PracticeConsultingScots deficits exposed

Scots deficits exposed

Accounts Commission blames management accounting systems for widespread financial losses, totalling #16m, in Scottish local authority DLOs and DSOs. Lawrie Holmes reports.

The Accounts Commission for Scotland has blamed management accounting systems for a raft of deficits in local authority Director Labour Organisations and Direct Service Organisations.

Its report reveals that 50% of councils are likely to end the year with at least one DLO or DSO in deficit.

In its review of DSOs and DLOs in Scotland, the commission reported that deficits for the year 1997/1998 totalled #16m with more than half the 28 deficits estimated to be greater than #100,000 in building maintenance and general highways contracts.

Controller of audit Robert Black was concerned by the findings. ‘Councils have a duty to safeguard public money and must take immediate action to address this situation. There is, however, encouraging evidence that councils are responding to the problems,’ he said.

Black said about 40% of management accounting systems were ‘seriously flawed’.

A similar proportion lacked business plans. ‘Good management accounts are vital for running a DLO or DSO, otherwise managers will not know the true picture at any point during the year, and monitoring reports to council committees could be misleading. A top priority for many councils must be improvements in the quality of their management information.’

Following a review of its DLOs by PricewaterhouseCoopers, Stirling Council took steps to turn its #776,000 deficit around.

Councillor Tom Coll, chair of the resources committee, said: ‘All options (for improvement) are open, although it is unlikely the building services DLO can continue in its present form and a working group of councillors, officers and trade union representatives is this week preparing a report with recommendations that will be discussed at next week’s resources committee meeting.’

Perth & Kinross Council recorded a #569,000 deficit, which it attributed to poor management, and is backing measures to allow increased private-sector involvement.

Chief executive Harry Robertson said: ‘We owe it to our local community to develop a new way of operating our building services section in line with best value. The council has taken and will be taking further action to bring about the appropriate service improvements.’

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