NEWS
Financial ‘health checker’ expanded and improved P
to include police authorities olice authorities and some Greater London Authority bodies will
now be able to join councils across England in using one of the Audit Commission’s most popular online services.
The ratios tool allows local public bodies, and those interested in their finances, to check and compare their financial performance with others, at no cost. The service has been improved so comparisons can now be made geographically, with groups extended to include map areas or ‘nearest neighbours’.
The original local government ratios tool was hailed as a helpful ready reckoner by 150 county and single tier councils when it
was launched in 2008 alongside the Commission’s national report Summing up: A review of financial management in local government. Last year it was extended to cover England’s 201 district councils.
This year the Commission has added police authorities and three GLA bodies to the database, giving them access to this easy to use comparative information.
The tool calculates, and then allows users to compare and contrast:
* Working capital - the ratio between a body’s assets and its current liabilities
* Usable reserves - capital and revenue reserves as a share of expenditure
* Long-term borrowing - as a share of tax revenue
* Long-term assets - in relation to long-term borrowing
There is an extra calculation for county and single-tier councils of their total school reserves as a share of dedicated schools grant.
The Commission’s managing director of audit, Martin Evans, explains: “In the public sector there is no simple indicator of a body’s financial health – we need to look at a range of measures to find out how effectively money is being managed.
“Our ratios tool distils the complex accounts of councils, police authorities and GLA bodies into just a few indicators based on financial ratios. Of
course they don’t provide a detailed analysis, but they do give a reckoner that is accessible and helpful for financial planners.”
The calculations used don’t, in themselves, indicate good or poor financial performance, because they are the products of a variety of local challenges and decisions. But they do allow similar bodies to make comparisons, identifying common trends and movements.
Martin says: “At a time when the government is focusing on the need for financial transparency and accountability to local taxpayers, the Ratios Tool provides a unique resource that will be helpful to finance staff and ‘armchair auditors’ alike.”
Commission plans almost £25 million savings for audited bodies T
he Audit Commission is set to save councils, health bodies and
other public organisations a total of £24.6 million in rebates, waived inspection charges, and proposed cuts in auditing fees. It is consulting on audit fees for 2011/12, and proposing to cut them by up to 20 per cent. This would save public bodies £11.8 million.
This is on top of rebates and the waiving of some inspection fees as already agreed for the current year, which total £12.8 million.
The consultation suggests significant cuts in 2011/12 including a reduction in fees of up to 20 per cent for local government bodies spending less than £6.5m, by removing the requirement for a value for money conclusion and between 10 and 20 per cent for larger
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national parks authorities, waste disposal authorities, joint committees, integrated transport authorities, passenger transport executives, probation trusts and strategic health authorities.
There will be significant transitional costs associated with the abolition of the Commission. However, the Department for Communities and Local Government has now agreed that these costs should not fall on audit fees. Therefore, the 2011/12 scales of audit fees is based only on what the Commission needs in order to recover the costs of audits and its other activities in 2011/12.
The combined financial effect of our proposals would be to reduce audit and inspection fees in 2011/12 by £11.8 million or 9 per cent for local government and health bodies.
Michael O’Higgins, the Commission’s chairman, says: ‘The Commission wants a simplified approach that will deliver clear and transparent savings to the bodies it audits and inspects. For 2011/12 it will take each audited body’s 2010/11 fee and reduce it by the proposed cuts. This will result in savings for audited bodies while allowing the Commission to wind down its business in an orderly manner.’
The Audit Commission Board has also decided to return some of the audit fees already collected for work carried out this year on use of resources. This work was suspended immediately the government announced in May 2010 that it would abolish Comprehensive Area Assessment.
Rebates will be sent to audited and inspected bodies shortly - a 1.5 per cent rebate for district
Nov/Dec 10
councils, police, and fire and rescue authorities, a 3.5 percent rebate for single tier and county councils and between 2 and 10 per cent for some health bodies.
The Commission has also decided not to charge any inspection fees for work on the managing performance part of the assessment of organisational effectiveness, as there was no value to this once CAA ended.
In total these measures will save audited bodies £12.8m in 2010/11.
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