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Introduction to Corporate Governance
1.1     What is Corporate Governance?
Quite simply it is best management practice, it is about knowing what is going on in your section/directorate, how to capitalise on best practice and how to recognise when things are going wrong and what to do about it.

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1.2     Statements of Internal Financial Control
The IG/ACE as agency accounting officer is required to sign a Statement of Internal Control at the end of each financial year in effect confirming the above. A copy of the type of control statement that the IG has to sign can be seen at Annex C (details are given in parts 5 and 6 as to Section Heads and Directors obligations).
1.3     The Aim of this Manual
‘To bring together all of the threads (risk management, risk registers, Statements of Internal Control, audit practice etc) which contribute to the totality of good corporate governance.’
Each thread is interlinked, Section heads will not be able to sign off their Statements of Internal Control without having made a risk assessment, have compiled a risk register and ensured that all identified key risks have been adequately controlled. Audits being but one of the many controls to be utilised.  
Carrying out good corporate governance should, if sections are managed well now, involve little or no extra work; moreover it involves a refocusing of limited resources concentrating on the key risk areas. This manual aims to explain why this should be and how it can be achieved.
2.0     The Role Of the Corporate Governance Group
2.1     The role of the Corporate Governance Group
The Corporate Governance Group was formed to
  • To provide a forum for discussion for those directly involved in The Service’s corporate governance review procedures and managers of The Service’s key risks.
  • To enable The Service to best direct resources in the areas of risk management and audit.
  • To ensure that The Service’s corporate governance and risk management practices remain focussed, relevant and in accordance with the views expressed by the Directing Board and Audit Committee.
2.2     Accountability
  • To report to the Directing Board (annually) and Audit Committee (at each meeting) on The Service’s corporate governance practices
  • To maintain and manage The Service’s Risk Register, including the appropriateness of risk control strategies
  • To plan and coordinate annual and long-term programmes for corporate governance review
  • To deal with matters referred to it by the IG/ACE, Directing Board or Audit Committee
  • To advise on/agree HQ Directorates and OR Ops risk registers and management thereof, including the appropriateness of risk control strategies
  • To receive reports from The Service’s own corporate governance review team on the corporate governance reviews carried out

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3.0    The Role of Internal Audit
Internal Audit are required to prepare an audit strategy which provided the IG as Agency Accounting Officer with an objective evaluation of the effectiveness of risk management, internal control and corporate governance arrangements.
3.1     Audit Focus and Approach
The focus of the work carried out by Internal Audit is to provide independent assurance to the IG on the following aspects of The Services work:
  • Risk Management and Corporate Governance.
  • Financial Control
  • Project and Case Management Processes
  • Other Significant Processes
Areas selected for Internal Audit review are based upon the following criteria:
  • Areas identified and agreed with senior management as high risk or medium risk
  • Key controls or controls processes which address a number of key risks
  • Areas that have not been subject to Internal Audit review in the last year. Except areas where significant control weaknesses have been found.
3.2     Example Audit Plan
The following example audit plan provides guidance as to the timing and scope of the ‘top level’ audits to be carried out by Internal Audit. This provides assurance to the IG on a number of wide ranging areas throughout HQ sections.
Audit Initial Scope/Processes to be audited Auditor Days Quarter

 

 

 

 

Corporate Management and Control

Review of the Corporate Governance Process. It will satisfy the NAO that appropriate Corporate Governance processes are followed and allow the Internal Control Statement to be signed

 

30

 

 Q1

 

 

 

 

Finance & Accounting

Review of key financial controls. To cover high level Resource Budgeting and financial control, procurement, payments and receipts processes

 

30

 

Q3

 

 

 

 

Central Accounting

Review of the key financial controls in the banking of ISA monies, as highlighted in the NAO Management letter for 2001

 

10

 

Q3

 

 

 

 

Information Systems (1)

Review of the Project Management for ReFIT Project including attendance at Project Board meetings

 

20

 

Q1 to Q4

 

 

 

 

Information Systems (2)

Review of the Key controls over the IT system

20

Q2

 

 

 

 

Human Resource Management

Review of the key controls over the pay and grading systems, possibly including pay and pensions.

 

20

 

Q3

 

 

 

 

Policy

Review of the key controls over policy setting in relation to the Enterprise Bill

10

 

Q4

 

 

 

 

Marketing, Media and Publicity

Risk Workshop on The Service’s marketing, media and publicity processes e.g. in respect of the Enterprise Bill

 

0

 

Q4

 

 

 

 

It should be noted that this only covers broad areas and processes within The Service. At Directorate and section level each of the key business processes should be subjected to audit. Section Heads are required to produce an annual audit plan for their respective sections in agreement with their Director, a copy of which must be placed on the section’s Intranet site.

