Review of Governance and Financial Management Arrangements

of the Surrey Hills AONB

Review of Governance & Financial Management Arrangements

of the Surrey Hills Area of Outstanding Natural Beauty (AONB)

Improvement Plan update Dec 2014

Contents

1.Introduction

2.Background

3.Governance Arrangements

3.1.The Constitution

3.2.The Management Plan

3.3.The Structure of Surrey Hills AONB

3.4.The Surrey Hills “Family”

3.5.AONB Board Arrangements

4.Financial Management Arrangements

4.1.AONB Unit Budget

4.2.Funding Arrangements

4.3.Budget Management Arrangements

5.Areas for Improvement

Annex A – People Interviewed and Sources of Information

People Interviewed

Other Sources of Information

Annex B – Membership of Boards/Groups

Annex C – Summary of AONB Unit Budget

Annex D – Areas for Improvement – Proposed Action Plan

1.Introduction

1.1This review was commissioned by Ian Boast, Assistant Director for Environment in July 2014. The scope of the review was to:-

Review the current Governance arrangements of the Surrey Hills AONB Board
Review the current Financial Management arrangements of the Surrey Hills AONB Board
Identify any areas of improvement

1.2The scope did not include a review of Governance or Financial Management arrangements of the three organisations that, alongside the Board, form the Surrey Hills AONB Family.

1.3A recent change in the Chairmanship of the Surrey Hills AONB Board and the appointment of a new Surrey County Council Cabinet Memberfor Environment and Planning has provided an opportunity to review the current Governance and Financial Management Arrangements and identify any areas of improvement for the future.

2.Background

2.1The Surrey Hills AONB is a partnership that sits within the Council’s Countryside Management Service, Environment and Infrastructure Directorate.

2.2The Surrey Hills AONB is one of 37 AONBs in England and stretches across rural Surrey, covering about a quarter of the county.

2.3The Countryside and Rights of Way Act (2000) places a statutory duty on AONB local authorities to produce and review management plans that will formulate their policy for the management of the area.

2.4Each of the Surrey AONB local authorities (see below) has delegated its statutory duty to prepare and keep under review the Surrey Hills AONB Management Plan to the Surrey Hills AONB Board, a joint management committee.

2.5The Surrey Hills AONB Board has been established by the following local authorities:-

Guildford Borough Council
Mole Valley District Council
Reigate and Banstead Borough Council
Surrey County Council
Tandridge District Council
Waverley Borough Council

2.6Defra, represented by Natural England, and the National Trust are co-opted members of the Surrey Hills AONB Board.

2.7The Surrey Hills AONB Board leads a consortium (“the Surrey Hills Family”) that uses the Surrey Hills trademark to deliver the strategic AONB Management Plan objectives.

2.8The Surrey Hills AONB Board is referred to as the AONB Board throughout this report.

2.9Annex A lists the names and positions of people interviewed and other sources of information provided in order to undertake this review.

3.Governance Arrangements

3.1.The Constitution

3.1.1The aim of the Surrey Hills AONB Joint Committee Constitution, reviewed and updated by the AONB Board in October 2013, is to set out roles and responsibilities for the work of the AONB Board and the direction of its development.

3.1.2The constitution is a high level, eleven-page, document that sets out:-

Purpose of the Board
Role of the Surrey Hills AONB Board
Terms of Reference
Patrons
Membership
Chairman and Vice Chairman of the Board
Members of the Advisory Group[1]
Number and Frequency of Meetings
Decision Making
Business to be Dealt with at Meetings
Surrey Hills Partnership
Officer’s Working Group
The AONB Staff
Finance
Review

3.2.The Management Plan

3.2.1The Surrey Hills AONB Management Plan is prepared by the AONB Board and is adopted by the Surrey AONB local authorities. The plan sets out a five year strategy for the AONB and has recently been reviewed and updated by the AONB Board to set out the next five year management plan for 2014-19.

3.2.2The management plan is a twenty-four page document that is split into three sections:-

Introduction – identifies who the plan is for; how it is produced; and AONB statutory responsibilities
The Policies – provides a statement of significance; a vision statement; and the aims and indicators of each the AONB policies
The Delivery Strategy – identifies the high level delivery and monitoring roles of each of the organisations; reports on progress in delivering the 2009 – 2014 AONB Management Plan; introduces the Surrey Hills Brand; highlights that individual business plans will identify funding, investment, human resources and technical expertise required to deliver the plan; and lists the strategic priorities for the next five years.

3.3.The Structure of Surrey Hills AONB

3.3.1The diagram below shows the structure of key organisations and groups of the Surrey Hills AONB partnership. Membership of these key organisations/groups is not formally kept up to date and communication of changes to membership is informal and so membership records may be out of date. The membership of the various groups is listed in Annex B.

3.4.The Surrey Hills “Family”

3.4.1Over the last five years the AONB Board has established a group of organisations (the Surrey Hills Family) to help support the delivery of the AONB Management Plan. The Surrey Hills Family includes the AONB Board, serviced by the AONB Unit, working collaboratively with the following organisations:-

Surrey Hills Enterprises – a Community Interest Company (CIC) to promote Surrey Hills, controlled by a Board of Directors, including representatives of the AONB Board. It offers membership to commercial partners under a licence agreement with Surrey County Council on behalf of the AONB Board. It sources grants and sponsorships
Surrey Hills Society – a membership organisation established as a charity to recruit and inform individuals with an interest in AONB, running a range of walks, talks and awareness raising activities
Surrey Hills Trust Fund – a fund established under the umbrella of The Community Foundation for Surrey to attract donations from individuals and companies

3.4.2Surrey County Councillor, Mike Goodman, and Guildford Borough Councillor, David Wright, are CIC Directors of Surrey Hills Enterprises. David Wright is also a panel member of the Community Foundation for Surrey. There are no councillors as trustees for Surrey Hills Society.

3.4.3Surrey County Council has a share in the Surrey Hills Enterprise CIC on behalf of the AONB Board.

3.5.AONB Board Arrangements

3.5.1The purpose, role, terms of reference, membership and business to be dealt with by the AONB Board are set out in the Constitution. The AONB Board will normally meet four times a year.

3.5.2The chair is elected by the Board members but this review concludes that this is carried out in a rather informal manner at the annual AGM.

3.5.3All members of the AONB Board will also be members of the Surrey Hills Partnership, alongside others (see Annex B). The Surrey Hills Partnership will provide advice and scrutinise the work of the AONB Board.

3.5.4The AONB Board produces an Annual Review of its activities that is published on the AONB database for members and partners to view.

3.5.5The Member’s Advisory Group to the AONB is a newly formed group, whose membership is set out in the constitution but clear roles and responsibilities of the group have yet to be defined and agreed.

4.Financial Management Arrangements

4.1.AONB Unit Budget

4.1.1Annex C sets out a summary of 2014/15 Estimate costs and funding in relation to the AONB Unit to give readers of this report an idea of financial management scale and context.

4.2.Funding Arrangements

4.2.1Although the Constitution identifies the core funding organisations and their percentage contribution (see below), there is no financial agreement in place between these organisations.

4.2.2Core funding contributions[2] towards the core AONB Unit costs are as follows:-

Defra75%
Surrey County Council13%
Guildford Borough Council 3%
Mole Valley District Council 3%
Waverley Borough Council 3%
Reigate & Banstead Borough Council1.5%
Tandridge District Council1.5%

4.2.3Funding raised by the Surrey Hills Family organisations is managed by the organisations themselves, are not part of the AONB Board funding and are not part of Surrey County Council’s accounts.

4.2.4The AONB Board does not provide any grants to the Surrey Hills Family organisations.

