PrintCIPFA's Comments on Local Government In Scotland Act 2003
Guidance on Duty to Make Arrangements to Secure Best Value
1. Introduction
1.1 The Local Government in Scotland Act 2003 introduced a radical package of reforms to the powers and duties of local government with a concomitant requirement for the proper stewardship of public funds.
1.2 Uniquely among the professional accountancy bodies in the UK, CIPFA and the CIPFA/LASAAC Joint Committee have responsibility for setting accounting standards for local government. This provides a specific locus to comment on guidance to help ensure both that it relates to those accounting standards and that it helps to deliver proper financial stewardship.
1.3 CIPFA's comments on the Best Value Task Force Guidance (hereafter referred to as "the Guidance") are thus intended both to ensure clarity and, where appropriate, to make explicit links between the Guidance and the relevant documents produced by CIPFA in fulfilment of its role as the standard setter.
2 General comments
2.1 The Guidance on the duty on Scottish local authorities to make arrangements to secure Best Value is welcomed by CIPFA. It goes some way to addressing concerns raised by CIPFA in response to the consultation on the draft Statutory Guidance previously issued by Scottish Ministers and will be a key tool for local authorities to utilise in seeking to achieve Best Value. That said, the Guidance only goes part of the way towards meeting the needs of local authorities in delivering Best Value. The need for a partnership approach is explicitly acknowledged in the draft Statutory Guidance ("an ongoing dialogue with other public sector partners and local business, voluntary and community sectors"). The Guidance could therefore be greatly strengthened in this respect by giving a lead on who might be key partners in certain aspects of Best Value and encouraging local authorities to consult those bodies and make use of any supporting guidance that they produce. There are, for example several organisations, such as professional bodies, that provide supporting guidance on technical aspects. In this context, reference is made throughout this paper to several CIPFA publications that will be essential in ensuring that, while delivering Best Value, local authorities also meet their duty to adhere to proper accounting practice, and a summary of key CIPFA publication is provided at Annex 1.
2.2 Local authorities should be encouraged to address the changes ushered in by the Local Government in Scotland Act as a whole. Statements such as those at the end of page 1 of the Guidance encouraging a joined up approach are therefore welcomed. But there is inadequate cross-reference within the Guidance leaving it unclear how local authorities should demonstrate such integration.
2.3 The Guidance also fails to anticipate future changes resulting from the Local Government in Scotland Act 2003, most specifically the introduction in April 2004 of the Prudential regime. While it might be inappropriate for the Guidance itself to contain such references in advance of implementation of the Prudential regime, it is certain that the Prudential regime will allow a significant advance in delivering Best Value and furthering well-being. It is therefore highly appropriate that such links should be anticipated in any covering letter from the Executive.
2.4 The descriptive approach adopted in the Guidance is to be welcomed, and specifically the style of identifying features of a "Best Value Authority" against which a local authority can assess itself. But it is unclear how well this process-based approach will work alongside Best Value audit arrangements which will necessarily be of a more output-based nature. At some stage in the future, a link will need to be made between the flexible approach of the Guidance and the need to audit measurable outputs in order to ensure sound stewardship of public resources.
2.5 It must be accepted from the outset that while Scottish local authorities have been adopting the Best Value approach on a voluntary basis for some time, the statutory basis is a new departure. As a consequence, and in the absence of central guidance, different local authorities have approached Best Value from different perspectives and will thus have made different degrees of progress towards each of the stated characteristics. This will inevitably result in a wide variation of results from the first round of Best Value Audits conducted by Audit Scotland. It is therefore vital that the Scottish Executive takes a pragmatic approach. Local authorities need the assurance that Scottish Ministers are aware that each local authority will inevitably have made more progress in some aspects of adapting for the Best Value Audit than in others. Local authorities will need reassurances that they will be allowed to adapt to a more formal environment in a reasonable time frame, and without recourse to intervention by Scottish Ministers except as a last resort where there are clear and unambiguous signs of failure.
2.6 Finally, where relevant, reference is made to CIPFA publications that provide useful information and guidance to local authorities to deliver Best Value. It will certainly be the case that other bodies will also produce material of such a nature. CIPFA recommends that explicit reference to these key documents should be made in the Guidance and that local authorities should be encouraged to use them.
3 Specific comments
Commitment and leadership
3.1 It should be explicit in the Guidance that Section 12 of the Local Government in Scotland Act 2003 introduces, for the first time, a statutory duty to adhere to proper accounting practice. CIPFA already produces the Best Value Accounting Code of Practice (BVACOP) to help in achieving this. The CIPFA Directors of Finance Section and LASAAC have recently published A Best Value Approach To Trading Accounts; A Guidance Note For Local Authority Practitioners to provide guidance and support to councils in relation to the new requirements of Sections 10 (Trading operations and accounts) and 12 of the 2003 Act.
Responsiveness and consultation
3.2 In response to the working draft of Statutory Guidance in December 2002, CIPFA expressed concern that the term "an ongoing dialogue with other public sector partners" requires expansion. CIPFA is still of the view that it is difficult to see how a commitment to dialogue in itself could contribute towards the achievement of Best Value by a local authority. The characteristics listed do not clarify the matter as they address issues of identifying stakeholders and how to ensure proper consultation, and not how to engage in dialogue with public sector partners. This is in stark contrast to Partnership for Care; Scotland's Health White Paper, which includes detailed discussion on dialogue with patients, carers and local communities.
