Departments’ oversight of arm’s-length bodies Contents

2Proportionate oversight and maximising value

A proportionate approach to oversight

13.Oversight that is not proprotionate to the risks and opportunities in an arm’s-length body risks duplicating existing governance arrangements and wasting money.16 We heard that in October 2015 the Ministry of Justice had imposed stringent spending controls that required its arm’s length bodies to clamp down on spending in many discretionary areas, such as travel. It had applied these irrespective of the assessed level of risk or financial management capability of the arm’s-length body. The Ministry had asked all its arm’s-length bodies to report weekly on how they were spending their money, a regime it has since relaxed. The controls consumed considerable senior staff time and arm’s-length bodies felt they implied a lack of trust in their own governance arrangements.17

14.We were, however, told that most departments use risk-based approaches to oversee their arm’s-length bodies.18 The Ministry of Justice told us it assessed risk in its arm’s-length bodies once a year, separately considering inherent risks, such as the size of the body or the nature of the people that use its services, from dynamic risks such as the capability of the body or changes in the environment in which it works.19 The Department for Culture, Media & Sport told us it assessed risk of arm’s-length bodies four times a year and under four categories, managing bodies more closely if they had more than two amber or amber-red ratings. But the Department told us that it does not share its assessment of risks with the bodies concerned, as it felt the bodies might as a result be “less honest” with the Department about what was going on. The Department for Environment Food & Rural Affairs told us it was developing a new approach to risk management as part of its broader group approach to how it managed both the central department and its delivery bodies. Rather than assessing arm’s-length bodies one by one in terms of risk, it hoped to bring their risk into an overall understanding of risk for the departmental group. It told us it had risk management that had operated reasonably effectively within individual bodies but it had not had a strategic overview.20

15.Despite the variation in approaches across government, departments rarely discussed at a senior level how they oversee arm’s-length bodies.21 The Cabinet Office told us that chief executives or chairs of arm’s-length bodies often talked about the bureaucratic nature of oversight.22 It acknowledged it had not yet succeeded in improving oversight of arm’s-length bodies across government by focusing on sponsorship as a function.The Cabinet Office wants to encourage an approach which, rather than focusing on sponsorship, considers the department and its arm’s length bodies as a “total delivery system” and determines the governance and sponsorship that is appropriate for that system. The Cabinet Office acknowledged this might vary by department but should adhere to common principles.23

Involvement in policy development

16.Arm’s-length bodies are often at the front line of delivering policy and they have deep expertise and understanding that could be exploited in both designing and implementing policy. However, the National Audit Office reported that arm’s-length bodies often felt they were not sufficiently involved in policy discussions. The National Audit Office also noted that the considerable skills and experience of non-executive directors within arm’s-length bodies were not routinely exploited and that secondments between bodies and departments were only used sporadically.24

17.Departments claimed to involve their arm’s-length bodies in policy discussions, for example the Department for Culture, Media & Sport said it talked to Ofcom about telecoms policy, and the Ministry of Justice said it used the Parole Board to advise on the reform of parole policy.25 The Department for Environment Food & Rural Affairs told us it included two of its biggest arm’s-length bodies—the Environment Agency and Natural England—on its executive Committee.26 But most policy is developed within the central departments.27

18.The Department for Environment Food & Rural Affairs acknowledged that if central departments tried to create policy without involving those who have to deliver it on the ground, “the chances are that they will get it wrong”.28 It told us it was keen to involve people at the front line, and also the eventual users of the service. The Department acknowledged it had not been good enough in the past at reflecting the views of users. For example, it had received a lot of feedback from customers about rural payments, and acknowledged it could have improved how it had carried out this function if it had incorporated feedback from customers into the process at a much earlier stage.29

Public appointments

19.The power to appoint and remove board members of arm’s-length bodies is an important way in which departments can influence the governance of those bodies. Departments can help develop understanding between themselves and arm’s-length bodies by drawing on the skills and experience of non-executive directors of both departments and arm’s-length bodies.30 The Cabinet Office told us it was seeking to involve non-executive board members in its reviews of arm’s-length bodies as they brought a different perspective, often a private sector one.31 The Department for Culture, Media & Sport told us that it actively drew on the experience of its non-executive directors to liaise with arm’s-length bodies, while the Department for Environment Food & Rural Affairs said it included the Chairs of two of its non-departmental public bodies on its departmental board.32

20.In March 2016 Sir Gerry Grimstone’s review of the public appointments process identified that ‘too many public appointments take far too long to conclude which is both inefficient and can deter good candidates from applying’. The Cabinet Office acknowledged that the Grimstone review had been largely welcomed, and agreed that the public appointments process needed to be more efficient and work better for applicants.33 A new Commissioner for Public Appointments was appointed in April 2016, who was finalising a set of principles for public appointment in response to the Grimstone review.34

16 C&AG’s Report para 2.10, 3.8

18 C&AG’s Report paras 13, 3.2

24 C&AG’s report, para 16

30 C&AG’s Report, paras 2.13, 4.6

34 Q 89; The Commissioner for Public Appointments, Peter Riddell appointed as Commissioner for Public Appointments, 20 April 2016

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18 October 2016