Performance Measurement And Evaluation In Local Authority Accounting Essay

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Management and performance is regarded as one of the kernel in reform of public sector in recent years. This is also one of the pillar of the reinventing government movement (Gianakis, 2002, p.36) . Performance measurement is a momentous tool to upgrade accountability; this is in accordance to OCED. The effectiveness and how efficient is the delivery of public services to the citizenry is aided through data provided by performance assessment. This article examines especially the role that performance measurement plays in the British public sector using some local authority as the case study. Control basis (Broadbent and Guthrie, 1992) and funding Boyne,(2002) are the two points of which the central government legitimacy right in directing activities affairs is based on. In the local government sector, for example, authorities in England have no independent constitutional standing and are required to act intra vires in accordance with legislation. Local government generate their major income through taxation with the help of the central government (about 70 percent). Talbot,(2001).

Performance measurement and evaluation in local authority is a constructive process through which the central government check the activities of its subordinate (local authorities) to ensure effective and sagacious management of fund empowered on them and to acknowledge the performance of its representatives at the grass roots level. Performance measurement is a tool used by the central government in planning, reporting, control measuring tools and accountability toward achieving the best value practise of the local authority in discharging its constitutional functions. Furthermore, performance measurement is regarded as a steering instrument within the public sector which made some authors refer to this function of performance measurement by the term "performance management. The boom of performance evaluation as a reporting as well as a steering instrument in British public sector has been fostered by the introduction of a contract culture in the public sector and many public services are nowadays allocated by a tendering process.

From the inception increasing the efficiency of public services has been high on the agenda of the promoters of new public management. Cutting through red tape, minimizing public waste and value-for-money reporting have been the motives for the introduction of performance measurement in the public sector. Unlike in the private sector that its primary objective is to establish profits, quality-of-life reporting of the governmental subject is an integral part of a more strategic use of performance measurement in the public sector.(Audit commission,2005)

FRAMEWORK OF PERFORMANCE ASSESSMENT IN UK LOCAL AUTHORITY

The audit commission under section 10 of the local government act has the authority to supervise or monitor local authority in relation to their assessment. The result of this assessment is vital as it immensely determine the overall CPA category for authority which is needed by the audit commission to assess and report on under section 99 of the local government ACT 2003.

Performance assessment ensures preferences are not given to any principal local authorities in England whatsoever, so that each and every one of them can be assessed and graded by the Independent Audit Commission. The grading was initially five ranging from Excellence, Good, Fair Weak and Poor but has now been modified into 4 stars to 0 stars. These ratings through a methodological are derived from weighted assessment of a council's core service which involves libraries , leisure, social cares, housing, education and the environmental facilities , welfare benefits, its use of resources and a grading of its corporate capacity to improve is used as the basis of general assessment

CCT and Best Value

This is a local government "reforms" that was introduced by the 1979-1997, arguably the most far-reaching were those connected with Compulsory Competitive Tendering. CCT required councils to compare the costs of continuing to provide specified services "in-house" with those of any interested private contractors, and to award the service contract to the most competitive bidder. This era considers and concentrated mostly on the cost and took the service quality as a secondary issue which was a major challenge to the policy. Cost was always the ultimate criterion, rather than quality, and this centralist rigidity and the privatising ideology underpinning it caused it, not surprisingly, CCT had to go, but ministers were insistent that it be replaced with a regime that, that would be more concerned with quality and performance improvement and continue to emphasise economy and efficiency in service delivery. Game, (2005)

Councils were required to produce an annual BV Performance Plan based in part on regular service-specific and cross-cutting reviews, themselves driven by "the four Cs" which involves: challenging the purpose of the service, compare the authority's performance with others, consult the community, and provide for competition where appropriate. Based on the information, the council can then select the delivery method that would give "best value" to local people. Game, (2005)

Comprehensive Performance Assessment

For the purpose of improving quality public services, in June 2001, there exist a transformation of a new means on how public sector can be assess due to the criticism of centralist bureaucracy, micro-management and interventionism of the former systems. In this vogue invention of managing the local authority (Comprehensive Performance Assessment), the high performing local authority is rewarded with fewer inspections, fewer policy plans to be submitted for ministerial approval, and reduction of any kind of constraints on their current and capital spending to motivate the local authority that perform beyond expectation. In contrary, the "Poor performers" local authority is always tailored with a limited freedoms and a great deal of remedial attention impose by the superior and supervisory authority for performance improvement intent. Excellent, Good, Fair, Weak and poor are the rating systems adopted by CPA method of assessment, the Best Value, however, operated on a service-by-service basis.

