Reviewing Board and Management Governance

Health and community service management and boards are busier than ever with increasing governance requirements to meet and be aware of in evolving risk and opportunity areas.

Areas that have historically been the responsibility of management are increasingly requiring board oversight to ensure the appropriate management of risk, including:

• workforce challenges arising from limited workforce availability and capacity;
• Occupational Health and Safety arising from legislative change increasing director liability;
• cyber security and digital maturity with the increase in risk relating to collection and storage of information;
• organisational culture as a key supporting component to managing risks in the areas above in addition to compliance, fraud, employee satisfaction and community reputation.

This has seen an increase in board responsibilities in addition to traditional roles around strategy setting, financial and organisational performance management and monitoring and executive performance management.

Boards are having to request assurance and information on key risk areas where organisations do not have resources or established frameworks to provide the comfort being, especially in relation to cyber security controls in light of the Optus, Medibank and Clinical Labs Australia data breaches.

Governance review objectives

As a result of the above it is becoming increasingly important for organisations and their governing bodies to have a comprehensive approach to reviewing board operations with an objective of:

• identifying areas where governance processes need improvement to support oversight and assurance activities
• identifying efficiency opportunities to make the best use of the time of both the board and management
• having a clearly defined improvement plan for supporting board operations, owned and tracked by the board and management.

The AFS Internal Audit team have been supporting clients to review their governance processes against better practice guidance, including the Australian Institute of Company Directions – Good Governance Principles and Guidance for Not-for-Profit Organisations.

The Governance Principles have been developed by the AICD as part of the AICD commitment to promote good governance in the not-for-profit (NFP) sector and provide a practical framework to help NFPs understand and achieve good governance. This tool was supplemented by health sector specific expectations and recommendations as outlined in the Department of Health and Human Services Directors Toolkit.

Benefits of governance reviews

The following highlights some of the main benefits of conducting a governance review:

• creates opportunity for the board and management to have an open and considered discussion about the role of board versus the role of management and governance performance;
• highlights systemic gaps in key areas at an operational level which have resulted in decreased oversight or information to report to the board or other governance groups;
• highlights the limitations of the resources available operationally or supporting the board to be able to implement and maintain good governance processes which can inform budgeting and resource allocation discussions;
• develops a prioritized action plan for governance improvements catergorised in to Strategic, Policy and Operational actions helping to identify quick wins versus longer term high resource projects;
• provides actions for both the board and management to own, recognising that good governance is achieved through working together on agreed priority areas;
• identifies key governance areas that were lacking both board oversight and operational processes to enable that oversight, highlighting additional risks for the board;
• provides an opportunity for board members who generally didn’t have involvement in audit processes to experience the internal audit process and actively engage with the outcomes and outputs.

Benefits of having governance reviews performed by an audit provider

Independent internal auditors have experience with a wide variety of organisations each with different strategic intentions and complexities which builds a strong knowledge and foundation of what “good governance” looks like, and how it may differ from one organisation to another.

A new and independent set of eyes can often identify long standing processes which may be accepted as normal or acceptable for those who see it every day.

An independent third party can also provide an opportunity for stakeholders to raise concerns or areas for discussion which they may not feel comfortable raising internally, in a group or other feedback mechanisms.

Most of all, as highlighted throughout this article are the increasing pressures on the board and management to do more. This raises the importance of outsourcing tasks where possible to experienced providers to allow management to focus on the delivery of organisational strategy.

If you would like more information about how AFS can support you to review your governance processes, or any other Internal Audit services, please contact Katie Dempster.