Failures in local government are not inevitable and proper exercise of functions by ‘golden triangle’ officers should keep all councils safe, says top audit firm

Failures in local authority bodies are not inevitable and the system of checks and balances which exist – “in theory at least” – should have caught most of the high-profile recent cases, leading audit firm Grant Thornton has said in a report.

The publication, Preventing failure in local government, suggested that most local authorities were “well led and managed and balance their books, even in these challenging times, but, unfortunately, the catastrophic failure of a local authority isn't the rare event it once was”.

It warned that a decade of austerity and wider downward trends in political governance (including auditor and government-related interventions) had led to failure in the full range of local authority bodies.

The report authors, Paul Dossett and Guy Clifton, said that at the heart of the system of checks and balances lie three key statutory officer roles: head of paid service, monitoring officer and section 151 officer.

“Proper exercise of their statutory functions by these officers should keep all councils safe,” they argued. The report noted, though, that if s.151 officers and Monitoring Officers are not on the senior management team their ability to advise and warn effectively is significantly reduced.

Specifically in relation to the role of the Monitoring Officer, which it describes as “a vital member of the senior leadership team”, the report recommended:

• Monitoring Officers should be part of the ‘golden triangle’ and active organisational leaders, not just specialist advisors.
• Monitoring Officers should ideally be qualified as a solicitor or barrister and non-qualified Monitoring Officers should be supported by their councils to qualify.
• Continuing professional development is vital to maintain expertise and enable the development of supportive professional networks.
• Monitoring Officers should seek independent, external advice when necessary.
• It is important to seek informal peer support and mentoring or coaching.

Grant Thornton said its experience of value for money audits showed that the circumstances of each council that had experienced significant financial, governance and service delivery problems were unique, but there were many common causes, symptoms and consequences of failure that can be observed across all types of council across England

Causes of failure included:

• poor decisions, often accompanied by a lack of transparency
• risky investments made without the necessary commercial skills and knowledge
• lack of an effective top team
• over-reliance on interims in key roles
• failure of members to ask the right questions.

The report noted that local government, central government, regulatory bodies, professional bodies and advocacy organisations have, between them, significant powers and opportunities to prevent local government failure.

“Each provides a particular link in the chain of safeguards protecting the interests of citizens and the stewardship of public money However, the work of each organisation is often not coordinated with, or even visible to, others in the chain,” it said.

The report claimed that each political, regulatory, professional and advocacy body “operates in its own sphere” with only limited shared learning from individual and collective failures.

There was evidence in each case of serious financial and governance failure that one or more links in the chain had been weak or altogether broken, Grant Thornton said, adding that there were opportunities to strengthen the chain by strengthening any weak link.

“Everyone whose expertise, powers and duties form part of the chain of safeguards should consider what they need to do to strengthen their ability to prevent failure,” Grant Thornton urged.

“It's important that this is done collectively, as well as individually. That requires strong collective leadership to recast the relationships between central and local government, and all the organisations which form part of the local government family. It's a daunting task, but the consequences of failing to tackle it will be further failure and a consequent focus on regulatory provisions.”

The challenge for all those in the local government system, the report said, is to make the best possible use of their powers and duties to prevent failure by:

• understanding and learning from past failures
• understanding and mitigating the risks of failure
• working collaboratively across professions, hierarchies and organisational boundaries to support good governance and robust financial management.

Grant Thornton called on CIPFA, Solace, and Lawyers in Local Government (LLG)  - together  with Treasurer Societies and ALATS - to develop a shared set of standards and expectations to underpin the collective leadership of Chief Executives, s151 officers and Monitoring Officers. "Training for aspiring Chief Executives, s151 officers and Monitoring Officers, is essential to ensure a pipeline of well-informed and collaborative statutory officers for the future."

It added: "These bodies should ensure arrangements are in place for effective training and CPD for individuals in the three statutory officer roles, and work together effectively and understand the statutory purpose of each role."

Responding to the report, Helen McGrath, Executive Director of Policy & Governance at LLG, said: “Whilst we hope this report assists the sector in ensuring good governance and reducing the risk of financial crisis, the truth is that without meaningful changes - from the modernisation of local authority legislation, cultural improvements and sanctions, through to addressing recruitment and retention challenges, statutory officer support and financial investment from government, we will continue to see the number of failing councils rise.

“We have the opportunity now, in a sector absolutely ready to unite, to make those changes within our own gift, and influence those at national level, to ensure that councils can support their local communities at a time where the numbers of vulnerable people are rising.”