APPENDIX B

Council Statement on Internal Control – Detailed Procedures

1. Governance Issues

1.1 Corporate governance arrangements JL

1.2 Council constitution JL

1.3 Executive decision making JL

1.4 Overview, Scrutiny & Audit JL

1.5 Standards Committee JL

1.6 New legislation JL

1.7 Monitoring Officer role JL

1.8 S151 Officer role PW

1.9 Delegated Authority JL

1.10 Member/Officer Protocol JL

2. Prioritisation and planning processes

2.1 LSP JB

2.2 Corporate Planning JB

2.3 Service and Team Planning JB

2.4 Medium Term Financial Plan PW

2.5 Resource Prioritisation PW

2.6 Asset management strategy and capital strategy PW

2.7 Development Review Process MB

2.8 Consultation JB

3. Performance management

3.1 BVPP JB

3.2 QPMR Reports JB

3.3 Priority Improvement Areas JB

3.4 Service Unit performance management framework JB

4. Risk management framework

4.1 General framework PW

4.2 Business continuity SG

4.3 Health & Safety Policy RO

4.4 Information Management DP

4.5 Review arrangements GR/RS

5. Procurement strategy

5.1 General framework PW

5.2 Strategic Procurement and Gateway reviews PW

5.3 Contract Standing Orders PW

6. Project management

6.1 Corporate framework JB

7. Financial arrangement

7.1 Budget Management and Financial Control PW

7.2 Management of Financial Risks PW

7.3 Accounting Standards PW

7.4 Financial Statements and Annual Report PW

7.5 Treasury Management GH

7.6 Prudential Code GH

8. Financial Control

8.1 Financial Regulations PW

8.2 Internal Audit PW

8.3 Audit Panel PW

8.4 Counter Fraud Unit PW

8.5 Separation of Duties As opposed to Internal Check PW

8.6 Fraud policy PW

8.7 External audit PW

9. Human resources issues

9.1 Overall HR strategy and policies MB

9.2 People Management MB

9.3 Equalities DP

10. External Inspections

10.1 CPA JB

10.2 IDeA JB

10.3 Ofsted KJ

10.4 CSCI SW

10.5 Benefits Fraud Inspectorate (BFI) PW

11. Partnerships and Joint Funding Arrangements

1 Governance Issues

1.1 Corporate governance arrangements

The Council secures corporate governance by way of a comprehensive constitution, which sets out the functions and governing rules of each of the Council’s political structures. It also explains how the Council’s business is conducted, including decision making, financial, contractual and legal matters, and the extent to which decision making is delegated to committees and officers of the Council. The Constitution also sets out the arrangements for maintaining an overview of corporate governance including: a Scrutiny Committee, Audit Committee, Standards Committee and Policy Commissions. At officer level, the Council’s Monitoring Officer and Chief Financial Officer play key roles in maintaining corporate governance. They are in turn supported by a Committee administration team, a scrutiny support team, Internal Audit function and Risk Management Group. The Council also provides a team (under the management of the Head of Legal and Democratic Services) whose specific role is to deal with complaints.

Further information: Council Constitution including Scheme of Delegation; Protocol on Decision Making

Assurance required: Monitoring officer to provide details of corporate governance arrangements and their effectiveness, identifying any areas where improved procedures may be necessary.

1.2 Council constitution

The council is required to publish and maintain a constitution which complies with a Directive issued by the Secretary of State in December 2000. Adoption of the constitution is a function of the Full Council.

The constitution must deliver efficient, transparent and accountable decision making, and be regularly reviewed to ensure it delivers that objective.

The Monitoring Officer has an obligation under the existing constitution to advise on necessary amendments.

Further information: The constitution; Constitutions Direction 2000

Assurance required:

Monitoring officer to confirm constitution is lawful, up to date and fit for purpose, identifying where necessary any need to amend.

1.3 Executive decision making

The Cabinet is responsible, by law, for the majority of the functions of the local authority, within the budget and policy framework set by the Full Council. It also has a duty to propose the terms of the annual budget and of a number of policies and plans for adoption by the Full Council.

Executive decisions can be taken by the Cabinet collectively (where the decision is of corporate significance, affects a number of service areas or is otherwise sensitive or controversial), by individual portfolio holders (where the decision significantly affects a service area or benefits from being taken publicly) or by officers acting under delegated powers.

It is necessary for decisions taken by members to be taken lawfully, efficiently, transparently and accountably, in the light of all relevant information and advice.

By use of the forward plan member decisions will be available for consideration by select committees, advertised in advance to the public and known to Strategic directors and specialist advisors in time for advice and recommendations to be made to the decision maker.

Member decisions must be taken and recorded publicly, except where the law provides otherwise. Decisions by officers must be subject to a proper, proportionate and auditable record.

Further information: Scheme of Delegations & Protocol on Decision Making within Constitution; Resolutions of Full Council; Executive/Cabinet Decisions; Local Government Act 2000 s13; Functions & Responsibilities Orders

Assurance required:

Chief Executive, Monitoring Officer, Chief Finance Officer confirming that decision making is lawful, efficient, transparent and accountable.

1.4 Overview and Scrutiny & Audit:

Policy Commissions, Scrutiny Committee Audit Committee

The council discharges it’s overview and Scrutiny Functions through 5 member bodies:

Policy Commission for Care Trust Delivery, Health Scrutiny and Housing

Policy Commission for Safer Communities

Policy Commission for Children and School Results

Policy Commission for the Economy, Tourism, Leisure, Regeneration and Transport

Corporate Scrutiny Committee

In addition, a separately constituted Audit Committee oversees internal and external audit and the outcome of external inspection.

