16 December 2005
Scottish councils are losing track of the millions of pounds they give to external organisations, the local government watchdog has found.
In a report, Following the public pound, published this week, the Accounts Commission said councils should have better information about their funding of arm's-length and external organisations (Aleos).
These include companies, trusts and voluntary organisations that deliver a wide range of council-related services, including management of leisure centres and provision of cultural and social work facilities.
Commission member Keith Geddes said councils were increasingly funding external organisations to provide services in important areas such as social work and leisure.
He added: 'All councils need better information about their funding of external organisations, the intended benefits and what is obtained for the money provided.
'They need to tailor their approach to monitoring how the money is used and ensure they can “follow the public pound”.'
The study found that Scottish councils provided £220m to 14,000 Aleos. The spending ranged from less than £1m in East Dunbartonshire to £46m in Edinburgh, which alone accounted for one fifth of all Scottish councils' financial support for Aleos.
According to the commission, no council complied fully with guidance drawn up by the Convention of Scottish Local Authorities and the Accounts Commission.
There was a high level of performance in nine councils, moderate performance in 18 councils and a low level of performance in five – East Dunbartonshire, Midlothian, Orkney, Shetland and South Ayrshire.
The majority of councils did not have a corporate system for managing financial support to Aleos and had difficulty in providing the information sought by the commission.
Councils that did have a corporate system were more effective.
The commission also pointed out that councils do not have a systematic risk-based approach to dealing with Aleos.
While spending on these bodies was about 2.4% of overall council budgets, 'this type of expenditure inherently presents more risk,' the commission warned.
There was scope for councils to improve their financial and performance monitoring.
The report advised: 'Councils should apply a risk-based approach, taking account of factors such as the amounts of money involved, the size of organisations funded and how they are managed.'
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