Archived decisions

Annual Governance Statement for Hampshire County Council

and Hampshire Pension Fund

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. This responsibility extends to the administration of the Hampshire Pension Fund which is undertaken by the Pension Fund Panel. The panel, which meets regularly, is comprised of County Councillors and representation of Unitary and District Councils and also co-opted members from other employer organisations and pensioners and contributors' representatives. The Panel is also advised by an external, independent adviser.

The Council 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 Council 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 as amended in 2006, this statement sets out how the Council

has sought to meet these requirements during 2007/2008.

2. The purposes 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 Council'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.

One of the key elements of the Corporate Governance regime and the production of the Annual Governance Statement is the methodology applied to obtain the necessary assurance. Briefly, this has included a detailed questionnaire being sent every two years to all Chief Officers and also to other officers who undertake a significant corporate role. The questionnaire, which is revised and updated on each occasion, covers a wide range of corporate governance issues. It will refer to the existence, knowledge and application within departments of governance policies generally but will also concentrate on specific issues that have been identified as having greater significance to the Council.

The responses to these questionnaires are then selectively tested in detail over the next following two year period by the Council's team of internal auditors. This testing is a significant piece of work for the internal audit team, which, on average over the past four years has utilised 100 days per annum.

In line with the revised Internal Audit Strategy adopted by the Council in December 2007, the key elements of the Corporate Governance framework will be risk assessed and reviewed over a 5 year period, drawing on the responses to the questionnaire.

The results of the internal audit team's work will deliver a report to the relevant Chief Officer or Senior Corporate Manager for any follow up work necessary, and also to compile the Annual Governance Statement.

A new revised questionnaire was due to have been issued in the summer of 2007. However, due to changes from the previous statement of internal control to the annual governance statement it was decided to submit a revised Code of Corporate Governance Framework for the County Council, which was approved by the Governance Committee in March 2008, and also to delay the issue of questionnaires until after this had been approved. Revised questionnaires based on this newly adopted Corporate Governance Framework were issued in April/May 2008.

The system of internal control has been in place within the Council for the year ended 31 March 2008 and up to the date of approval of the annual report and accounts. The next section outlines the internal control environment in which the Council operates and reviews the effectiveness of the controls.

As a result of the change to producing an Annual Governance Statement, the opportunity has been taken for the information to broadly reflect the CIPFA Finance Advisory Network methodology adopted in their rough guide for practitioners.

Establishing principal statutory obligations and organisational objectives.

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 to give added focus on governance and audit issues. It also set out the key roles of the Chief Officers and statutory officers.

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 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/officers relations. Financial limits within these documents have been recently reviewed and updated by the County Council at its meeting on 28 May 2007.

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

The Council also operates all its decision making processes in the context of a decision making protocol, agreed in 2001, which requires all reports for decisions, whether by the Executive or Committee to be submitted in advance for both Legal and Financial consideration.

These reports are considered by appropriately qualified legal and finance staff with expertise in the particular functional area. Legal staff also have direct access to a well equipped library on site, and through the internet to the Lawtel electronic legal information system. The processes and policies within the Legal Practice have also been quality assured through the possession of Lexcel which is the Law Society's quality accreditation scheme, annually reviewed by external independent assessors, and also through the Investors In People accreditation.

All legal staff have access to training courses and regular internal sessions are organised for the whole of the Legal Practice on topics of specific and general relevance to their roles and responsibilities. Senior lawyers within the practice have regular meetings with major clients to assess performance, review future demands and identify new legislative demands.

The Governance Committee also receives, in its audit role, regular reports from both external and internal audit and the minutes of the Governance Committee demonstrate that effective action is taken where issues of non compliance have been identified.

The Council sets out its priorities through the Corporate Strategy and Corporate Business Plan. In 2006 the Cabinet reviewed its aims and refined the previous six aims into a set of three priorities, introducing a greater emphasis on selecting priorities in the face of significant resource constraints. The corporate business plan sets out the key outcomes, activities and performance measures. This establishes a benchmark position, targets for improvement and the people who are accountable for delivering them. These targets are drawn from more detailed corporate policies and plans and cascaded through service plans and Individual Performance Plans. The resources to deliver the Corporate Strategy are summarised in the Workforce Plan, the Asset Management Strategy and the revenue and capital Budgets.

