1. John.Martin@eurocontrol.int Audit Committees/ Audit Boards/ External Audit Presented by John Martin EUROCONTROL 9 June 2009 see general disclaimer – next slide Benchmarking exercise – Financial Governance

2. John.Martin@eurocontrol.int Questionnaire for International Organisations Presenter gives no guarantee of the content of the answers and hence this presentation Questionnaire created and sent by the Internal Audit of EUROCONTROL to Controlling Functions of Intl. Organisations – Also Coordinated with an Internal Audit Network Group questionnaire – based on answers provided As a result, I kept the Organisations anonymous This presentation shows the synthesis of the data from 23 Organisations

3. John.Martin@eurocontrol.int Content of Presentation Audit Committee Audit Boards External Audit Accounting Standards Discharge

4. John.Martin@eurocontrol.int Participants of the Benchmarking 23 Organisations: 7 EU: EC, ECA, ECB, ETF, S-JU, EIB, European Ombudsman 9 Other European Intergovernmental: CERN, CoE, CEB, EPO, EIB, ESA, OSCE, EUROCONTROL, ESO 7 World-wide Orgs: UNOPS, Interpol, WIPO, WTO, ICRC, IUCN, OECD

5. John.Martin@eurocontrol.int What do I consider to be an Audit Committee? RIAS defines the purpose of an Audit Committee: RIAS = Representatives of Internal Audit Services in the U.N "The purpose of an Audit Committee -as an independent advisory expert body - is primarily to assist the governing body, and the executive head of the entity and other multilateral institution as appropriate, in fulfilling their oversight and governance responsibilities, including the effectiveness of internal controls, risk management and governance processes. The audit committee must add value and must strengthen accountability and governance functions; not duplicate them."

6. John.Martin@eurocontrol.int UK Government – HM Treasury Guidance - 5 GOOD PRACTICE PRINCIPLES AUDIT COMMITTEE ROLE - Support the Governing Board (& Accounting Officer) MEMBERSHIP Independent & Objective Good Understanding of objectives/priorities of the Organisation SKILLS – Committee should corporately own an appropriate skills mix to allow it to carry out its function SCOPE OF WORK – should be defined in Terms of Reference Particular engagement with work of Int Aud, Ext Aud, Fin Reptg COMMUNICATION – Effective Comms with Board, Head of Int Aud, Ext Aud, and other stakeholders

7. John.Martin@eurocontrol.int Do you have an Audit Committee ? (Y, N, unclear) YES: 10 NO: 10 Called an Audit Committee: (but seemingly with the functions of an Audit Board): 2 One response said their Finance Committee filled those roles: 1

8. John.Martin@eurocontrol.int Audit Committee ? (Yes, No) My conclusion : YES: 10 NO: 13

9. John.Martin@eurocontrol.int 10 Audit Committees in These Organisations – A 21 st Century Phenomonon 10 out of 23 Organisations surveyed have an Audit Committee or Audit Progress Committee At least 3 more currently considering or taking steps So by 2010 the majority of the 23 will have them

10. John.Martin@eurocontrol.int 10 Audit Committees – Who does AC report to? Out of 10 5 report to the Governing Body /Council 1 reports to the Finance Committee & Governing Body 2 report to DG/Exec Director 2 report to College of Commisioners/Court member

11. John.Martin@eurocontrol.int 10 Audit Committees – Role Internal Audit Out of 10, role re. IA 4 Supervisory 3 provide Advice 3 Review IA

12. John.Martin@eurocontrol.int 10 Audit Committees - External Audit & RM Role re External Audit - out of 10 2 Supervisory 2 advise concerning Ext Aud 2 Review Ext Aud 4 have no mandate in regard to Ext Aud Risk Management (RM) – out of 10 2 Advise in regard to Risk Management 8 have no mandate in regard to RM

13. John.Martin@eurocontrol.int 10 Audit Committees - Membership Conclusion: …………it varies Number of members Min: 3; Max 9; Average 5,6 Internal : External (1:3);(0:4);(3:1); (0:3); (7:2); (3:1); (0:9); (0:4);(1:6); (0:9)

14. John.Martin@eurocontrol.int 10 Audit Committees – Members from Gvng Body ? How many members from the Council / Governing Body Out of the 10 Audit Committees 7 had no Council members (or equivalent) 1 had one Council member 1 had 3 Council members (/ National Representatives) 1 had 6 Council members

15. John.Martin@eurocontrol.int How many have an Audit Board or Court ? Audit Board/Court Yes 11 (5 EU bodies by ECA) Yes ( but called an Audit Ctee) 2 13 No 10 Total 23 They deal with or the External Audit

16. John.Martin@eurocontrol.int External Audit of the accounts– who does it ? For 5 EU Institutions – the ECA does the audit (of course except the ECA itself) – 5 out of 23 Organisations External Audit done by contract with a National Supreme Audit Institutes for - 8 of 23 (some pay but one or two dont) Ext Audit done by Firms of auditors (or assistants or Statutory Auditor) for- 8 out of 23 (fees, where reported, between 50k and 500k) -Most < 200k Rotation - Many have a requirement in their Regs - but all who answered this question – did it in practice - (except the EU institutions – bound to the ECA)

17. John.Martin@eurocontrol.int Accounting Standards – getting there IPSAS: 12 (or nearly e.g. EU bodies) IFRS: 5 Own/Fin Regs: 6 Total23

18. John.Martin@eurocontrol.int Discharge Out of 23 organisations: 19 had a process of Discharge 4 didnt (just approval of the audited statements) What happens if discharge not given? Out of 19 : 13 were not sure !!! 1 said the Board would resign 5 said there would be / a requirement for re-presentation of the financial statements/ other limited measures/ new budget approval restricted CONCLUSION – Is this process out dated ?

19. John.Martin@eurocontrol.int Benchmarking exercise – Financial GovernanceCONCLUSIONS 3 fundamental conclusions on Financial Governance (1) Trend to form an Audit Committee in last 9 years Varied organisation, process and mandates (2) Naming is inconsistent (Audit Board / Audit Committee/ Audit progress Committee) (3) More organisations moving to Generally Accepted Accounting Standards Thank you – feel free to contact me