Comprehensive area assessment

Comprehensive area assessment is a new method of assessment that succeed the comprehensive performance assessment in 2008/2009, examining how well local council and other public services work together to meet the need of the people. Comprehensive Area Assessment (CAA) is the new framework for the independent assessment of local public services in England.

Game, (2005), CAA has two main elements that sum the assessment approach in the local council, which are:

Area assessment: This method is specific in nature. It is a system that shed lights on how well local public services delivers better results for local people across the whole area, concentrating on agreed priorities such as health, economic prospects and community safety, and how likely they are to improve in the future.

Organisational assessments for councils: This assessment is often determined by considering the external auditor's assessment of value for money in the use of resources with a joint inspectorate assessment of council service performance. The organisational assessments method is centralize on the main public bodies in a particular area that are statutory described in the respective frameworks for the NHS organisations, police authorities and forces and fire and rescue authorities, assessment of value for money in each of the organisation will be implemented by the external auditor. It is the responsibility of the Audit Commission to implement an effective organisational assessment on the councils, fire and rescue services when other inspectorates report separately care quality commission assesses PCT. When collation of the assessments of place and organisations is attain, judgement on how well public services deals with an area's problems and priorities. The separate inspectorate responsible for such functions involves; Audit commission, the Care Quality Commission, HM Inspectorates of Constabulary, Prisons and Probation, and Ofsted.

CAA Framework

www.audit-commission.gov.uk

There are three key overarching questions that needs to be considered in when implementing the CAA, which are

How well do local priorities express community needs and aspirations?

How well is the outcomes and improvements needed being delivered?

What are the prospects for future improvement?

These questions need to be address when implementing the comprehensive area assessment. The three key questions for the area assessment makes it possible to build up the understanding of local priorities, how the community needs are express, aspirations of the community and current performance and trends so that conclusions about the prospects for future improvement can be reach.

Under the CAA, assessment is not usually scored rather a clear indication of either significant concerns about future improvement or to exhibit an exceptional performance, which is execute through introducing the red and green flags. As this will signal where support or inspection may be necessary and where other local authorities may learn from the success of others. Green flags always reflect an outstanding improvement which is due to the delivery of better outcomes for local people that are sustainable and which we consider others could learn from, when the red flag is always displayed where there are significant concerns about outcomes that are not being tackled adequately. A red flag translates an unfit signal that something different or additional needs to happen to improve outcomes.

HOW INSPECTION IS CARRIED OUT

The inspection on CAA is always done through the preparation of a standard assessments using evidence from other inspection work and draw on the evidence that is available to the locally in order to avoid making extra demands on local services, these information is usually collected once and used numerously(count principle). CAA does not rely on the type of rolling program of major inspection and a focus on the corporate arrangements of local service organisations, used in previous assessment frameworks. Moreover, the high performing organisations and the local authority that impress and deliver improvements in its result and value for money will receive less inspection. The more relevance and timely the information being used to handle services locally, the lesser the inspection that is exercisable on such local authorities. The institutions also work hand-in-hand with the government office in the region, the efficiency partnership and others in ensuring an approach to support improvement and coordinate any inspections that are needed for the desired improvement support without any unjustified administrative impact on the inspected organisations.

