CX/11/44
Audit Committee
24 June 2011
Good Governance in Local GOVERNMENT
Report of the Corporate Leadership Team
Recommendation:
(a) that the draft Governance Statement be approved;
(b) that the Audit Commission be asked to clarify future reporting requirements.
~~~~~~~~~~~~~~~~~~~
1. The Council is required, annually, to prepare and publish a governance statement in accordance with CIPFA/SOLACE guidance and comply with Regulation 4(2) of the Accounts and Audit (Amendment) (England) Regulations 2006. The Council is required to publish the statement alongside the Annual Statement of Accounts.
2. This is the fourth year for which the Council has been required to produce a Governance Statement and the attached draft has, as is usual, been produced in line with the previous years versions, focusing on the six core principles of the CIPFA/SOLACE guidance which form the basis of the accompanying, detailed, schedule. In line with advice from the Audit Commission the Annual Governance Statement should be considered and signed-off by this Committee in parallel with the Council s Statement of Accounts.
3. It should be acknowledged that the nature of and requirements for future reporting mechanisms along these lines is at present unclear following the decision by the Secretary of State for Communities and Local Government to abolish the Audit Commission from 2012 and the absence of any clear guidance as to what may replace it.
4. In recommending the adoption of the attached Annual Governance Statement the Corporate Leadership Team confirms that the organisational, financial, compliance and operational key controls referred to therein and the accompanying schedule continue to be appropriate and that statements of internal control which support the content of this Statement have operated, effectively, during 2010/11.
5. This Report and the accompanying Statement have no specific equality, sustainability or legal implications that are not already covered by or subsumed within the detailed policies or actions referred to therein.
[Electoral Divisions: All]
Local Government Act 1972: List of Background Papers
Contact for Enquiries: R Hooper
Tel No: 01392 382300 Room: G31
Background Paper Date File ReferenceNil
DEVON COUNTY COUNCIL Annual Governance Statement 2010/11
Scope of Responsibility
Devon County Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards and that public money is safeguarded, properly accounted for and used economically, efficiently and effectively. Devon County Council also has a duty under the Local Government Act 1999 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 overall responsibility, the Council is responsible for putting in place proper arrangements for the governance of its affairs so as to facilitate the effective exercise of its functions and manage risk.
The County Council has approved and adopted a code of corporate governance which is consistent with the principles of the CIPFA/SOLACE Framework Delivering Good Governance in Local Government. A copy of the code can be obtained from the Director of Finance. This statement explains how the Council has complied with the code and also meets the requirements of the Accounts and Audit Regulations 2011.
Purpose of the Governance Framework
The governance framework comprises the systems and processes and culture and values by which the Council is directed and controlled; also the activities through which it accounts to, engages with and leads the community. It enables the Council to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost-effective services.
The system of internal control is a significant part of the framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing achievement of the Council s policies, aims and objectives, to evaluate the likelihood of those risks not being realised - and the impact should they be realised - and to manage them efficiently, effectively and economically.
Satisfactory controls to support statements made in this Annual Governance Statement are essential and in endorsing it the Council s officers confirm that input to systems and processing of transactions is complete for the financial year in question and that there were no material or significant delays or backlogs of either input or processes that would result in financial or other records being incomplete.
The Governance Framework The Council's Constitution
The Constitution is fundamental to the working of the County Council, transcending the six core principles of corporate governance in the CIPFA/SOLACE Framework which form the basis of the response set out in the attached schedule.
The Constitution is the Council s Code of Corporate Governance. Framed in accordance with statute and Government guidance and evolved in the light of experience and subsequent legislation, it sets out how the Council operates, how decisions are made and the procedures which are followed to ensure that these are efficient, transparent and accountable to local people.
The Constitution is the guarantor of the continuing openness, accountability and integrity of the Council's decision-making processes and sets a series of exacting standards against which the Council's actions can be judged and, if necessary, challenged.
The Constitution is at the heart of the Council s business:
It allocates power and responsibility within the Council and between it and partner organisations;
It delegates authority to act to the Leader, Committees and officers;
It enables the people of Devon to ask questions at certain meetings and to have them answered or submit petitions;
It sets down the procedures by which the people of Devon may give their views on the key decisions which the Council's Cabinet is to take;
It regulates the behaviour of individuals and groups through codes of conduct, protocols and standing orders.
The Constitution comprises 16 Articles setting out the basic rules governing all aspects of the working of the Council (Part 2) and is then divided up into:
In formulating its Constitution in 2002, the Council adhered closely throughout to the framework presented in Government's Modular Constitutions for English Local Authorities, enabling it to produce a constitution which was logical, integrated and accessible to members, officers, citizens and others interested in the way a local authority makes decisions and governs itself and its area. Then and subsequently, wherever legislation permitted local choice, the Council has framed its Constitution to take advantage of the most open and inclusive of the available options.
The Constitution is designed to meet all the necessary statutory requirements for instruments of governance and to include matters traditionally covered by local authority standing orders, financial regulations, schemes of delegation and terms of reference. It also contains the elements necessary to describe the Council's executive arrangements in a single, coherent document which can be used as a comprehensive point of reference by individuals and organisations inside and outside the Council. All the familiar elements can be found in the Constitution and the Council has sought to use the model format to create a genuinely accessible, meaningful instrument of governance.
The Council is committed to involving the community in setting its priorities, enabling citizens to raise matters with and convey their concerns to the Council and to considering the needs of all groups in the community and promoting democratic understanding and participation. The Council s Constitution provides that framework.
Review of Effectiveness
The County Council s Constitution has been in force since 2002 and was last comprehensively reviewed in July 2009 and again in February 2010, reflecting changes introduced following the County Council elections in 2009.
A number of minor amendments were subsequently made the to the Constitution during the year relating to the remits of Cabinet members and the terms of reference and membership of Scrutiny Committees.
The Constitution is published on the County Council s website at http://www.devon.gov.uk/constitution.htm and is also available for Inspection at the Council's Offices together with the most recent Annual Report (also at http://www.devon.gov.uk/annualreport2008) and the Statement of Accounts for 2009/10 (also at http://www.devon.gov.uk/statement-of-accounts0910.pdf
The County Council has responsibility for conducting, at least annually, a review of the effectiveness of its governance framework including systems of internal control. This review of effectiveness is informed by the work of managers within the authority who have a responsibility for the development and maintenance of the governance environment, the Head of Internal Audit s annual report, and also by comments made by the external auditors and other review agencies and inspectorates.
With the abolition by the new Government of the CAA process, the Audit Commission s formal response to the self assessment undertaken by the Council in the latter part of 2009/10 ) - as part of the accelerated timetable for the 2010/11 Use of Resources Assessment was never published, although informal indications from the Commission were that the Council s score would have reflected well upon the organisation.
Details of processes applied in maintaining and reviewing the effectiveness of the governance framework are summarised below.
The Constitution
The roles and responsibilities of the Council, its Cabinet and non-Cabinet Members are set out more fully in Articles 6 and 7 of the Constitution and in Part 3 (Responsibility for Functions). These were revised following the County Council elections in 2009 and are themselves balanced by the Codes of Personal Conduct set out at Part 6 of the Constitution.
The Council currently comprises 62 councillors, meeting together as the full Council for specific purposes, to decide the Council s overall policies and set the budget each year. Meetings of the Council and its Committees are normally open to the public. The Council appoints the Leader, Scrutiny Committees, the Standards Committee and all other committees. The Council receives the minutes of committees, and has power to vary or refer back decisions which are outside established policy. From time to time it also debates issues of particular relevance or topicality for the County.
The Council has acknowledged the potential impact of the provisions of the Localism Bill 2010 for its governance framework, when brought into force, including the new power of general competence for local authorities, governance arrangements including directly elected mayors, the abolition of the standards regime, enhanced community empowerment and availability of local referenda, community involvement in provision of services and potential acquisition of assets and reformation of the planning system including more localised neighbourhood plans.
The Cabinet
The Cabinet is the part of the Council responsible for most day-to-day decisions. It is made up of a Leader and no more than nine other members (Cabinet Members), appointed by the Leader from amongst the membership of the Council. When major decisions are to be discussed or made, these are published in the Cabinet's Forward Plan in so far as they can be foreseen. These major decisions will be taken with council officers present at meetings of the Cabinet which will be open to the public except where personal or confidential information is discussed. The Cabinet has to make decisions which are in line with the Council s overall policies and budget. If it wishes to make a decision which is outside the budget or policy framework, this matter must be referred to the full Council to decide.
The Scrutiny Function
Scrutiny Committees support the work of the Cabinet and the Council as a whole. They look at the effectiveness of the Council's own policies and inquire into matters of local concern. These investigations lead to reports and recommendations which advise the Cabinet and the Council on its policies, budget and service provision. Scrutiny Committees also monitor the Cabinets decisions. They may "call in" a decision which has been made by the Cabinet but not implemented. This enables them to consider whether the decision is appropriate and they may recommend that the Cabinet reconsiders it. They may also be consulted by the Cabinet or the Council on forthcoming decisions and the development of policy. An Annual Report is also prepared and considered by the County Council.