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4.0      The Role of The Director
The role of the director is very clearly set out in the statement of Internal Control (see Annex A)
4.1     Directors Requirements
  • Each director is required to ensure that the section has the necessary controls in place and to sign a Statement of Internal Control at the end of each financial year to that effect.
  • Directors must have an audit plan for the directorate (see Annex B for draft OR office annual audit plan – for information)
  • Directors must ensure that each section has an audit plan in place by the beginning of each new financial year
  • Directors must review audit performance against each Section Heads audit plan at least three times a year
  • Directors must ensure that Section heads sign a statement of Internal Control at the end of each financial year
4.2     A Multi faceted role
The Director’s role is a multi faceted one. To receive review reports at least 3 times a year from their section heads on their section’s corporate governance practices and to place reliance upon them if they can assure themselves, to an acceptable degree, that they are well founded by compliance testing either alone or through external verification as part of the Corporate Governance review process. In particular throughout the year Directors should ensure that the section head is undertaking work that will enable the Statement of Internal Control to be signed off.
4.3     Active Reviews
Directors need to actively review the Section Head reports which will include any compliance auditing and providing good advice and guidance on any areas to be addressed including the dissemination of good practices to be considered by other sections and to meet the requirements set out in part 7 of this manual.
4.4     Communications and Welfare
Communication is seen as being of vital importance within and outside of the directorate. Directors will be expected to undertake a yearly ‘communications and welfare’ audit of staff within their directorate.
If a problem cannot be addressed locally it should be communicated in a timely manner to the appropriate HQ section or DIG.
Whilst it is not the intention that Directors should check up on every aspect of a sections performance and controls Directors must review reports with a reasonably critical eye and act accordingly.

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5.0     The role of the section head and local management
The Section head and their local management team play an important part in ensuring that the IG is able to sign his statement of Internal Control at year-end, the IG and DIG (HQ) placing reliance on the Directors and Section Heads own statements of Internal Control.
5.1     Section Head Requirements
  • Section Heads must ensure that each section has an audit plan in place by the beginning of each new financial year
  • Section Heads must review audit performance against each Section Heads audit plan at least three times a year
  • Section Heads must ensure that they sign a statement of Internal Control at the end of each financial year
5.2       Bold Decisions
Section heads in agreement with their directors may at times need to take bold decisions, which will differ according to circumstances, about things which must be done, those which ideally should be done but which may be governed by available resources and those which it would be desirable to do given the resources but which are of relatively little importance.
Section heads will not be required nor indeed expected to personally have checked or ensured that every ‘t’ had been crossed or every ‘i’ dotted. Section heads and directors will be required however, to promote and engender a working culture of both accountability and responsibility -removing the blame culture.
5.3       Staff
Staff should be encouraged to take sensible and well judged risks, within set parameters according to their role, and not to be criticised the first time a mistake is made. Occasional error is inevitable; a pattern of error, repeated by the same person or in the same way is not acceptable. Proper managed application of audit practice and risk management should minimise the possibility of this.
5.4       A Consistent Approach
For reliance to be placed upon a section’s own corporate governance practices, sections need to aim for consistency in what they do but it is recognised this is not always possible due to the diverse nature of the work they carry out and have leeway to do more, not less, if they feel it appropriate to do so.
5.5       Audit Planner
The proforma statement of internal control, guidance for which is found at part 9, must be completed on time. Completeness, consistency and clarity of answers are essential.
Finally it should not be forgotten that corporate governance is not just about finding fault, it is about recognising best practice, rewarding best practice and ‘spreading the word!’

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6.0    Local Assurance and Audit Plans
6.1     Introduction
This manual covers only the areas common to all Sections and Directorates. Section heads should evaluate which are the key processes within the section and devise an audit plan to ensure that that these processes are effectively managed and controlled.
If you need guidance on what a business process is please contact Tony Kisiel in Finance and Planning who will be able to assist you in the production of your audit plan.
6.2     The Audit Plan
This range of internal checks of key processes are to provide assurance to the Director on the range and scope of controls in place within the section, individual section audit plans and timings are to be produced by the Section Head and agreed, approved and signed off by the respective Director.
Your finalised plan should then be submitted to Tony Kisiel in Finance and Planning for collation and distribution to the Corporate Governance Group members. The plan must be produced at the same time as your business plan and attached as an annex to it as well as being placed upon your intranet site.
6.3       IiP
As an IiP accredited organisation Section heads should ensure that the section adheres to the principles and has in place an effective induction programme, that pre and post course evaluation takes place and that members of the management team can evidence their commitment to training and development of their staff.
6.4       Training and Development
It is important for Section heads to assess the training and development needs of staff at the commencement of the year or as early as possible to ensure that sufficient monies are available within Section/Directorate budgets to ensure that staff training needs are met.
6.5       Audits
Staff management audits have been timed to coincide with particular milestones during the year. The Directors will audit PARS in May of each year (see 7.4).
With regard to PPP’s, come September the first PPP review should have been carried out (during August) the Section Head is to then ensure that these PPPs support the achievement of the Sections Business Plan objectives and the audit plan.
A check as to the adequacy of the review would be sensible and if failings are identified there is ample time in which to make amends and so possibly avoid an appeal of the forthcoming PAR. 
6.6       PPPs
Directors will notify Section Heads of how many and which of their staff’s PPP’s to audit and as such will enable a sense of independence to be maintained. It is envisaged that PPPs will be chosen to cover 2/3 staff reporting to each line manager within the office (if practical).
6.7       Health & Safety
The form is based on that completed once a year by PSP – just slightly shorter. Sections may feel that with PSP reviewing practices once a year the form produced here is overly long, sections will have to make a judgement if that is the case. Irrespective of that sections should undertake the ‘visual inspection’ part of the form and this should be factored into your section’s audit plan
6.8     Public Service – Charter Standards
As a holder of the Charter Mark award The Service needs to be sure that HQ Units are meeting our own Charter Standards. Section heads should undertake an audit of performance and monitoring of performance at least two times a year.