The four policy commissions have a work programme reflecting the political priorities of the administration and, through a cabinet level gate-keeping process, the issues identified through performance and change management structures, as requiring public engagement of stakeholders by members.

The Care Trust etc Policy Commission also undertakes the statutory Health Scrutiny function.

Internal scrutiny of Council functions and decision making is undertaken by the Corporate Scrutiny Committee.

Further information: Constitution

Assurance required:

Chief Executive, Monitoring Officer, Chief Finance Officer; confirming that Overview, Scrutiny and Audit Committee functions are well constituted, strategically focussed and well resourced.

1.5 Standards Committee

The council is obliged by law to establish a Standards Committee to promote high standards of ethical conduct by elected members; determine any complaints against members referred to it and to discharge similar functions in relation to Town and Parish Councils.

The Standards Committee must have a majority appointed as independent members, including it’s chair, who are not elected members of the council.

Further information: Article 9 of the Constitution; Standards Committee annual report.

Assurance required:

Monitoring Officer - Standards Committee is lawfully constituted and adequately resourced.

1.6 New legislation

Under corporately agreed procedures, the Head of Legal and Democratic Services has a responsibility to identify any piece of new legislation with corporate effect.

In relation to any such legislation Directors Group will agree an action plan (covering some or all of a 15 point checklist) for preparing the authority for compliance.

Further information: Report to Directors Group December 2003.

Assurance required:

Head of Legal and Democratic Services to confirm whether any legislation with corporate effect is imminent and if so that a corporate action plan has been agreed.

1.7 Monitoring Officer role

S5 Local Government and Housing Act 1989 (as amended) requires the authority to designate one of it’s officer as Monitoring Officer and to provide adequate resources to discharge their responsibilities. The Monitoring officer has a personal responsibility to report any actual or likely unlawful act and/or any actual or likely act of mal-administration.

Further information: The Monitoring Officer – loose leaf publication by Wragge and Co.

Assurance required:

Chief Executive Officer to confirm that an appointment has been made, Monitoring officer to confirm that and that arrangements and resources are adequate.

1.8 S151 Officer role

The Council is required under Section 151 of the Local Government Act 1972 to make arrangements for the proper administration of their financial affairs and to secure that one of their officers has responsibility for the administration of those affairs.

This role is carried out by the Chief Financial Officer, who sits on the Directors’ Group and attends all meetings of the Cabinet to provide financial advice. Subsequent legislation requires the Chief Financial Officer to advise the Council on the robustness of its budget and the adequacy of its reserves, and to carry out an on-going monitor of financial performance against budget.

Further information: Chartered Institute of Public Finance and Accountancy guidance on the Role of the Chief Financial Officer

Assurance required:

Chief Financial Officer - Statutory and code of practice responsibilities are being discharged.

1.9 Delegated Authority

The vast majority of decisions taken in the discharge of the myriad functions of the local authority are taken by officers, under powers delegated to them by elected members.

These decisions will vary widely in value, service significance and degree of complexity., from a purely administrative decision to refuse a benefit entitlement (affecting only one individual) through the granting of a planning consent (affecting a whole neighbourhood) to staffing decisions which can affect the provision of a whole service.

Each and every decision must be properly, proportionately and auditably recorded. Equally important is the need to be able to demonstrate a chain of delegation from the member decision making body to the officer taking the decision.

Since June 2001, the functions of the local authority are split into Executive and Council side functions. The Cabinet and Full Council must each, therefore, determine to delegate functions to officers. This is done by the adoption of a scheme of delegations, showing powers delegated to Strategic Directors and Heads of Service.

Further information: Scheme of Delegations & Protocol on Decision Making within Constitution; Resolutions of Full Council; Executive Decisions; Local Government Act 2000 s13; Functions & Responsibilities Orders.

Assurance required:

Monitoring Officer to confirm that Scheme of Delegations is lawful and efficient and has been properly adopted by the Executive (in relation to Executive Functions) and Full Council (in relation to Council side functions)

Directors/Heads of Service to confirm that auditable authorisations are in place for more junior staff to use delegated authority.

1.10 Member/Officer Protocol

Good member/officer relations are essential to the efficient discharge of local authority functions, and a clear statement of the respective roles and responsibilities is essential to the development and maintenance of those good relations.

It is therefore necessary to adopt and review a protocol setting out the respective roles and ground rules for interaction between officers and members.

Further information: Member/Officer Protocol in constitution

Assurance required:

Monitoring Officer to confirm that a Protocol is adopted and fit for purpose.

2 Prioritisation and planning processes

2.1 LSP

The Local Government Act (2000) provided local authorities with a ‘well being power’ and a duty to promote the social, environmental and economic well being of their area. They were to see that a community strategy was created and a local strategic partnership (LSP) established. The Council began this process in January 2001 and the Island Futures LSP was formally launched in January 2002. The Island Futures Strategy was developed through a parallel, extensive public consultation process and was published in the summer of 2002. This sets out broad strategic priorities for the coming 10 – 15 years. The Leader of the Council chaired the LSP through its first year, then stood down and there is now an independent chair.

