Source · Select Committees · Public Accounts Committee
Recommendation 11
11
The Department’s monthly survey is an addition to a broader framework of risk monitoring that...
Conclusion
The Department’s monthly survey is an addition to a broader framework of risk monitoring that draws on a range of other information sources.22 Through the use of this framework the Department had placed Croydon Council on its ‘long list’ of councils at financial risk for some years. However, it was only in the light of the council’s return to the Department’s monthly survey in April 2020 and subsequent conversations that the Department became fully aware of the scale of the financial challenge faced by the sector.23 The council’s section 151 officer subsequently issued a section 114 notice in October 2020, indicating that the council was at risk of failing to balance its budget, which is unlawful. We challenged the Department on whether it should have taken earlier action in relation to the council. The Department told us that in its view the authority itself was not fully aware of the scale of its own financial pressures for much of 2020, and by extension that the Department could not have been expected to know.24 The Department has agreed £120 million worth of capitalisation directions, which allow local authorities to either borrow or use receipts from the sale of capital assets to support revenue spending, in order to stabilise the council’s finances.25 19 Qq 100 and106 20 C&AG’s Report, paras 3.15, 3.16 and 3.21 21 Q103; C&AG’s Report, paras 3.17 and 3.19 22 Comptroller and Auditor General, Financial sustainability of local authorities 2018, HC 834, Session 2017–2019, 8 March 2018, para 21 23 C&AG’s report, para 3.27 24 Qq 97–98 25 Letter from Jeremy Pocklington CB, Permanent Secretary Ministry of Housing, Communities & Local Government to the Committee of Public Accounts regarding exceptional financial support, dated 17 March 2021. The £120 million comprises £70 million confirmed for 2020–21 and £50 million in principle for 2021–22. COVID-19: Local government finance 13 Designing schemes to support local authorities and their communities during the pandemic
Government Response
Acknowledged
HM Government
Acknowledged
2.10 The government agrees with the Committee’s recommendation. Target implementation date: October 2021 2.11 Whilst the department has stewardship of the overarching system, local authorities remain independent from central government, are responsible for managing their budgets in line with local priorities and are held accountable by local communities. The department does not performance manage local authorities, but relies on a series of checks and balances, including audit, as part of a wider accountability framework. 2.12 The department has closely monitored the pandemic’s impact on local authorities and responded rapidly to a small number of requests for exceptional financial support. All capitalisation directions were published on Gov.uk. 2.13 The department has considered how it engages local authorities at risk of experiencing financial, governance or service delivery challenges, to ensure that government takes action, where appropriate, consistently. 15 2.14 In the wake of the pandemic, the department has implemented changes to its approach. The Government Internal Audit Agency (GIAA) reviewed the design of intended changes and improvements being made to the stewardship framework, intended to ensure flexibility for responding to emergencies, and improve on other issues within the previous framework of assurance. In 2021-22, GIAA will undertake an in-depth assurance review to provide assurance that the framework is working as intended, and manages risks highlighted by the National Audit Office. Since the onset of the pandemic the department has increased its engagement across the sector and improved its internal processes around risk. The department also agreed principles and an approach to dealing with requests for additional support through the Exceptional Financial support process. 2.15 Regarding Croydon Council, as the external auditors noted, “the depth of the issues …existed prior to the pandemic” but were exacerbated by it. Following a non-statutory review, the Secretary of State appointed an improvement and assurance panel. The department will continue to engage with Croydon and consider the panel’s recommendations, which alongside the Secretary of State’s responses are published on Gov.uk. The department has taken on board lessons from this process and this is reflected in the design of external assurance reviews for councils requesting financial support. The department will write in October 2021 to set out its response to the Committee.