Agenda item

(Director of Governance) To consider the attached report (AGC-014-2014/15).

The Committee agreed to consider this report as the next item of business of the meeting.

The Director of Governance introduced a report on the review of the Council’s current structure of Scrutiny Panels, which included details of possible options for the future structure, being undertaken by a Task & Finish Panel during 2014/15. This report had been provided for the Audit & Governance Committee to comment on the proposals which had a potential impact upon it.

The Vice-Chairman of the Overview & Scrutiny Task & Finish Panel reminded the Committee that the Task & Finish Panel had been established in February 2014 to examine the existing framework of the Council’s Scrutiny Panels, and suggest how the future structure could complement the new management structure of the Council. The Task & Finish Panel had met on two occasions so far, with a third meeting due to take place the following evening. In addition, a Member workshop had recently taken place. At the second meeting of the Panel, all of the current Scrutiny Panel Chairmen had offered their views on the current and possible future arrangements.

The three Appendices to the report were highlighted to the Committee by the Vice-Chairman of the Task & Finish Panel. Appendix 1 illustrated the current structure and indicated those areas of responsibility that were not tacitly covered by one of the current Scrutiny Panels. Appendix 2 demonstrated how the Scrutiny Panels could be aligned with the new Directorate structure implemented in April 2014. This approach would also lend itself to a ‘Commissioning Model’ whereby a separate Task & Finish Panel or Work Group could be set up to examine a particular issue in detail. Appendix 3 revealed a potential five Panel Thematic ‘Select Committee’ approach, which would include a combined Audit & Standards Select Committee under the umbrella of the Overview & Scrutiny Committee. The current Constitution & Member Services Scrutiny Party could become a Working Party to complete its review of the Council’s Constitution.

The Vice-Chairman of the Task & Finish Panel informed the Committee that the recent Member Workshop had favoured the merger of the current Audit & Governance and Standards Committees, and the Commissioning Model was not popular although elements of it could prove useful. It was also felt that the current Housing Scrutiny Panel worked very well, and had a heavy workload which would preclude its combination with another Panel. The Committee was asked to consider and comment upon the review.

The Chairman of the Audit & Governance Committee expressed his concerns about the comments that had been attributed to him in the report, specifically paragraph (3) as the Chairman felt that he had been quoted out of context and had not made the statements quoted in the report. The Chairman clarified the context for his comments was that the original proposal for the review was for the structure of the Scrutiny Panels to match the structure of the new Directorates; it was not envisaged that this review would encompass the Audit & Governance Committee or the Standards Committee, as both of these bodies report direct to the Council. The Chairman stated that he felt the existing Scrutiny Panels did not provide a robust counter-balance to the Cabinet from an Audit point of view, and that his remarks should be viewed in that context.

The Chairman felt that the Task & Finish Panel had misunderstood the nature and independence of the Audit & Governance Committee. It was pointed out that the Chief Internal Auditor had a direct responsibility to the Chief Executive of the Council, and therefore it was analogous for the Audit & Governance Committee, as the body responsible for reviewing processes undertaken by Members and Officers, to report directly to the Council rather than a subsidiary body like the Overview & Scrutiny Committee. The Chairman emphasised that the Audit & Governance Committee had always reported directly to the Council, and that this should remain the case in the future. The suggestion in paragraph 8 of the report, that the Audit & Governance Committee, Standards Committee and Constitution & Member Services Scrutiny Panel should be combined into one Select Committee showed a lack of understanding of the purpose of these three Committees.

The Chairman apologised for not being able to attend the meetings of the Task & Finish Panel. The Chairman had not been requested to attend any meetings of the Panel before the meeting dates were set, and once they had been scheduled, the Chairman was not available to attend their meetings.

The Vice-Chairman of the Audit & Governance Committee stated that the previous report from the Task & Finish Panel had thoroughly analysed the existing Scrutiny Panel structure and had made no mention of either the Audit & Governance Committee or Standards Committee. Therefore, it had been a surprise to see proposals for the merger of these two Committees in this report. It was felt that the importance of the Audit & Governance Committee was not understood; Governance issues made up the majority of the Committee’s workload, and yet Governance had been excluded from the new Select Committee’s title. The report before the Committee had made no mention of how adequate independent oversight of the Council would be maintained nor how the new structure would meet the requirement to maintain an independent Audit Committee.

