Agenda item

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The Senior Internal Auditor presented the report on the Audit Terms of Reference and explained this was a requirement to review every 3 years. He outlined the Terms of Reference included the purpose of the Audit Committee, the membership, meetings, reporting, exclusions within the wider functions of the executive, core functions and responsibilities.

He highlighted the Terms of Reference needed to meet the requirements of the Accounts and Audit Regulations 2015. The Senior Internal Auditor added amendments were made to the Terms of Reference based on the CIPFA position statement 2022 Audit Committees in Local Authorities and Police.

He referred to the Committee to page 154 which identified the key issues including the wording to allow the appointment of independent co-opted member, the committee’s responsibility for receiving assurances on the wholly owned companies and the inclusion of the exclusions within the wider function of the executive.

He brought to the Committee’s attention further amendments to be made to the Terms of Reference;

Section 1, governance, risk, and control, - “Review and approve the Annual Governance Statement (AGS) and consider whether it properly reflects the risk environment and supporting assurances including the Head of Internal Audit’s annual opinion and fairly concludes that governance arrangements are fit for purpose.”

Section 6, financial reporting- “Review and approve the annual financial statements (including statutory statements and legislative disclosures) and specifically, consider whether appropriate accounting policies have been followed and whether there are concerns arising from the Financial Statements or from the audit that need to be brought to the attention of the Council.”

Section 8, Exclusions within the Wider Functions of the Executive- “Make or implement decision on behalf of the council in respect of approval of the annual governance statement and the financial statement of accounts.”

The Monitoring Officer advised the Audit Committee were an advisory Committee and their role is predominantly to review the frameworks however there was two matters where decision making responsibilities are with the Audit Committee for the approval of the annual governance statement and the approval of the financial statement of accounts on behalf of full council.

The Senior Internal Auditor invited suggestions from the Committee and explained the recommendation was for the Audit Terms of Reference to be amended and to go to Cabinet then full Council.

The Chair thank the Senior Internal Auditor and invited questions and comments for the Committee.

Councillor Dark referred to the membership section of the Terms of Reference and asked for Portfolio Holders to be included and explained how it benefited Cabinet Members being present in the meetings. He asked further if it was the role of the Committee to look at outside partners and their value for money as well as the wholly owned companies.

The Senior Internal Auditor explained the terms of reference includes the membership of 9 members for voting purposes. He referred to Standing Order 34 in which Portfolio Holders can attend under.

The Monitoring Officer commented another bullet point was to be added in the Meetings Section to say “Portfolio Holder would always be welcome to attend the Audit Committee meetings.

Councillor Devulapalli sought clarification on Councillor Dark’s comments and if the wholly owned companies should not be audited.

Councillor Dark clarified the wholly owned companies, and the Borough Council was to be audited however was concerned other partnerships would then be audited by the Borough Council too.

Councillor Devulapalli asked for an explanation on what an independent co-opted member was.

The Senior Internal Auditor clarified an independent member was a non-elected member who was co-opted into the Audit Committee based on their experience.

Councillor de Winton referred to Section 5, arrangement for audit and assurances and commended Officers for this part of the Terms of Reference as it allows Audit Committee to move items forward.

Councillor Morley, Portfolio Holder for Finance, re-emphasised the need and benefit of an independent person. He asked if this was being actively looked at as it had been in discussion since 2023. He added in response to Councillor Dark comments, the Committee should be independent and remind members of the Shareholder Committee for the wholly owned companies.

Councillor Dark confirmed the role of an independent person to the committee and the benefits it would have and clarified original comments.

The Chair commented it was usual for other Audit Committee to have 3-4 independent members. He referred to Section 4, wholly owned companies and asked for clarification.

The Monitoring Officer provided clarification and explained it was intended to be limited to the wholly owned companies.

The Assistant Director, Resource and Section 151 Officer added there was an example of this around the Town Deal governance arrangements and commented and appropriate governance arrangement needed to be in place.

The Chair asked if it would be down to the Audit Committee to decide what a significant partnership was.

The Assistant Director, Resource and Section 151 Officer commented this would be contract management and would be managed through the procurement processes. She added the Audit Committee role was to make sure the appropriate arrangements in place to ensure that contract management arrangements were being applied.  

Councillor de Winton commented the wholly owned properties was a corporate risk which the Audit Committee was to audit and review.

The Chair commented his concern of the high corporate risk and how this would be controlled and monitored.

The Monitoring Officer referred to the Shareholder Committee and she highlighted in the Terms of Reference; the Shareholder Committee would provide an annual report on the assurance to Audit Committee. She added the Shareholders could make disclosure around their finances to the Audit Committee. She suggested added financial assurance and risk management to Section 4.

Councillor Morley commented a template could be given to the Shareholder Committee to identify what the Audit Committee would like to see and received information on.

Councillor Jamieson agreed with the Chair of the concern of the Shareholder Committee and suggested a meeting to look at the audited numbers of the wholly owned companies.

The Senior Internal Auditor added this report from the Shareholder Committee would be in addition to what Audit Committee had already received such as risk management, corporate risk register report, internal report, and external reports.

Councillor Beales provide assurance he would regularly attending the Audit Committee and invited members of Audit Committee to attend the Shareholder Committee meetings. He advised the wholly owned companies were audited internally and the finances were a rolling agenda item. He expressed the importance of getting the wholly owned companies and the finances correct.

The Assistant Director, Resource and Section 151 Officer provided assurance that the wholly owned companies had their own External Auditors which would provide independent assurance around the finance sustainability of the companies.

The External Auditor commented they would contact the External Auditors of the wholly owned companies to contribute to the assurance and opinion on the work which had been audited.

The Monitoring Officer referred to Section 4 and made the suggested amendment of adding 4a- Significant Partnership and 4b- Wholly Owned Companies.

RESOLVED: The Audit Committee approved the Terms of Reference with the suggested amendments and recommend to Cabinet and to Council the revised Audit Terms of Reference be adopted.