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Local Authority Internal Audit Virtual Forum

26 October 2022

Please note:

All Institute responses are boxed and highlighted blue
Where the chair comments in that capacity this box is highlighted in yellow
For confidentiality, the identities of all delegates/attendees are anonymised

Institute's welcome

Good afternoon and thank you for joining us today. I am Liz Sandwith, Chief Professional Practices Advisor, Chartered IIA UK and Ireland.

The topic for today is ‘The Well-being of Future Generations’. In Wales they have documented the thinking / approach in legislation. The Act provides ambition, permission and legal obligation to improve our social, cultural, environmental and economic well-being.

The Well-being of Future Generations Act requires public bodies in Wales to think about the long-term impact of their decisions, to work better with people, communities and each other, and to prevent persistent problems such as poverty, health inequalities and climate change.

The Act is unique to Wales but is attracting interest from countries across the world as it offers a huge opportunity to make a long-lasting, positive change to current and future generations.

It is novel in its approach for the public sector, its intent has much in common with the UK Stewardship Code which promotes long-term thinking for investors.

The legislation is also a great example of speaking truth to power. Professionally, internal auditors are often the ones delivering the news others avoid or starting the unwanted conversations. This legislation cuts through many of those difficult topics by giving them a permanent voice.

The Well-being of Future Generations Act sets out seven wellness goals for Wales designed to improve economic, social, environmental and cultural well-being. All nations and organisations will have similar goals, whether documented or verbalised.

To achieve these goals, there are five sustainable development principles that now form the foundation blocks of all public sector decisions. It is a legislated commitment that these principles are central to decision-making.

Today’s presenter, Monica Dawson will provide an opportunity for all of us to reflect on the concept and apply it in our Councils even if, as yet there is no legislation.

I am joined today by:

Piyush Fatania, Chair for today and a member of the Institute’s Council

Chair's opening comments

Thank you, Liz. Future wellbeing has certainly been a key theme in the political machinations of the last several weeks. The wellbeing of the economy and of citizens who are facing the cost-of-living issues, mortgage payments and energy bills. This has highlighted how actions taken now and in the near past can have some serious ramifications for a protected length of time in the future. The mini budget was delivered in about 30 minutes and lasted for about 2 weeks before it was largely reversed. But in that time its impacts were already hard baked into the financial landscape that the country will face going forwards. So how, in a situation where the future is yet to reveal itself and where so many things are unknown, do we get certainty and stability?

The Welsh Government has appointed a Future Commissioner whose role is to consider, and to get others to consider, the impact of the actions taken now over a much longer period. This officer is linking actions on climate change and the ESG agenda, which are both very key challenges for all of our Councils and us as internal auditors.

One example of their intervention has been that the Welsh Government have scrapped plans for a £1.5 billion pound relief road on the M4 that would have cut through a nature reserve and is developing a new transport strategy that is focused on public transport and active travel.

It is not just future well-being that the Act aims to address. Today’s children are growing up with climate anxiety, a chronic fear of environmental doom.

Research in 2021 published in the Lancet, showed that of 1000 UK children surveyed:

28% were impacted in terms of day-to-day functionality
38% were hesitant to have children
51% believe humanity is doomed
69% think the government is not doing enough to avoid climate catastrophe

So as councils then, how do we engage with what is in effect our future workforce? The actions of our Councils today will potentially influence their ability to attract talent in the years ahead. Speaking about the Act, Nikhil Seth, the Head of Sustainable Development for the United Nations, said “what Wales is doing today, we hope the world will do tomorrow, action more than words is the hope for our future generations.”

Internal auditors can inform Council decision making processes by helping them to be more transparent, legal and accountable. This could be in areas such as whether, their strategic goals consider future generations. Is sustainability in its broadest sense considered by decision makers, how well understood are the anxieties and concerns of stakeholders?

To speak to us today on this important issue, I'm really delighted to give a very warm I welcome to Monica Dawson. Monica is an independent internal audit and risk advisor.

Key takeaways

Slides from the session are attached and link to the video. Notes below are supplementary.

