Internal Audit Unit Service Level Agreement Department of Finance

Internal Audit Unit

Department of Public Expenditure and Reform

Service Level Agreement

with

Department of Finance

for the Provision of Internal Audit Services

2020

Internal Audit Unit – Department of Public Expenditure and Reform

Service Level Agreement with the Department of Finance - 2020 Page 2

Table of Contents

Table of Contents ........................................................................................................................... 2

1. Introduction ........................................................................................................................... 3

2. Services to be provided ......................................................................................................... 3

3. Agreed Work Programme ..................................................................................................... 6

4. Assessment of Service Provision .......................................................................................... 6

5. Conflict Resolution ................................................................................................................ 7

6. Service Level Agreement Review ......................................................................................... 7

7. Duration of the Service Level Agreement .............................................................................. 7

8. Amendments to this Agreement ............................................................................................ 7

9. Approvals .............................................................................................................................. 8

APPENDIX: Planned Internal Audit Programme 2020 – Department of Finance ............................. 9

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Service Level Agreement with the Department of Finance - 2020 Page 3

Service Level Agreement – Internal Audit

Department of Public Expenditure and Reform

Department of Finance

1. Introduction

This Service Level Agreement (SLA) between the Department of Public Expenditure and Reform and the

Department of Finance will regulate the business relationship between the two parties in relation to the

provision of internal audit (IA) services to the Department of Finance by the Internal Audit Unit of the

Department of Public Expenditure and Reform. This agreement defines the levels of Internal Audit services and

support to be provided to the Department of Finance in 2020.

Mission of internal audit:

Enhance and protect organisational value by providing risk-based and objective assurance, advice and

insight

Definition of internal audit:

Internal auditing is an independent, objective, assurance and consulting activity designed to add value and

improve the organisation’s operations. It helps an organisation accomplish its objectives by bringing a

systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and

governance process

2. Services to be provided

2.1 IA Roles and Responsibilities

Consistent with the definition of internal audit, the role of IA shall be to evaluate adequacy of and compliance

with the internal control systems, risk management and governance procedures operated by management in

the Department of Finance.

IA shall be responsible for the review of the effectiveness of internal control and risk management

arrangements in respect of the areas of responsibility of the Accounting Officer (Secretary General) of

Department of Finance. The work of IA does not relieve line management of its responsibility for effective

control of the activities for which it is responsible.

The Head of Internal Audit, in consultation with the Audit Committee and the Accounting Officer of the

Department of Finance shall be responsible for drawing up an annual programme of audits having regard to

that Department’s Statement of Strategy and Risk Management Process. IA shall demonstrate objectivity,

comprehensiveness and relevance in the selection of areas for inclusion in the audit programme.

IA shall function professionally, adhering to the Internal Audit Standards for Government Departments and

Offices (2018) of the Department of Public Expenditure and Reform and taking account of the Core Principles

for the Professional Practice of Internal Auditing, the Code of Ethics and the International Standards of the

Institute of Internal Auditors.

Source: International Professional Practices Framework of the Institute of Internal Auditors (Global)

Source: As above.

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IA shall also endeavour to:

a. Demonstrate value-added in audit findings and recommendations;

b. Provide a quality, efficient and professional audit service;

c. Be objective, independent and constructive in its work;

d. Effectively monitor follow-up action taken to remedy weaknesses identified by internal audits;

e. Co-operate with others by way of joint audits/examinations where appropriate.

2.2 Reporting

IA shall be independent of the activities it audits. This is to ensure an environment in which IA can make

unbiased judgements and provide impartial advice to management.

The DFIN reporting lines for IA shall be:

 Primary: To the Accounting Officer of the Department of Finance who has overall responsibility for

the efficient and effective functioning of the Department;

 Secondary: To the Audit Committee of the Department of Finance.

The role of the Audit Committee is to consider the adequacy and effectiveness of the Department’s internal

control systems, control environment and control procedures, to oversee the work of the IA function and to

provide advice and professional guidance in relation to the systems of risk management and internal control

within the organisation.

Papers relating to Audit Committee meetings shall be circulated by IA not less than five working days in

advance of each meeting. The Head of Internal Audit shall have direct access to the Chairman of the Audit

Committee.

2.3 Steps in Approving an Audit Report

a. IA shall send the draft audit reports for comment to the Division/Section being audited.

b. IA shall then incorporate comments received, replies to recommendations, and agreed action plans

into the report.

c. The report shall then be submitted to the Audit Committee for consultation and review as

appropriate. IA shall incorporate the Audit Committees comments into the report. This is the final

audit report.

d. IA shall send the final audit report back to Divisions/Sections for information and for formal noting by

the Assistant Secretary with responsibility for that area.

e. The report shall then be submitted by IA, to the Accounting Officer of the Department of Finance and

circulated to the Corporate Affairs Section and to the Office of the Comptroller and Auditor General.

2.4 Obligations of Internal Audit

With regards to managing the relationship with Divisions in the Department of Finance, IA has the following

general obligations:

a. To conduct regular reviews of the risk register to ascertain the high risk areas within the audit universe

and to consult with senior management of the Department to ascertain and prioritise audits to be

included in the annual audit plan.

b. To propose an annual audit plan to the Secretary General and the Audit Committee for consideration

and approval.

