Comment / A compelling case for governance

There’s plenty of guidance and established best practice on governance. Now we need a bit of direction

I wrote some months ago on the importance of governance at this time of unprecedented organisational change. I was particularly concerned about the establishment of new organisations – GP-led clinical commissioning groups and community interest companies.

I make no apologies for revisiting this topic, as it is by no means clear that there will be any  formal requirement for any level of compliance with recognised best practice. This is at a time when the so-called developed world's economic systems are close to collapse as a result of lack of governance over the banking and financial markets. We have seen scandals abound in the media industry, again due to a lack of governance. And in the NHS, the Mid Staffordshire enquiry is still probing into the governance failures in that organisation and those charged with its oversight.

The HFMA has just published Governance: managing a corporate organisation. The briefing note – a sort of introduction to governance for GPs and commissioning groups – sits alongside more detailed guidance on integrated governance and the workings of the audit committee, published in May.

The truth is there is no shortage of guidance. What we do lack is direction and compulsion. The normal high level infrastructure requirements – such as the establishment of an  audit committee or need to complete a statement of internal control  – currently remain discretionary. Ditto the need to have a chief finance officer on the board – a topic covered in these pages in recent months.

I understand the need for these new organisations to be ‘lean and mean’. But this shouldn’t mean that the proven governance frameworks are abandoned. If there were no value in having non-executives, an audit committee, a properly qualified board level finance director, an internal control system and  assurance processes, then FTSE 100 companies wouldn't have them. But they do.

Governance failures almost always cost more than the control systems that should have been in place. It goes without saying that any investment in staff and processes that are not on the front line delivering value to patients must be rigorously tested to ensure they are necessary. We are all familiar with aspects of governance that have been over-engineered and under-delivered.

I am not promoting governance and control as ends in themselves. But we must make sure we have the basics in place, particularly as we move to clustering arrangements for strategic health authorities. This is perhaps a sensible response to cost pressures and sharing of human resources that would have dwindled as the old authorities moved towards abolition. But SHAs have undertaken the local performance management role and there is a danger that some of the support for organisations might disappear, leaving some more vulnerable to governance failures.

For new organisations, reading the detailed advice on the HFMA website and elsewhere is a good starting point. The HFMA Governance and Audit Committee will also do its best to provide answers to specific questions that may arise.

We must all strive to ensure that the governance baby is not thrown out with the bathwater in the rush to cut costs and structures. Our role as finance professionals is to influence the local policy makers in these new organisations to have proper governance from the outset.

John Yarnold is chairman of the HFMA Governance and Audit Committee