Conclusions and Recommendations
1. In 2013-14, the Government gave local authorities
£36.1 billion, of which £32.9 billion had no specific
conditions ('ringfences') attached as to how local authorities
could use it, other than that spending was lawful. This reflected
Government's intention to give local authorities maximum flexibility
to allocate funds in line with local priorities. Departmental
accounting officers retain a responsibility to assure Parliament
that the funding is used in line with its intentions and achieves
value for money. The Department for Communities and Local Government,
as the lead department for local government funding, states that
it has put in place assurance arrangements aimed at balancing
the tension between giving local authorities greater flexibility
whilst providing sufficient assurance to Parliament. However,
there are direct reporting arrangements for ringfenced grants
that amount to £3.2 billion of the £36.1 billion allocated.
The Department relies primarily on the local accountability system
of checks and balances to ensure that local authorities achieve
value for money with unringfenced funding. The new arrangements
for the audit of local authorities and the potential for political
party control of scrutiny arrangements also threaten to weaken
accountability.
2. The Department does not know whether the
local accountability system ensures local authorities achieve
value for money with government funding. Central government
grants form around 70% cent of local authorities' income. While
we acknowledge that the direction of policy is to give local authorities
greater flexibility over how they use this funding, Whitehall
departments must still be able to assure Parliament that they
are achieving value for this money. The Department expects that
a combination of factors: the 'best value' duty, the work of local
auditors, scrutiny committees of councillors and the statutory
role of local authority section 151 officers, will ensure that
local authorities make decisions which constitute value for money
locally. However, the Department has not assessed whether the
local accountability system operates effectively in practice.
Its oversight focuses on the local accountability system's effectiveness
in terms of local authorities' financial sustainability rather
than value for money. There are concerns over whether the new
arrangements for the audit of local authorities provide sufficient
assurance and whether scrutiny arrangements are independent of
partisan politics. The Department's information sources, such
as officials' personal contacts with local authorities and contacts
with regulators, do not give it an insight into whether the local
accountability system is effective in achieving value for money
and depending on personal relationships is not an adequate system
of oversight. Additionally, the assurances that the Department
gains from the Audit Commission's collation of local auditors'
findings will no longer be available after the Commission closes
in 2015. We welcome the Department's agreement to review the mechanisms
for the assurances it receives about value for money.
Recommendation: The Department should:
· ensure
the Department's information sources provide it with sufficient
assurance over the effectiveness of the system in relation to
value for money, including having plans in place to preserve the
assurance currently provided through the Audit Commission's annual
report Auditing the Accounts;
· focus
on the effectiveness of mechanisms that have a specific value
for money role, such as the Best Value duty, scrutiny committees,
local auditor roles, transparency of data and the role of section
151 officers.
3. The Department could do more to help local
authorities achieve better value for money now that they have
greater flexibility over funding. The Department intended
that removing ringfences on grants would allow local authorities
to allocate resources according to local priorities, and enable
them to use funding innovatively to protect services in a climate
of funding reductions. It told us that Local Government Association
peer reviews indicate that the sector is getting better at sharing
good practice between local authorities to achieve value for money
and it is aware of some individual examples of where local authorities
are achieving efficiencies. However, the Department itself seems
overly reliant on service user surveys to conclude that local
authorities are maintaining services despite funding reductions.
Whilst relevant, these surveys are certainly not intended for
that purpose and are unlikely to assess value for money.
Recommendation: The Department should identify
and share best practice examples that demonstrate where local
authorities have used greater funding flexibility to introduce
innovative practices that save money and protect frontline services.
