Local Government financial governance and scrutiny – passing the robustness test?
This week will see even more talk of the financial challenges facing councils, if that’s actually possible.
Looking at CfGS activities for the week, we’re talking financial resilience at the LGC Summit, it’s the inaugural CIPFA CfGS Councillor Conference and at our national health scrutiny and assurance conference on Friday we expect finance talk to be high on the agenda.
This week will also see the publication of our report for Northamptonshire County Council with recommendations to overhaul their scrutiny model to better support their transformation programme.
The ominous position of local government finances is well-rehearsed and well known within the sector. There are some signs of recognition in the national media, but no immediate expectation of government-led solutions.
All councils are also not in the same boat. Those with social care and children’s’ services responsibilities are clearly the most challenged. But there is otherwise a mix of positions, causes and responses. The net result however, after a decade of massive changes in council revenues, is that most are quickly running out of options.
For the time being at least, the sector continues to be charged with identifying how to navigate the unknowns and minimise the impact. And hopefully, how to support each other as best we can.
Within this context, our focus is on the effectiveness and robustness of existing governance, oversight and scrutiny mechanisms. Constantly asking if national and local structures and ways of working are helping, providing minimal impact, or in the worst case acting as an expensive distraction?
Some thoughts on the current situation:
- From a national perspective – CIPFA’s recent proposal of a financial resilience test for councils, and the overwhelming response to that proposal from the wider sector, demonstrates that there is a conversation to be had. Opinion is clearly divided, but the vexed question of whether some form of national oversight is necessary on council finances does need to be resolved.
Almost a decade after the Audit Commission’s substantive work was brought to a sudden end, there is still a fear that such a national system of oversight – even of something as central and fundamental as financial health – would be an overreach. It’s true that, handled badly, it would be. One could imagine a poorly designed, centralised system which would hinder councils’ ability to deal with the financial crisis rather than assisting. But surely given the pressures that some way for councils’ financial health to be independently assessed other than through traditional audit mechanisms should be explored.
It is great to see this conversation moving into the public domain of a debate, on from conferences, at roundtables, and so on – and hopefully this will continue.
- Locally – There is a need for more challenge and openness. We cannot continue to expect governance mechanisms that were created for a different age to adapt as if by magic to a very different world – where:
- Managing risk is now core to oversight – it’s no longer just about policy and delivery.
- Budget scrutiny can no longer be a one-off activity taking place in December/ January then followed up with ineffective, inconsistent review of financial scorecards – budget scrutiny has to be ongoing, and served with enough information to do the job properly. Look at our Northamptonshire recommendations. Scrutiny has to get closer not just to construction of a council’s finance, but to test and challenge assumptions, to know how costs, pressures and risks apply and crucially, how the council is reprioritising its resources.
- Precious (and often depleted resources) need to be prioritised and probably reprioritised several times over – focused on the main challenges, not dissipated and trying to cover every aspect of council business. Having six, or eight, or twelve, “priorities” is as bad as having no priorities at all.
- Structures need to be changed to reflect the changing world – we are seeing more the challenges of scrutinising commercial and different delivery vehicles and supply chains. We are helping councils – to keep hold of democratic accountability whilst maintaining the benefits.
- Recognition that the people operating the system may also need to work differently – we need to move on from the ‘hero’ approach to leadership, which imagines that individual, powerful decision-makers have the unique power to inspire and effect change. We need instead to develop and promote a model of leadership which involves being more open to challenge, overcoming the very human inclination to talk up success, and giving people new knowledge and skills (councillors as well as officers).
- System view – a significant change over the last decade has been increased partnership working and integration across different public services. What has been lagging is the necessary governance and oversight which gives the public and others transparency of this and the opportunity to challenge. The current scrutiny of combined authorities is gaining strength in some areas, but still has some way to go.
Our proposal for a Local Public Accounts Committee, which would be supported by a source of excellent, local data (think the equivalent of the NAO’s support to the PAC) would see councillors reviewing impact based on outcomes as well as value for money across a local public services landscape.
Finally, but critically to success is the effectiveness of resident and community involvement in decision-making – leading to greater trust in local councils and the sector. The governance review recommendations for Kensington and Chelsea Council were in the majority about finding practical ways to work more closely with their citizens and communities, much less on structures and process. Letting go and working out how to better engage should be part of every governance conversation. We will be making sure its on the agenda, every time.
These are some of the thoughts we’ll sharing this week and beyond. We’d welcome your thoughts on if these are the right issues/ challenges/ potential solutions.