Hampshire Fire and Rescue Authority Item10

Governance Committee

15/03/200526 July 2005

Draft Statement of Internal Control 2004/05Error! Bookmark not defined.

Report by the Chief Officer

Contact: David Howells, Director of Corporate Services Tel: 023 8062 6833




The Statement of Internal Control which explains the actions the Authority is taking to held provide financial management assurance, is an annual requirement. The Governance Committee is asked to approve the Statement so that it can be included as part of the Annual Statement of Accounts for 2004/05.



RecommendationError! Bookmark not defined.



That the Committee approves the draft Statement of Internal Control for signature by the Chairman and Chief Officer, subject to any further amendments that the Committee may wish to make.



Introduction Error! Bookmark not defined.and Background



Last year was the first that a broad based Statement of Internal Control was required to be produced and `signed off' by the Chairman and Chief Officer. This resulted from a requirement contained within the Accounts and Audit Regulations 2003.



The emphasis on Corporate Governance of which the Statement of Internal Control is a part, is increasing and is now firmly embedded into the Comprehensive Performance Assessment regime. The Statement of Internal Control represents a review of the effectiveness of the Authority's internal control and risk management systems and is also intended to give an assurance about how effectively these operate in practice.



The opportunity has been taken this year to improve on the content of the Statement of Internal Control and ensure that guidance issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) earlier in the year has been taken into account. Several additional areas of assurance have been included with an expanded explanation, including direct comments from senior managers responsible for significant corporate functions. While this year's Statement is somewhat longer it is considered to be much more informative.



The conclusions reached in the Statement of Internal Control also rely upon the essential on-going work undertaken by our Internal Auditors. The Annual Internal Audit Opinion for 2004/05 is also on the Committee's agenda for this meeting.



Draft Statement of Internal Control



A draft Statement is attached as Appendix 1. As a draft, members now have the opportunity to comment on the content and indicate whether or not they would wish to see any amendments made to it.



Contribution to Corporate Aims and Objectives



The preparation of this Statement of Internal Control provides an additional opportunity to identify and explain the actions being taken to ensure that the Authority's arrangements for financial management are sound and follow best practice. It can therefore contribute to our aim to become one of the top 20% of best performing fire and rescue authorities.



Risk Analysis



A Statement of Internal Control is a requirement of Accounts and Audit Regulations 2003. Failure to produce this as part of the annual statement of financial accounts would leave the Authority vulnerable to a qualified audit opinion by our external auditors and consequential damage to the Authority's reputation.



Resource Implications



There are no significant resource implications involved in producing this Statement other than the cost of the administrative task if preparing it.



Equality Impact Assessment



The recommendations of this report are assessed as not giving rise to any equality issues for the Authority.



The proposals within this report are considered compatible with the provisions of the European Convention on Human Rights, the Human Rights Act 1998, and the Race Relations (Amendment) Act 2000.


Background Information (Section 100D of Local Government Act 1972)


The following documents disclose the facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of the report:

The Annual Internal Audit Opinion for 2004/05 - also on this meeting's agenda

Note: The list excludes: (1) published works; and (2) documents that disclose exempt or confidential information defined in the Act.

Enc: Appendix 1 - Draft Statement of Internal Control

Secretarial/WP/Corporate/HFRA HFRA Governance 26 7 05 Statement of Internal Control DH/JMW/18 7 05

Appendix 1


Draft Statement of Internal Control for Hampshire Fire and Rescue Authority


Scope of responsibility



Hampshire Fire and Rescue Authority is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively.



The Authority 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 Authority is also responsible for ensuring that there is a sound system of internal control which facilitates the effective exercise of the Authority's functions and which includes arrangements for the management of risk.



In accordance with the requirements in the Accounts and Audit Regulations 2003, this statement sets out how the Authority has sought to meet these requirements during 2004/05.



The purpose of the system of internal control



The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness.



The system of internal control is based on an ongoing process designed to identify and prioritise the risk to the achievement of the Authority'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.



The internal control environment



The system of internal control has been in place for the year ended 31 March 2005 and up to the date of approval of the annual report and accounts. The next section outlines the internal control environment in which the Authority operates and reviews the effectiveness of the controls.



