CIPFA/SOLACE good governance in local government framework/interim guidance note for police authorities and forces

Report: 9
Date: 7 December 2007
By: the Chief Executive and Treasurer

Summary

This report details the requirements of the new CIPFA/SOLACE Framework regarding the Code of Governance and the Annual Governance Statement and in particular addresses the interim guidance for police authorities and forces.

A. Recommendation

That

1. members note the change in requirements regarding the new Annual Governance Statement and implications for the existing Statement on Internal Control;

2. endorse the Authority’s participation in the pilot for the Police Authority Self Assessment Framework;

3. agree the development of a local Code of Governance and that a fuller paper be brought to the next meeting;

4. consider whether they wish the Treasurer to sign the Annual Governance Statement; and

5. consider whether they wish to appoint a risk sponsor

B. Supporting information

Introduction

1. The purpose of the new CIPFA/SOLACE guidance note ‘Delivering Good Governance in Local Government: the Framework’ and the police specific ‘Interim Guidance Note for Police Authorities and Forces’ is to enable their use as a framework of best practice for developing and maintaining a locally adopted Code of Governance. It is also to assist authorities in reviewing the effectiveness of their own governance arrangements by reference to best practice and using self-assessment.

2. In addition, the Accounts and Audit (Amendment) Regulations 2006 include a statutory duty to prepare a statement on internal control in accordance with proper practice. With effect from 2007/08 ‘proper practice’ is defined by the CIPFA/SOLACE Framework as an Annual Governance Statement (AGS).

The Governance Framework

3. The Interim Guidance Note is aimed at suggesting how police authorities, assisted by their forces where appropriate, can

• Consider how they might go about reviewing their governance arrangements (i.e. against the framework)
• Develop and update their own local codes of governance
• Demonstrate compliance with the principles of good governance (i.e. prepare annually, a Governance Statement)

4. It is envisaged that in using the Good Governance Framework, authorities:

• Consider the extent to which the authority complies with the principles and elements of good governance set out in the Good Governance Framework
• Identify systems, processes and documentation that provides evidence of compliance
• Identify the individuals and committees responsible for monitoring and reviewing the systems, processes and documentation identified
• Identify issues that have not been addressed in the authority and consider how they should be addressed
• Identify the individuals who would be responsible for the actions that are required

5. Police authorities have a dual responsibility: for ensuring they have robust governance arrangements as an organisations in their own right; but also ensuring good governance arrangements are in place in police forces, which will cover a range of aspects from finance to ethical standards that authorities are responsible for overseeing. The Framework outlines six core principles of good governance and translates each one into a range of specific requirements that should be reflected in a local code of governance, something that the Authority does not yet have. The six core principles are:

• Focussing on the purpose of the authority and on outcomes for the community and creating and implementing a vision for the local area.
• Members and Officers working together to achieve a common purpose with clearly defined functions and roles.
• Promoting values for the authority and demonstrating the values of good governance through upholding high standards of conduct and behaviour.
• Taking informed and transparent decisions which are subject to effective scrutiny and managing risk
• Developing the capacity and capability of members and officers to be effective
• Engaging with local people and other stakeholders to ensure robust public accountability

6. The Interim Guidance Note suggests that in reviewing the effectiveness of their governance arrangements, police authorities may find it useful to use the Police Authority Self Assessment (PASA) Framework. The APA is presently piloting the PASA and it is felt that early involvement will provide valuable experience and the early development of a robust self-assessment process. This approach is supported of officers and it is proposed that members endorse the authority’s participation in the pilot scheme.

7. The Framework also requires a review, at least annually, of the Authority’s governance arrangements to ensure:

• Continuing compliance with best practice as set out in the framework;
• Arrangements are adequate and operating effectively in practice;
• Where reviews of governance arrangements have revealed gaps, action is planned that will ensure effective governance in future.

The Annual Governance Statement (AGS)

8. The Annual Governance Statement is a formal statement that records and publishes an authority’s governance arrangements. It is a statement that now subsumes and broadens the previously required Statement on Internal Control and will be required to be published with the Authority’s financial statements relating to 2007/08 and onwards to ensure compliance with the Accounts and Audit (Amendment) Regulations 2006. This requires authorities to ‘conduct a review at least once a year of the effectiveness of its system of internal control’ and to prepare a statement on internal control in accordance with proper practice.

