Financial transparency and accountability are key to restoring public trust.
Public sector institutions have grown in complexity, making it difficult for the public and even politicians to understand the lines of accountability for service quality and spending. Increasing numbers of services are being run by arm’s length external organisations, mutuals or social enterprises. These bodies are little understood by the public and, again, their accountability is unclear.
Public trust has been further undermined by failures among new institutions, including foundation trusts, clinical commissioning groups and academy schools. Public service reforms should increase public confidence, not erode it. Governance and public financial management frameworks need to be strengthened. The current government has agreed to look at the feasibility of implementing the Public Accounts Committee’s recommendations to mandate the use of open book accounting for contracts above an agreed level of expenditure in central government. We need to push for open book accounting and contract management to be the norm, rather than the exception, across the public sector.
We have earlier supported fiscal devolution, but this also requires accountability. Current alliances such as One North and the Greater Manchester Combined Authority are filling the gap, but they are not a long-term solution. Local people have a right to hold those responsible for public services to account.
The number of academies has grown dramatically in recent years, with over 4,000 academies and free schools now under the oversight of the Secretary of State. This has given academies additional freedoms over maintained schools – the ability to set their own pay and conditions, to diverge from the national curriculum, and to vary the length of terms and school days. However there have been a number of high profile governance and financial management failures in this sector, such as at the Education Fellowship Trust, where the Education Finance Authority concluded that the Trust had not complied with its Articles of Association and did not have an adequate internal control framework in place. Such examples have led to concern about the lack of accountability in some academies and demonstrate a need for strengthened financial management and better transparency and governance arrangements in the sector to ensure that they are managed well and in the public interest.
Half of the £187bn government spends with third parties each year goes on contracted out services but insufficient information is published on what this is spent on and the value obtained.
Recent high profile contract failures, including instances of significant overcharging have illustrated the need to strengthen contract terms and performance regimes, implement penalties proportionate to the costs incurred, share efficiency gains, and strengthen providers’ corporate social responsibility. Transparency too is an essential component, as is the capacity of public sector organisations to use the information provided. Open book accounting for all major contracts will be critical to improving the value obtained.
CIPFA calls for: