MPS Corporate Governance framework including financial control

Report: 8
Date: 7 December 2007
By: the Director of Strategic Finance on behalf of the Commissioner

Summary

This report provides an overview of the current MPS Corporate Governance Framework which supports the Service in carrying out its functions in accordance with the powers delegated to the Commissioner by the MPA. It also sets out plans to strengthen and consolidate corporate governance including ensuring improved financial control and better coordination and communication of corporate governance across the organisation. The report identifies how work is being progressed, and the planned reporting arrangements to provide the Commissioner and the Authority with reassurance that key processes, structures and policies are embedded within a single, cohesive framework.

The report also describes the work required to comply with the revised audit requirements, which came into force in April 2007. This requirement includes the production of an Annual Assurance Statement (AAS) at the end of this financial year.

This work complements the corporate governance protocol developed by the MPA and will ensure the MPS continues to develop a robust infrastructure to support future needs. The Service will continue to work closely with the MPA in progressing this work.

A. Recommendation

That

1. members note the contents of this report; and

2. endorse the approach taken to support a robust corporate governance framework.
 

B. Supporting information

Current Corporate Governance Arrangements

1. The MPA and MPS already have a range of activities that combine to make up the elements of the current Corporate Governance Framework. These include, but are not limited to:

MPA

1. Standing Orders (including Financial and Contract Regulations and the Protocol on compensation cases);
2. Business Plan (incorporating the Medium Term Financial Plan);
3. Code of Corporate Governance (to be amended);
4. Environmental Policy;

Joint MPA/MPS

1. Procurement Strategy and policies including the GLA group Sustainable Procurement and Supplier Diversity Policy;
2. Risk Management Strategy.

MPS

1. Vision, Values and Behaviours;
2. Scheme of Delegation;
3. Scheme of Devolved Financial Management;
4. Internal Control Framework;
5. Financial Instructions;
6. Code of Conduct;
7. Human Resources policies and procedures;
8. Management Board Operating Framework;
9. Risk Management Policy;
10. Equalities Schemes;
11. Business Risk Management Standard Operating Procedure;
12. Environment Strategy and Construction Environment Policy;
13. Information Governance Framework
14. MPS management structure including Business Group Senior Management Teams
15.  and supporting management arrangements, along with strategic committees.

Drivers for change

2. CIPFA/SOLACE guidance “Delivering Good Governance in Local Government: Interim Guidance Note for Police Authorities and Forces in England and Wales” was published in September 2007. This guidance is intended to assist police authorities and forces in implementing the CIPFA/ SOLACE Good Governance Framework in a policing context. It should be noted that further work is required to map the guidance to the specific governance arrangements of the MPS (see paragraph 17 below). A summary of the guidance can be found in Appendix 1.

3. Although the existing elements outlined in paragraph 1 above, which are already in place, cover many of the key features of a robust corporate governance framework set out in the Good Governance Framework, work does need to be undertaken to refresh them to ensure they continue to be fit for purpose and to consider how they link together in a way that is meaningful to staff and other stakeholders. Working with the MPA, the MPS now needs to formalise the framework into which each of these elements fit. In doing so we must ensure a complete picture of MPS corporate governance, based on the MPS values already developed, is available in a way that can be communicated to staff so that they understand the implications for how they should operate on a day-to-day basis.

4. The new requirement to produce an Annual Assurance Statement (AAS) is a key element of guidance. The AAS should set out the governance arrangements that have been in place throughout 2007/08, how the effectiveness of these has been reviewed and outline any significant governance issues alongside action taken or proposed to address them. Further details of this requirement and a template are included in Appendix 1.

5. In addition, the organisation needs to work with the MPA to respond in a proactive manner to external stakeholders such as the Audit Commission, HMIC and other inspection bodies in the areas of compliance, internal control, value for money and risk management.

