Contacts: Jeff Pattison, (01962) 84 7321; [email protected]

Ejner Knudsen, (01962) 84 7403; [email protected]

1 Summary

1.1 The Committee were advised at its June meeting that considerable changes were anticipated in the Government's expectations of corporate governance in local authorities, after selective consultation earlier in the year.

1.2 Information has recently been published in relation to the corporate governance framework which has the effect of re-defining the core principles to be incorporated into the Code of Local Governance to be adopted by each local authority.

1.3 The main outcome of the whole governance process is to produce and publish an Annual Governance Statement which replaces the former Statement on Internal Control which is to be approved by the Governance Committee. This requirement is mandatory under the Accounts and Audit Regulations as updated in 2006 and takes effect from the 2007/08 financial year (ie. retrospectively!).

1.4 Further guidance has been promised to assist authorities in meeting these and some other new requirements including an annual review of the system of internal audit, and additional documentation to identify the "map" of assurance sources available to the organisation.

1 Recommendation

That the Governance Committee approve the proposed approach to review the County Council's Corporate Governance arrangements in the light of new mandatory requirements but that the Head of Corporate and Legal Services be instructed to write to the Audit Commission on the basis set out in paragraph 3.1 below.

2 Proposed approach

2.1 The detailed guidance is still far from complete but what is evident is the need for a comprehensive review and updating of the County Council's current arrangements. In the circumstances the Committee might wish to express its concerns to the Audit Commission at the mandatory imposition of the revised code of governance part way through the current financial year (with two documents still not available) and the consequential adverse impact on resources; and to ask the Audit Commission to defer the implementation of the revised guidance to the financial year 2008/09 in order to ensure a smoother transition to the new process.

2.2 Since the introduction of the Hampshire County Council Code of Corporate Governance in 2001 there have been some changes made almost on an annual basis in response to the specific requirements of central government, or the Audit Commission as its inspectorate, or CIPFA/SOLACE as the original sources of guidance and best practice. These have largely been accommodated within the existing framework or through the production of ad-hoc reports when necessary (such as the review of the Audit Committee role presented to the last meeting).

2.3 As outlined in paragraphs 1.2 and 1.3 the new requirements are more fundamental in nature because they redefine the core principles needing to be recognised in the County Council's local Code and Framework, and introduce new terminology for describing various policies and procedures within it.

2.4 Stability has always been an important factor in the County Council's previous response to the continual changes demanded of its policies and controls. This is because awareness and compliance levels would be adversely affected and require significant investment in both communications and monitoring systems to mitigate this. Every effort will be made to minimise the actual changes needed in operational terms by reconciling and re-titling the County Council's existing practice to the new requirements where possible. It does seem inevitable that a major training/communication exercise will be needed to introduce and "embed" the new arrangements after approval.

2.5 It is proposed to complete this project in time for the Governance Committee to consider a new Corporate Governance Framework and local Code at its meeting in March 2008. All supporting processes will also be outlined to ensure the most efficient method of achieving the desired outcome - the Annual Governance Statement.

3 Committee Terms of Reference

3.1 At the last meeting in June it was recommended to update the Governance Committee's Terms of Reference and incorporate certain activities specific to its role as an Audit Committee. Further alterations may now be necessary as a result of this review and therefore the proposed changes will be deferred and included in the final recommendations to the March 2008 meeting.

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; the list exclude published works and ocuments which disclose exempt or confidential information as defined in the Act:

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