At the end of the exercise, it is the responsibility of the CAA to report the findings of the exercise to stakeholders such as the local people, the local strategic partnership and local organisations, elected councillors, national government and others with an interest in the future of the area. As inspectorates, the knowledge gained through CAA would be used as a standard future work and ensure coordination of activity for better management of the impact on local organisations and services

ADOPTED MECHANISM OF PERFORMANCE ASSESSMENT IN LOCAL AUTHORITY

IN HOUSE SERVICE:

Service departments primarily led the implementation of this mechanism. Service quality and/or cost effectiveness is the priority of the service department. The local authority impetus to every change was usually comparisons based on service-based performance indicators and benchmarking among two related and similar local authorities but not other service providers. Martins (2000)

MARKET MECHANISMS

A market mechanism has a number of strengths; it supplies a clear basis for comparing alternative providers and may offer substantial cost savings. Explicit objective of the market mechanisms were to drive down costs and/or to lever in new resources. The vehemence was on the authority's role as a procurer, rather than a direct provider, of services. The driver for change was typically the need for budget cuts and the means of review were typically voluntary competitive tendering (often without an in-house bid) and joint ventures with the private sector. The focus of reviews was usually operational and value was typically defined primarily in terms of costs and efficiency. Martins (2000)

In line with Game, (2006), best Value is always measure two major elements of a council's activities which include:

Core service performance: this usually covers six principal service areas such as education, social care for children and adults, housing, the environment, libraries and leisure facilities, and welfare benefits, plus a general assessment of the council's use of resources with a differential weighted. The evidence of assessment would include judgments from the Audit Commission's own and other inspectorates' performance indicators, and government assessments of council plans. Individual service assessments are also combined to provide an overall service score out of 4.

Ability to improve: defines how community is guided by the council to improve services as the primary assessment and to consider how effectively the community is conduced. "Self-assessment of what the council is trying to achieve, its success in delivering those priorities, and its plans for the future, followed by an external assessment are often carried out by a small team, including an auditor and inspector plus officers and members from "peer" councils for the corporate assessment purpose", Game (2006). The outcome is then graded on a 4-point scale of the ability to improve.

.According to Hughes (2004), In order to motivate, supervise, guide and assess the recovery of individual councils" they include:

The lead official - This role is usually performed by the former senior local government manager who engaged in series of daily activities such as identifying sources of support, recovery plan formulation and monitoring of government implementation plans

. The Audit Commission relationship manager - charged with the responsibility of co-ordinating inspection activity for all council

The Government monitoring board - Involves the stakeholders with an interest in the council's recovery and the above two officials, plus other. The board ensures the provision of means of which the Government evaluate the recovery rate of council's performance and alternatives on how problems can be fix is provided to the Minister, other government bodies and inspectorates, and the council itself.

The liaison board - They are charged to replace the monitoring board in councils where the Minister has decided that progress has been sufficient to introduce a lower level of oversight.

BALANCE SCORECARD AS TOOL FOR PERFORMANCE MEASUREMENT

One of the key to public sector quality management is the introduction of balanced scorecard (BSC). This was introduced in the year 2001 by the 2001 by the cabinet office. The balanced scorecard is capable of implementing, describing as well as managing strategy at various levels. Hence, it is regarded as a multi-dimensional frame work linking initiatives, objectives and measures to an organisation's strategy. Mcadam and walker,(2003).

DEVELOPMENT AND PURPOSE OF THE BALANCED SCORECARD IN LOCAL AUTHORITY

The balanced scorecard (BSC) was initially developed and refined by Kaplan and Norton (1996a). They enumerated that accountancy measures were inadequate for future planning as related to past performance and bottom lined.

They presented perspectives that were generic and inter-related chosen to provide information for better management .This three new perspectives presented are within a frame work to give a balanced view of performance. The frame work provides; methodology to assess management decisions and measures to gauge improvement

Moreover, the four perspectives were:

The customer

Internal business

Innovation and learning

Finance

However, all the aforementioned perspective even though has uniqueness yet gives a general overview of performance. This is explained in the figure shown below.

Mcadam and walker,(2003 p878)

The BSC can also be use in the public sector approach. it was observed that most public scorecards focused upon excellence and tends to work more efficiently(Norton 1996b). This includes reduction in cost, fewer mistakes and effective use of resources.