6. In terms of the Police Use of Resources Evaluation (PURE), the MPA/MPS was rated as achieving minimum requirements / adequate performance (level 2) with a strong improving direction of travel for 2007. The Service intends to improve this position for 2008, to be consistently above minimum requirements / performing well (level 3). The aspiration is then that the MPA/MPS will strive to be well above minimum requirements / performing strongly (level 4) from 2009. In order to move to either a level 3 or level 4, it will take considerable effort and will need to be effectively managed to ensure success. The 2007 PURE report is being presented to this Committee, showing more detail about the key lines of enquiry improvements needed to move to higher levels. It should be noted that in the themes Financial Standing and Financial Reporting, the MPA/MPS scores an overall level 3. The latter theme, Financial Reporting, has moved from a level 2 in 2006.

7. The Deputy Commissioner has also commissioned a review of the current function and structure of the ‘corporate centre’. As part of this review, he has asked the Director of Strategic Finance to consider how existing governance arrangements can be rationalised, legitimised and embedded. How to best communicate the corporate governance framework and ensure good practice is reflected in the MPS’ decision-making processes will also form part of the review.

8. In order to respond to all the drivers set out above, a Corporate Governance Coordination Group, to be chaired by the Director of Strategic Finance, will be established to review each element of the existing framework and identify the links and gaps between them. The Coordinating Group will take forward the key requirements of the Good Governance Framework and produce an overarching corporate governance strategy based on the model set out below in this report. It is envisaged that a series of newly identified documents, processes and structures will be required. Though the CIPFA/SOLACE Interim Guidance will provide the basis for the work programme, it will be used as a tool for steering the organisation and not as an end in itself.

9. The proposed terms of reference and membership for this Coordinating Group are attached at Appendix 2. The Coordinating Group will develop a formal work programme and key milestones including those for reporting progress to the MPA.

A corporate governance model to support quality policing

10. The MPS is striving to achieve excellence in corporate governance. To do this, a corporate governance framework must be in place that supports our highest priority, delivering quality policing. It must also build on the work that has already been carried out to develop the corporate values of the MPS. This means embedding a culture of openness, integrity, accountability and equality, working closely with the MPA to ensure the framework properly reflects the Service’s accountability to the Authority and the needs of the MPA’s governance arrangements.

11. The MPS operates in a fast evolving environment. Changes to how the organisation is structured and the way it operates are inevitable. As we develop the corporate governance framework, we need to do so in a way that provides the flexibility to respond to future challenges. Below are some examples of recent developments in policing all of which have implications for the corporate governance arrangements of the MPS:

• Partnership working – from Local Area Agreements, the new Community Call for Action to collaboration with other organisations on back office functions
• The requirement to improve the management of information, including sharing this with other agencies
• Continuing work to develop cooperation between forces to achieve a more strategic approach to combating serious crime and terrorism

12. Corporate governance frameworks are complex being made up of a large numbers of polices and processes. Communicating the core principles on which the corporate governance framework is based is vital in helping staff to understand what it means to them in their day-to-day roles. It is proposed that the analogy of a temple is used:

• The foundations - the principles which underpin everything the MPS does
• The pillars - the core areas the corporate governance framework covers, and makes the temple secure and sturdy
• The roof - the result of good corporate governance in the MPS.

13. This is an established model of corporate governance that reflects current good practice. Supporting documents and processes back up each pillar, and provide the robustness needed for the corporate governance framework. This approach also ensures that the model can be tailored to reflect the specific mission, values and governance arrangements of the MPS.

‘Temple’ model (see Appendix 3, chart 1)

How does the model map to the Good Governance guidance?

14. The CIPFA/SOLACE Framework Delivering Good Governance sets out six core principles on which effective governance should be built. (See Appendix 3, chart 2)

This approach also allows us to build on the MPS values that have already been established. (See Appendix 3, chart 3)

What ‘pillars’ does the MPS have in place?

15. The elements of the MPS’s existing corporate governance framework set out in paragraph 1 above demonstrate that much is already in place. The examples shown below are by no means exhaustive and it is anticipated that the review process will identify others as well as any gaps.