The LSP works through a broad representative board and a smaller steering group with champions for each of four themes. A revised Community Strategy is being developed and will be in place by early 2006. The draft Local Area Agreement (LAA) reflects the priorities of Island Futures and sets out measurable targets for each of the partnership’s themes. The LAA themes have, in turn, influenced the structure of the Council’s forthcoming Corporate / Change Plan which documents the actions the IWC itself will be taking in pursuit of the Island Futures objectives and to improve its own performance.

The Council provides officer support for Island Futures through its Community partnerships team. Recent developments include the establishment of an Executive level support group, whose role is to guide and advise Island Futures in pursuit of their objectives, and an interactive website.

Further Information: Agenda and Minutes of the IWC Executive June and October 2001, Island Futures Strategy July 2002, Agenda’s and minutes of Island Futures 2001 – 2004, BVPI 1.

Assurance required: Chief Executive Officer and Chair of Island Futures Partnership to confirm that the LSP is fit for purpose

2.2 Corporate Planning

The Council produced its first Corporate Plan ‘Achieving Excellence through teamwork’ in 2002 following extensive consultation with staff and partners. This demonstrates how six corporate objectives essential to the Councils mission of ‘Improving Island Life’ will be pursued through service development and improvement over a four year period. Part 3 of the Plan ‘Making it happen’ covered the Councils own internal actions to improve its corporate governance and performance.

The Plan has been implemented through Annual Action Statements that detailed particular activities and the achievement of these is monitored through quarterly performance management reports (QPMR’s) to the elected members. This arrangement allowed the key actions required in support of the Community Strategy, CPA Improvement Plan and other service strategic plans to be monitored and updated on a regular basis. In 2005 the Annual Action Statement was combined with the Best Value Performance Plan.

Following the Council elections in May 2005 the Council is consulting on a Change Management Plan ‘ Aim High’ and this will become the Councils second Corporate Plan when it is adopted by the newly elected Council. It focuses on five objectives and aligns Council activity to the themes adopted by Island Futures (the local strategic partnership) and the spending blocks in the Local Area Agreement.

Further Information: Agenda and Minutes of the Executive May, July and October 2002, Annual Action Statement (AAS) 2003 – 04 and 2004 – 05, BVPP 2004/05 (includes AAS 2005/06), QPMR reports to the Executive 2003/04 & 2004/05. CPA report December 2002. IDeA Peer review September 2003 and September 2004. Annual Audit letters 2002, 2003 & 2004.

Assurance required: Head of Corporate Policy and Communications to confirm that Annual Action statements or their replacements are produced and contain the relevant information, to ensure monitoring through the QPMR process and that the Corporate Plan is revised during 2005. Directors and Heads of Service to ensure that their contributions to Corporate Plans provide the key strategic guidance required by the authority and that Annual Action Statement or their replacements and service plans contain the necessary detail in support of these strategic objectives

2.3 Service and Team Planning

The Council has had a service planning process in place since 2000. This now forms part of a corporate Annual Planning Cycle introduced in 2003. The service planning process is reviewed every year and fresh guidance issued in consultation with Directors group and Heads of Service. Plans are now produced for 18 services detailing future actions and past performance in support of the Councils corporate objectives and internal improvement programme. Guidance is issued in late summer and plans are developed through team days and informed by local and national policy priorities. In accordance with the annual planning cycle, drafts are available in September and completed in March after the budget is finalised. Key issues are contained in the Annual Action Statement and monitored through the QPMR process. In 2005 the draft deadline is September 30^th.

Recent improvements make explicit links to the resource prioritisation process and risk management. The 2005/06 service plans focussed on key improvement and development initiatives with ongoing service delivery being documented in team plans. Together these will determine large parts of individual or group work-plans established through the personal development review process.

Further information: Service plan template and guidance, CPCU May 2005. The Service Plans 2005/06 from individual services are available on the Council’s intranet.

Assurance required. Head of Corporate Policy and Communications to ensure templates and guidance are reviewed and issued annually, that drafts are produced and plans completed in accordance with the annual planning cycle. Individual Heads of Service to produce plans in accordance with the guidance and planning cycle

2.4 Medium Term Financial Strategy

In order to assist the delivery of its key strategic objectives, the Council is required to put in place a Medium Term Financial Plan which is linked to the corporate objectives, and models income and expenditure over a minimum 3 year period to ensure adequate resources will be available to deliver the key priorities. This Plan should take account of both local requirements and national priorities, and be reviewed and updated on an annual basis to secure its continued relevance in the changing financial framework within which local authorities operate.

Further information: Isle of Wight Council Medium Term Financial Plan

Assurance required: Chief Financial Officer – MTFP is linked to corporate objectives, makes resource and expenditure projections, and is reviewed on a regular basis.

3 Performance management

3.1 BVPP

The Council produces an annual Best Value Performance Plan in accordance with legislative requirements and current regulations. This is audited annually as required and in 2004 received an unqualified report. The production of the plan is co-ordinated by the Corporate Policy Team using a network of Performance Indicator Co-ordinators (PIC’s) to provide the necessary data and content. Internal quality assurance processes continue to be assessed by the Corporate Policy Team, internal audit and the PIC network in view of the number of individual indicators that continue to be qualified during the audit or have reservations expressed about their accuracy.

In 2005 the BVPP incorporated the Annual Action Statement which was less specific than usual as the newly elected Council had yet to formally decide its priorities.

Further information: Annual Audit Report on the BVPP contained within the Annual Management Letter – December 2004. Agenda and papers of the PIC meetings. BVPP 2004 – 2005. Directors group reports and minutes

Assurance required: Head of Corporate Policy and Communications – process described above is being carried out. Audit manager – annual audit completed in accordance with Audit Commission requirements

3.2 QPMR Reports

In 2003 the Council introduced a process of quarterly performance management reports (QPMRs) which are reported to the Executive via the Directors Group. The QPMRs are also considered by Select Committees. The reports include achievement against the key actions required by the Annual Action, CPA and BV improvement plans, from the annual audit letter, a basket of performance indicators and PSA targets. It is produced according to the individual portfolio’s of the Executive. Information is supplied by individual Heads of Service and discussed at Directors group and with Portfolio holders. Areas to watch are highlighted with explanation of any necessary corrective actions being taken. The content deliberately varies in each quarter according to reporting requirements but the fourth quarter includes and annual assessment of overall achievement against targets across the Council. During 2004, increasing use was made of risk assessments to limit the data provided to that which were most significant.

During the second half of 2005 the content of the QPMR’s is being revised to meet the requirements of the newly elected Cabinet including monitoring the achievement of manifesto achievements and increasing exception reporting.

Further information : QPMR reports to the Executive each quarter since July 2003 and minutes of these meetings. Directors group agendas and minutes 2003 onwards

Assurance required: Head of Corporate Policy and Communications – framework described above continues to function and is periodically reviewed. Directors & Heads of Service identify key information, provide this on time and use it to improve performance locally. Cabinet Portfolio holders use the information to ensure the effective delivery of their responsibilities and to drive performance improvement where necessary

3.3 Priority Improvement Areas

As part of its corporate performance management framework the Council developed a mechanism to focus attention upon particular areas of concern. Known as Priority Improvement Areas (PIAs), this provides a focus upon a limited number of service areas that require improvement. The areas are selected on the basis of poor performance as derived from performance indicators and / or poor external inspection reports.

Meetings were held each quarter attended by the Leader, Deputy Leader, Chief Executive Officer, the relevant portfolio holder(s), Director and Head of Service and members of the corporate policy team. An action plan is produced by the service concerned and monitored at these meetings. The intention is that these services get priority for additional resources if these are needed to secure sustained improvement.

The 2004/05 PIA’s have recently been reviewed. Following good performance homelessness is to be removed from the programme and is to be replaced by educational attainment. A further review of the PIA programme will take place in the autumn of 2005 to fit the programme into the wider context of value for money and efficiency savings.

Further information: Agendas and notes for PIA meetings. Improvement plans for the services concerned. Service inspections and BVPI results. Directors Group reports on criteria for PIA’s

Assurance required: Head of Corporate Policy and Communications – framework functioning as described above. Relevant Heads of Service to establish and deliver service improvement plans

3.4 Service Unit performance management framework

Individual Directorates have their own performance management frameworks to comply with particular inspection or government reporting requirements. These focus on DMTs attended by Heads of Service. Beginning in 2004/05 these will also consider a basket of indicators on a quarterly basis and the QPMR reports as part of the improved corporate framework.

Individual Heads of Service already contribute performance data to the QPMR process and produce service plans. These provide links to overall corporate objectives. Some services are PIA’s and some have specific PSA targets providing links with local and national improvement priorities. Directors and Cabinet Members are encouraged to have regular meetings with Heads of Service where performance issues can be raised and resolved. There are management teams for individual services while individual performance is addressed through staff supervision sessions and during development reviews.

The Corporate Policy & Communications team also provide a central support service in order to encourage and facilitate a consistent approach to service unit performance. This process is currently being reviewed through a survey to all Heads of Service.

Further information: Individual Service plans, QPMR reports to Cabinet, Directorate and Unit management team agendas and notes. Personal development review papers

Assurance required: Individual service heads to confirm that adequate performance management arrangements are in place locally and contribute as required to the corporate processes

4 Risk management framework

4.1 General framework

The Council has a comprehensive framework for identifying and managing risk. Each service head is required to maintain a service risk register and to review it regularly, including as part of each service planning round. They are required to design appropriate controls to minimise service risks and to monitor the application of these against planned timescales.

Service risks are examined by the Risk Management Group and any risks with a corporate significance are performance managed at that level, again by monitoring the application of agreed controls.

The Risk Management Group is accountable to the Director’s Group which comprises directors of Strategic risks are managed directly by that group.

Risks which require additional resources can be fed into the resource prioritisation process from service plans, through the Risk Management Group, or through the Strategic Risk Group.

Further information: Isle of Wight Council Risk Management Framework, agendas and minutes of the Council’s Risk Management Group and Strategic Risk Group.

Assurance required:

Compliance and Risk Manager – Corporate framework functioning as described above

Service Heads – Service risk registers being maintained and managed, and incorporated in the service planning process

4.2 Business Continuity

The Council is putting in place Business Continuity Plans across the authority. The plans cover 3 stages of incident management.

i) Emergency Response

ii) Crisis Management

iii) Business Recovery

The plans are currently being embedded into departments and will be subject to regular review and exercising to ensure continued validity.

All new projects have to include consideration of Business Continuity and to ensure that on completion the project delivers a Business Continuity Plan, which conforms to the corporate model.

Further information: Business Continuity Plans

Assurance required:

Heads of Service to review and exercise Business Continuity Plans regularly and incorporate Business Continuity Planning into new projects.

Business Continuity has to be considered within the Risks of any decisions the Executive is asked to make.

4.3 Health & Safety Policy

Through its health and safety policy the Council aims to minimise the incidence of workplace risks by providing and maintaining a safe and healthy workplace

Further information:

Health and Safety Manual

Assurance required:

Head of Consumer Protection to ensure health and safety policies and procedures are regularly reviewed and updated.

Strategic Directors ensure that health and safety policy and rules are effectively managed.

Heads of Service ensure that arrangements are in place to safeguard the health and safety of all employees within their service areas.

Service Managers and supervisors are responsible for effective day-to-day management of arrangements for the health and safety of their employees.

4.4 Information Management

Information is held in many forms and in many places within the Council. There are corporate and departmental policies ensuring statutory compliance, (particularly in relation to the Data Protection Act and Freedom of Information Acts) and protocols to ensure that information is shared within and outside of the Council in order to deliver services, to achieve corporate objectives and to insure information is not used for purposes other than those for which it is acquired and kept.

The Council will adopt a corporate standard of information security, such as BS7799, to ensure uniformly high standards of information security.

Further information: NCC BS7799 gap analysis

Assurance required:

Head of Organisational Development – Corporate standard of information security has been adopted

4.5 Review arrangements

5 Procurement strategy

5.1 General framework

The Council’s Procurement Strategy, approved by the Executive Committee in 2002, sets out the actions that the Council will implement to achieve strategic direction and focus over its procurement activity. More detailed prescription of how the Council’s procurements are conducted are set out in Contract Standing Orders (see below).

The Council also sets and monitors its procurement spending through the annual budget process. There are also limits set for the authorisation levels of each officer, controlling the value of any order they can initiate.

Both Financial Regulations and Contract Standing Orders specify the operational procedures in relation to the ordering and payment for, goods, services and works that the Council needs.

The Internal Audit, Creditor Payments, and Procurement functions all play a part in monitoring adherence to the rules governing procurement.

Further information: The Council’s Procurement Strategy, Contract Standing Orders; Financial Regulations; Code of Practice for the certification of payments. The Best Value Review of Procurement – Improvement Plan. Procurement aspects of Service Planning Guidance.

Assurance required :

Compliance & Risk Manager, Procurement Manager and Chief Internal Auditor that policies and procedures are followed.

Service Heads: That they comply with Contract Standing Orders and Financial Procedure rules. That they maintain and review authorised lists for signing orders and certifying payments. That they assign responsibility for managing significant contracts. That they identify forthcoming procurements in their service plans.

5.2 Strategic Procurement and Gateway reviews

The Council has a Gateway review process which will control the progress of individual procurements, subjecting them to ‘gateways’ at appropriate stages in their development. The Process is delivered in a proportionate way, with those that represent the most risk and those that are of strategic importance receiving the greatest attention. Risk will be assessed using an appropriate risk assessment tool.

Further information: Outline of Gateway Review process. ‘PASS’ risk assessment tool. Best Value Review of Procurement – Improvement Plan.

Assurance required: Heads of Service will adhere to Service Planning Guidance to identify and record significant forthcoming procurements in their service plans.

5.3 Contract Standing Orders

The Council’s procurement practices and procedures are set out in its Contract Standing Orders. These require a proportionate degree of rigour and detail according to the value and strategic importance of a procurement. They also set out what competitive process is required, ranging from simple market testing through to the requirements of the EU procurement regulations.

Further information: Contract Standing Orders

Assurance required: Heads of Service that Contract Standing Orders are being followed.

6 Project management

6.1 Corporate framework

Developing and implementing a consistent approach to managing projects is a key element of the Councils CPA Improvement plan. As part of a baseline assessment exercise in 2003 the Audit Commission provided support in the form of a survey and interview programme to establish the scale of project work and the current skills base in the Authority. This concluded with a staff workshop to establish the basic IW project management process.

Following the baseline exercise, the next phase involved the procurement and delivery of a training programme to ensure consistently high standards of project management. The programme is in place at both best practice and Prince 2 practitioner level. A proportionate approach was recommended to Directors group in early summer 2004 with Prince 2 becoming the overall standard for major projects and minimum standards applying to other projects. I-method software was purchased corporately in 2005 providing both a tool and source of

information to managers. This is in the process of being rolled out across the authority. The need for additional procedures and organisational changes including a project register that links to the risk register, a network of qualified managers, better use of existing trained staff and a project support function is being considered as part of the Council’s overall approach to VFM.

Further information: Reports to Directors Group 2004.

Assurance required: Head of Corporate Policy and Communication - establish IWPM approach. Heads of service to ensure projects are identified and appropriate standards applied, including the use of Prince 2 or other suitable project management standards where appropriate.

7 Financial management

7.1 Budget Management and Financial Control

The Council’s arrangements for budget management and financial control are set out in the Financial Procedure Rules and Contract Standing Orders. Financial control is an integral part of the wider framework of internal control and risk management, and can be defined as ‘the operation of a financial control environment which works to safeguard resources and help ensure that their optimum use contributes to the goals and objectives of the organisation’. Within the context of financial control, the roles and responsibilities of the Chief Financial Officer, elected members, directors and service heads are clearly stated in the Financial Procedure Rules.

