Why monitor?

 

Ministers are accountable to Parliament for their policies [1].  Government organisations must use public money that is awarded to them with regularity, propriety and value for money.  Accounting Officers [2], appointed by HM Treasury, are accountable to Parliament for this [3].

 

‘Regularity’ means using money and other resources only for purposes authorised by Parliament (including any Parliamentary authority delegated to HM Treasury).   A similar requirement may apply to other sources of funding, such as European Union funds.

 

‘Propriety’ means patterns of resource consumption should respect Parliament’s intentions, conventions and control procedures, including any laid down by the Public Accounts Committee

 

‘Value for money’ means the optimum combination of whole-life costs and quality [4].  Finding solutions that achieve the best mix of quality and effectiveness for the least outlay does not always mean choosing the immediately cheapest option.  For instance, it may be more cost effective to buy a more reliable service or a better quality asset with lower maintenance costs and a longer operating life.

 

The concept of regularity and propriety is powerful. Parliament has consistently interpreted it as delivering public sector values in the round, encompassing the qualities summarised in the box below [5]. In striving to meet these standards, central government departments should give a lead to the partners with which they work. [6]

 

Standards expected of all public services

• honesty
• impartiality
• openness
• accountability
• accuracy
• fairness
• integrity
• transparency
• objectivity
• reliability

 

Carried out:

• in the spirit of, as well as the letter of, the law
• in the public interest

• to high ethical standards
• achieving value for money

 

If a government organisation (called a ‘funder’ in this note) has a financial agreement [7] with an external organisation (‘provider’), the funder must monitor the provider to ensure regularity, propriety and value for money.

 

Benefits

 

Monitoring, both internally for providers and externally for funders is an element of good management practice.  Done well, monitoring gives all those with an interest in a financial relationship – funder, taxpayer, provider, user – information about what is being achieved with the fund.  This in turn supports better understanding between funder and provider and promotes partnership working.  It also enables shared learning about what works, which provides for policies and programmes to be adjusted so they continue to meet need [8].

 

Impact of excessive monitoring

 

Monitoring puts a demand on providers: the information has to be specified, collected, analysed and submitted.  This has a cost.  Where the funder, by requiring the provider to carry out some monitoring, imposes a cost on the provider, the funder should pay for this, through full cost recovery if making grants and through price if contracting [9].   Often, that is a normal and acceptable part of the cost of managing the programme.

 

But monitoring can be excessive.  There is some evidence [10] that public funders’ monitoring of third sector providers is more likely to be excessive; and that, on average, public funders impose a heavier monitoring burden [11] on TSOs than do other funders [12]. 

 

If monitoring is excessive, it can take money away from the servicee and users by absorbing more of the grant or increasing contract costs.  Or the costs may be hidden or unfairly carried by providers.  Aside from the cost, the burden of meeting excessive monitoring demands can be too high for some TSOs.  It may simply be too much for small TSOs.  And TSOs involved in campaigning and advocacy may feel these roles are constrained by it.  They may be deterred from taking part in public service delivery.  Or they may be undermined in doing so.    This is evidently not in the interests of those TSOs.  However, neither is it in the interests of funders or society.  This is because there is a risk that the market of providers that are able and willing to accept offers of publicly-funded work is undermined.  This undermines Government’s ability to achieve its objectives, and weakens civil society.

 

Principles

 

Seeking to promote good practice in monitoring, the Government and National Audit Office have said:

 

Funding bodies should seek to minimise the monitoring and inspection burden on the recipients of funds to a level proportionate to the level of funding and risk, and which maintains proper control of public monies [13].

 

The Government has expanded on this in its principles of proportionate monitoring (Annex A) [14].

Notes

1. Cabinet Office, Ministerial Code, Cabinet Office, 2007
2. Each programme has an accounting officer.  This is usually the permanent secretary (the most senior manager) of the department, the chief executive of the agency or another, designated, senior manager
3. Treasury Officer of Accounts, Regularity, Propriety and Value for Money, HM Treasury, 2004
4. For a fuller definition, see Treasury Officer of Accounts, Regularity, Propriety and Value for Money, HM Treasury, 2004
5. Chapter 1 – Responsibilities, Managing Public Money, HM Treasury, February 2009
6. Chapter 2 – Use of Public Resources, Managing Public Money, HM Treasury, February 2009
7. In this note, a ‘financial agreement’ is an arrangement under which the funder agrees to pay the provider, whether this is through procurement, grant or grant-in-aid
8. Office of the Third Sector, Principles of Proportionate Monitoring and Reporting, Cabinet Office, awaiting publication
9. Decision Support Tool
10. Lucy Heady, Sarah Keen, Turning the Tables in England: Putting English Charities in Control of Reporting – a Guide for Charities and Funders, New Philanthropy Capital, 2008
11. Ibid - Measured as the proportion of the fund, in financial terms, that is needed to meet the monitoring demand.  
12. Such as charitable foundations and trusts
13. HM Treasury, National Audit Office, Office of Government Commerce, Improving Financial Relationships with the Third Sector:Guidance to Funders and Purchasers, HM Treasury, 2006
14. Office of the Third Sector, Principles of Proportionate Monitoring and Reporting (PDF - 64Kb), Cabinet Office, 2009