Pillar one: Organisational structures and processes

16. Pillar one is about how the MPS is organised internally to enable the organisation to deliver its objectives. It is about having transparent processes that are well communicated to staff and adhered to. These processes help us achieve our objectives by managing people, risk, budgets and decision making effectively and continuously improving how we do this.

Existing Elements

1. MPS management structure and supporting arrangements
2. Business plan
3. Performance management framework
4. Procurement Strategy and policies including the GLA Sustainable Procurement Policy
5. Internal control framework
6. Financial instructions
7. Human Resources policies and procedures
8. MPA/ MPS joint risk management strategy
9. MPS Risk management policy
10. Equalities schemes
11. Health and safety policy
12. Information Governance Framework

(See Appendix 3 chart 4)

Pillar two: Involving stakeholder groups

17. Working with the community is fundamental to delivering quality policing. Pillar two is about how we relate to our stakeholders and how we ensure we are accountable to them. Of particular importance to the MPS is the issue of accountability to the MPA. The MPA scrutinises, monitors and holds the MPS to account in terms of service delivery and the effective use of resources. This is undertaken through the committee process, MPA oversight groups and the Full Authority supported through MPA Standing Orders and evidenced in the Annual Report. The MPS Corporate Governance framework must, therefore, reflect this accountability and the needs of the MPA’s governance arrangements.

 Existing Elements

1. MPA governance arrangements
2. Annual Report
3. Policing Plan
4. Consultation and engagement processes including Safer Neighbourhood community engagement processes
5. Channels for customer feedback e.g. the Quality Call Back Process

(See Appendix 3 chart 5)

Pillar three: Standards of behaviour

18. Pillar three helps us demonstrate how the work of the MPS is carried out ethically and in a way that meets the legal requirements placed on the organisation. The elements in this pillar also help to ensure that MPS staff carry out their work without any conflict of interest, with clearly defined roles and standards of behaviour. (See Appendix 3, chart 6)

19. When considering Pillar three, the forthcoming changes under legislation wrought by the “Taylor” reforms must be considered. These will introduce a new Code of Conduct for Police Officers, simplifying and yet at the same time enlarging on what it means to be a police officer – and what behaviour is acceptable either on or off duty. There will be a clear move towards misconduct being dealt with locally, the focus being on the management of behaviour through Attendance Management, Unsatisfactory Performance Procedures or else misconduct where appropriate. The emphasis will be on learning and behaviour modification rather than sanction – thus improving the service delivered and linking in with citizen focus. Both time and resource will need to be expended locally to manage behaviour and undertake the relevant processes.

Existing Elements

1. MPS values
2. MPA Professional Standards and Complaints Committee and Professional Standards Sub-Committee
3. MPA Standing Orders
4. MPS Scheme of Delegation
5. MPS Code of conduct

Areas for development

20. The Interim Guidance recognises that policing is different to other local government structures and that some of the key terms used in the CIPFA / SOLACE guidance do require specific interpretation in a policing context. For example, ‘Chief Executive’ may refer to the Chief Officer of the force or the Chief Executive of the police authority, depending on the context. One of the initial pieces of work to be carried out by the Corporate Governance Coordination Group will be to examine how the specifics of the guidance relate to the unique governance structure of the MPA/MPS.

21. In addition, the following elements have already been identified as being necessary to enhance the current corporate governance environment:

• Enhanced MPA/MPS Fraud and Corruption Awareness Strategy
• MPA/MPS Community Engagement Strategy
• MPS Covert Policing Governance and Finance Strategy#
• MPS Partnership Framework, including partnership risk management standard operating procedure

MPS Complaints and Compliments (policy and resource)

22. Many of these work streams are already developing but in order to realise excellent corporate governance a step change is required. The Corporate Governance Coordination Group will provide programme management support while progress will be monitored through the MPS Performance Board.

23. The Service will continue to work closely with MPA officers and members in progressing the various elements of this work. It is also proposed that a summary of the progress made in these areas will be reported to this Committee as part of the Corporate Governance Project Group report on the revised framework in March 2008.

