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Interview with Alison Kelly, Strategy Advisor at the Audit Commission

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The Audit Commission is the primary auditor of local public services in England. What makes it special from Audit Courts in other countries is that it has introduced a new framework which will provide a snapshot of how effectively local partnerships are working together to deliver local people's priorities. This is referred to as Comprehensive Area Assessment. As Alison Kelly, the Strategic Advisor on Governance at the Audit Commission reports the Audit Commission has incorporated good governance in its key strategic objectives.




Elke Loeffler interviewed Alison Kelly on 18 March 2009 in order to learn more about the approach of the Audit Commission in assessing good governance

Participants


Alison Kelly
Audit Commision


Elke Loeffler
Governance International



Interview

 

Elke Loeffler: How did you become involved in public governance issues?

Alison Kelly: I think that ordinary people can get involved in the governance of local bodies to make them better. I personally got involved in governance when I stayed at home being the mother of three children. I volunteered to serve on the Board of Governors of the nursery school which my children attended. Within six weeks I became the chair of governors.

When I wanted to find out about my tasks and responsibilities nobody could give me clear guidance, so I ended up making a visit to the local authority where I still did not get a satisfactory answer. However, I was invited to help them to produce a range of guidance about things you need to know as a parent governor. Later I worked with the central government and Open University to develop training and guidance for school governors. When I sought full time employment, I was recruited as a chief officer in a London borough to deliver local management of schools. I ended up representing school governors at the Chartered Institute of Public Finance and Accountancy (CIPFA) working group which oversaw a huge shift in control of resources from councils to schools. When the Audit Commission discovered my passion for governance, I was asked to work with the Audit Commission to increase our impact on public governance.

 

Elke Loeffler: How does the Audit Commission get involved in governance issues?

Alison Kelly: Originally governance was mainly about counter-fraud and control of proper use of public resources which is the core business of the Audit Commission. In the late 1980s malpractice by members of Parliament and the government hit the headlines. This led to the establishment of the famous Nolan Committee on Standards in Public Life. The key recommendations of this committee introduced a Code of Conduct for local authority members. This shifted attention towards ethical behaviour and values. The Audit Commission was already looking at management arrangements and behaviours in public bodies. But the increased national debate on ethical governance and our increased understanding of the issues sharpened our focus. For example, we developed an ethical governance diagnostic to add to our existing portfolio of governance tools. However, it was only when the Independent Commission for Good Governance in Public Services developed an overarching new governance framework, the Good Governance Standard, that we had a common set of governance standards for all public services. Therefore, we have adopted the Independent Commission’s concepts of governance. All our governance work, whether assessments of individual public organisations or partnerships, or advice and assistance work is based on their analysis.

 

Elke Loeffler: What is your definition of good governance?

Alison Kelly: My favourite definition of governance is a very simple one which says that governance is about ensuring that the organisation or partnership is doing the right things, in the right way, for the right people in a timely, inclusive, open, honest and accountable manner. This definition has been adopted by the Audit Commission. This means that governance goes beyond a single organisation to extend to partnerships and geographical areas. At the same time, governance goes beyond direction, controls and accountability to include cultural and behavioural standards which people working in public agencies are expected to follow. This definition has as its core the principles of public life devised by the Committee on Standards in Public Life, back in 1997.

 

Elke Loeffler: How do your staff assess conformance to good governance?

Alison Kelly: As I said before our key business is to monitor proper use of public resources in local authorities, primary care trusts, police and fire. The Audit Commission specifically focuses on governance arrangements in our annual assessment of primary care trusts and local authorities, including fire authorities, police authorities, local councils and local probation boards as part of reaching our overall judgment of the organisation. Our Audit Code of Practice requires auditors to give a conclusion as to whether the audited body has put in place proper arrangements to secure economy, efficiency and effectiveness in the use of resources. The Code defines such arrangements as comprising the audited bodies’ corporate performance and financial management arrangements, and lists the elements of these. Local authorities are themselves required to report on these corporate governance arrangements in their Annual Governance Statement. The Code thus reinforces the importance of good governance reporting. 


In addition to this work, we have a number of governance tools which we use with public bodies, either because they want to know how well they are doing and how well they compare to other public bodies, or we consider their arrangements could be a risk.  For example, one of our tools looks at the governance of equalities, diversity and human rights, another at culture and behaviours, another at ICT fraud and abuse.  We have an on-line survey, audit of understanding and arrangements and workshops to explore the issues in more depth and agree a work plan. We have done this additional governance work with well over 500 public bodies in the last three years.

 

Elke Loeffler: Are there circumstances in which good governance principles need to be traded off when they cannot be achieved simultaneously? For example, it is often said that user involvement prolongs the decision-making process and has a cost which local authorities may no longer be able to afford in the recession. What guidance do you give on making these trade-offs?

Alison Kelly: I cannot see such a trade-off. My view is that public organisations can’t afford not to have good governance. The current pressures on public bodies as a result of the economic situation is to provide even better value for money and to increase services to the community.  Good governance brings a focus on what matters most and helps service to improve delivery through open accountability and transparency. 

If you engage with people you get a better idea of their needs and expectations so actually consultations can help to save money. I will give you an example from my own personal experience.  My own mother has dementia and attends a day centre. She could no longer use public transport and she was being transported by taxi to the centre. After consultation with me and better understanding of her needs the council was then able to send the day centre bus to pick her up – a huge saving of public money.

 

Elke Loeffler: The Audit Commission switched from the CPA to CAA this year. Could you briefly explain the key changes involved?

Alison Kelly: I will try to explain the key change in a simple way: The previous Comprehensive Performance Assessment focussed to a large extent on whether local authorities had the arrangements in place to bring about service improvements. The Comprehensive Area Assessment* is a big step forward as it focuses on outcomes and the impact of public agencies on the well-being of people in the area, rather than on processes. It is also not so much focussing on past performance as assessing future prospects in an area.  Moreover, we think it is very important that we report our assessments directly to the public in straightforward language.

 

Elke Loeffler: What is the status of governance in the CAA?

Alison Kelly:As part of CAA, annual organisational assessments will be undertaken. These include a review of the governance arrangements of individual public bodies. These assessments inform our overall judgement of how well local priorities express community needs and aspirations and how well the outcomes and improvements that are needed are being delivered or are likely to be achieved. 

As the area wide assessment focuses on outcomes and not on processes we don’t automatically look at governance arrangements in for example in local partnerships.  However, if we consider that the prospects for future improvement of agreed local priorities in the area are poor we then consider why this might be.  One of the key risks could be poor governance.  We could then, in exceptional circumstances, undertake an assessment of the local partnership’s governance arrangements.

 

Elke Loeffler: What should be done to give governance more weight in the public sector in the UK? Do you think we need governance managers or a lead officer for governance, as the Audit Commission itself has?

Alison Kelly: One new development is that we are moving our focus away from checking whether practitioners are doing the right thing to encouraging governors to play a stronger role in public organisations. For example, the Audit Commission has developed a self-assessment tool for the boards of local children’s trusts to help governors to assess whether they are doing a good job**.

So, to come back to your previous question on the role of citizens in evaluations, there will be questions auditors and assessors should be asking and other questions which are better asked by ordinary people who have a stake in a particular agency or partnership.

But I also observe another change which indicates to me that the profile of governance issues in public agencies in the UK is rising. According to our Code of Audit, all local authorities need to produce a statement of internal control which has been typically the responsibility of the director of finance. In some local authorities such as Birmingham City Council this role has now been widened and is being undertaken by the recently appointed Corporate Director of Governance – previously the council’s chief legal officer.  It will be interesting to see whether the role is undertaken in other councils by Corporate Directors of Performance or Delivery, for example, because improved performance and delivery is one of the key outcomes of effective governance.

 

Elke Loeffler: What do you think will be the key governance issues of the future?

Alison Kelly: Obviously, in the recession there is the danger that organisations take short-cuts but we have a lot of evidence that improvements are not sustainable without good governance. The current financial crisis provides just one example of this. Local authorities invested money – over £950 million – in major Icelandic banks in recent years. When the Icelandic banking sector failed in autumn 2008, their accounts were frozen and it is not clear how much of the money will ever be recovered.

Our recent report on local authorities and Icelandic banks*** shows that while officers from the best local authorities proactively sought feedback on treasury management issues, the governance arrangements was generally poor.  A backward-looking annual review of policy and practice is not sufficient to ensure that treasury management functions effectively.

In addition, we found few elected members have sufficient knowledge to enable them to effectively scrutinise or challenge council arrangements. In some local authorities, this meant that officers sought to exclude elected members from discussions. In others, elected members were content to delegate responsibility for treasury management to officers.

Informed scrutiny and timely action, both marks of good governance, might have reduced the risk to many millions of pounds of public money.

 

Governance International is grateful to Alison Kelly for this interview

Literature

 

*See the website of the Audit Commission to learn more about the CAA - click here

 

**Audit Commission (2008): Are we there yet? Improving governance and resource management in children's trusts.  Self assessment tool.

 

***Audit Commission. (2009) Risk and return: English local authorities and the Icelandic banks.

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