Corporate report

DLUHC accounting officer system statement 2023

Published 12 June 2023

Applies to England

1. Introduction

1.1. Principal Accounting Officers in government departments are accountable to Parliament for the proper stewardship of the resources allocated to their departments. Details of the requirement to ensure regularity and value for money are set out in the HM Treasury guide Managing Public Money. The Accounting Officer System Statements guidance published in April 2017 sets out how central government departments should construct an Accounting Officer System Statement, including details of the accountability relationships and processes within their department. This should include relationships with Arm’s Length Bodies (ALBs) and third-party delivery partners.

1.2. The Department for Levelling Up, Housing and Communities (DLUHC) has documented and published details of local accountability systems for several years. The first was the Local Government Accountability System Statement published in 2012. We then published the Local Growth Fund (LGF) Accountability System Statement in 2015. The Accounting Officer System Statement was first published in July 2018, with an updated version published in November 2020.

1.3. The purpose of this Accounting Officer System Statement is to provide Parliament with a single statement setting out all accountability relationships and processes within DLUHC and across the system for which we are responsible.

1.4. A review of the department’s governance structures and performance for takes place annually and is published in the Governance Statement within the department’s Annual Report and Accounts. The Governance Statement covers the accountabilities for all public money and other public resources which fall within the department’s responsibilities. It outlines standard processes which apply within the department and any significant bespoke arrangements which apply.

1.5. The Accounting Officer System Statement complements the Governance Statement. The Governance Statement charts how, in the role as Principal Accounting Officer, the Permanent Secretary has carried out responsibilities to manage and control the resources used in the department over the course of the latest financial year. The Accounting Officer System Statement charts the accountability relationships in place now and for the future and will be reviewed at the beginning of the financial year alongside the publication of the Annual Report and Accounts and updated as required.

2. Statement of Accounting Officer responsibilities

2.1. I am the Principal Accounting Officer for DLUHC. This system statement sets out the accountability relationships and processes within the department, making it clear who is accountable at all levels of the system.

2.2. As Principal Accounting Officer, I am personally responsible for safeguarding the public funds for which I have been given charge under the DLUHC Estimate and the Business Rates Retention and Non-Domestic Rates Trust Statement. Where I have appointed additional Accounting Officers, their responsibilities are also set out in this system statement.

2.3. This system statement covers the core department, its ALBs and other arm’s length relationships such as local authorities and Local Enterprise Partnerships (LEPs). It describes accountability for all expenditure of public money through the department’s Estimate, all public money raised as income, and the management of shareholdings, financial investments, and other publicly owned assets for which I am responsible. This system statement describes the system which I apply to fulfil my responsibilities as an accounting officer in accordance with Treasury guidance set out in Managing Public Money, and ensure that spending is carried out with regularity, propriety and achieves value for money.

2.4. This system statement describes the accountability system which is in place at the date of this statement, and which will continue to apply until a revised statement is published.

Sarah Healey
Principal Accounting Officer and Permanent Secretary

3. The accountability system

3.1. There are 3 distinct accountability systems within the department:

• funding distributed directly through DLUHC and our ALBs
• the Local Government Accountability System
• the Local Growth Fund Accountability System

3.2. The department has 2 finance directors - one for spending through the core department and ALBs, and one overseeing the funding provided to local government.

4. Responsibilities within the core department

4.1. The governance framework

4.1.1. The Permanent Secretary, appointed by Treasury as the department’s Principal Accounting Officer, takes personal responsibility for maintaining a sound system of internal control that supports the delivery of the department’s policies, aims and objectives, whilst safeguarding public funds and departmental assets. The governance framework for the department has been designed to maintain the existing internal control environment whilst developing further controls as appropriate as the department’s risk profile evolves.

Table: The department’s governance framework remit and attendees

Board committees

Forum	Remit	Attendees
Departmental Board	The Departmental Board is responsible for advising and supporting ministers on the operational implications and effectiveness of policy proposals, focusing on translating policy into results.	Chair: Secretary of State Membership: Ministers, Permanent Secretary, Chief Officer and Non-Executive Directors
Non-Ministerial Board	The Non-Ministerial Board is responsible for scrutinising organisational capability and culture.	Chair: Lead Non-Executive Director Membership: The Executive Team and Non-Executive Directors
Audit and Risk Committee (ARAC)	The Audit and Risk Committee (ARAC) is responsible for reviewing assurance on governance, risk, internal controls and the integrity of accounting and reporting procedures.	Chair: Non-Executive Director Membership: Non-Executive Directors and independent external members

Executive committees

Forum	Remit	Attendees
DLUHC Executive Team (ET)	The Executive Team is responsible for strategic leadership and management of the department.	Chair: Permanent Secretary Membership: Directors General, Director of People, Capability and Change, Director of Communications, Director of Strategy.
Senior Talent and Pay Committee	The Senior Talent and Pay Committee is responsible for Senior Civil Service performance, talent, succession planning and pay.	Chair: Permanent Secretary Membership: Directors General and Director of People, Capability and Change

Executive Sub-Committees

Forum	Remit	Attendees
Investment Sub-Committee (ISC)	The Investment Sub-Committee is responsible for the approval of investment proposals and financial transactions for the department	Chair: Chief Financial Officer Membership: Director-level representation

People Sub-Committee	The People Sub-Committee is responsible for making recommendations to Executive Team about implementation of the people plan and organisational changes that impact personnel.	Chair: Director General for Local Government, Resilience and Communities Membership: Representatives from across department
Risk Sub-Committee	The Risk Sub-Committee is responsible for reviewing corporate risk and the risk transformation programme.	Chair: Chief Financial Officer Membership: Director level representation, Chief Risk Officer and Head of Internal Audit

Portfolios

Forum	Remit	Attendees
Portfolio Boards	The Portfolio Boards are responsible for making key decisions relating to the strategic delivery of the department’s priority outcomes.	Chair: Director General Membership: Director-level representation, Portfolio Management Offices, other key subject matter experts (i.e. Finance, Commercial, Risk etc.)

4.1.2. Alongside the Board structures set out above, Ministers and the Permanent Secretaries have clearly defined responsibilities that support good governance within the departmental group through parliamentary accountability:

• The Secretary of State is responsible and answerable to Parliament for the exercise of the powers on which the administration of the department depends. They have a duty to Parliament to account, and to be held to account, for the policies, decisions and actions of the department.
• The Principal Accounting Officer may be called to account in Parliament for the stewardship of the resources within the department’s control and the system of accountability for funding devolved to the local level.

4.2. The financial control framework – principles

4.2.1. For each financial year, HM Treasury agrees budget control totals and issues ‘Delegation Limits’ to each department. This gives me, as the department’s Principal Accounting Officer, standing authorisation to commit resources or incur expenditure from money voted by Parliament without specific approval from HM Treasury, within the agreed framework. This includes a delegation for expenditure on new projects, programmes, policy proposals and financial transactions. These are set out in the table below. The table also shows ‘disclosure thresholds’ – new projects or programmes above these limits must be disclosed to HM Treasury.

All projects and programmes and announcements and policy proposals within a defined lifetime

Nature of delegation	Delegated limit	Disclosure threshold
Resource	£10 million	n/a
Capital - existing	£30 million*	£20 million
Capital - new	£0**	£20 million

Announcements and policy proposals creating ongoing expenditure (per year)

Nature of delegation	Delegated limit	Disclosure threshold
Resource	£10 million	n/a
Capital - existing	£30 million*	£20 million
Capital - new	£0**	£20 million

Financial transactions

Nature of delegation	Delegated limit	Disclosure threshold
AAA-CCC counterparty credit rating	£50 million	£20 million
CC-D counterparty credit rating	£0	n/a

* Existing project or programme (subject to the project / programme meeting the conditions placed on funding and there not being any substantial changes), is one that:

• Has received consent from HM Treasury ministers, or
• Where ISC has signed off the project or programme when it was within DLUHC’s previous delegated authority (as a full business case, including overarching programme business cases).

** All new CDEL (grant and financial transactions) projects and programmes that do not form part of an existing programme require HM Treasury approval from February 2023.

4.2.2. Other delegated authorities include those for write-offs and impairments; claims waived or abandoned; and special payments. HM Treasury specifies those types of expenditure where delegated authority does not apply and approval should be sought (for example, any novel and contentious expenditure).

4.2.3. The Principal Accounting Officer delegates responsibility through the department’s financial delegation framework. This provides a structure for control and compliance throughout the organisation. It ensures that the roles and responsibilities of staff in relation to resources, expenditure and financial transactions are clear. Guidance on resource management and corporate governance responsibilities is refreshed annually and circulated to all senior staff alongside formal delegations.

4.2.4. There are 3 types of financial delegation that operate within the department:

• Budget Delegation: Administration and Programme budgets are delegated from the Accounting Officer to the Directors General and Directors at the start of the financial year. All budgets must be managed in accordance with HM Treasury’s Managing Public Money and budgets cannot be delegated below Director-level.
• Approval Delegation: Before spending against budgets can be authorised, business case approval is required through a Finance Business Partner or the Investment Sub Committee (ISC). This includes any investment proposal or financial transaction with total costs of over £10,000. Any commitments below £10,000 can be authorised by the budget holder without Finance Business Partner or ISC approval. This is described in the table below in section 4.4.
• Spend Delegation: Once a business case is approved, spend delegations set out who is approved to commit funds and make payments within agreed limits. Spend delegations are issued by Directors to Deputy Directors and Grades 6/7 and are managed within a standard framework, except when an exceptional spend delegation is required for staff to commit higher levels (for example, authorising regular grant in aid payments).

4.2.5. These financial delegations are described in more detail in sections 4.3, 4.4 and 4.5.

4.3. Budget delegation

4.3.1. Resource and capital programme budgets are delegated, for which the Principal Accounting Officer is responsible as part of the Supply Estimate, to Directors General. Directors General then sub-delegate resource and programme budgets to Directors (who may also hold the role of Senior Responsible Owner) in their group and portfolios.

4.3.2. At the start of the financial year, all Directors and Senior Responsible Owners (SROs) are issued with a delegation letter to clearly set out their accountabilities and responsibilities in relation to resource and programme budgets. Budgets are monitored by Directors and SROs throughout the financial year, with Finance Business Partners providing appropriate challenge where necessary to the budget holder, ensuring budget control is not compromised. Budgets may not be delegated below Director-level unless in exceptional circumstances and must be agreed by the Principal Accounting Officer.

