Standards and Audit Committee
17 May 2011
Agenda Item No. 5
CORPORATE GOVERNANCE STATEMENT –2010-11
Report by: Ronnie Hinds, Chief Executive
Wards Affected: All
Purpose
As part of the annual accounts process the Council prepares a Corporate
Governance Statement for inclusion in the annual accounts.
This report is intended to provide some background for Members on the
processes adopted for preparing the Corporate Governance Statement, a
copy of which is appended for Members’ approval.
Recommendation(s)
Members are asked to note the contents of this report and approve the draft
Corporate Governance Statement attached in Appendix 1.
Resource Implications
None.
Legal & Risk Implications
A Corporate Governance Statement is required for inclusion in the annual
accounts submitted for audit. Failure to produce the statement would result in
the Council not meeting the requirements of the Accounting Code of Practice.
Policy & Impact Assessment
None
Consultation
The Governance Statement takes account of the Assurance Statements
provided by Executive Directors and Heads of Service and the Assurance
Statement provided by the Audit and Risk Management Services Manager.
1.0
Background
1.1
The Council adopted its Code of Corporate Governance in September 2003
when it was agreed the Code would be kept under ongoing review and the
Council would report annually on the extent of compliance with the Code for
that year. A revised Code of Corporate Governance based on the CIPFA /
SOLACE guidance – Delivering Good Governance in Local Government and
work was submitted to this Committee on 13 April 2010 (Para 168 SA 87
refers).
1.2
Fife Council has to prepare Group Accounts and accordingly the Governance
Statement covers a Statement of Internal Financial Control for the Arts &
Theatre Trust Fife and the Fife Sports & Leisure Trust.
1.3
The Executive Directors for Finance & Resources and Performance &
Organisational Support prepare Corporate Governance Assurance
Statements on behalf of the Council.
1.4
In addition, Executive Directors and Heads of Service are required to
complete annual Corporate Governance Assurance Statements for their
services. The Directors of the Arts and Theatre Trust Fife and the Fife Sports
and Leisure Trust prepare Statements of Internal Financial Control. These
statements are based on the Executive Directors / Heads of Service
knowledge of the Council’s governance, risk management and performance
monitoring arrangements, their own service arrangements and outcomes of
internal and external audit reports as well as HMI reports where relevant.
Cognisance is also taken of both internal and external audit reports submitted
to this committee and the subsequent action plans and their outcomes.
1.5
A separate Assurance Statement is provided by the Audit and Risk
Management Services Manager and a separate report to this Committee
explains the basis of its preparation.
1.6
From the above the attached draft Corporate Governance Statement is
prepared for consideration by this Committee. It should be noted that the
Council’s system of Corporate Governance can provide only reasonable and
not absolute assurance that Council objectives will be met, assets are
safeguarded, that transactions are authorised and properly recorded and that
material errors or irregularities are either prevented or would be detected
within a timely period.
1.7/
1.7
Additionally, the statement has been prepared prior to the completion of the
annual accounts and annual audit and any items identified in either of the
above processes may require to be reflected in the final statement prior to
publication with the annual accounts. It would therefore be intended to
produce a final statement and report for submission to the August Committee
cycle.
Report contact:
Ronnie Hinds
Chief Executive
Fife Council
Fife House
Glenrothes
APPENDIX 1
CORPORATE GOVERNANCE STATEMENT
1.0
Scope of responsibility
1.1
Fife Council is responsible for ensuring that its business is conducted in
accordance with the law and proper standards, that public money is
safeguarded and properly accounted for and used economically, efficiently
and effectively. Fife Council also has a duty under the Local Government in
Scotland Act 2003 to make arrangements to secure continuous improvement
in the way in which its functions are exercised, having regard to a combination
of economy, efficiency and effectiveness. In discharging this responsibility,
members and senior officers are responsible for putting in place proper
arrangements for the governance of Fife Council’s affairs, facilitating the
effective exercise of its functions, which includes the management of risk.
1.2
In discharging this overall responsibility, Fife Council has recently reviewed
the existing Code of Corporate Governance and approved and adopted a
Code of Corporate Governance, which is consistent with the principles and
reflects the requirements of the CIPFA/SOLACE Delivering Good Governance
in Local Government. A copy of the Code is on our website at
www.fifedirect.org.uk or can be obtained from Geoff McDonald, Audit and
Risk Management Services Manager. This statement explains how Fife
Council has complied with the code.
