Oversight of Arm’s Length Bodies

Background

Modern government relies on delivery of services not only directly by Ministerial departments but indirectly through other bodies.

Such bodies may be:

controlled by government
established by government
substantially funded by government; and/or
given a statutory power to levy charges to cover some or all of their costs.

There are good reasons why government may determine that it is more appropriate to establish or to fund bodies rather than undertaking activities directly. However, the establishment or funding of such Arm’s Length Bodies (ALBs) is not without potential costs and risks.

The establishment or funding of an ALB does not relieve the States of Jersey from a responsibility for ensuring that good governance is being demonstrated, effective internal control is in place and value for money is being secured.

Within this report the C&AG refers to both ALBs and Arm’s Length Organisations (ALOs). ALB has been used to capture the entities that I consider to be ALBs as defined in paragraph 8. ALOs has been used to capture the entities that the Government of Jersey currently classifies ALOs within the Public Finances Manual (PFM).

Scope

The review has evaluated the effectiveness of arrangements for the four areas of oversight of ALBs, which are:

Arrangements to consider the need for ALBs
Governance Arrangements
Accountability Arrangements
Delivery of Value for Money.

The review has included consideration of the specific arrangements for oversight across a sample of six relevant entities:

States controlled entities (where the States are a majority shareholder) – Andium Homes, Jersey Post and Jersey Development Company; and
ALOs that receive significant funding from the States of Jersey – Jersey Finance, Jersey Employment Trust (Employ Jersey) and Citizens Advice Jersey.

Governance, funding and operation of ALBs have been considered to different extents in previous C&AG reviews. The scope of this review included a follow up of all previous relevant C&AG recommendations from the following reports:

The States as a Shareholder – Jersey Telecom (July 2014)
Oversight of Arm’s Length Organisations (June 2017)
Arm’s Length Organisations – Visit Jersey (December 2018)
The States as a Shareholder – Follow Up (March 2019)
Remuneration of Board Members (October 2019)
States of Jersey Development Company (June 2020); and
Governance and Accountability of Independent Bodies and Office Holders: A Thinkpiece (December 2022).

Conclusions

ALBs can be a valuable part of the States’ framework for service delivery, regulation and resilience. Effective oversight, governance and accountability arrangements are however essential in order to ensure ALBs deliver in ways which meet overall objectives, including demonstrating value for money.

The current arrangements need to be strengthened in order to ensure that the opportunities to enhance accountability and value for money are realised in practice.