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20-09-2006
Response to “Communities Scotland Regulatory Code of Governance“ consultation document
To discuss any of the comments included in the response further, please contact:
Contact: Angela Scott
Head of CIPFA in Scotland
CIPFA in Scotland
Fettes Park
Second Floor
West Wing
496 Ferry Road
Edinburgh
EH5 2DL
angela.scott@cipfa.org
Introductory remarks
CIPFA welcomes the opportunity to provide comments on the draft regulatory code. Overall, we are supportive of the Code and commend Communities Scotland for adopting the Good Governance principles. Respondees were directed to a number of specific questions and our response to the most appropriate questions are detailed below. The Good governance Standard makes use of examples and this has proved an effective way of illustrating the text. Some examples from the RSL sector would be helpful.
Question 1
We have issued three documents for consultation (the Regulatory Code, Supporting Guidance and Self Assessment Guidance). Is the purpose of each document sufficiently clear?
The preamble to the self assessment guidance indicates that “while there is no obligation to use the self assessment guidance, it sets out the main issues Communities Scotland would expect an RSL to have considered about its governance arrangements and performance”. The indication of an “expectation” from the regulatory body may result in the self assessment guidance becoming a preparatory tool for future governance inspections.
Perhaps the self assessment guidance should be framed around supporting improvement within the field of governance. Organisations could be encouraged to indicate their perception of their current performance against each statement. This could then lead to an improvement action plan for those areas scored low.
The supporting guidance is in some areas repetitive and if the regulatory code were more focussed, then the supporting guidance would become unnecessary.
Question 2
We have based the Regulatory Code on the Langlands Principles. Do you think that the requirements we have included in the Regulatory Code are all relevant to the governance of RSLs?
The consultation paper states that RSLs are not public sector organisations but nevertheless goes on to apply Langlands as the requisite standard. The Good Governance Standard was an attempt to develop a common code and set of principles for good governance across public services. However, given the variable nature of the legal basis for RSL’s within Scotland, there may be a need to review the private sector codes of governance to determine what elements of that code, if any, should be reflected in this current draft.
Question 4
Are there any requirements in the Regulatory Code which you think are unreasonable or onerous. Have we left out anything which is important?
The 4th principle of the code states that good governance means taking informed, transparent decisions and managing risk. The audit committee plays a critical role in risk management. It should oversee and assess the risk management, control and governance arrangements and advise the governing body on the effectiveness and outcomes of these arrangements. The regulatory code should include some prescription regarding a requirement for an audit committee or at least some part of the governance structure should be charged with the functions of an audit committee.
It would be helpful if the requirement for standing orders could be made more explicit in the Code. The need for clearly defined rules of procedure i.e. standing orders is essential. Standing orders should cover all aspects of meetings i.e. procedures, operation and decision making. Major problems invariably stem from no relevant standing orders, incorrect interpretation or application or blatant disregard.
The requirement for Standing orders should figure in any Code of Governance Local authorities with rights to nominate to RSL committees need to be made aware that such nominees should not act as representatives delegated to adopt predetermined positions in accordance with what may be seen as council’s interests, but that, once nominated they are to serve the interests of the RSL.
Perhaps the supplementary guidance could share examples of good practice or provide advice about how the RSL can support elected members to understand that they should act in a personal capacity and that members of the governing body accept collective responsibility.
Questions 5
Do you think that the Regulatory Code sets clear and challenging standards for the governance of RSL’s?
The draft regulatory code acknowledges that the application of the principles will need to reflect local circumstances. It is unclear how the set of self assessment questions will help an RSL to decide how it will address the requirements based on its particular circumstances. Would it be appropriate perhaps for the regulatory code to give some kind of indication around application for the various categories of RSL’s?
Question 6
Do you think the Regulatory Code will provide other stakeholders such as tenants and funders with sufficient assurance about the governance standards RSL’s will be required to achieve?
Typically, an organisation will reflect its compliance with internal financial controls within an Internal Financial Controls Statement. Compliance with the Good Governance principles cannot be adequately reflected in such a statement. Should consideration be given to a broader governance statement?
The mere presence of a regulatory body with powers to intervene may be enough comfort for some stakeholders.
Question 12
Do you have any additional comments on the content of the Supporting Guidance?
Some thought perhaps needs to be given as to whether a designated officer must be appointed to advise board members on, for example, ultra vires issues, application and interpretation of standing orders and any other governance requirements. While some RSL’s may do this, others may rely on the Chief Executive or other senior officer to give such advice with the obvious possibility of conflict of interest in certain situations. We recognise that this may well be difficult to impose on small RSL’s.
Number of practical points of detail:
- Page 3 – “the effectiveness of the RSL’s performance – how is that to be measured
- Page – RSLs should inform their members about major issues – can this be
done within the annual report
- Page 6 – 1 senior employee to be co-opted – why allow this
- Page 10 – in the event of a conflict of interest, why can’t the member withdraw from the meeting for that item at all times
- Page 10 – why maintain a record of declarations of interest and record it in the minutes
- Page 12 – public record of governing body’s decisions – does this include subcommittee’s
- Page 13 – RSL’s managers – is that a level below RSL’s senior officers or should it be senior officers
- Page 15 – some RSLs will have difficulty with succession planning in an electoral process