9. There are a number of areas, particularly those concerning delegated functions and operational control, where any assessment needs to consider how these elements of governance are implemented by the force. These will need to be considered in the separate force Annual Assurance Statement that the Interim Guidance Note suggests the force should produce to support the police authority’s AGS. The Authority will indicate as part of its AGS how these aspects of force management are held to account. This separate assurance statement for the Statement of Internal Control has been the approach over the last few years and it is recommended that this approach be maintained for the AGS. The other option of a joint statement is not preferred because of the complexity and size of the MPS.

10. It was reported at full Authority on 22 November that the MPS would be undertaking a review of MPS Corporate Governance under the leadership of the Deputy Commissioner. The outcome of this review will need to be reported to this committee and will form part of the MPS Annual Assurance Statement.

11. One key issue, which requires interpretation in its application to the police service, relates to who should sign the AGS. The Guidance note recommends one option which the MPA already undertakes, viz: a detailed Annual assurance Statement about how the governance requirements are applied in the force, including the SIC, is prepared by the force to support the Authority’s AGS, and signed by the Commissioner. The force Annual Assurance Statement can then be relied on in preparing the MPA’s annual Governance Statement, which is itself signed by the Chair and Chief Executive of the Authority.

12. This approach requires the Treasurer (as the officer carrying the statutory responsibility for overall financial stability and control) to provide independent assurance to the Authority about financial propriety. Likewise, the Monitoring Officer (the Deputy Chief Executive) will need to provide independent assurance about the legality of activity, standards of ethical conduct and behaviours, and quality of processes for monitoring this.

13. The Framework requires that the Annual Governance Statement is owned and approved at a corporate level and should be confirmed as accurate and complete and signed by the most senior officer and most senior member. Additionally, it recommends the review and approval of the statement by a Member Group separately from the accounts to help secure its robustness and its corporate standing. This Committee presently receives a quarterly and year-end review process for the SIC, separate to the incorporation of the SIC in the statement of accounts. It is proposed that this continues with the AGS.

14. The AGS should be approved by the end of June but should also be up to date at the time of publication. The framework provides guidance on what the statement should contain including:

• Responsibilities for ensuring there is a sound system of governance (incorporating the system of internal control)
• An indication of the level of assurance that the systems and processes that comprise the Authority’s governance arrangements can provide
• A brief description of the key elements of the governance framework, including reference to group activities where these are significant
• A brief description of the process that has been applied in maintaining and reviewing the effectiveness of the governance framework including reference to the roles of various members/officers in this process
• An outline of the actions taken, or proposed to deal with significant governance issues, including an agreed action plan.

It is anticipated that the majority of the current processes in place with the SIC will remain, but it will need to be reviewed to ensure that all elements of the six core principles of Corporate Governance are covered. An example of an AGS is attached at Appendix 1.

15. Additionally, in preparation for the compilation of the AGS, current governance arrangements will be reviewed to:

• Determine the extent to which they comply with the principles and requirements of good governance set out in the CIPFA/SOLACE Framework
• Identify any issues that have not been addressed adequately in the authority and consider how they should be addressed together with responsibilities for doing so
• Identify systems processes and documentation that provide evidence of compliance
• Identify responsibilities for monitoring and reviewing the systems, processes and documentation identified

16. The Authority will review and extend the assurance gathering process as necessary to include any areas not already covered by the SIC process. At this stage, it is anticipated that greater assurances will be required from management involved in key partnerships together with a review of assurance provided by the work of the Standards Committee.

17. The Audit Commission have amended their Use of Resources Key Lines of Enquiry (KLOE) for 2007/08 to reflect the requirements for an Annual Governance Statement. The KLOEs now reflect an enhanced focus on effective governance and internal control including partnership governance.

Local Code of Corporate Governance

18. The CIPFA/SOLACE Framework recommends that the Authority should be able to demonstrate that it is complying with the core and supporting principles contained in the Framework (paragraph 5 above) and should therefore develop a code of governance appropriate to its won circumstances.

19. The development of such a code, consistent with the principles and requirements of the CIPFA/SOLACE Framework, will help to ensure the Authority fulfils its responsibilities to ensure it has proper arrangements in place for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively.

