Oversight of the local gov system needs improving

A new report by the National Audit Office (NAO) has said that the government must improve its oversight of the local governance system to help councils cope with increasing financial and demand pressures.

Since 2010, local authority funding has reduced, while demand for services has increased, witnessing a real-terms reduction in spending power of 29 per cent and a 15 per cent increase in the number of children in care, for example. The way authorities have responded to these challenges have tested local governance arrangements, with some pursuing risky large-scale transformations or commercial investments that add greater complexity to governance arrangements.

With local authorities operating within governance frameworks of checks and balances to ensure that decision-making is lawful, informed by objective advice, transparent and consultative, external auditors publish a conclusion on an authority’s arrangements to secure value for money every year, highlighting weaknesses by ‘qualifying’ their conclusion. In 2017-18, auditors issued qualified conclusions for around one in five single tier and county councils.

Worryingly, 27 per cent of auditors surveyed by the NAO do not agree that their authority’s audit committees provided sufficient assurance about the authorities’ governance arrangements. Auditors felt that many authorities are struggling in more than one aspect of governance, demonstrating the stress on governance at a local level.

As such, some authorities have begun to question the contribution of external audit to providing assurance on their governance arrangements, with 51 per cent of chief finance officers from single tier and county councils responding indicating that there are aspects of external audit they would like to change. This includes a greater focus on the value for money element of the audit (26 per cent).

The Ministry of Housing, Communities and Local Government is responsible for ensuring that the local governance framework contains the right checks and balances, that it works, and for changing the system if necessary. However, the NAO says that the department does not systematically collect data on governance, meaning it can’t rigorously assess whether issues are isolated incidents or symptomatic of failings in aspects of the system. Additionally, the process in which MHCLG can intervene both formally and informally in authorities where it has concerns about governance arrangements is not always revealed publicly, meaning its scale and effectiveness is not open to scrutiny or challenge.

The NAO recommends that the Ministry of Housing, Communities and Local Government works with local authorities and other stakeholders to assess the implications of the various governance issues identified. It should examine ways of introducing greater transparency and openness to its formal and informal interventions in local authorities and should adopt a stronger leadership role in overseeing the network of organisations managing key aspects of the governance framework.

Amyas Morse, the head of the NAO, said: “Poor governance can make the difference between local authorities coping and not coping. Given the significant challenges these bodies face, the government needs to take the lead in addressing weaknesses in the local governance system to ensure that local arrangements function as intended and support local decision-making.”