Board diary: The stakes are high

Tamsin Stirling starts her round-up of developments in governance with the awful fire in Kensington

I am sure that the absolute horror of the Grenfell Tower fire will have had a major impact on all those who serve on the boards of housing organisations. We join with all the other people who have offered sincere condolences to everyone affected and heartfelt thanks to the emergency services.

A statement on June 20 by the Welsh Government cabinet secretary for communities and children and subsequent questions identified a range of issues, including standard of materials and installation, the role of inspection, whether all tower blocks should have sprinklers, civil contingency planning and responding to concerns raised by tenants. However, Carl Sargeant noted that we will have to wait for the various investigations to identify exactly what went wrong. The public inquiry and criminal investigation will be complex, but both will seek to provide transparency and accountability, not least for the families and community.

Transparency and accountability in governance is a major theme of the recently published Wales Audit Office (WAO) discussion paper The Governance Challenges posed by Indirectly Provided, Publicly Funded Services in Wales[1]. In the foreword of the report, the Auditor General for Wales, Huw Vaughan Thomas, notes that recurring themes from reports published by WAO on governance failures are:

• ineffective oversight and monitoring
• a lack of transparency
• inappropriate conduct, and
• poorly managed conflicts of interest

He also highlighted the fact that the root causes of many of the audit issues that WAO has reported on include ‘a lack of clarity around how governance arrangements should operate in practice, contributing to reduced transparency and diluted public accountability’.

These fundamental issues seem to resonate with recent governance problems at Sport Wales that prompted the Welsh Government to first suspend the activities of the board, undertake an internal review and subsequently terminate the appointments of the chair and vice-chair.

In its inquiry into the regulatory oversight of housing associations, the National Assembly for Wales’ Public Accounts Committee[2] has also been concerned with openness and accountability, both at individual association level and in relation to the regulatory framework and approach for the sector. The view of at least some of the members of the committee is that there has not been sufficient transparency about the work of associations, how they make decisions and how the Welsh Government responds when problems emerge within one or more associations.

This inquiry has been taking place against the backdrop of the issue of reclassification by the Office for National Statistics. The Welsh Government has consulted on reforms that should enable the ONS to reclassify associations back to the private sector for accounting purposes. This is vital if the sector is to maximise its potential in meeting the need for social and affordable housing across Wales. The reforms will place more responsibility on boards for a number of issues on which permission is currently sought from the regulator.

To support these reforms and learning from regulation of associations over the past few years, the Welsh Government has developed a new regulatory framework in partnership with key stakeholders[3]. It aims to ensure that ‘Wales continues to have well governed, financially robust associations providing high quality and improving landlord services to tenants and service users.

‘The new framework recognises the autonomy and independence of housing association boards with an increased focus on good governance, specifically on how the board is assured that its primary responsibility of ensuring the effective running of the association is fully and properly discharged.’  

However, key elements of the risk-based approach of the 2011 framework remain unchanged, including ‘tenants remain at the heart of regulation with improved accountability and transparency to tenants and other stakeholders’.

The new performance standards that form part of the framework are clear about the expectation that boards will be in control, for example. the expectation that boards sign off the annual statement of compliance, and to have robust systems of assurance about performance, services and tenant satisfaction.

In recent months, the Regulatory Board for Wales has identified governance as a priority area of work and a review identifying progress on governance across the sector has just commenced. It will be interesting to see how this develops.

As the review starts, it is fair to say that understandings of what constitutes good governance differ, as do ideas for how governance might be improved; whether through application of principles and/or rules and/or mechanisms to encourage the ‘right’ behaviours. This territory is explored in the WAO report, as the Auditor General for Wales acknowledges:

‘It appears to me that there are no easy answers; attempts to impose order risk being inflexible and may constrain innovation. A proliferation of rules can be the enemy of good governance …. However, there are opportunities to learn, not only from previous failures, but also from existing good practice and innovative ideas, in relation to accepting and navigating complexity.’

The horrific Grenfell Tower fire will provide all board members with opportunities to learn, opportunities that I am sure we will all take very seriously.

[1] https://www.wao.gov.uk/publication/discussion-paper-governance-challenges-posed-indirectly-provided-publicly-funded

[2] http://senedd.assembly.wales/mgIssueHistoryHome.aspx?IId=16191

[3] http://gov.wales/topics/housing-and-regeneration/publications/regframeworkhousingassoc/?lang=en