Contact: Ejner Knudsen, ext 7403 or Jeff Pattison, ext 7321

1 Summary

1.1 In January 2003, Standards Committee, as part of their new terms of reference, adopted the Code of Corporate Governance for Hampshire County Council and agreed that the Monitoring Officer should monitor compliance with the Code both corporately and departmentally. This report outlines the process adopted to monitor compliance during 2003/04 and the key issues identified to date. It also outlines the arrangements for internal audit review to provide independent assurance about the effectiveness of corporate governance and the extent of compliance in departments and the County Council as a whole.

2 Background

2.1 The term corporate governance came into common use after the Cadbury Report in 1992 and is defined as "the system by which organisations are directed and controlled". Since then it has risen in prominence within the public sector, most recently as a result of the publication of the CIPFA/Society of Local Authority Chief Executives (SOLACE) framework document, " Corporate Governance in Local Government - Keystone for Community Governance" and the introduction of Comprehensive Performance Assessment (CPA) for local authorities. The framework requires local authorities to develop their own codes of corporate governance and report on how they have monitored the effectiveness of corporate governance arrangements in the year and any planned changes in the coming year.

2.2 Hampshire County Council (the County Council) has always had a strong framework of governance. To meet the requirements of the CIPFA/SOLACE document, however, the principles behind this were summarised in the form of a Code of Corporate Governance (the Code) which was approved by the Standards Committee on 28 January 2003. The terms of reference for the Standards Committee were also amended at that time to include the adoption, review and amendment of the corporate governance framework for the County Council.

3 Monitoring compliance with the Code of Corporate Governance

3.1 To demonstrate that the Code is effective and being complied with, the Standards Committee agreed that the Monitoring Officer should carry out an annual review of the arrangements to monitor compliance with the Code both corporately and departmentally. It was also agreed that the Chief Internal Auditor should audit this with the results included in periodic reports to the Committee.

3.2 To enable the Monitoring Officer to establish the effectiveness of corporate governance throughout the County Council, corporate and departmental questionnaires were developed covering each of the five dimensions identified in the Code of Corporate Governance. To enhance the awareness of managers, the departmental questionnaire includes an explanation of the principles involved and the policies and procedures that the County Council undertakes to have in place to adhere to these principles.

3.3 The questionnaires were designed to take as little time as possible to complete, requesting Yes or No answers to an initial series of questions. Where policies and procedures were considered to be in place, further information was requested to indicate where evidence can be found to support this self-assessment.

3.4 Where the answer was negative, information was requested to highlight any work in progress or planned to improve compliance with the Code and the person nominated as responsible.

3.5 In early May 2003, the questionnaires were circulated to Chief Officers, Heads of Department or lead officers for the corporate questionnaire, for return by 31 May 2003. Positive and timely returns were received from all recipients.

3.6 The completed questionnaires were shared with internal audit who have commenced a review of the evidence of compliance provided in the returns. Internal audit will test this in detail in selected areas during the period December 2003 to March 2004 in accordance with the Audit Strategy approved by the Committee in January 2003. This will enable internal audit to provide sufficient assurance about the effectiveness of corporate governance and the extent of compliance in departments and the County Council as a whole. The results of this work will be reported to the Committee during 2004/05.

3.7 It is envisaged that the questionnaires will be refined and circulated again during 2004/05 as part of the Monitoring Officer's ongoing role in monitoring compliance with the Corporate Code of Governance. This will also highlight progress made in addressing the issues raised during 2003/04.

4 Issues arising from the questionnaires

4.1 Responses to the questionnaires were generally positive. However, the completed returns have been analysed to identify areas of the Code of Corporate Governance that do not appear to have been implemented and to highlight common issues arising. These need further consideration to assess whether corrective action is needed by departments or at the corporate level, or whether the questionnaire or Code of Corporate Governance itself may require amendment. Key issues identifies so far are summarised below and will be included in the internal audit work outlined in paragraph 3.6:

· partnership arrangements - comprehensive lists of partnership arrangements are not always maintained by departments and the practice of documenting the framework for each partnership is varied. Corporate guidance is being developed by the County Treasurer's Professional Services section to address this issue to ensure that the more significant partnership arrangements are properly controlled

· not all departments have a formal, documented scheme of delegated authority for decision making by nominated officers within the department who exercise discretions on behalf of their Chief Officer. Arrangements are also required to ensure that the scheme of delegated authority is kept up to date to reflect staffing or service changes

· there were a variety of responses to questions surrounding the County Council's Reporting Concerns at Work policy, in particular the way in which incidents are recorded, actioned and reviewed. The responses indicate that these arrangements are not widely known or understood and that the initiative needs to be re-launched to ensure that the policy is applied consistently across the County Council. This debate has also raised the question over whether the County Council should adopt a separate fraud and corruption policy or whether this is already adequately covered by the Reporting Concerns at Work policy. This will be reviewed by internal audit, with reference to best practice in the sector, with recommendations made to the Monitoring Officer

· the questionnaires highlighted that the register of officers' interests had not been updated for a long time, however a letter has subsequently been sent to Chief Officers to address this. The letter also covers gifts and hospitality

· codes of conduct for staff are only monitored by reference to complaints received

· performance indicator data is not collected and used for monitoring performance in all areas, an issue that has also been raised by the District Auditor and requires further development.

4.2 The Monitoring Officer will consider these issues and the results of internal audit reviews during the year and appropriate action plans will be developed. Progress in implementing these actions will be reported to the Committee during 2004/05.

5 Recommendation

5.1 That the Standards Committee notes the progress and approves the approach adopted to monitoring compliance with the Code of Corporate Governance.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose 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 this report.

NB the list excludes:

Published works.

Documents which disclose exempt or confidential information as defined in the Act.

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