The National Audit Office (NAO) has published a report on local authority governance aimed at looking whether it provides local taxpayers and Parliament with the assurance that council spending achieves value for money.
The report highlights the importance of governance given the financial stress that councils are under, saying that there has been a 28.6% reduction in real terms in local spending power from 2010-11 to 2017-18.
“Governance arrangements have to be robust in this challenging context or this creates a risk that authorities will not be able to deliver their objectives”
In addition, the report says that governance has become more complicated, partly because councils have sought new sources of income to offset the declining grant from central government.
In particular, it says that councils need to make sure they have robust risk management procedures in place when making commercial investments.
As a consequence of reduced spending and the generation of new sources of income, the risk profiles of councils have increased.
The NAO’s survey for the report found that nearly one fifth (18%) of external auditors did not agree that the internal audit was effective.
The report also cites the high number of qualified value for money conclusions to accounts.
Auditors concluded that in 2017-18 nearly one in five single tier and county councils in 2017-18 did not have adequate arrangements in place to secure value for money.
“We have said elsewhere that, while levels of qualifications are lower amongst local authorities than some other public sector bodies, the level of qualified conclusions is unacceptably high.”
The report also looked at the role of the Ministry of Housing, Communities and Local Government in overseeing the councils, and noted that it did not collect data on individual councils’ governance but rather had a focus on supervision of the sector as a whole.
As a consequence, the report says: “The Department [ie the ministry] lacks the evidence base to assess rigorously whether governance issues are system-wide and this reduces the level of confidence it can have in the operation of the system.”
The NAO also says that, except where the ministry goes for statutory intervention, its oversight lacks transparency.
Its other, less drastic interventions, are not always made public and are therefore not subject to proper scrutiny.
Meg Hillier MP, chair of the Committee of Public Accounts, said: “Central government has got to start taking responsibility for ensuring governance is effective across local government and local bodies need to ensure that their governance arrangements are robust and transparent to citizens.”