The Council s Scrutiny Committees continue to be Chaired by members of the opposition groups with Vice-Chairmen drawn from the party of the administration. These Committees continue to operate in a non-partisan way which it is believed has served both the electorate and the Council well in line with the Constitution and the Council s protocol governing relationships between the Cabinet and Scrutiny Committees. Members of the Council may place items on the agenda of any Scrutiny Committee, a right which has always effectively existed in the Constitution since it was first adopted in 2002, reflecting the requirements of the Local Government Public Involvement in Health Act and its definition of any local government matter .
Having previously acknowledged the need to review the roles and remits of the then Overview and Scrutiny Committees after the first 12 months of operation of the new Council, the composition and terms of reference of the Council s Scrutiny Committee was amended to create 4 separate Scrutiny Committees responsible for discrete services areas of the Council and the Policy Resources Scrutiny Committee was empowered, in line with the revised CIPFA Code of Practice, to examine and comment upon the Council s Treasury Management Strategy prior to it being adopted by the Council as part of its annual budget considerations.
In light of the unprecedented changes faced by the Council in setting future budgets, a revised format was piloted in 2010 for scrutinising the Council s budget with a joint all-day session of the four Scrutiny Committees where all scrutiny Members could critique/question/challenge the detailed budget proposals across all directorates and services, to better understand the implications of budget reductions across the whole Council and make more effective recommendations to Cabinet and the Council. In addition a dedicated electronic mailbox for Members was established to enable them to ask detailed questions on the budget in advance of the meeting referred to above, responses to which would then be circulated to all Scrutiny Committee members.
The Cabinet and Corporate Leadership Team remain appreciative of the work undertaken by Overview/Scrutiny Committees and acknowledge that it has made a major contribution to the work of the Council, especially in areas where detailed objective research and analysis needed to be done.
Organisational Performance
The Council agreed revised organisational structures for the Council and the Corporate Leadership Team, reflecting the impact of the new Government s Comprehensive Spending Review, the Council s financial settlement for 2011/12 and beyond, the general direction of travel indicated by Government for the reform of the public realm services and the need for a more flexible organisational structure to respond to those challenges and better equip and position the Council to focus on its future strategic commissioning responsibilities.
The existing formal Directorate structure would be replaced with a corporate single organisation approach under the Leadership of the Chief Executive and two Strategic Directors with accountability for service outcomes under a new Head of Service level; ensuring that accountability for service performance to rest with those who actually manage services. These new structures are anticipated to be in place by September 2011, at the latest.
The Council endorsed proposed new arrangements for the provision of children s health services, in partnership with NHS Devon. Recognising the imperative on NHS Devon under the national Transforming Community Services (TCS) to transfer its community services to alternative providers by 1 April 2011 and the pre-existing arrangements with the Council s Children Young People's Services for the delivery of services for children with additional needs it was agreed that the County Council should manage Children's Health Services on behalf of NHS Devon, for an initial period of two years.
In a similar vein the Council also agreed:
(a) to establish a Joint Venture Company (JVC) to provide and undertake services currently provided for schools by the Council's in-house provider, Devon Catering and Cleaning Services commencing in April 2011, phased over time;
(b) to explore detailed proposals for the future management and delivery of the Devon Youth Service, moving to a commissioning role, to ensure it is fit for purpose in delivering the service to vulnerable young people in line with national policy direction. Detailed proposals will be considered further during 2011/12;
(c) to establish a joint venture arrangement for the Learning Development Partnership, to secure the delivery of school improvement and inclusion services;
(d) approval to the final business case submitted by the South West Devon Waste Partnership for the procurement of waste treatment services for the South West of Devon on behalf of the formal Partnership between the County Council and Plymouth City and Torbay Councils established for that purpose.
In relation to service provision generally, the outcomes of the Annual Performance Assessment for Adult Care Services undertaken by the Care Quality Commission for 2009/10 showed that, overall, the Council was performing Well in Delivering Outcomes and that it was regarded as Excellent in Making a Positive Contribution in recognition of the involvement of clients, their carers and partners, providers and staff in making decisions and redesigning services. Only one other Council in the South West had received a similar rating for this area.
The County Council s Children Young People s Services were also adjudged by OFSTED to be performing well in its Annual rating for 2010. OFSTED had acknowledged that the very large majority of services, settings and institutions inspected were good or better and that there had been improvements in most aspects of provision since the previous year.
