Governance and Audit Committee

Member Guidance

June 2011 - Version 3

Introduction

The aim of this guidance is to recognise the importance of the Governance and Audit Committees work, not only to the council as a whole but also to the communities of Thanet who benefit from good governance in their local authority.

It will also inform any potential or existing elected member of the District Council as to what will be expected of them should they be appointed to serve on the Governance and Audit Committee.

Finally it serves as a reminder to those councillors who already fulfil the role of member of the Governance and Audit Committee, helping them to explain their function, assess their own performance and benchmark with others in similar positions.

Statement of Purpose

The purpose of the Governance and Audit Committee is to provide independent assurance of the adequacy of the risk management framework and associated control environment; independent scrutiny of the authority’s financial and non-financial performance to the extent that it affects the authority’s exposure to risk and weakens the control environment; and to oversee the financial reporting process.

The Governance and Audit Committee is an essential element of good governance and is best delivered by a committee which is independent from the Executive and Scrutiny functions. An effective Governance and Audit Committee can assist in raising the profile and importance of internal control, risk management and financial reporting arrangements within the authority. It can also act as a forum for the discussion of issues raised by internal (East Kent Audit Partnership) and external (Audit Commission) audit.

Features

Good audit committees are characterised by strong chairmanship – displaying a depth of skills and interest. An interest and level of knowledge in financial and risk management, accounting concepts and standards and the regulatory regime are also essential. There needs to be unbiased attitudes – treating auditors, Cabinet and Senior Management Team (SMT) equally, as well as having the ability to challenge the Cabinet / SMT when required. The Governance and Audit Committee should have a membership that is balanced, objective, independent of mind and knowledgeable.

Other features of an effective committee include:

meetings characterised by free and open discussions by all members without political influences being displayed;
prompt decisions on all matters put before the committee;
financial understanding displayed by one or more of the members when considering issues;
the committee displays a role of monitoring and, where necessary, chasing managers for responses to audit recommendations.

Structure and Administration

Although no single model of committee is prescribed, it should be independent of the Executive and Scrutiny functions. It should have clear reporting lines and rights of access to other committees and functions, for example scrutiny and service committees, the officer Governance Board and other strategic groups.

There must be terms of reference which are reviewed on an annual basis, taking into account relevant governance developments and how the Governance and Audit Committee integrates with other committees within the council.

Regular attendees to Governance and Audit Committee meetings should include the Chief Executive, the Monitoring Officer (MO) and the Director of Finance and Corporate Services (with S151 responsibility). The committee should also have the right to call any other officers or agencies of the council as required.

The Benefits

The Governance and Audit Committee will bring the following benefits to the authority:

reduce the risks of illegal or improper acts;
reinforce the importance and independence of internal and external Audit;
increase confidence in the objectivity and fairness of financial reporting.

Stricter internal control and the establishment of a Governance and Audit Committee can never eliminate the risks of serious fraud, misconduct or misrepresentation of the financial position. However, it will:

give additional assurance through a process of independent and objective review; and
raise awareness of the need for internal control and the implementation of audit recommendations.

Committee authority

The Governance and Audit Committee is vested with sufficient authority to act with independence. It is constituted as a sub-committee of full Council and the terms of reference are contained within the council’s Constitution. The Committee has explicit authority to receive full access to information and the ability to investigate any matters within its terms of reference.

Frequency of meetings

The frequency of meetings needs to be driven by the nature and timing of the business to be considered, any complementary work conducted by other committees and any work that can be carried out between meetings. This all needs to be determined at the outset of the financial year so that the Committee is not considering unnecessary issues, reacting to foreseeable events or commenting on matters that can no longer be influenced.

It is expected that the Governance and Audit Committee will meet 4 times per year but the Committee can decide to increase this, if it is felt necessary, to ensure that the Committee meets its terms of reference. The quorum for the Committee will be 50%.

The decision was taken in May 2010 to increase the number of meetings in June to ensure that all business was undertaken as necessary, and ensure that adequate and suitable challenge was provided when approving the Statement of Accounts.

Substitutions

Substitutions at the Governance and Audit Committee should be aware of the requirements of the Committee and have the necessary understanding to be able to contribute to the Committee’s roles and functions.

Substitutes should also have attended any specific training provided for the meeting they are attending, especially in the case of approving the council’s Statement of Accounts. Substitutes will also be responsible for feeding back to the member they are attending for.

It shall be the responsibility of the member unable to attend the Governance and Audit Committee meeting to appoint a substitute member and inform the Democratic Services Manager in accordance with the council’s Constitution.

Training

There is a strong expectation that members of the Governance and Audit Committee (including substitute members) will undertake the relevant training provided to ensure that the responsibilities of the Committee are able to be discharged effectively.

When considering areas for training the Committee are advised to refer to the programme of reports to help inform the training requirements.

Assurance Framework

The majority of assurances to the Committee should come from management and auditors, who provide a critical element of independent assurance. In this context robust systems of risk management and application of an assurance framework should be at the core of any committee’s review process.

To this end the Governance and Audit Committee will need to liaise closely with any management and other committees involved in dealing and managing risk, to minimise any duplication or overlap. The Governance and Audit Committee’s role is not to manage risks, but rather to ensure that the overall system is in place and effective, leaving the operational management to Corporate Management Team.

Some assurances will be external to the organisation (such as the Audit Commission or Inland Revenue). The committee members should task the Director of Finance and Corporate Services and the East Kent Audit Partnership to make them aware of relevant reports and recommendations. Others will be internal to the organisation (such as the Corporate Governance and Risk Officer) and the Committee may wish to understand the nature of their work and the relative appropriateness of their source of assurance.

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