4.4. Approval delegation

4.4.1. The department has put in place a system that requires teams to prepare business cases to inform decisions on investment proposals above £10,000 and ensures all business cases receive the appropriate level of scrutiny before spending is approved. This gives assurance that investments the department makes are value for money, well-designed and any assumptions are tested.

4.4.2. All business cases should follow HM Treasury’s five case model and should be completed based on the stage of the project or the nature of the investment. This will determine whether a Strategic Outline Case (SOC), Outline Business Case (OBC) or Full Business Case (FBC) should be completed.

4.4.3. Business case approval depends on the nature and size of spend as shown in the table below. The department has separate processes for decisions about financial transactions such as loans or guarantees – these are set out in Section 10.

Type of business case	Business case approval required by
The total value is lower than £2 million	Grade 6 Finance Business Partner (or above)
The total financial value is greater than £2 million, but less than: • £10 million for RDEL Programme • £30 million for Capital DEL for existing projects and programmes • £5 million for Local Government DEL HM Treasury approval is not required, and the quality assurance completed with full approval from all subject matter experts	Grade 6 Finance Business Partner (or above)
The funding request for RDEL Admin if up to £1 million or more	Grade 6 Finance Business Partner (or above)
The funding request for RDEL Admin of £1 million or more	Investment Sub-Committee and HM Treasury
The total financial value is greater than £10 million RDEL Programme, £30 million CDEL for existing programmes, £0 million CDEL for new projects and programmes, £5 million LGDEL or £10 million Admin	Investment Sub-Committee and HM Treasury
Any amount that is ‘novel, contentious or repercussive’	Investment Sub-Committee and HM Treasury
Commitments beyond the current Spending Review period	HM Treasury
Expenditure for 8 specific areas which are subject to Cabinet Office spending controls approval	Cabinet Office
Financial Transactions (FTs): • Up to £50 million ISC • Over £50 million	Investment Sub-Committee HM Treasury

4.4.4. Before approval, each business case should be:

• Signed off by the Programme/Project Board and Director to demonstrate that funding can be used from within their delegated budget; and
• Quality assured through an independent review from subject matter experts, which may include Finance, Analysis and Data Directorate (ADD), Risk, Legal, Commercial, Digital and external stakeholders such as other Government Departments (OGDs).

4.4.5. The ISC is a sub-committee of the Executive Team responsible for scrutinising and approving investment proposals for the department (including ALBs) to ensure they achieve value for money. ISC membership consists of:

• Chief Financial Officer (Chair)
• Finance Director (Vice-Chair)
• Director for Analysis and Data
• Director of Legal
• Commercial Director
• Chief Risk Officer
• Digital Director
• Chief Scientific Adviser
• Independent policy Directors (any Director or Deputy Director can fulfil this role)

Additional attendees consist of

• key members of the policy team presenting the case
• the Finance Business Partner who has been advising policy on the case

4.5. Spend delegation

4.5.1. Once the decision to spend has been made following business case approval, officials in the department can commit funds and make payments within agreed limits. Spend delegations set out who is approved to carry out these processes.

4.5.2. Spend delegation are issued in line with a standard framework across the department, as per the table below. They are reviewed annually and adjusted in line with changing business need.

Grade	Maximum Limit per transaction
Accounting Officer	Any amount
Director General	Any amount up to and within their delegated budget
Director	Any amount up to and within their delegated budget
Deputy Director	£ 5m CDEL £ 1m RDEL
Grade 6	£ 500,000 CDEL £ 250,000 RDEL
Grade 7	£ 100,000 CDEL £ 50,000 RDEL

4.5.3. The potential risks of financial mismanagement are mitigated by DLUHC’s financial control framework. The framework provides robust assurance and protection by segregating the steps and responsibilities for delegating budgets, committing funds and making payments. This ensures that individuals and teams are deprived the breadth of authority to unilaterally commit payments or carry out fraudulent activity.

4.5.4. The standard spend delegations apply to grants and contracts. These do not apply to payments for goods and services through the ‘Purchase to Pay’ (P2P) system, which has its own integrated controls. They also do not apply to special payments set out in the table below which lists the category of special payments and the limit delegated to the Accounting Officer by HM Treasury.

Description	Delegated Limit
Extra-contractual payments involving departmental default and made on appropriate legal or other professional advice	£250,000
Ex Gratia payments to contractors outside binding contracts, including those to meet hardship caused by official delay or inadequacy; out of court settlements to avoid legal action on grounds of official inadequacy; payments made to meet hardship caused by official failure or delay	£250,000
Other Ex-gratia payments: including payments, which go beyond statutory cover, legal liability or administrative rules, including payments to meet hardship caused by official failure or delay, out of court settlements to avoid legal action on grounds of inadequacy. Includes ex gratia payments related to Planning Inspectorate (PINS) remedy arrangements. NB DLUHC may set lower limits in its arrangements with PINS	£100,000
Compensation, payments based on legal or other professional advice providing redress for personal injuries (aside from those under CSIBS), traffic accidents, damage to property suffered by civil servants. They include payments to those in the public service outside statutory schemes or outside contracts.	£150,000 (Personal injury) £200,000 in personal injury cases related solely to historic asbestos exposure causing asbestosis or mesothelioma £100,000 (Other)
Extra-statutory and extra- regulatory payments (as defined by Managing Public Money Box A4.13A)	£100,000
Consolatory payments (ex gratia payments to individuals in respect of incidents which do not involve financial loss)	£500

4.5.5. Directors are responsible for sub-delegating their spend delegations to Deputy Directors and grades below where appropriate and are supported by Finance Business Partners in managing their spend delegations. Compliance with the delegation framework is reviewed annually as part of the Governance Assurance Exercise (see section 4.8).

4.5.6. Further delegations are issued during the year as needed, such as temporary delegations when senior members of staff are on leave, and exceptional delegations above the standard spend delegation limits where business circumstances dictate. Only in instances where a Director needs to depart from their standard role is sub-delegation permitted. Finance Business Partners provide the necessary support and advice to the nominated deputy, with a delegation letter issued clearly setting out the roles and responsibilities that come with such budget delegation. A central log of instances where budget has been sub-delegated is maintained and reviewed every 3 months to ensure the arrangements are still required.

4.6. Capital flexibilities

4.6.1. HMT have granted DLUHC additional flexibilities over this SR period to support delivery of our capital programmes. These flexibilities principally apply where the annual budget profile needs adjusting to reflect changes in the pace of delivery, but the lifetime cost remains the same. The flexibilities are based on groupings of programmes or ‘umbrellas’ that were agreed with HMT at the spending review. We have six umbrellas: Housing Supply (Grant), Housing Supply (FT), Affordable Homes Programme, Towns, Building Safety, and Devolution Deals. There are 3 main flexibilities that apply:

• Over-programming: the Principal Accounting Officer can make a risk-based decision to allocate higher working budgets to SROs to deliver programmes than the total SR settlement, in order to boost delivery and mitigate against underspends that often arise when delivering complex capital programmes. DLUHC monitors this risk centrally through monthly financial reporting to ensure the department does breach control totals at year-end. The Principal Accounting Officer determines the level of over-programming and is responsible for managing this risk.
• DLUHC can make in-year budget changes where money is moved within an umbrella programme according to delivery needs. DLUHC can also move budgets across umbrellas and HMT approval is only required if the change is greater than 10% of in-year spend (or Delegated authority limits if higher).
• Additionally, DLUHC can make inter-year budget changes at the Supplementary Estimates. Up to 20% of in-year CDEL underspend within an Umbrella can be moved into future years. DLUHC can also request to bring forward 2% of CDEL budget from future years if deliverability or value for money will improve. In order to use these flexibilities, DLUHC must meet with HMT on a quarterly basis to review delivery of capital programmes, and send management information updates for an agreed list of capital programmes.

4.7. Performance and planning

4.7.1. The department is organised into Director General-led portfolios; five are aligned to our priority outcomes, supported by our Corporate Group which enables the department to deliver these outcomes. Departmental priority outcomes and metrics to measure progress are typically agreed between the department and HM Treasury during the Spending Review process, with published Outcome Delivery Plans then setting out how the department will use resources it has been allocated to deliver those outcomes.

4.7.2. The current priority outcomes for the department were developed outside of the Spending Review 2021 process due to ministerial changes, changes to the department and to reflect the department’s role in delivering the vision and missions set out within the Levelling Up White Paper.

4.7.3. Although Outcome Delivery Plans were not published for 2022-23, the Principal Accounting Officer is assured through our internal business planning processes that we have a robust plan in place, with Directors General accountable for its delivery, having recently completed the planning process for 2023-24.

4.7.4. During the year, the Executive Team (ET) and Departmental Board receives assurance from several sources that projects and programmes are being delivered as planned, and that commitments we have made to deliver the outputs and outcomes set out in the ODP are achievable. The primary sources of these assurances are:

• Performance Reporting: The ET and Non-Executive Directors are provided with a monthly Departmental Performance Report (DPR), which presents data on performance against the priority outcomes, programme and administration budgets, human resources, credit and non-credit risks, the Investment Sub-Committee and other corporate services performance indicators.
• Governance: Portfolio Boards (or equivalent arrangements) for each of the six departmental groups meet monthly and are chaired by Director Generals and sit above Programme and Project Boards. The boards oversee delivery progress, risks, and interdependencies across work areas and escalates emerging issues to the ET.
• Project and Programme Assurance: The Finance Directorate and Portfolio Management Offices (PMOs) provide guidance and support to project and programme managers to apply consistent approaches to project delivery and assurance.
• Financial Management: The Finance Directorate tracks our financial performance and position. Detailed reports covering spend and forecast data for both administration and programme budgets are provided monthly to Directors and Directors General, and headline data is provided to the ET via the DPR outlined above.
• Resource Management: The People Committee has delegated authority from the ET to consider and decide on a range of people issues, including delivery of our People Plan. It receives a regular and wide variety of metrics and key performance indicators covering all aspects of people and resource management at the department, and reports progress to the ET.

4.8. The risk management framework

4.8.1. The Principal Accounting Officer is assured through the Executive Team, Risk Sub-Committee and ARAC that the department’s risk management framework is adequately designed and implemented to support effective decision making with the intention of enabling the department to achieve its strategic and operational objectives.