1.3
Fife Council has put in place appropriate management and reporting
arrangements to enable it to satisfy itself that its approach to corporate
governance is both adequate and effective in practice. Specifically, it has
developed and adopted a risk management strategy for the Council.
1.4
A lead officer has been appointed to:
• oversee the implementation and monitor the operation of the Code of
Corporate Governance
• review the operation of the Code in practice
• report annually to the Standards and Audit Committee on compliance with
the Code and any changes that may be necessary to maintain it and ensure
its effectiveness in practice.
1.5
In addition, Fife Council’s Audit and Risk Management Services Manager has
been given the responsibility to review independently and report to the
Standards and Audit Committee annually to provide assurance on the
adequacy and effectiveness of the Code and the extent of compliance with it.
APPENDIX 1
2.0
Purpose of the governance framework
2.1
The governance framework comprises the structure, systems and processes,
and culture and values, by which the authority is directed and controlled and
its activities through which it accounts to, engages with and leads the
community. It enables the authority to monitor the achievement of its strategic
objectives and to consider whether those objectives have led to the delivery of
appropriate, cost effective services.
2.2
The Council’s Code of Corporate Governance and the related systems of
internal control are a significant part of that framework and are designed to
manage risk to a reasonable level. They cannot eliminate all risk of failure to
achieve policies, aims and objectives and can therefore provide only
reasonable and not absolute assurance that objectives will be met, assets are
safeguarded, transactions are authorised and properly recorded and that
material errors or irregularities are either prevented or would be detected
within a timely period.
2.3
The system of internal control is based on an ongoing process designed to
identify and prioritise the risks to the achievement of Fife’s policies, aims and
objectives, to evaluate the likelihood of those risks being realised and the
impact should they be realised and to manage them efficiently, effectively and
economically.
2.4
Key elements of good corporate governance include honesty, trust and
integrity, openness, performance orientation, responsibility and accountability,
mutual respect and commitment to the organisation. To that end the system of
corporate governance and internal control in Fife Council is based on a
framework that includes:
 Community Plan
 Council Plan
 Codes of Conduct for councillors and employees
 Schemes of Administration and Delegation
 Financial Regulations
 Scheme of Scrutiny and Performance
 regular planning and performance management reports
 comprehensive financial management systems
 periodic and annual financial reports which indicate actual and
projected financial performance against budget
 setting targets for financial and other performance
 clearly defined capital expenditure guidelines
 IT Strategy
 Procurement Strategy
 Capital Plan
APPENDIX 1
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HR Policies
as appropriate, formal programme and project management
disciplines.
2.5
The Council's internal audit requirements are met by the Audit and Risk
Management Services Division which independently appraises the corporate
governance and internal control systems. The Division is part of the Finance
and Resources Directorate and operates in accordance with CIPFA Code of
Practice for Internal Audit in Local Government. It undertakes an annual
programme of work approved by the Standards and Audit Committee, derived
from the five year Strategic Audit Plan prepared using a risk based
assessment process and reviewed annually. A review of the effectiveness of
the Standards and Audit Committee has been carried out in the current year
and will be done annually in future.
2.6
All internal audit reports are issued to the appropriate Head of Service and
copied to the Chair of Standards and Audit Committee, Executive Director
Finance and Resources, the Executive Director Performance and
Organisational Support, other relevant Executive Directors and Heads of
Service and the External Auditor. Copies are also made available to the
Chairs of the relevant strategic Committees. Summaries of all audit reports
are provided to the Standards and Audit Committee for their scrutiny. Where
necessary the Standards and Audit Committee can seek further reports from
the appropriate Executive Director or Head of Service.
2.7
The Council must demonstrate the delivery of Best Value as defined by the
Local Government in Scotland Act 2003. Following the Audit of Best Value
and Community Planning in 2009, the Council has received reports every six
months on the progress of the action plan to meet the improvements identified
in the Best Value Audit report. The action plan is now complete and the Best
Value arrangements for the Council are now monitored through the
Assurance and Improvement Plan (AIP). The AIP is the result of an annual
Shared Risk Assessment (SRA) jointly undertaken by the external audit and
inspection agencies for Fife. It identifies the key local and national risks
facing the Council and the rolling three-year programme of external scrutiny
that will be undertaken to monitor progress in these areas. There has been a
significant improvement in the overall level of assessed risk in comparison to
the 2010 Fife AIP. This is based largely on positive audits/inspections by the
Social Work Inspection Agency (SWIA) and the Scottish Housing Regulator
(SHR) during the past year.
