Tuesday, 18 January 2011

Let's learn to use the local authority auditor

Taxpayers are, or should be, considerably interested in  the work and opinions of the auditors of their local authorities and all other public bodies.

It is intended but not generally realised that assurance is given on value for money and resource utilization as well as the annual accounts.

This process is currently rendered largely wasted because (a) the financial statements are mired in detail and late, and of (b) bureaucratic language.  Similarly the value for money judgements when written up by auditors are  unintelligable to the lay reader and do not extend beyond  whether suitable arrangements are in place - not whether achieving.

In 2012 the Audit Commission is to be scrapped leaving the ‘market’ open for  privatisation but in ways that have not yet been worked out. At the same time there is to be the gradual decentralisation of public activity eg Private Health Trusts giving way to GP groups.  For example there are now some 11,000 such organisations accounting for some £200bn of public funds, some so small such as parish councils as not to feature even in their own minds as needing to account for our money.

We should be very concerned that developments do not weaken still further our ability to keep tabs on our money in a proper businesslike environment. We are also as a nation moving into a situation which in Europe has caused the accounts there to be failed by the Court of Auditors for 14 years. How will the first ever UK government consolidated Accounts, for 2009-10, fare when they see the light of day at the end of 2011 ?

Monday, 3 January 2011

Councils to set parking fees (News report 3rd January 2011)

At last. Eric Pickles, the Local Government Secretary says “we’re getting out of the way and it’s up to councils to set the right parking policy for their area”. That includes setting competitive local charges.

Up until now Government made it “unlawful” to use charges to “raise revenue or as a local tax”. Why ?

The Local Government Association still says “Councils can’t use parking as a revenue raising exercise but they should have the freedom to set charges at a level which covers the cost of providing parking”. In other words they mustn’t make a profit. Why not ? Especially if it is ‘ploughed back’ as it must be. And more especially because taxpayers paid for the car park in the first place.

But the LGA view is wrong at a deeper level. The first thing to realise is that in order to meet their requirement it is necessary to pass acres of legislation, codes of practice and so on to define what is cost and when a price is a cost recovery and when revenue raising. I haven’t dared to bury myself in the mountains of stuff trying to do that. In practice there is no difference.

Then Profit and Loss requires a cost accounting system. This is something, and the Audit Commission supports me in this,  which hasn’t yet come into government consciousness and practice. How do they intend to set prices ? Do they have to account for direct costs, direct costs plus overhead apportionment, marginal costs, or contributions  ? In practice "actual" cost is meaningless. Cost can only be defined by the question needing answer.

But set to one side those questions of management tools and technique. There is one simply stated  marketing approach which fits the bill.  Charges should be  set to achieve if possible say a 5% under-occupancy of spaces at any one time. Higher charges will deter to the detriment of revenue and lower will lead to perpetually full occupancy which also frustrates and may even so yield  less revenue. Of course quiet and busy periods might be differentially priced to advantage.

And there’s more. Optimised revenue gives council management choices. Either to stabilise or reduce council tax, or put a surplus towards development, subject to pay-back calculations, of more spaces and in turn more revenue.

Is there now some small hope that government may at last be seeing the light and will allow new behaviours which will relieve the  burden on taxpayers’ shoulders which has been added to exponentially in the past for little discernable benefit to anyone except public employees, managers and councillors.