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7.0     Directorate Audit and Assurance
As highlighted in the Statement of Internal Control at annex A, the Director is not expected, nor should they re-audit everything audited by the Section Head and their team.
7.1     Carrying out Audits
However as well as relying on reports from the Section Head the Director must also carry out a percentage of audits relating to directorate processes (where appropriate).
7.2     Consistency in Approach
Directors will be expected to audit the same processes audited by the Section Head in the Sections Audit plan. Whilst this may seem laborious it is essential to ensure that both the audit process is tested as well as the judgement of the Section Head and their team in their audit findings.
7.3     Auditing Independently
When auditing processes the Director should audit independently of the findings already noted by the Section Head, only once the Director has completed the audit should the findings be compared.
The Director should also comment, additionally, on the way the audit forms have been completed, i.e. have they been completed, if so are they wholly complete as far as possible, are they consistent and legible.
7.4     Staff Issues
Directors will not be expected to audit staff related issues in the same was as Section heads and their teams. Directors will be expected to audit a number of PARs in May of each financial year (before they are forwarded to HR).
In conjunction with placing reliance on the audits carried out by the office Directors will be expected to carry out a ‘Communications and Welfare’ audit half way through each financial year. This will ensure that staff are satisfied (or not satisfied but for no good reason) with the staff appraisal system, that they are being adequately trained, that the office has sound communication processes and that they are being treated fairly.

As the issues being considered are of a more wide-ranging nature and because some staff will be more able to give replies of use than others, the audit sample will again be determined independently by directors. All grades of staff will be included, as will differing levels of experience.

7.5     Section Head Accountability
It should also be noted that Sections Heads commitment to Corporate Governance should be reflected in their PPPs and objectives set for the achievement of their audit plans

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8.0     Risk Register Reviews
8.1     The Risk Register
Each section must maintain a current risk register. Guidance on risk registers has been issued separately.
8.2     Register Review
It is the responsibility of each Section Head to ensure that the register is reviewed every 6 months as part of the business planning cycle.
8.3     Risk Register Review checklist
A proforma risk register review checklist is provided at proforma A.
Directors should be satisfied that the review has been carried out in a meaningful way and an updated risk register, agreed with them, produced if appropriate.
8.4       External Verification of Risk Registers
At least once a year the Corporate Governance Group will review each sections top-level risk.
8.5       Updating the Agency Risk Register
A copy of section risk registers must be forwarded by e-mail to Tony Kisiel in Finance and Planning section every six months.
An accompanying narrative must be provided to support the downgrading or removal of risks or the addition of any new risks. This is to enable the Corporate Governance Group to assess whether Agency Top Level risks should be amended.

