09 April 2004
The Accounts Commission in Scotland has told councils to review their policy on financial reserves after it was disclosed that these currently amount to almost 9% of total annual expenditure.
In a local government overview report published this week, the commission described the scale of reserves and balances as 'high' and voiced 'serious concern' that only a third of the 32 councils had a fully established audit committee.
It commended councils, however, for improving their financial controls and maintaining sound stewardship of public funds. For the first time since local government reorganisation in 1996, there were no audit qualifications on the accounts.
The report showed that, against a backdrop of annual revenue spending of some £9bn, the total value of reserves held by councils at March 2003 was about £839m – up from £686m in March 2002.
The amount held in general fund balances came to £323m. This was equivalent to 3.9% of general fund expenditure, but the amounts varied from less than 1% of the net cost of services in South Lanarkshire to more than 8% in Dumfries and Galloway.
As the commission pointed out, council revenue expenditure is financed from three main sources: government grants (which includes yields from non-domestic rates); council tax; and fees and charges.
The findings will inevitably raise questions about whether council taxes in Scotland could have been lower this year – for 2004/05 they rose by an above-inflation Band D average of 4.4%.
Commission chair Alastair MacNish said it was pleasing that council financial controls had improved last year and that none of their accounts was qualified. However, while it was encouraging that all councils had now set up audit committee arrangements, only a third of these were fully established and working well.
He added: 'This is disappointing as audit committees have proved to be a powerful tool of audit scrutiny.'
PFapr2004
