MPs warn council audit could be politicised by reforms

11 Sep 14
Changes to the audit regime for councils being introduced following the abolition of the Audit Commission could weaken accountability for public money and lead to politicisation of scrutiny, MPs have warned.

By Richard Johnstone | 12 September 2014 

Changes to the audit regime for councils being introduced following the abolition of the Audit Commission could weaken accountability for public money and lead to politicisation of scrutiny, MPs have warned.

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In a hard-hitting report examining the assurance of local government funding to Parliament, the Public Accounts Committee said ministers believed the best way to ensure that councils spend money wisely was for residents and councillors to provide scrutiny.

However, committee chair Margaret Hodge said that there was ‘no convincing evidence that armchair auditor members of the public are being empowered to hold local authorities to account for how they spend the £36.1bn in funding they receive every year’.

Changes to the audit regime for local authorities once the Audit Commission closes next April to create a decentralised audit regime where authorities manage their own arrangements could also weaken accountability.

‘The new arrangements for the audit of local authorities and the potential for political party control of scrutiny arrangements also threaten to weaken accountability.’

‘Councillors do not always have the skills or time to fulfil this role, which involves scrutinising the delivery of complex services such as adult social care provision,’ Hodge added.

Particular local circumstances could lessen the effectiveness of accountability mechanisms, the committee said. For example, local councils dominated by one political party may not be subject to sufficient scrutiny from opposition members.

Within the existing arrangements, the MPs said the Department for Communities and Local Government does not know whether its local accountability system was able to ensure value for money from central government funding.

In particular, there were gaps in the assurance that had been provided to parliament for £2.8bn of ‘targeted’ grants, where money is allocated earmarked for one function but can be spent elsewhere. Funding targeted at local welfare provision and transport improvement schemes fall into this gap, the report stated.

Hodge welcomed a DCLG pledge to review the mechanisms for the assurances it receives about value for money as these were ‘overly reliant on service user surveys to conclude that local authorities are maintaining services despite funding reductions’.

‘These surveys are certainly not intended for that purpose and are unlikely to assess value for money,’ she added.

‘Whitehall departments must still be able to assure Parliament that they are achieving value for this money – not just that local authorities are financially sustainable. DCLG must tighten up assurances on funding so that we can follow the taxpayers’ pound.’

Specifically, MPs called for DCLG to focus on the effectiveness of local authority mechanisms that have a specific value for money role, such as the Best Value duty, scrutiny committees and the role of section 151 officers.

Responding to the report, local government minister Kris Hopkins said the government made no apology for scrapping what he called ‘the last administration’s avalanche of targets, top-down blanket inspection and micro-management of local government’.

This has freed councils from the shackles of Whitehall control and reduced the reporting burdens on councils, he added.

‘However, robust auditing remains in place and a more accountable and efficient way of holding local councils to account is being created through the Local Audit and Accountability Act. And reserve powers remain to conduct targeted inspections where there is an overwhelming public interest, as, for example, are currently taking place in Rotherham and Tower Hamlets.’

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