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c. To ensure that the annual audit programme is completed while also allowing for contingency reviews

or other urgent work to be undertaken when requested by the Accounting Officer and/or Audit

Committee.

d. To determine the scope and objectives of audit assignments in conjunction with the management of

the Department of Finance.

e. To notify relevant Line Management and the Corporate Affairs Section of the commencement of an

audit.

f. To provide Line Management in the Department with the opportunity to formally respond to draft

audit reports.

g. To issue a draft audit report detailing the adequacy of internal controls within two weeks after

completion of the audit work regarding individual audited activities. Issuing the report is dependent

on obtaining all relevant information and access to records from line management in the Department.

h. To agree recommendations by way of a formal action plan with Line Management. Management

comments and target dates for the implementation of the agreed action plans will also be included in

the final report.

i. To present the report to the next Audit Committee and to issue a final audit report for formal noting

by the relevant Division within two weeks of the Audit Committee meeting.

j. To maintain a register of outstanding audit recommendations and to update the Audit Committee

and the Secretary General quarterly on the current status of recommendations.

k. To perform a follow up audit where appropriate, the purpose of which will be to ensure that

recommendations and actions plans agreed with management have been implemented.

l. To report progress on the audit work programme at least quarterly to the Department of Finance

Audit Committee and explain significant variances in relation to performance targets.

m. To identify, track and report operational problems which may occur.

n. To adhere to the professional standards for audit including confidentiality, independence and

objectivity.

2.5 Department of Finance Roles and Responsibilities

The Department of Finance is responsible for the implementation and maintenance of an effective system of

internal control and risk management.

IA shall derive its authority from, and will work under the general direction of, the Accounting Officer and the

Audit Committee of the Department of Finance. The Head of Internal Audit will have the right of direct access

to the Accounting Officer on all matters relating to internal audit.

2.6 Obligations of the Department of Finance

The Department of Finance has the following general obligations:

a. To use IA services as defined in this SLA.

b. To consult IA in all projects or programmes which impact on the demand for IA services.

c. To make available all information relating to the Department, specific systems and processes,

procedure manuals, regulations, laws, acts, risk analysis, etc. In this regard, the Department of Finance

shall grant IA unrestricted access to all functional areas, records (both manual and electronic),

property, and personnel in the performance of its audits.

d. To inform IA of any significant concerns regarding risk management and/or control matters.

e. To meet appointments, requests for information and deadlines for responses and recommendations.

f. To ensure that findings in audit reports are responded to within two weeks.

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g. To implement recommendations and action plans within agreed timeframes.

h. To accurately and fully complete any Internal Audit Questionnaire(s) issued in a timely manner.

2.7 Protected Disclosures

In the event of the receipt of a Protected Disclosure by the Head of Internal Audit (HIA), he will contact the

Department of Finance Audit Committee Chair to schedule a meeting of the Audit Committee.

The Audit Committee will discuss the Protected Disclosure and determine the most appropriate manner of

review / investigation.

3. Agreed Work Programme

Resources Available

The Internal Audit Unit of the Department of Public Expenditure and Reform (DPER) shall provide an internal

audit resource of 450 audit days to the Department of Finance. An annual internal audit Work Programme for

2020 has been prepared for the Department of Finance having regard to its risk management strategy and

other documentation completed by management (See Appendix). This was agreed by the Audit Committee.

4. Assessment of Service Provision

4.1 Internal Audit Standards, Core Principles and Code of Ethics

IA shall function professionally, adhering to the Department of Public Expenditure and Reform Internal Audit

Standards (2012) and taking account of the Core Principles for the Professional Practice of Internal Auditing,

the Code of Ethics and the International Standards of the Institute of Internal Auditors. IA is committed to

delivering quality internal audit services to the Department of Finance thereby assisting the Department to

meet its business objectives. The service levels and their measurements are intended to assess whether or not

the IA function is meeting performance levels necessary to satisfy the Department of Finance’s business

requirements.

4.2 Performance Monitoring Criteria

IA performance will be evaluated in line with set criteria and any disputes over standards of performance will

be evaluated on the performance indicators set out below:

a. Reporting on recommendations accepted, turned into action plans and implemented. This will indicate

the effectiveness of the service rendered by IA.

b. Percentage (%) of actual audit assignments completed against the annual audit plan. This will indicate

the ability of IA to meet the Department’s service expectations as well as the appropriate level of

assurance to the Audit Committee.

4.3 Reporting by IA to the Audit Committee

IA will report quarterly to the Audit Committee on the above performance monitoring criteria together with

significant findings of audits carried out in the Department of Finance.

The audit work programme will be implemented having regard to the advice and guidance of the Audit

Committee.

In line with protocols agreed between IA and the IARM of the Department, IA will report quarterly to the Audit

Committee on the status of all significant outstanding audit recommendations.

IA will provide an annual report of its activities to the Audit Committee and to the Accounting Officer.

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5. Conflict Resolution

Any conflict arising in relation to the audit work and the services to be provided under this agreement shall be

resolved between the Accounting Officers of both Departments, in consultation with the respective

Chairpersons of the two Audit Committees, where necessary.

6. Service Level Agreement Review

The provisions of this agreement will be monitored by the Audit Committee of the Department of Finance

throughout 2020 and will be reviewed annually by the Secretary General of Department of Finance, the

Secretary General of Department of Public Expenditure and Reform and the Head of Internal Audit. The Audit

Committee of Department of Finance will also input into the review mechanism. A review of the SLA and

appended annual programme of audits will be undertaken annually.

7. Duration of the Service Level Agreement

This SLA including the internal audit services listed above will be effective upon the date of signature by all

parties and will continue until 31 December 2020. Service scope and performance targets will be reviewed

annually prior to the commencement of the new audit year.

8. Amendments to this Agreement

This agreement can be amended to add or remove IA services provided by IAU. Any such amendments shall be

agreed by the Head of Internal Audit in consultation with the Audit Committee of Department of Finance and

the Secretaries General of Department of Finance and Department of Public Expenditure and Reform.

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9. Approvals

This Service Level Agreement has been reviewed and approved by: