related documents
ORP27 - Local government management letters
Bowerman and Gray 1999
Executive summary
The local government Management Letter is potentially a rich source of information for public accountability, but is not well regarded by those who construct and receive it. This research aimed to discover more about stakeholder expectations of the Letter and to this end addressed four main questions.
- How is the Letter constructed and discussed?
- On whom and to whom is the Letter intended to report?
- What is the purpose of the Letter?
- How can the Letter be made more useful?
How is the Letter Constructed and Discussed?
We suggest that within local government an inner circle of Officers and external Auditors dominate the Management Letter process, with some late involvement from leading Members. Other stakeholders are excluded, the most serious exclusion being of opposition Members (who are often deprived of the opportunity to debate the Auditor's findings or to monitor implementation of Management Letter points) and of the public (who are deprived of a useful insight into the council's activities). Rather than enabling the Auditor's findings to be used as a starting point to improve the management of an authority, the Letter tends to be rushed through the process.
On Whom and to Whom is the Letter Intended to Report?
The Letter is technically a report to Members on the authority as a whole, but, although the authority is managed by both Officers and Members, it is difficult to identify in it measures of the respective performance of these two groups. This in itself reduces its value, but more significantly, the Letter is not used in the ways that many of our survey correspondents believed it should be. Notably, while there was considerable support for the Management Letter becoming a report to the public, the public does not have an automatic right of access to it at present.
What is the Purpose of the Letter?
The Management Letter has a wide range of uses. During our research we identified 10 purposes for which the Letters were commonly used in our survey authorities and this may account for the absence of a clearly focused role. In practice, expressing judgements on probity and on the proper management of the authority are seen to be by far the most important roles for the Letter; it is not seen as providing an important insight into the audit process as it is in the private sector. Our study also suggests that Officers and Members do not believe the Management Letter to be an aid to policy making.
How Can the Letter be Made More Useful?
During our research we made 11 suggestions on both the content and style of the Management Letter and ways in which it could be used. Our findings suggest that much could be done to make it more useful, especially for Members. Broadly, it seems that stakeholders included in the study would like to see the letter reflect the legitimate policy decisions of the authority. Some of the suggested improvements would be simple to implement, as they either involve extending best practice already advised by the Auditor or are simple presentational changes. Others would be more difficult to achieve, such as providing a suitable forum in which to discuss and build on the Letter.
Conclusion
This research provides an insight, through examination of the Management Letter, into the audit process in local authorities. It suggests that, despite an implicit faith in the audit process, the Auditor's findings are not well known to those at the periphery of local government. The Letter provides a wealth of detail about the financial state of an authority, on how well the authority is managed and on the audit process itself. However, it has little impact on the way the local authority operates and has become part of a mere ritual. The Letter has the potential to strengthen accountability to back-bench Members and to the public and this report offers suggestions on some challenging new directions for the Letter to help achieve this goal.