Memorandum by CIPFA (LGA 20)|
1.1 CIPFA has a keen interest in the impact
of the local government Act 2000 on the underlying governance
structures and financial management arrangements of local authorities
and is therefore pleased to submit comments to the Sub-Committee's
1.2 As a professional accountancy body that
specialises in the public services, CIPFA's evidence focuses on
two areasthe link between changes in approach to political
management and governance arrangements and the effects on local
2.1 In CIPFA's view it is still too early
to assess in any great detail the effects of the 2000 Act as new
approaches to political management have not yet had time to "bed
down". However what is clear is just how important it is
for new executive structures to be built on solid foundations.
In our view, the key factor that can provide this sound underpinning
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.
2.2 Introducing a new 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 executive arrangements 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.
2.3 In CIPFA's view, effective local government
and democratic engagement rely primarily on the credibility of,
and public confidence in, elected councillors and officials rather
than on organisational structures. In particular, local authorities
need to operate in an open and accountable manner and demonstrate
high standards of conduct and self governance that can inspire
confidence amongst citizens and in potential partners from the
public, private or voluntary sectors. In practice this means that
the principles of good corporate governance need to be
embedded in the culture of individual
applied within a defined framework
of management processes
transparent to all stakeholders.
2.4 We strongly believe that 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. Our view is that local government has long recognised
the importance of good governance and therefore has a sound base
on which to build. Local authorities also have the advantage of
operating within a strong regulatory framework of control and
robust arrangements for monitoring and review.
2.5 Given the central importance of corporate
governance, CIPFA and SOLACE with the support of the LGA and the
Audit Commission last year published "Corporate Governance
in Local Government: A Keystone for Community Governance".
This Framework emphasizes that authorities must be able to demonstrate
that they are complying with the underlying principles of good
governance, that is
openness and inclusivity
2.6 The CIPFA/SOLACE Framework promotes
a local, self-regulatory approach to good governance, with a strong
emphasis on continuous improvement, rather than a universal "one-size-fits-all"
approachit does not therefore prescribe a single model
of governance, but rather commends local authorities to review
their existing corporate governance arrangements against the Framework.
It is also designed as a stimulus to local authorities to prepare
and adopt an up to date local code of corporate governance including
arrangements for ensuring its implementation. In our view this
is an invaluable exercise that not only provides a sound foundation
for 2000 Act executive arrangements but also helps foster a positive,
trusting view of authorities amongst their stakeholders
3. THE IMPACT
2000 ACT ON
3.1 Any change to the way in which local
authorities operate is bound to cause tensions and anxieties amongst
staff in the short term and during the process of transition.
By introducing significant constitutional changes, the 2000 Act
has also led to questions over whether traditional officer structures
need to change. Whilst CIPFA agrees that authorities need to think
through the implications of new executive arrangements on managerial
structures it is important that the continuing value and relevance
of the underlying principlethat officers serve the whole
council, are politically neutral, objective and professionalis
3.2 CIPFA is particularly concerned about
the potential impact of the split between executive and scrutiny
on senior managers. Clearly the 2000 Act has introduced a tension
in that both "sides" will need and expect objective
advice and support from officers. Anecdotal evidence suggests
that in some authorities this has led to pressure to establish
two sets of officers: one accountable to the executive, the other
to the scrutiny function. Quite apart from the duplication of
effort this would involve and the associated resource implications,
this approach also ignores the fact thatwhen it comes to
financethere is a statutory duty (s151) for each Council
to have a single officer responsible for managing an authority's
financial affairs in all its dealings.
3.3 In response to these and other concerns,
CIPFA is now reviewing its 1999 Statement on the role of the finance
director. To ensure that we take account of practical issues,
we carried out a survey last year of all finance directors to
identify points of tension arising as a result of the 2000 Act.
This exercise revealed a number of actual or expected difficulties
that can be grouped loosely under three broad headingscultural,
structural and procedural.
3.4 As you would expect there were general
concerns at both officer and member level about coping with resistance
to change and adapting to a new way of doing things. One particular
issue identified in a number of responses was an anxiety that
"backbenchers" may disengage if they felt their roles
lack meaning when compared with those involved in the executive
or scrutiny functions.
3.5 The most commonly cited concern relates
to making the overview and scrutiny role work effectively and
in particular getting "buy in" from councillors and
officers and developing effective structures for its operation
and support. There were also a number of detailed concerns about
establishing structures for officer support that could serve both
executive and overview and scrutiny.
3.6 Another area of concern centred on the
potential for lack of clarity in reporting lines for finance directors
and other chief officers and confusion over linkages between functions.
For example how the roles of scrutiny, internal audit and audit
committees fit together.
3.7 At a more detailed level, the survey
identified a number of practical or procedural requirements linked
to the 2000 Act. For example, the need to establish
a framework for decision making rules
and procedures that is workable and not overly bureaucratic
a practical and workable framework
for budget and policy making
new protocols setting out how the
s151 officer reconciles advice to cabinet/leader with accountability
to full council/scrutiny.
protocols governing how the finance
director's advice is secured and taken into account in arriving
at cabinet decisions
clear delegation rules and procedures
financial regulations that fit new
3.8 As well as recognising the impact of
the 2000 Act on the finance director's role, CIPFA's revised guidance
will look at the implications of the Government's recent White
PaperStrong Local Leadership, Quality Public Servicesand
in particular the emphasis it places on sound financial management
and advice. Our intention is to issue a draft for consultation
in the Spring and we would be happy to share a copy with the Sub-Committee
if that would be helpful.