Impending abolition of the Audit Commission and the end of most ringfences on government grants have left Whitehall ignorant of whether councils give value for money.
That conclusion has come from the public accounts committee, which said the Department for Communities & Local Government did not know if local accountability could accurately detect whether some £32.9bn of non-ringfenced grants were well used by councils.
It said the local amateur ‘armchair auditors’ promised by communities secretary Eric Pickles to help monitor this had failed to materialise.
The PAC’s report Local Government Funding: Assurance to Parliament, found the DCLG “cannot be sure that the local accountability system is ensuring that local authorities are achieving value for money with their funding”.
It added: “The department does not know whether the local accountability system ensures local authorities achieve value for money with government funding.”
Despite the drive to give councils more flexibility over spending grants “Whitehall departments must still be able to assure Parliament that they are achieving value for this money”.
A combination of factors was now used to assess value for money including local auditors, scrutiny hearings and reports from section 151 officers, but “the department has not assessed whether the local accountability system operates effectively in practice”, the report said.
It said the DCLG would lose an important source of assurance when the commission closes next spring and should have “plans in place to preserve the assurance currently provided through the Audit Commission’s annual report”.
The MPs did not though call for the restoration of ringfences on government grants.
Committee chair Margaret Hodge (Lab, pictured) said in a statement: “There is no convincing evidence that ‘armchair auditor’ members of the public are being empowered to hold local authorities to account.
“Councillors do not always have the skills or time to fulfil this role, if this system of local accountability is to work effectively, residents and councillors must have access to relevant and comprehensible information.”
A statement from local government minister Kris Hopkins said: “We make no apologies for scrapping the last administration’s avalanche of targets, top-down blanket inspection and micro-management of local government.”
Mr Hopkins said “robust auditing remains in place” through the local audit system that will replace the commission.
An LGA statement said: “Local councils are accountable through the ballot box for the way we spend public money and we are serious about transparency. With a successful and comprehensive system of sector-led improvement in place, there is no need for greater government control over local spending.”