Appointment arrangements for
audit sub committees of the DH
Audit & Risk Committee
Background
Audit committees have played a pivotal role in reviewing PCT and SHA annual reports and
accounts and governance statements. They provide an essential assurance mechanism to
boards on the rigour of the processes and the quality of the data that lie behind these
documents. When SHAs and PCTs cease to be statutory bodies on 1 April 2013, the statutory
status of this scrutiny function is no longer present.
This role must be maintained for the 2012/13 accounts, not only to support robust processes at
a local level, but also to support the consolidation process into the Department’s own resource
accounts. The Chief Executive of the NHS, as Accounting Officer for the NHS relies on the
quality of both the annual accounts and governance statements to inform disclosures in the
resource accounts and the scrutiny provided by audit committees provides additional
assurance on these matters.
It is for this reason the Department will facilitate establishment of audit committees to support
the final accounts process for 2012/13.
The approach set out below is designed to draw on the expertise of current audit committee
members to form audit sub committees of the Department’s own Audit and Risk Committee. It
provides a mechanism with the appropriate status to discharge the function effectively.
Nature of appointment
Existing non executive directors (NEDs) will be appointed as non-executive members of audit
sub committees of the Department’s Audit and Risk Committee. They will not be employees
but will receive an attendance fee equivalent to daily rates received for their current NED roles.
Appointments will be for a fixed period of three months. They will run 1 April 2013 to 30 June
2013.
Attached at Appendix 1 is the appointment letter the Department will use for these roles. It
provides further detail on expenses, conduct, management of conflicts of interest and personal
liability.
Scope
The scope of the audit sub committees will be to review the annual report, financial statements
and governance statement prior to signing by the Accountable Officer and Director of Finance.
Appendix 2 contains model terms of reference applicable to sub committees that reflect this
scope.
Where in the course of an audit sub committee meeting, members identify issues that, in their
view, is not addressed adequately by the accountable officer this should be recorded in the
minutes and also summarised in a return (to be supplied by the Department of Health)
addressed to the chair of the Audit and Risk Committee.
Both the minutes of audit sub committee meetings and these returns must be sent to
nhsfinance.transition@dh.gsi.gov.uk by 21 June 2013.
2
Eligibility
The scope and the nature of the appointment (in being a member of a sub-committee of the
Department of Health) will mean that there is no legal barrier to individuals who have accepted
NED appointments in other NHS organisations, being able to accept positions on these sub
committees. This extends to individuals that have accepted roles as lay members of clinical
commissioning groups. However, individuals that do hold other non-executive or lay roles
within the NHS should have particular regard to the conflict of interest section within letters of
appointment.
Membership
The composition of these sub committees must satisfy the following criteria:




The cluster for the audit committee should be based on existing PCT and SHA clusters
structures.
Each cluster audit sub committee should have a minimum of three members (with two
being quorate).
Each cluster audit sub committee should have knowledge and experience of the cluster
in which the PCT or SHA was located. To achieve this the Department expects
membership to be drawn from existing cluster audit committee NEDs with at least one
member having knowledge of the relevant cluster.
Membership includes, where possible, the existing chair of the cluster.
Local flexibility is permitted on the maximum size of these sub groups. This is to acknowledge
the fact that in some clusters there are local arrangements that support audit committees to
discharge their functions, for example local audit groups, will also no longer exist from 1 April
2013. The number of audit sub committee members should be driven by the number and
knowledge required to provide adequate scrutiny of the accounts within the published
timetable. Where membership exceeds three for any one audit sub committee, an explanation
should be returned along with nomination documents.
Nomination process
Each member must be nominated by the cluster Accountable Officer. The nomination form to
be used is attached at Appendix 3. This must be completed for each individual and returned to
nhsfinance.transition@dh.gsi.gov.uk by 28 February 2013.
Once received nominations will be approved by a DH official on behalf of the Chair of the Audit
and Risk Committee. Notification will then be provided to Directors of Finance and to NHS
Business Services Authority (BSA) and personal information for payment will be collected.
Further information
Appendix 4 sets out key dates for this process. Any queries relating to non-executive member
appointments should be referred to Alistair Morgan (alistair.morgan@dh.gsi.gov.uk).
3
Appendix 1
NON-EXECUTIVE MEMBER LETTER OF APPOINTMENT
[NED Name & Address]
1. Commencement of appointment
Your appointment is effective from 1 April 2013.
2. Duration
2.1.
Subject to earlier termination your appointment will be for a fixed period of three months.
It will run from 1 April 2013 to 30 June 2013.
3. Roles and responsibilities of non-executive member
3.1.
You are appointed, as a Non-Executive Member of the [insert cluster name] audit sub
committee (the sub committee) of the Department of Health’s Audit and Risk
Committee.
3.2.
Your appointment shall not be construed as, or taken to create, a contract of
employment or any employment relationship between you and the Department of
Health (the Department).
3.3.
You are appointed to attend meetings of the sub committee. This will involve an
estimated time commitment of up to three days (one day preparation and one day
meeting for the scrutiny of the accounts and one day contingency to provide for local
circumstances).
3.4.
As a Non-Executive Member your function is not to take executive decisions but to
influence, advise and support as well as provide external scrutiny and expertise in
association with independence of thought which informs the accounts and annual
report process. You will add value by offering independent constructive challenge to
the preparation of these and any associated closure documents.
4. Remuneration
4.1.
You will receive an attendance fee of £[insert daily rate – this must equal rate currently
received by member in their cluster NED role] per day.
4.2.
Remuneration is taxable under Schedule E and subject to Class I National Insurance
contributions. Any queries on these arrangements should be taken up with HMRC.
Remuneration is not pensionable.
4
4.3.
Sub committee members will also be eligible to claim allowances, at rates set centrally,
for travel and subsistence costs necessarily incurred on sub committee business.
4.4.
The fee of Non-Executive Board Members will be disclosed in the annual departmental
accounts, in accordance with the HM Treasury Resource Accounting Manual. In
entering into this agreement and accepting this appointment you thereby consent to this
disclosure.
5. Expenses and Subsistence
5.1.
You should claim your fee and travel expenses retrospectively after each meeting and
payment will then be made by credit transfer to your bank or building society. Given
the short term nature of this appointment any claim for expenses must be submitted by
30 June 2013. A copy of the Department’s expenses guide is attached for your
information.
5.2.
Both fees and expenses are subject to deduction of income tax and earnings related
National Insurance (ERNIC) at source under the PAYE scheme.
6. Termination of appointment
6.1.
Either party may terminate this contract for any reason before the expiry of the fixed
period by giving one week’s notice in writing.
6.2.
The Department may terminate your appointment immediately in writing, if you have:





