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FINANCIAL WEAKNESSES IN SCOTTISH COUNCILS IDENTIFIED

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£14bn of public expenditure by local authorities and NHS bodies was generally well managed and accounted for in 199...
£14bn of public expenditure by local authorities and NHS bodies was generally well managed and accounted for in 1999. However, the Accounts Commission's Annual Report reveals that three years after local government reorganisation some councils' financial procedures and controls were still not of an adequate standard.

The performance of councils

The Report says that some councils still need to take action to improve the standard of their financial records, to guard against irregularities and fraud, and to involve members fully in the financial management of their authorities. Accounts Commission chairman professor Ian Percy, says:

'A significant number of financial weaknesses have been identified in some councils and these need to be improved if public confidence is to be maintained. There is no room for complacency.'

'Some councils need to devote more resources to improving their financial management and controls. Making this investment could, for example, help to reduce the level of council tax and housing rent arrears resulting in more money being available for front-line services.'

The commission's review of how well local authorities performed in delivering their services identifies a number of areas where there is room for improvement:

- during 1998/99 councils did not collect£155m of the council tax due for the year. This performance is slightly worse overall than the previous year. The overall collection level was 87.2%, compared with about 95% for councils in England and Wales.

- council house tenants rent arrears rose to£37m (8.2%) the highest since 1993/94

- the proportion of Scotland's household waste recycled each year since 1996/97, remains well below the government's target

- the number of people receiving a home care service has fallen from 92,000 in 1994/95 to less than 72,000 in 1998/99

- council spending on library stock has dropped by about 20% over the last six years and several councils still do not have adequate information systems in place to manage their library service

The commission also identifies a number of areas where performance is good or has improved over the three years since the new councils came into being:

- fire brigades improved their response times to fire calls compared with 1997/98

- the percentage of all crimes cleared up by the police in 1998/99 has improved compared with the two previous years

- councils increased the proportion of children entering primary school with nursery school experience

- twenty-two councils reduced the average size of primary classes and a higher proportion of schools had more places occupied

- councils significantly improved the proportion of food hygiene inspections carried out in time in high-risk premises (good response to the Pennington Report)

- the proportion of single rooms in residential homes increased to nearly 80% in children's homes, 85% in homes for the elderly and over 90% in homes for other adults

The performance of health boards and trusts

In1998/99, health boards and trusts generally demonstrated high standards of financial management and seem to have avoided any significant problems despite undergoing reorganisation during the year. Professor Percy says:

'Last year, we advised health boards and trusts to learn lessons from the local government experience of reorganisation. The information available so far suggests that NHS trusts avoided many of the pitfalls of reorganisation and that their preparations for ensuring Year 2000 compliance were effective.

'However, I am concerned that several trusts may struggle to meet their financial targets for 1999/2000 and that some may incur significant year-end deficits. The final position is not yet known but auditors are monitoring the situation closely and will report the outcome to the Auditor General for Scotland.'

In 1998/99, all NHS accounts were presented for audit on time and there were no qualifications to any of the 67 sets of NHS accounts. Four trusts failed to meet their annual financial targets either because of technical accounting adjustments or circumstances outwith their control. Argyll and Bute Trust failed to meet its targets because of weak financial management. The successor Trust has taken remedial action.

In 1998/99, the commission made the following recommendations to help trusts and boards improve their financial procedures:

- the management executive needs to clarify the guidance given to trusts on remuneration matters

- the process of resolving disputes with senior staff needs to be speeded up to minimise the cost to the service

- where significant expenditure on termination payments is to be incurred proper procedures must be followed

The Accounts Commission's Annual Report also explains about the creation of Audit Scotland and other changes which will affect the future role and work of the Accounts Commission. The Report can be downloaded from the commission's web site from 16 February: www.accounts-commission.gov.uk

Note

Arrangements put in place by the Scottish parliament will result in the creation of Audit Scotland from 1 April 2000 and the appointment of an Auditor General for Scotland. Audit Scotland will serve both the Accounts Commission and the Auditor General by arranging the financial and performance audit of around 250 public sector bodies in Scotland. Audit Scotland will undertake its local authority work for, and will report to, the Accounts Commission. The Auditor General will take over responsibility for the audit of NHS bodies in Scotland.

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