4.3.Budget Management Arrangements

4.3.1As the host authority, Surrey County Council is responsible for employment, pensions, financial control, banking services, audit, recruitment, payroll, insurance, legal services, IT provision, estates management and health and safety. The AONB budget is administered by Surrey County Council (the AONB Unit) and the Office Manager is aware of and adheres to Surrey County Council’s Financial Regulations and Instructions, and Procurement Standing Orders.

4.3.2However, it is difficult to reconcile the financial reports presented to the Board with the Council’s general ledger (SAP). The bottom line, net budget position reconciles, but the financial analysis of the income and expenditure seem to vary between the financial reports and the transactions in SAP.

4.3.3The Terms of Reference for the AONB Board, as set out in the Constitution, include “to secure sufficient funding to meet its overall aims and objectives for effective management of the AONB and to manage its own devolved budget”.

4.3.4The Finance section of the constitution states “A budget will be prepared each year by the Surrey Hills Director and presented to the AONB Board for approval in the context of the five year Development Strategy” and that “The Surrey Hills Director will prepare an annual statement of accounts for the previous year for the AONB Board’s approval”. The current budget reports that are presented to the AONB Board are over two years, not five.

4.3.5The Finance section of the constitution also identifies what the budget will make sufficient provision to cover; that financial contributions to the AONB Board’s budget will be agreed on an annual basis and that any surplus remaining in the AONB Board’s account at the end of the financial year shall be carried forward into the next financial year.

4.3.6The annual budget is prepared each year by the AONB Director, supported by the AONB Office Manager and is presented to the AONB Board for approval as an estimate at the October Board meeting.

4.3.7The end of year position is also reported to the AONB Board in October.

4.3.8The AONB Director and Office Manager meet monthly to review the in year budget position but it is not reported to the AONB Board.

4.3.9The AONB Board are not presented with Financial Statements from the Surrey Hills Family organisation.

5.Areas for Improvement

5.1Good governance ensures that decisions are taken for the right reasons and that public money is spent wisely.

5.2Although the constitution identifies high level roles and responsibilities, there needs to be a clear, more detailed Terms of Reference for the AONB Board and the groups/organisations that represent the Surrey Hills AONB:-

What is their purpose/their responsibilities towards the AONB
What relationships will they have with other organisations/individuals
What is their membership and what are the roles of those individuals
What decisions will they be responsible for
What information will be regularly considered by the group

5.3The role of the Chairman of the AONB Board should be clearly defined and the election of the Chairman made formal and proper. The AONB Unit Director has raised this as an agenda item at the Members Advisory Group meeting on the 12th September in preparation for the AONB Board AGM on the 15th October. Consideration should be given as to whether the AONB Board should have an independent Chair, in line with other AONBs across the country.

5.4Membership of the AONB Board and other groups should be formally maintained by the AONB Unit and kept up to date.

5.5If members have roles on more than one group, their roles and responsibilities on each of the groups should be made clear and independent.

5.6Where a Councillor or Council employee is a trustee, shareholder or representative of a Board/family organisation, a review should take place, involving the Council’s Legal Service, to understand the impact on the Council’s legal status. A review of the organisation’s financial regulations should also take place by the Council’s Finance Service to ensure appropriate financial controls are in place.

5.7The constitution identifies the need for a five year rolling business plan that will align with the AONB Management Plan. The AONB Unit Director is currently producing aFamily Delivery (Action) Plan that will be used as a framework for business planning and monitored through quarterly meetings of the AONB Board and the annual meeting of the AONB Partnership. It will also form the basis of annual reporting to partners.

5.8The above Delivery/Business Plan 2014-2019 should aim to set out the short to medium term priorities for the AONB Board and should be the basis for agreeing the Surrey Hills AONB Unit’s annual work programme.

5.9The five year rolling Business Plan should also include a five year financial plan, including a detailed annual plan that links to the annual work programme and highlights what resources are required (both HR and financial) to deliver the plan.

