REPORT OF THE

GOVERNANCE COMMITTEE

PART II

CORPORATE GOVERNANCE, INTERNAL AUDIT AND INTERNAL CONTROL

1. The Committee has considered the detailed annual internal audit report and opinion for 2004/05, which shows that once again Hampshire County Council has an effective framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of its objectives. This represents an independent opinion by the Chief Internal Auditor on the adequacy and effectiveness of the control environment, comprising risk management, control and governance for each department and for the County Council as a whole. Based on that opinion, the Committee is satisfied that the framework of controls is working well in practice and that there are no major weaknesses. Issues identified are being pursued by internal audit with departments.

2. The Committee has also given approval to the statement of internal control, which has been signed by the Chief Executive and the Leader. This is a document which requires the County Council to identify the risks involved in achieving its objectives and to ensure that controls are in place to mitigate these through the application of a risk management process. It gives further assurance as to the effectiveness of how the County Council's controls and procedures operate in practice. It takes into account guidance recently issued by the Chartered Institute of Public Finance and Accountancy (CIPFA), the process is more rigorous this year and the statement is far more detailed than its predecessors. Again, issues identified by internal audit will be pursued with departments and any necessary corrective action will be taken.

3. Both the above items were the responsibility of the former Standards Committee, and the Governance Committee has taken the opportunity to review in detail issues which they had identified. They have accordingly considered detailed reports on contracting for Children's Services, contract compliance, criminal records checks for Regulation 38 foster carers, and financial issues at residential homes, and they are pleased with the progress which has been made in overcoming the risks identified. For the future, the Committee intends to look more closely at areas in the field of risk management and human resources, with a view to achieving further improvements.

4. The items summarised in the three paragraphs above relate to the Corporate Strategy Aim 5 (Improving Services) and Aim 6 (Developing Councillors and Staff) by providing independent assurance that proper procedures and controls are in place to minimise risk.

T.K. Thornber CBE

Chairman

5nR48805