Ethical governance in england and role of audit commission
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Ethical governance in England and role of Audit Commission. Alison Kelly, Senior Manager, Governance and Counter Fraud Practice. Introduction …. Audit Commission – what we are and what we do Context for our work – CSPL/SBE Our methodologies and tools Our impact. Audit Commission.

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Ethical governance in england and role of audit commission

Ethical governance in England and role of Audit Commission

Alison Kelly, Senior Manager,

Governance and Counter Fraud Practice


Introduction …

  • Audit Commission – what we are and what we do

  • Context for our work – CSPL/SBE

  • Our methodologies and tools

  • Our impact

Audit commission

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

Audit commission1










Audit Commission





Our mission

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

Ethical governance in england and role of audit commission

To raise

standards of


management and

financial reporting.

To challenge

public bodies to deliver better value for money.

To stimulate


improvement in

the quality of

data and the use

of information

by decision


Strategic objectives

To encourage


Improvement in public

services 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.

Promoting governance and accountability

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

Definition of governance changed with new focus

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

Definition of governance

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

What is good governance

What is good governance?


  • 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

  • Context 1980s and 1990s

    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

    Committee on standards in public life

    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

    Findings of cspl

    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

    Recommendations 1 st cspl report

    Recommendations - 1st CSPL report

    Principles of public life

    • General principles of conduct which underpin public life need to be restated

      Codes 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.


    • More needs to be done to promote and reinforce standards of conduct in public bodies, in particular through guidance and training, including induction training.

    Seven principles of public life

    Seven Principles of Public Life

    • Selflessness

    • Integrity

    • Objectivity

    • Accountability

    • Openness

    • Honesty

    • Leadership

    Seven principles of public life1

    Seven Principles of Public Life


    • 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.


    • 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.


    • 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.


    • 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.

    Seven principles of public life cont

    Seven Principles of Public Life cont.


    • 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.


    • 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.


    • Holders of public office should promote and support these principles by leadership and example.

    Recommendations 3 rd report 1998

    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)

    Local government act 2000 part iii impact

    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

    Audit commission focuses on improvement not on compliance

    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

    Getting the balance right 10 th report 2005

    Getting the Balance Right10th 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

    How do we support improvement

    How do we support improvement?

    Audit tools

    Good 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 CulturesRaises fraud awareness within an organisation through a survey and workshops.

      Your Business @ RiskReviews 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.

    Concept of tools

    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!

    Ethical governance in england and role of 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


    David Prince,

    Chief Executive, Standards Board for England

    “… a source of pride for

    the commission”.

    James Strachan,

    former Chairman,

    Audit Commission,

    “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

    Use of resources methodology

    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.

    Use of resources assessment by auditors

    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.

    Use of resources governing the business

    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?

    Use of resources key lines of enquiry

    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?

    Use of resources key lines of enquiry1

    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?

    Use of resources driving improvement

    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

    Our governance tools driving improvement

    Our governance tools driving improvement

    • Used ethical governance diagnostic in over 100 local authorities

    • 4,600 councillors and officers completed survey

    Our governance tools driving improvement1

    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

    Our governance tools driving improvement2

    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

    Our impact

    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

    In conclusion

    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!

    Questions open forum and discussion

    Questions, open forum and discussion

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