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How Effective is Your Audit & Risk Committee?

The effectiveness of a charity’s Audit & Risk committee is important. One of the key objectives of an Audit & Risk committee is to ensure that internal controls are assisting in managing risks and ensuring funds are used efficiently and effectively.

With continued pressure on accountability, governance and risk driven by regulative changes and economic uncertainty, committees should actively pursue good practice and seek to add tools which will increase their effectiveness. It is essential that committees put adequate risk management and reporting frameworks in place to address their task of systematic and effective scrutiny of finances and risk.

The underpinning, fundamental framework of an Audit & Risk committee is the creation of suitable terms of reference. The terms of reference should be reviewed each year and updated as external factors change. As a minimum, it should include:

  • overall purpose, responsibilities and delegation of authority,
  • membership requirements and how the charity will manage conflicts of interest and terms of appointment,
  • minimum frequency of meetings,
  • compensation details,
  • interaction and reporting with the main board,
  • relationship with external/internal auditors,
  • overview of the charity compliance function,
  • authority to conduct one-off investigations,
  • authority to engage with specialists and independent experts; and
  • method of self-assessment.

On an annual basis the committee must evaluate its performance (with consideration of its purpose and responsibilities) driven by the terms of reference. The self-assessment process should help determine any training and development needs as well as assisting to identify any capability or assessment needs on the Board.

Baker Tilly Staples Rodway have both the experience and expertise to provide effective governance guidance to assist both Boards and Audit & Risk Committees. If you would like further assistance in this area please contact your usual Baker Tilly Staples Rodway representative.

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