In the time since our first analysis of auditor interventions on some local authorities, more PIRs have come out. The use of other auditor powers has also increased: eg, statutory recommendations and related actions, such as section 114 powers. While this still affects a minority of councils, the growing trend is a concern, and serves as a reminder that things can go wrong anywhere – with potentially significant risks, including government intervention.
Our findings highlight that not all councils:
- exercise appropriate care with public money
- exercise appropriate governance
- have the capability to manage risk in both the short and long term
- remove optimum bias in their medium-term plans.
Over a decade of reduced funding from central government has seen councils become increasingly reliant on generating additional income to support frontline services. This has led to a number of local councils expanding commercialisation and developing different vehicles to facilitate this, including joint ventures and local authority trading companies. Some PIRs have shown that the failure of council-owned companies can have a significant financial and reputational impact on those councils.
This new report considers the key themes from the latest set of interventions:
- cultural and governance issues
- failure to understand and manage the risks associated with external companies
- failure to address and resolve relationship difficulties between senior officers and members
- financial capability and capacity
- audit committee effectiveness.