Council making progress after governance failures, says watchdog

A special inspection into a local authority that developed “fundamental” weaknesses in corporate governance has found that the council is improving its performance.

In a report the Wales Audit Office concluded that a combination of weaknesses at Caerphilly Council “inevitably led” to the governance failings.

It added that whilst the authority was making encouraging progress in improving its governance arrangements, it was too early to conclude whether these improvements could be sustained.

The report, which can be viewed here, found that:

• The tone at the top of the organisation had changed with the appointment of a new chief executive in September 2010. “The council became more action oriented with a greater risk appetite and pressure for an increased pace of working.”
• Key governance arrangements were not reviewed or changed to reflect the change in tone at the top of the organisation and the increased operating pace. “The potential for conflicts of interest inherent in the new structures were not considered and key statutory officer roles did not have sufficient profile or influence.”
• A number of decisions were taken by the council which did not follow appropriate governance procedures. “There were also weaknesses in the way business cases were prepared to support decisions and in the transparency and comprehensiveness of reports prepared to support decisions.”
• Weaknesses in the council’s internal challenge functions were present throughout the relevant period of time. “In particular, its risk management arrangements were weak, the Internal Audit service was not used effectively, scrutiny arrangements were not sufficiently effective and there were weaknesses in performance management arrangements.” This increased the risk that governance failures would not be prevented or detected.
• There continued to be some uncertainty amongst officers as to when to consult members and when officers could make decisions. The council’s constitution still lacked clarity over decision-making processes. “Whilst training is taking place on report writing, the council has not yet embedded a cultural shift that ensures that transparency, comprehensiveness and balance of reports is maintained over time.”

The Auditor General for Wales, Huw Vaughan Thomas, had announced the special inspection in September 2013.

This was after a public interest report issued by an appointed auditor that highlighted failiures in governance and inadequacies in the processes followed by Caerphilly to set the pay of chief officers.

The Appointed Auditor had concluded that the council had acted unlawfully with regards to the pay-setting process.

Caerphilly is undertaking its own disciplinary investigation, but this is on hold pending an investigation by Avon and Somerset Police.

In its special inspection report the WAO said the council had clearly recognised and was embracing the need to change and improve its governance arrangements.

“There is a strong determination amongst members and officers to ensure governance arrangements are working properly and to re-build the council’s credibility,” it said.

The establishment of an Improving Governance Programme Board is among the actions that the authority has undertaken.

However, the WAO said that risk management was not yet successfully embedded across the council. “Whistle-blowing procedures are out of date and do not reflect the most recent legislative changes. Internal audit is not used effectively to provide assurance over the major risks facing the council. In addition, identified actions to improve its HR functions and performance management are yet to be implemented.”

On the council’s chances of sustaining the improvement, the report pointed to the appointment of a former chief executive on an interim basis as giving reassurance that the stability previously enjoyed at Caerphilly could be attained.

Changes have also been made that have strengthened the Corporate Management Team and the roles of statutory officers.

The WAO reported that there had been a “healthy focus” in the council on getting on with providing services and dealing with normal business.

But it said that future changes were inevitable following completion of the police investigation. “It is critical that the council ensures that the improvements in governance already made or planned are implemented fully and are robust enough to be sustainable for the future.”

The WAO made eight recommendations for improvement. These included a call for Caerphilly to clarify “in an easily understandable way”, the governance and decision-making roles of: the Cabinet; chief executive; Corporate Management team; corporate directors; scrutiny committees; and the Audit Committee.

The Auditor General for Wales said: “Caerphilly Council is already taking steps to address fundamental weaknesses in governance. It now needs to continue this road to recovery and apply the same levels of energy to improving other aspects of its Corporate Services. 

“Further changes are likely following the completion of the police investigation. The Council needs to ensure that the changes it is making, and planning, are robust enough to be sustainable for the future.”

Caerphilly said it welcomed the WAO’s findings. 

Cllr Harry Andrews, Leader of the council, said: “We welcome the report and it is pleasing to note that the Wales Audit Office have clearly stated that improvements have been made. 

“That said, we also recognise that there is still much work to do and we will act on the recommendations contained within the report and continue to build on our positive progress to date.”