Contact: Gary Smith, ext 7691 e-mail: [email protected]

1 Summary

1.1 Each year the District Auditor compiles an annual audit and inspection letter to members which summarises the conclusions and significant issues arising from the Audit Commission's audit and inspection of the Council. The 2004 letter, which contained a number of recommendations, was presented to Cabinet by the District Auditor, Stephen Taylor, on 25 January 2005. The letter has since been published on Hantsweb (www.hants.gov.uk/cpa/pdf/annualauditlet_04.pdf). It should be noted that, in contrast to previous years, there were no formal recommendations in 2003 and therefore no need for agreement to a response last year.

1.2 This paper summarises the main points from the current letter and highlights areas for action. It is important to ensure audit recommendations are followed up as this forms an essential part of CPA, in terms of responding to external feedback and evaluation.

2 Auditors recommendations

2.1 The District Auditor recommended six specific actions for the Council to act upon:

1. Ensure learning from scrutiny pilots improves members engagement in policy development and scrutiny.

2. Ensure that service and financial planning and performance reporting are robustly linked to underpin the council's capacity to deliver improvement.

3. Continue to develop performance management processes and timetables.

4. Work in liaison with the Audit Commission to ensure that earlier accounts closure and audit deadlines can be met in future.

5. Consider the outcomes of the work being undertaken by the County Treasurer to document and evaluate the council's revised financial systems in the context of the Statement of Internal Control.

6. Ensure robust benefit realisation is undertaken in respect of the new Social Care Information System.

2.2 The first three are consistent with points noted in Hampshire County Council's 2002 CPA corporate assessment, the Hampshire Improvement Programme (HIP) and subsequently the Corporate Strategy with action in these areas ongoing. The last three differ, they relate to specific financial and accounting concerns rather than governance issues. Each of the actions is explored in more detail below and appendix one contains a matrix of the recommendations, actions being taken/to be taken, lead officers and timescales.

2.3 While Cabinet will continue to receive separate reports on these areas, this paper provides an overview bringing all the relevant areas of activity together in response to the Audit Commission's recommendations.

3 Member engagement in policy development and scrutiny (recommendation one)

3.1 This has long been recognised as an area for improvement. It is widely accepted that Member involvement in policy formation and scrutiny is important as a challenge and enhancement mechanism. This is also key from a democratic angle, providing all Members the opportunity to guide council activity.

3.2 With this in mind a pilot of the select committee style is being undertaken alongside a review of the democratic processes and structures. Proposals are being looked at as to how to strengthen Member involvement in both the overview (policy development) and scrutiny arrangements in the new administration following the elections. Part of the improvements will include better planning of overview and scrutiny activities in line with Member input at key stages of the integrated planning cycle and will need to be included as part of Member induction. A Councillor training and development programme will support this effort by providing Members the means to extend their capacity and competence. Hampshire County Council is trailblazing in this field and will be piloting an IDeA political skills framework in May.

3.3 The review of democratic structures has included proposals for implementing area arrangements across the county following two pilot area committees which have provided useful learning since their introduction in September 2004. Consideration is being given to how these will link with existing local structures; better support the community leadership role of the Council and individual Councillors and effectively link with both the decision-making and overview and scrutiny arrangements. The committees are intended to act as the `eyes and ears' of the Council and provide the means for Members to better appreciate the communities needs and aspirations as well as their reaction to council services and initiatives. This increased public and councillor interaction will support Members in their policy development and scrutiny role as well as open the prospect of grass-root initiatives.

3.4 A related branch of activity is the identification of `Member Champions'. Following best value reviews of cross-cutting issues individual Councillors are asked to continue their involvement to ensure the cross-cutting areas maintain high profiles and are considered in policy development. The development of scrutiny as a whole is being informed by the successful establishment of health scrutiny arrangements.

4 Service planning, financial planning and performance reporting (recommendation two)

4.1 Good practice has shown that integrated service planning, financial planning and performance reporting are key to efficient service provision. Great time and effort has been invested in strengthening the links between these disciplines to create an integrated planning and budgeting (IPB) system. Service and human resource planning are aligned with the budget through a common timetable in order to rationalise operational planning and monitoring activities and align resources to deliver our corporate priorities. This enables financial decision making to clearly and consistently relate to policy; performance information to be consistently managed; and the corporate strategy and service plans and priorities to be supported by realistic and fully costed human resource plans.

4.2 Service plans are now scheduled to be monitored for their achievement toward Corporate Strategy targets by Departmental Management Teams (DMTs) quarterly and then reported to the Corporate Management Team (CMT) and Cabinet biannually. This is intended to allow closer accountability against the Corporate Strategy and highlight shortfalls in arrangements and resources.

