7  Reporting and Audit Requirements 

7.3.7 

The following ‘Standardised Terms of Agreement’ should be read in conjunction with the Technical Release – Audit 03/03, Public Sector Special Reporting Engagements – Grant Claims’ (September 2003) published by the Institute of Chartered Accountants of England and Wales (ICAEW). By publishing standardised terms of engagement the Housing Corporation makes an offer to engage on these terms without the need to sign a commissioning document. As outlined in the 2008-11 NAHP PPA the Corporation will engage on these terms with suitably experienced and qualified accountants and with suitably experienced and qualified RICS surveyors. If the offer to engage is accepted by an RSL (Lead) and an accountant or RICS surveyor, then an agreement is formed.

Standardised Terms of Engagement

The following are the terms of engagement on which the Housing Corporation (HC) agrees to engage [insert name of accountant/RICS surveyor] (the “independent auditor”) to perform agreed upon procedures and report in connection with procedural compliance in relation to the receipt of Social Housing Grant (SHG).

An agreement between [insert name of the Lead RSL/Lead Grant recipient] (the “Lead Grant recipient”) its reporting independent auditor and the HC on these terms is formed if the Lead Grant recipient and the independent auditor enter into a commissioning arrangement incorporating the following terms of engagement. The duties owed to the HC by the independent auditor  under the agreement cease when the specified report, signed by the independent auditor , and, if requested the completed checklists, are received by the HC all as set out below.

1 Introduction

The Lead Grant recipient is required to commission the independent auditor to provide to the HC reports as set out in Clause 3 below in order to provide independent assurance. These terms of engagement set out the basis on which the independent auditor will sign the report.

2 The Lead Grant recipient’s Responsibilities

2.1 The Lead Grant recipient is responsible for using grant for the purposes provided, maintaining proper records complying with the terms of any legislation or regulatory requirements and the HC’s terms and conditions of grant and providing relevant information to the HC on a basis in accordance with the requirements of the grant conditions. The Lead Grant recipient is responsible for ensuring that the non-financial records can be reconciled to the financial records.

2.2 The management of the Lead Grant recipient will make available to the independent auditor all records, correspondence, information and explanations that the independent auditor considers necessary to enable the independent auditor to perform the independent auditor’s work.

2.3 The Lead Grant recipient and the HC accept that the ability of the independent auditor to perform the work effectively depends upon the Lead Grant recipient providing full and free access to the financial and other records and the Lead Grant recipient shall procure that any such records held by a third party are made available to the independent auditor.

2.4 The independent auditor accepts that, whether or not the Lead Grant recipient meets its obligations, the independent auditor remains under an obligation to the HC to perform the work with reasonable care. The failure by the Lead Grant recipient to meet its obligations may cause the independent auditor to qualify the report or be unable to provide a report.

3 Scope of the independent auditor’s work

3.1 The Lead Grant recipient will provide the independent auditor with such information, explanations and documentation that the independent auditor considers necessary to carry out the due responsibilities. The independent auditor will seek written representations from management in relation to matters for which independent corroboration is not available. The independent auditor will also seek confirmation that any significant matters of which the independent auditor should be aware have been brought to the independent auditor’s attention.

3.2 The independent auditor will perform the following work in relation to reports required by the HC:

3.2.1 Grant return: The independent auditor will perform agreed performance tests as set out in the relevant procedural checklists published on the HC website within the  related information accompanying the Capital Funding Guide 2008 and will produce a report in the form set out in the Annual Independent Auditor's Report  published on the HC website within the related information accompanying the Capital Funding Guide 2008.  As a minimum this report should confirm the list of schemes checked and the independent auditor’s summary of observations that arise from the completion of the Procedural Checklists and checks made for each scheme. If requested, by the relevant regional office of the HC, the completed procedural checklists must be submitted with the report.

3.2.2 The procedural compliance checklists to be used will depend upon the category of product being developed and the financial year in which grant approval was given. Procedural checklists applicable to each category and year are available via the HC website.  

3.3 The independent auditor will not subject the information provided by the Lead Grant recipient to checking or verification except to the extent expressly stated. While, the independent auditor will perform the independent auditor’s work with reasonable skill and care, the independent auditor’s work should not be relied upon to disclose all misstatements, fraud or errors that might exist.

4 Form of the independent auditor’s report

4.1 The independent auditor’s reports are prepared on the following basis:

4.1.1 The independent auditor’s reports are prepared solely for the confidential use of the Lead Grant recipient and the HC and solely for the purpose of submission to the HC in connection with the HC’s requirements in connection with SHG. They may not be relied upon by the Lead Grant recipient or the HC for any other purpose except as provided in 4.1.2 below.

4.1.2 The HC may only disclose the reports to others who may have statutory rights of access to the report (“Others”).

4.1.3 Neither the Lead Grant recipient, nor the HC may rely on any oral or draft reports the independent auditor provides. The independent auditor accepts responsibility to the Lead Grant recipient and the HC for the independent auditor’s final signed report only.

4.1.4 The independent auditor’s reports must not be recited or referred to in whole or in part in any other document (including, without limitation, any publication issued by the HC) without the prior written approval of the independent auditor.

4.1.5 Except to the extent required by court order, law or regulation or to assist in the resolution of any court proceedings the independent auditor’s reports must not be made available, copied or recited to any other person (including, without limitation, any person who may use or refer to any of the HC’s publications).

4.1.6 To the fullest extent permitted by law, the firm of independent auditors, its partners and staff neither owe nor accept any duty to any person other than the Lead Grant recipient and the HC (including, without limitation, any person who may use or refer to any of the HC’s publications including the Others) and shall not be liable for any loss, damage or expense of whatsoever nature which is cause by any other party’s (including the Others) reliance on representations in the independent auditor’s reports.

