What is good governance for local councils and why are auditors interested?

Local councils spend about £40 million of public money each year and it’s essential that councils manage this money effectively.

Good governance and financial management are at the heart of a trusted and effective local council.  They help to safeguard against waste, and other losses, by making sure decisions are made properly and for the right reasons.

Where a council can demonstrate it has effective governance arrangements in place, the local community can have confidence in the council and in the decisions that it makes.

But good governance is not just about transparent and accountable decision-making – it’s also about standards of behaviour in public life.

At the recent One Voice Wales/Society of Local Council Clerks (SLCC) conference – on Strong and Effective Financial Governance in the sector – the Auditor General for Wales highlighted his concerns that auditors continue to find common examples of financial management and governance weaknesses.

He reported that local councils need to address systemic weaknesses in their financial management and governance arrangements. There has been insufficient improvement since his 2009 report – Community Councils: Good Governance – Good Practice – which highlighted common weaknesses in governance arrangements at town and community councils and identified good practice lessons.

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One Voice Wales, the SLCC and the Auditor General share a desire to support councils in improving financial management and governance.  The recent conference is one example of that support, as is the Community Council Money good practice guide and other materials produced and maintained by the Wales Audit Office.

 

Changes to the audit approach

The audit approach in Wales is changing in response to the Auditor General’s concerns and the desire of the National Assembly’s Public Accounts Committee that these matters receive more focused audit scrutiny.

The changes will provide stronger assurance. But, they will also help councils focus on improving financial management and governance arrangements, and increase the public reporting of issues arising from audit work.

How? Well, each year, the annual governance statement will have a small number of ‘themes’ designed to address weaknesses commonly found in local councils. However, these themes are not intended to be a burden and add new requirements to councils. They will actually seek to look at areas where councils should already have adequate arrangements in place.

The audit process is not intended to ‘catch out’ councils. For this reason, the Auditor General will announce the themes for each year during the previous financial year. This will give all councils time to look at how they do things, compare this to good practice and make improvements if necessary.

So, for the audit of the 2015-16 accounts, the themes will be budget setting and monitoring and engagement of internal audit. Auditors will want to see evidence of how the budget is developed and monitored and how the council secured an effective internal audit.

The benefits of improving governance and financial management will outweigh any additional effort local councils need to make and will help to restore the public’s confidence in their council.

About the author:

DeryckOwen_Blog_June2014Deryck is the WAO’s Technical Manager for Local Government and Community Councils. He has worked on community council audit since 1994 and has presented on local council’s governance and financial management at various sector led conferences.

 

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