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Departments’ oversight of arm’s length bodies: a comparative study

There is no collective understanding of what type of oversight is appropriate and cost effective for different types of arm’s length bodies, according to today’s report from the National Audit Office.

Arm’s-length bodies (ALBs) is a commonly used term covering a wide range of public bodies, including non-ministerial departments, non-departmental public bodies, executive agencies and other bodies, such as public corporations. Departments rely on ALBs to carry out a range of important functions, many of which are vital to delivering departments’ strategic objectives. Today’s NAO report looks at four departments that oversee a large number of ALBs: Department for Business, Innovation & Skills, Ministry of Justice, Department for Environment, Department for Food & Rural Affairs, and Department for Culture, Media & Sport.

The NAO found that the arm’s-length bodies sector remains confused and incoherent. There is no single list of all ALBs across government nor a common understanding of when ALBs should be used, or what type of ALB is most appropriate for particular circumstances. Different departments define ALBs in different ways and some ALBs are uncertain about how they relate to their department’s objectives. The prevailing inconsistency hampers a coherent approach to overseeing ALBs that is consistent with their purpose, although the Cabinet Office is building on its Public Bodies Reform Programme and taking further steps to address this.

Across the four departments the NAO looked at, approaches to oversight of ALBs have evolved in response to internal and external pressures. All four departments use different approaches, but without a consistent overarching framework that draws on learning from departments’ experience.

Departments can undermine good relationships with ALBs by frequent, often duplicated, requests for information. Although 87% of the ALBs the NAO surveyed felt the frequency of contact with departments was ‘the right amount’, 52% felt oversight had increased in the last 18 months.  The NAO heard concerns that departments often contacted ALBs to request information that was already held by the department, or available in published documents such as annual reports.

According to the NAO, the one consistent feature is the extent to which oversight is focussing on compliance and control, as opposed to achieving greater value from the relationship. There are, however, examples of departments adopting a more strategic approach through greater involvement of more senior staff and selective, targeted collaboration with and between ALBs.

Differing circumstances within individual departments and across ALBs precludes a one size fits all approach, but the Cabinet Office has more to do to develop greater coherence and consistency in the oversight of arm’s length bodies. Among the NAO’s recommendations is that the Cabinet Office should review the effectiveness of existing mechanisms for sharing good practice and developing capability in departmental oversight of their ALBs.

“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.”

Amyas Morse, head of the National Audit Office, 5 July 2016

Notes for Editors

£25bn
National Audit Office  estimate of the funding provided by the four departments to the 116 arm’s-length bodies (ALBs) covered by this report in 2014-15

144,000
NAO estimate of  the number of staff employed by the 116 ALBs covered by this report, in 2014-15

9,200
Staff employed in the four core departments in 2014-15

24
NAO qualifications of ALBs’ accounts between 2010 and 2015 in the four departments covered by this report (40 across all departments)

355
Public appointments, including reappointments , made by the four departments to ALBs in 2014-15

28%
Percentage of ALBs that were partially clear or not clear about their department’s objective in relation to their organisation’s area of work

80%
Percentage of ALBs in our survey who reported that the current relationship with their department was very or moderately effective in helping them to deliver their objectives, compared to 69% 18 months ago

52%
Percentage of ALBs reporting that oversight of their organisation has increased in the past 18 months

 

    1. This report is about how departments oversee and manage the relationship with their arm's length bodies (ALBs). The scale and role of ALBs vary hugely. ALBs range from large executive agencies, like Her Majesty's Courts & Tribunals Service, to smaller non-departmental public bodies, such as the Gambling Commission.
    2. There has been considerable debate about what is and is not an ALB, and there is no single list of all the ALBs across government. Both the Office for National Statistics (ONS) and the Cabinet Office classify central government public bodies. The ONS determines how a body should be classified for the national accounts, including whether it sits in central government; the Cabinet Office further classifies central government bodies for administrative purposes. The Cabinet Office oversees the public bodies’ landscape, and provides support and guidance to departments in relation to the creation, governance and oversight of ALBs. It also leads on the process for reviewing whether ALBs should continue to exist.
    3. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
    4. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 785 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.21 billion in 2015.

Contact

NAO Press Office
+44 (0)20 7798 7400 or email pressoffice@nao.org.uk

PN: 42/16