APPENDIX 1
2.8
The effectiveness of the Council’s scrutiny arrangements continues to be
monitored on a regular basis. In this regard, a report was submitted to the
meeting of the Cross Party Leaders’ Group on 19th April, 2011 inviting
comments on the improvements which were implemented following a report to
the Policy, Finance and Asset Management Committee in September, 2009.
2.9
The Group agreed that no major changes to the current arrangements should
be considered until after the local government elections in 2012 but that a
further attempt should be made to establish a core scrutiny group of elected
members in order to develop expertise on scrutiny matters and from which
members of scrutiny panels may (but not exclusively) be drawn .
2.10
Changes to the governance arrangements for Fife Constabulary were agreed
at Policy, Finance & Asset Management Committee and, at its meeting on
2nd September, 2010, the Police, Fire & Safety Committee agreed the terms
of an Accountability Framework between the police authority and Chief
Constable which clarified the responsibilities of the police authority and the
Chief Constable having regard to Fife Council’s governance arrangements .
2.11
A new format of performance reports has been produced and has been used
to improve in-year performance reporting.
In addition a Corporate
Performance Management System (CPMS) is being implemented across the
Council following a successful collaborative procurement arrangement with
Clackmannanshire and Stirling Councils. The system will improve the
collation, reporting and resilience of the performance management approach
within the Council.
2.12
The Council continues to develop and implement cohesive strategies for the
effective management of resources including finance and workforce planning.
The approach and framework for workforce planning has been developed and
is integrated into the service planning process with directorate workforce
plans being used to create a Corporate Workforce Plan.
2.13
The draft roles and remit of the Investment Strategy Group (ISG) were agreed
by Council Management Team (CMT) in May 2009 and have now been
implemented. ISG now receives improved high-level performance monitoring
reports in relation to capital. Exception reports are prepared by ISG
directorate representatives that highlight slippage, variances and proposed
corrective actions, where appropriate and possible. A best practice template
for improved capital performance reporting has been agreed by ISG and was
implemented for monitoring reports to committee.
APPENDIX 1
2.14
An Asset Management Plan 2009-12 was approved by PFAM Committee in
September 2009 and is being rolled out with the current focus on office and
depot rationalisation, with progress updates presented to PFAM Committee.
2.15
A systematic review of competitiveness is being undertaken with an
Alternative Delivery Models Board established in November 2009.
Consultants have been appointed to provide a baseline report on suitable
delivery models for Council and senior officers and unions are engaged with
the process
2.16
The Council produces an annual efficiency statement and work is ongoing to
review the processes used to identify and capture Council efficiencies and
consider relevant measures.
2.17
Work is ongoing on the planned improvements to customer service and the
community planning process.
3.0
Review of effectiveness
3.1
Fife Council has responsibility for conducting, at least annually, a review of
the effectiveness of its governance framework including the system of internal
control. The review of effectiveness is informed by the work of the executive
directors within the authority who have responsibility for the development and
maintenance of the governance environment, the Audit & Risk Management
Services Manager’s annual report, and also by comments made by the
external auditors and other review agencies and inspectorates.
3.2
Our review of the effectiveness of the corporate governance and internal
control procedures is informed by:
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feedback from members and committees carrying out their scrutiny role
the work of managers within the Council
the work of Audit and Risk Management Services as described above
assurance statements provided by Executive Directors, Heads of Service
and the Audit and Risk Management Services Manager
the external auditors in their reports
work undertaken by external review bodies including Her Majesty’s
Inspectors
review of various forms of customer and stakeholder feedback
the outcome of Community Planning
progress with the Best Value Action Plan
APPENDIX 1
3.3
The Council Plan contains clear priorities intended to ensure that resources
are directed towards delivering excellent services that will make a real
difference to the people of Fife. The Council’s strategic planning is undertaken
within a framework that links community, corporate and service planning
together and action taken during the year has improved the clarity in the
related reporting and monitoring structures. This provides continuity and
consistency between the various levels of planning and performance
management in the Council. Performance management is undertaken in a
framework that involves senior management teams, the Council Management
Team and members through various committees. The Council had updated
its service planning and annual performance reporting framework including
integration with the risk management process and in the last year
implemented a Scheme of Scrutiny and Performance. In the coming year
further improvements will continue to be made to reporting performance to
Committees and scrutiny within the financial year.
