Internal Audit Implementation Steering Committee

INTERNAL AUDIT IMPLEMENTATION STEERING COMMITTEE

Minutes – 5 February 2009

Attendance: Philip Mussared (Chair), Peter Connelly, Stephen Horne, Bill Middleton, Greg Byrne, Heather Watson, Mark Pellowe, Charlie Sherlock, John Holmes

Other attendees: Chris Bowdler (NSW Audit Office), Nadia Theore (Secretary), Michael Di Francesco (NSW Treasury)

Apologies: Ross Tyler, Peter Whitehead, Fatima Abbas

1. Minutes of meeting 2 December 2008

Peter Connelly requested that the words in the first sentence of the third paragraph in Item 3, and all of Item 10, be amended.

The Chair requested that Peter Connelly provide the replacement sentence for Item 3, and a total replacement of Item 10, to the Secretary for inclusion in the final Minutes

Actions:

 Peter Connelly to send a replacement sentence for the first sentence of the third paragraph of Item 3, and a total replacement of Item 10, from the Minutes of the meeting held 2 December 2008.  The Secretary to amend and then distribute revised Minutes to the Committee members.

2. Review actions outstanding

The Committee discussed the Actions List noting updates (please refer to current actions schedule for full details).

The Committee agreed that the Chair should trim down the Actions Outstanding list as there are many ongoing items that are not required on the list.

Actions:

 The Chair to review the Actions List and close off any items no longer required on the List.  The Secretary to update the Actions List as at 5 February 2009 then distribute to the Committee. - 2 -

3. Status report on strengthened NSW policy for internal audit and risk management

Mark Pellowe advised that, at the Reference Group meeting held on 18 December 2008, the group endorsed the ASX Comply or Explain model for the policy framework with one modification. The Reference Group agreed to meet with the NSW Audit Office to discuss the various options. Mark advised that the agreement of the Steering Committee was now sought to proceed with this model.

The Committee requested Michael Di Francesco make some changes to points 5 and 6 of the ASX Comply or Explain model paper (i.e. the paper provided as Attachment A to this item).

Peter Connelly requested that the NSW Audit Office provide a glossary of terms to the Committee. However, rather than provide a full glossary of terms, Heather Watson undertook to provide an executive overview to terms used by the Audit Office.

The Committee members who are on the Reference Group requested the following changes to the Minutes of the Reference Group Meeting held on 18 December 2008: - the term ‘attack dogs’ be changed to ‘champions’ in the second dot point on page two; - soften the final line of the first dot point on page three; and - the word ‘recommendations’ be changed to ‘outcomes approved by Government’ in paragraph three on page three.

Peter Connelly advised that he had met with Kent Broadhead, Charlie Sherlock and Heather Watson to discuss the policy framework and the paper he had submitted for this item provided an overview of that meeting.

The paper proposed mandating the professional standards and releasing a direction, then following up with the guidelines section by section to provide the specific detail. The Committee discussed different options available, including examples from the Commonwealth. The Committee also noted that the Institute of Internal Auditors has agreed to look at the list for the direction and match it to the standards.

The Committee agreed that the way forward is to release a direction, then issue guidelines to clarify the details as they are finalised.

Actions:

 Michael Di Francesco to amend points 5 and 6 of the ASX Comply or Explain model paper.  Heather Watson to provide an executive overview to the terms used by the NSW Audit Office.  Michael Di Francesco to amend the Minutes of the Reference Group Meeting held on 18 December 2008 and then distribute to the Committee. - 3 -

4. Status report on the establishment of pre-qualification scheme

The Committee noted the progress with the establishment of the pre-qualification scheme, including the tender box opening on 6 February, provided by Peter Connelly.

The Chair advised that the Assessment Committee had canvassed an “Induction” style session for all successful applicants, perhaps half a day in length, to clarify the expectations on these roles. Stephen Horne suggested that perhaps the Audit and Risk Network could assist with the ‘Induction’ session.

The Committee also discussed the option of opening up the ‘Induction’ program to Directors in the Audit Office as Audit Office staff are the common thread amongst all agencies.

Charlie Sherlock noted that Peter Connelly has put a lot of work into the scheme and he believed it would be a success, much of which could be accounted to Peter’s contribution to the establishment of the scheme.

5. Status report on internal audit compliance assurance

Heather Watson introduced to the Committee Mr Chris Bowdler from the NSW Audit Office, who will have a role to play in the development of the Audit Office’s assurance process.

At this stage, offering assurance is beyond the Audit Office capabilities until the framework is released and time is allowed for agencies to implement the framework. The Audit Office may be able to assist in other areas though i.e. non-assurance measures.

Heather advised the Audit Office has been working with NSW Treasury on the development of the guidelines.

6. Status report on pilot agency clusters

The Committee noted no further progress had been made since Kent Broadhead left on parental leave - there is a staffing issue and therefore progress cannot be made on the pilot agency cluster until the pre-qualification scheme is operational.

7. Status report on update of better practice guidance for internal audit

This relates to the update of policy and guidance on internal audit and was covered under Item 3. - 4 -

8. Status report on internal audit and risk management network

Stephen Horne advised that the current membership of the Network was at 180 and it would probably remain at this level for some time.

The governance group had been expanded for 2009 and Stephen Horne stepped aside from his role as Chair. At the next meeting, the group will consider the involvement of staff from private audit companies. A quick survey indicated that respondents supported private companies being invited to events but not onto email groups.

It was agreed that Audit and Risk Committee independent Chairs and Members should also be encouraged to join the Audit and Risk Network. Once the panel is established, the Department of Commerce should forward the pre-qualification list to Stephen Horne to send a group email from the Network inviting them to join.

Actions:

 Department of Commerce to forward the pre-qualification list to Stephen Horne to send a group email from the Network inviting them to join.

9. Status Report on strategy for access and use of technology in internal audit

Charlie Sherlock distributed a status report on development of a strategy for better use of technology.

It was noted that the SAP Knowledge Resource Centre (KRC) is open. Whilst the group is beneficial for SAP users it could also be useful for non-SAP users to join the group. Register to the SAP Knowledge Resource Centre via www.sapkrc.gcio.nsw.gov.au – there is no cost to join however there may be a training cost involved in using some of the tools.

Charlie reported that progress on the SAP Governance Resource Centre (GRC) has slowed but likely to be rolled out over the SAP KRC at an estimated cost of $500,000.

Charlie advised that agencies are informed about the tools available to them such as the SAP KRC via emails to Auditing Officers, by the Institute of Internal Auditors and also through the Audit and Risk Network.

10. Status Report on internal audit human resources development

Peter Connelly provided a verbal update and advised that a document had been drafted and some Committee members had assisted in the development of the document. - 5 -

The Fast Track option had been explored but was not taken up by the sector. Mark Pellowe advised that the accounting stream of Fast Track Graduates had provided feedback that they are interested in doing Auditing placement and Mark asked whether this could be incorporated into the accounting stream. Peter Connelly advised he would look into this option with the Public Sector Workforce Office.

Both Charlie Sherlock and Stephen Horne advised they found that the accounting participants found the auditing experience interesting however their main interest remained in accounting.

The Chair requested that the draft paper be circulated to the Committee and Peter Connelly agreed to confirm the paper was ready for distribution.

Actions:

 Peter Connelly to investigate with PSWO the option of including auditing within the accounting Fast Track Graduate program.  Peter Connelly to distribute the draft paper if appropriate.

11. Communication Strategy

There was no progress in relation to the communication strategy.

12. Other Business

There were no other business items to discuss.