Audit watchdog calls for greater clarity on funding of Welsh councils

The Funding Councils report looked at how the Welsh Government funds the 22 principal councils in Wales, including the annual local government settlement and the grants given to councils for a specific purpose.

The report observed that the formula and process that the Welsh Government uses to allocate most funding to councils has not been fully and independently reviewed for more than 20 years.

It found that some indicators used in the formula rely on data from 1991 and 2001, despite “significant changes” across Wales over that period.

The Auditor General is the independent statutory external auditor of the devolved Welsh public sector. He is responsible for the annual audit of the majority of the public money spent in Wales.

In his report, Crompton also warned that the number, design and timing of grants can create inefficiencies.

He said: “Councils sometimes receive funding late in the financial year, increasing the risk that decisions are made quickly and public money is not used strategically.”

In light of its findings, the report made five recommendations to the Welsh Government to improve the value for money it and councils achieve.

This includes reviewing how it allocates funding to councils, providing councils with greater certainty over future funding levels, and improving how it gives grants to councils.

Auditor General, Adrian Crompton said: “Many of the findings in this report reflect reoccurring themes I have seen throughout my time as Auditor General. This report finds that the way the Welsh Government funds councils does not always help them to achieve value for money - particularly over the longer term. Addressing these themes is essential if the Welsh Government and local authorities are to navigate today’s extreme financial and demand challenges and deliver sustainable public services to the people of Wales.”

The Welsh Government said: "We welcome this report by Audit Wales and will carefully consider its recommendations. We are committed to working with local authorities, to ensure funding is allocated fairly and effectively, and we recognise the importance of providing councils with greater certainty to support their long-term financial planning.

“We have already committed to reviewing the funding formula to better reflect the real costs of delivering services across Wales, and to reducing fragmented grant funding that creates unnecessary bureaucracy for councils.”

Lottie Winson