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Report of the Council on the composition of the Audit Committee: Notice

25 March 2002

The Council have considered the remarks made at the Discussion on 12 February 2002 (Reporter, p. 547) of their Report dated 30 January 2002 on the composition of the Audit Committee (Reporter, p. 481).

The Council believe that the proposals in their Report represent an important step in implementing the recommendations arising from the reviews of CAPSA. The Council have noted the strong support given to the proposals by the present Chairman of the Audit Committee, Professor Badger.

The Council are grateful to Dr Cowley for his detailed consideration of the proposals. In replying to Dr Cowley's comments, the Council wish to emphasize that the particular proposals before the Regent House for decision are those contained in the actual recommendation of the Report, drawing, necessarily, on the existing composition of the Council. There is no intention that in future it should be possible for the Audit Committee to consist wholly of external members. If external membership of the Council is introduced the regulations for the Audit Committee should so provide. However, the Council believe that it is important, whether or not changes are made to the composition of the Council itself, that the Audit Committee should contain a majority of external members as recommended by Professor Shattock. The Council have agreed that a Notice inviting nomination of persons external to the University to serve on the Audit Committee will be published in the Reporter as part of the normal process of seeking nominations for consideration by the Council.

The Council agree with Dr Cowley that it would be desirable for there to be members of the Audit Committee other than members of the Council and external members, that is 'independent' internal members. It is for this reason that the Report proposes that the Committee should continue to be able to co-opt persons, other than members of the Council, to serve. The Council believe that it would be better for the Audit Committee to co-opt such members than for them to be nominated by other bodies, such as the Board of Scrutiny, as suggested by Dr Cowley. Nomination by the Board or other bodies risks confusing the executive roles of the various bodies, the post hoc scrutiny role of the Board of Scrutiny, and the different process of audit. However, the Council have agreed that at least one of the two persons who may be co-opted should be a member of the Regent House and propose that Regulation 1(d) as set out in the Report be amended to read:

Dr Cowley suggested that the proposals for the Audit Committee should be fast-tracked based on the present composition of the Council. This is indeed the Council's intention and the recommendations of the Report are framed to achieve this. The recommendations make no assumptions about the outcome of the current consultation on governance.

Dr Cowley commented that it might be possible under new arrangements for an external Chair of the University Council to serve on the Audit Committee. The Council agree with Dr Cowley that this would not be desirable, and had taken note of the point, to be taken into account should external membership of the Council be introduced.

Other points made by Dr Cowley included a question about the remuneration of external members of the Audit Committee. The Council do not intend to provide remuneration beyond proper expenses.

Dr Evans raised the possibility that the Chair of the Audit Committee should not be on the University Council. It is strong guidance from the HEFCE that the Chairs of University Audit Committees should serve on bodies equivalent to the Council. It is also a recommendation of the Shattock Review that the Chair of the Audit Committee should be external. It is a combination of these two requirements which leads to the scheme set out in the preamble of the Council's Report.

Dr Evans asserted that the Report sought approval for a proposition that the Chair of the Audit Committee should be one of the external members of the Council. Although the preamble of the Report suggests this arrangement should external membership of the Council be introduced, the formal recommendations of the Report cannot, because it has not yet been decided whether or not there should be external membership of the Council. Consultation about governance matters is currently taking place, and no proposals about this aspect can be before the Regent House until the Council report about it in the Easter Term.

The Council are accordingly submitting a Grace to the Regent House for the approval of the recommendations for the revised composition of the Audit Committee as set out in their Report and amended above (Grace 1, p. 659).

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Cambridge University Reporter, 27 March 2002
Copyright © 2002 The Chancellor, Masters and Scholars of the University of Cambridge.