3.4
The Council Plan sets a clear strategic direction for the Council. Progress is
monitored using a balanced scorecard approach and reported in the Council’s
Annual Performance Report. Performance has also been reported within the
Fife Council Guide to Services which is delivered to every household in Fife.
3.5
The Council has in place many of the components for the effective
management of its resources. These include a Finance Strategy, a
Procurement Strategy and HR Policies. An IT Strategy and IT investment
plan have been developed and these are monitored through the IT Strategy
Board. The Risk Management Strategy Group continues to work to embed
risk management in the Council with Services making continued progress in
the last year. Audit Services has completed a second series of reviews of the
arrangements in all services and agreed action plans. In addition the Council’s
Business Continuity Project has developed Business Continuity Plans for the
Council. The Council’s Code of Corporate Governance has been reviewed in
line with new guidance from CIPFA / SOLACE which reflects best practice
and a new Code approved.
3.6
External Audit has assessed the Council’s corporate governance
arrangements to be generally robust but with scope for improvement. All
services are operating in accordance with the Council’s Financial Regulations
and the systems of financial controls are operating reasonably effectively
across all parts of the Council. The External Auditors have however identified
that the service level asset management plans are at various stages of
development and that it is not clear how these will feed into an overarching
corporate asset management plan. Whilst they are pleased to see that
positive steps have been taken by the Authority to address the
recommendations contained within their previous report on IT Strategy a
number of key recommendations remain outstanding. In addition, they have
APPENDIX 1
commented on the lack of comprehensive registers of moveable assets
belonging to the common good and a lack of consistency in charging for the
use of common good buildings.
3.7
Audit and Risk Management Services identified instances where written
procedures were not reviewed and updated on a regular basis. There were
also instances of poor controls over sums of cash in establishments. Whilst
not material, these have been addressed through the Audit User Group, which
was set up to provide guidance on internal control and procedures and
revised procedures being implemented in the Education Service. System
checks identified incorrect use of payments vouchers in one establishment
which resulted in Council procedures not being fully complied with. Work
carried out by Audit Services also identified instances where whilst disclosure
checks were being carried out these were not being recorded properly.
Continued improvements were made in completing bank reconciliations and
most Services are working to improving their Risk Management processes.
Overall, the main financial systems were all operating well. As part of each
audit, a detailed action plan improving controls was agreed and the outcome
monitored.
3.8
Building on previous years, the Council has continued to adopt a rigorous
approach to containing expenditure within budget, which has seen a further
strengthening of balances over the last year.
3.9
It is our opinion, based on the above, that reasonable assurance can be
placed on the adequacy and effectiveness of the Council’s corporate
governance systems in the year to 31 March 2011.
3.10
The Council has reviewed its Code of Corporate Governance in line with the
revised framework for delivering Good Governance in Local Government. The
approach adopted provides strong leadership focussing on clear priorities,
with a cultural shift from process to results and with staff empowered to
assume personal responsibility for the delivery of the corporate priorities
against these objectives.
3.11
Our corporate governance framework is evolving by encouraging an
appropriate balance between prudent, competent service planning and
delivery, and encouraging innovative thinking and creativity amongst all
employees and services. With this is mind, the Council seeks to continually
improve its corporate governance code and internal controls and accordingly
work continues on a number of areas including:-
APPENDIX 1
Engaging Fife’s communities in the planning, delivery and monitoring of
Council services.
Providing employees with the training and skills required to deliver Council
services and engaging them in the improvement of these services.
Increasing awareness of codes of conduct and whistle-blowing procedures.
Delivering competitive and best value services, making use of the best of the
public, voluntary and private sectors.
Promoting good practice in risk and performance management.
Improving governance in joint working and joint service delivery.
We intend to focus on the above actions in the coming year to enhance further our corporate
governance and internal control arrangements.
Councillor Peter Grant
Leader of the Administration
June 2011
Ronnie Hinds
Chief Executive
June 2011