Individual budgets and direct payments

Audit Commission guidance to appointed auditors

  
What is the issue?

The Department of Health (DH) ran 13 individual budgets pilot sites (external link) at local authorities in 2007/08. These pilots built on and extend previous more limited arrangements whereby authorities made direct payments (external link) to clients. Authorities need to have put in place arrangements to allocate, approve and assess individual budgets.

It is likely that, following the assessment of the trial, the DH will expand this programme of individual budgets. A number of stakeholders have expressed concerns that audit arrangements could undermine the purpose of the policy which is to empower individuals to use resources in a way that best meets their needs. However, the Commission is clear that the key issues are whether payments are made under lawful powers, in accordance with relevant statutory and professional guidance, and that proper arrangements are in place to ensure this, rather than simply how the payments are spent. Recognising the need for proper arrangements to ensure accountability for public money, audit work will therefore focus on the effectiveness of the arrangements that the audited body has in place to deliver value for money.

Where individual budgets or direct payments are significant, audit work is therefore likely to relate to the Code conclusion criterion on internal control to assess the authority's arrangements for managing individual budgets and how the authority is ensuring value for public money.

Who does it affect?

Single tier and county councils with social services responsibilities

What are individual budgets and direct payments?

As CIPFA (external link) states in 'Direct Payments and Individual Budgets: Managing the Finances':

'Simply put, it is helpful to think of 'self-directed support' as an overarching term which encompasses a variety of tools to give disabled and older people greater levels of control over how their support needs are met. An Individual Budget is the amount of money that a local authority agrees to spend to meet an individual's needs and a Direct Payment is one way the person can choose to take that money in order to meet their needs. A trust or an appointed agent could also use an Individual Budget to arrange services on behalf of the person needing support.'

A person could receive their individual budget as a direct payment. So what are the differences?
   

Why is it important?

Individual budgets are designed to provide individuals who currently receive services greater choice and control over their own support arrangements. DH has given a commitment to piloting individual budgets with a view to rolling them out nationally should they prove successful. The pilot project is a cross-government initiative led by DH but also working with DWP and CLG.

In December 2007, the Government announced in the Putting People First (external link) concordat that personal budgets would be rolled out nationally and become the norm for everyone eligible for help from social services in future, except in emergencies. Personal budgets are a form of individual budget that includes only social care funding. From 2008-09 all councils with social services responsibilities are actively implementing personal budgets.
The policy objective of the initiative is to empower individuals and therefore it is important that any audit work addresses the accountability for public money by the audited body rather than how the individuals have spent that money.

What should I do about it?

Auditors of the 13 individual budgets pilot sites (external link) will need to be aware of the pilot programme during 2007/08. Where individual budgets are material the auditor may wish to consider whether the authority has accounted for these properly as part of the opinion work. In giving the Code conclusion the auditor, when considering the criterion on internal control, may wish to consider the arrangements that the authority has in place to review, approve, allocate and monitor individual budgets.
While the individual budget pilot involved 13 councils, over 100 councils had already begun to implement personal budgets ahead of the policy announcement, as part of a voluntary initiative called In Control (external link). Therefore this guidance may also be relevant for auditors working with these councils.

Following the pilot, DH has published a personalisation toolkit (external link) reflecting learning and good practice from the pilot sites. DH guidance for pilot sites (Financial Monitoring and Review Guidance for IB Pilot Sites (external link)) emphasised that authorities should develop appropriate arrangements of their own. The guidance highlighted monitoring and review as an integral part of the individual budgets planning and evaluation process. The guidance refers to the need for pilot authorities to carry out an annual review, including assessing how the individual budget holder used their budget to achieve planned outcomes. CIPFA's (external link) 'Direct Payments and Individual Budgets: Managing the Finance' includes guidance on financial issues such as:

• resource allocation systems;
• [internal] auditing of individual budgets and direct payments; and
• risk management and financial monitoring.

DH states that 'the main idea behind individual budgets is to put the person who is supported, or given services, in control of deciding what support or services they get', If payments are made under lawful powers and in accordance with relevant statutory and professional guidance and there are proper arrangements in place then how the payments are spent is not a focus for audit work.

Auditors should focus on the effectiveness of the authority's arrangements to review, approve, allocate and assess such monies. CIPFA recommends the following principles to local authorities for reviewing individual budgets:

• People have independence and choice but they also have responsibility. It is reasonable to ask people to account for how they have spent their Individual Budget money in achieving their support plan outcomes.
• Monitoring arrangements should be light touch and proportionate to the level of risk involved.
• Monitoring should be aligned as closely as possible with the review process so that information contributes to an understanding which can support people to make best use of the resources available to them.
• People should have flexibility to spend the resources allocated to meet their needs flexibly, and in ways which reflect their own priorities.

CIPFA also recommends that:

• Wherever possible, financial information should be collected alongside other information necessary to review the effectiveness of the existing support plan, how well it has been effected, and any changes in people's circumstances or needs. Councils should undertake a risk analysis to identify whether additional information should be collected and whether financial information alone will provide a reasonable indication of how well outcomes are being met or to indicate whether a person is at risk.
• Monitoring and review intervals should vary according to the level of risk involved. Reviews should occur more frequently where, for example, there may be a conflict of interest with the agent or family member, where there is evidence of poor financial history, or where the resource allocation system is large.
• It is acceptable for large amounts to be spent (for example on a holiday) if it meets the outcomes set out in the care plan.

In some circumstances, such as failure to manage the budget or excess accumulation of money, it may be appropriate for authorities to take back some control over the administration of the budget or claw back money.

In summary, where individual budgets or direct payments are significant, auditors should consider authorities' arrangements to:

• assess and monitor individual budgets; and
• ensure that payments are made in accordance with relevant statutory and professional guidance including CIPFA's guidance.

Where can I find out more?

DH has a personalisation toolkit (external link) and more information is on the In Control (external link) website.
CIPFA (external link) has also updated its guidance on direct payments and published: 'Direct Payments and Individual Budgets: Managing the Finances in 2007'. This publication covers key areas including:

• the relationship between the service user and the local authority;
• resource allocation systems;
• charging for self-directed care;
• commissioning;
• auditing individual budgets and direct payments (internal audit);
• risk management and financial monitoring; and
• review intervals.