What is corporate governance?
Corporate governance is about doing the right things in the right way. It's about demonstrating accountability and transparency in our actions and decisions. It affects us all.
The Audit Commission have defined corporate governance in the public services as:
"the framework of accountability to users, stakeholders and the wider community, within which organisations take decisions and lead and control their functions, to achieve their objectives".
It therefore requires:
"robust systems and processes, effective leadership and high standards of behaviour, a culture based on openness and honesty and an external focus on the needs of service users and the public".
Corporate Governance often reaches the headlines: in the business world, think of the recent scandals involving the Lehmann Brothers, Allan Stanford and Northern Rock; in the public sector, the M.P. expenses furore. In each case, there was insufficient accountability for decisions and spending; procedures either did not exist or were not followed. Accountability, checks and balances were weak.
Corporate governance within local government and within Oxfordshire County Council has benefited from the development of a national and local framework of good governance. The Cadbury Report (1992), following the private sector scandals of the Maxwell Pension fund and the Bank of Credit and Commerce International (BCCI), said that corporate governance was about: integrity, openness and accountability.
This was taken further by the Nolan Committee into Standards in Public Life in 1997. It identified seven key principles (behaviours) of public sector conduct:
These behaviours will be familiar to councillors as they form part of the principles of the Members' Code of Conduct. They are also reflected in the council's Officers' Code of Conduct and the six values (CHOICE) contained in it.
Corporate governance in local government
In 2007, Delivering Good Governance in Local Government was published by four leading public sector organisations1. This arose from a review of previous findings and had two outcomes: guidance on how to achieve good governance and a framework for making it happen.
Six core principles were identified. Councils were encouraged to demonstrate them:
- Focussing on the purpose of the authority and on outcomes for the community and creating and implementing a vision for the local area
- Councillors and officers working together to achieve a common purpose with clearly defined functions and roles
- Promoting the values for the authority and demonstrating the values of good governance through upholding high standards of conduct and behaviour
- Taking informed and transparent decisions which are subject to effective scrutiny and managing risk
- Developing the capacity and capability of councillors and officers to be effective
- Engaging with local people and other stakeholders to ensure robust public accountability.
The CIPFA/SOLACE Framework urged local authorities to test their structures against these six principles by:
- Reviewing their existing governance arrangements against them
- Developing and maintaining an up-to-date Local Code of Governance including arrangements for ensuring its ongoing application and effectiveness
- Preparing a Annual Governance Statement in order to report publicly on the extent to which they comply with their own code on an annual basis, including how they have monitored the effectiveness of their governance arrangements in the year, and on any planned changes for the coming period.
Corporate governance in Oxfordshire County Council
The county council has taken seriously the principles and compliance framework. The Audit and Governance Committee have approved a Corporate Governance Assurance Framework which sets out the Corporate Governance arrangements within the Council and sets out the roles and responsibilities of key Officers, councillors and committees within that process.
The council has also adopted a Local Code of Corporate Governance which conforms to the CIPFA/SOLACE framework and guidance. The Local Code sets out how the county council complies with good corporate governance and identifies key documents that demonstrate this.
The preparation and publication of an Annual Governance Statement is also necessary to meet the statutory requirement for authorities to prepare a statement of internal control which demonstrates for authorities to prepare a statement of internal control in accordance with "proper practices" (Accounts and Audit (England) Regulations 2011).
Internal control and risk management are increasingly recognised as important elements of good Corporate Governance. Internal control spans the whole range of the council's activities and includes controls designed to ensure that:
- The council's policies are implemented in practice;
- High quality services are delivered efficiently and effectively;
- The council's values and ethical standards are met;
- Laws and Regulations are complied with
- Required procedures are adhered to;
- Financial statements and other published performance information is accurate and reliable;
- Human, financial, environmental and other resources are managed efficiently and effectively.
The Regulations place a requirement on the council to conduct at least an annual review of the effectiveness of its internal controls and identify areas where improvements can be made.
Monitoring Officer and Chief Legal Officer.
1 The four organisations were: the Local Government Association, the Chartered Institute of Public Finance and Accountancy, the Audit Commission and the Society of Local Authority Chief Executives.