The Authority sets out its key aims and objectives in its Corporate Plan and Integrated Risk Management Plan (IRMP). These are supplemented by a number of medium-term functional or business plans which set out in more detail the actions and activities that will be pursued. These plans are integrated and monitored as part of the Authority's well-established corporate planning process and performance management framework.



The IRMP, in particular, sets out for the benefit of all our stakeholders the key corporate aims and the primary actions the Authority will take to achieve them. It shows how the Authority will respond to changes and challenges, identifies common aims with partners and sets priorities and targets for improvement. The IRMP is approved by the full Authority. Actions set out in the IRMP are reviewed regularly and the Plan itself is informed by the outcomes of consultation, performance results, other review programmes and factors such as local and national policies and initiatives. It is published on the Authority's website together with current information on actual performance against targets. It is also published in hard copy for circulation internally and to key partners. The IRMP is supported by promotional activities and campaigns to ensure that the Authority's five corporate aims and targets provide a cornerstone for all internal and external communication activities.



The Authority's Performance Review Committee has responsibility for overseeing service planning and reporting on performance. The Corporate Management Team (CMT) also plays an important role in working with officers on drafting new policies and actions.



The development and revision of the IRMP is subject to an extensive corporate consultation strategy involving key stakeholders (including residents, partners and staff). The research findings are published, in summary, on the Authority's website as part of our extensive consultation strategy.



The Authority has a Constitution, originally adopted with effect from 1 April 1997 which sets out in full the processes by which its policies are made and decisions taken. It sets out clearly the role of the Authority and its Standing Committees. It also identifies the role of the Governance Committee (established in 2004) to give added focus on governance issues.



The financial management of the Authority is led by the Treasurer in conjunction with the Chief Officer and is integrated with and influenced by the corporate planning and monitoring processes set out above. This includes processes for forward planning of expenditure, consultation on budget proposals, setting and monitoring income and budgets, and completion of final accounts. All are intended to be accurate, informative, timely and within statutory requirements. The approaches taken are summarised annually in the Authority's Budget Book.



The Authority's Financial Regulations and Scheme of Delegation to Officers have been reviewed and revised during 2004/05.



Review of effectiveness of internal control



In order to ensure compliance with policies, procedures and statutory requirements the Authority has a range of controls and processes in place which are summarised in this section. These processes also help the Authority to ensure the economical, effective and efficient use of resources, to secure continuous improvement in excising its functions, and to provide effective performance management and reporting.



Statutory roles of Monitoring Officer and Section 151 Officer to ensure internal control procedures are efficient and effective and are being complied with on a routine basis to ensure legality and sound financial standing.


The role of Monitoring Officer is combined with that of Clerk. He works with the Authority's Internal Auditor and they have close working relationships with the Standards Committee and Governance Committee. The Standards Committee has responsibility for maintaining high standards of probity amongst members through the provision of advice and training and by carrying out investigations referred to it by the Standards Board. The Governance Committee is responsible for monitoring, reviewing and reporting to the Authority the governance arrangements.


The Authority, its standing committees and the Chief Officer have a full range of professional officer (including legal and financial) advice to enable them to carry out their functions effectively and in compliance with statutory requirements. Legal and financial services are provided through a contract for services with Hampshire County Council. This is supplemented by specialist legal advice (mainly for fire and rescue specific activities and occasional employment advice) by other external providers. The External Auditor is satisfied with the Authority's arrangements (Annual Audit Letter 2003/04) and aware of the Authority's intention to review the contracts for services with Hampshire County Council in 2005/06.



Internal Audit provide independent and objective assurances across the whole range of the Authority's activities.


The Governance Committee has approved the Internal Audit Strategy and Plan for 2005/06 and will receive the Annual Internal Audit Opinion for 2004/05 at its July 2005 meeting.


The Authority's Internal Auditor has provided an Annual Statement of Assurance which is included in the Statement of Final Accounts for 2004/05.



External Audit provide a further source of assurance by reviewing and reporting upon the Authority's internal control processes and any other matters relevant to their statutory functions and codes of practice.


The Annual Audit Letter for 2003/04 commented positively on the Authority's governance arrangements and performance.


