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¾¾¾ITEM ITEM South Hams District CouncilExecutive – 4 December 2003 LOCAL CODE OF CORPORATE GOVERNANCE FOR SOUTH HAMS DISTRICT COUNCIL Report of the Chief Finance and Administration Officer and Monitoring Officer Statutory Powers: Section 111 Local Government Act 1972. Financial Implications: None: within existing budgets. Purpose 1. The purpose of this report is to: set out the principles of a Code of Corporate Governance; describe South Hams District Council’s intention to discharge its responsibilities under the Code, and how the local code will be tested and monitored annually, and invite members to adopt the Code on behalf of the Council. Link to ‘Aim and Priorities’: Improve core service performance in a cost-effective way. Recommendations It is recommended that Members adopt the Code of Corporate Governance in accordance with this report and the attached Appendix A. Background Introduction to the Code Corporate Governance 2. The CIPFA/SOLACE document, Corporate Governance in Local Government, defines Corporate Governance as ‘the system by which local authorities direct and control their functions and relate to their communities’. 3. The document accepts that to a significant extent, local government already conforms, in whole or in part and in many different ways, with the principles of good governance through a strong regulatory framework of control, and robust arrangements for ...
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ITEM South Hams Executive 4 December 2003 D i s t r i c t C o u n c i l LOCAL CODE OF CORPORATE GOVERNANCE FOR SOUTH HAMS DISTRICT COUNCIL Report of the Chief Finance and Administration Officer and Monitoring Officer Statutory Powers: Section 111 Local Government Act 1972. Financial Implications: None: within existing budgets. Purpose 1. The purpose of this report is to: ¾ set out the principles of a Code of Corporate Governance; ¾ describe South Hams District Council’s intention to discharge its responsibilities under the Code, and how the local code will be tested and monitored annually, and ¾ invite members to adopt the Code on behalf of the Council. ‘ ’ Link to Aim and Priorities : Improve core service performance in a cost-effective way. Recommendations It is recommended that Members adopt the Code of Corporate Governance in accordance with this report and the attached Appendix A. Background Introduction to the Code Corporate Governance 2. The CIPFA/SOLACE document, Corporate Governance in Local Government , defines Corporate Governance as ‘the system by which local authorities direct and control their functions and relate to their communities . ’ 3. The document accepts that to a significant extent, local government already conforms, in whole or in part and in many different ways, with the principles of good governance through a strong regulatory framework of control, and robust arrangements for monitoring and review.
Code Of Corporate Governance
4. It makes the point however that arrangements have been developed in an ad hoc manner over many years, and that local government is the only part of the public services that has not responded formally to the recommendations of the Cadbury report and the Hampel report. The Principles of Corporate Governance 5. The Report of the Committee on the Financial Aspects of Corporate Governance (the Cadbury Report) identified three fundamental principles of corporate governance as: ¾ openness ¾ integrity, and ¾ accountability. 6. To define core principles in its publication Corporate Governance: A Framework for Public Service Bodies (July 1995) , CIPFA built upon the three principles identified in the Cadbury Report. It redefined them to reflect the public services context. 7. In particular, public service bodies have to satisfy a more complex range of political, economic and social objectives, and subject them to a different set of external constraints and influences. They are also subject to forms of accountability to their various stakeholders, which are different to those that a private company owes to its shareholders. 8. For local authority purposes, the principle of openness has been enhanced to emphasise the need to engage with their communities on an inclusive basis, taking care to include the many distinct communities of place and of interest, including those often referred to as ‘hard to reach’ parts of the community. Local Code 9. The CIPFA document Corporate Governance in Local Government: A Keystone for Community Governance Framework, defines how the principles that underpin good governance, openness and inclusivity, accountability and integrity should be reflected in the dimensions of a local authority’s business. 10. It also stresses that systems and processes must be: ¾ monitored for their effectiveness in practice, and ¾ subject to review on a continuing basis to ensure that they are up to date.
