Directors' report
By Paul Manning CMIIA QIAL CIA
The Directors of the Council have pleasure in submitting the annual report and audited accounts for the year ended 31 March 2019.
Principal activities
The principal activities of the Group are: the promotion and development of the practice of internal auditing, the dissemination of technical and professional guidance to members, the development of professional education and training programmes for internal auditors, and the provision of opportunities for members to network, exchange information and share best practice.
Financial stewardship
Operating income has increased by £433,419 (8.3%) on the previous year whilst direct expenses have increased by £847,792 (16.3%). In consequence we are recording a deficit, after interest receivable and tax, of £402,544 (2018: Deficit of £14,813).
Membership at 31 March 2019 was 10,456 (2018: 10,052). This increase in members contributes significantly to our income from qualifications and training events. Income has increased by £150,000 in respect of the CIA qualification and by the £66,000 in respect of the CMIIA qualification. Training course income has increased by £46,000 year-on-year. Demand for our External Quality Assurance service continues to grow, and income has increased by £148,000. Other areas also have year-on-year changes in reported income, amounting to an additional £23,419 (net).
As described in last year’s accounts, our investment in the “digital strategy” would result in a year-on-year increase in spend of approximately £700,000 in 2018/19. In fact, the increase has been greater and is £847,792. The additional £147,792 primarily relates to sub-contractors. The £847,792 itself comprises an increase of: £478,470 in our spend on sub-contractors with specialist skills and knowledge; £156,320 in respect of expenditure with employment agencies (new employees), temporary staff costs and training, and £109,249 in respect of professional fees, bad debts (our magazine publisher went into administration) and irrecoverable VAT on purchases (due to our partial exemption status). Other areas of expenditure, including cost of sales, have increased by £103,753 (net).
The financial position of the Group remains strong. We have cash balances of £2,164,039 (2018: £2,766,735) and net assets of £1,820,305 (2018: £2,222,849) at 31 March 2019. In addition, in Council’s opinion, the market value of the Institute’s leasehold property continues to exceed its carrying value.
Future developments
2019/20 is the second year of our 5-year plan and so we remain in an investment phase. We have plans that will result in a significant increase in membership, in income and in costs. Overall, we expect the deficit in 2019/20 to be similar to 2018/19. Thereafter we will move closer to break even, then back into surplus, both within the 5-year strategy.
In the coming months we expect more organisations to enrol as group schemes, more Heads of Internal Audit to enrol to our Audit Leaders service and more enrolment to study for our qualifications. Initially this will be for the CIA qualification and our Level 4 IA practitioner apprenticeship. Subsequently we anticipate that members will enrol for our Level 7 apprenticeship in order to acquire CMIIA status.
Our External Quality Assurance service and our training course offerings (i.e. both public courses and tailored in-house courses) are expected to benefit from increased demand as a result of continued growth in membership.
Control, monitoring and reporting
Council, through the Chief Executive, is responsible for ensuring that budgets and plans are prepared and that programmes of work are implemented. The Institute’s culture, code of conduct and human resources policies support the achievement of its objectives, the management of risk and the internal control system. There are ongoing processes embedded within the Institute’s overall business operations, supervised by senior management, which monitor the effective application of the policies, processes and activities related to internal control and risk management. During the year the Risk Framework was redeveloped, and our Risk Appetite was reassessed to reflect new and/or changing risks and operations. This is overseen by the Audit Committee.
The members of the Audit Committee were C. Fiddes, M. Lenton (Member & Chairman from 11/10/18), P. Manning (Chairman to 11/10/18), A. Shah (to 13/8/18), S. Stanbury and P. Wood.
The Institute’s own internal audit activities are outsourced to Ashby Associates Ltd, and the external audit activities were successfully transitioned from Warrener Stewart to Haysmacintyre LLP during the year. The Audit Committee met with the internal auditors and the external auditors, without management being present, on three occasions.
An annual risk assessment and audit plan is developed, presented to and approved by the Audit Committee. Senior management monitors the risk assessment during the year and advises the Audit Committee of any significant developments. Recommendations to address any identified issues are monitored by the Audit Committee, which in turn reports to Council. The Risk Register and key strategic risks are reported to and considered by Council, via the Audit Committee. The Remuneration Committee sets on-going policy for pay and reward of staff and approves the salary of the Chief Executive. Council also receives regular reports on key performance indicators.
Directors
The following Directors have held office in the year:
- A Allcock
- P Boyle OBE
- Retired 11/10/18
- D Byrne
- S Clark
- P Elam
- Appointed 11/10/18
- C Fiddes
- M Lenton
- P Manning
- President and Chairman from 11/10/18
- R Nightingale
- I Peters MBE
- Chief Executive
- M Sullivan
- M Taylor
- President and Chairman to 11/10/18
- S Tompkins
- J Whitfield CBE
- P Wood
No Director received a fee in the period. The Chief Executive is also an employee of the Institute and his remuneration as an employee is disclosed in note 7 to the financial statements.
Statement of directors’ responsibilities
We are required under the terms of our Royal Charter to prepare accounts that give a true and fair view of the state of affairs of the Institute, and of the surplus or deficit of the Institute for the period of account. In preparing these accounts we are required to:
- Select suitable accounting policies and apply them consistently
- Make reasonable and prudent judgments and estimates
- State whether accounting standards have been followed and give details of any departures
- Prepare the accounts on a going concern basis, unless in our view the Institute will be unable to continue in business
We are also responsible for: keeping proper accounting records, safeguarding the Institute’s assets, ensuring that only authorised transactions are entered into, and taking reasonable steps for the prevention and detection of fraud.
Directors’ statement as to disclosure of information to auditors
The Directors confirm that, to the best of their knowledge and belief, there is no relevant audit information of which the company’s auditors are unaware. The Directors have taken all the steps that they might reasonably be expected to have taken to be aware of any relevant audit information and to establish that the company’s auditors are aware of that information.
Appointment of auditors
Haysmacintyre LLP have agreed to offer themselves for re-election as auditors to the Institute.
By Order of the Council of Directors
