Public spending watchdog the Accounts Commission has flagged up transparency failings in its latest annual report on the financial health of local authorities in Scotland.
The body said an analysis of the latest management commentaries setting out the annual performance of each of the nation’s 32 councils displayed a patchy approach to explaining the figures presented in their accounts.
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March 25th, 2020, Manchester
Council treasury investment & borrowing
The commission said that five Scottish authorities did not provide explanations for “significant variations from budget” in their 2018/19 commentaries on their year-end outturn.
It added that nine authorities reported their outturn in their management commentaries, but the information was “not reconciled” to the financial performance in their accounts.
“This narrative is critical to the understanding of a council’s performance against budget and how this translates into the movement on the general fund reported in the accounts,” it said.
The report said that only 10 councils had reported progress against agreed savings.
Commission chair Graham Sharp said, while the transparency overview indicated “some progress” on 2017-18, it was vital that councils “continue to improve the transparency and clarity of management commentaries and wider financial information provided to councillors and the public”.
More broadly, the annual report noted that councils’ finances were “straining to keep pace” with “changing and growing demands” on services against a backdrop of real-terms funding cuts from the Scottish Government since 2013/14.
The report said that while overall revenue funding for councils had increased from £17.3bn in 2017/18 to £17.7bn in 2018/19, there had been a 0.7% real-terms decrease in Scottish Government revenue funding. It added that the real-terms decrease since 2013/14 was 7.6%.
The commission said the local government funding gap for 2018/19 had been 3% of total budget, which councils had planned to manage primarily through savings.
However, it noted that authorities were “increasingly drawing on their revenue reserves” where savings could not cover all of the shortfall.
“The net draw on revenue reserves in 2018/19 was £45m,” it said. “Twenty-three councils have reduced their general fund reserves over the last three years.”
Elsewhere, the report said that Integration Joint Boards set up to deliver joined-up care services between councils and the NHS, faced “very significant challenges” in terms of the pace of integration work and their financial sustainability.
Accounts Commission chair Graham Sharp said the watchdog had “yet to see evidence of a significant shift in spending” between hospital services and community care, while there appeared to be an annual turnover of senior staff in excess of 30% at IJBs in 2018/19.
“This instability inevitably impacts on leadership capacity and the pace of progress,” Sharp said. “The commission has a strong interest in the performance and development of IJBs and we are planning arrangements to review their progress in delivering best value for their communities.”
The report said a majority of IJBs struggled to break even during 2018/19 and 19 would have recorded a deficit without additional funding from partners at the year end.
Separately, the commission published its annual update on the state of the 11 main Scottish Local Government Pension Scheme (LGPS) funds last month.
It said the schemes, which cover all 32 authorities and 500 other employers, had seen funding-levels slip year-on-year to 82% for 2018/19, with liabilities increasing by 13% to £57.9bn against a backdrop of a 7% growth in assets to £47.7bn.
According to the Accounts Commission, the total annual SLGPS income from current members is £75m less than the benefits paid out.
The commission added that the impact of last June’s Supreme Court ruling on the McCloud case – which established that 2015 changes to public-sector pensions had been discriminatory to younger scheme members – was in the region of £500m in total.
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