Good Governance - Effective Relationships between Departments and their Arm's Length Bodies

Today, John Dowdall CB, Comptroller and Auditor General (C&AG), produced a report aiming to promote good governance arrangements and effective working relationships between Government departments and their Arm’s Length Bodies (ALBs).

Key Findings

In recent years there has been an increasing emphasis on strengthening corporate governance in the public sector as a means of improving the capability of public bodies to deliver high quality public services. The Department of Finance and Personnel has issued guidance on how government departments could report on their corporate governance with effect from 2006-07. This notes that a new area of reporting is how they manage the relationships with the Arm’s Length Bodies (ALBs) with which they operate.

The need to promote and encourage good corporate governance within departments and ALBs in Northern Ireland has been underscored by several high profile cases of weaknesses which became the subjects of reports by the Committee of Public Accounts.

While much will have been learned from these cases and taken into account by departments in their governance arrangements, the C&AG considered that it was an opportune time to review how the arrangements for corporate governance are working between departments and ALBs in Northern Ireland and to draw broader good practice lessons for the future.

The key good practice principles emerging from the C&AG’s report are:

Building Structures

Departments are responsible for establishing and documenting governance arrangements with their ALBs and should work co-operatively with them in setting objectives, agreeing targets and in other strategic management decisions. Departments must exercise an appropriate and effective level of oversight and ensure that their ALBs have in place necessary financial and other management controls and procedures.

Managing Risks

Departments should have in place structured processes for identifying and managing risks associated with their sponsorship responsibilities and these processes should be reviewed regularly. Departments should develop a strategic view of risk and a co-ordinated approach to risk management. They should identify and evaluate any shared risks with their ALBs and how these should be managed.

Safeguarding Accountability

Departments need to have in place effective liaison, reporting and monitoring arrangements with their ALBs. ALB Boards, particularly non-executive members, have a crucial role in accountability and should be apprised of their need to provide a constructive challenge function. Both departmental and ALB Audit Committees should be an integral part of accountability arrangements through their responsibility to provide an independent challenge to the executive and to oversee risk and financial management, probity and good governance in the ALB. The Internal Audit function can be used to provide assurance on risk management and in ensuring high standards of accountability.

Case Illustrations

The C&AG’s report includes a series of 16 case illustrations. These provide evidence of where particular elements of the good practice principles are being applied by departments in their relationships with their ALBs. For example:

  • The Department for Employment and Learning is finalising a new Management Statement with the Labour Relations Agency. They are using a template drawn up by the Department of Finance and Personnel which deals with areas such as the legislative basis for the Agency; its functions, duties and powers; its aims and objectives; and planning, budgeting and control arrangements.
  • The Department of Enterprise, Trade and Investment has introduced a number of measures to improve risk management. For Invest Northern Ireland, this includes agreeing the annual Internal Audit programme and receiving quarterly assurance statements from its Chief Executive that there are no issues of concern regarding performance or financial management.
  • The Laganside Corporation, an ALB of the Department for Social Development, is being dissolved. The Department has established arrangements to ensure that this happens in an orderly and controlled manner and that the joint risks are managed co-operatively.