Aberdeen City Council has a patchy record of planning and monitoring its service-boosting income generation proposals – many of which fail to meet their budgeted targets, an internal audit report has found.
The report to members of the council’s audit, risk and scrutiny committee also warned that a focus on bottom-line budgets for functions risked “alternative actions” taking place in lieu of originally-agreed measures in a way that “may not be sustainable or achieve the intended outcomes”.
David Hughes, Aberdeen’s chief internal auditor, said the authority had set out “income generation opportunities” of £2.32m in 2017/18, an additional £1.77m the following year and a further £1.64m in 2019/20 as part of efforts to support service delivery amid rising costs.
But he said not all income-generation proposals had been “sufficiently clear” and noted there was only “limited evidence” of planning in advance for the delivery of projects to raise additional income.
“The objective of this audit was to provide assurance that budgeted income generation is based on robust assumptions and is being realised,” he said.
“This has not always been the case.”
He continued: “Whilst budgets are regularly monitored, there has been no specific monitoring of detailed options in 2019/20.”
The report said that in-year changes to Aberdeen’s budget amounting to £11.36m had been agreed by the authority’s corporate management team in 2017/18, including the reversal of some savings and income-generation options agreed by the council earlier in the year.
It added that “further post-budget adjustments” had been made in 2018/19 relating to restructuring and the allocation of procurement savings.
Hughes’ report said that while committees had been advised that virements had been made in quarterly financial statements, councillors had not been provided with enough detail or given the option of reinstating earlier savings plans or income generation options.
“These changes were insufficiently transparent, and represent a breach of financial regulations in respect of budget virements,” he said.
Hughes said that plans and project teams were in place for only two of four agreed new revenue streams or savings programmes introduced for the current year that were selected for internal audit.
He added that two of six previous years’ options had not progressed, “indicating they had also not been through rigorous planning and project-management in order to deliver the anticipated outcomes”.
Hughes said that in some cases prudent estimates had been calculated based on officers’ knowledge of the potential market.
“In others it was not clear that the viability of the option had been fully explored in advance,” he said.
“Supporting calculations were only available for four out of the 10 options. For the remainder, officers charged with their delivery were unclear of the basis for the budget adjustment due to service and staff changes, or were otherwise unable to provide supporting detail.”
The report said advertising and sponsorship income was one area where Aberdeen had consistently fallen short of targets.
It said an anticipated £180,000 in sponsorship income had been incorporated into the council’s 2018/19 budget – on top of £150,000 to be generated from advertising and £140,000 from the sponsorship of roundabouts.
However, the audit report said the additional £180,000 was not achieved and as of June last year income of just £26,000 was recorded.
It said that an advertising and sponsorship strategy had yet to be produced and there was “no list of available assets (except for roundabouts) on which sponsorship could be placed”.
Elsewhere the report pointed to an “absence of plans” for how the council’s building standards team would achieve its target of generating an additional £50,000 in 2019/2020 income following the end of a contract with another local authority that had contributed to the target in previous years.
The report also said that from 2017/18 onwards Aberdeen had targeted the collection of an additional £200,000 a year in council tax arrears through investment in additional staff.
It said that specific plans to demonstrate how additional income would be generated and monitoring to show how it had been were “not available”.
The report said that although council tax income increased between 2016/17 and 2017/18, it was not possible to separate any benefit from additional staff from other changes including growth in the tax base and reductions in available discounts. It noted that the collection rate for council-tax arrears did not change.
Hughes said Aberdeen’s finance function had put a new process in place for documenting plans for 2020/21 budget proposals.
“It will be implementing additional monitoring of delivery of milestones for significant material budget options (those in excess of £250,000),” his report said.
