In depth: New code for local authority monitoring officers

Last September, a year after Birmingham did a spectacular job of hosting the Commonwealth Games (pictured above), the city council declared itself effectively bankrupt by issuing a section 114 notice. It then signed off on £300m worth of swingeing cuts. Croydon Council issued three section 114 notices between 2020 and 2022.

Birmingham and Croydon were on a growing list of councils to find themselves in, or approaching, financial meltdown. Last December, the Local Government Association released a survey showing that one in five council leaders and chief executives in England believed it was very or fairly likely that their chief finance officer (CFO) would need to issue a section 114 notice.

Auditor Grant Thornton identified several reasons why councils fail in a December 2023 report, Preventing Failure in Local Government. Councils need to get the basics of good governance correct, it stressed. The three statutory officers who make up the ‘Golden Triangle’ – CEO, CFO and monitoring officer – have ‘complementary legal powers and duties which help to support good governance’.

Grant Thornton recommended that Lawyers in Local Government (LLG), the Chartered Institute of Public Finance and Accountancy, and Solace, a representative body for CEOs, should develop a shared set of standards and expectations to underpin the collective leadership of CEOs, CFOs and monitoring officers.

On Tuesday last week, the three bodies duly delivered a Code of Practice on Good Governance for Local Authority Statutory Officers.

The code sets out ‘seven standards of the Golden Triangle’. Statutory officers must understand governance, act wisely, lead ethically, act effectively, resource the roles, build resilience and deliver sound decision-making.

LLG governance lead Helen Bradley said the role of the monitoring officer – usually held by a solicitor – is perhaps the least understood of the three. The 22-page code clearly explains the statutory officers’ roles for those working closely with them.

Monitoring officers are responsible for ensuring the operation of the council’s decision-making process is lawful and fair. They are responsible for the maintenance and interpretation of the authority’s constitution, play a key role in promoting and maintaining high standards of conduct, and should be the ‘proper officer’ for the purposes of publishing decisions and access to information.

They have a duty to act when it appears to them that any proposal, decision, or omission by the authority has given rise to, is likely to, or would give rise to a contravention of any enactment or rule of law or amounts to maladministration.

Research carried out by the Local Democracy Research Centre, LLG and law firm Browne Jacobson found that monitoring officers did not feel sufficiently protected to fulfil their governance function without fear of reprisal. The code says their role should be articulated within the local authority’s constitution, clearly stating their right to attend meetings, have access to documents, give advice in writing or in person, and to produce reports for consideration by their authority’s decision-making bodies.

They need to be ‘full and active’ members of the authority’s most senior leadership team and must have access to brief the leader or directly elected mayor.

‘At various points, the decisions, or statements of elected members, as decision makers or as commentators, will be at variance with the advice or statements of officers of the authority,’ the code says. The statutory officers should ensure that those within and outside the authority understand this, that this is a normal and proper manner of conducting public debate and business, and that, where the decisions of the authority are understandable, lawful and implementable, it is the duty of the authority, and of the statutory officers, to arrange itself in a manner that delivers those decisions.

Draft reports to a cabinet or committees should be cleared with the monitoring officer and CFO as a matter of routine ‘to ensure they contain and are informed by the correct content and comments on legal, financial and other relevant matters, including risk awareness and management, statutory considerations such as equality duties and capturing viable alternative options’.

LLG CEO Deborah Evans acknowledges that other factors, such as the financial crisis, can influence failure. The code cannot fix bigger structural issues – but it provides a ‘framework with tools to manage effectively with what we have’.

The LLG also stressed that the code contains much that could be useful to in-house lawyers working in other sectors.

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