24. There are key tools already in place that need to be used by the MPS to ensure financial control and robust corporate governance. These include:

• MPA Standing Orders;
• MPS Scheme of Delegation;
• MPS Consolidated Action Plan (CAP) for financial external audit recommendations;
• MPS Corporate Audit and Inspection strategy;
• MPS Capital and Revenue finance and business planning guidelines;
• MPS Corporate Risk Management strategy.

25. A summary of the progress to date on each of these work streams along with an indication of outstanding work that is required for each, is as follows:

Scheme of Delegation

26. The MPS introduced a Scheme of Delegation on 1 October 2007. This Scheme sets out the key delegations of financial authority within the MPS. Further work is to be undertaken in this area over the next few months, to ensure that all local schemes of delegation for each Business Group are in place and reflective of both local needs and corporate policy.

Consolidated External Audit Action Plan

27. Strategic Finance produces a monthly action plan, which identifies and monitors progress against financial audit recommendations. It incorporates recommendations arising from the Annual Audit letter, Interim Systems Audit, PURE and any outstanding queries from the HMIC Baseline Assessment and identifies issue owners at both Management Board and practitioner levels. This report is also reviewed on a regular basis by the joint Strategic Finance and Business Support working group, this ensures ownership of issues by Lead Accountants and that progress is formally monitored. It is intended that this plan will be developed to also incorporate internal audit recommendations.

Corporate Audit and Inspection strategy

28. This developing work stream draws together the work of both Finance and the MPS Inspectorate, on the monitoring and progression of audit recommendations. The Inspectorate team identify and monitor progress to service wide audit recommendations and as finance is now represented on this group to ensure that all financial recommendations are also included. This work will continue to identify and actively progress outstanding audit recommendations, but will also seek to provide better co-ordination of inspection activity and overall improvement of internal control.

Capital and Revenue budget and business planning

29. A review was undertaken in spring 2006 of the financial planning framework to determine how financial planning could better support the MPS. This review resulted in a new business planning process, intended to more closely align its resources to deliver its strategic priorities. This integrated business and financial planning process provides a three-year corporate business plan, which outlines what the MPA/MPS plans to deliver in support of the priorities, together with the resources required. In addition, for budget planning year 2008/09 the capital programme has been produced covering a seven-year time horizon for the first time.

30. The planning framework will continue to be developed and further integration between finance and planning will emerge as the 2009/10 budget process commences. The strategic vision for this work stream is that it will become the essential business tool that will form the basis of the MPS financial and performance setting process, building on the strong operational performance focus already in place.

Risk management

31. This is the subject of a separate report to this Committee. Corporate Risk Management is a key part of the governance process and will be a major consideration in the review of corporate governance. Currently, risk registers are maintained at Corporate, Business Group and OCU levels. The Business Risk Management Team in the Strategy Unit support the MPS in maintaining the corporate risk register and in the mainstreaming of business risk management. Each Business Group and OCU has a business risk lead officer supporting their command team / SMT. The Corporate Risk Review Group (DAC and equivalents) review and monitor corporate risks, then provides both information and recommendations to Management Board on a monthly basis. Management Board then reviews the Corporate Risk Register, directing amendments as necessary. This approach is intended to be both top down and bottom up.

32. This approach to supporting and developing an even more robust corporate governance framework for the MPS was agreed by the Management Board on 21 November 2007.

C. Race and equality impact

The model of corporate governance set out in this report is based on the principles of openness; integrity; accountability and equality. The development of the framework therefore should have a positive race and diversity impact by ensuring that these principles inform the way in which the MPS operates. Furthermore, improved communication of the corporate governance framework aims to help staff understand how to apply these principles in their day-to-day work.

D. Financial implications

The work streams identified will be delivered within existing budgets

E. Background papers

• CIPFA/SOLACE consultation – Good Governance in Local Government
• CIPFA/SOLACE – Delivering Good Governance in Local Government, Interim Guidance Notes for Police Authorities and Forces in England and Wales
• MPA report to Corporate Governance Committee, 22 September 2006.

F. Contact details

Report authors: Paul Stock and Lucy Dunn, Resources Directorate, MPS.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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