been guilty of any conduct that in the opinion of the Department brings or is likely to
bring you or the Department into disrepute or is materially adverse to the interests of
the Department;
committed a material breach of your obligations as set out in this letter;
failed to attend a meeting of the [insert cluster name] audit sub committee unless the
Department is satisfied that the absence was due to a reasonable cause; and that you
will be able to attend meetings of the [insert cluster name] audit sub committee within
such a period as the Department considers reasonable;
been guilty of any fraud or dishonesty; or
subsequent to your appointment, you become disqualified for appointment.
7. Suspension
7.1.
The Department may suspend you from any or all of your duties if it appears to the
Department that any of the conditions set out in paragraph 6.2 of these terms may be
satisfied
7.2.
You will receive no notice if this appointment is terminated early by the agreement of
both parties.
5
8. Conduct
8.1.
It is essential that you are, and are seen to be honest and impartial in the exercise of
your duties. You must not allow your judgement or integrity to be compromised or
permit there to arise any reasonable grounds for suspicion as to the compromise of
your judgement and integrity. The Seven Principles of Public Life, attached for your
information , are considered to provide good guidance in the standards expected of
Non-Executive Members.
8.2.
If you believe you are being required to act in a way which:




is illegal, improper, or unethical;
is in breach of constitutional convention or a professional code;
may involve possible maladministration; or
is otherwise inconsistent with the Seven Principles of Public Life;
8.3.
You should report the matter in writing to the Chair of the Department’s Audit and Risk
Committee.
9.
Conflicts of interest
8.4.
You must declare to the Chair of the Department’s Audit and Risk Committee any
personal or business interest which may, or may be perceived (by a reasonable
member of the public) to influence your judgement in performing your functions and
obligations under this agreement. These interests include (without limitation), personal
direct and indirect pecuniary interests, and, any such interests of your close family
members and/or of people living in the same household as you or as your close family
members.
8.5.
must inform the Chair of the Department’s Audit and Risk Committee in advance of any
new appointments that may impinge on your performance of your functions and
obligations under this Agreement.
8.6.
You must not occupy any paid post in any national political party or hold any politically
sensitive or high level post in a political party (whether paid or unpaid).
8.7.
You must inform the Chair of the Department’s Audit and Risk Committee if it is your
intention to take up a position in any political party.
8.8.
It will be your responsibility to withdraw from any discussions where you have any
interests that may, or may be perceived to, influence your judgement.
8.9.
All information on potential conflicts of interest will be held by the Permanent
Secretary’s Office and could be disclosed to the public under the Freedom of
Information Act. In entering in to this agreement and accepting this appointment you
thereby consent to this disclosure.
9. Personal liability
9.1.
The Department does not issue any indemnity, in respect of work as a Non-Executive
Member of the Department’s Audit and Risk Committee and this will also apply to
6
members of the [insert cluster name] audit sub committee. However, individual NonExecutive Members who have acted honestly, reasonably, in good faith and without
negligence will not have to meet out of their own personal resources any personal civil
liability which is incurred in execution or purported execution of their board functions.
10. Confidentiality
10.1.
You acknowledge that all information acquired in the course of carrying out your duties
during your appointment is confidential to the Department of Health and should not be
released, communicated or disclosed to third parties or used for any reason other than
in the interests of the Department, either during your appointment or following
termination (by whatever means) without prior clearance from the Department. The
restriction shall cease to apply to any confidential information which may (other than by
reason of your breach) become available to the public generally. Nothing in this
paragraph would prevent you from disclosing information which you are entitled to