4. Departments do not monitor some unringfenced
grants, which means they do not know whether they are achieving
their stated strategic objectives. Despite the Department's
position that local authorities should be able to achieve better
outcomes with maximum flexibility over funding, some departments
continue to specify intentions for how local authorities spend
unringfenced grants. In 2013-14, departments expected, but did
not require, local authorities to spend £7.8 billion of unringfenced
grants on particular activities; but the departments then did
not monitor how local authorities had actually used £2.8
billion of these grants. Grants within the unmonitored £2.8
billion include, for example, the Department for Work & Pensions'
Local Welfare Provision Grant (£178 million in 2013-14) and
the Department for Transport's Integrated Transport Block (£320
million in 2013-14). In these cases, departments cannot assess
whether they are achieving intended outcomes or getting value
for money. We recognise the policy to reduce reporting burdens
means that departments' monitoring is at the minimum possible
level. However, where departments have specific intentions for
funding, they should be doing more to understand whether they
are achieving their objectives.
Recommendation: Where departments judge
that unringfenced targeted grants are appropriate, they should
ensure they have sufficient information to understand the impact
of these grants, to assure Parliament on the expenditure and to
inform their decision-making on future funding arrangements.
5. The Department's reliance on local accountability
places a greater onus on value for money judgments made at a local
level, but local authorities' capability to perform this role
varies. The Department is clear that local councillors are
best placed to make decisions on value for money locally. It therefore
relies on the effectiveness of local accountability mechanisms,
such as councillors' scrutiny committees. However, councillors
may not have sufficient capacity to fulfil this challenging role.
Councillors are required to scrutinise the delivery of complex
services, such as adult social care provision, requiring appropriate
skills and expertise. In addition, particular local circumstances
could lessen the effectiveness of local accountability mechanisms;
for example, local councils dominated by one political party may
not be subject to sufficient scrutiny from opposition members.
Recommendation: The Department should recommend
to the Local Government Association that it identifies and shares
best practice in scrutiny committees for authorities where there
is little or no opposition representation.
6. The quality and accessibility of information
to enable residents and councillors to scrutinise local authorities'
decisions varies. If the local accountability system is to
work effectively it is fundamentally important that residents
can hold local authorities to account for their decisions. It
is therefore vital that residents can access relevant and understandable
financial and performance information. The Department's Local
Government Transparency Code requires local authorities to publish
data, including details of all expenditure over £500, information
on senior salaries and details on local authorities' land holdings
and building assets. However, often this data is presented in
a way which makes easy and effective scrutiny by the public very
difficult. We are also concerned that the public might be less
engaged with decisions on services that are significant in terms
of expenditure, but do not affect them directly, such as adult
care and children's services. The Department expects that greater
transparency of information will empower "armchair auditors"
to hold local authorities to account, but there is no evidence
that this has actually happened.
Recommendation: The Department should ensure
that local authorities conform to the new mandatory Transparency
Code on the publication of data, and work with local authorities
to improve performance where shortcomings are identified.
Recommendation: The Department should assess
whether the data published under the Transparency Code helps residents
to scrutinise the performance of local authorities, and if alternative
data would be of more value.
7. The accountability system is not aligned
with funding for new local bodies such as Local Enterprise Partnerships
(LEPs) and Health and Wellbeing Boards. Government increasingly
funds local service delivery through new partnerships, where accountability
arrangements remain unclear. Where more than one local authority
is involved, such as with LEPs, democratic accountability is complicated
if one local authority makes decisions on behalf of others. For
multi-agency partnerships like Health and Wellbeing Boards, Government
is encouraging local authorities to work with other local public
bodies, in sectors such as health, policing and welfare, to tackle
complex local issues. However, lines of accountability run from
these bodies to different government departments, which can obscure
who is accountable overall for the use of the funds and potentially
undermine the drive for local integration and joint working. New
partnerships need to be subject to the safeguards of local accountability
so they derive value for money from taxpayers' money.
Recommendation: The Department should ensure
that they develop a separate accountability system statement,
which makes it clear how new bodies, such as Local Enterprise
Partnerships and Health and Wellbeing Boards, will be transparent
and accountable for their use of public money. Responsibilities
should be defined at both central and local levels.
| 
