1、New Business InitiativesInternal Audit Programme GuideRevised January 2007 Version 2 New Business InitiativesInternal Audit Programme GuideThis guide has been funded by the Housing CorporationIGP Database Ref No G01-20213New Business InitiativesInternal Audit Programme GuideRevised January 2007 Vers
2、ion 2 IntroductionThis guide provides advice on matters designed to assist the auditor in developing an internal audit programme on new business initiatives. It is the responsibility of the auditor to determine which elements of the guide are incorporated into their internal audit programme. The tab
3、les setting out the key control and expected tests do not imply that all the items contained in the tables need to be included in the internal audit programme developed by the auditor.PreambleMany housing associations have or are diversifying into new areas of social housing (e.g. Supported Housing,
4、 Residential Homes) or even into activities that are not considered as social housing (e.g. Market Renting, Care Homes). When diversifying into new areas, new risks are inevitably faced by the housing association. Housing Corporation requirementsThe diversification of a housing associations activiti
5、es can be applied against each of the three main components of the Regulatory Code, viability, governance and management, although section 2.4 of the code is one of the most important in this area. This sets out that Housing Associations must protect public investment: using their social housing ass
6、ets only for social housing purposes; and ensuring that their social housing assets are not placed at risk by non-social housing activities.The Housing Corporation, issued a Circular (04/04) and a Good Practice Note (number 9) on regulating a diversified sector in 2004 which is due for review in 200
7、7-08. The elements of the GPN that are mandatory are: The Housing Corporation only expects associations to proceed with diversification where there is a clear and robust business case, if the Housing Corporation receives evidence that this is not the case they would regard this as a breach of the Re
8、gulatory Code and take appropriate regulatory action; the Housing Corporation expects a majority of a housing associations business activities to be in social housing, they interpret majority as meaning 51% or more of an associations turnover or capital; the Housing Corporations requirement that an
9、association (or a group) that derives at least 5% of its turnover or employs at least 5% of its capital in diverse activities meets the accounting disclosure requirements currently set out in The accounting requirements for registered social landlords: General determination 2006; the hierarchy of fu
10、nding diverse activities as set out in paragraph 5.6 of the GPN, namely, first recourse to secure the borrowing for diverse activities on non-social housing assets, second to utilize any available surpluses and finally borrowings may be secured on social housing assets subject to the criteria set ou
11、t in paragraph 5.6; the Housing Corporation expects an association which is seeking any new borrowings to do so in a way that minimises the risk to social housing assets and tenancies whether the new borrowings are being used to fund social or non-social housing activities.The Housing Corporations N
12、eighbourhoods and Communities Strategy was also launched in October 2006 (press release ref: 103/06). The strategy aims to encourage more associations to become further involved in activities beyond simply housing.New Business InitiativesInternal Audit Programme GuideRevised January 2007 Version 2 U
13、nder the Regulatory Code, the Corporations current process of regulating this area is more of self assessment statements by the housing association and information submitted to inform its Housing Corporation Assessments and Annual Viability Reviews such as financial statements and the collection of
14、data from the Regulatory Statutory Return (RSR).Audit Commission requirementsThe Audit Commission does not include any specific requirements on new business initiatives within the KLOEs.Areas covered by this GuideThis Internal Audit Programme Guide covers the following areas: High Level Control Fram
15、ework Definition Appraisal Approval Planning/Implementation Management InformationKey Risk AreasFailure to put in place and enforce robust systems of internal control in the area of business continuity exposes a housing association to a number of risks. These could include the following:-Risk Potent
16、ial ImplicationsFailure to achieve objectives Bad publicity Loss of income Regulatory action by the Housing Corporation Unnecessary rent increasesInadequate business case Loss of income Failure to achieve objectivesNo realistic exit strategy Losses continue longer than necessary Failure to achieve o
17、bjectivesFailure to identify risks associated with new business initiative Failure to achieve objectives Loss of incomeThe auditor should also review their own organisations risk map for risks relevant to this review.The Internal Auditor should also obtain details of the most recent Housing Corporat