Budget management requirements for the Council are detailed in the Financial Procedure Rules, and the financial procedures related to the management of contracts are included within the Contract Standing Orders

Further information: Isle of Wight Council Financial Procedure Rules and Contract Standing Orders

Assurance required:

Chief Internal Auditor – compliance monitored through the audit programme

Accountancy Services Manager – compliance monitored on a regular basis through budget monitoring and control

Service heads – all relevant staff are made aware of the Rules and their relevance to each

7.2 Management of Financial Risks

It is acknowledged that within the context of the Council’s overall revenue and capital budgets, some service areas and projects represent a more significant risk to the achievement of strategic objectives, and to the financial health of the Council, than others. In order to manage these key financial risks year on year, finance staff, in conjunction with service managers, identify the most significant risks and publish details on the intranet in a consistent format. Once published, the financial risks remain on the system for the full financial year, and are monitored and updated monthly. In addition, any further risks emerging during the course of the year will be added to the original list and will remain on the system until the risk is resolved. The list of key financial risks is reviewed annually to ensure its continued relevance. It is anticipated that this process ensures focus is maintained on the financial management of significant risks to achievement of the Council’s objectives, thereby lessening the likely impact the risks may have on the Financial health of the Council.

Further information: Isle of Wight Council Financial Risk Areas published on Intranet site

Assurance required:

Accountancy Services Manager – budget accountants aware of the requirement and risk areas updated and monitored on a regular basis

Service heads – all relevant service managers are made aware of the risk areas and their potential impact on service financial management

7.3 Accounting Standards

The Accounts and Audit Regulations 2003 require the Council to ensure that the financial management of the Council is adequate and effective and that the Council has a sound system of internal control which facilitates the effective exercise of the Council’s functions. In addition to the statutory background, the Chartered Institute of Public Finance and Accountancy has produced various codes of practice with which the Council’s finance staff are obliged to comply, thereby establishing professional standards which effectively take the place of legislation. CIPFA has also produced Standards of Professional Practice which require all members to comply with any standard that regulates an area of their work.

Further information: Chartered Institute of Public Finance and Accountancy Standards of Professional Practice

Assurance required:

Accountancy Services Manager – statutory requirements and compliance with relevant codes of practice and standards of professional practice are being discharged as required

7.4 Financial Statements and Annual Report

In addition to financial management arrangements, the Accounts and Audit Regulations 2003 also require the Council to prepare in accordance with proper practices a statement of accounts for each year, to include specified information. The Council is required to ensure that the statement of accounts is prepared in accordance with the Regulations. The statement should be signed by the responsible finance officer prior to approval, and once approval is given by members, the statement should also be signed and dated by the person presiding at the committee or meeting at which the approval was given. This approval by elected members should be as soon as reasonably practicable, but in any event prior to the date specified in the Regulations. Once approved, the statement should be published, and is subject to a period of public inspection and a full external audit. The audit is also required to be concluded prior to the date specified in the Regulations.

Further information: Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice

Assurance required:

Accountancy Services Manager – statutory requirements and compliance with relevant codes of practice are being discharged as required

7.5 Treasury Management

The Council’s Treasury Management activities include the following:

· Daily cash flow management and longer term cash forecasts

· Investment of surplus funds through the money market

· Borrowing short term to finance day to day cash flow fluctuations

· Funding of capital expenditure through longer term borrowing, capital receipts, capital grants or leasing

· Management of debt (including debt restructuring and monitoring to achieve an even maturity profile)

· Treasury management procedures with money brokers, bankers and the Public Works Loan Board

· Interest rate exposure management

Using the powers of the Local Government Act 2003 the Secretary of State has issued guidance to local authorities on investments. Under the terms of the Act local authorities are required to have regard to the guidance, which recommends that an Annual Investment Strategy should be approved each year by the Council. The general objective of the guidance is that local authorities should invest prudently any surplus funds held on behalf of their local community. As a result, the Council has in place a Treasury Policy which is in accordance with CIPFA’s Code of Practice for Treasury Management in Local Authorities. The Policy was first adopted by the Council in February 2003 and is reviewed and approved on an annual basis.

Further information: Code of Practice for Treasury Management in Local Authorities; Treasury Strategy 2004-05 and 2005-06; Local Government Act 2003

Assurance required:

Chief Financial Officer – the Council’s Treasury Management practices are operating in accordance with relevant statutes and codes of practice

Financial Services Manager – Treasury Management Policy is being applied rigorously in accordance with the requirements of the strategy

7.6 Prudential Code

In order to underpin the changed system of capital financing introduced by the Local Government Act 2003, CIPFA developed a Prudential Code for Capital Finance in Local Authorities. Local Authorities are required by regulation to comply with the code when carrying out their duties under Part 1 of the Act. The Prudential Code specifies indicators that the Council must consider in determining how much it will borrow for capital purposes. The framework for self- management of capital financing arrangements focuses on three elements:

· Capital expenditure plans

· External debt

· Treasury management

The code requires the Council, in determining its capital programme, to set a range of indicators for the next three year period. These indicators form part of the annual budget setting process

Further information: Prudential Code for Capital Finance in Local Authorities; Local Government Act 2003

Assurance required:

Chief Financial Officer – the Council’s capital financing arrangements are operating in accordance with relevant statutes and codes of practice

Financial Services Manager – Prudential Code requirements are being applied rigorously in day to day management of the Council’s capital investment programme

8 Financial Controls

8.1 Financial Regulations

The Council has set down a comprehensive set of Financial Procedure Rules which officers and members are required to abide by, and which cover

· Roles and responsibilities of members, directors, service heads and the Chief Financial Officer

· General accounting requirements

· Buying goods and services

· Receiving income

· Safeguarding assets

· Transactions involving staff and members

· Budget management

· Compliance with the requirements is monitored by the Internal Audit Section on an on-going basis.

