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Audit and Quality Committee 3 September 2007
Agenda Item No.
Report by the Secretary
GOVERNANCE REVIEW CIPFA / SOLACE FRAMEWORK 2007
1. The Fire Authority at its meeting on 31st May 2007 approved a review of its
governance arrangements during 2007/8, so as to continually enhance its governance processes. The Audit & Quality and Standards Committees received reports in June 2007 in respect to the new CIPFA/SOLACE Governance Framework. This Framework will act as a catalyst for governance review in all Authorities. This Report sets out the key themes within the new Framework and proposes the means by which the Fire Authority may review its governance arrangements, in accordance with the framework and best practice. Members will also be aware of the new Framework from their nominating authority. CIPFA/SOLACE GOVERNANCE FRAMEWORK 2007
2. During mid June 2007 CIPFA (Chartered Institute of Public Finance and
Accountancy) and SOLACE (Society of Local Authority Chief Executives and Senior Managers) released a new Framework and Guidance upon delivering good governance.
3. The Guidance, to be used in conjunction with the Framework, is aimed at
assisting Fire Authorities (local authorities, police authorities, etc) to review their current governance arrangements.
4. The new Framework is a significant development from the previous 2001
Framework (Corporate Governance in Local Government). The key driver for the new Framework arises from the changes which have taken place in local government and to ensure authorities are equipped to face the challenges ahead, particularly to ensure that they possess fit for purpose structures.
5. The Framework defines the principles that should underpin the governance
of local government authorities. Authorities are ‘urged’ to test their structures against the principles set out in the Framework (see Appendix 1) by reviewing their existing governance arrangements, developing an up to date Code and preparing a governance statement accordingly.
6. CIPFA/SOLACE consider that good governance leads to good management,
performance, engagement, and outcomes for service users. The framework encourages Authorities to meet the standards of governance, which should not only be sound but be seen to be sound. The Audit Commission is currently reviewing the link between high standards of governance and strong performance, as part of its five strategic objectives.
DEFINITION OF GOVERNANCE
7. There are a number of definitions of corporate governance in both the private corporate and public sectors.
8. The Guidance and Framework provide a brief refresher. Members will be
familiar with the Cadbury Code, followed by Greenbury, which lead to a first Combined Code in the private corporate sector. The Turnball report then arose, with further work produced by Higgs (role of non-executive directors) and Smith (Audit Committees), again leading to a new Combined Code. In tandem, Nolan produced (in 1995) the 7 principles of public life (which later became 10). (A further review on standards in public life was undertaken in 2005 by Graham). As Members are aware this led to Model Member Codes of Conduct as part of a more developed ethical framework and the first Framework produced by CIPFA/SOLACE.
9. In essence the new framework is intended to establish a common governance
standard for the public services, similar to the private corporate sector. 10. In broad terms, governance means sound decision making, with effective
processes in support, which improve accountability and engagement. 11. Good governance should enable an Authority to focus upon and achieve key
outcomes, deploying resources accordingly. Good governance does matter and the correlation between effective governance, corporate risk management, and performance, in the view of the Secretary, is clear.
12. In an Authority where good governance is demonstrable, the following will
be readily apparent:-
• Clear understanding of its purposes and outcomes • Well defined functions, responsibilities • Appropriate corporate culture • Robust and transparent decision making • Strong governance teams (and empathy) • Real accountability
13. Governance is described by CIPFA/SOLACE as being about how a body ensures that it is doing the right things, in the right way, for the right people, in a timely, inclusive, open, honest and accountable manner. It comprises the systems and processes, and cultures and values by which the body is directed and controlled and through which they account to, engage with the community.
14. COMPLIANCE WITH THE NEW FRAMEWORK
In certain respects the Framework is voluntary and not overly perceptive. An effective Authority keeps under review its governance arrangements in any event. In fact it should be recorded that Humberside Fire Authority agreed to a review of its governance arrangements prior to the release of the new
Framework. In addition, the Corporate Management Team also agreed to establishing governance protocols, again prior to the Framework. The Framework will now help to shape that work.
15. The Authority will be required in the production of the annual governance statement to meet the Accounts and Audit (Amendment) (England) Regs 2006, as part of the SIC (Statement of Internal Control). This is a supplemental requirement from 2007/8. As such the Framework requires an annual review, to be reported via the Audit and Quality Committee, to the Fire Authority, and through audit (internal and external).
16. A pro forma governance statement is provided, which the Authority will
consider in due course.
CIPFA/SOLACE CORE PRINCIPLES SUPPORTING GOVERNANCE
17. Attached at Appendix 1 are the 6 core supporting principles specified in the Framework. Each sets out specific further requirements and the Framework goes on to specify how a local code of governance will reflect those principles. It is primarily against these principles upon which it is proposed that a review is based.
18. It is also from these principles that the Guidance has distilled a series of self
assessment questions for Members to address (Appendix 2). 19. It should be added that, in the view of the Secretary, effective governance,
while being key to the proper functioning of the Authority itself, should be reflected throughout the organisation. As with corporate risk management, governance needs to be embedded (indeed corporate risk management underpins effective governance). As such, it is important to recognise that a governance review (and a governance statement) embraces all significant corporate systems and processes.
CARRYING OUT A REVIEW
20. The Guidance provides useful direction, but is not prescriptive as to how a
review should be conducted. It ‘urges’ that a review is carried out. 21. The Guidance provides a schedule to assist in putting the key governance
principles into practice, along with suggested self assessment tools. Most helpfully, the Guidance has set down a range of questions for Authorities to address. The questions are aimed predominantly at Members and can (and should) be adopted by the Executive (Senior Officers) of the Authority.
22. It is suggested that the proposed self review by Members (of the governance
of the Fire Authority) should run in tandem with a review conducted by the Executive (in respect to the Service), with the outcomes coming together in a report to the Authority (see below).
23. It is therefore proposed that in order to review current corporate governance
arrangements, focus should be made upon:
(a) extent to which the Authority complies with the new Framework, having reviewed our existing Code (in part by Members having regard to their functions, and likewise the Executive). In particular, the 6 Core Principles will be tested;
(b) identifying systems/evidence of support; (c) identifying individuals and committees for monitoring, reviewing the systems, processes; (d) action plans going forward, which dovetail with other work around performance, corporate risk management and planning.
24. Paragraph 25 below outlines briefly the process proposed cumulating to a first report to the Fire Authority in December 2007. To assist Members, a suite of key documents will be created for ease of reference.
PROPOSED PROCESS OF REVIEW 25. The Secretary proposes the following for consideration: (a) Members adopt the draft questionnaire proposed at Appendix 3.
The questionnaire has been produced by the Secretary, based upon Appendix 2, amended to be bespoke to a Fire Authority and to bring added value to Humberside Fire Authority.
Consequently, it is therefore proposed that the initial tool of a self
review by Members will be the questionnaire followed by review by the full Fire Authority (via Committee). The use of self assessment questionnaires has been common in other areas of the public sector, with varying degrees of success. The questionnaire is perhaps longer than desirable, but a first governance questionnaire is often more lengthy, and will be refined over time, with focus upon action plans arising from subsequent reviews.
(b) In tandem, the Corporate Management Team will