Accounts criticised by Audit Scotland

FINANCIAL watchdog Audit Scotland has delivered a heavily critical assessment of the SIC’s accounts and reasserted its view that Shetland Charitable Trust’s books should be grouped with the council’s because of the close relationship between the two bodies.

Although the body gave its qualified approval for the SIC’s 2007/8 accounts, it identified some 18 areas where improvements needed to be made and expressed serious concern about a number of key issues including:

• A heavily over-subscribed capital programme, with a funding gap of almost £37 million identified up to 2010/11, without including the Anderson High School which has an estimated cost of £49m;
• Pressure on its revenue budgets, with the council facing ongoing pressure for education and social care services as well as implementing single status and budgeting for no increase in council tax for the next two financial years;
• A fear that reserve balances will be used to meet funding shortfalls, meaning the SIC’s target of maintaining its reserves at £250m may not be achieved and maintained;
• The absence of clear project briefs meaning that additional expenditure will be incurred and capital projects will be deferred.

The auditors are urging the council to ensure that capital projects are well-managed and provide value for money, that spending on capital projects should be restricted to £15m a year from 2010/11 onwards, and that efficiency savings are identified and delivered as soon as possible.

Head of finance Graham Johnston told members of the audit and scrutiny committee on Wednesday that the council continued to hold the opposite view from Audit Scotland on the matter of the charitable trust.

He said the impasse could go on in­definitely, although the ongoing examination of the trust’s status with charity regulator OSCR “might lead to clarity”. One possible resolution which has gathered support in some quarters is to introduce a majority of independent trustees to sit on the charitable trust.

Councillor Jonathan Wills said it was clear the council was “on the naughty step” and that there were “a number of criticisms that we cannot ignore”.

The auditors’ report also makes mention of the European Commission’s ruling that money used to support the fishing industry breached state aid rules and raised its concern that further breaches may have occurred prior to the council introducing a state aid manual for employees.

Dr Wills jested that in light of the UK government’s multi-billion pound bail-out of banks that “surely state aid rules no longer apply . . .perhaps we should bring it to the auditors’ attention.”

Representatives from Audit Scotland are expected to be present when the report goes before the full council on 3rd December.