Ordinary Resolution E: Application to Audit Committee

Ordinary Resolution E.

“That member applications to serve on the audit committee are circulated and appointments are made by 31st March 2021.”
Moved by Nick Meyne, Secretary

Resonate Rulebook

Just putting down the marker that we need an audit committee in place by the end of Q1 2021.

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If you are interested in running for a position on this future Audit Committee, below are the rights and responsibilities of that committee. The committee will be up to four people elected annually and they must be from at least two shareholder classes: “Music-Makers (artists & labels)”, “Fans (listeners)”, and “Collaborators (staff & workers)”. The Audit Committee thus cannot be made up of only artists, or only listeners, or only staff, for example.

Board members cannot serve on the Audit Committee.

Role of Audit Committee:

a. to assist and check the preparation of financial records presented
to General Meetings so that they are accurate, authentic and meet
the needs of members;

b. to assist and check the preparation of the information needed for a
social audit;

c. to organise elections in accordance with Clause 38;

d. to record, check and authenticate that the procedures are being
followed when voting takes place in a General Meeting.

e. to regularly review the Board has maintained up-to-date records of
all qualifying contributions made by members.

@Nick_M It is a bit unclear to me in the current Rulebook: it says that the Audit Committee is elected “At the third AGM and every AGM thereafter” but it also says in the same section (53) that “The board shall recommend a choice of financial and social auditors for approval in General Meeting.”

Are these two things connected? Does the board propose who shall be on the Audit Committee, which then is subject to a vote by members at the AGM, or do members run for the spots directly and then are voted onto the Audit Committee at the AGM?

I’d love an explanation on how this process works in more detail. How does someone get onto the Audit Committee?

The Rulebook is not an operating manual. It says ‘what’ has to be done, but not really ‘how’ in any detail, and that can lead to some ambiguity and necessary interpretation. We need to write in the detail of policy and process of ‘how’ things are done. In this instance I think the board needs to define roles on the committee and then ask the wider membership for volunteers with relevant experience to apply. If there are more applicants than slots available, we’d hold an election, probably a poll on here. Ideally, we should have an accountant and perhaps some contracting/legal and hr expertise in the audit committee team, as well as some general governance experience. Motivation and common-sense engagement come top, though I think? I hope we can find folks to help out. Approving the names by the wider membership at a general meeting at the end of Q1 would be a good confirmation of the mandate. Does that make sense?

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The choice of external auditor is separate, and something that is required by our jurisdiction. Accounts must be prepared, checked internally by audit committee and then certified by an external auditor for compliance before they can be accepted by the Registrar. Tax and other statistical returns are normally part of this process.

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It appears from the description that part of the purpose of the Audit Committee is to check that the Board is fulfilling its own responsibilities. This is made more explicit by the guidance that board members themselves cannot serve on the Audit Committee.

Wikipedia: “The central objective of a social audit is to monitor, track, analyze, and evaluate government performance, thus making public officials accountable for their actions and decisions. As an evaluation of government performance, a social audit exercise can be considered a mechanism of social oversight: that is, the control that citizens can exert on their government officials to ensure that they act transparently, responsibly and effectively.”

It seems sensible that the Board should offer guidance on what skills the members of the Audit Committee should have collectively (in order to fulfill their own responsibilities). At the same time, it appears that a key part of the Audit Committee’s governance role is to review and verify that the Board and Co-op themselves are following co-op processes, so I think that the election process for the Audit Committee should be independent as possible from the Board itself.

I’ve been reading Workplace Democratization by Paul Bernstein. The purpose of the Audit Committee we are proposing reminds me of another process I read about in the Scott-Bader Commonwealth:

Bernstein: “Full-time managers are further supervised by the total Commonwealth through a unique organizational mechanism invoked annually at the general meeting. Twelve members are selected by lot, as a kind of jury, to approve or state reservations on the board of directors’ conduct of company business over the preceding year. If this panel of representatives should decide that the board’s performance has not been satisfactory the board is given three months maximum to take appropriate remedial action. Then it must report back to the Commonwealth, which resumes its general meeting for this purpose. Another twelve persons are then selected by lot as representatives of the whole Commonwealth and are asked to render their judgment. If this panel approves, then business may proceed. If not, then the task falls on the trustees to decide which directors may need to be replaced.”

The Audit Committee we are proposing has different responsibilities from the sortition jury at Scott-Bader, but the intent is similar. In order to perform a good and trustworthy “audit” on behalf of members, the election of the Audit Committee should be sufficiently independent of the Board.