Audit Committee, 19 January 2004

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• Publié par: Orgie
• Nombre de lectures: 13
• Langue: English

Extrait

Agenda Item No:

Report No:

Report Title:

Corporate Governance in Local Government – Compliance

with the CIPFA/SOLACE Framework

Report To:

Audit Committee

Date: 19 January 2004

Ward(s) Affected:

All

Report By:

Director of Finance and Community Services

Contact Officer(s):

David Heath, Chief Internal Auditor

Purpose of Report:

To inform Councillors of the best practice guidance on Corporate Governance in

Local Government and future steps to adhere to this guidance.

Officers Recommendation(s):

1

That the Audit Committee approves officer proposals set out in paragraph 5.1 to enable

the Council to meet the CIPFA/ SOLACE Framework for Corporate Governance.

Reasons for Recommendations

1

To ensure the Council follows best practice for Corporate Governance as identified by

the CIPFA/SOLACE Framework.

2

To meet the requirements identified in the Annual Audit Letter 2003 in respect of the

CIPFA/SOLACE Framework.

Information

3

Background

3.1

During the late 1980s, the term corporate governance rose to prominence in the

private sector following a number of high profile business failures and scandals

including BCCI and Maxwell Communications. Amid calls for measures to

increase control and responsibility in both the private and public sectors a series

of review bodies were set up in the 1990s. These resulted in:

•

The Cadbury Report,

The Financial Aspects of Corporate Governance

in

1992 that recognised the three fundamental principles of corporate

governance as being openness, integrity and accountability.

•

The report of the Nolan Committee,

Standards of Conduct in Local

Government in England, Scotland and Wales

in 1997 that determined seven

principles for conduct in public life as being selflessness, integrity,

objectivity, accountability, openness, honesty and leadership.

3.2

Much of the Government’s modernising agenda impacts on Corporate

Governance. The following key elements of that agenda have an impact:

•

Democratic renewal

•

Community leadership

•

Engagement of the local community

•

Accountable and responsive services

•

Continuous improvement

•

High standards of conduct and probity

A common theme running through all of the requirements is the need for local

authorities to review the various systems and processes they have in place for

managing both their own internal affairs and their relationships with key

stakeholders. Together these systems and processes comprise Corporate

Governance.

3.3

The Chartered Institute of Public Finance (CIPFA) and Society of Local

Authority Chief Executives (SOLACE) recognised the need for a coherent

approach to the Government’s modernisation agenda as local authorities review

the arrangements for Corporate Governance. In 2001 CIPFA/SOLACE

published

Corporate Governance in Local Government – A Keystone to

Community Governance,

the document

included a Framework and supporting

Guidance Note.

4

Corporate Governance in Local Government – A Keystone to Community

Governance – Framework and Guidance Note

4.1

This document advises that local authorities should review their existing

Corporate Governance arrangements against the Framework, and prepare and

adopt a local Code of Corporate Governance. Furthermore, that authorities must

be able to demonstrate that they are complying with the underlying principles of

good governance which are openness and inclusivity, integrity and

accountability.

4.2

The Framework recommends that the fundamental principles of Corporate

Governance need to be reflected in the different dimensions of a local

authority’s business. These dimensions are defined as:

•

Community Focus

•

Service Delivery Arrangements

•

Structures and Processes

•

Risk Management and Internal Control

•

Standards of Conduct

4.3

The Framework outlines how the principles of Corporate Governance should be

reflected in each of the five dimensions, as detailed in Appendix A.

4.4

The Framework recommends that to achieve the principles of good Corporate

Governance, local authorities should develop a local Code of Corporate

Governance with a series of controls, procedures and processes for each of the

five dimensions.

4.5

The separate Guidance Note document is aimed at assisting authorities in:

•

Considering how they might best go about reviewing their Corporate

Governance arrangements

•

Drawing up their own codes of Corporate Governance

•

Demonstrating compliance with the principles of good Corporate

Governance.

The Guidance Note also provides examples of what documents, processes and

procedures could be used to demonstrate compliance with the CIPFA/SOLACE

Framework.

4.6

The 2003 Annual Audit Letter recommended that the Council review its

arrangements for Corporate Governance against best practice as defined by the

CIPFA/SOLACE Framework. Furthermore, that the Council considers whether

its arrangements are appropriate to its needs, that they comply with the

CIPFA/SOLACE Framework and are operating as intended.

5

Proposals to ensure the Council complies with the CIPFA/SOLACE Framework

5.1

The Council has already put in place a range of procedures and controls to

ensure Corporate Governance is being addressed. However to comply fully with

the CIPFA/SOLACE Framework the following actions will be necessary:

•

Compare the Council’s arrangements for Corporate Governance with the

best practice as set out in the CIPFA/SOLACE framework (by March 2004)

•

Identify any issues that have not been addressed by the Council and

consider how they should be actioned (by April 2004).

•

Prepare a local Code of Corporate Governance (by June 2004).

