Council / ‘Step change’ required for SIC to reach financial sustainability, audit report says
SHETLAND Islands Council (SIC) needs to make a “step change” to achieve financial sustainability, a report from the local government watchdog Accounts Commission says.
The report also says auditors have highlighted “slow progress” on transformation within the council.
Members of the Accounts Commission discussed the ‘best value’ report at a meeting this morning (Thursday).
They will make a decision in private on the next steps.
Back in 2022 an Audit Scotland report, prepared for the Accounts Commission, took a first look at how the SIC was meeting its ‘best value’ duty.
Audit Scotland describes best value as “ensuring there is good governance and effective management of resources, with a focus on improvement, to deliver the best possible outcomes for the public”.
While there were many positives highlighted, the 2022 report ruled that the SIC had been slow to improve its plans for financial sustainability and has not yet demonstrated that it is meeting its ‘best value’ duty in a number of areas.
The SIC said at the time that it had already begun addressing the issues raised, with follow-up reports ensuing.
The latest report, presented to Accounts Commission members today (Thursday), said the council has completed various recommendations on performance management, community engagement and equality impact assessments.
“However, challenges remain around unsustainable use of reserves to balance the budget and progressing service transformation at pace,” the report said.
Audit controller Helena Gray, presenting the report, said the SIC is in a strong reserves position compared to other local authorities, but there continues to be unsustainable draws to cover expenditure.
The value of the reserves, which are invested in the financial market, at the end of September was £411 million.
The audit report said the SIC’s 2025/26 budget included a £43.9 million deficit to be funded from reserves, which was nearly £21 million above the sustainable level of draw identified by the council.
Questions were raised at Thursday’s meeting as to the terminology, with Gray saying that unsustainable is when the SIC spends beyond what it takes in from income.
Rachel Browne from Audit Scotland also highlighted a range of measures the SIC is undertaking, such as a review of fees and charges and a taking a longer-term look at harbour income.
Former SIC convener Malcolm Bell, who is now a member of the Accounts Commission, praised the quality of services provided by the council but said the unsustainable draw had been a theme for many years.
He asked how can the required “step change” be achieved, with Gray for example noting in response how the SIC’s medium term financial plan includes an aspiration to move to a sustainable draw.
One key theme of the report was ‘transformation’, with the paper noting the SIC’s change programme.
But auditors found that progress to develop detailed project plans had been slow.
“Auditors highlighted the need for the council to ensure that it is clear about what it is able to deliver within the resources it has available, and to what timescale,” the report added.
There were some concerns from members on the pace of change, but they were told that staff capacity can be a challenge.
Browne also noted the council’s strong partnership links and how part of the SIC’s ambition is to benefit “Shetland as a whole” – which may impact on its own pace.
In terms of the next steps the commission will decide in private how it wishes to proceed.
The commission could, for instance, direct the controller of audit to carry out further investigations, hold hearing or state its findings.
A covering report added: “Findings may include recommendations and the persons to whom those recommendations may be made include Scottish Ministers, who have powers to make an enforcement direction requiring an authority to take such action as is specified in the direction.”
Either way, the commission has to inform the SIC of its decision first before making it public.
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