A commentary on the Public Accounts Committee’s inquiry into council governance
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Faced with eyewatering funding pressures, councils looking for savings may be tempted to trim down their governance and scrutiny structures. With these pressures in mind, the Public Accounts Committe has launched an inquiry into local governance and accountability which met yesterday to consider how the Ministry of Housing, Communities & Local Government could take a stronger leadership role in overseeing local government
There was a general consensus among those presenting evidence to the inquiry that given the unchartered waters that many councils are now venturing into through their commercial investments that the framework of financial checks and balances needs tweaking for the modern, more entrepreneurial council age.
Rob Whiteman, chief executive of the Chartered Institute of Public Finance & Accountancy, voiced his concerns about the risk that governance is seen as an overhead to be cut, at a time when more investment is needed.
“The abolition of the Audit Commission led to unintended consequences,” he said. “At the moment for me there’s a big gap between the secretary of state and the nuclear powers that assist as a reaction to failure.”
But Lord Porter (Con), LGC chair and leader of South Holland DC, was cynical about what the reality of more intense council scrutiny by government might entail.
“Local government was being robbed blind before by auditing - the audit commission cost £2bn. To spend that sort of money on a tick-box exercise would be a gross waste of money,” he said. “The audit functions are now stronger than they’ve ever been - less councils are likely to fall down, [even though] they are in a less healthy financial position.”
But he also acknowledged that councils now have to take on “more riskier activities”. “We are not getting money from central government, so we have to earn it ourselves,” he said. “There is more risk than just sitting there with a begging bowl. But I think we are in a much healthier position.”
CIPFA’s ethics survey last September found that 57% of public sector finance professionals have come under pressure to act unethically at least once in their career, and Mr Whiteman said he believes there is a risk that council employees could be “bullied” into giving advice to councillors, for example to buy a shopping centre, or simply to sign off on cuts. “Clearly, the finance officers feel under a great deal of pressure,” he said.
One committee member raised concerns that the role of a Section 151 officers could be essentially about “marking their own homework”.
Alex Skinner, director of local government finance at MHCLG, responded by explaining that there is an ”interlogging web of codes” to support the role of the 151 officers. ”The vast majority feel confident that they can raise issues with their chief executives,” he added.
The issuing of S114 notices by Northamptonshire CC last year illustrates what can happen when there is not sufficient scrutiny, or where external opinions are either side-lined or ignored. Today it was announced the council had managed to bring a forecast £30m overspend under control in seven months with the support of commissioners and new senior officers.
Lord Porter told MPs it was an “open secret” that Northants was in trouble but said that conversations with councils about financial pressures have to be done primarily on an “under the radar basis”. “There is plenty of oversight on what’s going on,” he added.
Jacqui McKinlay, chief executive of the Centre for Public Scrutiny, also claimed there was an awareness of when Northants was going in the wrong direction, and said that the CfPS had been working with the CFO.
“The policy question is ‘how is that oversight dealt with and does it need to be more transparent and shared across players in the system to prevent failure, rather than after the event?’ I think [the ministry’s] oversight can be strengthened,” she said.
The National Audit Office’s recent report on local authority governance found that the MHCLG does not collate systemic data on governance, and its work to date has been primarily focused on financial risk. The information available to the department has not enabled it to assess the implications of the governance concerns relating to scrutiny committees, the role of local auditors and of section 151 officers.
Ms McKinlay said she thought that council scrutiny teams were rarer now – and smaller.
“There is some excellent scrutiny going on, but we can’t be complacent about it - I don’t think all the departments have got a grip of finance,” she said.
“If you ask a group of councillors what committee they want to go on, it’s very rarely the audit committee which I think is a shame.
Ms McKinlay says that she believes the effectiveness of good governance is dependent on coordination, which happens in the majority of cases, but not of course in instances of failure. “It can look like everything is fine and then you go into the organisation and find out that they haven’t had a peer review for a while,” she said. “You need local intelligence and better sharing of insights between organisations – two stages before Northants got into that state. Where you get a good council like Rotherham, they will share their story. There needs to be a process and structure to enable that to happen.”
Councils are also democratically accountable to their electorate, whose role was compared to that of shareholders in the corporate sector for holding those in power to account. But concerns were raised by committee member Gareth Snell that “most most local newspapers are now struggling to do investigatve work”.
Melanie Dawes, permanent secretary at the ministry, responded by saying that often journalism thows up things government didn’t know.
”LGC and the [Municipal] Journal are doing those things too, not just local newspapers,” she said. ”The LGA does over 100 peer reviews a year and we do read those.”
Sharon Taylor, leader of Stevenage BC, pointed out that there are also new ways to interact with the electorate and be more accountable through social media. ”Twitter can be great for answering people’s questions, which is very healthy,” she said.
There’s no doubt about it, the world is a very different one to that for which most current systems of governance and oversight were designed. But any changes to the role of the ministry should be proportionate.
Jessica Hill, senior reporter