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 2004/05.

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 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.

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 Corporate Strategy sets out in one document the main messages about what the County Council stands for and how we aim to achieve them. It shows how the County Council responds to changes and challenges, identifies common aims with partners and sets priorities and targets for improvement. The Corporate Strategy is approved by CMT, Cabinet and full Council and forms the major part of the County Council's policy framework alongside the Community Strategy and Performance Plan. The Corporate Strategy is reviewed regularly and 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 County Council's website alongside the Performance Plan and in hard copy for circulation internally and to key partners. The Strategy is supported by other promotional activities including posters and the six aims provide a cornerstone for all internal and external communication activities.

The County Council has published guidance on its service planning process which links workforce, budget and service planning into the County Council's Corporate Strategy. The Corporate Performance Steering Group has responsibility for overseeing service planning and reporting on performance, in relation to the targets set in the Corporate Strategy, on a six-month basis to CMT and Cabinet through the Corporate Performance report.

To establish these corporate objectives the County Council has a corporate consultation strategy agreed by the Corporate Management Team (CMT) and Cabinet annually which sets out plans to consult with staff, residents and other stakeholders and partners. The research findings are published, in summary, on the County Council's website. The results help inform the development of the Corporate Strategy and are disseminated through CMT/Cabinet, Departmental Management Teams (DMTs), senior managers seminars (Success through People) and other staff communications mechanisms to inform service planning.

The County Council has an agreed communications strategy, currently under review, which is driven by the Corporate Strategy key aims and includes specific communications plans for individual activities and documents e.g. Cabinet priority work, Comprehensive Performance Assessment (CPA) etc. These plans are produced routinely for agreement by CMT and Cabinet.

· The County Council has a Constitution, originally adopted with effect from 1 September 2001, which sets out in full the processes by which its policies are made and decisions taken. It sets out clearly the role of the Council, the Leader, Cabinet, arrangements for the performance of regulatory functions and the Standards Committee. It also identifies the role of the Governance Committee established during the course of the year to give added focus on governance issues.

The Constitution also contains arrangements for the delegation of decision making to the above bodies and also to Chief Officers and others. In addition, appendices to the Constitution also contain a range of Codes and Protocols including those on Financial Regulations, Contract Standing Orders, Codes of Conduct for members and officers and a Protocol for member/officer relations.

· 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 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 control

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 Monitoring Officer (the Head of Corporate and Legal Services) and the Chief Internal Auditor (for the Section 151 Officer) have close working relationships both between themselves and the Standards Committee and the 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 Cabinet the governance arrangements for the County Council.

The Council, Cabinet, Executive Members, Committees and Chief Officers have a full range of professional officer (including legal and finance) advice to enable them to carry out their functions effectively and in compliance with statutory requirements. The Council's Legal Practice has a central role in this respect. The Legal Practice obtained the Law Society's quality accreditation (Lexcel) in 1999 and has retained it since. Senior lawyers within the Practice have regular meetings with major clients to assess performance, review future demands and identify new legislative requirements.

The External Auditor is satisfied with the Council's arrangements (Annual Audit Letter 2003/04).

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

The Governance Committee has approved the Internal Audit Plan for 2005/06 and monitored progress and outcomes of the 2004/05 Plan.

The Chief Internal Auditor has provided an Annual Statement of Assurance which is considered in conjunction with the Final Accounts.

External Audit provide a further source of assurance by reviewing and reporting upon the Council'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 Council's excellent performance assessment and stated "it is well placed to further improve the way it works and the services it provides". In a separate report to the Governance Committee on the management of its financial affairs and standards of financial conduct, the External Auditor was able to place reliance on the work performed by Internal Audit.

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 County Council has a well-developed Risk Management Strategy, the details of which can be found on the intranet at http://hantsnet2000.hants.gov.uk/TC/riskmanagement/index.html

A Corporate Risk Management Board and Risk Management Steering Group exist. The former is chaired by the Chief Executive and the latter by the Head of Resources in the Chief Executive's Department. The terms of reference etc. can be found on the intranet site.

The methodology for assessing risks has just been reviewed and amended. Following this, workshops were held with all departments to raise awareness and provide training in the use of the methodology. Copies of the slides used at the presentation are available on the intranet site.

For the 2004 risk assessments each department trialled a database that had been developed by the Environment Department. This now forms the corporate risk register and during 2005 we will be seeking to turn this into an integrated corporate risk management system. It is likely that this will be done in conjunction with the development of an audit management system.

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

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

The Council's Financial Management Strategy is incorporated annually in the Budget Book. Progress against it is reviewed annually with the Final Accounts report. Procedures have been reviewed to ensure that the timetable for earlier completion of Final Accounts is achieved. As part of Comprehensive Performance Assessment process, the Council received the top rating of four for its policies and procedures in relation to use of resources. New and revised Financial Regulations were implemented from 1 September 2001, within the Constitution. Internal Audit monitor the effectiveness and level of compliance as part of their work during the year. This has confirmed 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 has complied with the 2003 CIPFA Code of Practice relating to Capital Finance and Treasury Management. The County Council's Cabinet monitors policies, practices and activities through regular reports on debt management and investment strategy.

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 regularly in the last financial year.

Governance Committee is charged with governance responsibilities.