4.1.7 Any disclosure of the product of the independent auditor’s report beyond what is permitted under clause 4.1.1, 4.1.2, 4.1.4 and 4.1.5 and any disclosure of this agreement beyond the HC, the Lead Grant recipient and the independent auditors, may damage the independent auditor’s commercial interests. If the HC or the Lead Grant recipient receives a request for disclosure of the independent auditor’s report or this agreement under the Freedom of Information Act 2000, the HC or the Lead Grant recipient (as the case may be) will advise the independent auditor and will not make a disclosure in response to any such request without first consulting the independent auditor.

5 LIABILITY PROVISIONS

5.1 The independent auditor will perform the engagement with reasonable skill and care and acknowledges that it will be liable to the Lead Grant recipient and the HC for losses, damages costs or expenses (“losses”) caused by its breach of contract, negligence or wilful default, subject to the following provisions.

5.1.1 The independent auditor will not be so liable if such losses are due to the provision of false, misleading or incomplete information or documentation or due to the acts or omissions of any person other than the independent auditor, except where, on the basis of the enquiries normally undertaken by independent auditors within the scope set out in these terms of engagement, it would have been reasonable for the independent auditor to discover such defects;

5.1.2 The independent auditor accepts liability without limit for the consequences of its own fraud and for any other liability that is not permitted by law to limit or exclude;

5.1.3 Subject to the previous paragraph (5.1.2), the total aggregate liability of the independent auditor whether in contract, tort (including negligence) or other wise, to the HC and the Department of Communities and Local Government arising from or in connection with the work which is the subject of these terms (including any addition or variation to the work), shall not exceed the amount of £1 million;

5.2 The Lead Grant recipient and the HC agree that they will not bring any claims or proceedings against any individual partners, members, directors or employees of the independent auditor. This clause is intended to benefit such partners, members, directors and employees who may enforce this clause pursuant to the Contracts (Rights of Third Parties( Act 1999) (“the Act”). Notwithstanding any benefits or rights conferred by this agreement on any third party by virtue of the Act, the parties to this agreement may agree to vary or rescind this agreement without any third party’s consent. Other than as expressly provided in these terms, the provisions of the Act are excluded;

5.3 Any claims whether in contract, negligence or other wise, must be formally commenced within three years after the party bringing the claim becomes aware (or ought reasonably to have become aware) of the facts which give rise to the action in any event no later than six years after any alleged breach of contract, negligence or other cause of action. This expressly overrides any statutory provision that would otherwise apply.

5.4 This engagement is separate from, and unrelated to, the independent auditor’s audit work on the financial statements of the Lead Grant recipient for the purposes of the Companies Act 1985 (or its successor) or other legislation and nothing herein creates obligations or liabilities regarding the independent auditor’s statutory audit work, which would not otherwise exist.

6 FEES

The independent auditor’s fees, together with VAT and out of pocket expenses, will be billed to the Lead Grant recipient. The Lead Grant recipient shall be solely responsible for the payment of such amounts in full. HC is not liable in any circumstances to pay the independent auditor’s fees or expenses.

7 QUALITY OF SERVICE

The independent auditor will investigate all complaints. The HC or the Lead Grant recipient has the right to take any complaint to the relevant professional body.  The HC or the Lead Grant recipient may obtain an explanation of the mechanisms that operate in respect of a complaint to the ICAEW at www.icaew.co.uk/complaints or by writing to ICAEW Professional Standards Office, Silbury Court, 412-416 Silbury Boulevard, Central Milton Keynes, MK9 2AF. In the case of the mechanisms that operate in respect of the RICS contact  regulation@rics.org  or write to RICS Regulation, Surveyor Court, Westwood Way, Coventry CV4 8JE.

8 PROVIDING SERVICES TO OTHER PARTIES

The independent auditor will not be prevented or restricted by virtue of the independent auditor’s relationship with the Lead Grant recipient and the HC including anything in these terms of engagement, from providing services to other clients. The independent auditor’s standard internal procedures are designed to ensure that confidential information communicated to the independent auditor during the course of an assignment will be maintained confidentially.

9 APPLICABLE LAW AND JUSRISDICTION

9.1 This agreement shall be governed by, and interpreted and constructed in accordance with English law.

9.2 The Lead Grant recipient and the HC and the independent auditor irrevocably agree that the courts of England shall have exclusive jurisdiction to settle any dispute (including claims for set-off and counter claims) which may arise in connection with the validity, effect, interpretation or performance or, of the legal relationship established by this agreement or other wise arising in connection with this agreement.

9.3 Each clause or term of this agreement constitutes a separate and independent provision. If any of the provisions other than clause 6.1 of the agreement are judged by any court or authority of competent jurisdiction to be void or unenforceable, the remaining provisions shall continue in full force and effect.

10 ALTERATION TO TERMS

All additions, amendments and variations to these terms of engagement shall be binding only if in writing and signed by the duly authorised representatives of the parties. These terms supersede any previous agreements and representations between the parties in respect of the scope of the independent auditor’s work and the independent auditor’s report or the obligations of any of the parties relating thereto (whether oral or written) and represents the entire understanding between the parties.

 

7.4.1 

The purpose of the audit will be to verify that all requirements and the Funding Conditions have been met, and that the RSL has properly exercised its responsibilities as set out elsewhere in this procedure guide.

Compliance audit does not reduce the responsibility of the RSL and the Corporation to ensure that the costs in any claim for SHG are appropriate and have been properly incurred.