The Corporate Strategy draws heavily from the Hampshire Community Strategy, which expresses the aims the Council shares with strategic partners in Hampshire, the Local Area Agreement and Local Public Service Agreement 2. It was prepared to reflect consultations with a wide range of stakeholders.

It also takes account of strategic partnership contributions and income streams, these being assessed through partnership agreements. Required contributions and income are built into the medium plan financial plan and budget forecast. Separate accounts are maintained where the County Council is responsible for partnership accounting, for example, the Safety Camera Partnership.

The Corporate Strategy and Business Plan set out in one document the main messages about what the County Council stands for and how we aim to achieve them. They show how the County Council responds to changes and challenges, identifies common aims with partners, linking to the Local Area Agreement, and sets priorities and targets for improvement. The Corporate Strategy is approved by the Corporate Management Team (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 sets priorities for the life of the administration and the Business Plan is reviewed annually. This is informed by the outcomes of consultation, performance results, review programmes and external inspections and factors such as local and national policies and initiatives. The priorities and business plan are published on the County Council's website alongside the Performance Plan and in hard copy for circulation internally and to key partners. Communication of the priorities is supported by other promotional activities including posters and a flash video and provide a cornerstone for all internal and external communication activities.

The Corporate Business Plan element of the Corporate Strategy has been used as the basis for developing departmental service plans and individual performance plans for 2007/2008 and 2008/2009 so that the `golden thread' between the documents is strengthened and visible.

The County Council has published guidance on its integrated planning process which links workforce, budget and service planning into the County Council's Corporate Strategy and priorities. The Corporate Performance and Efficiency 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 Departmental Management Teams (DMTs) and Executive Members, CMT and Cabinet through the Corporate Performance Results report.

To help establish these corporate priorities the County Council has a corporate consultation plan agreed by CMT and Cabinet annually which sets out proposals to consult with staff, residence 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, DMTs, senior managers seminars (Success Through People) and other staff communication mechanisms to inform service planning.

Clear guidance is set for the preparation of service plans and this guidance is accessible on the performance management website. The guidance also cross-references budget planning and workforce planning and is available as an e-learning package. A `Corporate Threads Portal' has been developed, which supports service managers in taking account of corporate priorities in the planning and delivery of their services.

The Corporate Strategy Priorities are set out in our Corporate Strategy and Performance Plan web pages.

A comprehensive Communications Strategy was also developed and implemented to inform external and internal audiences of the Council's new corporate strategy objectives using a wider variety of traditional and innovative communication routes.

Effective Corporate Governance arrangements are embedded within the County Council.

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. It also acts as the Audit Committee for the County Council.

As a result of the changes introduced by the Accounts and Audit (Amendment) (England) Regulations 2006 a revised Code of Corporate Governance was submitted by the Monitoring Officer and Chief Internal Auditor to the Governance Committee in March 2008 so as to ensure compliance with all new guidance and best practice. This was approved and will be disseminated in due course. The Committee discussed and favoured a more formalised training programme for raising awareness of the new Code, potentially through the Hampshire Learning Centre and requested the Chief Internal Auditor and the Monitoring Officer to investigate this option.

The Monitoring Officer has undertaken a review of the systems of internal audit and the results of this are referred to throughout this statement.

Responsibility for overseeing corporate governance has been formally delegated and documented through the Constitution to the Governance Committee. The terms of reference for the Governance Committee are also contained within the constitution and the Committee itself includes the Leaders of the three political parties. This has been the situation for several years and through the involvement of these senior politicians has demonstrated its stature and the effectiveness of the Committee when regular internal audit reports have been submitted for consideration and future action.

Internal Audit is required to comply with the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice for Internal Audit in Local Government in the UK 2006 and its prescribed professional standards. External assurance that these standards are met is provided through regular inspections by the Audit Commission, ISO quality accreditation assessors, and specialist inspectors of services within the education and social care fields who need to place reliance on the work of internal audit.

The Governance Committee has approved the Internal Audit Strategy and Plan for 2007/2008 and continued to monitor performance and the progress of significant issues including the implementation of audit recommendations. The Governance Committee at its meeting in December 2007 also approved a revised future Audit Strategy for 2008 to 2013.

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

The Annual Audit and Inspection Letter for 2007 (based on data from 2006/2007) commented positively on the Council. The District Auditor commented that:-

"The Council has successfully maintained its positive direction of travel this year and we have judged it as a `four star' Council which is "improving well". It has improved its high quality services both in national priority areas and in the majority of those areas which are of concern to local people".