This however has some limitations due to the fact the more straightforward customer profiles in the private sectors will be applied to complex customer and stake holder profiles in the public sector leading to overly simplified measures within the customer's quadrant of the scoreboard. Moreover, McAdam and O neil (1999) also enumerated on the use of tools in the public sectors by emphasising that the frame work had clear advantages for evaluating all aspects of the organisation.

Regarding the establishment of performance measurement, procurement and management, many governments had carried out a series of research in employing balance scorecard in public sector. There has been insufficient research carried out on balance scorecard in relation to best value in UK.(Hepworth 1998). Unlike US BEM with the buttress of balance scorecard contribute comprehensively in measuring people satisfaction. In 1998, the account commission of Scotland outlined the role of balanced scorecard and its measures coupled with how Balance Score Card could be designed and used.

In line with Mc Adam et al (2002), In relation to best value, scorecard connects operation to strategy in incessant and relentless basis. (Talbot 1999) also states the use of BSC as a model that recognises any existing conflict in measurement and allows for prioritisation. To conclude what BSC is about, Kaplan and Norton (1996) states that BSC is about reconciling the goals and priorities in other to achieve a balanced outcome in relation to performance control and management ,

Chesley and Wenger (1999) execute a successful implementation of the use BSC in LGA of charlotte (USA) that facilitates the function of balanced scorecard as:

Learning and Strategic feed back enhancement

BSC communicate and connect objectives and measures.

Clarification of strategy

Alignment of plan, strategic objective and established target.

The public sector management always adopt a minimum management techniques and initiative on how best value can be accomplished. Although BSC is basically originates to focus on private organisation, presently, it is viewed as being suitable for the public organisation and concluded that the implementation of balance scorecard will facilitate efficient use of resources entrust on local government. McAdam and Walker, (2003).

PERFORMANCE ASSESSMENT IN MIDDLESBROUGH LOCAL COUNCIL

According to one place website, Middlesbrough is located near the north-east coast of England, within the Tees Valley conurbation with the total population of 138,700, in which Forty nine different nationalities are represented in the population. Minority ethnic communities make up 7.5 per cent of the population and the highest proportion in the north east of England.17 per cent of Middlesbrough pupils are from ethnic minority communities, which makes it the ninth smallest unitary council in England. The town of Middlesbrough forms the whole borough, which is the smallest by area in Teesside and is the ninth smallest unitary borough in England.

Middlesbrough local public service was assessed to look at how well they are performing and how they have been spending the public money. Organisational assessment was performed on value of money for the Middlesbrough council, Fire Authority, Police Authority and the primary trust care.

MIDDLESBROUGH COUNCIL

MANAGING PERFORMANCE

3 out of 4

USE OF RESOURCES

3 out of 4

MANAGING FINANCE

3 out of 4

GOVERNING THE BUSINESS

3 out of 4

MANAGING RESOURCES

4 out of 4

CLEVELAND FIRE AUTHORITY

MANAGING PERFORMANCE

3 out of 4

USE OF RESOURCES

2 out of 4

MANAGING FINANCE

3 out of 4

GOVERNING THE BUSINESS

2 out of 4

MANAGING RESOURCES

2 out of 4

CLEVELAND POLICE AUTHORITY

USE OF RESOURCES

2 out of 4

MANAGING FINANCE

3 out of 4

GOVERNING THE BUSINESS

2 out of 4

MANAGING RESOURCES

2 out of 4

MIDDLESBROUGH PRIMARY CARE TRUST

MANAGING FINANCE

3 out of 4

GOVERNING THE BUSINESS

3 out of 4

MANAGING RESOURCES

2 out of 4

www.audit-commission.gov.uk

This assessments is based on the areas and organisations which sum up to be the comprehensive area assessment (CAA), to consider how effective the public bodies (local authority) are using their resources to meet the needs of local people in a way that provides value for money. The Audit Commission which has the sole responsibility based their assessment on the total grade of 4. Considering the Middlesbrough Council, three out of four is the average assessments which are a good performance score. Its use of resources score is three out of four, the finance is must also be managed effectively for the score to also be 3 out of 4 and its managing performance score is three out of four. Overall, Middlesbrough Council performs well and is delivering improvements for local people.