Given, in both of the above instances, that levels of performance and expectation were raised each year through a combination of higher targets and standards, simply maintaining performance levels was an achievement and improving them even more noteworthy.
In relation to Members Allowances - and as a result of issues and concern expressed around expenses claims of Members of Parliament the Audit Committee had suggested the Council review its controls for payment of members allowances. The subsequent Auditors Report concluded that the process for payment of allowances was robust and well controlled and the controls mitigated the potential risks. There were therefore no issues arising from the examination of systems and controls that would warrant inclusion in this Annual Governance Statement or remedy by the Council.
Similarly, in relation to the management and allocation of Performance Reward Grant funding received by the County Council under LPSA2, a review by the Devon Audit Partnership of the procedures and processes followed concluded that - particularly in the absence of any detailed requirements on auditing and control by the Department of Communities and Local Government all expenditure had satisfactorily followed normal County Council accounting practices and that, subsequently, there were no issues arising from the examination of systems and control that would warrant inclusion in this Annual Governance Statement.
The Standards Committee
The Standards Committee continued to exercise its role in monitoring complaints and standards. The number of complaints received against Councillors remains small notwithstanding the changes in operation brought about by the Local Government Public Involvement in Health Act - with the Council s Standards Committee now being responsible for the local investigation and determination of complaints against Councillors. There were no cases locally where a councillor was found to have been in breach of the Council s Code of Conduct. That Committee particularly welcomed the favourable comments of the Ombudsman had on the way the Council had dealt with complaints generally and the Council s work in this area of activity.
Efficient, effective and ethical governance protects the public interest and the Council itself. Members and Officers are supported by a wide range of polices and Codes of Practice enunciated in the Council's Constitution and also by a wide range of training opportunities tailored to meet their needs. The Council's Governance Framework is reviewed annually and any issues for the future governance of the Council are highlighted and addressed at that time.
The Standards Committee Annual Report for 2001/11 may be viewed at: http://www.devon.gov.uk/index/councildemocracy/decision_making/full_council/standards.htm
However, the Council notes that the Coalition Government s Programme for Government of 20 May 2010 contained a commitment to abolish the Standards Board regime, as proved for in the Localism Bill published in December 2010. While there is now some clarity about the content of the Bill the Council will need to determine what exactly will be put in its place, locally.
Notwithstanding the proposed legislation, Government is committed to maintaining high standards of conduct in office and ensuring that councillors do not abuse their office for personal gain by putting their own interests before those of the general community or the area they represent. It has said that wilful failure to comply with those requirements will constitute a criminal offence.
The Standards Committee itself recognises the importance of retaining a structure which will not only uphold public confidence and contribute to the maintenance of high standards. but will also protect members themselves by providing an authoritative means of testing allegations made against them.
The Audit Committee/ Devon Audit Partnership
The Audit Committee is, as always, vigilant in monitoring the Council s arrangements to secure economy, efficiency and effectiveness in its use of resources including the work of the Council s Internal Audit team and the Audit Commission and the application of the Council s Risk Management policy. This resulted in an unqualified conclusion by the Audit Commission in its Annual Governance Report.
The Audit Committee will also review separately, and on a regular basis, progress with and implementation of any recommendations made in Audit Reports into specific areas of activity to ensure they have been adhered to and appropriate management action taken.
The Devon Audit Partnership was established by the Council in conjunction with Plymouth City and Torbay Councils came into operation on 1 April 2009 to provide shared internal audit services (as a means of improving services through joint working and maximising efficiencies and economies of scale) reporting to the new Devon Audit Partnership. The Partnership and democratic arrangements are working well but will continue to be monitored.
The Investment and Pension Fund Committee
Accounting arrangements require separate accounts to be prepared for the County Council and the Devon Pension Fund. Recognising the need for clear governance arrangements for managing these Accounts the Council previously expanded the remit of the Investment Pension Fund Committee (as it already monitored the activities of that Fund during the year) to review and approve the accounts of the Devon Pension Fund and to ensure appropriate accounting policies was introduced in the same way as the Audit Committee was responsible for monitoring and approving the Council s main accounts. As previously agreed with the Audit Commission, this process was implemented for the 2009/10 accounts.