For the first time all fire and rescue services have been reviewed under a Comprehensive Performance Assessment (CPA) and the results of this will be published at the end of July 2005. Provisional feedback suggests that there are no concerns expressed about the Authority's financial and governance arrangements.



Risk Management policies and procedures are in place with the objective of ensuring that the risks facing the authority in achieving its objectives are evaluated, regularly reviewed and mitigation strategies developed.


The Authority has developed a Risk Management Policy and Strategic Risk Register which were reported to the Authority in February 2005. This is now under a process of continual review. The CMT takes an active role in the monitoring process.


Additional risk assessment training is being progressively rolled-out to those senior managers with responsibility for business planning.


Insurance policies and funds are in place and are regularly reviewed to ensure the Authority is adequately safeguarded.



Provision of effective, efficient and responsive systems of financial management.


The Authority's financial management strategy is incorporated in the Budget Book for 2005/06. Progress against it is monitored during the year by the Finance and General Purposes Committee and will be reviewed annually in the Final Accounts report. Procedures have been reviewed to ensure that the timetable for earlier completion of Final Accounts is achieved. As part of CPA process, no concerns were raised in relation to the Authority's policies and procedures in the use of resources. Revised Financial Regulations were approved by the Authority in February 2005 and implemented from 1 April 2005.


Internal Audit monitor the effectiveness and level of compliance as part of their work during the year. It has been confirmed - in the Audit Opinion - that they continue to operate successfully.



Codes of practice are issued by external bodies in respect of services and processes, with which the Authority is expected to comply.


The Authority complies with the 2003 CIPFA Code of Practice relating to Capital Finance and Treasury Management. This work is undertaken on behalf of the Authority by Hampshire County Council's Treasurers Department under a contract for services. The Authority monitors policies, practices and activities through regular reports.



The role of the Standards Committee is to promote and maintain high standards of conduct by councillors and co-opted members.


The Standards Committee has met only once in the last financial year and have not dealt with any major issues of concern.



Governance Committee is charged with governance responsibilities.


A Governance Committee was established during the year to give enhanced focus on corporate governance issues. This is reflected in the Committee's terms of reference.



Performance Management processes are in place to measure progress against objectives and to provide for remedial action where appropriate.


The entire performance management framework is well-developed. The Authority has a good track record of monitoring performance via the Performance Review Committee which also now receives reports on compliance with audit recommendations. All performance indicators, both national and local, are clearly set out on the Authority's website and responsibility for monitoring each indicator is allocated to a member of the Service Management Team.


The Authority is actively involved in regional collaboration across the full six workstreams set out in the National Framework for the Fire and Rescue Service. Hampshire takes the lead on the Human Resources workstream.


A Best Value review of vehicle workshops was undertaken in 2004/05 which made a series of recommendations to improve efficiency and effectiveness of the operation.



A corporate procurement policy has been formally approved and communicated to all relevant staff.


The Authority, having completed a Best Value review of its procurement function, has appointed a Procurement Manager tasked with pursuing all the outstanding actions arsing from the Review. This also includes active participation in the national and regional procurement initiatives -especially the `FireBuy' consortium arrangement.



A Corporate Health and Safety Policy has been formally approved and communicated to all relevant staff.


The Authority has a well-established policy (Service Order 8/1/1) which has been communicated widely to its staff. Comprehensive information and advice is available on our website.



A corporate complaints policy/procedure has been formally approved, communicated to all relevant staff, the public and other stakeholders and is regularly reviewed.


The Authority has a well-established complaints procedure (Service Order 2/8/3/6/2) setting out our policy and procedure for dealing with complaints. Full information is available on our website.



Reports received from external agencies and inspectorates. Relevant external inspection reports.


The Authority's rating under CPA will be confirmed at the end of July 2005.



Delivery of services by trained, skilled and experienced personnel.


The Authority has achieved ISO 9001 accreditation for its Commercial Training function.

Signed: .............................. Date: ............ Signed: ............................... Date: .........

Chairman Chief Officer

Secretarial/WP/Corporate/HFRA HFRA Governance 26 7 05 Statement of Internal Control DH/JMW/18 7 05