Government should tailor governance and audit requirements for small public bodies, says spending watchdog

The report warns that some of government’s requirements on how public bodies should operate effectively are better suited to large organisations than to small ones, which have “fewer resources at their disposal”.

In light of its findings, the NAO has recommended the government explore “streamlining” the requirements for small bodies, and help these bodies more effectively comply with updated requirements.

Government issues a range of requirements in areas such as counter fraud, digital, human resources and security to ensure that public bodies carry out their functions with efficiency, accountability and transparency.

However, the NAO notes that while the functional requirements are designed to be applied in a way that is tailored to organisations of different sizes, complexity and level of risk, small bodies find it hard to work out which requirements are appropriate for their operations because they often have fewer people, less in-house expertise and more limited resources than their larger counterparts.

According to the report, these small bodies have indicated that they would like more support to help with compliance in the form of “tailored self-assessment checklists and greater involvement in knowledge-sharing forums such as conferences and webinars”.

The NAO notes: “Although there are some examples of departments adopting innovative approaches to overseeing how their arm’s-length bodies comply with requirements, oversight remains inconsistent across government.”

To ensure that the financial reporting requirements for small bodies are “meaningful and proportionate”, the report recommends government work with departments to develop a “consistent approach” to deciding which bodies may be eligible for “light-touch” reporting requirements, where the risk to public money is low.

The NAO identified the following five points for the government to consider when it sets new requirements for government bodies:

• understand the costs of implementing requirements for small bodies;
• consider whether the benefits of new requirements outweigh the costs, especially for small and low-risk organisations;
• tailor requirements to organisations of different sizes where this results in a better cost-benefit trade-off;
• clearly communicate the rationale for new requirements; and
• consider whether new requirements can replace or streamline existing requirements.

Gareth Davies, head of the NAO, said: “The government is implementing ambitious plans to provide greater autonomy to individual public bodies and streamline regulations to increase efficiency and productivity.

“In doing so, it has an opportunity to review the requirements placed upon smaller public bodies to ensure that they achieve an optimal balance between accountability, transparency, efficiency and continuous improvement.”

Lottie Winson