Performance Management Arrangements

The background to performance management arrangements in the context of the setting of corporate aims and objectives and cascading these through the organisation through service plans and the Individual Performance Plan process is described above.

In addition to this departments have developed their own regimes for approving and monitoring objectives and targets set in service plans. Service reviews are now instigated through the Service Planning process, while the Corporate Review Programme focuses on cross cutting and strategic issues, paying attention to efficiency and value for money.

All performance measures, both national and local are known and responsibility allocated through the service planning process. Both external and internal audit reports include reviews of key performance indicators, systems and data quality with consequent reports to management.

Performance Management arrangements are enhanced by a thorough and fully embedded system of budget forecasting and monitoring which focuses on:-

· annually updated three year budget projections and a three year capital programme.

· detailed quarterly budget monitoring reports on revenue and capital to the relevant executive member.

· ability of Select Committees to scrutinise monitoring reports.

· overall budget monitoring report to Cabinet on a quarterly basis.

The corporate performance reporting process covers:-

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

· Results against Corporate Strategy targets/priorities - these form the major part of the corporate performance results.

· Reports against departmental/service targets/priorities - reports go to Departmental Management Teams and Cabinet portfolio holders half yearly and should be monitored regularly by service managers and DMT level managers.

· Individual performance reports - every line manager considers performance results at least on an annual basis, though usually more frequently. The process is evaluated by Investors in People 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 Audit Commission's report on the 2007 Performance Plan indicates satisfaction that the Plan includes those matters prescribed in legislation and statutory guidance and was appropriately published. The Audit Commission had no matters to report to the Council nor any recommendations to make on procedures in relation to the Plan.

The performance frameworks are regularly reviewed and updated to take account of changes in organisational structure, new Government initiates, new internal performance measures and other factors including external or internal review of the arrangements.

The Six Core Principles of Good Corporate Governance for the County Council

Focusing on the purpose of the Council and our outcomes for the community and creating and implementing a vision for the local area.

The County Council has achieved this through the development, implementation and publication of the Corporate Strategy and the underpinning Business Plan, which is regularly reviewed, and its cascading through to service delivery via Departmental Service Plans and Individual Performance planning.

This objective is also achieved though the adoption of a sustainable Community Strategy which has been revised during 2007/2008, and which provides a common vision to the Council's partners, ensuring that their work is understood and agreed by all parties.

Annual reports are published via the Council's Performance Plan web pages which communicate the Council's activities and achievements as well as its financial position and performance.

The County Council considers that the achievement of value for money in the delivery of its services is fundamental. The County Council's performance against this criteria can be demonstrated by the following factors:-

· benchmarking of spend compared with service quality ie lower

quartile council tax and `excellent' rated performance

· all Gershon targets for efficiency gains exceeded.

· integrated planning which links corporate priorities and areas for improvement to the budget setting decision process.

· high levels of capital investment which shows that short term gains are not pursued at the expense of long term value for money.

· a `good' score of 3 in the Audit Commissions overall Use of Resources assessment and for the value for money component of that assessment in particular.

The Council has an effective and comprehensive department and corporate complaints system which allows for any failures in service delivery to be properly dealt with and, to allow lessons to be learned.

Members and officers working together to achieve a common purpose with clearly defined functions and roles.

As indicated earlier, the Council has a comprehensive Constitution, accessible on the website which set out the roles of the Council, Cabinet, Executive Members, the Chief Executive who is allocated the role of Head of Paid Service, Chief Officers and other senior officers.

The Constitution also allocates the statutory roles of Section 151 Officer to the County Treasurer and that of the Monitoring Officer to the Head of Corporate and Legal Services. Details and descriptions of both roles and their responsibilities are contained within the Constitution.

The relationship between members and officers is enforced by an established Member/Officer protocol.

The remuneration for members is agreed by the Council annually when it considers any revisions to the Members allowances scheme. This is accomplished only after consideration of the issue by the Independent Remuneration Panel. This Panel meets in public session and invites comments from the public and members of the Council. The minutes of the Panel and of the Council are made available to the public. In 2008 the Panel will undertake a fundamental review of all members allowance.