The Local Authority has also been very active in promoting and improving the quality of life for local residents in the protection against fire. It scored 3 out of the total of 4 in how to manage the performances and financial management which is a good score and has a low assessment (2) in other assessment which led the overall performance of the Cleveland Fire Authority to be more than average. As a result of such result, the inspectorates will address the Cleveland Fire Authority performance lapses and communicate on the areas that needed to be improved.

The Primary Care Trusts ensure efficient provision of healthcare services to the local people; example is the community nurses. The Audit Commission based its evaluation on the quality of commissioning; quality of financial management and the service provision that is provided to the local people. Considering its area assessment, performed very well in the financial management and the way the business is govern with the score of 3 out of 4 which translate to a good result but drops in the management of resources with the score of 2 translating to an average score.

The police authority performed above average in managing the finance and later drop to average in other area of assessment like use of resources, managing resources and business governance. These areas that need to be improved will need to be addressed for future improvement which is the primary purpose of measuring performance in the local authority.

The inspectors responsible in carrying out such functions in different field involve:

INSPECTION

ORGANISATION

INSPECTORATE

Regeneration

Middlesbrough council

Audit Commission

Children's Social Care

Middlesbrough Council

ofsted

Youth Offending Work

Middlesbrough Council, Redcar and Cleveland Borough Council

HMI Probation

Adult Social Care

Middlesbrough Council

Care quality commission

www.oneplace.direct.gov.uk

The performance measurement in local authority facilitates improvement in implementing their primary obligations. The authority that has a poor rating would look forward to perform better in the subsequent rating and inject maximum effort in the provision of a quality service in order to meet up to the public expectation. Example of such is during the comprehensive performance era, the effect of the recovery plans has always been impressive because All but one of the 15 major councils assessed as "poorly performing" in December 2002 had, by December 2004, improved their grading by at least one category which has displayed an improvement in their performances, also in 2005/2006, over two-thirds of major English councils (70 per cent) officially were judged as either good or excellent, and a similar which displayed an improvement in the service quality that is delivered by the local authority over time .Game,(2005)

CONCLUSION

Measuring performance in the local authority can greatly contribute to an efficient boost in the field of public services. The act of providing value for money has always been significant throughout the public services which had been raising pressures on public spending and remain a high priority in every public sector. The Comprehensive Area Assessment will exhibit an opportunity to take a wider view across organisations, couple with the common approach use of resources across the primary care trusts, councils, police and fire services and support in achieving the general assessment objective. Therefore, the management of local public services are therefore likely to rely increasingly on plural forms of assessment. Measuring the recent performance is a critical first step in looking ahead to the next target. Public government and local public service users need to know how well local public services are performing and when the Independent assessment are always surface in providing such assurance.

The performance measurement in UK local authority has experience several changes before resulting in the current form of assessment. The policies on performance assessment in the local authority began with the Compulsory Competitive Tendering (CCT) later transit to Comprehensive Performance Assessment and then to the current policy known as Comprehensive Area Assessment.

The problem of best Value inspections has been hugely confrontational, time-demanding and intrusive. Also, the inspectors only focused on one service at a time about which they might be expected to have some specialist knowledge to take up such responsibilities. The CPA challenges has been to demand the impossible and generalise a single judgement of the performance on the whole authority, based on the assumption that performance will be integrate across various service areas and thousands of employees.

CAA now aim to be very different to what has been experienced in the past because rather than giving a structured score using stars or another rating system, the CAA paint a picture of how well local public services are doing over time. Area assessments will be reported as story, narrating about what is said to be the most important issue.

The local services such as schools, hospitals, police and other sectors are monitored by separate a watchdog that knows much on the profession. Comprehensive Area Assessments bring the work of these watchdogs together to see the whole picture for the particular area in general. The CAA was implemented in Middlesbrough used as the case study of the research work and result in Overall result, the Middlesbrough Council is performing strongly, but neither the green nor red flag has been displayed considering both the area assessment and organisational assessment. Therefore, the assessment approaches is often used to secure the recovery of the poor performing councils and suggest ways on how performance can be improved.

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