The AGS should present a picture of how a council’s governance system is performing, and where risks to its performance might arise now and in the future. It is not possible to undertake a meaningful governance review with a limited understanding of what “good governance” looks like across an authority, and so it is not a surprise that councils with poor governance tend to have poor AGSs. This means that a poor Annual Governance Statement can be a good early warning sign of more profound governance weakness, and failure. This makes the AGS is a critically important document.
For those involved in preparing the AGS, the process begins with guidance issued by CIPFA and SOLACE – initially prepared in 2016 and updated in 2025 to provide more detail about how governance should be reviewed in preparation for the drafting of the AGS. Overall the CIPFA-SOLACE Framework requires councils to address three interlocking questions:
- What do you understand governance, and “good governance”, to be?
- What arrangements do you have in place to secure good governance?
- How effective are these arrangements, and what steps will be taken to improve?
Answering the first question is difficult. The CIPFA/SOLACE framework sets out seven interconnected principles which between them focus on the presence of an organisational culture that takes governance seriously. This culture enables clarity about what we are doing to support local people and their needs and the interventions we are putting in place to support those actions – and how we will monitor their effectiveness.
The second question is addressed through the council’s Code of Corporate Governance. This document describes the shape of the governance system with reference to the seven principles in the CIPFA/SOLACE Framework. The Code should describe the individual elements of the governance system but also, importantly, how that framework works as a coherent whole. A well-developed Code provides the basis for meaningful evaluation and helps identify where assurance, challenge and improvement activity should be focused.
This leads us to the final question. Answering this is the central purpose of the Annual Governance Statement itself. The Statement is the final report of an evaluation – the outcome of a review, an assessment of the strength of the governance system overall. It is built directly on the foundations of the seven principles and the application of those principles to the Code of Corporate Governance.
A strong and effective AGS will draw conclusions on the effectiveness of a council’s governance arrangements from a range of sources. It will need to be informed by robust evidence but ultimately the call as to whether the system overall is effective, and what needs to be done to address those parts of the system that need improvement, is a subjective one that sits with the drafting officer (usually the Monitoring Officer) and with the members who approve the AGS itself. Effectiveness is a qualitative judgement – not one that is limited to assurance on the mere presence of processes, systems and structures.
The subjectivity of this process is why ownership of the AGS “process” is so important. The drafting of the AGS itself and the work to undertake the review that precedes it should always be internally-led – held by senior officers, overseen and directed by members.
Internal ownership is critical to ensuring that the AGS reflects a genuine, organisation-wide understanding of how governance operates in practice—not just how it is designed on paper.
However, there is also a valuable role for targeted external support. Councils often benefit from supplementing their internal review with an independent governance diagnostic. This can precede the review – highlighting areas that may require further investigation, and passing judgement of where and how improvements may have been made since last year’s Statement. External assistance can also ensure that the AGS, once written, reflects developing practice from elsewhere.
This type of external baselining is not required every year, but may be particularly useful at key moments, for example following political change, during periods of financial pressure, or alongside major transformation programmes.
If you are a Monitoring Officer or CFO, as this year’s AGS process nears its conclusion, you will need to spend time reflecting on how the AGS has been developed and agreed. How has evidence been gathered? How has the review been conducted? How has member ownership of the process been secured? In due course, you will also need to reflect on how the AGS’s recommendations are acted on – and how those actions are reported back to members. This reflection will then need to feed into the planning process for 26/27. And if this is an area where you might appreciate advice and support, we would be happy to help.