Local government governance review 2012

Assurance leaders seminarBirmingham - 10 May 2012

© 2012 Grant Thornton UK LLP. All rights reserved.

Agenda

• Why look at governance again now• Scope of our review• Main conclusions• Key messages for councils

© 2012 Grant Thornton UK LLP. All rights reserved.

Why look at governance again now

High pressure in the system• SR10• localism• reorganisation• alternative delivery models.

Good governance essential to help councils manage through

© 2012 Grant Thornton UK LLP. All rights reserved.

Scope of our review

• Wide agenda• Focus on public reporting• Consideration of components

of governance framework• Methodology:

– 200 AGS and explanatory foreword reviews

– 100 survey responses– roundtable discussion

• FTSE 350 and NHS reviews

© 2012 Grant Thornton UK LLP. All rights reserved.

Main conclusions

People

Councils should rethink their investment in people to ensure good governance.

Governance framework

Councils have strengthened their processes around governance, but more focus is needed on improving their effectiveness and on emerging risks.

Reporting

Councils can significantly improve stakeholder engagement in their reporting.

Way forward

We believe there is a strong case for all councils to publish a consolidated annual report.

© 2012 Grant Thornton UK LLP. All rights reserved.

Key messages - peopleCapacity and capability

20% of survey respondents said that their council did not have robust arrangements to develop the capacity and capability of officers and members.

With people, culture and behaviour at the heart of making governance work, this is a significant finding.Underpins many of the key messages in our report around challenging effectiveness of governance arrangements to move from compliance to best practice.

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Although 98% of members and senior officers said that their council carries out an annual review of governance arrangements, this is often done to ‘tick the box’ rather than a genuine effort to achieve best practice.

for example…

© 2012 Grant Thornton UK LLP. All rights reserved.

Key messages - peopleGender balance

Lots of focus nationally and internationally on board gender balance.UK councils do a lot better than UK large corporates on the gender balance of the cabinet (board).However, there is a low proportion of female Cabinet leaders (12%).Councils should consider what more could be done to ensure that they are benefitting from as diverse a leadership as possible.

© 2012 Grant Thornton UK LLP. All rights reserved.

Key messages - governance frameworkRisk management

Over 90% of our survey respondents said that their council had effective and embedded risk management arrangements, reflecting a decade of focus.However, risks are increasing and resources are under pressure.Councils will now need to become more creative with the deployment of a more stretched risk management resource. This will include maximisation of opportunity arising from forced change rather than just minimisation of risk.

© 2012 Grant Thornton UK LLP. All rights reserved.

Key messages - governance frameworkScrutiny

With one-third of senior officers and members saying that their council’s scrutiny function was not effectively responding to changing risks, our survey results demonstrate a recognition in the sector that scrutiny needs to improve. The attitude that the leadership takes towards accountability and inviting challenge is fundamental to successful scrutiny.

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Key messages - governance frameworkAudit Committee

Survey results showed a strong view that audit committees were effectively responding to changing risks and adding value.We recognise the development over recent years but, in our experience, there is considerable variation in practice.

© 2012 Grant Thornton UK LLP. All rights reserved.

© 2012 Grant Thornton UK LLP. All rights reserved.

Key messages - governance frameworkPartnership working

Partnership working is now the rule rather than the exception and this trend is set to continue.89% were positive about clarity of responsibilities when working in partnership.Other published evidence suggests that there may be some underestimation of the governance challenge.

© 2012 Grant Thornton UK LLP. All rights reserved.

Key messages - governance frameworkFraud and corruption

Over 90% reported that their council was aware of increased risk and was responding effectively.£185m detected last year supports the positive response. However, estimated fraud is 10 times this figure so there is always more that can be done, with reference to established good practice.

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Key messages - public reportingAccounts

With more than a third of members and senior officers saying that they did not find the accounts helpful, there is a clear message that councils should challenge the overall usefulness of their accounts.

© 2012 Grant Thornton UK LLP. All rights reserved.

Key messages - public reportingExplanatory foreword

Our survey results show a very positive view from councils around the usefulness of the explanatory foreword.Whilst generally compliant, we noted a great variety in content and approach.We think that councils should review their forewords from a user perspective to improve transparency and accountability.

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Key messages - public reportingAGS accessibility

There is scope for councils to improve the accessibility of the draft and final AGS.

© 2012 Grant Thornton UK LLP. All rights reserved.

Key messages - public reportingAGS usefulness

Our survey showed 98% positive survey results on the usefulness of the AGS.Our analysis suggests that while most comply, few represent best practice.Better planning, tracking and evaluation could bridge the gap between the perceived and actual merits of the AGS.

© 2012 Grant Thornton UK LLP. All rights reserved.

Key messages - public reportingAnnual reports

Our results indicate that there is a strong case for all councils to produce a consolidated annual report.

Produced by 30 September each year, it would include audited summary accounts, a final AGS, an explanatory foreword, KPIs, significant risks, environmental matters and any other information the council believes stakeholders should see.

© 2012 Grant Thornton UK LLP. All rights reserved.

Questions and comments?

© 2012 Grant Thornton UK LLP. All rights reserved.

Contact details

Paul HughesEmail: paul.hughes@uk.gt.comTwitter: @paulhughes71Mobile: 07860 282763