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CONTINUING CONCERN OVER FINANCIAL MANAGEMENT AT INVERCLYDE COUNCIL

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The Accounts Commission has expressed their continuing concern over financial management at Inverclyde Council and ...
The Accounts Commission has expressed their continuing concern over financial management at Inverclyde Council and reminded the elected members that they are ultimately responsible for the financial stewardship of their local authority.

The commission's comments follow a public hearing in Greenock on 23 August 2000 at which evidence was given by the leader of the council, the chief executive, the director of resource services and the director of social work and housing.

In a statement of their findings on the hearing, the commission said council members had been insufficiently proactive in responding to critical comments made by external auditors and had not displayed the required degree of urgency in addressing serious concerns about the council's financial management systems. The commission also called on members to ensure they were satisfied with the resources of the council's finance function.

'There is a need for clear communication and transparency between elected members, officials and external auditors,' said Ian Percy, chairman of the commission. 'We expect the council's action plan for sound financial management in Inverclyde to be implememnted as soon as possible.'

The commission has instructed the controller of audit to report in early 2001 on the extent to which Inverclyde Council has achieved by 31 December 2000 the commitments set out in its action plan.

FINDINGS

On 23 August the Accounts Commission for Scotland held a hearing at which evidence was given by the leader of the council, the chief executive, the director of resource services and the director of social work and housing. The hearing followed consideration by the commission of reports to it by the Controller of Audit (SR 2000/2 and SR 2000/4) on issues arising from the audit of accounts of Inverclyde Council and its arrangements for financial management.

At its meeting on 5 July the Commission considered the two reports together with a response to the first report by Inverclyde Council dated 20 March 2000 and decided to hold the hearing. In so doing the Commission were concerned about reports of significant problems regarding the Council's financial procedures and the arrangements for preparing accounts and a number of matters which were indicative of a poor standard of financial administration and control across many of the Council's financial functions. The Commission were particularly concerned at the lack of response to the auditor's reports and the lack of pace in the taking of remedial action and whether the changes in staffing levels and responsibilities would be sufficient to improve the effectiveness of the Council's financial administration and management.

Following on intimation of the hearing the Commission received documents submitted by Inverclyde Council on 4 August 2000 relating to -

- action plan

- finance structures

- Audit Committee principles and Chief Internal Auditor's reporting link

- fixed asset valuations

- council tax collection

- rent voids

- housing benefits

Supplementary papers on ICT development were submitted by Inverclyde Council on 9 August 2000.

The Commission appreciates the difficult circumstances inherited by the Council on its establishment in 1996 but is concerned at the serious continuing shortcomings in financial management and stewardship in Inverclyde Council since 1997/98 as set out in the Controller of Audit's reports.

The Commission notes the adoption by the Council of the action plan submitted by the Director of Resource Services to the Policy and Strategy Committee of the Council on 17 August 2000. The action plan includes timescales and clear accountabilities designed to remedy the many deficiencies demonstrated in the Controller's reports.

The Commission finds that members were insufficiently proactive in responding to critical comments made by the Council's external auditors, and did not display the required degree of urgency in addressing serious concerns about the integrity of the Council's financial management systems. The Commission also finds that under resourcing of the Council's finance and internal audit function contributed to the failure to address these concerns.

Members must take a proactive approach to ensure a sound regime of financial management in their council. In addition, members must satisfy themselves that the resources of the council's finance function are of sufficient quality and number to ensure such a sound regime. Such assurance should specifically be sought where material concerns are being raised in internal or external audit reports.

The Commission reiterates that the ultimate responsibility for the financial stewardship of any council rests with the elected members. In particular, the Commission recommends that members should as a matter of routine meet with the external auditor following completion of the audits to discuss the auditor's report and recommendations. Members should subsequently ensure that any action plan required to address those recommendations is substantive, timetabled, and with clear accountabilities, and that provision is made to update the Council on its implementation.

The Commission has instructed the Controller of Audit to report in early 2001 on the extent to which Inverclyde Council has achieved by 31 December 2000 the com

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