4.8.2. A revised approach to risk management has been endorsed by the Executive Team, in line with the methodology set out in HM Treasury’s The Orange Book. The department’s risk management framework has been aligned to The Orange Book to ensure the department’s approach to risk management is consistent with the rest of Government. The risk management framework sets out the department’s overarching approach to risk, reinforcing the importance of managing risk proactively, empowers our business teams and people to take responsibility for risk and fosters a culture where consideration of risk is integral to delivery of the department’s activities. This revised approach:

• Formalised the use of the ‘three lines of defence’ approach to risk management.
• Revised the principal risk categories and principal risks register, aligning the register into principal risks together with associated risk appetite statements.
• Set out a more structured approach to risk ownership and risk awareness across the department.

4.8.3. At a corporate level, there are currently a total of twelve principal risks, details of which are documented on the department’s principal risk register. The principal risks were significantly revised during 2021-22 to better align them to the Orange Book risk categories, and ongoing review and moderation through our governance structure will ensure the principal risks remain reflective of the risks the department faces in delivering its strategic objectives.

4.8.4. All the principal risks are owned by members of the department’s Executive Team, supported by an SRO, who are responsible for putting in place and managing the appropriate controls and mitigating actions in line with our risk appetite. Project and programme risks are assigned to the principal risks to help each portfolio understand the makeup of its risk profile. The department has also improved the way it reports risk to the Executive Team and ARAC to facilitate better oversight at an executive level. This includes a schedule of deep dives into each principal risk.

4.8.5. The approach to risk management is supported by an assurance framework that underpins the monitoring and management of risk. This is based on the three lines of defence model, as outlined below:

• First line of defence: Each business team has primary ownership, responsibility, and accountability for identifying, assessing, and managing the risks relevant to their business activities.
• Second line of defence: Functions and activities to monitor, challenge and facilitate the implementation of effective risk management and co-ordinate the reporting of risk information. The Group Risk team is a core part of the second line of defence and provide me with assurance via the Risk Sub-Committee, Executive Team and ARAC.
• Third line of defence: Led by Internal Audit, which is led by the Government Internal Audit Agency (GIAA) for the department. Each year a plan for audit work is agreed to cover key risk areas and provide assurance to the Principal Accounting Officer that processes are operating as designed. Based on their findings throughout the year and the actions the department has taken in response, the GIAA provides an opinion on the overall adequacy and effectiveness of the department’s framework of governance, risk management and control. This is reported in the Governance Statement in the Annual Report and Accounts. The ARAC receives regular reports from GIAA about the progress of the audit plan and any outstanding recommendations.
• External assurance: Outside of the department’s own risk management framework and the ‘three lines of defence’ model, there are a range of other sources of external assurance around risk management. This includes assurance from the Infrastructure and Projects Authority (IPA) and the National Audit Office (NAO).

4.9. Governance assurance exercise

4.9.1. The Principal Accounting Officer for the department is required by HM Treasury to publish a Governance Statement as part of the department’s Annual Report and Accounts (ARA). The Governance Statement provides a high-level summary of the department’s approach to governance, including our systems of internal control, risk management and accountability. To inform the Governance Statement and provide assurance to me that the system of governance, risk management and internal controls in place across the department are effective, the department undertakes a governance assurance exercise at the end of each financial year.

4.9.2. The governance assurance exercise is structured around our six departmental groups and seeks assurance on the effectiveness of the governance arrangements, internal controls and risk management arrangements implemented by Directors in the discharge of their delegated authority and responsibilities towards the delivery of the department’s strategic objectives. Chaired by the department’s Non-Executive Directors (NEDs) and supported by internal and external auditors, the governance assurance exercise explores how Directors General and Directors have safeguarded the department’s assets by ensuring regularity and propriety of expenditure and the promotion of best value for money of that expenditure. The governance assurance exercise is not designed to scrutinise the department’s policies.

5. Relationships with Arm’s Length Bodies

5.1. The department sponsors 14 arm’s length bodies. The table at the end of this section provides a list of current ALBs, their current designated Accounting Officer and a short description of their responsibilities. This section explains the systems and processes in place for the department to manage delivery, ensure appropriate corporate governance and monitor risk.

5.2. The Principal Accounting Officer ensures that the DLUHC Group, including the ALBs and it sponsors, operates effectively and to a high standard of probity. This responsibility is fulfilled through proportionate and effective arrangements for working in partnership with our ALBs.

5.3. The Principal Accounting Officer is also responsible for appointing the Accounting Officer of the department’s ALBs. Each Accounting Officer takes personal responsibility for ensuring that the resources under their remit are managed in accordance with the standards and policies set out by HM Treasury’s Managing Public Money.

5.4. The department’s Chief Financial Officer has overall responsibility for the framework of assurance and oversight for the department’s ALBs. Primary responsibility for managing the department’s relationship with each ALB and ensuring each ALB delivers against their objectives, sits with a designated Senior Sponsor - typically a policy Director or Director-General.

5.5. The department’s Commercial Director and Finance Director are responsible for ensuring (i) the department has an appropriate framework to manage and escalate risk in our ALBs, (ii) there is sound financial management across the Group and (iii) that ALBs have effective assurance arrangements in place. The Group’s financial position, which includes all ALBs as well as the core department, to the Executive Team on a regular basis, and publicly reports the Group’s financial position in our Annual Report and Accounts.

5.6. The department’s Human Resources (HR) Director or team meet regularly with the HR Directors from Homes England, the Planning Inspectorate and QEII Conference Centre.  The department’s HR team provides assurance on operational areas, such as pay and reward issues, the pay remit, upper pay controls and voluntary exit schemes; and provides advice on legal requirements, for example on whistleblowing and IR35 legislation. Through the Public Appointment team, the department’s HR function also provide support on the recruitment of board members.

5.7. Senior Sponsors are responsible for oversight of ALBs, including managing day-to-day relationships, and delegating capital, administrative and programme budgets to ALBs from their own delegated budgets (where applicable). Regular Accounting Officer meetings are held between the ALB Accounting Officer, and the Principal Accounting Officer or Senior Sponsor to review performance, hold the ALB to account and escalate any key issues/risks. Senior Sponsors ensure that there is strategic consistency between ALB strategies and the government’s wider agenda, and that the ALBs fulfil expectations on operational performance.

5.8. ALBs are required to provide the department with monthly financial forecasts, which provide detail on the financial performance of the ALB against its budget. ALBs that are solely self-funded (such as the Architects Registration Board, Queen Elizabeth II Conference Centre and the Building Regulations Advisory Committee) do not provide monthly financial performance reports to the department.

5.9. Each ALB has an agreed framework document or equivalent in place between the department and the body which sets out roles and responsibilities and secures propriety, regularity and value for money in accordance with Managing Public Money. The framework documents cover all aspects of the partnership with ALBs including:

• departmental priorities relating to the ALB
• strategic aims of the ALB
• lines of accountability between the department and the ALB
• governance arrangements within the ALB

5.10. All framework documents need to be reviewed every 3 years and a number are currently under review and in the process of being updated.

5.11. All of the department’s ALBs are subject to scrutiny by the DLUHC Select Committee and the Public Accounts Committee.

5.12. The department has established a risk-based approach to determine the appropriate level of governance and oversight for its ALBs. This is informed by an annual Impact Assessment, now known as Relationship and Assurance Assessment (RAA) exercise, which assesses ALBs according to different risk categories including:

• operational performance
• financial management
• delivery environment
• assurance arrangements
• risk management
• organisational relationship

5.13. The Relationship and Assurance Assessment exercise is carried out by the Senior Sponsor and the Finance Directorate, as well as the ALB. In 2022-23, this exercise was incorporated into our Governance Assurance exercise described in section 4.9 above. The degree of oversight is reviewed on an ongoing basis through regular engagement with the ALB, taking into account any relevant developments within the organisation’s operating environment. This ensures that the department’s resources are targeted effectively, and that each ALB has an appropriate and proportionate degree of oversight.

5.14. ALB Non-Executive Board Members are normally appointed by the department’s ministers and hold the Chief Executive to account for the ALB’s performance. ALB budgets are mostly determined by ministers based on corporate and business plans. Each ALB has key performance indicators which it reports on, and these are monitored and challenged by members of the Finance Directorate and Senior Sponsors.

5.15. The department receives assurance from ALBs on specific issues (such as workforce planning) where periodic returns to Cabinet Office are required. ALBs also require departmental approval for the creation of any new senior civil servant roles and the majority of ALBs are subject to pay remit constraints.

5.16. Members of the department’s Corporate Group and/or sponsor team attend the ALB’s ARAC meetings as observers, as appropriate for the agreed level of oversight required for the ALB. This provides assurance for the Principal Accounting Officer that risks are being escalated appropriately and that corporate governance is effective. A representative from the relevant policy sponsor team also attends the ALB board meeting as an observer, if appropriate. In the Planning Inspectorate, the department’s Planning Director is a formal member of its Advisory Board.

ALB	Accounting Officer	Policy Responsibilities
Architects Registration Board (Public Corporation)	Hugh Simpson	Regulator of architects in the UK to ensure good standards are maintained in the profession
Building Regulations Advisory Committee (Advisory NDPB)	Not applicable	Expert Committee to advise the Secretaries of State for Levelling Up, Housing and Communities, and Wales on making building regulations and setting standards for the design and construction of buildings
Local Government and Social Care Ombudsman (Other public body)	Nigel Ellis	Conducts the final stage of investigations into complaints about councils and certain other organisations providing local services
Ebbsfleet Development Corporation (Declassified as a public body)	Ian Piper	Developing plans for a new garden city at Ebbsfleet, Kent, operating within Governance requirements
Homes England (Executive NDPB)	Peter Denton	Government body responsible for delivering housing ambitions
Regulator of Social Housing (executive NDPB)	Fiona MacGregor	Regulates registered providers of social housing to promote a viable, efficient and well-governed social housing sector able to deliver homes that meet a range of needs. RSH became a standalone organisation on 1 October 2018, with the function previously part of Homes and Communities Agency (now known as Homes England)
Housing Ombudsman Service (Corporation Sole and Executive NDPB)	Richard Blakeway	Investigates disputes made by tenants against social landlords in England.
Leasehold Advisory Service (Executive NDPB)	Anthony Essien	Provides free information, initial advice and guidance to members of the public on residential leasehold and park homes law
Planning Inspectorate (Executive Agency)	Paul Morrison	Deals with planning appeals, national infrastructure planning applications, examinations of local plans and other planning-related and specialist casework in England and Wales
Queen Elizabeth II Conference Centre (Executive Agency / Trading Fund)	Mark Taylor	The largest dedicated conference, events and exhibition service in central London, providing a high-quality service and facilities
Valuation Tribunal Service (Executive NDPB)	Tony Masella	Independent appeals tribunal. which hears council tax and rating appeals in England. It provides a free service and local hearings.
Valuation Tribunal for England (Tribunal NDPB)	Tony Masella	Provides the administrative function for the Valuation Tribunal Service
Boundary Commission for England (Advisory NDPB)	Not applicable	Reviews the parliamentary constituencies in England every 5 years.
Boundary Commission for Wales (Advisory NDPB)	Not applicable	Carries out boundary reviews of parliamentary constituencies in Wales, and submits its recommendations to the government.

