Bonfire of the Quangos

Recent news that the Audit Commission is to be axed is an interesting one for Nottingham.

Given the council's necessarily close relationship with the Commission you might have expected our political leaders to have felt the need for some comment on its planned demise. After all they're not normally shy on criticising the new government's policies, JoCo was quite vocal on elected mayors, the budget and the scrapping of EMDA. But not a peep about the Audit Commission.

Of course, NCC has always had a somewhat difficult relationship with the Audit Commission. There was the Public Interest Report into the mess at Nottingham City Homes, none too flattering corporate inspection reports followed by a slap on the wrist for dishonestly spinning the findings of those Commission assessments.

Even the bizarre love affair between the Commission and the Housing Benefits service seems to have cooled. Recently the Commission caught Housing Benefits out for having overclaimed their subsidy to the tune of £2m. Now, after happily accepting its judgment when awarding them 4 star ratings HB are now challenging the Commission's assessment of the level of overclaim, reckoning it to be out by a factor of nearly 5 (see 'Housing and Council Tax Benefit Subsidy Claim 2008/09' p23 of this document)-

"The housing benefit and council tax benefit subsidy claim 2008/09 was qualified by the Audit Commission. Their qualification letter extrapolated financial errors found in the claim to calculate that there was potential for the subsidy claim to be overstated by £2.1m. The DWP has since written to the City Council requiring a response to the qualification letter...Additional work has been undertaken to challenge the calculation of the potential impact of the errors that could reduce the adjustment of subsidy to £0.430m, subject to agreement by the DWP. In summary the City Council is challenging some of the statistical extrapolation calculations used to derive the final figure. "

So, perhaps NCC isn't really that upset about the loss of the Audit Commission after all. And their smiles no doubt widened when the alternative of allowing councils to appoint their own private sector auditors was announced.

You see, NCC is known for sending quite a lot of business to private sector consultants, spending nearly 9% of all staffing costs on them. Now, clearly some of this is spent on the Harold Tinworths and Bill Trattles types, one-man-band former local government bods who set up in business with what are essentially a series of temporary jobs. However, it also includes big firms like PricewaterhouseCoopers who NCC has a long and cosy relationship with. Well, as luck would have it, PwC can provide accountancy services as well!

Now lets imagine a scenario where PwC as auditors are charged with assessing the VFM of a decision to outsource a service or award a contract to PwC, you're not going to get an entirely independent viewpoint are you? What you probably will get is the answer you want and have paid to hear. That will be right up JoCo and the gang's street.

Another issue that bodes badly for us the taxpayer is that these big accountancy/outsourcing firms don't exactly have sparkling records of brilliance in the projects they have undertaken, a lack of talent they will probably bring to public sector auditing.

So incompetence and an in-built conflict of interest. Just what councils need.

In a related matter, have a read of this article by Johann Hari in the Indy on the pernicious effect of management consultants on the organisations they prey on.

(Post updated with links 21/8/10)