18、ion / Audit Commission Inspection along with the Housing Corporations most recent Assessment against New Business InitiativesInternal Audit Programme GuideRevised January 2007 Version 2 compliance with the Regulatory Code standards to identify whether any weaknesses were highlighted in the area of n
19、ew business initiatives.Other sources of informationThere are a number of useful publications available on this topic, details of which are given below: Neighbourhoods and Communities Strategy Housing Corporation (2006) R04/04 - Regulating a diverse sector Housing Corporation (2004) Good Practice No
20、te 9 on regulating a diversified sector Housing Corporation (2004) Managing Successful Projects with PRINCE2 OGC (2002) Useful Websites Housing Corporation www.housingcorp.gov.uk National Housing Federation - www.housing.org.uk Chartered Institute of Housing - www.cih.org The Communities and Local G
21、overnment munities.gov.uk CIPFA - www.cipfa.org.uk Office of Government Commerce - www.ogc.gov.uk/princeDisclaimerThis guide has been prepared to provide persons carrying out internal audit reviews with an understanding of the risks and controls associated with the activity covered in this guide. Th
22、is guide does not purport to be a detailed technical guide on the activity itself. The information and guidance contained in this guide are provided for general information purposes only and do not constitute legal or other professional advice. Users of this guide are responsible for establishing wh
23、ether there has been any new guidance and/or regulatory change since this guide was prepared. This guide should not be relied upon to identify all strengths and weaknesses that may exist or to identify all instances of fraud or irregularity. HAIAF does not accept responsibility for any loss that may
24、 arise from reliance on information contained in this guide, or from its omission or unavailability. Specific professional advice must be sought in respect of any particular query. All references to publications and legislation are applicable in England only.New Business InitiativesInternal Audit Pr
25、ogramme GuideRevised January 2007 Version 2 1. OVERALL CONTROL FRAMEWORKKey Risk Implication Expected Key Control or Process Suggested Tests1.1.1 The housing association Board: has a clear role in determining the housing associations business approach; and classifies its different activities.(a) Con
26、firm that the housing association Board terms of reference specify that it has a clear role in determining the housing associations business approach.(b) Confirm that a report is taken to the Board on at least an annual basis that classifies the different activities undertaken by the housing associa
27、tion in terms of whether they constitute social housing provision.1.1.2 Appropriate mechanisms are in place for identifying new business initiatives.(a) Confirm that a department or individual, with sufficient authority, has the responsibility for identifying new business initiatives within the hous
28、ing association.(b) Confirm there is a clear reporting line for communicating any new business initiatives (e.g. the Senior Management Team).1.1 The new business initiatives appraisal arrangements are not carried out in a duly authorised manner which may lead to financial loss due to an absence of d
29、irection and to lack of accountability1.1.3 The Internal Audit Strategy is updated each time a new business initiative is undertaken.(a) Confirm that there is a mechanism for regularly updating the Audit Strategy to reflect any new business initiatives undertaken.New Business InitiativesInternal Aud
30、it Programme GuideRevised January 2007 Version 2 Key Risk Implication Expected Key Control or Process Suggested Tests1.1.4 There is evidence of suitable skills and experience amongst board members and senior staff to undertake the new initiative.(a) Confirm that a skills audit of board members and s
31、enior staff has been carried out and is reviewed each time a significant new initiative is identified to ensure that the housing association has the skills to manage the new initiative.(b) Where a skills shortfall is identified confirm that procedures are in place for appropriate action to be taken
32、to recruit or develop the expertise.1.1.5 Policies and Procedures have been developed for new business initiatives which: Require, where appropriate, a business plan to be developed for significant new business initiatives. Require the Housing Corporation to be contacted where uncertainties exist. A
33、llows for external advice to be sought, where appropriate. Include a scheme of delegation for approving new business initiatives.(a) Confirm that Policies and Procedures have been developed and approved for new business initiatives that cover all relevant areas and are up-to-date.(b) For a sample of
