SIC had many serious problems at the top, Accounts Commission concludes in its findings

Shetland Islands Council has serious problems with leadership, vision and strategic direction, governance, financial management and accountability, according to the Accounts Commission.

Announcing its findings following the public hearing at the end of June, the Commission said the council needed to address these issues urgently by implementing an improvement programme.

In a press release the Commission said there were serious concerns about how the council had been run. It found an absence of clear, decisive and consistent leadership at councillor level and limited evidence of effective leadership from the corporate management team. The council struggled to agree and communicate a clear purpose, made more difficult by significant tensions between councillors and between councillors and officials.

Commission chairman John Baillie said: “Shetland Islands Council has taken a positive step towards better working by appointing an interim chief executive, although there is a danger that unrealistic expectations will be placed on him.

“It is essential that the council now pulls together and addresses its shortcomings. All councillors need to accept their responsibilities for making sure the council is run properly, with leadership from the convener and effective support from the corporate management team.”

The Commission characterised the council’s approach to governance as “haphazard” and also criticised its processes and procedures. One area of particular concern was the council’s approach to dealing with conflicts of interest.

Mr Bailie said: “Every council needs to ensure it is run properly, through good governance. But that has not happened at Shetland. The council needs to develop a shared understanding of what good governance means and requires. This is about individuals’ behaviour and also about making sure the council has and uses rigorous systems to support leadership, transparency and clear decision-making.”

The Commission had further serious concerns about financial management and accountability, including the accounting treatment of Shetland Charitable Trust which has resulted in repeated qualification of the council’s accounts by the external auditors.

Mr Baillie said: “Shetland Islands Council faces many challenges in the years ahead and needs to be in the best possible shape to tackle them. There are significant weaknesses in the way in which the council currently manages its finances. It is essential that the council takes action to improve on this.”

The processes used in the recruitment and employment of former chief executive David Clark are also criticised. The Commission noted that the negotiated settlement resulted in considerable anger in the local community and the actions of some councillors damaged the council’s position.

In its recommendations the Commission says the council should put in place a comprehensive programme of improvements as a matter of urgency, with clear objectives, milestones and timescales for delivery.

Mr Baillie concluded: “Shetland Islands Council has serious problems. Councillors and officers need to accept the need for change, to pull together and act quickly and decisively to implement our recommendations and ensure Best Value for people in Shetland.”

Legislation requires the council to consider the findings at a meeting of the council within three months of receiving them, and to decide what action to take in response to them.

The Commission will continue to monitor the council’s circumstances through the council’s external auditors, and has asked for a further report by the Controller of Audit in 12 months on progress made by the council.

Reacting to the Commission’s findings, Mr Clark said Shetland had been manipulated into a “lose-lose” situation and its autonomy and oil funds were now under threat.

He called for the scrapping of the “supposedly independent body” Audit Scotland, whose draft report after the initial investigation last year was “superficial, unprofessional and riddled with factual inaccuracies”.

The report had to be substantially changed before being released in its final version, Mr Clark said, and the inadequacy of the final report was proven by the necessity of the Accounts Commission to hold a public hearing in an effort to get to the facts.

Mr Clark said there were now two possible scenarios. If the Commission’s recommendations were not implemented and the situation did not improve, it would give the establishment justification for direct intervention in the affairs of Shetland Islands Council.

On the other hand, should the recommendations be implemented and the situation be resolved, the twin responsibilities of current chief executive Alistair Buchan, on a two-year secondment from Orkney Islands Council, would be viewed as evidence that a joint local authority could be run efficiently.

Mr Clark said: “Either way, Shetland will lose her political autonomy, and her community could lose much of the control she has over her vast oil and gas revenues.”

He said it was pleasing that the positives highlighted in the Commission report were initiatives that he personally put in place and drove forward.

It was also significant that the Commission refused to make any criticism of his own performance, Mr Clark added, while drawing attention to alleged breaches of the code of conduct by some elected members in their public attacks on him as chief executive.