The government should review its practice of funding councils through unringfenced grants that come with a steer about how they should be spent, according to the spending watchdog.
The National Audit Office has questioned the use of “unringfenced targeted grants”, which include the education services grant, highways maintenance grant and troubled families grants. Grants of this type totalled £7.8bn in 2013-14.
In a report published today, the watchdog urged ministers to assess whether this was the right approach “in the context of a locally defined approach to achieving value for money”.
It said: “Departments do not have to monitor directly how local authorities use unringfenced targeted grants, but state their expectations for how these grants are spent.
“This approach may increase local financial flexibility, but there is a risk that the primacy of local priorities within the accountability system could mean that the departments’ expectations for these grants are overridden locally.”
The report also said the government’s policy of reducing reporting burdens meant that for £2.8bn of the £7.8bn in unringfenced targeted grants, departments received no direct information on how local authorities used them.
“The lack of direct evidence means that departments cannot be confident of the impact of these grants and whether they should continue, change or end them,” it said.
The report also warned that the Department for Communities & Local Government had “limited insight” into whether councils were achieving value for money.
“The DCLG is clear that its role is to assure itself that local accountability is effective, rather than to monitor whether spending is value for money,” it said. “DCLG believes that the system creates the conditions for local authorities to achieve value for money, but the NAO found its monitoring information gives limited insight into whether this is happening in practice.”
It said the government should assess the appropriateness of “unringfenced targeted grants”. If it decided these grants were appropriate, it should “assess how far reporting arrangements for targeted grants give enough assurance that local authorities spend this funding according to policy intentions”.