disclose under the Employment Rights Act 1996, as amended by the Public Interest
Disclosure Act 1998, provided that the disclosure is made in accordance with the
provisions of that Act.
11. Data Protection
11.1.
By agreeing to these terms you consent to the Secretary of State for Health holding and
processing data about you for legal, personnel, administrative and management
purposes and in particular to the processing of any sensitive personal data (as defined
in the Data Protection Act 1998) relating to you.
Signed ______________________________
On behalf of the Department of Health
Signed ______________________________
[NAME OF NE Member]
_______________
(Date)
_______________
(Date)
7
Appendix 2
[Template]
[Insert name]
Audit sub-committee of the Department of Health Audit
and Risk Committee
Terms of Reference
1. Introduction
The audit sub committee to review the accounts and annual reports of
 [PCT/SHA 1];
 [PCT/SHA 2];
 [PCT/SHA 3];
 [PCT/SHA 4];
 [PCT/SHA 5]; and
 [PCT/SHA 6]
is established in as a sub committee of the Department of Health’s Audit and Risk Committee (DH
A&RC). These terms of reference set out the membership, remit, responsibilities and reporting
arrangements of the committee.
2. Membership
The members of the audit sub-committee shall be appointed by a Department of Health official and
shall consist of [insert number of members – minimum of 3] members.
The tenure of each appointment will be from 1 April 2013 to 30 June 2013 inclusive.
3. Attendance
The Accountable Officer, Director of Finance and appropriate internal and external audit
representatives for the above organisations shall attend meetings.
[Insert individual with secretariat responsibility] shall take minutes of the meeting and provide
appropriate support to the Chair and Committee members.
4. Quorum
Two members must be present to achieve a quorum.
5. Frequency and notice of meetings
The sub committee is expected to meet at least once between April 2013 and June 2013.
6. Remit and responsibilities of the committee
Review the annual report, financial statements and governance statement prior to signing by the
Accountable Officer/Director of Finance, focusing particularly on;

the wording in the governance statement;
8

changes in, and compliance with, accounting policies and practices;

unadjusted mis-statements in the financial statements;

significant judgements in preparing the financial statements;

significant adjustments resulting from audit;

letter of representation; and

qualitative aspects of financial reporting.
7. Relationship with the Department of Health Audit and Risk Committee
Minutes of meetings should be submitted to the DH A&RC nhsfinance.transition@dh.gsi.gov.uk by 21
June 2013. These should be submitted along with a return (provided by DH) summarising issues, in the
opinion of the sub-committee, inadequately addressed by the Accountable Officer.
[Date agreed]
9
Appendix 3
[Insert cluster name] audit sub committee nomination form
This form must be signed by the Accountable Officer of the PCT or SHA cluster and returned
to nhsfinance.transition@dh.gsi.gov.uk by 28 February 2013. Before returning please insert
RESTRICTED – PERSONAL DATA in the sheet header.
Personal Information
Name
Contact email address
Post Information
Job Title
Start Date of Fixed Term
End Date of Fixed Term
Daily rate
Member/chair1 of [insert cluster name] audit sub committee
1 April 2013
30 June 2013
[This must equal rate currently received by member in their
cluster NED role]
Base with Address
Notice
From employer
From employee
One week
One week
Declaration of any
NHS appointments
held
Nominated by: ______________________ Job Title : _______________________
Date : ___________________Signature : _________________________________________
Appointee Declaration:
I agree that the above information is a true and accurate record.
Name :____________________________ Date : __________________________________
Signature :_________________________________________________________________
1
Delete as applicable.
10
Appendix 4 timeline
Latest date/action by
28 February 2013
Data/Information required
Non executive member nominations
form supplied by clusters.
If membership for any cluster exceeds
three then the cluster should also
provide a brief explanation supporting
the increased membership.
15 March 2013

Non executive member
appointment confirmations issued

Request for personal information
for payment issued.
21 June 2013
Minutes of sub-committee meetings
and ‘issues’ return submitted to DH
30 June 2013
DH receives final expenses
submissions.
11