5.10As stated in the AONB Management Plan (The Delivery Strategy Section) each of the Surrey Hills Family organisations should have individual business plans that identify funding, investment, human resources and technical expertise required to deliver the plan – presenting both financial and performance targets that should be agreed by the AONB Board. Progress against these targets should be reviewed regularly (at least quarterly) and any variance highlighted to the AONB Board. The AONB Board needs to be reassured that funding raised and spent by the Surrey Hills Family organisations are contributing towards the AONB Management Plan.

5.11Financial and performance reports should be aligned and reviewedquarterly by the AONB Board. Any financial risks or significant variances to the budget should be reported to the Member’s Advisory Group immediately for review at an exceptional meeting or at the planned quarterly meeting (one month prior to the AONB Board meeting) if timing is appropriate. Surrey County Council’s Risk Based Approach to budget monitoring could be applied to help identify significant variances for review.

5.12Surrey County Council’s general ledger and financial reporting system is SAP. The AONB Unit Office Manager should work with the Council’s Finance Service to ensure that SAP and financial reports submitted to the AONB Board are consistent and clear. Reports presenting budget estimates and outturn reports should be signed off by the Council’s Finance Service before being presented to the AONB Board.

5.13There needs to be an effective risk management process in place. Risk Registers need to be reviewed monthly by an appropriate officer group and reported quarterly to the AONB Board to ensure effective control actions are in place for significant risks and to identify any emerging risks.

5.14There should be a financial agreement between the funding organisations of the AONB Unit that sets out funding arrangements and arrangements for any under or overspends should they occur at the end of the financial year. The Council’s Finance Service should sign off the financial agreement.

5.15A financial agreement should be put in place that sets out what happens with any surpluses made by the Surrey Hills Family organisations. The Council’s Finance Service should sign off the financial agreements.

5.16Although there are no grants/contributions/loans from the AONB Board to any of the Surrey Hills Family organisations, this may change in the future. If so, proper financial agreements/contracts, signed off by the Council’s Finance Service, should be set up by those parties involved in the payment and receipt of the grants/contributions/loans.

5.17The table in Annex D summarises the above areas for improvement, giving each a priority rating, recommending a timescale and identifying a responsible officer.

Annex A – People Interviewed and Sources of Information

People Interviewed

Ian Boast, Assistant Director for Environment

Lisa Creaye-Griffin, Countryside Group Manager

Rob Fairbanks, Surrey Hills AONB Director

Denise Furlonger, AONB Office Manager

Other Sources of Information

Constitution for the Surrey Hills AONB Board (October 2013)

Surrey Hills AONB Management Plan (2014 – 2019)

DRAFT Business Plan 2014 – 2019

AONB Board Minutes (October 2013 (part), April 2014 and July 2014)

Surrey Hills Enterprises Community Interest Company (CIC) – Articles of Association

Surrey Hills Enterprises CIC – Certificate of Incorporation

Surrey Hills Society – Memorandum and Articles of Association

Surrey Hills Trust Fund – Fund Agreement

Annex B – Membership of Boards/Groups

Surrey Hills AONB Board – Membership

Core Members

Guildford BC-Councillor-David Wright

Mole Valley DC-Councillor-David Mir

Reigate & Banstead BC-Councillor-John Stephenson

Tandridge DC-Councillor-Lindsey Dunbar

Waverley Borough Council-Councillor-Mike Band

Surrey County Council-County Councillor-Mike Goodman

National Trust-General Manager, Sy Hills -David Kennington

Natural England--Adam Wallace

Advisory Members

Country Land & Business Assoc.--Robin Edwards

CPRE Surrey--Tim Harrold

National Farmers Union--Sandra Nichols

Surrey Sussex Assoc. Local Councils--Liz Cutter

Surrey Wildlife Trust-Chief Executive-Nigel Davenport

Delivery Partners

Surrey Hills Society-Chairman-Chris Howard

Surrey Hills Trust Fund-Chairman-Neil Maltby

Surrey Hills Enterprises CIC-Chairman -Simon Whalley

AONB Partnership

All Board Members as above plus:

Bristish Horse Society-Diane Beach

RSPB-Mike Coates