The Directors of the Council have pleasure in submitting the annual report and audited accounts for the year ended 31 March 2021.
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.
This financial year has been a very challenging one for the Institute. Following on from a year of transition and a major restructure in the previous financial year, the Institute was budgeting a surplus for 2020/21. However, with the onset of the pandemic in March 2020, the Institute had to rapidly change to new ways of working and delivery and suffered significant loss of revenue, especially in the early months of the new year.
Prior years’ investment in systems enabled staff to transition to work from home effortlessly and continue to offer services to our members virtually. However, the Institute’s traditional face-to-face offerings ceased immediately with a two-month interruption, before being able to switch to virtual training and learning.
The net result of COVID-19 has been to reduce to originally anticipated surplus for the year to a deficit of £136,497 (2020: £1,205,861) after interest receivable and tax. This is however, a much smaller deficit than feared after the onset of the virus in March 2020.
The operating income for the year has decreased by £953,559 (17.4%) compared to the previous year whilst direct expenses have decreased by £1,985,814 (29.7%).
The number of Members at 31 March 2021 was 9,899 (2020: 10,204). Despite this decline in numbers, income increased by £43,000 due the membership rate increase of 3% agreed in June 2019. The membership rates for 2021/22 have been frozen.
Training, Learning and Events saw the greatest reduction in income totalling £921,000, because the Institute could not provide face-to-face activities. Most of first quarter saw no services being offered as the Institute transitioned to online delivery. There were £504,000 worth of savings resulting from not hiring venues and paying travel expenses.
A further cost saving of £110,000 was achieved by ceasing to print the magazine and offering it exclusively online.
Despite the pandemic, the External Quality Assurance service performed better than in prior years, generating £222,000 more revenue than last year. The increase is partly due to organisations using up their budgets before possible cuts in 2021/22, as well as best practice requirements to have an independent external assessment at least once every 5 years.
Overhead costs decreased by £1,205,000 on the prior year, largely within employee costs resulting from the restructure carried out in the previous year and the reduction of 12 employees and contractors.
The cash balance at the end of the financial year is £1,033,513 (2020: 1,052,183) and the net assets £477,947 (2020: 614,444). As reported last year, in order to strengthen our liquidity and improve our going concern prospects amidst the uncertainty of the pandemic, and in accordance with our reserves policy, the directors decided to put the head office up for sale and move into a smaller rented accommodation which would enable staff to work flexibly, commonly termed ‘hybrid working’. An offer from a prospective buyer has been accepted and the sale process is currently underway.
The Institute has done exceptionally well to support our members and champion the internal audit profession in the UK and Ireland over the past year and will continue to do so in the year ahead. We will continue to engage with the profession by providing support through relevant research, guidance, training, and events.
Our annual thought-leadership research ‘Risk in Focus 2022’ will be published in September 2021, highlighting the top 10 new and emerging risks and providing guidance for internal audit to address them effectively. In addition to this, we will also publish thought-leadership pieces on financial resilience and stability, disruption, corporate culture, and in the run up to CoP26 a follow-up piece on climate change.
Our members will continue to be supported by the Audit Leaders Forum events and the Talk to Internal Audit live stream, which has been established at the beginning of the pandemic to provide the most up-to-date and relevant insights for the profession. We will also continue to innovate and strive to meet the needs of our members and the wider profession - our Annual Conference will take place in November 2021 in a hybrid capacity offering guests the flexibility to choose the format based on their needs.
Given the challenges the Institute has faced in the last couple of years, including the restructure at the end of 2019/2020 and the impact of the COVID-19 pandemic, it has done well to mitigate the associated financial risks during these challenging and uncertain times. We will continue to do so in the year ahead and aim to ensure a smooth transition back to “normal” and of course, continue to prioritise the safety of our staff, members, and the wider profession.
Our ‘COVID-19 hub’ has been replaced with the ‘community hub’ to help support members and non-members and help facilitate a more collaborative environment with an overview of the Institute’s various groups and forums. With events continuing virtually for the first few months of the year and then gradually moving to hybrid capacity, we endeavour that the Institute’s financial position will continue to improve over the next year.
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. Processes and controls are adjusted to reflect new and/or changing risks or operational deficiencies. This is overseen by the Audit Committee.
The members of the Audit Committee were, N. Butler, M. Moore, E. Stevenson, S Owen and P. Wood (Chairman).
The Institute’s own internal audit activities are outsourced to Ashby Associates Ltd. Once a year the internal auditors and the external auditors meet with the Audit Committee without management being present.
An annual risk assessment and audit plan are developed and 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.
The following Directors have held office in the year:
The Interim Chief Executive is a contractor. Directors’ remuneration and fees are disclosed in note 7. Related parties are disclosed in note 9.
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:
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.
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.
Haysmacintyre LLP have agreed to offer themselves for re-election as auditors to the Institute.
By Order of the Council of Directors.