Course bookings and enrolment now open for students of CIPFA’s Professional Accountancy Qualification.
Enrol now >
Diana Melville, Governance Advisor from CIPFA’s Better Governance Forum, shares her top tips on how local authorities can improve their governance statement.
Local authorities across the UK are now busy completing their annual governance statement*.
The statement serves an important purpose, giving authorities the opportunity to reflect and report publicly on the extent to which they comply with their own code of governance. They should include how the authority has monitored and evaluated the effectiveness of their governance arrangements in the year, and any planned changes in the coming period.
To help authorities prepare their annual statement, below are five key recommendations to keep in mind.
1. Keep it relevant
Make sure your governance statement is written specifically for the year being considered. It should reflect the adequacy of the governance in place for the year and provide an opportunity to reflect on current governance challenges. Things change, and quite considerably, so your governance statement shouldn’t read the same as last year’s.
2. Evaluate and conclude
The statement should be an evaluation rather than a description. Since the 2012 Addendum the statement should include a conclusion: “the arrangements continue to be regarded as fit for purpose in accordance with the governance framework”, followed by the identification of any significant governance issues. Not all governance statements have clearly identified this conclusion and the assurance that the statement offers is weakened as a result.
The governance statement should be underpinned by a robust review and assessment of your governance. If you are going to say that your arrangements are fit for purpose then you should have adequate assurance to support that. The head of internal audit’s annual opinion is one essential element, but other assessments can also contribute.
For example, by making use of the counter fraud assessment tool you can establish how well you are meeting the CIPFA Code of Practice on Managing the Risk of Fraud and Corruption and report this is as part of your evaluation.
The CIPFA Counter Fraud Centre’s Fraud Risk Wheel can also help you review the effectiveness of your framework for identifying and managing your fraud risks.
4. Plan improvement
Working towards good governance includes being open and transparent and supporting accountability to the public. The governance statement is one way of being more open about what is working well and what needs improvement. It is highly unlikely that everything will be “fit for purpose”: new risks emerge, expectations increase and systems and controls change. Be clear about what needs to improve and how that is to be achieved.
5. Keep it short
The annual governance statement should be brief, focused and high-level, written in an open and readable style. One way to avoid a lot of lengthy description in the statement is to ensure you have a local code that sets out how you fulfil the principles of the governance framework. This allows your statement to signpost the code rather than repeat the detail.
Please also visit the Better Governance Forum.
*The preparation and publication of an annual governance statement in accordance with Delivering Good Governance in Local Government: Framework fulfills the statutory requirement in England for a local authority to conduct a review at least once in each financial year of the effectiveness of its system of internal control and to include a statement reporting on the review with its statement of accounts. This requirement is reflected in the Code of Practice on Local Authority Accounting in the United Kingdom (CIPFA/LASAAC).