Written Evidence submitted by Essex County
Council
SUMMARY
1. Essex County Council welcomes the opportunity
to respond to the Committee's call for evidence. As one of the
largest local authorities in the United Kingdom, serving a population
of 1.4 million, we have long felt the audit and inspection regimes
were inflexible and overly burdensome, and welcome the Government's
commitment to develop new methods of local government audit and
inspection.
2. The current political climate and the need to
ensure accountability in public spending require new ways of working.
Local authorities must be accountable for the spending of every
pound of public money, but they must also be given enough flexibility
to ensure that disproportionate effort and expense is not spent
working to meet irrelevant and overly burdensome assessment measures
for central government. Giving local authorities the opportunity
to help shape the new regime is essential to achieve a more effective
audit and inspection process.
3. Essex County Council (ECC) wishes to submit the
following response to the Committee.
RESPONSE FROM
ESSEX COUNTY
COUNCIL
The current regime
4. ECC welcomes the Government's move to reform local
government audit and inspection, including the abolition of the
Audit Commission and the Comprehensive Area Assessment. ECC is
a forward-thinking authority which has long campaigned for greater
freedom for local authorities in this area. The current audit
system is too expensive, overly burdensome, disproportionate to
risk and value for money, and inflexible.
5. The national cost of monitoring and inspecting
local government under the Audit Commission regime was estimated
at over £2 billion[7].
Taking into account the level of preparation and provision of
evidence that was required, the full actual and opportunity costs
were estimated as high as £34 billion[8].
Clearly, there were serious questions around the "value for
money" that this represented. Public money must be spent
as effectively as possible with waste, duplication and bureaucracy
minimised so that there is as much funding as possible available
to spend on front-line services.
6. While being responsible for just 25% of public
expenditure, local government has been subject to over 80% of
centrally administered targets. In addition to this, soft rules
through which the regulation framework is given effect - codes
of practice, guidance, key lines of enquiry, recommendations,
advice notes - are the vehicle for scope creep and they colonise
and crowd out the space for local discretion. It also creates
an over-bureaucratic system that undermines the fostering of local
accountability. The attempt to capture best practice through this
route is deeply flawed and acts as a contra-indicator to innovation.
7. The key lines of enquiry may have become less
prescriptive, but many of the areas for inspection focus refer
to established professional practice and guidance rather than
legislative or true audit requirements. It would be unfortunate
if, by seeking to comply with guidelines to achieve high audit
"scores", local authorities divert their resources and
focus away from their own priorities. Indeed, the audit process
has catered more for the needs of the auditor rather than the
citizen and community to whom the authority is directly accountable.
8. Such a system does achieve accountability and
scrutiny of public finances, but this can be done more effectively
and without tying up excessive resources. ECC is committed to
value for money but believes that there are more effective and
more appropriate ways of achieving this in local areas.
A poposed approach
9. Any new approach to local government audit should
focus on basic comparative metrics while continuing to provide
opportunity to benefit from best practice. There should be proportionality
grounded in a risk-based approach. A move towards fewer assessment
measures for central government, less rigidity and as a result,
less bureaucracy, is required. We recognise that it is appropriate
to use generic assessment measures to enable meaningful comparisons
in some areas - for example, in relation to core services - but
these should form a technical "menu" from which local
public services can select as appropriate for their area. By agreeing
a common definition and ways to assess performance, this will
support robust comparison.
10. The crucial point, though, is that outside centrally
contracted and funded outcomes, the choice of measures should
be at local discretion, with input and steer on priorities and
service standards from citizens. Moving away from a top-down approach
with uniform measures determined by central government, a system
that seeks to incorporate the views of citizens and public bodies
in the local area will lead to more locally relevant priority
setting. Far from being a "postcode lottery", we believe
that such an approach is more appropriately labelled as "managed
difference" - where local people have a real say in their
own priorities, according to the particular needs and characteristics
of their area. Local government, Whitehall and local people should
be aware that variance is the logical corollary of local choice.
A package of generic assessment measures and locally-driven priorities
allows for both rigorous comparisons between authorities as well
as assessment on the basis of priorities relevant to the local
area. Best practice should continue to play a part in raising
standards.
11. Certainly, in relation to audit of expenditure,
benchmarking is essential to allow for cost performance comparisons
of core services provision with other local authorities and ensure
value for money. Local authorities must be able to demonstrate
how public money is spent and benchmarking cost is a simple and
effective method of comparison. But flexibility must be a key
principle of any new audit regime, and a steer from focus on the
auditor's needs to focus on the customer's needs is vital.
12. Any new approach to local authority audit and
inspection should, therefore, recognise the importance of stronger
local ownership with much greater alignment of regulatory frameworks
to support joint working at the local level, particularly when
shared services are strongly supported and becoming more widespread.