34、 new business initiatives, ensure that the policies and procedures have been adhered to in full.New Business InitiativesInternal Audit Programme GuideRevised January 2007 Version 2 2. DEFINITIONKey Risk Implication Expected Key Control or Process Suggested Tests2.1 Potential projects are not indepen
35、dently appraised which could lead to financial loss through either/or costs being higher or income being lower than anticipated2.1.1 The new initiative is fully defined and boundaries, both operationally and geographically, are set.(a) Procedures require new initiatives to be fully defined and bound
36、aries, both operationally and geographically, to be set.(b) For the sample of new initiatives at 1.1.5(b), ensure that the initiative is fully defined and boundaries, both operationally and geographically, are set.2.1.2 A business case for the new initiative is documented and subjected to review and
37、 approval.(a) Confirm procedures require a business case to be developed for each new initiative that is documented and is subject to review and approval.(b) For the sample at 1.1.5(b) ensure that a business case has been developed for each new initiative, is documented, and subject to review and ap
38、proval.2.1.3 All necessary financial, IT and human resources are identified.(a) Confirm procedures require all necessary financial, IT and human resources to be identified prior to appraisal.(b) For the sample at 1.1.5(b) initiatives ensure that all necessary financial, IT and human resources are id
39、entified prior to appraisal.New Business InitiativesInternal Audit Programme GuideRevised January 2007 Version 2 Key Risk Implication Expected Key Control or Process Suggested Tests2.1.4 There is an exit strategy should the initiative prove unsuccessful.(a) Confirm procedures require an exit strateg
40、y to be developed should the initiative prove unsuccessful.(b) For the sample at 1.1.5(b) initiatives ensure that an exit strategy was developed where the initiative proved unsuccessful.2.1.5 Links with other parts of the housing association are defined and the impact on these areas is considered.(a
41、) Confirm procedures require links with other parts of the housing association to be defined and the impact on these areas to be considered.(b) For the sample at 1.1.5(b) ensure that links with other parts of the housing association was defined and the impact on these areas were considered.2.1.6 The
42、 impact of Housing Corporation guidance is considered and any areas of concern are adequately dealt with.(a) Confirm procedures require consideration of impact of Housing Corporation guidance and that any areas of concern are adequately dealt with prior to considering a new business initiative.(b) F
43、or the sample of new initiatives ensure that the impact of Housing Corporation guidance is considered and that any areas of concern were adequately dealt with.New Business InitiativesInternal Audit Programme GuideRevised January 2007 Version 2 Key Risk Implication Expected Key Control or Process Sug
44、gested Tests2.1.7 Steps to address any significant weaknesses in the control framework of the housing association are addressed before a new business initiative is considered.(a) Review significant outstanding recommendations and ensure that no major relevant issues remained outstanding prior to con
45、sidering undertaking any new initiative in the context of those initiatives sampled at 1.1.5(b).New Business InitiativesInternal Audit Programme GuideRevised January 2007 Version 2 3. APPRAISALKey Risk Implication Expected Key Control or Process Suggested Tests3.1 A project is not independently scru
46、tinised before approval is given which could lead to an inappropriate contract being entered into resulting in financial loss to the organisation.3.1.1 Appropriate appraisals are carried out of all new initiatives.(a) Procedures require new initiatives to be appraised to ensure that: It is legal and
47、 within the housing associations rules; It is in line with the housing associations mission/strategic objectives; Resources are available to fund it; It makes a contribution to the housing association.(b) For the sample at 1.1.5(b) ensure that each initiative was subject to an appraisal and that the
48、 housing associations actions were consistent with the results of the appraisal.3.1.2 The new business initiative is reviewed in light of loan covenants.(a) Confirm that procedures require the impact of a significant new business initiative to be reviewed in the context of existing borrowings and lo
49、an covenants.(b) For the sample at 1.1.5(b) ensure that evidence exists of the new business initiative being reviewed in light of existing borrowings and loan covenantsNew Business InitiativesInternal Audit Programme GuideRevised January 2007 Version 2 Key Risk Implication Expected Key Control or Process Suggested Tests3.1.3 The initiative is included in a business plan and financial forecast which reflects the type and level of the planned activity.(a) For the sample at 1.1.5(b) ensure that a