20. The Framework commends the development of a governance code as best practice but leaves it as an optional/discretionary requirement for local determination. Many of the elements of such a local code already exist, but it is proposed that a gap analysis is undertaken and that officers report back to the next meeting of this committee with proposals for a local code of governance. When developed the authority will then conduct an annual assessment of the extent to which they have met the aspirations set out in the Code, which will be summarised in the AGS.

21. Much of the work undertaken in the first year in preparation for the AGS would contribute to the formulation of a local corporate governance code. It is proposed that such a code should be prepared for the MPA.

Actions and implementation of the Framework

22. There are several issues arising from the new statutory and best practice requirements.

• The publication of a wider Annual Governance Statement (AGS) from 2007/08 onwards in place of the Statement on Internal Control
• The need for a review of our current governance arrangements to determine their adequacy and alignment to the best practice framework suggested by CIPFA/SOLACE
• The need to develop a local Code of Governance for the Authority in line with the best practice suggested
• A framework for ensuring and demonstrating compliance with the local Code of Governance

Corporate Governance Committee Implications

23. As ‘those charged with governance’, the Corporate Governance Committee should receive assurances on the effectiveness of governance arrangements in place and compliance with any local Code of Governance which is developed.

24. As with the Statement on Internal Control, the Corporate Governance Committee should review the AGS and its supporting documentation and review process to ensure it accurately reflects the governance environment. This will contributes to meeting the Audit Commission KLOE requirements that the ‘Authority can demonstrate that it is effectively delivering the core functions of an audit committee, as identified in the CIPFA guidance; that it provides challenge to the Executive when required and provides for effective leadership on governance, financial reporting and audit issues’.

25. Once satisfied with the AGS, the Committee will approve it for submission to the Chair of the Authority and Chief Executive for signature. Although not a requirement, the Committee may wish to consider requiring the s151 Officer to sign the statement too as it subsumes the previously required statement on internal financial control.

26. The Corporate Governance Committee’s terms of reference will need review to ensure that accurately reflect the committee’s role in monitoring effective governance and the AGS.

Risk Management Implications

27. Good governance requires that risk management is embedded into the culture of the organisation, with members and managers at all levels recognising that risk management is part of their job. Authorities and forces should be able to demonstrate that risk management has been embedded in the corporate business process. The Interim Guidance Note specifically requires that authorities need to identify what is the most effective structure for them to oversee the force’s management of risk. The Terms of Reference of the Corporate Governance Committee already require oversight of risk management.

28. Authorities have a dual responsibility: for putting in place arrangements to manage their own risks, separate from those of the force, and for ensuring that the force has adequate risk management arrangements in place. To ensure an effective level of risk management, the authority will need to be able to demonstrate, as a minimum, the following:

• A risk management strategy/policy has been adopted and approved by members
• The risk management strategy/policy requires the authority to:
  • Identify its own corporate and operational risks
  • Ensure the force has appropriate arrangements in place to identify risks to its business and service delivery
  • Ensure appropriate arrangements are in place to align authority and force risk management strategies
• In identifying risks, the management strategy/policy in both force and authority should also
  • Identify and analyse causes and consequences
  • Assess the risks for likelihood and impact
  • Identify controls
  • Allocate responsibility for the controls

29. One of the emerging themes on risk management that have emerged about effective governance in policing from the initial Police Use of Resources Exercise (PURE) where police authorities could improve is to

• Appoint a risk sponsor on the police authority, and
• Provide training and guidance to officers and members who have responsibility for managing risk within their responsibilities.

Members are asked whether they would wish to consider the appointment of a risk sponsor, and indeed whether it is a function that may be more appropriately exercised by the committee as a whole.
Turning to the training issue, members will recall that there was risk training arranged last year. It is proposed that another training session be arranged in the first quarter of next year fir members and appropriate officers from the Authority.

C. Race and equality impact

1. The authority's procedures to promote equality and diversity will be come part of the MPA governance framework. Participation in the APA self-assessment pilot will enable the authority to demonstrate how effectively embedded these arrangements are to the governance of the organisation.

2. An Equality Impact Assessment will be undertaken of the Governance Framework.

D. Financial implications

None arising directly from this report.

E. Background papers

• CIPFA/SOLACE – Delivering good governance in Local Government Framework
• CIPFA/SOLACE: APA/ACPO Interim Guidance note for police authorities and forces in England and Wales.

F. Contact details

Report author: Ken Hunt, Treasurer, MPA

For information contact:

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

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