Further information: Isle of Wight Council Financial Procedure Rules

Assurance required:

Chief Internal Auditor – compliance monitored through the audit programme

Service heads – all relevant staff are made aware of the Rules and their relevance to each job.

8.2 Internal Audit

The council maintains an internal audit function consisting of seven full time equivalent staff members. The role of internal audit is to be an independent, objective assurance and consulting activity designed to add value and improve the council’s operations. It helps the council to accomplish its objectives by bringing a systematic, disciplined approach to the evaluation and improvement of the effectiveness of risk management, control and governance processes. Internal audit’s independence is maintained by being free from any non-audit duties with unrestricted access to records and the right to seek explanations from all employees including the Chief Executive Officer and strategic directors. The audit approach is risk based ensuring scarce audit resources are directed at the areas of greatest need. All audit staff are appropriately qualified.

Further information: Isle of Wight Council Internal Audit Charter, the Council’s Financial Regulations, Audit Panel reports on internal audit activity.

Assurance required:

Chief Internal Auditor – The council’s internal control system is functioning in compliance with managements’ expectations and any impairments to the adequacy and effectiveness of the internal control system are identified and reported to management to enable rectification of identified weaknesses. The council’s external auditors give assurance on the extent to which the internal audit function is effective and whether their work can be relied upon to assist the development of the external auditors opinion on the council’s control systems and the published financial statements.

8.3 Audit Committee

The council has established an audit committee of non-executive elected members to have oversight of the adequacy and effectiveness of the council’s corporate governance, risk management and internal control frameworks. It receives regular reports from internal and external auditors to allow it to discharge its scrutiny function over these areas. It also has a role in measuring the effectiveness of both the internal and external and external audit functions.

Further information: Isle of Wight Council Audit Committee Terms of Reference, Agenda and Minutes of the Audit Committee.

Assurance required:

Monitoring Officer - The Audit Committee ensures that the Council’s audit arrangements effectively monitor corporate governance, risk management and internal control standards and expectations and ensure that any shortcomings are identified and rectified.

8.4 Counter Fraud Unit

The Council has a benefit fraud team located in the Revenues and Benefits section comprising a Senior Fraud Officer and three investigators.

Plans and procedures are in place encompassing the requirements of both the DWP SAFE policies and the Benefit Performance Standards. This ensures action including the prosecution of offenders is taken where fraud is proven.

All case information is held securely with access restricted to fraud staff and the Revenues and Benefits Manger. None of the fraud staff have update access to the benefit systems.

The Council are set overall fraud targets by the DWP and this is translated into individual targets for all investigators as recommended by the Benefit Fraud Inspectorate. Performance against target is monitored monthly.

Further information: DWP Benefit Performance Standards

Assurance required:

Revenues and Benefits Manager – Counter Fraud Unit is operating to standard.

8.5 Separation of Duties

The council maintains a system of internal check as a safeguard against financial irregularity. The system comprises the separation of the duties of calculating, recording, checking and examining sums due to and from the council from the duties of collecting or disbursing those sums. Financial systems and procedures are designed to separate as completely as possible these functions and in particular to ensure that no single officer is able to undertake all stages of a transaction

Further information: Isle of Wight Council’s Financial Regulations

Assurance required:

Heads of Service – That financial procedure rules in general and the principles of internal check in particular, are being complied with in their areas of responsibility.

8.6 Fraud policy

Regarding general fraud, the council maintains a policy of zero tolerance of fraudulent or corrupt behaviour that involves the loss of public money. All instances of potential fraud/corruption are rigorously investigated and if confirmed as being fraudulent, appropriate sanctions against the perpetrator are applied in all instances.

Further information: Isle of Wight Council Anti-Fraud Policy

Assurance required:

Heads of Service – That the anti-fraud policy is being complied with in their areas of responsibility

8.7 External audit

It is a statutory requirement that the council is subject to a robust system of external audit. The council’s external auditor is the Audit Commission. Based on their Audit Code of Practice, the Audit Commission not only audit the council’s financial statements but also have a duty to seek to assure the public that the council conducts its business economically, efficiently and effectively and that best value is secured in all areas of service delivery. To facilitate the assessment of best value, the Commission maintains an inspectorate specifically to assess the value of the council’s services and the results of their and other inspectorates work are amalgamated in the Comprehensive Performance Assessment of the council’s overall performance.

9.3 Equalities

The council is obliged by law to meet the requirements of the Race Relations (Amendment) Act 2000 and to achieve Level 5 of the Equality Standards for Local Government. The Council has put into place a ‘Valuing Diversity’ Policy Group led by the Strategic Director of Adult and Community Services. The purpose of that group will be to lead the council in meeting the requirements of relevant legislation such as Race Relations and also Disability Discrimination, ensuring that its moral and statutory obligations are met.

The process is a long-term one, which is set out in the policies and strategies as, described below and one which is on-going and will be measured by annual review and monitoring by the Resources Select Committee.

10 External Inspections

10.1 CPA

The 2002 CPA ranked the authority as ‘fair’ scoring 3/4 on service delivery and 2/4 corporate governance. The 2003 & 2004 annual audit letters confirmed this ranking noting that the authority’s direction of travel was positive but that improvements had not yet worked through to deliver consistently improved service delivery outcomes. The Councils stated objective – as shown by its corporate plan – is to become an excellent authority and this is underpinned by the CPA improvement plan. The next CPA is due in 2006 under new rules.

