More public bodies failing to provide value for money, says NAO

10 Jan 19

The number of public bodies in England failing to provide value for money is “unacceptably high” and increasing, the public spending watchdog has warned.

Of the nearly 1,000 councils, police, fire and NHS bodies across England, 208 (22%) were found to have “significant weaknesses” in securing value for money in 2017-18, a National Audit Office report out today revealed.

This was higher than the 170 (18%) of public bodies awarded a ‘qualified’ audit conclusion – signifying the significant weaknesses - in 2015-16.

“This increase varies between local government and NHS sectors”, the report found – with NHS bodies seemingly faring worse than other public bodies.

Amongst the 442 NHS bodies, which received funding of about £100bn in the last financial year, 38% local NHS bodies received a qualified audit conclusion, the NAO reported showed.

Of the 495 local authorities, police and fire authorities – responsible for about £54bn of net revenue spending in 2017-18 - the NAO said that 8% were given a qualified audit in the last financial year.  

Head of the NAO Amyas Morse said: “I am shocked by the persistent high level of qualified audit reports at local public bodies.

“A qualification is a judgement that something is seriously wrong, but despite these continued warnings, the number of bodies receiving qualifications is trending upwards.”

The proportion of qualified audit opinions was highest for single-tier local authorities and county councils, where auditors qualified 27 (18%) of their value for money arrangements conclusions.

Morse added: “This is not good enough; local bodies need to address their weaknesses, and departments across government should ensure they are challenging local bodies to demonstrate how they are responding.”

Financial performance issues that can lead to a qualified conclusion, include failure to meet financial targets, such as annual spending limits or delivering planned savings.

The NAO report said: “Qualified conclusions on arrangements to secure value for money locally are both unacceptably high and increasing.”

It continued: “The proportion of local public bodies whose plans for keeping spending within budget are not fit-for-purpose, or who have significant weaknesses in their governance, is too high. This is a risk to public money and undermines confidence in how well local services are managed.”

Local government and local NHS bodies spent £64m on audit fees in 2017-18, the NAO report said, and as such “local bodies need to demonstrate to the wider public that they are managing their organisations effectively, and take local auditor reports seriously.”

The report also suggested that a large proportion of local bodies may not fully understand the purpose of an auditor’s conclusion on arrangements to secure value for money.

Of 61 local public bodies that responded to the NAO, 82% said auditors identified issues they were already aware of, but the NAO stressed that the auditor’s report is to provide public assurance on the adequacy of arrangements in place, not to uncover new issues.

While 95% of respondents said they had plans in place to address issues in the auditor’s report, only 5% said had already dealt with their auditor’s concerns.

Rob Whiteman, CIPFA chief executive, said: “Value for money conclusions should be treated as a cornerstone on which local bodies can show their dedication to transparency and accountability, crucial aspects of good governance in the public sector.

“Local auditors, councillors and directors should exercise their powers to hold executives to account, especially where local bodies are not taking sufficient action to address issues raised.

Meg Hillier, chair of the Public Accounts Committee, said: “It is deeply concerning that local auditors are raising increasing numbers of concerns about local bodies’ arrangements to secure value for money, but these are often not being listened to and there is no consequence for the local bodies themselves.

“With ever stretched public services, citizens deserve to know that there are effective arrangements in place to make sure they are getting value for money.

“Local auditors should be using the full range of their powers and local bodies should be acting on their findings transparently, with departments holding them to account.”

This week, CIPFA member Gareth Davies was identified as the next head of the NAO.

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