Renew commitment to high ethical standards, report on local financial governance reform has advised
English councils seeking to restore trust in how they spend council taxpayers’ money should recommit to the Nolan principles underpinning high standards in public life, a report published today by the think-tank Localis has advised.
In a new report entitled “Present Tense: renewing and reforming local financial governance towards long-term resilience and sustainability”, Localis acknowledges the severe challenges faced by councils since the abolition in 2010 of regulator the Audit Commission and straitened local finance settlements but argues improved governance will be essential to ensuring attempts by the new government to rebuild local public finances are effective.
Among principal recommendations aimed at councils, the report calls for a shift towards long-term financial planning in line with multi-year settlements anticipated in next spring’s Comprehensive Review, and for local authorities to create organisational cultures that embrace challenge and criticism and hold town hall leaders accountable.
This process would be achieved, the paper suggests, by:
- formalising checks and balances;
- giving statutory monitoring officers more support and protection to perform their duties;
- reviewing whistleblowing policies; and
- strengthening internal audit functions to identify emerging financial threats.
In their recommendations to central government, the report authors call for a national body or set of local bodies to oversee the local audit system by setting standards, managing contracts, maintaining quality of audit as well as overseeing the strategic functions of local authorities.
A further key recommendation is for central government to provide a framework for local government that establishes a clear definition of good governance and outlines the different roles and responsibilities of local government – effectively moving away from the current centralised approach to council financing and empowering local authorities to manage their finances strategically.
Other recommendations in the study include a call to give councils more resources to clear the backlog of audits and also to recruit and retain experienced governance officers by working with professional organisations.
Localis chief executive, Jonathan Werran, said: “In renewing governance, the task for local authorities – to focus on meeting their statutory obligations and pursuing innovative governance strategies without compromising their core functions – is extremely challenging.
“Many councils are already actively engaged in reform and organisational development to respond to the challenges we identified and many of the recommendations are drawn from this best practice.
“However, there is still work to be done in universalising a reformist mindset in the sector and ensuring that an ethos of public service, combined with long-term, strategic thinking, guides local decision-making and service provision everywhere in England.”
Localis senior researcher, Callin McLinden, said: “Local authorities continue to face unprecedented financial challenges, exacerbated by years of austerity and outdated funding models reliant on central government grants.
“Our report, Present Tense, reveals an alarming erosion of governance capacity, undermining councils’ ability to manage finances, oversee contracts, and plan effectively.
“It calls for urgent reform to create a more accountable, transport, and sustainable system of local government finance that empowers councils to deliver for their communities.
“Collaboration between the government and local authorities will prove absolutely vital to rebuilding trust and ensuring resilient local finances in the long-term.”
Guy Clifton, Local Government Value for Money Director, Grant Thornton UK LLP, said: “As auditors of local government we recognise the diagnoses set out in this report.
“Whilst high profile governance failures at some councils should not reflect on the sector as a whole, these failures are a symptom of the need to renew the system of governance.
“All councils continue to operate in an environment of increasing complexity, uncertainty and volatility.
“The report provides an important contribution to the changes needed to improve decision making, scrutiny and the stewardship of public finances nationally.”
Simon Christian, Local Government Consulting Director, Grant Thornton UK LLP, said: “Now is a time for renewal in governance in the local government sector.
“The systems of oversight and scrutiny need to be improved both nationally and within local councils as, if the financial challenges ahead for the sector are to be met, robust and effective governance is essential.”
Read the full report here