From 2004/05 the CPA Improvement Plan has been incorporated within the Annual Action Statement (see section 2.2.) which is subject to regular review through the QPMR process (see section 3.2.) until the fourth quarter. This provided an appropriate mechanism to ensure the continuous improvement required to achieve the Council’s ambitions to be recognised as an “excellent” authority. Any remaining actions will be considered for inclusion in the Councils 2005 change management plan.

The Council has recently completed self assessments of its approach to value for money and direction of travel as part of the 2005 CPA process. The results of both will be included in the 2005 Annual management letter

Further information: CPA report December 2002. CPA Improvement Plan, Annual Audit letter December 2003 & 2004. Audit Commission publications on the CPA. 2002, CPA the Harder Test (2005) and ongoing.

Assurance required: Head of Corporate Policy & Communications to ensure that the Annual Action Statement (AAS) or its successor change management plan is produced and contains the appropriate CPA improvement actions. Head of Corporate Policy & Communications to also ensure regular review of the AAS or its successor through the QPMR process.

Directors & Heads of Service to ensure that CPA improvement actions are subject to regular review.

Chief Executive Officer and Head of Corporate Policy and Communications that the authority is adequately prepared for CPA 2006

10.2 IDeA

The authority has used IDeA skills on a number of occasions. The connecting with communities project involved a senior member of IDeA staff acting as a critical friend which resulted in the creation of the Great Access to Great services project (known as GAGs) to implement electronic government and improved customer services across the Council. The peer challenge process was used as part of the Council’s procurement best value review and the authority’s development of a performance management system is documented on the IDeA best practice web site following a brief consultancy exercise. The Council commissioned a peer review in September 2003 that set the direction for further improvement. The review team revisited the authority in September 2004. The Annual Action Statement (see section 2.2.) includes appropriate reference to the improvement actions identified through the Peer Review. Officers and members of the Council are accredited by the IDeA to undertake reviews and other consultancy assignments thus promoting the Councils good practice and learning from others.

Further Information: IDeA peer review report 2003 & 2004

Assurance required: Chief Executive Officer and Head of Corporate Policy and Communications to ensure that the findings of the Peer Review are appropriately responded to and that other Directors and Heads of Service are aware of the IDeA’s services and that they are used whenever appropriate.

10.3 Ofsted

The Office for Standards and Education (OfSTED) has overall responsibility for ensuring that the local authority discharges its functions and requirements under the 2004 Children Act. To this end, OfSTED co-ordinates the work of a number of inspection bodies notably the Commission for Social Care Inspection and the Audit Commission. An annual monitoring process was implemented in May 2005 (Annual Performance Assessment). The authority was required to present a self assessment in May 2005 reporting on its discharge of functions against the five key outcomes of the 2004 Act :

· being healthy

· staying safe

· enjoying and achieving

· making a positive contribution

· economic well-being

The authority will be judged in December 2005 again key criteria in the following areas of service provision:

· children's social care

· education services

· children's services overall

· capacity to improve.

The APA process involves self-assessment and a visit conducted by the inspection team led by HMI on behalf of OfSTED. Final judgements are made on the basis of published performance data and interview.

Starting in 2005 each Local Authority will be subject to a triennial joint area review. This inspection will focus on areas of under-performance identified in the APA and current performance data. The Local Authority is the statutory children's services authority for the area and as such the Isle of Wight Children's Services Directorate is required to co-ordinate the response which includes scrutiny of all children's services provision by the local authority and partners. The Isle of Wight will receive its first JAR during the financial year 2006/07. The report from the Joint Area Review (JAR) will be presented to the Council’s Commission for Children and School Results. It will be for the Commission to refer the report to the Scrutiny Committee.

Further information: OfSTED Inspection Report September 2003, and agreed action plan.

Assurance required:

Head of Planning and Resources – agreed action plan has been incorporated in, and is monitored and updated through, the service planning and staff development framework

10.4 CSCI

On 1^st April 2004, the Government introduced a new organisation to lead on the inspection, regulation and performance rating of Local Authority Social Service Departments and providers of social care. The Commission for Social Care Inspection (CSCI) is an independent body, established by the Government to undertake this role. Local Authorities are responsible for ensuring close co-operation with CSCI in undertaking reviews of service areas, annual performance and performance tracking exercises and, reporting any untoward incidents from low level incidents within registered direct care services to death of a service user or staff member. It is also a responsibility on the Authority to nominate and secure an appropriate appointment to various functions in meeting statutory requirements such as those involved in managing direct services.

This responsibility involves Officers and Members in a variety of ways but the key agents are the Strategic Director of Social Services & Housing and his/her Heads of Service.

Text Box: Further information: Members briefed
Assurance required:
Strategic Director for Social Services and Housing – agreed action plan has been incorporated in, and is monitored and updated through, the service planning and staff development framework

10.5 Benefits Fraud Inspectorate (BFI)

The Housing Benefit Service is subject to inspection by the Department of Work and Pensions through the BFI. Assessment is made against a wide range of performance and security standards which have been laid down by the BFI, and an action plan for moving closer to full compliance has been agreed and is periodically monitored and updated.

CONTENTS

2. Prioritisation and planning processes

5. Procurement strategy

7. Financial arrangement

9. Human resources issues

2 Prioritisation and planning processes

4.4 Information Management

5 Procurement strategy

7 Financial management

9 Human resources issues