6. Local funding arrangements

6.1. The current and previous Principal Accounting Officers have documented and published details of local accountability systems within our responsibility for several years. The department has published a Local Government Accountability System Statement since 2012 and a Local Growth Fund Accountability System Statement since 2013. A summary of the responsibilities for these systems is below and the detail is provided in Annexes A and B.

6.2. Local Government Accountability System

6.2.1. As set out in Annex A, the department’s Principal Accounting Officer is responsible for the core local government accountability framework for local authorities and for ensuring that it is effective as a national system within which local authorities take their own decisions.

6.2.2. In addition to the core accountability system, other departments which oversee services run by local government publish statements that explain any other grants made to local authorities, and relevant legislation and regulation in relation to those services, including the Department for Education (DFE), Department of Health & Social Care (DHSC), Department for Transport (DfT) and Department for Business, Energy & Industrial Strategy (BEIS).

6.3. Accountability System for Local Growth Funding

6.3.1. As set out in Annex B, the department’s Principal Accounting Officer, is responsible for the allocation, payment and monitoring of local growth funding to Local Enterprise Partnerships (LEPs) and accountable to Parliament for those elements of such funds which are awarded to LEPs from the department’s Departmental Expenditure Limit (DEL).

6.3.2. Those elements of local growth funds which remain on other departments’ DEL are subject to their own funding and oversight mechanisms, e.g., the Department for Transport and the Department for Business, Energy and Industrial Strategy.

6.3.3. The department also provides funding via the “Single Pot” to mayoral combined authorities which have been set up as part of devolution agreements. The Single Pot represents different lines of funding from both DLUHC and the Department for Transport. Assurances over the use of funding provided through the Single Pot are obtained via the accountability systems for both local authorities and the LGF, and the Department for Transport accountability system.

7. Third party delivery arrangements

7.1. Any significant third-party delivery arrangements that the department has in place are managed within our management of grants in section 8, the contract relationships described in section 9 or the credit risk function described in section 10.

8. Grants to private and voluntary sectors

8.1. Grant award

8.1.1. The department awards grants to the private and voluntary sectors. The Finance Director is responsible for oversight of compliance with the department’s processes. Any new grant funding requires ministerial approval. Grant funding can only be awarded after funding for the project is approved, as set out in section 4.4.

8.1.2. The department follows a single set of principles and processes for all grants to the private and voluntary sectors. We evaluate project costs, value for money and compliance with UK and EU legislation as part of the business case approval process. As part of the project approval the department agrees milestones, outcomes and outputs which grant recipients must meet in order to receive funding.

8.1.3. The department draws up a grant funding agreement with the grant recipient. This includes conditions that ensure the grant has been used for the purposes intended, and that the grant recipients retain records which enable them to demonstrate compliance, and that the use of the funds complies with HM Treasury requirements in accordance with the department’s delegated spending authorities.

8.1.4. The department distinguishes between grants which are awarded to local authorities and other organisations. Accountability for grants to local authorities is explained in Annex A.

8.2. Monitoring and compliance

8.2.1. The department agrees measurable outputs and milestones which are set out in the Schedule to the Grant Funding Agreement so that effective monitoring can be carried out.

8.2.2. The department requires every grant recipient to produce a statement of grant usage in the year following the funding period. Where the grant is over £20,000 this must be audited by an independent reporting accountant paid for by the grant recipient. If grant money is used for ineligible purposes or the grant recipient fails in any other way to comply with the terms on which grant is paid, the department will seek to recover an amount or to withhold or reduce payment, using legal powers if necessary.

8.2.3. Policy leads in the department are responsible for ensuring that the statement of grant usage is completed and retained for audit purposes. We will recover any ineligible expenditure or unspent funds.

8.2.4. The department actively engages with the Cabinet Office best practice networks and the Grants Centre of Excellence via grants champions.

8.3 UK wide funding programmes

8.3.1. The department awards grants to local authorities, private, and voluntary sectors across the United Kingdom (UK). This is reflective of section 50 of the UK Internal Markets Act (UKIM S50) which enables the provision of financial assistance UK wide within a defined set of parameters.

8.3.2. The department utilises reciprocal assurance statements, where responsibility of a fund is shared with other government departments.

8.3.3. Funding programmes utilising UKIM S50 can be of a hybrid nature, with public and private organisation grant recipients.

8.3.4. The department draws up a memorandum of understanding (MOU) or a grant funding agreement (GFA) with local authority grant recipients UK wide. Both include the conditions that ensure the grant has been used for the purposes intended and that the local authority retains records which enable it to demonstrate compliance under GFA or give assurance in the case of an MOU, and that the use of the funds complies with HM Treasury requirements in accordance with the department’s delegated spending authorities.

8.3.5. For local authority grant recipients, the department secures assurance of UK wide funds through fund specific assurance frameworks describing the cycle of assurance appropriate for either MOU or GFA.

8.3.6. For private and voluntary sector recipients of grants via UKIM S50, the department draws up a grant funding agreement with the grant recipient. This includes conditions that ensure the grant has been used for the purposes intended, and that the grant recipients retain records which enable it to demonstrate compliance, and that the use of the funds complies with HM Treasury requirements in accordance with the department’s delegated spending authorities.

8.3.7. The department implements sample testing and deep dives to secure assurance from private and voluntary sector organisations in receipt of UK wide funds in scope of UKIM S50. Deep dives review governance, transparency and accountability processes of the grant recipient.

9. Major contracts and outsourced services

9.1. The Commercial Director is responsible for oversight of procurement and the department’s contracts. This section explains how we ensure we have effective processes to manage contracts and procurement. Before starting a procurement (valued at over £10,000), a business case must be approved as set out in section 4.4.

9.2. Procurement

9.2.1. The department’s policy is that all contracts over £10,000 (inclusive of VAT) must be competed and awarded either through advertised competition or through a pre competed form of agreement including Frameworks or Dynamic Purchasing Systems. Procurements for contracts above £10,000 (including VAT) must be undertaken through the department’s Commercial Directorate or with their agreement through Crown Commercial Service as an assisted procurement. All contracts above £10,000 (including VAT) must be approved and signed by a member of Commercial Directorate staff holding appropriate delegation from the Commercial Director. The department has a contractual delegation which rests with the in-house procurement team and individual delegations are assigned based on suitable qualifications and experience.

Amount	Treatment
Below £5,000	One quotation should be obtained
£5,000-£10,000	At least three quotations should be obtained
Above £10,000	Procurements should be dealt with by DLUHC procurement team or CCS

9.2.2. The department makes use of any existing central government contracts for common commodities to meet departmental needs.

9.2.3. All of the department’s senior procurement staff are employees of the Government Commercial Organisation’s (GCO). They are required to undertake the GCO Assessment and Development Centre and maintain accreditation through completion of Continuous Professional Development.

9.2.4. The department only uses single tender action in exceptional circumstances with the approval of senior staff who have delegated authority from the Commercial Director and for proposed contracts above OJEU threshold.

9.3. Contract management

9.3.1. The department follows best practice Cabinet Office processes and controls for managing contracts, with relevant application of Government Functional Standard 008: Commercial (PDF, 929KB) which covers contract management.

9.3.2. The department’s large and/or complex contracts are assigned a dedicated Senior Responsible Owner in accordance with the Cabinet Office standards. All contracts are managed by an individual within the business area whose responsibility is to measure supplier performance and ensure value for money is achieved throughout the life of the contract.

10. Investments, joint ventures, and other assets

10.1.1. The department designs and oversees several programmes that expose it to credit risk and potential financial loss. This includes programmes underpinned by financial instruments, such as loans and guarantees, as well as land sale agreements that give rise to credit risk (for example, where payment is deferred).

10.1.2. The department’s portfolio consists of programmes delivered by Homes England (explained in part 10.2) or by devolved bodies such as the Greater London Authority (part 10.3).

10.1.3. The Principal Accounting Officer for the Group’s investment portfolio is ultimately accountable for oversight of the department’s financial exposures and is supported by:

• A Senior Responsible Owner who oversees the overall delivery of the individual programmes and manages and escalates any risks identified by the department and its delivery partners. Where Homes England are responsible for the delivery of a fund within a departmental programme or work package, oversight of its delivery is managed through a programme board within Homes England with representation from the relevant departmental officials, as well as HM Treasury and the Infrastructure and Projects Authority (IPA). Homes England programme boards will also escalate any issues within Homes England to the department through key sponsorship meetings.
• The Homes England Accounting Officer, who is accountable for the day-to-day management of the delivery of programmes including taking decisions on investments up to delegated levels, having accountability for the onward recommendation of decisions outside of delegation, and ensuring appropriate management of risk with oversight from the Homes England Board.
• Homes England’s Audit Assurance and Enterprise Risk Committee (AAERC) reviews risk management processes in the agency and provides assurances over their operation. The Chair of Homes England AAERC also attends the department’s ARAC.
• A Senior Sponsor from the department who oversees the relationship with Homes England as set out in section 5.
• The overarching approach to management of risk within in the department, as described in section 4.6.

10.2. Homes England

10.2.1. For the majority of our investment programmes, the responsibility for delivery sits with Homes England with oversight and approval from the department and, where appropriate, HM Treasury.

10.2.2. Delegations are in place between HM Treasury, the department, and Homes England to manage the day-to-day delivery of the individual transactions that make up the department’s loan and guarantee portfolio and are applied in conjunction with financial risk appetite thresholds set up by the department^{[footnote 1]}. Help to Buy and land transactions have their own delegation arrangements that are managed through the processes set out in section 4.

10.2.3. As a general rule, with the exception of the Housing Guarantees Schemes, Homes England has final approval of individual transactions that fall within their delegation and designated risk appetite and are not considered novel or contentious. For transactions outside of delegation, risk appetite or those considered novel or contentious the department has in place appropriate governance arrangements to consider these prior to onward recommendation to HM Treasury for final approval.

