Agenda item

The purpose of this report is to seek Members views on the appointment of an Independent Member to the Audit and Risk Management Committee

Kathy Woodward, Internal Audit Manager, presented the report to members.

Kathy Woodward explained that this report has arisen from the action plan where the committee stated that they wanted to review whether or not to appoint independent members to its committee and within the report it details the view of CIPFA including their guidance for local authority audit committees and its advice is that there should be independent members, albeit not a legal requirement, as it provides additional strength to the committee. She highlighted to members the section of the report relating to national context and made reference to various Government reports including a report by Sir  Tony Redmond which had featured an independent review into the oversight of local audits that highlighted a number of areas not solely with external auditors but the governance arrangements within councils themselves and the various improvements that could be made, including the recommendation of the appointment of at least one independent member, suitably qualified to the audit committee.

Kathy Woodward explained that as a result of that report the Department for Levelling Up for Housing and Communities have issued a formal response with four specific measures and the second measure states that they intend to provide funding of £45 million over the course of the next spending review period to support local bodies with the cost of strengthening their financial reporting and new burdens related to the appointment of independent members and other ‘Redmond’ recommendations and for CIPFA to publish further guidance on audit committees, with its guidance emphasising the role that Audit Committees should have in ensuring that accounts are prepared to the highest of standards alongside making broader changes of making appointments of independent members. She advised the committee that there appears to be a steer from CIPFA, the Government and the regulatory bodies to appoint independent members to Audit Committees.

Kathy Woodward made reference to guidance that was issued on 31 May which stated that although it is not currently mandatory, it is going to become mandatory although there is no current timescale which has been provided. She outlined the benefits and pitfalls of having independent members, with the benefits including the additional knowledge and expertise that they bring to the committee, and they reinforce the political neutrality, independence of the committee and they also maintain continuity where membership is affected by the electoral cycle and the pitfalls being an over reliance on independent members by other committee members, lack of organisational knowledge, poor context amongst independent members and the additional effort by officers, staff and independent members to establish that working relationship.

Members asked questions, made comments and received responses as follows:

·         Councillor Mrs French asked for clarity over the £45 million of funding that had been referred to and she asked how many Local Authorities that funding would be for? Kathy Woodward explained that there are 323 District Councils. Neil Krajewski explained that the funding has been allocated already and it is principally linked to where external audit fees are going and the committee are aware that there is currently a procurement exercise underway for the Council’s external auditors and the outcome of that exercise is still not known, however Central Government has already decided a mechanism as to how those monies will be distributed. He added that whilst the Council’s fee had been increased, the proposed increase was adjusted down by Public Sector Audit Appointments Limited who are the external body that oversees external auditor appointments. The base position for external audit fees from 2023/24 depends on the procurement exercise and the outcome of this, is still unknown. He added that if there is any expectation that some of the Council’s share of the £45M set aside by Government might be available to fund the costs associated with identifying and renumerating the independent members post this is optimistic.

·         Councillor Mrs French asked how much the cost of an independent member would be? Kathy Woodward expressed the view that she does not anticipate it being a significant sum of money and where she has seen other authorities appoint independent members, they appear to follow the same route that the Council has when appointing to committees such as Conduct and the Independent Renumeration Committees. Councillor Mrs French stated that as it is going to become a mandatory function, in her opinion, steps should be taken to achieve an appointment as soon as possible.

·         Councillor Wicks asked who would do the selection of the independent person to the committee and what mechanism would be put in place for suitable candidates?

·         Councillor Mrs French stated that it would be a sub committee of the Audit and Risk Management Committee. Kathy Woodward stated that she would suggest that the current skills of the committee are analysed to identify any gaps which maybe in place and added that she would suggest that the person should be suitably qualified preferably in a Local Government finance background which would bring significant strengths to the committee. Kathy Woodward added that the Independent Remuneration Panel should be invited to advise the Authority of an appropriate rate of remuneration for the role and it would also need to be approved by Full Council. She suggested that it should be a cross-party panel drawn from the Audit and Risk Management Committee to undertake the search and selection process advised by the Monitoring Officer and the Chief Financial Officer (or their nominees).

·         Councillor Mrs Davis stated that she also agrees with Councillor Mrs French that the appointment should be made as soon as possible and before it becomes mandatory. She added that she anticipates that there will not be a large pool of individuals to recruit to the post and, in her view, she would expect them to be employed by more than one authority and, therefore, it is important to start the process as soon as possible.

·         Kathy Woodward stated that an additional report would be brought back to the committee in September for members to consider further, prior to it being presented to Full Council.

Members agreed to note the report.