Code Of Corporate Governance
’ South Hams District Council s Intention to Discharge Responsibilities Under the Code 11. Direct responsibility for compliance will rest with the Section 151 Officer, the Monitoring Officer and Internal Audit Manager are a group of individuals within the Council who have the appropriate knowledge, expertise and levels of seniority to consider the extent to which South Hams complies with the principles and elements of corporate governance set out in the Framework. Much of the work involves issues of legal and financial propriety and includes: ¾ identifying systems, processes and documentation that provide evidence of compliance; ¾ identifying the individuals and committees responsible for monitoring and reviewing the systems, processes and documentation identified; ¾ identifying issues that have not been addressed in the authority and consider how they should be addressed; and ¾ identifying the individuals who would be responsible for undertaking the actions that are required. 12. The code is organised into the five dimensions outlined by CIPFA/SOLACE (Appendix A): ¾ Community Focus; ¾ Service Delivery Arrangements; ¾ Structures and Processes; ¾ Risk Management and Internal Control; and ¾ Standards of Conduct. 13. To discharge the Council’s responsibilities under the Code, it is proposed that the officers named in paragraph 11 will: ¾ review the evidence annually and report to CMT any actions required; ¾ report the results of monitoring and testing to Scrutiny and the Standards Committee, as appropriate, on an annual basis. Testing and Monitoring the Code 14. Appendix A to this report provides examples of the systems, processes and documents that are cited by the Council as evidence of compliance with good practice under each of the five dimensions. 15. It is intended that the review be reported on both within the Council, to Scrutiny, and the Standards Committee, and externally within the published statement of accounts. In doing this, South Hams is looking to provide assurance that: ¾ its corporate governance arrangements are adequate and operating effectively in practice, or
Code Of Corporate Governance
¾ where review of the corporate governance arrangements has revealed gaps, what actions the Council plans to take to ensure effective governance in future. 16. Internal audit will test that the Code is being adhered to and prepare a report annually for presentation to Scrutiny and the Standards Committee. Risk Assessment 17. As discussed above, CIPFA makes the point that Corporate Governance arrangements have been developed in an ad hoc manner over many years. 18. There is a risk that if the Corporate Governance process is not formalised and brought together, some aspects may fall by the wayside and the Council will not be able to readily demonstrate to stakeholders and inspectors that the principles are being adhered to. The arrangements proposed will mitigate this risk. Human Rights Act 19. Corporate Governance arrangements will give due regard to the implications of the Human Rights Act. Conclusion 20. The CIPFA/SOLACE document, Corporate Governance in Local Government, makes the point that corporate governance arrangements have been developed in local government in an unstructured manner over many years. 21. This comment applies to South Hams District Council, with many of the documents referred to in the proposed local ode (Appendix A) already being produced, reviewed and presented to members. 22. A local Code, however, will bring these individual arrangements together into a formal process that will ensure that the Council has discharged its responsibilities under the Code. Allan Goodman Executive Internal Audit Manager 4 December 2003 Graham Rowe Monitoring Officer Mark Seymour Chief Finance and Administration Officer
Code Of Corporate Governance
Report Appendices Appendix A Local Code Background Documents Corporate Governance : A Framework for Public Service Bodies: CIPFA (1995) Accountability : A Framework for Public Services: CIPFA (1998) Corporate Governance in Local Government: A Keystone for Community Governance: CIPFA (2001) Reference(T:\. . . . . . . . .\ . . . . . . . . . .\ . . . . . . . .doc)
Code Of Corporate Governance
APPENDIX A
Dimension 1: Community Focus CIPFA s view of how the principles of corporate governance should be reflected Through carrying out their general and specific duties and responsibilities and their ability to exert wider influence, local authorities should: • work for and with their communities • exercise leadership in their local communities, where appropriate • undertake an ‘ambassadorial’ role to promote the wellbeing of their area, where appropriate, through maintaining effective arrangements: - for explicit accountability to stakeholders for the authority’s performance and its effectiveness in the delivery of services and the sustainable use of resources - demonstrate integrity in the authority’s dealings in building effective relationships and partnerships with other public and the private/voluntary sectors - demonstrates openness in all their dealings - demonstrate inclusivity by communicating and engaging with all sections of the community to encourage active participation - develop and articulate a clear and up-to-date vision and corporate strategy in response to community needs. The Council s local code reflects the requirements Source documents/processes/other means that will be to: used to demonstrate compliance (a) publish on a timely basis an