Engagement and Participation
The County Council has always prided itself on the work it does, over and above statutory consultations, to encourage individuals from all sections of the community to engage with, contribute to and participate in the work of the Council. Examples of this are the Council s Communications Strategy are the Devon Voice (Residents Panel), Parent/Carer Voice, and the Young Peoples Shadow Executive and Scrutiny Forums (Hear by Right) and Community ( Tough Choices ) Roadshows held by the Leader of the Council across the County as part of a wider exercise by the County Council to consult and involve local people in determining the Council s priorities.
The Council had previously established a Senior Council, in partnership with the Department for Work and Pensions, to act as an independent, non-political body to lobby for, and be part of local policy making to provide, better local services for the over 50s. Devon was one of only eight local authority areas in the country chosen by the Government to pilot new ways of supporting and empowering people over 50, of which the Senior Council was but one element. However, acknowledging that the existing contract would cease at the end of March 2012 discussions had taken place between the County Council, the Senior Council and stakeholders in the latter part of the year about how to take this forward and in light of the comprehensive spending review without diminishing the valued role and contribution played by the Senior Council in the past.
The proposals outlined by the Council would see the creation of a single contract for health and social care involvement activity spanning all current providers which would aslo enable those organisations to reduce their costs by forming a consortium whiilst retaining the highest level of engagement activity as possible. This Joint Engagement Strategy was intended to secure the involvement of all relevant groups in a way which would not only ensure parity between the different groups but make the best use of the investment in this activity by the County Council and NHS Devon. The process was ongoing with a view to new arrangements being in place by June 2011.
On a more local level, and as part of the Council s desire to develop a more strategic and coordinated approach to community engagement a pilot exercise in locality engagement was undertaken in Ivybridge, modelling the community board approach and bringing together elements of intelligence and profiling, service performance and analysis of parish plans in support of the local county councillors leading the community workshop in December. This had proved to be useful and will form the basis of a model for development in other areas.
Significant Governance Issues
The continuing impact of the unprecedented turmoil in the financial markets over the previous three years justifies the continuing focus on Treasury Management Practices. The County Council s treasury management practices are soundly based on the principle that when balancing risk and return the security and liquidity of an investment is given a higher priority than the yield.
Throughout the year, the Council has been active in managing investment and interest risk. Levels of liquidity and active treasury management have meant that no short term borrowing was required. Similarly, no long term borrowing was undertaken during this financial year with all capital expenditure having been funded by revenue balances.
The Council also regularly reviews and updates its Investment Strategy and its Treasury Management Policy and Practices to ensure that they reflected best practice guidance as issued by the Chartered Institute of Public Finance and Accountancy (CIPFA). In line with that guidance, the policies were first scrutinised - as indicated above - by the Council s Policy Resources Scrutiny prior to consideration by the Council s Cabinet.
At the time this Annual Statement was in preparation and over and above the impact upon the organisation and services of the Comprehensive Spending Review and financial settlements for 2010/12 and beyond a great deal of uncertainty remains over the impact upon the Council s local authority s governance framework of the Government s intentions for and direction of travel of public realm services through, in particular:
the implications of the Localism Bill,
the shape of any future arrangements to be made by the County Council for the discharge of the functions of a Standards Committee,
the implications of reorganising the NHS set out in the Health Bill published in January 2011 including:
o the transfer of local health improvement functions to local councils;
o the role of local councils in leading joint strategic needs assessments;
o the
o the establishment by councils of Health and Wellbeing Boards and enhanced Scrutiny functions;
o transferring responsibility for funding and contracting of the new local Healthwatch (replacing LINk); and
o increased joint commissioning and pooled budgets
the implications of the decision by the Secretary of State for Communities and Local Government to abolish the Audit Commission from 2012.
While the County Council was already planning for the future, greater clarity over the local government landscape of the future would be beneficial not least because the proposed changes to the NHS would require formal Shadow Arrangements to be put in place in 2012 at the latest.
The Council formally places on record and express its appreciation to all of its staff for their continuing commitment to the delivery of high quality services for the people of Devon throughout this period.
Certification
We have been advised on the result of the review of the effectiveness of the governance framework undertaken by the Cabinet, the Standards Committee, the Audit Committee, the Investment Pension Fund Committee and by Scrutiny Committees and the plans, as summarised above, to address weaknesses and ensure continuous improvement of systems is in place.
We will over the coming year continue to address the above matters to further enhance our governance arrangements. We are satisfied that these steps will address the need for improvements that were identified in our review of effectiveness and will monitor their implementation and operation as part of our next annual review.
Signed ..
Chairman of the Audit Committee, on behalf of Devon County Council
Signed ..
Chief Executive, on behalf of Devon County Council
30 June 2011