Audit shake-up at local councils

The Audit Commission is to overhaul the local government performance indicator regime by introducing a new suite of measures that will diagnose the financial health of the council.

The commission wants to introduce the new indicators as soon as possible to prepare councils for best value – the government’s replacement for compulsory competitive tendering outlined in last month’s local government white paper.

It hopes to confirm the new indicators in December and put them in place for the financial year beginning next April, 12 months before legislation could require councils to introduce local performance plans under best value.

In a consultation paper issued today, the commission proposes a set of ten ‘organisation health indicators’ covering financial management, people management, democratic accountability and quality of service management.

For the new financial indicators, the commission consulted the Confederation of British Industry in an attempt to reflect the use of financial ratios in the private sector. Those included will require councils to publish figures covering their use of reserves over the year, their level of external debt and the percentage of their annual expenditure that is eaten up by interest payments on debt.

The changes are the most significant to the performance indicator regime since it was introduced six years ago, in an attempt by the last government to drive up standards in local government. To keep the regime simple, the commission wants to change or delete many of existing indicators to make way for the new ones.

Paul Vevers, the commission’s director of audit support, acknowledged the new indicators marked a change of direction. But he added: ‘Best value focuses on local authorities carrying out fundamental performance reviews and CCT is being relaxed. As those constraints go, it becomes more important to highlight where there is a risk of corporate problems.’

The commission also hopes to use the new indicators, which ministers have already accepted as a cornerstone of the best value regime, to encourage councils to publish indicators earlier than the present December deadline.

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