French theologian Henri de Lubac once said: ‘Habit and routine have an unbelievable power to waste and destroy.’ This is particularly so in large organisations. Bad habits can become part of the body’s cultural fabric leading to dysfunction. In private businesses, this may reduce profits or lead to insolvency. But for local authorities, it is the tax-paying public who suffer.
Which is where external audit comes in. For by section 24 and schedule 7(2) to the Local Audit and Accountability Act 2014, an authority’s external auditor ‘may make a written recommendation to the authority’ so that the recommendation can be considered in accordance with the schedule 7 provisions. For the authority concerned, ‘public interest’ and other corporate governance reports can provide the necessary organisational shock to catalyse change. But for the rest of local government, the reports can provide valuable corporate management lessons to help keep the authority properly functioning.
A recent example is a Lessons Learnt Paper (LLP), issued on 16 May by independent monitoring officer (IMO) Quentin Baker. This followed a section 24 direction to Thanet District Council (TDC) by external auditor Grant Thornton. The auditor’s statutory direction made written recommendations addressing ‘inadequate arrangements in governance in responding to whistleblowing, grievances and disciplinary processes, with the direct financial costs adding further pressure to a fragile financial position’. The auditor’s report had referred to eight reports by six external independent reviewers in the preceding two and a half years. The council reacted by unanimously accepting the auditor’s recommendations which can be viewed at Appendix B to the LLP (tinyurl.com/2y6wy4vv). Paragraph 1 of Appendix B required an experienced IMO (among other things) to prepare a ‘lessons learnt report collating themes and recommendations from all externally commissioned reports and any other appropriate evidence’. Baker was appointed IMO on 12 December 2021. His LLP governance review focused primarily on circumstances and events from early 2019 to December 2021. He indicated that this ‘chapter in the life of TDC is best characterised as a period of disintegration/absence of good working relationships between the most senior officers in the authority resulting in collateral damage and dysfunction affecting the wider officer group and councillors’. The LLP indicated ‘a deep-set and persisting problem in the governance of TDC which has its roots in the leadership and culture of the organisation’.
The LLP adopted the following good governance definition/benchmark: ‘Organisations that have good governance use clear decision-making processes, behave openly by reporting on their activities, actively engage with their stakeholders, effectively manage the risks they face, and take responsibility for controlling and protecting their assets, including their reputation. Each of these areas of governance activity contributes to an organisation’s success.’ Baker found that TDC had, to a greater or lesser degree, underperformed against all these facets of good governance. He also pointed out that his governance review highlighted a ‘lack of grip or focus on governance by the CMT [corporate management team] who were pre-occupied by their internecine dispute’. The relationship between the CEO and council leader (‘often a key determinant of the wider success of the authority’) lacked trust and mutual respect. The key concerns identified included: serious relationship breakdown in the four senior officers comprising CMT; lack of appropriate and lawful processes for dealing with grievances and disciplinary matters involving chief officers; failure to manage whistleblowing cases, grievances and disciplinary cases and their outcomes promptly and systematically, and failure to involve councillors at an appropriate stage and/or with sufficient detail of information.
Among the starting point recommendations for improvement in the LLP (not an exhaustive list) were: to review the TDC constitution (including the member officer protocol and scheme of delegation); to restructure CMT to include at least one additional corporate director including responsibility for HR; to appoint the Local Government Association or another body to lead development work and team-building and in understanding the different roles and responsibilities of officers and members; to institute a coaching and mentoring programme for CEO and directors; to introduce regular staff survey and other staff feedback forums; to review TDC’s HR resource to ensure fitness for purpose and to establish an independent Assurance/Assistance Panel comprising: (i) an independent: financial officer (conducting functions under section 151 of the Local Government Act 1972 (LGA 1972)). This is a duty to arrange for the proper administration of financial affairs and to arrange for an officer so responsible; (ii) an independent monitoring officer (responsible for legal, administrative and corporate propriety per sections 5 and 5A of the Local Government and Housing Act 1989 – LGHA 1989) and; (iii) an independent head of paid service (per section 4 LGHA 1989). The full LLP is worth perusing and many authorities will recognise at least some of the areas highlighted in their own organisation.
Another report worth looking up is the Independent Governance Review by Solace in Business into Northumberland County Council (NCC) (February to May 2022). This (among other things) found that: ‘NCC is currently operating in a dysfunctional way: the behaviours and practices observed and documented fall well below good or acceptable practice and are preventing the effective transaction of business.’ NCC therefore needs a ‘fundamental reset to establish an appropriate operating model and clear working rules for both Members and officers.’ The external auditor had also considered statutory action. Local authority monitoring officers are well positioned to highlight corporate governance failings. For it is obviously more desirable and less painful for authorities themselves to recognise and effectively act on any governance dysfunctions than to be subjected to formal statutory action.
Nicholas Dobson writes on local authority, public law and governance
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