Commissioning must be needs-based for the locality and thus, audit
and inspection should acknowledge this by not seeking to reach
uniformity in all areas. Indeed, cost is not always an appropriate
measure - for example, monitoring place-based budgeting should
have a stronger focus on outcomes rather than cost. Taking a joined
up view of costs, productivity and outcomes would generate a better
overall picture of performance instead of looking at those independently.
13. ECC supports a single improvement framework for
local public services. An overarching structure that encompasses
all audit and performance regimes would streamline audit processes,
reduce the burden on local government and better align with the
principle of value for money. We seek a commitment to working
across Whitehall boundaries to achieve a unified approach and
a proportionate audit process.
Practical arrangements
14. ECC supports a regime that commits to flexibility
and reduces the burden and expense on local government. The opportunity
to choose external auditors creates a system where authorities
can select auditors on the basis of their expertise, knowledge
of local circumstances and the value for money tools they can
offer. The competitive pricing structures that market competition
encourages are welcome. However, there is a need to ensure the
independence of the auditor is protected, and a system to regulate
cost is in place.
15. The scrapping of the self-assessment in relation
to the Value for Money programme relieves pressure on resources.
However, this will only relieve local authorities of this burden
if the same information is not required at a later stage in the
process. Local government must provide data and information that
is relevant, coherent and helpful, enabling the electorate to
exercise their democratic rights in an informal manner. Clearly,
local authorities will provide as much information as required
to auditors but if the reduction in up-front information is offset
with a higher level of subsequent questioning and requests for
information or documentation, this will not benefit local authorities.
16. ECC believes that Local Government should not
face greater inspection burdens than central government and that
inspection should be proportionate. To this end, we agree that
inspection should be focused on financial audit and probity, and
on services where the impact of failure is severe. We would like
it made more explicit, however, that this means that other services
with less severe failure consequences should not be subject to
inspection. These areas should be left to local discretion with
judgement of performance left to the electorate. In terms of the
financial audit, we would suggest that the Statement of Accounts
requirements should in themselves be reviewed. The end product
not only requires some six months of preparation and audit, but
results in a set of accounts that is practically meaningless to
the local community and as such does not add to the transparency
agenda.
17. The auditors' request for information and the
current climate committing to the free flow of public information
are clearly interrelated. Signposting auditors towards council
or partnership websites would significantly reduce the time spent
finding information for auditors. Information published online
will now include all local authority spending over £500 as
well as service standards and performance against those standards,
complaints and comments, publications and reports, and strategy
and improvement planning documents. This move will improve financial
transparency and will ensure more efficient use of resources if
auditors can be directed to this information. However, providing
context would be worthwhile and the Government might consider
how ensuring the new online spending commitment could provide
the appropriate level of background to offer real transparency.
18. Self-regulating mechanisms can provide the flexibility
required in local government as well as crowding out the scope
for unnecessary external oversight. Using our own triggers for
strengthening oversight of local authority spending and putting
power, control and choice in the hands of our citizens is a plausible
venture and promotes a culture of transparency. Such mechanisms
can also help an organisation to define its current status and
look to build in a system design which can continue to improve
performance. Tying this to publicly communicated service standards
would ensure the rigour of the approach as well as reducing the
burden on local authorities. Furthermore, partnership arrangements
provide a strong emphasis on internal accountability and help
to raise the standard of services. Indeed, this may be a more
successful method of auditing shared services with additional
powers to scrutinise and ensure cooperation than a rigid audit
regime has so far provided.
19. The local government community is supportive,
innovative and practical. It is best placed to understand the
issues, problems and difficulties being faced by its peers and
to find practical ways to overcome them. To this end, sector-led
support is an appropriate and understated principle to work from
and could be used as an alternative to intervention in some cases.
It is infinitely more sensible for authorities who excel in a
particular area to support those who are weak, rather than for
a third party to determine support needs. Sector-led support would
allow authorities with differing outcomes to compare practices
and for stronger authorities to take the lead in practices of
excellence. This can take place effectively both within an authority
area with other public services or with comparative authorities.
20. Commitments to robust peer-led external challenges
and self-evaluation can provide locally relevant measures of performance
while established networks of knowledge sharing such as communities
of practice can improve methods of assessment. Increasing the
role of the appropriate statutory officers employed within councils
can provide reassurance that the authority is not in danger of
either corporate, financial or service-specific failure. Such
assessment measures must be rigorous and give central government
confidence in the system.
CONCLUSION
21. ECC supports a single overarching audit and inspection
regime that incorporates the principles of value for money, flexibility,
and accountability to the local electorate. Accountability can
be achieved without the need for excessive assessment measures
that create unnecessary cost. As such, ECC supports a regime that
provides an element of self-regulation and sector-led support,
where local authorities have the opportunity to shape how they
will measure the success of their initiatives and commitments.
Essex County Council
January 2011
7 Local Government Association (2010), Freedom to
Lead: Trust to deliver, LGA: London Back
8
Localis (2010), For Good Measure: Devolving Accountability
for performance and assessment to local areas, Localis: London Back
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