10.2.4. Homes England operates a ‘three lines of defence’ model. Programme delivery staff own and manage risk within the business conducting due diligence, credit assessment and conforming to its agreed governance processes. It has a dedicated risk function providing second line risk assurance and challenge, and credit approvals. The third line of defence is made up of internal audit and external programme reviews.

10.2.5. Where a transaction breaches delegations and/or risk appetite and for all guarantee transactions, while reliance is placed on Homes England’s recommendation, final approval is provided by the department and HM Treasury. The department and HM Treasury assure that there are no wider portfolio-level issues that need to be taken into account and that the impact on the departments overarching risk profile is understood.

10.3. Devolved funding

10.3.1. The department currently provides funds to the Greater London Authority (GLA) and Greater Manchester Combined Authority (GMCA) for recoverable investment in housing. Departmental funds are provided on the basis that operational responsibility is passed to the authority. This is set out in a legally-binding contract. It is the receiving authority’s responsibility to ensure that appropriate governance over credit risk approval and management is in place. Authorities must ensure that they meet a minimum recovery rate and repayment schedule agreed with the department, but there are no requirements for transaction review or approvals from the department.

10.3.2. Authorities provide on-going assurance through the annual reporting statement provided to the department. At the outset, the department collaborated with these authorities to promote appropriate controls for the risk management of their investment portfolio.

10.3.3. The department also holds authorities to account for delivery of housing units through clear expectations set out in contracts and accompanying documents, as well as regular engagement on delivery progress.

Annex A: Local Government Accountability System

Introduction

Local government, through elected councillors (and, where applicable, mayors), is accountable to its local communities for the proper stewardship of all of its resources. Over recent years, government policy has been to free local authorities from some of the previous governments’ accounting and reporting requirements, and to devolve greater powers and accountability to them, including through the Cities and Local Government Devolution Act 2016.

Nevertheless, there remains a role for Accounting Officers in government to maintain the statutory framework of legal duties and financial controls on local authorities, to ensure proper democratic accountability, transparency, public scrutiny and audit.

The Accounting Officer for DLUHC is responsible for the core Local Government Accountability Framework for local authorities and for ensuring that it is working and contains the right checks and balances.

This statement sets out the core Local Government Accountability Framework. It covers:

• the overall scope of accountability in relation to local government funding and spending
• how the core accountability system for local government works
• how the system responds to failure
• how the department gets assurance and information on financial sustainability and effectiveness
• how the framework applies and is being adapted in the light of devolution deals within England, in the context of the Cities and Local Government Devolution Act 2016, including the arrangements for London

The overall scope of accountability

1.1 This section explains the scope of accountability in relation to local government funding and spending. Specifically, it covers:

• the issues for which local authorities are directly accountable;
• the scope of accountability for local government funding and spending;
• responsibility for coordinating advice to Ministers on the overall position of local government;
• accountability for the overall core Local Government Accountability Framework, and its maintenance, review and amendment; and
• the role of other government departments

Local authorities’ accountability

1.2. Local authorities’ budgets comprise money from a number of sources. This includes general funding from DLUHC on behalf of government; and specific funding from other government departments via Section 31 payments and locally raised sources (principally council tax and locally retained business rates). These resources are pooled at the local level.

1.3. Individual councils are responsible for their own financial performance. This comprises a number of different responsibilities including delivering a balanced budget, providing statutory services (including, for example adult social care and children’s services) and securing value for money and propriety in spending decisions. In two tier areas, functions provided by unitary councils elsewhere are split between county and district councils. Introducing the ‘general power of competence’ in the 2011 Localism Act increased local authorities’ discretion over the range of services they provide.

1.4. Within the framework of statutory duties, councillors are free to set their own priorities and determine outcomes. They make decisions about how to allocate resources to competing priorities, such as providing care services, improving roads or keeping council tax low.

1.5. The direct democratic accountability of councillors to the electorate is an important assurance that they will manage spending and services effectively. Assurance for the taxpayer is reinforced by the Best Value duty on local authorities. Under the Local Government Act 1999, a council must “make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness”. They must consult local people on how they should fulfil this duty.

1.6. Local authorities have an important role in making their decisions on resourcing transparent. Effective scrutiny by councillors and the public requires the availability of comparable information on spending and the outcomes achieved. All local authorities produce public accounts, have open meetings and are required to consult the public, and all are subject to the Freedom of Information Act. The public are also entitled to have access to documents relating to council meetings and documents relating to executive decisions made by executive members or officers.

The scope of accountability for funding

1.7. DLUHC’s Principal Accounting Officer is accountable for two budgets which provide funding for local government:

• The Local Government Departmental Expenditure Limit is the budget for local authority core funding, which I manage on behalf of the government
• The budget for DLUHC’s own policies. This budget is to support the implementation of departmental priorities such as housing, planning and local growth. The LGF is paid for from this budget and Annex B sets out the accountability system for the fund due to the particular nature of the arrangements for that spending

1.8. DLUHC’s Principal Accounting Officer is accountable for ensuring regularity, propriety and value for money in the distribution of these two revenue budgets to local authorities. Other departmental accounting officers are accountable for distribution of grants from their budgets to local government to support delivery of other policy areas.

1.9. DLUHC’s Principal Accounting Officer is also accountable for the framework that determines the sums payable to and from local authorities under business rates retention which came into effect in April 2013, and for those funds from business rates which pass through government accounts. Since April 2013, the government has allowed the local authority sector to retain a share of the business rates that they collect locally. In 2013-14, local government’s share was set at 50%. In each year since 2017-18 a number of authorities have been permitted to retain higher shares as pilots for increased local retention. The share of locally-collected business rates that is surrendered to central government is used for the benefit of local government by being redistributed to authorities in full through a variety of grants, not all of which are allocated by DLUHC.

Providing comprehensive advice to ministers

1.10. DLUHC is also responsible for ensuring that ministers have comprehensive advice in order to make decisions on the level and distribution of local government funding. Other government departments that rely on local authorities to deliver policy objectives or services are responsible for understanding demand, costs and the scope for efficiency in those policy areas for which they are accountable. The Principal Accounting Officer includes ensuring that the government has an overview of the expected spending power of local government, the overall cost pressures arising from its various statutory and policy delivery responsibilities, and the opportunities for savings.

1.11. To provide full and adequate advice to Ministers, the department co-ordinates work across government departments that brings different analysis together on a common basis to understand the overall fiscal position of local authorities, and particular risks and opportunities.

1.12. The process by which the department does this has been strengthened in recent years including for SR19 and in preparation for SR20, in part reflecting recommendations from the National Audit Office studies on the Financial Sustainability of Local Authorities. For example, the analysis we co-ordinate now considers in more detail the potential impact of policy options on different types of local authorities.

1.13. The analysis the department develops across government is then central to the advice the department provides to ministers to enable discussions about spending allocations with departments and, crucially, HM Treasury. It is the responsibility of the Principal Accounting Officer with responsibility for local government overall, to provide clear and honest advice if I have significant concerns. Ultimately, however, it is for ministers to make final decisions on funding allocations both for the sector as a whole and for individual councils.

1.14. As set out in the Local Government Finance Act 1988, the government must consult on the proposed annual distribution between individual councils of both government grant and revenue from business rates. This local government finance settlement is then approved by the House of Commons through the Local Government Finance Report before councils set final budgets. Key data, including breakdowns of funding assessments and calculations, are published on the DLUHC website.

Responsibility for the accountability system for local government

1.15. To discharge the responsibilities set out above, DLUHC’s Principal Accounting Officer is responsible for maintaining the overall accountability system for local government. The specific aspects of this system are set out in section 2.

1.16. Once decisions and allocations are made by ministers and Parliament, DLUHC’s Principal Accounting Officer is accountable for ensuring that this system ensures local authorities are accountable for acting with regularity, propriety and value for money in the use of their resources.

1.17. DLUHC’s Principal Accounting Officer is accountable for maintaining the effectiveness of the system framework (as set out in section 2 below) and publish highlights of how the framework has worked over the previous year in the Governance Statement of the department’s Annual Report and Accounts. Should there be concerns that the framework is failing to provide the necessary assurances, DLUHC’s Principal Accounting Officer is responsible for making the appropriate recommendations for change to Ministers.

1.18. Central government departments can rely on this framework for accountability arrangements for unringfenced funds allocated to local authorities. Whilst DLUHC’s Principal Accounting Officer responsible for the financial framework for local government and for developing an overview of the overall service cost pressures faced by local government, responsibility for statutory services delivered by local authorities is spread across government departments. Each department is responsible for establishing its own arrangements to ensure that services remain sustainable and that statutory responsibilities are being met. These departments are also responsible for giving DLUHC the necessary data and analysis to support the department’s work in producing analysis to understand the overall position that local authorities are in, primarily but not exclusively as part of a spending review.

1.19. Where departments, including DLUHC, have specific ringfenced grants which have additional accountability measures put in place by the relevant Accounting Officer, these additional measures are described in the relevant department’s systems statement. Departments are responsible for regularly revising and publishing their own systems statements.

1.20. The majority of central government funding for local government is not ringfenced. The two major exceptions are schools funding and the Public Health Grant. These grants impose conditions on what the money is spent on and how it is spent. It is therefore for the DfE and the DHSC respectively (and any other departments who might issue ringfenced grants in the future) to take any additional measures that they judge necessary, beyond those set out in this statement, to ensure that those grants are spent according to their grant conditions. The DfE and DHSC have set out the relevant arrangements in their respective accountability statements.

How the core accountability system works

2.1 This section covers the essential elements of the core Local Government Accountability Framework. It shows how the elements work together and relate to each other, to ensure local government acts with regularity, propriety and value for money in the management of its resources.

2.2 Key elements of the framework are: clarity about who is responsible for resources:

• a set of statutory codes and rules which require councils to act prudently in their spending;
• a framework of internal and external checks and balances including audit and whistleblowing;
• transparency and publication of data; and
• requirements to have strategies and action plans on fraud.

2.3 There are legal and formal controls in place to ensure that it is clear who is accountable for money at the local level. Ultimate accountability lies with the full council (elected members of the council collectively). The relevant legislation is the Local Government Act 2000 (“the 2000 Act”), which introduced governance arrangements based on an executive, either the mayor and cabinet executive or leader and cabinet executive, and the Localism Act 2011 (“the 2011 Act”), which allows councils to return to the committee system form of governance. The 2000 Act also enables local people to hold councils and their officials to account for their spending decisions through public scrutiny via overview and scrutiny arrangements.

