Alan Doig

It came as no surprise that the incoming Conservative government was quick to abolish the Standards Board for England after its 2010 election victory. Media comments and party policy briefs made it plain that the government had no time for what it perceived to be an over-zealous, heavy-handed and centralised regulator that added little value to local government.

More of a surprise was the decision to bury the Audit Commission at the same time for, apparently, the same reasons. One can be charitable and assume the government didn’t think through the consequences; the legislative reforms or pronouncements about armchair auditors certainly suggest this. However, it would now appear that at least some in government and Whitehall recognise that throwing out the baby with the bathwater may have won them political brownie points with their local government colleagues and with the private sector, but removing the Commission’s Audit Practice (still District Audit to the rest of us) may have been akin to throwing out the bath as well.

Why Regulation?

In noting some of the episodic scandals that underline the enduring conflict between private or partisan interests and the responsibilities of public office, my recent article in Local Government Studies discusses the long haul of what might be termed the low road of compliance and the high road of ethical standards. The former concerns a control environment – the presence and application of technical and procedural controls that provides reasonable assurance of effective and efficient operations, internal financial control and the proper stewardship of public funds and powers, as well as laws, procedures and resources to scrutinise, detect and punish perpetrators. The latter involves the more recent focus on public ethics and governance arrangements. Together the two roads should combine to achieve an internalisation of norms and standards that in turn promote organisational cultures which protect against specific interests and individuals, and where the control environment can operate more effectively against those seeing to defraud or corrupt local government internally or externally.

Tipping Points in Integrity and Compliance

Unfortunately the dissolution of District Audit, together with its institutional expertise, inter-institutional cooperation, particular powers, and national assessment of patterns of delivery, overview of issues and trends, as well as data dissemination, has come at a time when local government is also undergoing changes, ranging from the implementation of the localism agenda to the declining in-house capacity to underpin the control environment which has drawn on council resources dedicated to fraud against housing benefits.

Externally, there continues to be a decrease in the resources the police are willing to commit to economic crime while the abolition of the National Fraud Authority removes the short-lived attempt to develop a national anti-fraud strategy at local level. Combined they create an unstable and under-resourced environment in which to maintain the direction of travel along both roads in the face of the roadworks thrown up by the various abolitions and wider legislative reforms.

…And a Voice from Beyond the Grave

One consequence of the roadworks has been discussions over government funding for councils’ investigative capacity and about whether other bodies could pick up the high road agenda. While good councils continue holding on to the lessons learned and seeking to maintain the direction of travel, the potential for poorer councils reverting back to those habits that made the roles of the Audit Commission and District Audit, and even the Standards Board, necessary is a risk that government cannot ignore. Nevertheless, having thrown out baby, bathwater and bath, with councils left to their own devices, and with much more pressing issues on council agendas, it will be interesting to see if the Audit Commission’s own warning, over 20 years ago in 1993, may come back to haunt the government when, in arguing for value and relevance of an anti-fraud culture or an ethical environment, the Commission warned of a local government environment which had been ‘rendered more demanding and complex by recent changes to the nature and operation of local government services. Many of these changes, such as the delegation of financial and management responsibilities, while contributing to improved quality of service, have increased the risks of fraud and corruption occurring’.

Alan’s article in Local Government Studies: Roadworks Ahead? Addressing Fraud, Corruption and Conflict of Interest in English Local Government is available online now (or contact the author if you do not have an institutional subscription).

Alan Doig is Hon. Senior Research Fellow at the International Development Department, University of Birmingham; Visiting Professor, Newcastle Business School, Northumbria University and Board member, Management Board, North-east Fraud Forum.