A Governance Committee was established during the year so as to give enhanced focus on corporate governance issues. This is reflected in the Committee's terms of reference and by it being chaired by the Leader of the Council and with representation from the Leaders of the two opposition parties. The full role of the Committee is clearly referred to in the Council's Constitution at Part 1: Chapter 10.

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 not yet fully developed. Responding to recommendations from external inspection and audit, the Council is developing its sound building blocks of performance management into an integrated approach, which it is working to embed in the culture of the organisation. Particular attention is being paid to accountability for targets and monitoring progress with them on a regular basis.

Clear terms of reference are set for the preparation of service plans and guidance is accessible on the performance management website, which incorporates a mechanism to reflect corporate objectives within service plans. The guidance also cross-references guidance for budget planning and workforce planning.

Half yearly reports, initially within Departments, were implemented from October 2004, to report against the objectives and targets in service plans. Since service reviews are now instigated through the Service Planning regime, Best Value Reviews only focus on cross cutting and strategic issues. From 2005 these will drop the `Best Value' label and work will be undertaken to map the full range of strategic and cross cutting reviews.

All performance measures, both national and local are known and responsibility either allocated or in the process of being identified through the service planning process.

From October 2004 the revised corporate performance reporting process covers:-

· National performance results - these are incorporated in the corporate performance report: half yearly report in October/November and full year report in April/May.

· Results against corporate strategy targets/priorities - these form the major part of the corporate performance report.

· Reports against departmental/service targets/priorities - reports go to Departmental Management Teams half yearly.

· Individual performance reports - every line manager considers performance results at least on an annual basis, though usually more frequently. The process is evaluated by IIP accreditation.

Poor performance is escalated through performance reporting to the managerial/political level which can agree remedial action. Once remedial action is agreed, it should be implemented through service plans.

Performance is driven upwards over time primarily by changes to policy or strategy arising from a mix of professional aspirations or experience of senior/service managers, feedback from frontline staff, political aspirations, extensive opinion research, knowledge and analysis of external factors with performance results being added to this array of factors.

The performance plan updates and publishes year-on-year comparison of achievement against performance targets on the website which is accessible internally and externally.

The performance management systems are regularly reviewed and updated to take account of changes in organisational structure, new performance measurement frameworks (i.e. new Government initiatives, new internal performance measures etc.) and other factors including external or internal review of the arrangements.

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

The County Council produced its first formal Corporate Procurement Strategy (CPS) in 2003 and this complemented existing procurement policies and guidance. The CPS was launched to senior managers at a corporate `Success through People' event in October 2003 and the document is accessible to all employees of the County Council as part of the procurement information published on its intranet, Hantsnet. Awareness sessions to support the Council's procurement agenda have been delivered to more than three hundred staff and further supporting information has been produced, for example `Purchasing: A Brief Guide for Staff'. The strategy is supported by a detailed action plan and progress against these actions and against the milestones contained in the National Procurement Strategy for Local Government is regularly monitored by the Corporate Procurement Network, which was established in December 2002. The Director of Property, Business and Regulatory Services is the Corporate Management Team (CMT) sponsor for the procurement agenda and progress reports are made both to CMT and to the Buildings, Land and Procurement Panel, which is chaired by Councillor Woodhall.

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

The most recent Corporate Health and Safety Policy Statement was issued in March 2004 having been the subject of extensive consultation and after being approved by the Corporate Health and Safety Steering Group, the Chief Executive and the Leader of the Council.

The Policy was published in full electronically, both on the web pages and on the Health and Safety Intranet site. An extract of the policy is being issued to departments to be put up on safety notice boards.

The Corporate Health and Safety Policy, along with the corporate topic based policy statements and standards documents, form the basis of the departmental health and safety management systems and documentation. Each department produces documents to comply with the corporate standards and has audit programmes to monitor compliance with their own arrangements. The Corporate Health and Safety Team has a programme to audit each department's health and safety management system and arrangements.

Statistical information on health and safety performance is collected and considered regularly at departmental and corporate forums and annually information is published publicly via the Council's 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 corporate complaints policy/procedure was last reviewed and revised in 2002, having been previously reviewed in 1999. A corporate policy for dealing with difficult complainants was also endorsed in 2002. The corporate complaints policy is published as a fact sheet along with a form that the public can use to register complaints. Both policies and an e-form are published in Hantsweb and Hantsnet. Equalities monitoring is undertaken using data supplied by complainants with these forms. Copies of the fact sheet have been distributed to all departments and copies for the public are available from reception desks and all Information Centres around the county. Provision is made in departmental induction programmes to raise the awareness of new staff to the complaints policy/procedure. Separate complaints case files are maintained at departmental and corporate levels. Annual reports summarising/analysing complaints received, decisions made and actions taken to improve service delivery are presented by individual departments to appropriate Policy Review Committees. Similarly an annual report providing a corporate overview of complaints goes to Cabinet.

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

The Council's "Excellent" status under CPA was reaffirmed in December 2004.

Delivery of services by trained, skilled and experienced personnel.

The Council has demonstrated its commitment through IiP accreditation; its attention to training needs including for example the Leading Success programme and the proposed development of Hampshire Apprenticeship schemes; and the implementation of an authority-wide Enterprise Resource Management IT Systems and IT2000 facilities to support staff. Overall planning for Workforce needs to take place through the annual Workforce Plan.

Signed: .............................. Signed: ...............................

Chief Executive Leader