The Council has recently introduced a new pay and reward framework for officers. As part of this, a revised pay policy and governance arrangements for the remuneration of staff have been developed and agreed. The overall governance of officers' remuneration is managed though the Employment in Hampshire County Council (EHCC) Committee, which considers all policy matters relating to employment, terms and conditions. A Remuneration Committee made up of Members from EHCC has also now been established.

The Council engages with a wide range of partner organisations. The Corporate Strategy and Community Strategy ensures that vision and priorities are developed appropriately and, through the Council's communication strategies, clearly articulated and disseminated.

Guidance is also available through the Council's Partnership web pages to ensure clarity about roles and responsibilities in relationship to the partnership and to the Council.

Promoting values for the Council and demonstrating the values of good governance through upholding high standards of conduct and behaviour

The Council's Constitution is predicated on it operating in an open and transparent way and therefore for the Leader of the Council and the Chief Executive to set the tone for the organisation by creating a climate and culture of openness, support and respect.

The Council is therefore committed to the highest ethical standards and has adopted a wide range of policies to re-enforce this philosophy as well as procedures to investigate them should the need arise. These policies and processes include:-

· Members and Officers Codes of Conduct

· Member/Officer protocol

· Standards Committee

· Complaints Procedures

· Anti fraud and corruption policy

· Standing Orders governing the conduct of Council business

· Contract Standing Orders

· Financial Regulations

· Guidance on Partnerships

· Performance Management system

· Investors in People and therefore a system of individual performance

appraisal.

An effective Standards Committee is in force, which in the coming year, will take on responsibility from the Standards Board for England for the initial filtering of any complains made against County Council Members. In the year 2007/2008 no complaints against any County Councillors has required investigation either by the Standards Board or the Standards Committee.

Taking informed and transparent decisions which are subject to effective scrutiny and managing risk.

The Council's Constitution together with other documents such as the Decision Making Protocol ensures that appropriate legal and financial advice is given and also that decisions made are open and transparent. The Council decided several years ago that individual Executive Members decision making would go beyond the minimum Statutory requirements by ensuring that, subject to confidential items, all such decisions are made in pubic.

All decisions are recorded and published on the Council's website and in accordance with statutory provisions. These requirements are also subject to performance monitoring within the Chief Executive's Department.

Advice is available to members from lawyers in the Legal Practice on any aspects of the Members Code of Conduct or conflicts of interest that may arise either before or in most cases at the point where the decision is to be made.

Within their own areas of responsibility, Executive Members, committee chairmen and vice chairmen, minority group spokespersons and local members are routinely briefed in relation to business pending. After County Council elections, all members received induction training, both generic and specific, to support them in the exercise of their duties as a county councillor. Ongoing training is available through the County Council's own established monthly half day briefing programme and via external seminars, conferences and briefings. Hampshire Learning Centre also provide developmental opportunities, their work proceeding against a background of related member work being undertaken by the Association of Hampshire and Isle of Wight Local Authorities and the Improvement and Development Agency.

Reference has also been made to the Council's Complaints systems and Members Code of Conduct which supports this objective and on which more information is given elsewhere in this statement.

There is a risk management strategy and policy in place and through the Risk Management Board, chaired by the Chief Executive, risk management is embedded into the culture of the organisation so as to better influence decision making. Risk management issues are also reported to the Governance Committee.

There is a well established Reporting Concerns at Work (whistleblowing) Policy in place, with good evidence of its use. The Chief Internal Auditor is in discussions with the Audit Commission about how their requirement that this policy should be "accessible to all those contracting with the authority" should be interpreted and applied.

The role of Monitoring Officer, supported by other members of the Legal Practice, is also critical in ensuring that all decisions made are legally, soundly based.

The Council has an effective system of scrutiny via dedicated Committees. The annual report of the Policy Resources Select Committee to the County Council on the 27 September 2007 provides publicly accessible details.

Developing the capacity and capability of members and officers to be effective

All new officers and members joining the Council undergo a corporate induction programme, which is underpinned by a service-specific induction. In order to ensure officers identify and update their knowledge and skills on a regular basis, a revised Individual Performance Planning (IPP) process has been introduced, which facilitates the identification of training requirements. This is subsequently used to develop departmental training and development plans. A Member Development Programme is also currently being introduced to ensure councillors' skills and knowledge can be updated on a regular basis.

