Arm's length bodies oversight "confused and incoherent"

The use of arm's length bodies to deliver Government objectives is "confused and incoherent" with no proper understanding of what kind of oversight is appropriate and cost-effective, despite them handling billions in public money, the National Audit Office has warned.

The watchdog said there are large numbers of ALBs carrying out a range of functions, many vital to delivering Whitehall's strategic objectives, but there is no single list of the bodies and no "common understanding" of when they should be used or what type is most appropriate for different circumstances.

Furthermore, more than a quarter are only partially clear - or not clear at all - about how their work relates to their parent department's work.

The NAO looked at 116 ALBs across four departments - Defra, Justice, Business, Innovation & Skills and Culture, Media & Sport. Between them, the departments provided an estimated £25bn in funding to these bodies in 2014-15. The ALBs employed a combined 144,000 people, compared with 9,200 staff across the four departments.  

Between 2010 and 2015, the NAO made 24 qualifications to the accounts of the departments' ALBs  - and 40 to bodies across the whole of Whitehall.

The NAO said oversight have developed in response to internal and external pressures, with all four departments using a different approach, without a consistent, overarching framework built on past experience.

One consistent feature is the extent to which oversight focuses on compliance and control, rather than achieving greater value from the relationship. There are, however, some examples of departments taking a more strategic approach through greater involvement of more senior staff and targeted collaboration with and between ALBs.

Eight out of 10 said their relationship with their department was 'very' or 'moderately' effective in helping them deliver their objectives, up from 69 per cent 18 months ago. More than half (52 per cent) said oversight of their organisation had increased over the same period.

The NAO concluded that while the circumstances of individual departments precludes a one-size-fits-all approach, the Cabinet Office must do more to improve the coherence and consistency of oversight. It called for a review of existing mechanisms for sharing good practice and developing capability in departmental oversight of their ALBs.

Amyas Morse, head of the NAO, said: "If one of the main reasons for having arm’s length bodies is to provide a zone of relative independence, the fact that oversight mechanisms focus predominantly on compliance and control means there is almost certainly room for improvement."