The Vice-Chairman highlighted that an Audit & Governance Committee was concerned with processes, controls and how Senior Officers managed the organisation. A Standards Committee was concerned with Members and their personal conduct. Therefore, there was a conflict of interest between the two Committees, one of which dealt with corporate ethics and the other which dealt with individual ethics. It was reiterated that the report lacked detail about the proposals for the new Audit & Standards Select Committee, which made it very difficult to debate the proposals and advise the Task & Finish Panel accordingly. Therefore, the Vice-Chairman could not support the proposals pertaining to the Audit & Governance Committee  within the report.

The Vice-Chairman of the Task & Finish Panel reiterated that the report before the Committee offered suggested solutions, and was a paper for discussion and consultation. No decisions had been made, and the report would now be considered again by the Task & Finish Panel before being released for consultation with Members, Stakeholders and Officers. The Vice-Chairman of the Task & Finish Panel did state that the suggested Audit & Standards Select Committee would not report direct to the Overview & Scrutiny Committee, but would continue to report directly to the Council as at present with the two separate Committees.

The Vice-Chairman of the Committee responded that he would welcome any suggestions on how to improve the Council’s Scrutiny Function or the operation of Audit & Governance Committee. However, the report before the Committee lacked detail to be given proper consideration and comment.

The Director of Governance added that the report still contained a considerable degree of flexibility as certain principles were still to be discussed. The final structure of the Scrutiny Panels had not been fully worked out and this was simply an interim report showing indicative areas of responsibility. The import of the Audit & Governance Committee reporting direct to the Council had been understood, and it was enquired as to whether there were any further issues that the Task & Finish Panel needed to consider.

When invited by the Chairman to comment, the External Auditor informed the Committee that they would like to contribute some best practice and guidance documents which the Task & Finish Panel could have regard to. The Chartered Institute of Public Finance & Accountancy (CIPFA) had also produced some position statements on Audit Committees, including guidance on how an Audit Committee should interact with a Council’s Scrutiny function. The External Auditor also requested the opportunity to be included in the discussions if that was possible.

The Assistant Director of Governance (Governance & Performance Management) informed the Committee that the timetable for the process included a consultation to be undertaken after the next Task & Finish Scrutiny Panel meeting, and that this had to be completed in time for a report to be made to the Overview & Scrutiny Committee at its meeting scheduled for 12 January 2015.

The Chairman proposed, and the Committee agreed, a timetable whereby a report from the Overview & Scrutiny Committee meeting scheduled for 12 January 2015 on the proposals for the future structure of the Scrutiny Panels would be submitted to the next meeting of this Committee on 5 February 2015, and that this report should also include the views of both the Internal and External Auditors. The Audit & Governance Committee would then report their views on the proposals to the Council on 17 February 2015.

In terms of further comments for the Task & Finish Panel to consider at its next meeting, the Committee wanted to convey:

·         their strong reservations about audit issues and standards issues being considered by the same body as it was felt that there was a possible conflict of interest;

·         the importance of Audit & Governance Committee Members to be kept away from any involvement in Cabinet decision making to uphold their monitoring role;

·         the importance of the difference between an Audit Committee and a Standards Committee, and why these should be maintained as separate bodies; and

·         the importance to examine the CIPFA guidelines as part of the review regarding the relationship between Audit and Scrutiny, and why they should also be kept separate.

Resolved:

(1)        That a further report on the future structure of the Council’s Scrutiny Panels be submitted to the next meeting of the Committee scheduled for 5 February 2015 following:

            (a)        the consultation exercise on the draft proposals;

            (b)        consideration of the consultation responses at the meeting of the    Overview & Scrutiny Committee scheduled for 12 January 2015; and

            (c)        consideration of the views of the Internal and External Auditors;

(2)        That the views of the Audit & Governance Committee on the proposed future structure of the Council’s Scrutiny Panels be reported directly to the Council meeting scheduled for 17 February 2015;

(3)        That the Scrutiny Review Task & Finish Panel be requested to consider the following further comments of the Committee:

            (a)        the possible conflict of interest generated by the same body            considering both Audit and Standards issues;

            (b)        the need for members of the Audit & Governance to be separated   from the Cabinet decision making process;

            (c)        the difference between an Audit Committee and a Standards           Committee, and the importance of retaining them as separate bodies; and

            (d)        examination of the guidelines issues by CIPFA regarding the           relationship between Audit and Scrutiny, and the importance of retaining them          as separate functions of the Council.