5 Value for Money Studies (VfM)|
64. In 2010, prior to the publication of the
draft Bill, the Government decided to terminate the Audit Commission's
Comprehensive Area Assessments. The draft Bill removes the Audit
Commission's statutory duties in relation to undertaking
or promoting Value for Money (VfM) studies. In the future the
Government expects the National Audit Office "will undertake
a small number of additional value for money studies each year,
with a focus on sector wide systemic issues and end to end scrutiny".
The draft Bill expects that sector specific bodies including the
LGA, HMIC and Monitor, will lead performance improvement for bodies
in their respective sectors.
The Audit Commission's Value
for Money work
65. Lord Heseltine, the architect of the Audit
Commission, considered VfM studies to be one of the founding rationales
for the creation of the Commission and an integral tool for measuring
the efficiency and effectiveness of local bodies.
According to Lord Heseltine:
The work that the Audit Commission did in value-for-money
studies created massive economies, and benefits therefore, simply
by turning a spotlight on what you could achieve in a well-run
authority. It has elevated the practice of the best to a standard
that others could copy.
66. However, we also heard evidence that the
nature of the Commission's VfM work had changed. Witnesses argued
that while larger national studies which were perceived to have
had "a lot of value in terms of efficiency and effectiveness
across local authorities", they had been superseded by the
Comprehensive Area Assessment which local authorities, in particular,
judged to be less effective.
67. A number of Witnesses argued that the CAA
had become unwieldy, poorly reflected local priorities and that
the studies had increased in volume but declined in quality. Joanna
Simons, Chief Executive of Oxfordshire City Council told us that
there had been too many reports of insufficient quality.
Similarly, Stephen Hughes, Chief Executive of Birmingham City
Council, argued that some of the Commission's work "was really
very good, but quite a lot of the studies they did were useless".
Moreover Joanna Simons told us that for most local authorities
"the worry is about being inundated with endless requests
for additional data for things that feel like a long way from
our priorities". She argued that:
the problem with the Audit Commission [was that]
it just got out of control in terms of the latest idea that might
be fine in "X" part of the country but wasn't relevant
68. The Secretary of State reinforced this argument
and told us that he was not convinced that the Audit Commission
"really added to that process of producing value for money".
69. The scope of the Audit Commission's
work on VfM expanded over time at the request of the Government.
While we received conflicting evidence about the value of the
Audit Commission's work in this area, we are disappointed that
the Government failed to undertake a review of the Commission's
Value for Money work prior to its termination.
70. We are very concerned that
the draft Bill makes no provision for comprehensive like-for-like
value for money comparisons which would enable informed judgements
about whether taxpayer money had been spent effectively. The Bill
should be redrafted to include a systematic process to enable
benchmarking and like-for-like comparisons between public bodies
in the new regime.
The National Audit Office and
national VfM studies
71. The NAO currently undertakes approximately
sixty VfM studies per annum.
Amyas Morse, C&AG, told us that he intends to undertake a
further six in response to the additional responsibilities conferred
on the NAO in the draft Bill; he referred to these pieces of work
as the "devolved and local space" studies. The C&AG
expected the NAO to undertake studies across local authorities,
the Constabulary and health bodies.
These studies would, he argued, differ from the inspection
work undertaken by the HMIC and Monitor as it would focus on broader
72. Some witnesses questioned whether the NAO
had the expertise and experience to perform its new role, arguing
that an opportunity has been missed to transfer remaining expertise
from the Audit Commission to the NAO.
However, the C&AG said he had already recruited of additional
and he was confident that the NAO was in a strong position
to undertake the work with the resources he has already requested
which amount to "roughly a 10% uplift in resources".
We note the C&AG's confidence
that the NAO will be capable of undertaking the additional VfM
work imposed by the draft Bill. The C&AG should monitor closely
whether he has sufficient resources to meet this requirement and,
if necessary, request additional resources from the Public Accounts
Commission to discharge his new responsibilities.
73. A number of witnesses argued that limiting
the number of devolved and local space studies to be undertaken
by the NAO to six was arbitrary; and that the C&AG should
be able to undertake further studies where he deemed it necessary.
The C&AG told us that he would be content for the NAO to take
on more VfM studies should it "become obvious that we need
to do more" but warned against a situation where the NAO
would be "covering areas that were not envisaged originally".
The Local Government Association voiced similar concerns and warned
that the majority of councils would object to the NAO being "involved
with individual inspections of work in individual councils in
any way, shape or form".
74. The C&AG told us he was committed to
the NAO maintaining a close working relationship with the LGA.
The NAO currently consults the LGA on the topics for the VfM studies
undertaken by the NAO through a reference panel chaired by the
Chief Executive of the LGA, Carolyn Downs.
While the LGA offers the NAO "considerable guidance"
on its approach it is important to stress that the C&AG should
take final decisions regarding the six VfM studies.
75. Some of our witnesses were concerned about
the way in which topics would be selected for VfM studies. Gillian
Fawcett of ACCA questioned whether the reference panel would choose
to address some of the "wicked issues", which are usually
complex or intractable problems which require monitoring.
