental management and auditors f rom other Government
Departments. A range of topics was covered at the sentinar, including presentations
on the Code of Practice for Governance of State Bodies, Audi t Committees in the
Public Sector, an update on the 2007-2013 Rural Development Programme and an
oudine o f the Food Flarvest 2020 proposals.
The Committee appreciates the continued support that it receives f rom both the
Minister and the Secretary General.
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Section 5: Audit Committee Objectives for 2010 and Related Outcomes
The 2009 Annual Report o f the Committee set out a number o f priorities for hs
work in 2010. T'hese were:
• Reviewing the management o f budget cuts and the moratorium on staff
recruitment.
• Monitoring the management o f the risk o f B U disallowances.
• Reviewing the work of the Internal Audit Uni t including the implementation
of the recommendations o f the External Quahty Assessmeni.
Revievidng the management of budget cuts and the moratorium on staff
recruitment
The Committee was updated on progress in relation to the local office
reorganisation plan agreed in 2009, which wiU reduce the number of local
Departmental offices to sixteen and lead to a reduction of four hundred staff T'he
Committee also noted that recent grant schemes introduced by the Department
have clearly defined objectives and target groups. Applications for grant aid are
evaluated against objective criteria to ensure that optimum value for money is
obtained f rom the grant aid available. T'he Committee discussed the effect the
moratorium on staff recmitment is having on Departmental activities and the risks
that are arising as a consequence of vacancies not being filled T'he Committee wiU
receive further updates on developments in relation to these areas during the
current year.
Monitoring the management of the risk ofEU disallowances
The Committee received a number o f presentations on Departmental responses to
recent E U audits and how the Department is ensuring that the risk o f E U
disallowances is minimised. The Committee noted the increased frequency and
rigour in E U audits which is evidenced by an increase in disallowances in a number
o f Member States in recent years. T'he Committee wil l continue to review how the
Department is addressing the risks in this area.
Reviewing the work of the Internal Audit Unit including the implementation of the recommendations of the Extemal Quality Assessment
The Committee closely monitored the work of the Internal Audit Unit. The
Committee continues to be satisfied with the quahty of work carried out by the
Unit. The Committee received updates on the implementation of the
recommendations contained in the external quaht)' assessment that was conducted
in 2009. The (Committee monitored the follow-up of issues that arose f rom the
internal audit activity and requested management attendance at meetings and
additional audits where it considered this necessary.
T'he Committee is satisfied that it has achieved the objectives that it set itself for the year.
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Section 6: Audit Environment of tlie Department
The Department spends approximately €3 billion each year, a significant
proportion o f wliich is funded by the European Union. The Department is highly
decentralised, with major facilities in Backweston, Cavan, Clonakilty, Portlaoise and
Wexford, as well as a network of local offices.
As well as having its Internal Audit and Scrutiny functions, D A F F has five sources
of independent external audit and it is also subject to scrutiny by the E U ' s Food
and Veterinary Off ice in relation to animal and pubhc health and the animal welfare
aspects o f its work. The number o f audit bodies arises primarily f rom the large
percentage o f the Department's expendimre that is funded by the FLU. The role of
these external auditors is oudined in the following paragraphs:
Tbe Comptroller & Auditor General
The Comptroller & Auditor General has a full time staff presence based in the
Department, who audit all Departmental expenditure. The Comptroller & Auditor
General reports annually to the Pubhc Accounts Committee on findings arising
f rom Itis audits. Tl ie primary responsibihty o f the Comptroller & Audi tor General
is in relation to national expendimre.
The Certifying Body
F^U Regulations require that an audit certificate and a report on the internal
controls o f D y \ F F from an independent 'Certifying Body' must accompany tiic
Annual Accounts that are submitted to the K\J Commission. Deioitte were re
appointed as Certifying Body in 2010 following a pubhc tendering process.
The Court of Auditors
Tlie Court of Auditors is required to give a statement of assurance (similar to a
certificate given by the Comptroller and yVuditor General) on the reliabilit)^ o f the
European Communities' accounts and die legahty and regulanty o f the transactions
underlying those accounts.
OLAF (EU Anti-Fraud Office)
O L A F is the Imropean Anti-Fraud Off ice . The Off ice has responsibihty for
conducting administrative anti-fraud investigations in all member states and also
outside the F^U. Tlie Department co-operates fully with O L A F and assists in any
missions that this body undertakes in Ireland.
Commission Audit Services
Audit Services f rom the E U Commission also carry out a number o f audits annually on the Department's expendimre of E U funded schemes and the related controls.
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A n indication o f tlie extent of audit coverage during the year is shown in the
following table.
Approximate Audit Coverage in Person Days
Audit Body 2010 2009 2008
Comptroller & Auditor General 347 404 358
Certifying Body 678 585 569
Court o f Auditors - mission days in Ireland 9 11 41
E U Commission - mission days in Ireland 13 20 27
Internal Audit 2,156 2,584 2,386
T O T A L 3,203 3,604 3,381
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Section 7: Review of Intemal Audit Unit work in 2010
Programme of work
The 2010 Internal Audit Plan was agreed both by the Audit Committee and by the
Department's Management Advisory Committee. Progress in unplemenring the
plan was monitored by both Committees by means of quarterly progress reports
that were presented by the Internal Audit Unit.
