Audit Commission

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Ethical governance in England and role of Audit Commission

Alison Kelly, Senior Manager, Governance and Counter Fraud Practice

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Introduction …

• Audit Commission – what we are and what we do

• Context for our work – CSPL/SBE

• Our methodologies and tools

• Our impact

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Audit Commission

• Established by Parliament 1983• Independent body responsible for ensuring

that public money spent economically, efficiently and effectively to achieve high-quality local services for the public

• Work covers local government, health, housing, community safety and fire and rescue services

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Audit Commission

£180+bn

PROBITY

PROBITYAUDITAUDIT REGULARITY

REGULARITY

AUDITAUDIT

VALUEVALUEFOR MONEYFOR MONEY

AUDITAUDIT

TOWN HALL

INSPECTIONINSPECTION

RESEARCHRESEARCH/STUDIES/STUDIESIMPROVEMENTIMPROVEMENT

Audit Commission

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Our mission …

• … to be a driving force in the improvement of public services

• We promote good practice and help those responsible for public services to achieve better outcomes for citizens, with a focus on those people who need public services most

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Strategic objectives

To raise standards of

Financialmanagement and

financial reporting.

To challengepublic bodies to deliver better value

for money.

To stimulateSignificant

improvement in the quality of

data and the useof information

by decisionmakers.

To encourage Continual

Improvement in publicservices so they

meet the changing needs of diverse communities and provide fair access

for all.

Strategic objectives

Strategic plan – ‘We will make

available a range of tools , information

and expertise, including self-

assessment tools, to help local bodies

achieve high standards of

governance and proper conduct.’

To promote high standards of governance and accountability.

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Promoting governance and accountability

• Steering group established to focus and develop our approach to governance and counter fraud across Audit Commission

• Governance and Counter Fraud Practice established• Knowledge Network includes staff across England

sharing knowledge, information and good practice• Training sessions• Extensive Intranet site – including notable practice• Publications • Methodologies and governance tools

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Definition of governance changed with new focus

• Originally about financial management and internal controls

• Now about making a difference• Impact on trust and confidence in public bodies• Focus on behaviour, values, culture and

understanding

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Definition of governance

Ensuring the organisation (or partnership) is doing the right things, in the right way, for the right people, in an open, honest, inclusive and timely manner

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What is good governance?Both

– the means and the ends– brains and the central nervous system of

organisation• Arrangements alone do not bring about good

governance• Must have appropriate culture, understanding

and behaviours.

Everyone in organisation has role to play– providing vision and leadership and – good quality services

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Context – 1980s and 1990s

• Widespread concern about standards in public life• Widespread perception that standards in public life

declined• Allegations that

– MPs accepted cash for asking questions in Parliament– appointment to public bodies made on basis of politics or

personal connections rather than merit– local government being run by politicians for own benefit

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Committee on Standards in Public Life

Established by Prime Minister October 1994 to:• examine current concerns about standards of conduct

of all holders of public office, including arrangements relating to financial and commercial activities

• make recommendations as to any changes in present arrangements which might be required to ensure the highest standards of propriety in public life.

Not charged with examining individual issues of misconduct

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Findings of CSPL

• Couldn’t say conclusively that standards of behaviour in public life declined

• Conduct in public life more rigorously scrutinised than in past• Standards which the public demands remain high• Great majority of people in public life meet high standards

• Weaknesses in procedures for maintaining and enforcing those standards

• As a result people in public life are not always as clear about boundaries of acceptable conduct

• Principal reason for public disquiet

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Recommendations - 1st CSPL reportPrinciples of public life• General principles of conduct which underpin public life need to

be restatedCodes of Conduct• All public bodies should draw up Codes of Conduct incorporating

these principles. Independent Scrutiny• Internal systems for maintaining standards should be supported

by independent scrutiny. Education• More needs to be done to promote and reinforce standards of

conduct in public bodies, in particular through guidance and training, including induction training.

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Seven Principles of Public Life

• Selflessness

• Integrity

• Objectivity

• Accountability

• Openness

• Honesty

• Leadership

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Seven Principles of Public LifeSelflessness• Holders of public office should take decisions solely in terms of the public

interest. They should not do so in order to gain financial or other material benefits for themselves, their family, or their friends.

Integrity• Holders of public office should not place themselves under any financial

or other obligation to outside individuals or organisations that might influence them in the performance of their official duties.

Objectivity• In carrying out public business, including making public appointments,

awarding contracts, or recommending individuals for rewards and benefits, holders of public office should make choices on merit.

Accountability• Holders of public office are accountable for their decisions and actions to

the public and must submit themselves to whatever scrutiny is appropriate to their office.

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Seven Principles of Public Life cont.Openness• Holders of public office should be as open as possible about all

the decisions and actions that they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands.

Honesty• Holders of public office have a duty to declare any private

interests relating to their public duties and to take steps to resolve any conflicts arising in a way that protects the public interest.

Leadership• Holders of public office should promote and support these

principles by leadership and example.