2.4 For executive forms of governance, the 2000 Act (and underpinning secondary legislation) provides that the full council sets the budget and policy framework. The executive implements that budget and policy framework. The executive is responsible for proposing the policy framework and budget to full council. For councils that adopt the committee form of governance, the 2011 Act (and underpinning regulations) allows local authorities the flexibility to make decisions in full council or delegate decision making to committees, sub-committees, other local authorities or officers.

The council must make it clear in standing orders how and by whom decisions will be taken. Also under these regulations, the Secretary of State could, by regulation, provide that certain matters are reserved for the full council to decide.

A set of statutory codes and rules which require councils to act prudently in their spending

2.5 A system of legal duties requires councillors to spend money with regularity and propriety. Under section 151 of the Local Government Act 1972, “every local authority shall make arrangements for the proper administration of their financial affairs and shall secure that one of their officers [the section 151 officer or Chief Finance Officer] has responsibility for the administration of those affairs”. The section 151 officer is an important mechanism for holding councils to account and has duties and powers to alert councillors and the auditor in the case of unlawful expenditure. This role is complemented and reinforced by authorities’ duty under section 5 of the Local Government and Housing Act 1989 to appoint a monitoring officer, who must report to the council when any proposal, decision or omission is likely to lead to contravention of any enactment, rule of law or statutory code.

2.6 In handling the routine management of their budgets, local authorities must set their council tax at a level which will balance their budget (Part 1 of the Local Government Finance Act 1992 and, for the Greater London Authority, Part 3 of the Greater London Authority Act 1999). Under section 25 of the Local Government Act 2003, the section 151 officer must report to the council when the council tax is being set on the robustness of the estimates and the adequacy of the reserves allowed for in the budget. Elected members must have regard to the report.

2.7 Authorities must restrict borrowing to what is affordable (section 2 and section 3 of the Local Government Act 2003). They must comply with the statutory codes issued by the Chartered

Institute of Public Finance and Accountancy (CIPFA) and DLUHC when making borrowing or investment decisions. This requirement covers county councils, unitary councils, district councils, and parish councils. Similar provisions in the Greater London Authority Act 1999 apply for the Greater London Authority and in the Local Government and Housing Act 1989 for the Common Council and certain other authorities.

2.8 During 2017-18 all four statutory codes covering borrowing and investment activities were updated to respond to changes in patterns of local authority behaviour. The overarching aims of the updates were to improve transparency of decision-making and to encourage local authorities to take a longer term view of opportunities and risks. The department has since completed a post implementation review of the updated guidance to understand how local authorities responded to changes that were made. The findings of the review, together with our ongoing monitoring of the sector and the findings from the NAO’s recent report on local authority investment in commercial property are being considered as part of the department’s continual evaluation of the effectiveness of the framework and the role it plays as part of the core accountability system.

2.9 The Accounts and Audit Regulations 2015 require that elected members maintain a sound system of internal control including arrangements for the management of risk, an effective internal audit, and that local authorities prepare annual accounts. These accounts are subject to external audit. Independent auditors are required to form an opinion on whether the accounts give a true and fair view, and to conclude on whether the authority has made proper arrangements for securing value for money.

A system of internal and external checks and balances including audit and whistleblowing

2.10 There are mechanisms in place for occasions when routine processes fail. The Local Government Finance Act 1988 requires the section 151 officer to issue a report (a section 114 notice) to all councillors if there is unlawful expenditure or an unbalanced budget. The authority’s full council must meet within 21 days of the issuing of the section 114 notice to consider it, and during that period the authority is prohibited from either pursuing the course of action which is the subject of the report (in the case of unlawful expenditure) or entering into new agreements involving the incurring of expenditure (in the case of an unbalanced budget). Councillors therefore cannot avoid being aware of illegal activity.

Also, external auditors can pursue action in the courts where they believe that either elements of the accounts, the actions or decisions of an authority, or the authority’s failure to act, are unlawful (sections 28 and 31 of the Local Audit and Accountability Act 2014). This is a strong incentive to avoid illegal actions.

2.11 The system includes external checks, such as a local authority being subject to an annual external audit. The independent auditor is required to give an opinion on whether the financial statements of the audited body give a true and fair view, and whether all statutory provisions relating to the accounts have been complied with. They are also required to satisfy themselves that proper arrangements are in place to achieve effectiveness, efficiency and economy in the use of resources.

2.12 The auditor is also under a duty to consider making “a report in the public interest” on any significant matter coming to their notice during the course of an audit which they feel should be brought to the attention of the public. Any public interest report must be considered by the full council within one month of receipt. All of this information must be placed in the public domain. The auditor is also required to send a copy of the report to the Secretary of State. All Public Interest Reports are forwarded to DLUHC to consider.

2.13 The Financial Reporting Council and professional bodies have an oversight role in the new audit framework, mirroring their regulatory roles within the companies audit sector. The National Audit Office produces the Code of Audit Practice and supporting guidance, which sets out what auditors are required to do in order to fulfil their statutory responsibilities in carrying out the audit of local authorities. Both the external Auditor and the NAO are prescribed persons under the Public Interest Disclosure Act 1998, to which employees may make protected ‘whistle blowing’ disclosures.

2.14 Councils are strongly recommended to have whistleblowing arrangements in place as recommended in the Chartered Institute of Public Finance and Accountancy / Society of Local Authority Chief Executives Delivering Good Governance in Local Government: Framework (2016).

Transparency and publication of data

2.15 As part of the overall core accountability framework, the Local Government Transparency Code 2015 requires principal local authorities to publish, on a regular basis, certain information about their expenditure, procurement and assets. Access by the public to this data makes it easier for local people to hold their local authority to account, contribute to the local decision making process, and help shape public services.

Requirements to have strategies and action plans in place on fraud

2.16 Although there are no specific statutory requirements to prevent or detect fraud, local authorities are under an overriding duty to protect the public purse and should ensure their systems are robust. The above mentioned 2015 Transparency Code sets out the specific counter- fraud requirements they must publish annually. Local authorities are required to comply with Part 2 of the Code and the department has undertaken periodic reviews to test this, most recently in 2018.

2.17 Local authorities should ensure they have a clear counter fraud policy embedded into their systems and follow the recommendations set out in the latest Local Government Counter Fraud and Corruption Strategy, initially published by the sector in March 2016 and funded by DLUHC and updated in March 2020. A practitioner’s guide, also funded by the department and published by the Chartered Institute of Public Finance and Accountancy, sets out the practical measures local authority counter fraud staff should take to identify and detect fraud.

2.18 In summary, the core Local Government Accountability Framework for which Principal Accounting Officer is accountable, has roles for the public, the council executive, councillors, the sector and auditors in ensuring that value for money is achieved. For many services, this provides sufficient assurance.

2.19 As stated above, departments have put additional accountability arrangements in place for some specific services to provide additional assurance. This may be because a service is high risk or because the service is being used by vulnerable people who are less able to influence service delivery through choice and voice. One example is children’s safeguarding, where universal inspection is in place to ensure that children are protected. These decisions are the responsibility for those departments which are accountable for the relevant services

How the accountability system responds to failure

3.1 This section describes what happens when councils do not meet the statutory requirements for which they are responsible to deliver adequate services or value for money in their local communities.

3.2 There are a range of external systems in place should councils fail to fulfil their functions, and which contribute to the maintenance of regularity, propriety and value for money. These are summarised below.

3.3 For any case of service failure affecting an individual (including all council services), the Local Government Ombudsman provides an independent route of complaint and redress. The Ombudsman reports annually on complaints investigated.

3.4 For service specific failure, where the safeguarding of vulnerable people may be at stake, the relevant government department has in some cases put in place specific failure and improvement regimes. Accountability arrangements for tackling these cases are covered under separate system statements (e.g. the DfE system statement). Actions which may be taken on failure may include improvement activity from the local government sector, led by the Local Government Association (LGA); programmes of inspection to identify failure and make recommendations; and powers for central government to intervene.

3.5 To assure and strengthen the overall corporate performance of councils across the sector, funds are provided from Local Government Departmental Expenditure Limit to the LGA to provide peer support, including mentoring and peer challenge. Peer support can be particularly effective at key moments, such as when an authority is experiencing a transition. The LGA is responsible for this work and has a systematic approach to identifying those councils that could benefit from sector support, based on data and informal conversations with all councils in the sector.

3.6 As a last resort, the government has powers to investigate and intervene based on councils’ best value duty. If an inspection identifies a failure or very high risk of failure, to comply with the best value duty, under section 15 of the Local Government Act 1999 the Secretary of State has powers to intervene. Under section 15(5) he can direct an authority to take any action which he considers necessary or expedient to secure compliance with the best value duty. Under section 15(6) the Secretary of State may direct that any (or all) functions of the authority be exercised by him or a nominee (e.g. a commissioner).

3.7 Though intervention in a local authority is rare, DLUHC has experience of doing this where necessary, including in Rotherham, Tower Hamlets and Northamptonshire. We also work closely with colleagues in the DfE and the DHSC who have their own service specific inspection regimes and means of intervention.

3.8 It is responsibility of the Principal Accounting Officer to ensure that advice is given to the Secretary of State about the relative merits and risk of statutory and non-statutory intervention in particular cases, based on evidence and the department’s own analysis and risk assessment of the issues, to maintain the integrity of the overall accountability system.

How the Department gets assurance

4.1 This section describes how the department collects and analyses information to provide assurance that the core Local Government Accountability Framework is working and to assess risk.

4.2 The department collects and analyses information from a wide range of sources. This includes financial data, information on outcomes, information relating to specific services as well as soft intelligence. All financial data is taken from one or a combination of Office for National Statistics data, the publicly available statistical returns provided by local authorities to the department, or from authorities’ Whole of Government Account Returns submitted to Her Majesty’s Treasury. Other information including soft intelligence is primarily gained from our interaction with authorities and from other government departments.

4.3 The main sources of financial data available annually are:

• income data published December / January as part of the Local Government Settlement
• expenditure data published in the autumn
• reserves level and liquidity data published in the autumn

4.4 Other sources of information include:

• the department’s local intelligence collected through relationships built with authorities by teams in the department
• the LGA, especially through their regional Principal Advisers and from their sector support work
• DfE, including Ofsted reports
• DHSC, including Care Quality Commission reports and Better Care Fund plans
• Department for Business, Energy & Industrial Strategy (BEIS) Local leads across England who provide local intelligence on leadership, local relationships and progress on devolution deals
• notifications received of public interest reports and annual data on the work of auditors published previously by PSAA and to be taken forward by the NAO in future
• information published on local authorities’ websites, for example, minutes of Council meetings
• media reporting focused on the sector and generally

4.5 This data and intelligence is considered and analysed in the department to provide indications of which local authorities or groups of authorities are at highest risk of financial distress, service failure or other inability to meet statutory duties. This represents a strengthening of the department’s analysis and oversight following the recommendations in the NAO 2014 report: Financial Sustainability of Local Authorities. Regular meetings are held to probe and assure the analysis; consider what further work is being done or might be done through service departments and/or the LGA’s sector support; determine any specific actions or advice to ministers in the department; and consider any trends e.g. risk for particular types of local authorities.