The skills required by both members and officers to undertake their roles are identified within the person specification for the particular job in question and an assessment is made of the individual's competence against these during the selection process. Further skills assessment for Officers is undertaken during the annual IPP process and these are incorporated within service and departmental training plans

As previously stated, skills are developed on a continuing basis through the Council's IPP process. Furthermore the Council has recently introduced management and leadership competencies, which form the basis of how managers and leaders within the organisation need to develop themselves and others to be even more effective. Implicit within the competencies are a recognition that to be fully effective, individuals need to be able to positively challenge and scrutinise information presented to them. The "vision and direction" and "stakeholders' and partnerships'" competencies also identify the need to work with others, particularly when expertise is not available internally.

In terms of ensuring members are equipped with the necessary skills, the Council, in partnership with IDeA, is creating a Member Development Programme which, in addition to generic skills development, will also include personal one-to-one coaching to develop performance.

The Council currently operates with a clearly defined structure and succession planning is undertaken via departmental workforce plans, which are produced on an annual basis.

The entire performance managements framework continues to be developed. The business plan element of the Corporate Strategy has introduced high profile accountability for targets, and departments are using the plan on the basis for developing departmental service plans and individual performance plans for 2007/2008, so that the `golden thread' between these core documents is strengthened and visible. At the strategic level the relationship between the targets and activities in the Corporate Strategy, expressed in the Business Plan, are being aligned with the Corporate Budget and Workforce Plan. Work is ongoing at the operational level to identify the resource implications of focusing on the new priorities. This supports the work to respond to audit recommendations to improve costs benchmarking, while the `integrated' approach is working to embed performance management in the culture of the organisation.

Performance of the Council as a whole is monitored at least half yearly by CMT, Executive Members and Cabinet.

Performance information is regularly published on our web pages for all to view at:

http://www3.hants.gov.uk/corporatestrategy/overview of performance.htm

A project is being led by the Director of Recreation and Heritage to coordinate community engagement that is taking place across the Council.

Engaging with local people and other stakeholders to ensure robust public accountability

The Council goes to great lengths to consult with its communities, to listen to what they say and wherever possible to include their views in its strategies and policies. It also, by so doing, informs those same communities what the Council is responsible for.

The Council therefore pursues its business with the help and assistance of the:-

· External Communications Strategy

· Annual Consultation Plan

· Best practice guidance

· Inter Faith Forum

· Development of a community involvement strategy

· e consultation database.

Public accountability is further enhanced by the system of publicly accessible scrutiny committees operating at the Council and also, on a trial basis, a system of local area based Hampshire Action Teams.

The publication of a wide range of documents such as:-

Corporate Strategy

Business Plan

Financial Statements and Accounts

Performance Plan

Policy and Resources Select Committee report to the Council on 27 September 2007

Health Overview and Scrutiny report to the Policy and Resources Scrutiny Committee in April 2008

Annual reporting to the wider public via special articles being published in the Council's newspaper "Hampshire Now"

help to ensure that the Council is held to account.

Principal risks to the achievement of objectives

Risk Management

The County Council is addressing a number of key risks to the people of Hampshire through its Corporate Business Plan and in partnership with other organisations, principally, through its Local Area Agreement. It has developed effective methods of communicating risk issues to the public, for example its guidance during the recent flooding and foot and mouth outbreaks. In addition, it has taken steps to investigate the possible impacts of new and emerging risks, for example, the effects of environmental risk through its Commission of Inquiry on Climate change.

The County Council manages the risks to its capacity to deliver services through a series of risk registers, at Corporate and Departmental level. These are subject to regular review through a formal reporting framework through its Risk Management Board, senior management team and Councillors. The annual report to the Governance Committee is also an important part of the assurance framework.

The County Council has developed and uses a performance management framework that measures the maturity of its risk management arrangements. It provides assurance that:

· Senior managers act as role models to apply risk management consistently and thoroughly across the organisation

· Risk policies and strategies are communicated effectively and work through a framework of processes.

· A core group of people have the skills and knowledge to manage risk effectively.

· Approaches for addressing risk with partners are being developed and implemented.

The County Council is devising new ways to record consideration of risk in its major decision making processes and is working in conjunction with partners to develop shared approaches to the management of risk across the Hampshire area.

Health and Safety

The financial year 2007/2008 has seen continued development of the health and safety management arrangements. The corporate Health and Safety Policy and Strategy have been reviewed and revised. A performance management framework and system of audits is in place.

