AUDIT SECRET KEPT UNDER WRAPS

A move by Cr Hugh Fraser to discuss in open council an agenda item marked confidential was voted down 5-4 at the 12 September council meeting. The item related to the shire’s audit committee, of which Cr Fraser is a member as a councillor representative.

bc-carl-cowieIn the debate that preceded the vote – from which Cr Antonella Celi excused herself on conflict of interest grounds – Cr Fraser stated that shire CEO Carl Cowie (pictured right) had designated as confidential “this important report” without supplying the required grounds for doing so.

The report to which Cr Fraser referred was apparently the one sought at the 11 July council meeting. That meeting deferred adoption of the 13 April audit committee meeting minutes and instructed management to report on the audit committee’s terms of reference, its status as an advisory committee of council, its powers and its voting protocols.

These instructions could well be construed as unfriendly to the audit committee under its present charter, adopted early this year.

What was in those minutes that so exercised the motion’s mover, Cr Anne Shaw, and its seconder, Cr Bev Colomb? Its contents also stirred councillors Andrew “Billy” Dixon, David Garnock and David Gibb to join them in calling for the report.

Audit committee meeting minutes are generally “wave-through” items. It is clear that the 13 April minutes contain some pretty powerful stuff. Some significance must be placed in the fact that Cr Celi excused herself from the chamber for the debate.

Fast-forward back to 12 September.

Cr Fraser told that meeting: “(Mr Cowie designated) a matter as confidential contrary to the Local Government Act section 77 and contrary to our resolution abolishing the Special Purposes Committee, which requires the CEO to state his grounds or reasons.”

While the minutiae of what Cr Fraser sought to discuss can only be speculated on, he said in answer to Cr Bev Colomb that there was “nothing intrinsically confidential” in the matter he wanted made public.

I’m dealing with the entitlement of the public to know what this item is about,” he said.

Governance manager Joe Spiteri, asked about the implications of discussing an audit committee matter in public, said the committee’s charter “specifically stipulates that all proceedings at audit committee are in the confidential realm.

So it would be contravening the charter, which has been formally adopted by council in February of this year,” he said.

Mr Spiteri added that “there would be scope for us to be contravening the Local Government Act in that [documents contained in the confidential item] have already been deemed confidential.”

Meeting chair Graham Pittock ruled that the matter proceed, over several objections. But the proposal was defeated 5-4, the five being councillors Shaw, Colomb, Dixon, Garnock and Gibb. Those for the motion were councillors Fraser, Tim Rodgers, Tim Wood and Graham Pittock.

In the debate that preceded the vote, Cr Fraser soon confirmed that the confidential item was an “important report on the scope and function of the audit committee charter and what its councillor members can and cannot raise by way of ‘any issue they believe relevant’.” 

The charter states that the committee chairperson “will allow time during audit committee meetings for any committee member to raise any issue they believe relevant”.

This conflicts with the councillor code of conduct, which was amended before council approval on 6 June this year, to direct councillor delegates, including those to the audit committee, to “advise fellow councillors in advance the nature of the voting issues and seek feedback to assist the delegate in exercising a vote on behalf of council”.

Bandicoot invites you to reflect on what these honeyed words actually mean. They are a barely disguised diktat aimed at controlling what the audit committee delegate – in fact, all councillor delegates to all committees – can raise at meetings.

So what, you might ask.

But the shire’s audit function is run by no ordinary committee. Consider this: let’s say a councillor belonging to the council’s dominant faction has overstepped the mark in, say, an area involving spending, and doesn’t want the audit committee poking its nose into the matter – one of high significance under its audit responsibilities and ethical requirements.

Simple solution: instruct the audit committee councillor delegate not to raise the subject, as permitted by the councillor code of conduct.

Take this one step further. What if such a matter is raised by a permanent audit committee member, three of whom are chartered accountants? Is the councillor delegate required by the council code of conduct to remain mute rather than participate in the ensuing discussion, despite possibly having pertinent information?

If so, what are the legal implications of a committee member not raising a significant matter, or refusing to discuss an issue, at an audit committee meeting?

And would there be any point having a councillor as a member of the audit committee so severely hampered by the councillor code of conduct?

Auditors (as Bandicoot has written previously) are the bedrock of organisations, and therefore the good governance of society, from BHP Billiton to humble community groups.

Interference with them can have grievous consequences – even interference that might at first seem trivial and possibly well-meaning can lead to unbalanced books, investigations, and worse.

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