4.6 In addition, twice a year, the department provides the Principal Accounting Officer with comprehensive assurance advice on how the core Local Government Accountability Framework is working. This advice presents research from the sector and think tanks; work the department has produced; and specific advice on whether the framework needs amending.

4.7 The Principal Accounting Officer also meets regularly with Accounting Officers from the DfE and the DHSC to discuss the analysis described above, alongside any specific pressures on children’s services and adult social care. This ensures both that the department’s analysis reflects a cross-government approach and also that other Accounting Officers with responsibilities for particular services have the benefit of a broad assessment of the sector.

4.8 The NAO’s report into the financial sustainability of local authorities in November 2018 , acknowledged the improvements made to our understanding of the extent to which local authorities are at risk of financial failure, and our developing relationships with other key departments. It also recognised evidence of the systematic collection and use of data, with robust reporting mechanisms. Following the report, the NAO published two further reports related reports, which were subsequently examined by the Public Accounts Committee, covering:

• correspondence from local councillors, Members of Parliament and members of the public. Local Auditor Reporting in England
• Local Government Governance and Accountability.

4.9 As a result, the department has taken a number of steps to improve its oversight and assurance. Actions taken so far include:

• Establishing and holding the first meeting of the Local Authority Governance and Accountability Framework Panel. The Panel was established in September 2019 and further details about its work are provided below (para 4.11).
• Supporting the Centre for Public Scrutiny and Localism research on how local authorities can diagnose and reduce the risk of failure in corporate governance.
• Discussions with colleagues in the sector to inform the government response to the Committee on Standards in Public Life report on ethics in local government.
• Commissioning the independent Redmond review of the effectiveness of the local authority financial reporting and audit regime, which reported on 8 September
• Conducted a review into the risks of fraud and corruption in local government procurement.
• instituted formal meetings with other government departments and extended the scope of the department’s contact, including engagement with: the Department for Education (covering schools funding as well as children’s services) and the Department for Health and Social care (covering public health as well as adult social care) on a monthly basis, and quarterly contact with the Department for Culture, Media and Sport (relating to local authority library provision). This is providing a shared view across departments of where authorities are experiencing challenges. This is resulting in a refreshed approach to formal data sharing with OGD partners.

4.10 The recommendations of the Redmond Review will help inform any future changes to the local audit framework necessary to improve accountability and assurance and DLUHC is intending to respond before the end of the year. The NAO’s new code of audit practice and accompanying guidance notes which takes effect for accounting year 2020/21, will also help to improve transparency and accountability by clarifying the information to be included in audit reports and making them more useful to local bodies and other interested parties.

4.11 In September 2019, DLUHC convened our partners with responsibility for individual components of the accountability system, in the Local Authority Governance and Accountability Framework Review Panel. The Panel has been created as an ongoing, rather than time-limited body and meets regularly. It is chaired by the department and its membership is from the National Audit Office, Local Government and Social Care Ombudsman, Local Government Association, Society of Local Authority Chief Executives, Centre for Public Scrutiny, Chartered Institute of Public Finance and Accountancy, and Lawyers in Local Government and the Association of Local Authority Treasurers. This body is the principal mechanism for gathering the views of key organisations with a national focus on the sector, and on overseeing the sector regarding the health of the framework. The Panel is assisting the department in identifying areas where corrective action is required and continually assess the framework for governance and accountability to identify if it is still fit for purpose.

4.12 The combination of all of these sources of information and activities above mean that the department is well-placed to understand risk, both across the system and in relation to individual Councils.

The accountability framework and devolution deals

5.1 This section explains how the core Local Government Accountability Framework applies in the light of devolution deals in England, in the context of the Cities and Local Government Devolution Act 2016 (the 2016 Act). This section also covers the separate devolution to London, setting out the accountability arrangements for the Greater London Authority (GLA).

Devolution in England

5.2 This accountability system applies to all local authority bodies. This includes new combined authorities, such as the Greater Manchester Combined Authority and other governance structures in local government.

5.3 The government has set out a clear aim of devolving powers and budgets to local areas through bespoke devolution deals. In response to this the department has taken steps to strengthen the accountability system, to allow a greater variety of local governance arrangements while ensuring that there is clear and strong accountability, particularly where the government is devolving the most powers. This includes a commitment to publish a Devolution Accountability Framework which will apply to all English institutions with devolved powers.

5.4 The 2016 Act enables the government to create mayoral combined authorities, where groups of local authorities agree locally that they wish to work together to deliver particular functions across the combined area, led by a directly elected mayor. Directly elected mayors enhance accountability by providing clear and visible leadership and by being directly and personally accountable to the local electorate at the ballot box through regular elections. The establishment of each mayoral combined authority is subject to locally-led statutory consultation, approval by individual local councils and the Parliamentary approval of relevant orders.

5.5 Combined authorities are, like local authorities, bound by the legal and technical requirements set out in this statement. The 2016 Act sets out that - in addition - all combined authorities (including mayoral) must have at least one overview and scrutiny committee and an audit committee to hold both the authority and the mayor to account.

5.6 In addition to devolution of specific powers, several devolution agreements with local areas have included a commitment to increase the flexibility with which combined authorities can use devolved funds, creating a ‘Single Pot’ which the combined authority will be able to use in a way that best meets local priorities.

5.7 To strengthen accountability and value for money assurance for combined authorities the government has put in place new arrangements, in addition to the existing statutory structures on Best Value. New combined authorities must put in place a Local Assurance Framework that is agreed with the department. This must be done before new devolved funds are made available. In addition, for the new investment funds, which provide 30-year funding from government through DLUHC, combined authorities will be subject to scrutiny from an external, expert panel that will provide evidence on the procedures to determine spending and the impact of spending locally.

5.8 Finally, the government will lay before both Houses of Parliament an Annual Report on Devolution, pursuant to the provisions of section 1 of the Cities and Local Government Devolution Act 2016. This will contain a range of information, specified in Section 1 of the 2016 Act, on the progress of English devolution to inform MPs and others of the latest developments. The latest such annual report was laid before Parliament on 28 February 2022.

Devolution in London

5.9 Particular arrangements apply to London. The Greater London Authority (GLA) was established through the Greater London Authority Act 1999 according to a strong Mayoral model with a directly elected Mayor taking decisions and being scrutinised by the London Assembly. In the last Parliament, the government devolved further responsibilities to the Mayor for housing, planning and economic development through the Localism Act 2011.

5.10 Underpinning the Mayor’s strategic delivery role in London is a financial settlement, the London Settlement, which was agreed between DLUHC and the GLA. This was issued in February 2012, and reissued in December 2014.

5.11 As the lead Accounting Officer for the London Settlement, I have the same responsibilities as described in section one of this statement. Accountability for spending decisions rests solely with the Mayor of London and scrutiny of those decisions with the London Assembly.

5.12 The government is also taking forward and supporting London partners’ proposals for further reform in relation to employment and skills, congestion, health, social care and justice and a business rates retention pilot. Appropriate governance and accountability arrangements are being co-designed to underpin delivery. As any changes are made, they will be reflected in this statement.

5.13 There is a robust core Local Government Accountability Framework in place which I can rely on as Accounting Officer for DLUHC to assure me that councils will spend their money with regularity, propriety and value for money. The key elements are legal and formal controls; local audit; and transparency and democratic accountability to local people as set out in Section 2.

5.14 Inevitably, as the core Local Government Accountability Framework reflects current policy, so it will need to change when new policies are developed and implemented. As this document has been amended to reflect changes with the development of devolution deals, and as policies such as Business Rate Retention are developed, the department will consider their impacts fully, including upon accountabilities of the Principal Accounting Officer. This statement, as a living document, will be updated as appropriate to reflect all such changes.

Annex B: Accountability System for Local Growth Funding

Introduction

Annex A sets out detail of the Local Government Accountability System, explaining the statutory duties, defences and safeguards through which value for money is assured.

This Local Growth Funding Accountability System sits alongside the Local Government System. This Annex sets out the specific accountability structures and processes through which value for money is assured on this funding. It covers:

• the Local Growth Fund (LGF), Getting Building Fund (GBF) and Local Enterprise Partnerships (LEPs)
• the scope of Principal Accounting Officer accountability in relation to local growth funding
• how the accountability system works for local growth funding
• monitoring and evaluating delivery
• how LEPs receive their local growth funding allocations
• implications of the Levelling Up White Paper

The Local Growth Fund, Getting Building Fund and Local Enterprise Partnerships

1.1 The LGF was a £12bn fund, established in the 2013 spending round as a means of devolving national funding streams to local places. The LGF comprised funding commitments to LEPs through 3 rounds of Growth Deals running from 2015-16 to 2020-21 and all LGF has now been expended.

1.2 The GBF is a £900m fund announced in 2020 to deliver jobs, skills and infrastructure across the country. GBF targeted areas facing the biggest economic challenge as a result of the Covid-19 pandemic. GBF supports the delivery of shovel-ready infrastructure projects, agreed with mayors and LEPs to boost economic growth, and fuel local recovery and jobs.

1.3 GBF was to be expended by the end of FY 2022/23. However, in a number of LEP areas freedoms and flexibilities have been used to enable spend on projects to continue into 2022/23.

1.4 This statement therefore focuses on the system which has been put in place to ensure that remaining GBF is spent with regularity, propriety and value for money.

1.5 Given LEPs’ non-statutory status, LGF, GBF and other public funds were not paid to them directly, but rather to an ‘accountable body’. The accountable body received these funds on the LEP’s behalf and ensured that they are properly accounted for alongside other funding for local government, as set out in Annex A. A local authority within each LEP’s geographical area acts as the single nominated accountable body for each LEP. These accountable bodies play a fundamental role in ensuring that funds are spent with propriety, regularity, and value for money.

