Contact: Jeff Pattison, tel 01962 847321, [email protected]
Ejner Knudsen, tel 01962 847403, [email protected]

1. Introduction

1.1 There is continuing drive within the public and private sectors to increase the quality and reporting of corporate governance. In previous years, a `Statement of Internal Financial Control', signed by the Treasurer, has been required to be included in the Authority's Statement of Accounts. With effect from the 2003/04 Statement of Accounts all local authorities and other relevant bodies are required to produce a more broadly based `Statement of Internal Control' (SIC).

1.2 The requirement to comply is set within the Accounts and Audit Regulations 2003. However, guidance on how to comply has only recently been issued by the Chartered Institute of Public Finance and Accountancy (Cipfa). In recognition of this fact, authorities are entitled to produce an interim statement for inclusion with the 2003/04 Statement of Accounts. But the County Council's arrangements are relatively advanced and a full statement is considered possible.

2. Synopsis of the requirements

2.1 The previous statement on the system of internal financial control related purely to financial issues and, therefore, was signed by the Treasurer. The new statement of internal control relates to the wider corporate governance responsibilities and so is required to be signed by the most senior employee and member (ie Chief Executive and Leader).

2.2 The Authority is required to identify the risks to achieving its objectives and ensure that controls are in place to mitigate these through the application of a risk management process. Having established the system of internal control, the Authority should put in place processes to maintain it and keep it up to date.

3. Approach taken

3.1 The approach followed in order to assess internal control is now as follows:

3.2 A draft statement is attached as appendix 1. All headings and the content of sections one and two are taken from the guidance. The first and third paragraphs of section four are also directly taken from the guidance as recommended. The remaining content is expected to be specific to the organisation. The draft statement has been agreed by the Chief Executive.

3.3 There is no guidance on how detailed the authority-specific content should be. The draft version is intended as a starting point which members may wish to comment on.

Recommendation

That the Committee approves the Statement of Internal Control for the signature of the Chief Executive and the Leader.

Appendix 1

Statement of Internal Control for Hampshire County Council

1. Scope of responsibility

Hampshire 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 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 2003/04.

2. 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 system of internal control has been in place at the Authority for the year ended 31 March 2004 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.

3. The internal control environment

The key elements of control are as follows:

· The Authority sets out its objectives through the corporate strategy. Linked to this are Service Plans, the Workforce Plan, the Asset Management Strategy, the four Cabinet priorities, the Local Public Service Agreement, the Community Strategy, the Revenue and Capital Budgets, Action Plans arising from Best Value Reviews and External Inspection reports.

· The Authority facilitates policy and decision making through the arrangements set out in its Constitution which operate in accordance with a range of policies and processes including financial regulations, standing orders, codes of conduct and procedures for delegation of decision taking.

· The financial management of the Authority is led by the County Treasurer and is integrated with and influenced by the processes set out above. It 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 Capitals Financial Management Policy included in the Council's Budget Book.

· In order to ensure compliance with policies, procedures and statutory requirements the Authority has a range of controls and processes in place, as set out and reviewed below. 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.

Review of Effectiveness of Internal Controls

Signed : ______________________ Signed : ___________________________

Chief Executive Leader