Insurance Arrangements

The County Council largely self-insures against risk, subject to the availability of catastrophic insurance. There is good evidence that the management of claims within the Legal Practice is in accordance with the Civil Procedure Rules and that appropriate reserves are placed on claims. Significant claims are regularly reviewed between the Monitoring Officer and the Head of Litigation and Procurement. The budget for dealing with these claims and the contributions to be made to that budget by departments reflects the sums identified within the reserve figures placed on all claims. There is evidence of monitoring the incidence of successful and unsuccessful claims and of feeding that information into the policy for risk financing accordingly. The system of self insurance is subject to internal audit and review by external insurers.

Key Controls to managing principal risks

The financial management of the Council is led by the County Treasurer and is integrated with and influenced by the processes set out above. It includes processes for forward planning and 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.

The Cabinet and County Council approve the annual Treasury Management and Investment Strategy together with outturn reports and external audit has confirmed compliance with the Prudential Code.

Financial Regulations and Contract Standing Orders are regularly reviewed with the most recent changes to Financial Regulations having been agreed by the Governance Committee in March 2008 prior to formal approval by the Council. It is accepted that the time is now appropriate to undertake a more thorough review of Contract Standing Orders and the intention is to do this, resources permitting, in 2008/2009.

There is a Reporting Concerns at Work (whistle-blowing) Policy and Anti-fraud and Corruption Policy embedded into the organisation and fully accessible on the Council's website.

There are registers of gifts and hospitality for both members and officers available for public inspection and also direct access to the Monitoring Officer for any advice required on whether specific gifts or offers of hospitality should be accepted or politely declined.

A revised Members Code of Conduct was adopted by the Council in 2007 and signed up to by all members. Training sessions on the new Code were offered by the Monitoring Officers to all members including co-opted members, not only of the County Council but also the Fire and Police Authorities. In addition to this the Monitoring Officer has arranged for and sent to every member of the Council (and Fire and Police Authorities) a copy of the Standard Boards Training DVD on the new Code of Conduct.

A high level scheme of delegation is contained within the Constitution and this is supplemented within each department whereby the Chief Officer authorises other senior officers to carry out allocated functions on their behalf.

The County Council produced its first formal Corporate Procurement Strategy in 2003 and this was replaced in 2006 with a new document for the period 2006-2008. This is accessible to all employees of the County Council on its intranet, Hantsnet. Awareness and training sessions to support the Council's procurement agenda have now been delivered to more than eight hundred and forty staff and further supporting information is available to staff electronically. The new Strategy was approved by members and presentations outlining the key themes in the Strategy have been made to all departmental management teams. The Corporate Procurement Network continues to monitor progress against action plans and is developing relevant performance indicators. The Director of Property, Business and Regulatory Services is the Corporate Management Team sponsor for the procurement agenda and progress reports are made to the Buildings, Land and Procurement Panel, which is chaired by the Deputy Leader of the County Council. A range of procurement reviews identified jointly with departments is now in progress and this will continue through the next financial year.

Contract Standing Orders and the need to comply with European Union procurement rules have existed for many years. However, there is evidence to indicate that these require further and better promotion to ensure compliance. This will be considered during the course of the next year possibly in the form of a user friendly "Staff Guide to Procurement".

Significant progress has been made in embedding business continuity arrangements into the County Council. Potential critical service areas have been identified and prioritised across the Council's services against guideline criteria described in the Civil Contingencies Act 2004. This work was completed in 2007. Business impact analysis within the critical services is reaching completion and appropriate department and service plans developed as appropriate. A suite of business continuity plans consisting of corporate and incident management plans, together with template department incident and service recovery plans have been prepared. A scheduled programme of testing is being prepared and a database to record and monitor progress created. Regular testing of recovery plans for IT services currently takes place.

Internal Control Framework

It is a management responsibility to develop and maintain the internal control framework, and to ensure that the County Council's resources are properly applied . Internal audit is an assurance function that primarily provides an independent and objective opinion to the County Council on the control environment by evaluating its effectiveness in achieving the County Council's objectives. Within the County Council, internal audit assists managers by evaluating and reporting to them the effectiveness of the controls for which they are responsible.

