Agenda item

To consider the attached report.

The Committee considered a review of its terms of reference and effectiveness, in order to ensure that it satisfied the core functions of an audit committee as prescribed by the Chartered Institute of Public Finance and Accountancy (CIPFA) and remained effective as a key component of the Council’s assurance and governance framework. The Chief Internal Auditor reported that no changes to the terms of reference of the Committee were proposed as a result of the review and that an action plan had been developed to address minor weaknesses identified as part of the review process.  

Members were advised that the Committee normally reviewed its terms of reference and effectiveness on an annual basis, but that the review for 2017 had been deferred to await the issue of new guidance on the operation of local authority audit committees by CIPFA. The Committee noted that such guidance, which had been published in Spring 2018, updated the core functions of audit committees in relation to governance, risk management, internal control and audit, and included new legislation affecting audit committees in combined authorities, alongside revisions to regulations, standards and statutory guidance.

The Chief Internal Auditor reported that the Committee had last reviewed its terms of reference in November 2016 and had proposed that no changes be made, as it had been considered that they remained fit for purpose at that time. Members noted that the Chief Internal Auditor had recently carried out a comparison of the current terms of reference of the Committee with the latest model terms of reference recommended by and had undertaken appropriate benchmarking with the terms of reference of the audit committees operated by Broxbourne Borough Council and Harlow District Council. The Committee was advised that no changes to the current terms of reference were proposed as a result of the latest review, as they were considered to continue to remain fit for purpose.

The Chief Internal Auditor indicated that effective audit committees were characterised by a membership that was balanced, objective, independent of mind, knowledgeable and properly trained to fulfil its role, whilst also achieving a mix of apolitical expertise. Members were advised that CIPFA endorsed the appointment of independent members to audit committees, although there appeared to be little consistency in the size of audit committees across the local government sector. Members noted that the Council had five councillor members on its committee, which was fewer than both Broxbourne Borough Council and Harlow District Council, although neither authority currently appointed independent members to their committees.

The Chief Internal Auditor reported that the current terms of reference for the Committee provided that co-opted members serve for a period of three years from appointment and could serve for a total of two such terms as of right, but might be considered for two further three-year terms, provided they were successful after open competition. The Committee noted that both current co-opted members were in their second three-year term of membership and that Mr. T. Jarvis could be considered for a further three-year term of membership in October 2019, subject to open competition and that it would be necessary to consider arrangements for public advertisement of Mr. Jarvis’ position in early 2019. The Chief Internal Auditor reported that no statutory guidance existed in relation to the membership of audit committees.

Members were advised that a review of the effectiveness of the Audit and Governance Committee had last been undertaken in November 2016 and that the review had identified several minor areas for improvement, all of which had been completed. The Chief Internal Auditor reported that checklists developed by CIPFA supported assessment against recommended practice to inform and support the Audit and Governance Committee and that the results of such self-assessment indicated that the Council was able to demonstrate compliance with recommended best practice for an effective audit committee. Members noted that, arising from the review, two areas for improvement had been identified around skills and knowledge analysis and committee engagement. The Committee was advised that a skills and knowledge analysis had last been undertaken in September 2017 and would be repeated as soon as possible, as the membership of the Committee had changed in the interim period. The Chief Internal Auditor reported that the Committee was most effective in supporting internal accountability when it discussed governance, risk or control issues directly with responsible managers and that arrangements to achieve both areas for improvement had been included within an appropriate action plan. Members were advised however that it was a matter for the Committee to determine the extent to which it required engagement with officers of the Council in relation to the results of audit activity.

The Committee suggested that its effectiveness, particularly in terms of the development of internal audit priorities and the annual Audit Plan, would be improved through greater understanding of the key corporate and strategic risks identified by the Council and its arrangements for monitoring the effective operation of risk management in relation to the priorities of the authority.

RESOLVED:

(1)       That the current terms of reference of the Audit and Governance Committee be endorsed and that no recommendation for changes be made to the Council;

(2)       That the results of the review of the effectiveness of the Committee be noted;

(3)       That the proposed action plan for improvement arising from the review of the effectiveness of the Committee, be agreed; and

(4)       That the Council’s corporate Risk Register be supplied to the Committee as a standing agenda item, to support the development of internal audit priorities and the annual Audit Plan.