3.3 As mentioned, CIPFA supports the link between Best Value and Community Planning. Issues relating to dialogue with public sector partners are explicitly part of Community Planning and a specific link should be made in this section of the Guidance to give local authorities a lead as to how best to achieve and maintain "an ongoing dialogue with other public sector partners".
Sound Governance and Management of Resources
3.4 The CIPFA, SOLACE publication Corporate Governance in Local Government is considered to be the established paper on corporate governance in Scotland. The document was designed specifically against the background of anticipated legislation on Best Value. The Guidance could therefore make reference to this document. There should also be explicit reference to the requirement to adhere to the Code of Practice of Local Authority Accounting - A Statement of Recommended Practice (the SORP) and to the Best Value Accounting Code of Practice.
3.5 The strong emphasis on the need for shared vision and forward planning with partners is supported. However, the Guidance does not follow this with the need to ensure sound financial stewardship of local authority partnerships. Specific guidance on this should be included. CIPFA has produced Sterling Work - Financial Control and Budgeting for Local Authority Partnerships: A Practical Guide which is commended to the Executive.
3.6 Asset management planning is a key tool to ensure effective management of resources. There is therefore substantial pressure on local authorities to produce and implement asset management plans. Indeed, CIPFA would argue that this is an essential element of Best Value. However, even if that were not the case, future changes will inevitably have a significant impact upon asset management, especially with the introduction of a Prudential framework. Sound governance will be critical, for while the CIPFA Prudential Code (in prep) specifies the prudential indicators to be adopted, it does not specify the acceptable limits for each indicator, leaving those decisions to the individual local authority. The Prudential regime will be a major tool in securing Best Value in terms of the procurement, management and maintenance of capital assets such as schools, housing and roads. Local authorities should be preparing asset management plans now to help achieve Best Value and in anticipation of the introduction of the Prudential regime next year. Of particular relevance is the CIPFA publication People + Pounds + Property = Services, which includes guidance on the use of capital accounting to improve asset management. The Executive, through the Guidance, or a covering letter to the Guidance, should be encouraging them to do so.
3.7 The Institute of Public Finance (IPF) is the commercial arm of CIPFA, and widely regarded as the leading professional accountancy body for public services. One of the key themes for IPF is asset management and IPF can provide a comprehensive range of services in this respect. Further details can be found at the IPF website at www.ipf.co.uk
Competitiveness, trading and the discharge of authority functions
3.8 Paragraph 3.1 above refers to the key publication A Best Value Approach To Trading Accounts; A Guidance Note For Local Authority Practitioners. This is particularly relevant in the context of this section of the Guidance.
Sustainable development
3.9 CIPFA supports the commitment to sustainable development but it is unclear how "the achievement of sustainable development" is to be measured and accounted for. In particular, how are local authorities supposed to take account of long term social and environmental benefits against short term financial costs? CIPFA is willing to work with the Executive and with other bodies to deliver more specific guidance on this aspect of Best Value to ensure that means to deliver sustainable development are both workable and accountable.
Accountability
3.10 The introduction of a statutory requirement for a Public Performance Report is potentially the key reporting mechanism for demonstration by a local authority of transparency, accountability and performance. It is crucial in CIPFA's opinion that careful consideration be given to this area to ensure that the guidance given to local authorities ensures that publications are of a high quality in terms of content and in terms of the delivery mechanism.
3.11 The Public Performance Report should also demonstrate that the local authority has a clear decision making process, similar in essence to that promoted under the Prudential regime. Local authorities should report that they have set clear objectives, put mechanisms and structures in place geared to achieving those objectives, and then followed a clear and objective decision making process to ensure delivery.
3.12 In addition to the financial information suggested in the draft Guidance (3.b) the Public Performance Report should present financial information in a way that engages the public and demonstrates the arrangements to ensure sound stewardship of local authority resources. LASAAC is already examining possible improvements to local authority accounts with the twin aims of reducing complexity and making the accounts more useful. The review will not seek to influence the disclosure requirements of the SORP but, rather, will seek to identify improved methods of expression for financial results. The production of summarised revenue accounts is being considered, as is the inclusion of the Housing Revenue Accounts. This summary will be in addition to, and not instead of, the current consolidated revenue account. The Executive may wish to draw on this work in developing guidance on Public Performance Reporting.
Annex 1: Key CIPFA publications
2002 Edition of the Best Value Accounting Code of Practice (BVACOP), CIPFA, London, 2002
A Best Value Approach To Trading Accounts; A Guidance Note For Local Authority Practitioners, CIPFA Directors of Finance Section and LASAAC, Edinburgh, 2003
Corporate Governance in Local Government, CIPFA and SOLACE, London, 2001
Code of Practice of Local Authority Accounting in the United Kingdom - A Statement of Recommended Practice, CIPFA, London, 2002
Sterling Work - Financial Control and Budgeting for Local Authority Partnerships: A Practical; Guide, CIPFA, London, 2001
The Prudential Code for Capital Finance in Local Authorities, CIPFA, London, (in prep)
The Prudential Code: Preliminary Guidance, CIPFA, London, 2003
People + Pounds + Property = Services, CIPFA, London, 1998
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