The internal audit strategy and terms of reference for internal audit, approved by the Governance Committee, require the regular assessment and review of risks, controls and governance processes; and also the provision of an annual report and opinion from the Chief Internal Auditor. This is a key element of the assurance available to the Monitoring Officer in drafting the Annual Governance Statement.

Additional independent assessment of the internal control framework is provided by external audit reports including the regular Use of Resources reviews required by the Audit Commission as part of the statutory performance assessment process. These are also published independently in the form of a public report.

Complaints Policy

The council has an established complaints policy and procedure which is reviewed on a quarterly basis. The procedure is compliant with all relevant statutory requirements and evidence of the approach and dissemination of the complaints regime can be found on the Council's website. In particular, leaflets and posters highlight complaints procedures.

All complaints files are kept in locked and secure cabinets with restricted access.

An annual report on the Complaints Policy and procedure is submitted to the Governance Committee and to the appropriate Scrutiny Committee.

Assurances on the effectiveness of key controls

Key controls relating to risks, internal control ( including financial management ), and governance processes are identified by managers as part of the governance framework and recorded on regular returns. These are consolidated into the risk registers at corporate and departmental level and the Corporate Governance questionnaires retained by the Monitoring Officer as part of the assurance framework. Internal Audit, as part of its planned review of internal controls regularly evaluates the key controls to determine their adequacy and also carries out tests to confirm the level of compliance. Together the results of each review enable an audit opinion on effectiveness to be provided to management, and any recommendations for improvement to be agreed. This assurance is given to each manager in respect of the controls they are responsible for in the form of an audit report and regular summaries are provided for Chief Officers and the Governance Committee to ensure each level of the County Council's management is kept informed of findings and opinions.

Other sources of internal assurance are outlined in the framework map included at appendix C to the Annual Governance Statement and are considered sufficient to provide overall reliance.

External sources of assurance include the regular provision of inspection and assessment reports by the Audit Commission ( as the designated external auditor ), and statutory inspections of adults and children's social care services and education services. These reports are subject to consideration by senior management and members of the County Council and appropriate response to any recommendations for improvements are also agreed. These reports and responses are normally approved in public and published.

As a consequence of the Accounts and Audit revised guidance issued by the Chartered Institute of Public Finance Accountants and the Society of Local Authority Chief Executives, "Delivering Good Governance in Local Government" a report was presented to the Council's Governance Committee in March 2008. This report fully took into account the revised guidance and recommended that the Committee adopt a refreshed Code of Corporate Governance for the County Council. Attached was an assurance diagram showing the several elements relied upon to draft the Annual Governance Statement. It is considered that this work gives assurance that there are no significant gaps in the effectiveness of key controls.

Evaluate assurances and identify gaps in control

The Monitoring Officer with the assistance of the Chief Internal Auditor has undertaken this analysis, the results of which are contained throughout this Annual Governance Statement.

Action Plan

There are several areas of improvement identified within the Annual Governance Statement, which, whilst important do not require to be specifically included within the action plan below. However, the totality of all of these actions will contribute to ensure the continuous improvement of the system of internal control. The action plan below envisages completion within 2008/2009.

1. The Policy Unit will carry out a fundamental change in data collection and storing mechanisms including with a range of partner organisations to reflect the introduction of the National Indicator Set.

2. A risk and performance framework will be established by the Policy Unit to prepare for the introduction of the National Indicator Set.

3. The Corporate Risk Manager will, so as to improves the capacity and competency in advanced risk management techniques

· Draw up skill set and training strategy

· Publish e-learning module on risk management

· Produce new risk management training course

· Deliver programme of training on risk management system

· Undertake repeat awareness survey

4. The Corporate risk manager will, so as to improve risk management arrangements for the Local Area Agreement

· Develop integrated performance and risk management protocol and reporting framework

· Produce shares methodology for risk handling

· Produce revised strategic risk register

5. The Policy Unit will manage a set of actions agreed by the Corporate Management Team on the 19 March 2008 to further improve the relationship with the voluntary and community sector and ensure compliance with comprehensive Performance Assessment recommendations.

6. The Monitoring Officer and the Chief Internal Auditor will discuss with the Director of Human Resources the need for a Corporate Programme to raise awareness levels of the new Corporate Governance framework, with particular emphasis being given to:-

· Contract Standing Orders

· Procurement

· Conduct

· Gifts and Hospitality

· Whistleblowing duties

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