4.3 The general purpose of the IPB is to encourage integrated working through creating the appropriate mechanisms and systems as well as providing guidance and support for staff. This effort is supported by the service planning e-learning package, IPB web guidance and departmental service plans on Hantsnet. In addition mechanisms and guidance for corporate and departmental performance reporting have been created.

5 Performance management processes and timetables (recommendation three)

5.1 The Council has strong aspirations for a comprehensive Performance Management Framework (PMF) which will strengthen the links and provide an overarching structure to the entire policy process from formation, through implementation to evaluation ¹. The framework will highlight all the relevant planning and reporting timetables as well as providing tools and guidance to drive continual improvement, user focus, equalities/diversity and value for money. An outline PMF already exists with a detailed version being developed. The framework is designed to shape organisational culture as well as provide operational support and signpost relevant information.

5.2 The Corporate Performance Steering Group (CPSG) has been refocused to steer the Council's preparations for external assessment and ensure these activities are aligned appropriately with the Council's own corporate priorities. CPSG will ultimately provide support to CMT, taking action and making recommendations, to ensure performance management and the impact and implications of external audit is considered at the highest levels of the organisation. Whereas CPSG provide the strategic overview, the Performance Support Network (PSN) is being developed to provide operational support and facilitate implementation to ensure the performance agenda permeates all levels of the organisation, both political and managerial.

5.3 The Corporate Strategy has been updated to incorporate the HIP and to include the latest local performance measures. HIP is no longer reported separately but instead incorporated in the Corporate Strategy and service plans. The creation of local PIs allows for more appropriate measurement of the progress toward corporate priorities and builds on the approach to develop stretching targets. The new template for improvement plans ensure attention is paid to specifying objectives in outcome terms. Facilitation of reviews is developing competence in this area, supported by the Hampshire Learning Centre's core development programme.

5.4 CMT has taken action to ensure improved data collection and ownership of results with regular reports on PI results to CMT. This has included the introduction, in October 2004, of half year reporting of performance information with finance and workforce planning - the Corporate Performance Report. This has generated further interest and commitment via DMTs, CMT and Cabinet. Among other things the number of reserved PIs has been reduced significantly with work to further reduce compilation errors continuing.

5.5 In early 2005 a review of the Council's review programme was completed and a revised approach agreed, work is now being undertaken with departments to agree the review cycle for 2005-2006.

5.6 At the individual level, in the process of updating individual Performance Development Reviews (PDRs) the Corporate Strategy links are being highlighted to strengthen personal accountability toward corporate targets. New PDR templates are being developed which mirror the service planning format with reference to corporate aims and will also align with the ongoing pay and benefits programme.

6 Accounts closure and audit deadlines (recommendation four)

6.1 Action is being taken to prepare earlier for accounts closure by utilising SAP appropriately. There are options available for enhancing continuous financial reporting processes (for example, as proposed in the draft CPA guidance for the use of resources element). The potential costs and benefits of such approaches will be assessed in due course, taking account in particular of the final CPA guidance once issued.

7 Financial systems and statement of internal control (recommendation five)

7.1 The Audit Commission and Chief Internal Auditor will report their opinions on financial controls and their documentation to the Governance Committee in the usual way. This will enable members to gain the appropriate assurances.

8 Social care information system and benefit realisation (recommendation six)

8.1 Progress in decommissioning mainframe systems has been good and this is on schedule. Benefit realisation resulting from Swift is being recast in light of the final costs of the new system. This will concentrate on efficiency improvements achievable, though the cashable element is unlikely to extend beyond the crucial contribution this project makes to the corporate savings achieved by turning off the mainframe.

9 Additional: E-Government

9.1 The County Council published its e-Government and ICT strategy in November 2003. This strategy will be subject to formal review and revision during 2005/06. In addition to the strategy, a Routemap has been developed to establish the programme of work required to deliver the strategy. A key part of this is the set of actions that are being taken to meet ODPM targets for e-Government, including the BVPI157 and Priority Service Transformation Outcome targets. Progress against these targets are monitored on a regular basis by the Council's e-Government and Corporate ICT Steering Group. The Council's e-Government programme embraces a number of key corporate business transformation initiatives including contact centres, website improvement, mobile/flexible working, and upgrade to core back-office functions for finance, procurement and HR/payroll, together with infrastructure upgrades and various departmental applications.

Recommendation

1 That the District Auditor's letter and comments be welcomed and that the County Council approve the approach laid out in appendix one.

Section 100 D - Local Government Act 1972 - background documents

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

NB: the list excludes:

1. Published works

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

Documents: none

Appendix one