annual report Annual financial statements presenting an objective, understandable account of Annual business plan the Council’s: Formal annual report activities and achievements financial position and performance The report includes statements: explaining the Council’s responsibility for the financial statements confirming that the Council complies with relevant standards and codes of corporate governance on the effectiveness of the Council’s system for risk management and internal control (b) publish on a timely basis a performance plan Extract from Best Value Performance Plan presenting an objective, balanced and Community strategy understandable account and assessment of the Council’s: current performance in service delivery plans to maintain and improve service quality (c) put in place proper arrangements for the Annual audit letter and other audit reports independent review of the financial and operational Scrutiny committee function reporting process Inspectorate reports (d) put in place proper arrangements designed to Strategic partnership framework encourage individuals and groups from all sections Stakeholders forums’ terms of reference of the community to engage with, contribute to and Area forums’ roles and responsibilities pplaartcieci paaptper ionp rtihaet e wmorokn iotfo rtihneg Cprooucnecsil saens dt op uetn isnu re RAesidelnrtes’p oprat nel structure that they continue to work in practice nnua
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APPENDIX A
Dimension 1: Community Focus (Continued) The Council s local code reflects the requirements to: Source documents/processes/other means that will be used to demonstrate compliance (e) make an explicit commitment to openness in all of Constitution their dealings, subject only to the need to preserve confidentiality in those specific circumstances where it is proper and appropriate to do so, and by their actions and communications deliver an account against that commitment (f) establish clear channels of communication with all Beacon status sections on their community and other stakeholders, Partnership framework and put in place proper monitoring arrangements to Inv ensure that they operate effectively Coemsmtournsi icna tiPoeno sptlrea taecgcyr editation (g) ensure that a vision for their local communities and Community strategy their strategic plans, priorities and targets are Service plans developed through robust mechanisms, and in BVPP consultation with the local community and other key stakeholders, and that they are clearly articulated and disseminated Monitoring and Testing Review of documents by the Section 151 Officer, Monitoring Officer and Internal Audit Manager; Testing of process by internal audit; Report to Scrutiny and the Standards Committee as appropriate.
Code Of Corporate Governance
CIPFA recommended tools for self-assessment purposes Benchmark of the Ideal Authority I&DeA (1999)
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APPENDIX A
Dimension 2: Service Delivery Arrangements CIPFA s view of how the principles of corporate governance should be reflected A local authority should ensure that continuous improvement is sought, agreed policies are implemented and decisions carried out by maintaining arrangements which: discharge their accountability for service delivery at a local level ensure effectiveness through setting targets and measuring performance demonstrate integrity in dealings with service users and developing partnerships to ensure the ‘right’ provision of services locally demonstrate openness and inclusivity through consulting with key stakeholders, including service users are flexible so that they can be kept up to date and be adapted to accommodate change and meet user wishes. The Council s local code reflects the requirements to: Source documents/ rocesses/other means that will be used to demonstrate compliance (a) set standards and targets for performance in the Best value performance plans delivery of services on a sustainable basis and with Best value reviews reference to equality policies (b) put in place sound systems for providing management Performance management and information system information for performance measurement purposes (c) monitor and report performance against agreed Best value performance plans astnadn duanrddesr and targets afnodr develop comprehensive Scrutiny committee reports standable per mance plans (d) put in place arrangements to allocate resources Community Plan according to priorities Service plans Budget (e) foster effective relationships and partnerships with Community strategy other public sector agencies and the private and Adherence to good employment practice voluntary sectors, and consider outsourcing where it is efficient and effective to do so, in d Partnership framework elivering itProtocol for: asenrdv ipcuets i tno plmaeceet pthroe cneesesdess toof tehnes luorce atl hcaot tmhmeyu ny, joint commissioning operate effectively in practice joint funding joint accountability (f) respond positively to the findings and Annual audit letter and other reports recommendations of external auditors and statutory Inspectorate reports inspectors and put in place arrangements for the effective implementation of agreed actions Monitoring and Testing CIPFA recommended tools for self-assessment purposes Review of documents by the Section 151 Officer, -Monitoring Officer and Internal Audit Manager; Testing of process by internal audit; Report to Scrutiny and the Standards Committee as appropriate.
