CIPFA/SOLACE consultation – good governance in local government

Report: 06
Date: 05 October 2006
By: the Chief Executive and Clerk

Summary

A Working Group set up by CIPFA and SOLACE has revised their 2001 guidance “Corporate Governance in Local Government: a keystone for Community Governance.” This report summarises the proposals for a new corporate governance framework and the MPA’s response to consultation.

A. Recommendation

That

1. the Committee notes the content of the draft Framework and endorses the MPA’s response; and
2. once the Framework has been finalised, a further report be put to the committee on how it can be used to further the Authority’s corporate governance work.

B. Supporting information

The Draft Framework

1. In 2001 CIPFA and SOLACE published ‘Corporate Governance in Local Government: A Keystone for Community Governance’ which gave guidance to local authorities on a framework with which to assess how well they were meeting their corporate governance responsibilities.

2. CIPFA/SOLACE point to a number of areas where since 2001 development and reform have changed the local government picture and in the light of which it would be helpful to update the corporate governance framework. In particular it was felt that a new framework should address the following areas not previously covered:

• The role of standards and audit committees
• Partnership arrangements
• Risk management
• The relationship of the Framework with the Statement on Internal Control
• The relationship of the Framework with the ‘Good Governance Standard’

3. A working group was set up with 28 members drawn from a range of local authorities and organisations. The working group has drafted a new framework, for authorities to follow as best practice for developing and maintaining a locally adopted code of governance. The full draft framework will be sent separately to members of the committee. It can be viewed on the CIPFA website – www.cipfa.org.uk.

4. The framework defines the principles that that should underpin local authority governance, without prescribing a single model of governance. It then proposes that authorities should test their structures against these principles by:

• Reviewing their existing governance arrangements against this framework
• Developing and maintaining an up-to-date local code of governance
• Preparing a governance statement to report annually on the extent to which this local code has been met

5. The framework aims to reflect the dimensions of local government role, which are seen as:

• To provide leadership for and with the community and engage in effective partnerships
• To ensure the delivery of high quality local services whether directly or in partnership or by commissioning
• To perform a stewardship role which protects the interests of local people and makes the best use of resources
• To develop local democracy and citizenship

6. The six principles underpinning the framework have been taken from the Good Governance Standard developed by the Independent Commission on Good Governance in Public Services, suitably adapted for local government purposes, as follows:

1. Focussing on the purpose of the authority and on outcomes for the community including citizens and service users and creating and implementing a vision for the local area
   • exercising leadership by clearly communicating the authority’s purpose and vision and its intended outcomes for citizens and service users
   • ensuring that users receive a high quality of service whether directly, or in partnership or by commissioning
   • ensuring that the authority makes best use of resources and that tax payers and service users receive excellent value for money.
2. Members and officers working together to achieve a common purpose with clearly defined functions and roles
   • ensuring effective leadership throughout the authority by being clear about executive and non executive functions and of the roles and responsibilities of the scrutiny function
   • ensuring that a constructive working relationship exists between elected members and officers and that the responsibilities of members and officers are carried out to a high standard
   • ensuring relationships between the authority and the public are clear so that each know what to expect of the other.
3. Promoting the values of the authority and demonstrating the values of good governance through behaviour
   • ensuring council members and officers exercise leadership by behaving in ways that uphold high standards of conduct and exemplify effective governance
   • ensuring that organisational values are put into practice and are effective.
4. Taking informed and transparent decisions which are subject to effective scrutiny and managing risk
   • exercising leadership by being rigorous and transparent about how decisions are taken and listening and acting on the outcome of constructive scrutiny
   • having good quality information, advice and support to ensure that services are delivered effectively and are what the community wants/needs
   • making sure that an effective risk management system is in place
   • recognising the limits of lawful action and observing both the specific requirements of legislation and the general responsibilities placed on local authorities by public law, but also accepting responsibility to use their legal powers to the full benefit of the citizens and communities in their area.
5. Developing the capacity and capability of members to be effective and ensuring that officers – including the statutory officers – also have the capability and capacity to deliver effectively
   • making sure that members and officers have the skills, knowledge and experience they need to perform well in their roles
   • developing the capability of people with governance responsibilities and evaluating their performance, as individuals and as a group
   • encouraging new talent for membership of the authority so that best use can be made of resources in balancing continuity and renewal.
6. Engaging with local people and other stakeholders to ensure robust local public accountability
   • exercising leadership through a robust scrutiny function which effectively engages local people and all local institutional stakeholders including partnerships, and develops constructive accountability relationships
   • taking an active and planned approach to dialogue with and accountability to the public to ensure effective and appropriate service delivery
   • making best use of resources by taking an active and planned approach to meet responsibility to staff.

