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Central government not tracking grant money spent by councils

Central government departments that fund local authorities no longer get clarity on how that money gets spent, warns a new National Audit Office report, writes Abigail Lillicrap.

This is as a result of the increased flexibility given to local authorities by the Department for Committees and Local Government (DCLG) since 2010.

The eight government departments involved in funding local authorities now rely heavily on local accountability – including external auditors – to ensure funding is value for money and being spent with regard to original intentions.

Of £36.1bn of funding given to local authorities in 2013/14, 69% was through unringfenced general grants, where the only expectation is that authorities spent the funding lawfully. A further 22% was paid in unringfenced targeted grants, where departments expect that local authorities spend funding on a specific activity, but they cannot require that they do so.

All 100%of ringfenced funding were reported back to authorities, but only 64% of unringfenced targeted funding was, in varying detail. The lack of evidence on unringfenced targeted funding means departments “cannot be confident” of the impact of these grants and therefore cannot decide based on evidence whether they should continue, change or end.

Amyas Morse, head of the National Audit Office, said: “Local authorities have more freedom to allocate funds according to their own priorities, but the government has less information on how funds are being spent. The Department must still assure itself that the local accountability system that oversees local spending is effective.

“The DCLG’s arrangements to assure Parliament over funding are in transition, but the Department should do more to understand whether the system for funding local government is effective in delivering value for money.” 

The NAO report suggests that tensions remain between the government and local authorities, with regards to the government still specifying how grants should be spent, despite local authorities now having preference. Expectations are stated by government departments on how unringfenced targeted grants are spent, but these are not monitored. However, with the financial flexibility given to local authorities, comes the risk of local priorities within the accountability system over riding the department’s expectation for spending.

The DCLG believe that this flexibility creates conditions for creating value for money; however it is clear that its role is to assure the effectiveness of local accountability. However, the NAO found in its report that through monitoring; the information collected gave a limited observation of whether value for money was being achieved by the local authorities.

The report suggests that departments focus should be on reassessing the appropriateness of funding local authorities through unringfenced targeting grants, if they wish to achieve value for money on a local basis

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