“There is a complete lack of transparency over the government’s handling of local authorities with governance issues, MPs have warned.
A damning report from the Public Accounts Committee has called on the government to strengthen audit and governance of the “complex and fast-moving” environment that local authorities find themselves in.
The cross-party group of MPs warned that local authorities are now pursuing shared services and taking on commercial risk, but are simultaneously dealing with a “significant” reduction in resources.
The report noted that while some authorities have robust arrangements, others are under strain and have “audit committees that do not provide sufficient assurance, ineffective internal audit, weak arrangements for the management of risk in local authorities’ commercial investments, and inadequate oversight and scrutiny”.
The Ministry of Housing, Communities & Local Government’s oversight of local authority governance has until now been “reactive and ill-informed”, the report said. However, it noted that the department has now committed to improving its oversight.
MPs said that MHCLG lacks reliable information on key governance risks and relies on weak sources of information, meaning it has “no way of pinpointing at-risk councils”. They also said that the department is not focused on long-term risks to council finances.
“There is a complete lack of transparency over both the department’s informal interventions in local authorities with financial or governance problems and the results of its formal interventions,” the PAC said.
The report claimed that taxpayers have a right to know if there are problems with their councils’ finances. It cited the demise of Northamptonshire County Council, which it said was an ‘open secret’ but only for those in the sector.
PAC chair Meg Hillier said: “On the rare occasions a local authority fails, the impact on local citizens is severe. Residents facing decimated services get no comfort from being told that their council’s dire finances were “an open secret”.
“The government needs to recognise the extra pressure that squeezed budgets and increased commercial risks are having on local government and make sure it is monitoring the risks effectively so that it can be alert to the impact of changes on local government.”
MHCLG has been contacted for a response.”
Appearing before the PAC in March:
CIPFA chief executive Rob Whiteman called for an improvement in local government audit.”