1.6 In October 2017 the department strengthened its systems and published various reviews including the Review of LEPs Governance and Transparency, a report led by Mary Ney, Non-Executive Director (NED) of the DLUHC Board. Following these reviews the department published the revised National Local Growth Assurance Framework, which came into effect April 2019 (latest version September 2021). The National Local Growth Assurance Framework incorporates the recommendations of the Ney review; the best practice guidance for LEPs has strengthened the annual performance conversation process and introduced deep dives to review LEP governance, transparency and accountability in more detail. It also addresses a number of the recommendations included in the Ministerial Review into LEPs, Strengthened Local Enterprise Partnerships (July 2018), and in NAO reports.

The Scope of Accounting Officer accountability in relation to the Local Growth Fund

2.1 DLUHC’s Principal Accounting Officer is the accounting officer for the award of the LGF and GBF that was made to LEPs. The Principal Accounting Officer is accountable to Parliament for those elements of the LGF and GBF which were awarded to LEPs from DLUHC’s DEL. Those elements of the Fund which remain on other departments’ DEL are subject to their own funding and oversight mechanisms. These comprise funding from the DfT and BEIS.

2.2 DLUHC’s Principal Accounting Officer is responsible for ensuring that the delivery system within which LEPs invest the local growth funding works effectively. Building on the Local Government Accountability System set out in Annex A, the Local Growth Funding assurance system is based on the following elements:

• The National Local Growth Assurance Framework which sets out standards around transparency, accountability and value for money which LEPs must comply with in composing their own local assurance frameworks
• regular reporting against agreed output metrics
• an evaluation framework
• annual performance conversations with each LEP
• deep dives to review LEP governance, accountability and transparency

2.3 Together these elements provide mechanisms for ensuring that funds are spent locally with regularity, propriety, and value for money. They also provide me with oversight of what is being delivered. Further details on these are set out later in this statement.

2.4 The National Local Growth Assurance Framework replaced the Single Pot assurance framework, and also provides guidance on funding where LGF is part of a place’s ‘Single Pot’ of funding awarded under devolution or city deals. DLUHC has to formally sign off Local Assurance Frameworks before they become operational.

How the accountability system works for the Local Growth Fund & Getting Building Fund

3.1 The accountability system for local growth funds builds on the checks and balances established in the accountability system for local government. It includes a National Local Growth Assurance Framework, regular reporting, a mid-year and annual performance conversation, and a robust approach to monitoring and evaluation. This system enables decision making which is accountable, transparent, and which delivers value for money.

LEP assurance frameworks

3.2 The government has worked with LEPs, local authorities, and government departments to co-produce an additional national assurance framework. This framework is used to support accountable, transparent local decision making, which delivers value for money. This national assurance framework sets standards which LEPs and their accountable bodies must adopt through their own local assurance frameworks, providing assurance to the government in exchange for delegated funding arrangements and local flexibilities.

3.3 These local assurance frameworks have been agreed by the LEP board, published, and signed off by the accountable body through the Section 151 officer. Each accountable body’s Section 151 officer has written to the department verifying that a local assurance framework has been developed and is compliant with the standards articulated in the national LEP assurance framework. These local assurance frameworks must also be reviewed each year to ensure they remain current.

3.4 The department also provides funding to mayoral combined authorities, assurance is achieved via the accountability systems for local authorities and local growth funding. This includes following the guidance within the National Local Growth Assurance Framework.

3.5 The assurance frameworks set out details of:

• the LEP’s constitution, and within that the arrangements for taking and accounting for decisions, including a clear description of roles and responsibilities;
• transparent decision-making and ways of working – ensuring effective public engagement, with key documents, decisions etc. made public in line with the requirements placed on local authorities, and an agreed means to manage conflicts of interest;
• the responsibilities of the accountable body role - ensuring that the local system established through each LEP’s local assurance framework supports effective LEP decision making;
• a clear and transparent basis against which projects and programmes are identified, appraised and prioritised. Appropriate methodology to assess value for money with business cases developed in line with government guidance;
• the LEP’s scrutiny and audit arrangements.

3.6 Given this context, we expect accountability and value for money for local growth funding resources to work in the following way. The accountable body, as the legal recipient of grant, must put in place appropriate arrangements for the proper use and administration of funding, building on the existing Local Government System outlined in Annex A. The LEP as strategic decision maker develops and maintains its Strategic Economic Plan, determining the key funding priorities to which LGF, GBF and other resources should be directed, and ensures there is adequate capacity to deliver against those. Democratic accountability for LEP decisions is provided through local authority leader representation, with business community representation coming from the business leaders on each LEP board.

3.7 In places where not all local authorities are represented directly on the LEP board, it is important that those who do sit on the board have been given a clear mandate, through an underpinning local authority arrangement, such as a joint committee or combined authority or other similar arrangement, which brings all the local authorities together in the area, formalising decision making. This is also important for facilitating collaboration and the pooling of resources and efforts between local authorities in support of agreed LEP priorities. The detail of how these arrangements work will be picked up in each LEP’s assurance framework.

Monitoring and evaluating delivery

4.1 The government has developed a coherent approach to the monitoring and evaluation of local growth funds. We have agreed with LEPs a range of data on inputs, outputs and outcomes that they should use to demonstrate success, providing clarity to government and the public about what LEPs have delivered with their LGF and GBF resources.

4.2 Relevant metrics include the amount of private sector investment leveraged, levels of employment, housing units completed, and qualifications achieved. LEP performance is monitored by government, enabling it to target support where issues arise.

4.3 LEP performance is monitored in the following ways:

• Area Lead (AL) discussions. ALs are regionally based civil servants who provide the LEPs with day-to-day advice and support and are the main channel of communication between the LEPs and central government. ALs hold regular performance discussion with their LEPs, ensuring dialogue is maintained and emerging risks and issues can be dealt with early.
• LEP monitoring returns. LEPs provide central government with a comprehensive set of data relating to each project on a quarterly or biannual basis, including both total and forecast spend, and output metrics.
• Annual performance review. Each year the department conducts a performance review with every LEP which reviews their progress on delivery over the past 12 months. This leads to an agreed set of actions and next steps, if there are any issues to be addressed either by the LEP or by central government.
• Mid-year reviews. In addition to the annual performance review, the Strengthened Local Enterprise Partnerships (July 2018) introduced a mid-year review which focuses on progress against the agreed set of actions and next steps, and the progress and projection of delivery. The review also considers the annual report and delivery plans that the LEP is required to publish.
• Deep Dives. The department maintains the option to conduct deep dives to review the governance, transparency and accountability processes and culture in LEPs. Deep dives capture best practice amongst LEPs and where there are any issues identified next steps and actions are agreed with the LEP.

4.4 The evaluation approach is based on several key pillars:

• Government review of the LEPs’ case studies to develop information about thematic impact of specific policy interventions.
• A national evaluation of LGF and GBF. This will include a process evaluation, an output and outcome assessment focusing on case studies and a feasibility study into the option of a full impact evaluation.
• Local evaluations, produced by LEPs, which mainly focus on process questions concerning how best to deliver outputs, alongside collation of case studies.

4.5 The approach to local evaluation was co-designed by the government a LEPs to guide LEPs in developing their own local evaluation plans. The guiding principle behind these LEP Evaluation Plans is that they should be SMART:

• specific enough to provide the level of detail LEP officials and scheme promoters will require to guide delivery of evaluations
• measurable so it is clear whether the evaluation work carried out fulfils the evaluation plan or not
• achievable so that the LEP has a realistic chance of producing evaluations in line with its plan
• relevant so that the plan is of practical use to the LEP and covers the most important areas for delivery of evaluations
• timed so LEP officials know what they need to do by when in order to keep delivery of their evaluation plan on track

4.6. Evaluations that assess how effectively schemes are delivered and their causal effect on planned outcomes and impacts will provide the government with evidence on the effectiveness of delivery and value for money from LGF & GBF interventions. The LEP evaluation plans provide a mechanism to ensure that the best local evaluation evidence is produced as rapidly and effectively as is technically feasible.

How LEPs receive their Funding allocations

5.1 Funding allocations have been and will continue to be paid to the LEP’s accountable body in 2022/23. All payments from the DLUHC DEL will be made under Section 31 of the Local Government Act 2003. This is how local authorities receive the majority of their funding from national government. Allocations are awarded on an annual basis. The department can review the level of funding and flexibility awarded to each LEP as part of the annual performance conversation.

5.2 As is the policy with Section 31, the grant funding agreement does not impose detailed legal conditions which would restrict how funding can be used. The grant offer letter does however set out clear funding requirements which must be followed:

• funding is to support the agreed projects between the government and the LEP and will be used to secure the agreed outcomes
• funding decisions must be agreed between the LEP and the accountable body in accordance with their local assurance framework (which must be compliant with the standards established in the national LEP assurance framework)
• progress will be measured against agreed core metrics and outcomes, in line with the national monitoring and evaluation framework

5.3 There is a clear framework in place which provides assurance that LEPs, working with their accountable local authorities, will spend their money with regularity, propriety, and value for money. The key elements are the legal controls and democratic accountability to local people through the local authority leader representation on LEPs, and the role of the accountable local authority. In addition to the general requirements on local authorities, there are additional arrangements in place through the assurance framework and monitoring and evaluation strategy to ensure LEPs carry out their responsibilities effectively. The system provides assurance that the government’s decentralising agenda can be achieved in relation to LEPs without compromising the proper spending of public money.

Implications of the Levelling Up White Paper

6.1 The Levelling Up White Paper UK set out revisions to the Government’s approach to local growth. It proposes the integration of LEPs and their business boards into Mayoral Combined Authorities, the Greater London Authority and County Deals, where these exist. LEPs will continue to receive core funding in 2022/23 in order to make preparations for the integration of LEP functions into authorities from 2023/24 onwards.

6.2 Where a devolution deal does not yet exist, LEPs will be expected to continue to play their vital role in supporting local businesses and the local economy. Where devolution deals cover part of a LEP, this will be looked at on a case-by-case basis.

6.3 The framework as set out in this annex will therefore continue to apply in 2022/23 to provide assurance that LEPs, working with their accountable local authorities, will spend any remaining local growth funds with regularity, propriety, and value for money whilst putting in place arrangements for integration where feasible.

6.4 The Department will review the National Local Growth Assurance Framework and Local Government Accountability system during 2022/23 to ensure that a suitable assurance system is in place for these revised arrangements from 2023/24.

1. Delegated authority relates to transaction specific amounts, whereas risk appetite thresholds are set up in terms of the aggregated position (across all financial instrument programmes) to a single counterparty or group of connected counterparties. ↩