Meeting documents

Cabinet
Tuesday, 6 September 2005

CA060905-18

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Division(s): N/A

ITEM CA18

CABINET – 6 SEPTEMBER 2005

CODE OF CORPORATE GOVERNANCE 2005

Report by the Solicitor to the Council & Monitoring Officer

Introduction

  1. The Audit Commission identified the elements of good Corporate Governance as including robust systems and processes, effective leadership and high standards of behaviour, a culture based on openness and honesty and an external focus on the needs of service users and the public. The Commission in association with CIPFA (the Chartered Institute of Public Finance and Accountancy) and SOLACE (the Society of Local Authority Chief Executives and Senior Managers) produced guidance and a framework for the production of a Code of Corporate Governance.

  2. The Code of Corporate Governance itself covers five dimensions of local authorities’ work to which the principles of openness and inclusivity, accountability and integrity should be applied:

    • Community focus

    • Service delivery arrangements

    • Structures and processes

    • Risk management and internal control

    • Standards of conduct

The Oxfordshire Code

  1. On the 16 June 2004 the Executive adopted a Code of Corporate Governance subject to any final adjustments to the Code in the light of observations of the Corporate Governance Scrutiny Committee which considered the matter on the 15 July 2004. The Corporate Governance Scrutiny Committee agreed to note the purpose of the Code of Corporate Governance and accepted the Executive’s invitation to adopt the proposal for an annual review of the Code commencing in July 2005.

    (CA18 - Code of Corporate Governance - The Code - download as .doc file)

  2. A Corporate Governance Officer Working Party was set up under the direction of the Solicitor to the Council to work through the CIPFA/SOLACE Guidance and Framework. The Working Party undertook an initial audit of current systems and processes which identified a number of gaps and weaknesses. The following work has been conducted:

    • all key policies and procedures have been reviewed, updated and formally approved;

    • action has been taken to raise awareness of key policies and procedures;

    • action has been taken to ensure access to these key policies and procedures is more readily available;

    • seminars are being conducted to raise officers’ understanding of corporate governance issues’

  1. An Internal Audit of the corporate governance arrangements was undertaken and a report produced on the 15 June 2005. Its assessment was one of qualified assurance which means that, whilst there is basically a sound framework, there are some weaknesses that put some of the principles of corporate governance at risk. The following recommendations were made:

    • to make identified amendments to the Code of Corporate Governance;

    • to include all outstanding issues contained in the previous Audit relating to corporate governance in the Working Group’s Action Plan;

    • to review the appropriateness of the CIPFA/SOLACE Framework as the basis of the Code of Corporate Governance;

    • to decide whether an Assurance Statement on Corporate Governance should be published;

    • to consider how best to incorporate the community focus and service delivery dimensions into the Working Group.

All of Internal Audit’s suggested amendments and changes to the Code have now been incorporated within an updated Code of Corporate Governance (annexed).

  1. As part of the Audit Inspection the work of the working group itself was scrutinised and the following is taken from the Internal Audit Report Summary:

    2. "The relevant actions in Raising our Performance 2 have been substantially completed. The Corporate Governance and Statement of Internal Control Working Groups have become well established forums for monitoring and reviewing the Corporate Governance arrangements, holding Officers to account for the delivery of key tasks in several important areas, and have the capabilities to take the process forward. The Solicitor to the Council and the Monitoring Officer have been successful in raising the profile of Corporate Governance through presentations at seminars and briefings, emails to managers and articles in the Post".

    Annual Assurance

  2. The CIPFA/SOLACE Guidance recommends that each local authority should provide an annual assurance that its corporate governance arrangements are adequate and operating effectively in practice and that such a statement should be signed by the local authority’s Leader and Chief Executive.

  3. A decision is required to be made as to whether to provide a formal Statement of Assurance. There is unfortunately a degree of confusion in relation to the guidance that has been produced from CIPFA in relation to this. The requirement for a Statement of Assurance on corporate governance was considered best practice in 2001 but matters have been overtaken by the requirement for the Council to produce the Statement on Internal Control which forms part of the Statement of Accounts as required by the Accounts and Audit Regulations 2003. This Statutory Statement covers many (though not all) the Corporate Governance dimensions, and specifically the following:

    • establishment and monitoring of the authority’s objectives;

    • facilitation of policy and decision making;

    • ensure and complies with established policies, procedures, laws and regulations;

    • ensuring that that risk management is embedded;

    • ensuring the economic effective and efficient use of resources;

    • financial management and reporting of financial management;

    • performance management and the reporting of performance management.

  1. The current guidance provided by CIPFA is contained in their Statement of Recommended Practice 2004, in which it recommends that the statement be produced within the system for internal financial control and refers to the requirement for councils to conduct reviews on effectiveness of its systems of internal control. It leaves a wide discretion to an authority as to whether to publish a wider ranging statement on the systems of internal control and/or a statement on the adoption of a local Code of Corporate Governance and how they have complied with such a code and monitored its effectiveness.

  2. KPMG as our external auditors would only consider and scrutinise a statement on corporate governance in the absence of a Statement on Internal Control.

  3. The current arrangements are that Statement on Internal Control is signed at the end of an assurance process that includes the following:

    • completion by each Directorate of an Internal Control Checklist which complies fully with the requirements of CIPFA;

    • risk registers are produced by all Services and incorporated within their Service Plans;

    • Directors, Heads of Service and Business Managers sign Assurance Certificates confirming the accuracy of their work;

    • the work of the Statement on Internal Control Officer Working Group;

    • the work of internal auditors;

    • the work of the Corporate Governance Working Group;

    • the external auditor’s annual audit and inspection letter;

    • reports by other independent inspection bodies.

  1. The Solicitor to the Council’s recommendation is not to proceed with a further assurance process specifically in relation to the Code of Corporate Governance. There is a risk that to do so would reduce the focused work that is currently being undertaken both for Statement on Internal Control issues and raising awareness and compliance with corporate governance policies and procedures.

    2. Corporate Governance Scrutiny Committee

  2. The Corporate Governance Scrutiny Committee on 21 July considered an earlier version of this report, together with the attached revised Code of Corporate Governance. The Committee received the report and made recommendations to the Cabinet in line with those set out below.

    3. RECOMMENDATIONS

  3. The Cabinet is RECOMMENDED:

          1. to approve the updated Code of Corporate Governance for 2005/06; and

          2. that the statutory Statement on Internal Control be the preferred assurance statement for the Council on corporate governance matters.

P G CLARK
Solicitor to the Council & Monitoring Officer

Background Papers: Nil

Contact Officer: Peter Clark, Solicitor to the Council & Monitoring Officer (01865 815363)

July 2005

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