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APPENDIX A
Dimension 3: Structures and Processes CIPFA s view of how the principles of corporate governance should be reflected A local authority needs to establish effective political and managerial structures and processes to govern decision making and the exercise of authority within the organisation. A local authority should maintain arrangements to: define the roles and responsibilities of members and officers to ensure accountability , clarity and ordering of the authority’s 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. The Council s local code reflects the requirements to: Source documents/processes/other means that will be used to demonstrate compliance Balance of Power and Authority (a) put in place clearly documented protocols governing Protocols relationships between members and officers (b) ensure that the relative roles and responsibilities of Constitution executive and other members, members generally Record of decisions and supporting materials and senior officers are clearly defined Roles and Responsibilities Members (c) ensure that members meet on a formal basis regularly Schedule of council meetings to set the strategic direction of the Council and to Performance and management system monitor service delivery Financial standards and regulations (d) develop and maintain a scheme of delegated or Constitution reserved powers, which should include a formal schedule of those matters specifically reserved for the collective decision of the Council (e) put in place clearly documented and understood Constitution management processes for policy development, implementation and review and for decision making, monitoring and financial regulations to govern the conduct of the Council’s business (f) put in place arrangements to ensure that members Members’ induction scheme are properly trained for their roles and have access to Trainin mmittee chairs all relevant information, advice and resource as g for co necessary to enable them to carry out their roles Regular update sessions effectively Training plan (g) ensure that the role of the executive member(s) is/are Constitution formally defined in writing, to include responsibility for providing effective strategic leadership to the Council and for ensuring that the Council successfully discharges its overall responsibilities for the activities of the organisation as a whole
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APPENDIX A Dimension 3: Structures and Processes (Continued) The Council s local code reflects the requirements to: Source documents/ rocesses/other means that will be used to demonstrate compliance (h) ensure that the roles and responsibilities of all Constitution members of the Council, together with the terms of Members’ allowance scheme their remuneration and its review, are defined clearly in writing Roles and Responsibilities Officers (i) ensure that a chief executive or equivalent is made Conditions of employment responsible to the Council for all aspects of Scheme of delegation operational management Statutory provisions Job description/specification Performance management system (j) ensure that a senior officer is made responsible to the Section 151 responsibilities Council for ensuring that appropriate advice is given Statutory provision tfion iat nocni aal lrl eficnoarndcsi aaln dm aatctecrosu, nftosr, kaenedp finorg mpraoinpteari ning an Statutory reports tem of inter Budget documentation effective sys nal financial control Job description/specification (k) ensure that a senior officer is made responsible to the Monitoring officer provisions Council for ensuring that agreed procedures are Statutory provision followed and that all applicable statutes, regulations Job description/specification and other relevant statements of good practice are complied with (l) ensure that the roles and responsibilities of all senior Job descriptions/specifications officers ,r etovigeewth, earr ew idthe fthe terms of their remuneration Pay and conditions of service and its ined clearly in writing Performance review/appraisal (m) adopt clear protocols and codes of conduct to ensure Protocols governing member/manager relations that the implications for supporting community political leadership for the whole council are acknowledged and resolved Monitoring and Testing CIPFA recommended tools for self-assessment purposes Review of documents by the Section 151 Officer, Self Evaluation Tool Kit: New Forms of Political Monitoring Officer and Internal Audit Manager; Management Arrangements I&DeA (2000) Testing of process by internal audit; Report to Scrutiny and the Standards Committee as appropriate. Code Of Corporate Governance - 10 -
APPENDIX A
Dimension 4: Risk Management and Internal Control CIPFA s view of how the principles of corporate governance should be reflected 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 risk displays 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 process is monitored for continuing compliance to ensure that changes in circumstances are accommodated and that it remains up to date. The Council s local code reflects the requirements to: Source documents/processes/other means that will be used to demonstrate compliance (a) develop and maintain robust systems for identifying and Risk management protocol evaluation all significant risks which involve the Control framework proactive participation of all those associated Scrutiny committee role Performance management system (b) put in place effective risk management systems, Scheme of delegation including systems of internal control and an internal it audit function. These arrangements need to ensure IPnetrefronraml aanucde aprpoptroacisola l compliance with all applicable statutes, regulations and Performance management system relevant statements of best practice and need to ensure Fina i l standards and regulations that public funds are properly safeguarded and are used nc a economically, efficiently and effectively, and in accordance with the statutory and other authorities that govern their use. (c) ensure that services are delivered by trained and Job description/personal specifications experienced people Training plan (d) put in place effective arrangements for an objective Performance management system review of risk management and internal control, including internal audit (e) maintain an objective and professional relationship with Inspectorate reports their external auditors and statutory inspectors Annual audit letter and other audit reports Audit protocol (f) publish on a timely basis, within the annual report, an Annual report objective, balanced and understandable statement and assessment of the Council’s risk management and internal control mechanisms and their effectiveness in practice
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