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Recommendations – 3rd report 1998

• Local Government Act, 2000 Part III• Every local authority ethical framework based on

seven principles of public life – lead responsibility for own standards– adopt statutory code of conduct for councillors

that sets out rules governing the behaviour of its Councillors

– set up standards committee• Established Standards Board for England (SBE)

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Local Government Act, 2000 Part III- impact

• Initially too focused on compliance• Not enough of focus on

understanding, behaviours and culture

• Difficult issues exported by councils to Standards Board for England

• One councillor a week disbarred

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Audit Commission focuses on improvement – not on compliance

• Little focus on small print of legislation and compliance

• Main focus on understanding, behaviour, culture and values

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Getting the Balance Right 10th Report - 2005

R31: All local authorities should consider using the Audit Commission/Standards Board Ethical Governance Audit tool and facilitated workshop to self-assess their arrangements for ensuring ethical standards

R35: The boards of all public bodies should commit themselves to the adoption and use of the Audit Commission’s self assessment tool, Changing Organisational Culture Audit, which is especially designed to help embed a good conduct culture

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How do we support improvement?

Audit toolsGood Governance Standard Assesses and develops governance of an organisation or partnership using a survey,

diagnostic and workshops. Based on the Good Governance Standard for Public Services is aligned with CIPFA’s Annual Governance Statement for local government.

Changing Organisational Cultures Raises fraud awareness within an organisation through a survey and workshops.

Your Business @ Risk Reviews an organisation’s exposure to IT risk through a survey for all staff.

Ethical Governance Diagnostic Assesses and develops ethical governance arrangements in organisation covered by the

Local government Act 2000 through survey, review and workshops.

Under development: Managing the risk of fraud; Risk management; and Equalities, diversity and human rights.

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Concept of tools

• Self assessment by leadership and staff of the organisation

• Organisation works with Audit Commission to agree how well organisation doing

• Extensive feedback from staff or other stakeholders reality check for leadership

• Together with organisation agree next steps• Often most impact when return to check on progress!

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“We are particularly impressed with the innovative experience based learning

techniques pioneered by the Audit Commission which help organisations reach

their own determination of their strengths and weaknesses and allow the solutions

to come from within rather than imposed from outside. The tools (Changing

Organisational Cultures and Ethical Governance Diagnostic) have the added

benefit of allowing benchmarking against similar organisations and, if widely used,

will provide useful aggregate data on ethical culture across the public sector”.

10th report of the Committee on Standards in Public Life

“… a source of pride for the commission”.James Strachan, former Chairman,

Audit Commission,

“We are pleased to be associated with this important

diagnostic. It is helping to drive up standards across

local government. It tackles some extremely sensitive

issues that get right to the heart of good governance.

We know that many councils have already benefited

from this work and we hope that others will take up the

opportunity”

David Prince,

Chief Executive, Standards Board for England

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Use of Resources – methodology• Annual assessment of local authorities, fire and rescue

authorities, police authorities and primary care trusts (health)

• Considers how well organisations managing and using resources to deliver value for money and better sustainable outcomes for local people

• Three themes – strategic financial management– strategic commissioning and good governance – management of natural resources, assets and people.

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Use of ResourcesAssessment by auditors

• Scored judgement based on evidence• Able to compare scores and judgements between

organisations• Sense of competition driving up standards across

country• Leadership don’t like public humiliation.

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Use of ResourcesGoverning the business

Overall issue …

How well does the organisation govern itself and commission services that provide value for money and deliver better outcomes for local people?

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Use of ResourcesKey lines of enquiry

1. Does the organisation commission and procure quality services and supplies, tailored to local needs, to deliver sustainable outcomes and value for money?

2. Does the organisation produce relevant and reliable data and information to support decision making and manage performance?

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Use of ResourcesKey lines of enquiry

3. Does the organisation promote and demonstrate the principles and values of good governance?

4. Does the organisation manage its risks and maintain a sound system of internal control?

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Use of Resources driving improvement

• Overall councils are improving governance arrangements

• Percentage scored 3s and 4s (highest scores)– 2006 - 55 per cent– 2007 - 60 per cent,

• 5 per cent higher in 2007 than in 2006

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Our governance tools driving improvement

• Used ethical governance diagnostic in over 100 local authorities

• 4,600 councillors and officers completed survey

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Our governance tools driving improvement

• Standards Board for England referring more challenging local authorities to us

• SBE considers undertaking our diagnostic important lever for improvement

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Our governance tools driving improvement

• Recently revisited problematic council • In two years survey scores markedly improved • In 2006 only 52 per cent of elected members

considered elected leader of council was proactively promoting importance of the ethical agenda. 63 per cent members considered chief executive proactive

• By 2008 figures increased to 82 and 83 per cent respectively

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Our impact

• considered by stakeholders to be thought leader in field of governance and counter fraud

• recognised as expert partner by CIPFA, Standards Board for England, IDeA, Committee on Standards in Public Life and other stakeholders, such as UK national audit offices

• key stakeholder National Fraud Strategic Authority (NFSA). Audit Commission plays key role in making the UK hostile environment for fraudsters, including money laundering

• considered by local public bodies to make impartial judgements and provide impartial advice on effectiveness of their governance

• evidence that governance improving

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In conclusion …

• Focus on working with organisations to drive improvement

• Focus on culture. values and understanding relevant to whole public organisation

• Focus on compliance and penalties can bring game playing and ridicule rather than improvement

• Public doesn’t understand niceties of statutory codes• Public understand the principles of public life• Next steps to help government to reach this level of

understanding!

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Questions, open forum and discussion