Monica Dawson, Independent Internal Audit and Risk Adviser

The seven goals of the Act aim to improve the social, economic, environmental and cultural well-being of Wales, uniting decision makers in a common purpose
You could remove the word Wales and these goals could equally apply to your own region or local authority.
If you think more generally about ESG for a moment: Who in your organisation is the figurehead, the advocate, the driving force for ESG?
Since 2015, 192 countries plus the European Union have signed the Paris Agreement, yet only the UK has legislated its net-zero commitment.
Last year the Scottish government entered a power-sharing deal with the Scottish Green Party, introducing two ministerial roles that focus on areas such as achieving net zero targets, green skills and the circular economy. They also intend to appoint a Future Generations Commissioner
Ireland is committed to its 2021 Climate Action Plan, which details how it will meet net-zero emissions
In England a proposed Act similar to that in Wales passed through the House of Lords but has not progressed in the House of Commons, with the Cabinet Office welcoming the debate but not supporting it.
The United Nations is currently drafting a Declaration for Future Generations for launch in 2024 and like the Declaration on Human Rights it could be a powerful statement of humanity’s moral priorities and consideration of those who will inherit our planet.
With the complexities and uncertainties that everyone is dealing with it’s easy to see how future generations can be deprioritised
Legislation forces a concept like thinking about Future Generations into the mainstream
Our natural risk bias is to use what Kahneman would call fast thinking using heuristics, two of the most common being: Familiarity bias = past experiences and Availability bias = known information
Combine this with our natural human desire to think positively and it’s easy to see why so many people focus on today thinking the future will be ok
Many will have strong beliefs and values that it’s the immediate issues that should take priority not those of the future, e.g., why abandon oil reserves that can fund improved living standards for those at the foodbank today? Why prevent new road infrastructures that will help business today when the green technology of tomorrow isn’t even on the design board?
The Act is about stewardship. It’s part of the UK Corporate Governance Code and an accepted concept
Internal auditors need to be courageous and get tough: When validating ESG reporting and providing assurance over activities – challenge the targets/purpose – are they future as well as immediate focused? Are they stretching enough? Are enough voices being heard?
If you’re not in Wales, don’t wait for legislation to tell your authority what is common sense

Chair's closing comments

Thank you very much, Monica. I found that fascinating and interesting. I like your slide at the end about the role of internal auditors because as auditors, that is what we should be doing day in day out.

But an individual mentioned about how politicians make decisions and how they like to see the outcome in a short space of time. Do they want to do something now, commit money, which is already tight, just to see the outcome in 30-40 years’ time? So, there is a considerable amount of short termism, and I’ve seen that across different aspects of local government.

I am glad that the Welsh Government has got this Act because I do think it needs to be a national framework to avoid councils going off in different directions and doing their own thing. I think it does need a national framework and national planning in terms of long term aims and plans. The world we currently find ourselves in is meaning that we are currently suffering a number of shocks, particularly regarding the energy crisis and environmental impact, which can really impact well-intentioned plans, so I really do feel a national framework would be the way to go.

Thank you very much for that, Monica. I've found that really fascinating. Thank you.

Institute's closing comments

As usual, notes, chat comments and the slides shared today will be placed on our web pages in the next day or two.

Our next session is 23^rd November 2022 when the topic is Effective Communication and Reports – a good internal audit report is one that clearly communicates the objectives, scope, and findings of an audit engagement, and in doing so, motivates its readers to take internal audit’s recommended actions. Is it really that easy?

Thank you everyone, see you in November.

Thank you for attending. As always, if you have any ideas or suggestions for what we might include in future agendas, please contact Liz Sandwith.

Q&A and chatbox comments

Q: Future thinking is becoming more important, last year after receiving an input from a Futures Analyst and future thinking team externally; we tried to adapt and deliver the key messages, workshops and training and engage with key stakeholders within the organisation to really consider key challenges 10+ years ahead. Engagement was disappointing from the key stakeholders we identified. How can we better hold those to account within key positions to challenge their thinking to really start thinking about wider achievement of objectives? The attitude from some stakeholders made it seem as a “nice to have” rather than something we should be doing. How can mindsets be shifted?

A: I think it's very much about risk maturity because when we think about any of this from an ESG point of view and particularly the environment and future generations, it is just about understanding risk. If you can get over to people what it's really about, and that is people, they will connect with something that they feel emotional about. The more we can connect with future generations in terms of your children's grandchildren and do it in that way making it emotional really helps. But some of it is about core risk management principles and just risk maturity.

Q: You mentioned in your presentation the Declaration of Future Generation coming into place by 2024. Do you think that the UK, England, Scotland, Ireland will sign up to that and implement the principles in that declaration in in our Councils, our public sector?

A: I would imagine so, because as with the Declaration on Human Rights, the vast majority have signed up to that, and their intention is that that this declaration will do the same for future generations. It's a nice way of again making that human connection with the climate emergency because it's all too easy to think it's somebody else's problem. Making it very real and making it human to think about future generations who are people, they will be relatives of all of us, you know. Do we want to look back in, our hypothetical minds, and be thought of as people that totally ignored their life, their future? The essence of it is just really trying to make those strong connections.