Study finds more work needed on public finance reporting

More work should be done to strengthen the transparency of public finances as new tax-raising powers are introduced at Holyrood, the Auditor General has said.

Derek Mackay said report shows government had a firm grip. Picture; Scottish Parliament

In her report on the Scottish Government’s consolidated accounts for 2015/16, Caroline Gardner said progress has been made to improve reporting of public spending, but she also identified areas for improvement.

These include making it clearer what spending aims to achieve and how this contributes to the Government’s overall strategy.

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Finance Secretary Derek Mackay said the report showed the Government had a “firm grip” on Scotland’s finances.

But opposition parties seized on a section of the report highlighting issues with the management of European Union (EU) farming payments and European Structural Funding.

The consolidated accounts cover about 90% of the spending approved by Holyrood.

The Audit Scotland report found total spending in 2015/16 was £33,308 million, £392 million less than budgeted.

The resource budget was underspent by £357 million and capital by £35 million, with an overspend in health offset by underspends in education and justice.

Ms Gardner gave an unqualified independent audit opinion on the accounts, meaning she is “content they show a true and fair picture, follow accounting standards and that the income and expenditure for the year is lawful”.

She added the Scottish budget is becoming “increasingly complex” and the Government “has established a strong base to address the substantial changes and uncertainty affecting public finances”.

“While recent developments show the Scottish Government is heading in the right direction, there’s much still to do to ensure that the Scottish Parliament, and the public, have the information they need to fully understand and scrutinise the implementation of the new powers, especially the new tax and spending choices,” she said.

Ms Gardner also highlighted concerns over the Common Agricultural Policy Futures Programme, which delivers EU payments to farmers and has been hit by delays, and the management of European Structural Funds, which provide financial assistance in areas such as transport links and business growth.

During 2015/16, three of the four structural funds programmes managed by the Government were suspended due to a failure to comply with European Commission requirements.

While the Scottish Government has taken action to have the suspensions lifted, the accounts contain a provision of £14 million to reflect “a permanent loss of grant to the Scottish Government which it cannot now recover”.

Finance Secretary Derek Mackay said: “This is the 11th consecutive year Audit Scotland has given the consolidated accounts a clean, unqualified audit and once again demonstrates our firm grip on Scotland’s public finances.

“We recognise that Scotland’s budget process needs to evolve to take account of the complexities and opportunities associated with the new powers, notably those relating to fiscal policy.

“That is why I have agreed a fundamental review of the budgetary process to ensure we develop a process that balances the time required for proportionate and effective parliamentary scrutiny with the need to ensure the information is based on the most up-to-date forecasts.”

Underspend will be taken forward into 2016/17, Mr Mackay said.