5.2

The Chief Internal Auditor has undertaken an initial assessment, which indicates

that the Council largely complies with all the key areas of the Framework.

5.3

The Chief Internal Auditor and his team will undertake a detailed review of

Corporate Governance arrangements and will prepare the draft local code on

behalf of the Council.

The experience of other District Councils is that

undertaking the review and developing a local code is potentially a significant

task that involves liaison with a number of officers and Councillors.

5.4

The Audit Committee will be aware that the Staff and Corporate Policies

Review Board is currently undertaking a policy review of Corporate

Governance.

However, that review focuses upon the Council’s Constitution,

scrutiny and the role of Councillors.

Preparing a local Code of Corporate

Governance is a distinct and separate activity that can progress independently of

the Review Board’s work, although a copy of this report can be provided to the

Review Board for information.

Financial Appraisal

6

There are no additional financial implications from this report.

Environmental Implications

7

I have completed the Environmental Implications Questionnaire and there are no

significant effects as a result of these recommendations.

Background Papers

8

Corporate Governance in Local Government – A Keystone for Community Governance

– Framework and Guidance Note (CIPFA/SOLACE) 2001.

Appendix A

The five Dimensions of a Local Authority’s business

Dimension 1: Community Focus

Through carrying out their general and specific duties and responsibilities and their ability to

exert wider influence local authorities should:

•

Work with their communities.

•

Exercise leadership in their local communities where appropriate.

•

Undertake an ambassadorial role to promote the well –being of their area,

where appropriate.

Local authorities should therefore maintain effective arrangements:

•

For explicit accountability to stakeholders for the authority’s performance

and its effectiveness in the delivery of services and sustainable use of

resources.

•

To demonstrate integrity in the authority’s dealings in building effective

relationships and partnerships with other public agencies and the

private/voluntary sectors.

•

To demonstrate openness in all their dealings.

•

To demonstrate inclusivity by communicating and engaging with all

sections of the community to encourage active participation.

•

To develop and articulate a clear up to date vision and corporate strategy in

response to community needs.

Dimension 2: Service Delivery Arrangements

A local authority should ensure that continuous improvement is sought, agreed policies are

implemented and decisions carried out by maintaining arrangement which:

•

Discharge their accountability for service delivery at a local level.

•

Ensure effectiveness through setting targets and measuring performance.

•

Demonstrate integrity in dealing with service users and developing

partnerships to ensure the right provision of services locally.

•

Demonstrate openness and inclusivity through consulting with key

stakeholders.

•

Are flexible so that they can be kept up to date and adapted to accommodate

change and meet user wishes.

Dimension 3: Structures and Processes

A local authority needs to establish effective political and managerial structures and process

to govern decision making and to exercise authority within the organisation. A local authority

should maintain arrangements to:

•

Define the role of members and officers to encourage accountability, clarity

and good ordering of the authorities business.

•

Ensure that there is proper scrutiny and review of all aspects of performance

and effectiveness.

•

Demonstrate integrity by ensuring a proper balance of power and authority.

•

Document clearly such structures and processes and to ensure that they are

communicated and understood to demonstrate openness and inclusivity.

•

Ensure such structures and processes are kept up to date and adapted to

accommodate change.

Appendix A (cont’d)

Dimension 4: Risk Management and Internal Control

An authority needs to establish and maintain a systematic strategy, framework and processes

for managing risk. Together, these arrangements should:

•

Include making public statements to stakeholders on the authority’s risk

management strategy, framework and processes to demonstrate

accountability.

•

Include mechanisms for monitoring and reviewing effectiveness against

agreed standards and targets and the operation of controls in practice.

•

Demonstrate integrity by being based on robust systems for identifying,

profiling, controlling and monitoring all significant strategic and operational

risks.

•

Display openness and inclusivity by involving all those associated with

planning and delivering services, including partners.

•

Include mechanisms to ensure that the risk management and control

practices is monitored for continuing compliance to ensure that changes in

circumstances are accommodated and that it remains up to date.

Dimension 5: Standards of Conduct

The openness, integrity and accountability of individuals within a local authority form the

cornerstone of effective corporate governance. The reputation of the authority depends on the

standards of behaviour of everyone in it, whether members, employees or agents contracted to

it. Therefore members and senior officers of a local authority will need to:

•

Exercise leadership by conducting themselves as role models for others

within the authority to follow.

•

Define standards of personal behaviour that are expected from members and

staff and all those involved in service delivery, and put in place

arrangements to ensure:

(i)

Accountability, through establishing systems for

investigating breaches and disciplinary problems and

taking action where appropriate, including arrangements

for redress.

(ii)

Effectiveness in practice through monitoring

compliance.

(iii)

That objectivity and impartiality are maintained in all

relationships to demonstrate integrity.

(iv)

That such standards are documented and clearly

understood to display openness and inclusivity and are

reviewed on a regular basis to ensure that they are kept

up to date.