7. The framework then develops detailed checklists to help authorities to assess and document the extent to which they meet the core principles. The final part of the framework addresses annual Governance Statements. The Accounts and Audit Regulations 2003 require a local authority to “conduct a review at least once in a year of the effectiveness of its system of internal control and …. include a statement on internal control, prepared in accordance with proper practices ….”. The framework proposes an annual governance statement that would subsume this requirement to publish a statement on internal control.

The MPA response

8. The draft framework was published over the summer with 11 September as the deadline for responses. It was not possible, therefore, to clear the proposed response with the committee but it was cleared with the Chair of the Corporate Governance Committee and is attached as Appendix 1.

9. It is considered that the framework helps to demonstrate the inter-connectivity of an authority’s various roles and service functions. In committee terms the Corporate Governance Committee has the clear lead in this area, but the framework recognises the importance of the work of the Standards Committee, for instance in terms of ethical behaviour and the relationships between and respective roles of members and officers.

10. The main shortcoming of the framework, which is focused on local authorities, is that it does not reflect the different circumstances of other bodies such as police authorities nor is it in a form that could easily be applied to the police. It is to be hoped that this will be changed in the final version.

11. CIPFA/SOLACE is looking to publish the final version of the framework in the autumn. At that stage the committee will be invited to consider how the MPA should use the framework as part of its corporate governance work.

C. Race and equality impact

The equalities implications are not specifically addressed in the draft framework. However, they are implicit in the principles which underpin it, for instance in the promotion of the authority’s values, in the transparency of decision-making and the engagement with local people to ensure accountability.

D. Financial implications

There are no specific financial implications.

E. Background papers

None

F. Contact details

Report author: Simon Vile, Head of Secretariat, MPA.

For information contact:

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

Appendix 1

MPA response to the consultation

Thank you for the opportunity to comment on the draft Good Governance Framework. Overall this is an excellent piece of work, which will provide a viable framework within which to marshal the various elements of corporate governance.

I note that although the Commissioner of the Metropolis was a member of the Committee that provided the forerunner to this framework, the Good Governance Standard for the Public Service, there appears to have been no emergency service or police authority representation on the committee convened by CIPFA to prepare the local government version. One example of the significance of this is that the “dimensions of a local authority business” which underpins the CIPFA framework requires adjustment to ensure a framework suitable for a policing context.

Understandably though, the framework’s focus is on local government but I would suggest that it does need to reflect the circumstances of other parts of the local government 'family', such as the uniformed services.

We need to take care here because police authorities, will be caught in any event by the need to implement the essence of the proposals - even if the framework ignores their special circumstances. This is because the new requirement for a 'Governance Statement' (which will pick up many of the ideas in the new framework) will become a ‘proper practice’ and therefore replace the existing requirement to publish the Statement of Internal Control in the Authority’s annual Statement of Accounts. Therefore the Framework Document should be flexible enough to cater for the wider ‘audience’.

As you may know the MPA, as a police authority, differs from local authorities in several respects, in particular:

• we do not deliver services ourselves but are responsible for oversight of the Metropolitan Police Service delivery of those services; you will find county forces operate in a similar way;
• we have a different membership basis - 12 democratically elected members appointed by the Mayor from the London Assembly, 4 magistrate members and 7 independent members - and so our democratic legitimacy, for want of a better term, is more complex;
• being a regional body, but with responsibilities to ensure consultation and engagement with local communities, our relationship with our local communities is inevitably more 'arms length'. However, this role of community consultation and engagement is at the very essence of the police authority’s core business in a way that is perhaps different to a local authority’s advocacy and promotion role for the economic, social and environmental well being of their area. Indeed the MPA has not been designated as a “local authority” for the purposes of Section 2 of the Local Government Act 2000 which gives a local authority power to do anything which it considers is likely to achieve the promotion or improvement of the economic, social or environmental well being of its area;
• we are organised on traditional local authority committee lines (the Local Government Act 2000 does not apply to police authorities with regard to Cabinet Government and the executive/scrutiny split); and
• the requirement to make a chief executive or equivalent responsible and accountable to the authority for all aspects of operation management will not apply to the MPA (or other police authorities). There is a clear distinction in that the Commissioner takes operational responsibility for the Service. In practical terms a solution would be to adopt the MPA’s present approach in preparing its Statement of Internal Control - the Commissioner certifies a separate statement on operational risk and internal control, provides it to the authority and this is then incorporated into the Authority’s separately produced statement. This is then signed off by the Chair of the Authority and the Chief Executive & Clerk.

As it stands, we could certainly adapt the draft framework for our own use as much of it does apply to bodies such as ourselves (and, in London, the Greater London Authority and the other Functional Bodies). However, it would be helpful if there could be some recognition of its applicability to a wider range of organisations than just local authorities with some amendment to content accordingly.

Ken Hunt
Treasurer to the MPA

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