The Audit Commission currently addressed these difficult
issues through their studies by drawing on a national picture
in order to make suggestions for improvement nationally and on
a local level. It
was not clear whether the C&AG would continue this practise.
76. We recommend that the C&AG
consult widely in order to identify the core issues which need
to be addressed by its six Value for Money Studies. We expect
the C&AG to work closely with the Committee of Public Accounts
in developing its expanded VfM programme.
77. A number of witnesses were concerned about
the C&AG's ability to access sufficient high quality data
in order to make powerful VfM conclusions. Other witnesses argued
that the C&AG's detailed guidance published alongside the
Code (see Chapter 2) would ensure that data is collected in comprehensive
and consistent fashion. Moreover, it was also recognised that
some of the valuable data and information currently collected
by the Audit Commission might be lost in the new regime. An example
given was the Audit Commission's unique relationship with the
auditors allowed it to survey auditors for information outside
of the Code for no additional cost as this work was funded through
the Audit Commission's "top slice".
This arrangement allowed the Audit Commission to produce reports
on local council financial resilience and make conclusions about
how many councils struggled to cope with cuts to resources rather
than naming them individually.
There is no mechanism in the draft Bill to continue this arrangement;
any additional work would have to be commissioned separately at
an additional cost to the C&AG.
78. We recommend that the Bill
include a provision to confer on the C&AG an additional power
to instruct auditors to collect consistent information on his
behalf. The Secretary of State should provide detail on how auditors
will be reimbursed for this additional work.
79. Alongside the NAO's six national VfM studies,
the Government invites "the sectors themselves" to play
"a greater role in improvement activity".According
to the Government, this would 'enable a greater focus on issues
the sectors consider will be able to add greatest value'.
During our inquiry we heard evidence from Monitor and HMIC
about their approach to inspection and improvement as well as
evidence from the LGA about its newly instituted sector led-approach
to performance management. The LGA's approach, which predominantly
consists of a peer challenge process
and an online data and benchmarking service called LG
Inform, was of particular interest to us.
80. We heard conflicting evidence about whether,
in principle, a sector-led approach is the most appropriate way
to address improvement issues in local bodies. The C&AG argued
that "there is nothing wrong at all with the LGA being seen
in the role of encouraging and driving improvement"
but cautioned that he would want to investigate any cases where
the NAO's findings contradicted the LGA's work.
81. However, other witnesses argued that a body
representative of the taxpayer rather than the LGA, which is a
membership organisation representative of local government, should
be responsible for this work, due to the substantial funds that
local authorities receive from central Government via taxpayers.
We are concerned that as
a result of the draft Bill there a vacuum surrounding Value for
Money work for individual local bodies which sector led organisations,
including the LGA, are expected to fill. This places a substantial
amount of responsibility on the LGA which is essentially a membership
organisation and is primarily accountable to its members, rather
than directly to the taxpayer.
82. Witnesses gave mixed opinions about the effectiveness
of a sector-led approach to improvement. While some witnesses
suggested that a sector-led process could provide more targeted
information to local bodies which better suits their needs, others
doubted that such an approach would prove sufficiently robust
because the LGA cannot compel its members to collect information
in a standardised format.
We consider that the effectiveness
of the LGA's peer-led improvement work is undermined by that organisation
being a membership body, and the absence of a formal mechanisms
to identify poorly performing local authorities who may, or may
not, choose to participate.
83. Despite this we are encouraged by the progress
that the LGA has made with regard to its sector-led approach and
it is reassuring to hear that the C&AG is satisfied with the
LGA's methodology. Furthermore, we are encouraged that, from mid-2013
the public will be able to use the LG Inform tool to compare the
performance of their local authority to others and hold the executive
to account. We recommend
that the NAO should undertake a review of the effectiveness of
the LGA's sector-led approach one year from the commencement of
79 Draft Local Audit Bill, Cm 8393, July 2012,
p 165 Back
"From Audit Clerk to Audit Commission Audit Commission",
Lord Heseltine,25th Annual Lecture, July 2008, www.audit-commission.gov.uk Back
Q 477 Back
Q 391 Back
Q 200 Back
Q 198 Back
Q 198 Back
Q 655 Back
Communities and Local Government Committee, Audit and inspection
of local authorities, p 35 Back
Q 597 Back
Q 390 Back
Q 585 Back
Q 594 Back
Q 594 Back
Q 240 Back
Q 590 Back
Q 203 Back
Q 573 Back
Q 392 Back
Examples include Joining up health and social care; Improving
value for money across the interface (2011), Managing sickness
absence in the NHS (2011), The final countdown - countdown to
IFRS in local government (2011), Tough times: Councils' responses
to a challenging financial climate (2011). Back
Q 52 Back
Audit Commission, "Tough Times 2012: Councils approach
to the challenging financial climate", 21 November 2012,
Draft Local Audit Bill, Cm 8393, July 2012, p 165 Back
Draft Local Audit Bill, Cm 8393, July 2012, p 165 Back
Written evidence from the Local Government Association Back
Q 590 Back
Q 590 Back
Q 490 Back
Q 186 Back