The Internal Audit Unit carried out a large body of audit work in 2010, with twenty
one audit reports finahsed and issued during the year.
T'he Internal Audit Unit is represented in a number of different audit networks,
including the Heads of Internal Audi t I 'omm, E U network of audit bodies and the
U K Interdepartmental Internal Audit Group. The Director of Internal Audit also
attends the Department's Accreditation Review Group and Risk Management
Committee meetings.
Structural Funds
The 2010 Strucmral Fund audit plan focused on completing the 5% sample checks
required under Regulation 438/01 and Closure o f die 2000-2006 Round of
Strucmral Funds. The Strucmral P'unds Control Uni t is a dedicated section within
l A U , wltich carries out this work for the on-farm investment schemes. Forestry
Guidance schemes and Fisheries Guidance schemes managed within D A F F . In the
case o f the Leader and P E A C E programmes this task has been outsourced to the
internal audit functions o f the Department o f Community, Equaht}^ and Gaeltacht
Affairs, the Department o f Environment, Heritage and Local Government as well
as the S E U P B (Special E U Programmes Body). A l l checks were completed in 2010,
the Leader programme was closed in March 2010 and the other programmes in
September. In total, seven programmes were closed in 2010, all with unquahfied
opinions, in hne with regulatory requirements.
Scrutiny
D A F F is required by E U Regulations to submit specific information annually to the
Commission and to haise with other Member States in relation to mumal
assistance. As in all previous years, deadhnes for submission to the Commission of
annual programmes, annual reports, quarterly reports on mumal assistance and risk
analysis criteria relating to die Scmtiny Regulation have been met. The 2009/10
annual work programme was completed on schedule and it is expected that the
2010/11 programme, which ends on 30'^ June 2011, wil l also be completed on
time.
The 2009/10 scmtiny audit programme comprised of scmtiny audits o f twenty
commercial organisations, which were carried out by both Department and
Revenue teams. The calculated minimum number o f scmtinies prescribed by the
Regulation for the programme was thirteen.
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Revenue teams. The calculated minimum number o f scmtinies prescribed by die
Regulation for the programme was tlhrteen.
Close co-operation with other Member States and with the CCommission services
continued during the year under mumal assistance arrangements provided for in
Article 7 o f Regulation 485/08. Five mumal assistance requests were received from
other Member States and Ireland raised seven requests with other Member States
dunng 2010.
StafBng and Training
The Comirtittee continues to closely monitor the staffing resources available to the
Unit, particularly in relation to the staff changes that will occur as a result o f the
decentrahsation process. The Internal Audit Unit comprised a total of eighteen
staff at the end of 2010.
The (Committee is pleased to note that the Unit continues to undertake a
substantial level o f training. Formal training of staff in the Unit in 2010 amounted
to 112 staff days. T he major part o f the 2010 training programme related to internal
audit modular courses run by the Instimte o f Pubhc Adnunistration, IT audh
courses, computer skills and various other relevant courses, including those held by
the Institute o f Internal Auditors, Association of Chartered Certified Accountants
and the Instimte o f (Chartered Accountants.
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Section 8: Priorities for 2011
Each year, the Committee sets out a number o f priority issues for its own worl?:
programme in addition to its normal functions as oudined in the Charter. The
prionties identified for 2011 are set out below.
Reviewing the management of the moratorium on staff recruitment
The moratorium on staff recruitment and ongoing budget cuts wil l continue to
impact on the work of the Department. Over the past two years, there has been a
large reduction in the number o f senior staff within the Department. The
Committee will continue to monitor how the Department manages this issue and
addresses any consequential control risks that arise.
Monitoring the management of the risk ofEU disallowances
The Committee is conscious o f the increased level o f E U disallowances, following
audits, across Member States in recent years. The Committee wil l continue to
review how the Department is ensuring that the risk o f E U disallowances is
miitimised and that its good record in this regard is maintained.
Monitoring the management of debtors
The Committee has noted that the results o f external and internal audit reports
have drawn attention to the need for the Department to improve its debt
management procedures. The Department has undertaken to implement revised
debt management pohcies and stmcmres in 2011 and the Committee will monitor
this process during the year.
Reviewing the work of the Internal Audit Unit and monitoring the
implementation of the Department's risk management strategy
The Committee will continue to monitor, on a quarterly basis, the work of the
Internal Audit Unit to ensure that a comprehensive body o f quaht)^ audit work is
completed. The Department's risk management strategy will also be momtored to
ensure that it is appropriate and that all risks identified are addressed in a suitable
manner.
Helen Nolan , Chairman Bi l l Cunninghar
/ Martin Heragnt}'
Ckainne M c G u c l d n Claire O 'Connor Paddy O'Shaughnessy
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