1.  INTRODUCTION

  1.1  CIPFA is pleased to submit this memorandum of comments to the Environment Sub-Committee's Inquiry into Local Authority Governance.

  1.2  As a professional accountancy body that specialises in the public services, CIPFA has a particular interest in the underlying governance arrangements of local authorities and will shortly be publishing best practice guidance in conjunction with SOLACE to assist them in establishing their own codes of corporate governance[21]. We believe that it is important to promote a local, self-regularity approach to good governance, with a strong emphasis on continuous improvement, rather than impose a universal "one-size-fits-all" approach.

  1.3  The comments that follow focus on the principles that CIPFA believes should underpin any organisational structure if sound governance arrangements are to be assured. In relation to the Sub-Committee's specific terms of reference our evidence concentrates on the impact of changes in political management structures on accountability and on the roles of local authority officers.

  1.4  In summary CIPFA's views are that:

—  it is too early to assess the impact of changes in political management structures on efficiency, transparency or accountability;

—  the emphasis at this stage and in the future should be on ensuring that each authority's approach to political management is underpinned by a sound framework of corporate governance;

—  the respective roles and responsibilities of members and officers must be clearly defined and understood;

—  officers must continue to work for the authority as a whole, providing impartial advice to executive, scrutiny and overview functions.

2.  ARE CHANGES IN POLITICAL MANAGEMENT STRUCTURES LIKELY TO CONTRIBUTE TO GREATER EFFICIENCY, TRANSPARENCY AND ACCOUNTABILITY?

  2.1  In CIPFA's view it is far too early to pass judgement on the new political management arrangements. In theory the new approaches will lead to improvements, particularly in terms of speed of decision making and accountability for decisions taken. It is too early, however, to confirm that these benefits are being realised in practice.

  2.2  In the short term authorities are having to work hard to develop and implement a framework of supporting rules and procedures to underpin the new arrangements. These are the essential checks and balances which protect the system from abuse. It will inevitably take time before these procedures are put in place and successfully embedded in every authority in the country.

  2.3  The new structures create fundamentally new roles for elected members and it will take time before the nature of these roles becomes evident in practice. The emergence of these roles will inevitably impact upon the roles and responsibilities of senior officers within authorities and again we expect these changes to take time to evolve fully. In CIPFA's view, the challenge is to modernise, but in doing so to maintain the best features of existing well managed councils. It is vital, for example, that the strong sense of partnership which exists between elected members and senior officers is not damaged or diluted by the implementation of new structures. Similarly it is critically important to preserve the political neutrality of officers and their duty to advise the whole council.

  2.4  In CIPFA's opinion, the focus at this stage should be on ensuring that each authority's approach to political management is built on solid foundations. The key ingredient here is a robust but dynamic approach to corporate governance that is sufficiently flexible to respond to cultural and organisational change without sacrificing probity and accountability.

  2.5  Opting to introduce a particular approach to political management will achieve nothing unless the underlying systems and processes that an authority has in place to manage its internal affairs and its relationships with key stakeholders are themselves sound and "fit for purpose". If insufficient attention is paid to the need for sound governance arrangements there is a risk that new structures of political management will be regarded as a bureaucratic "add on" and as a result fail to take root throughout the organisation or have an impact on the wider community.

  2.6  CIPFA's own work in this area indicates that effective local government relies on the credibility of, and public confidence in, elected councillors and officials and that good corporate governance provides an essential underpinning for this credibility and confidence. The principles of good corporate governance, embedded in the culture of individual local authorities and applied within a defined framework of management processes, should be transparent to all stakeholders. By making explicit their high standards of self governance, local authorities can give a lead to potential partners, from the public, private or voluntary sectors and to their citizens. In this way, CIPFA sees sound corporate governance as the keystone for effective community governance.

  2.7  To a significant extent, local government already conforms with, in whole or in part and in many different ways, the principles of good governance and has therefore a sound base on which to build regardless of the structure of political management adopted. In particular, there is a strong regulatory framework of control and there are robust arrangements for monitoring and review.

  2.8  In CIPFA's opinion it is an authority's underlying approach to corporate governance that is the key to whether or not any new approach to political management is effective and whether greater transparency and accountability is achieved as a result.

  2.9  In practical terms the framework being developed by CIPFA with SOLACE, the LGA and the Audit Commission emphasises that authorities must be able to demonstrate that they are complying with the underlying principles of good governance, that is:

—  openness and inclusivity;

—  integrity;

—  accountability.

  2.10  If authorities are to do this, these principles need to be translated into a framework which both seeks to ensure that they are fully integrated in the conduct of the authority's business and establishes a means of demonstrating compliance. Therefore local authorities will need to demonstrate that their systems and processes are:

—  monitored for their effectiveness in practice;

—  subject to review on a regular and continuing basis;

—  continuously improved.

  2.11  The fundamental principles of corporate governance therefore need to be reflected in the different dimensions of a local authority's business regardless of the political management structure adopted. To give the Sub-committee an idea of what this involves the five dimensions identified in the CIPFA/SOLACE Framework—community focus; service delivery arrangements; structures and processes; risk management and internal control; standards of conduct—are set out in an annex[22] to this submission. It is important to recognise that these "dimensions" are not mutually exclusive—for example standards of conduct are part of every dimension.

3.  THE IMPACT OF THE NEW ARRANGEMENTS ON THE ROLES OF LOCAL AUTHORITY OFFICERS

  3.1  Any change to the way in which local authorities operate is bound to cause tensions and anxieties in the short term and during the process of transition. However, in CIPFA's view these inevitable difficulties will be significantly mitigated if the respective roles and responsibilities of members and officers are clearly defined and understood from the outset. It is particularly important that the impartiality and professionalism of officers is respected and a clear and sensible division of responsibilities between officers and members maintained. At the same time it is essential that members and officers continue to work together as partners with shared aims and mutual respect.

  3.2  At a more detailed level it is important that in the interests of accountability, decision making under any structure is supported by sound professional advice to avoid the possibility that local authorities may:

—  commit themselves to activities that are outside their powers;

—  incur damaging financial consequences;

—  find their actions being challenged by auditors, ombudsmen and the courts;

—  find themselves open to criticism from inspectorates.

  3.3  To avoid such risks, new structures of political management need to allow for careful pre-decision making scrutiny so that professional advice is sought before a decision is taken.

  3.4  It is also important that whatever structure is adopted, officers continue to work for the authority as a whole. In particular both the executive, scrutiny and overview functions should be able to gain access to the authority's senior officers and to receive full, impartial advice. Councils should work hard to encourage a culture in which such advice can be given freely without fear or favour, and inspectors and auditors should be encouraged to draw attention to any evidence which might suggest the absence of such a culture.

January 2001

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