Audit Wales says councils need earlier decisions, clearer forecasts and a full review of how billions of pounds are distributed
THE SYSTEM used to distribute Welsh Government funding to councils has not been independently reviewed for more than 20 years and still relies partly on information dating back to 1991, a new report has warned.
Audit Wales says the current arrangements do not always help Wales’ 22 principal councils secure value for money or plan essential public services effectively.
Its report, Funding Councils, calls on the Welsh Government to provide funding information earlier, offer councils greater certainty about future settlements and ensure decisions are based on accurate, up-to-date evidence.
Councils rely heavily on Welsh Government funding to pay for services including education, social care, waste collection, highways and housing support.
However, auditors found that councils are often given limited information about how much funding they are likely to receive in future years, making long-term financial planning more difficult.
The report says both councils and the Welsh Government should prepare for a range of possible funding settlements so that decisions do not have to be rushed once final figures are announced.
It also raises concerns about the formula used to distribute the majority of unrestricted council funding.
The system has not undergone a full independent review for more than two decades, while some of the indicators used to calculate allocations continue to draw on census and other information from 1991 and 2001.
Audit Wales said there had been significant demographic, economic and social changes across Wales since those figures were collected.
The report also questions the number, design and timing of specific grants handed to councils.
Some grants are announced late in the financial year, leaving authorities with little time to spend the money and increasing the risk that decisions are made quickly rather than as part of a wider strategic plan.
Five recommendations have been made to the Welsh Government, including a review of the funding formula, clearer indications of future funding levels and improvements to the administration of grants.
Auditor General for Wales Adrian Crompton said many of the problems identified reflected recurring concerns he had encountered during his time in office.
He said: “This report finds that the way the Welsh Government funds councils does not always help them to achieve value for money, particularly over the longer term.
“Addressing these themes is essential if the Welsh Government and local authorities are to navigate today’s extreme financial and demand challenges and deliver sustainable public services to the people of Wales.”
The annual local government settlement provides councils with money that is not restricted to a particular service. The amount received by each authority is calculated using a formula intended to reflect local needs and circumstances.
Councils also receive separate grants that must be used for specified purposes.
The latest findings follow previous Audit Wales reports examining the financial sustainability and capital planning arrangements of Welsh local authorities.
