Our latest report, Financial resilience of local authorities in Wales 2015-16, looks at how local authorities are addressing and managing reductions in public expenditure in Wales. Report author, Nick Selwyn, talks about the progress of local authorities in ensuring they have sound financial management arrangements to maintain the important services they provide across Wales which we all rely on.
The ability for local government to anticipate, react, and bounce back from major impacts has been a key theme of our audit work in recent years. And the findings of our most recent assessment of financial resilience in local government, published in August 2016, provides a good overview of how local authorities are rising to the challenge of sustained cuts in public spending.
On your marks, get set…save!
We found that authorities have mostly made good progress in improving their financial planning, management, controls and governance arrangements. Using a red, amber and green rating system, we assessed most councils as having strengthened their arrangements in the last year despite further cuts in public funding. In fact, financial performance has been so positive that overall authorities in Wales have increased how much money they have in their reserves despite the unprecedented cuts in public finances.
However, we also found that more work is still required and in a number of key areas challenges remain. Identifying realistic savings programmes and delivering commitments as well as having the right information to be able to evaluate assumptions and performance to deliver sustained improvement remain a challenges for many authorities. For authorities to continue to be financially viable and strengthen their resilience, then they need to have a well-planned process, with thorough analysis and clear links to organisational strategy, supported by effective controls and sound governance arrangements.
In addition, oversight of local authorities’ performance, and continued support from Welsh Government, also needs to be improved. Current systems have mostly worked well but the sustained period of cuts and significant reductions in funding of many front line local services that citizens value and rely on is beginning to accelerate. The risks to services like environmental health, leisure and trading standards being unable to deliver what is expected and needed is growing and there needs to be stronger oversight form Government on the changes and potential impact.
Sound financial management has other related benefits as well, including building trust with citizens and imposing discipline on the decision-making process to build resilience.
Done well, this can provide a solid foundation for local authorities to plan for funding reductions and make strategic resource allocation decisions.
Done badly, poor decisions are made and service failure becomes ever more likely.
At this time local authorities in Wales have risen to the challenge and progress is being made. However, if the weaknesses we highlight are not addressed then we will run the risk of services being unable to function and deliver, something that none of us want to see.
About the author
Nick Selwyn is a Local Government Manager at the Wales Audit Office, with responsibilities for our programme of all-Wales studies. He has worked for the WAO for eleven years in a variety of roles and is a Fellow of the Chartered Institute of Housing.