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9.0            Guide to using Corporate Governance Checklists
9.1                Index of Audit work (Proforma B)
The index  should be kept at the front of the folder where all audit work should be located. Audit work must not be kept by individual section members but filed in one place
9.2                 HQ SECTION HEAD STATEMENT OF INTERNAL CONTROL and Directors Review checklist (proformas C and D)
The guidance below is to be read in conjunction with the Certificate of Internal Control and Directors Review Checklist and will aid in their completion. Whether or not questions require a YES/NO answer, examples of good practice and/or explanations of what has not been done but will be done within a given timescale should be given in the comment column.
9.2.1            Organisational Framework
9.2.1.1          Roles and Responsibilities
This section deals with ‘how do your staff know what to do?’ i.e. are they adequately trained, if so how, what instructions are there available to them, if so where.
For example there are many procedural instructions ranging from guidance in the technical manual to simple at the desk instructions and idiot guides on how to carry out a specific role or task. Only list those your staff use or have access to. Likewise there are numerous ways in which staff are trained to do their job. Either centrally driven, as with NVQ’s in customer service or audit or ad hoc in the office all of which should be in the sections training matrix and PPPs.
It should also be noted that there cannot possibly be instructions to cover every aspect of every job, this is particularly the case in HQ where much project and liaison work is undertaken. However, written objectives, notes of meetings etc should be kept to ensure managers can determine outputs achieved and ensure that others could take on that role when necessary.
9.2.1.2          Reviewing the effectiveness of processes and systems
This section asks whether systems of internal control (such as management checks, audits etc) and the underlying processes within the section are monitored (if so how) and whether any weaknesses were found. Any improvements made/action plans agreed as a result should be listed/annexed to the checklist.
9.2.1.3         Reaction to weaknesses
Once weaknesses have been identified this section asks how were they addressed, i.e. how and by whom were staff informed, examples should be listed, what remedial action was taken, if any and if none why not.
9.2             Accountability for section performance and resources
9.2.1          Internal control environment
This section covers a wide area of responsibility. The first five questions relate to how you assess and review risks and the controls in place to enable the section to achieve its objectives. The risk management workshops will provide some evidence, as will other forms of audit etc
The next three questions relate to section and individuals’ performance. There is an abundance of management information you can list as well as referring to the staff appraisal process. Specific examples should be given
The remaining questions relate to purely financial matters, desk instructions together with any section notices can be given as examples if applicable.
9.2.3             Business Plans and Budgets
9.2.3.1          Planning systems
This section should detail how your business plan and budgets are agreed, reviewed and disseminated to staff. Evidence may come from discussions with the Director and/or a section notice/e-mail to show all staff are aware of the business plan and budgets.
 9.2.3.2         Monitoring
Having agreed the business plan and budgets this section asks for evidence to show that actual performance has been assessed against the business plan and budget, and if action was necessary as a result what it was, e.g. how were matters managed to ensure that timeliness targets within the section continued to be met despite rising inputs.
Internal reporting should be interpreted as management information produced within the section, such as local database reports, prepared budget spreadsheets etc
9.2.4              Reliability of Management and Financial information
9.2.4.1       Internal Reporting
This section asks you how you know the management and financial information internal to your section is accurate, or in the instance of Finance and Planning that provision of The Service’s financial information is accurate
Management information should include (if appropriate), budget monitoring spreadsheets, internal performance statistics for the section, charter standards etc.
9.2.4.2        External Reporting
This section asks for your views on information provided about your section by your Director and HQ. List comments as appropriate. If information received has not been sufficient/accurate comment as to how and when the issue was raised and eventually resolved if that is the case.
9.2.5           Standards of Behaviour
9.2.5.1         Leadership
Evidence can be provided of any workshops held or minutes of relevant meetings held
9.2.5.2         Regularity and Propriety
The Service provides discipline and grievance procedures as well as a compulsory gifts and hospitality register. List any other local activities here
9.3                 Staff Management (proformas E,F & G)
Section heads and their teams will be expected to complete forms for PPPs and Training and Development, Directors will audit the PARs. Mention has been made in part 7 of this manual, local assurance and audit plans as to the frequency and timing of such audits.
If there are any concerns as to the findings of such reviews throughout the year, HR can be contacted for advice on standards of reporting If it is a grievance or discipline matter Inspectorate can be contacted for advice
9.4                  FIRE, Health and Safety (proforma H)
PSP are responsible for all aspects of Heath and Safety throughout 21 Bloomsbury Street and Ladywood House, they will bring to Section heads attention any possible areas for concern or things that should be addressed locally, these should be actioned upon and this manual updated accordingly
9.5                 Public Service (proformas I,J &K)
This area is split into two parts, Charter Standard Compliance generally which should be completed by each section and a review of the reception areas in London and Birmingham. PSP should agree with a third party/ other section to conduct this audit on their behalf.
9.6                Communication and Welfare (proforma L)
This form should be sent to staff (nominated by Directors) once a year by the director. In the main it deals with communication issues, in the directorate, in the section and on a more personal level. Effective communication is essential to the successful running of any section or directorate
There are some questions that may pose a greater degree of difficulty for Directors when they come to assess the completed forms, such as relating to ‘staff feelings and perceptions’ .If there are any concerns as to the findings of such reviews, the Inspectorate should be contacted for advice.
9.7                 Record of Audit Work (proforma M)
A ‘Record of audit work’ form should be completed after each ‘batch of auditing’. This is to enable the findings of such reviews to be bought together more easily. It must be remembered that not only the negative be highlighted, the positive must also be highlighted and best practice praised and disseminated
9.8                 Review Assessments Summary (proforma N)
This form is to be completed by the Director to bring together the findings of their reviews to compare performance across the directorate over a range of activities and again to highlight both good and not so good practice.

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