Reporting of Scottish finances will need to develop further in light of new powers

11th July 2013

The Scottish Government will need to make sure its financial reporting is more comprehensive and transparent as it prepares for new tax and borrowing powers.

An Audit Scotland report published last week, "Developing financial reporting in Scotland", highlights why good financial reporting matters. It is a contribution to preparations for new financial powers as the Scotland Act 2012 is implemented over the next three years.

The report says while the audited accounts of public bodies across Scotland provide a sound base for financial reporting and scrutiny, there is currently no single complete picture of the devolved public sector’s finances, and particularly its assets and liabilities.
The report says the Scottish Government will need to further develop its public financial reporting ahead of the new powers taking effect, making sure it is comprehensive and transparent. Areas of particular consideration include:
• the long-term consequences of funding assets from borrowing or public private partnerships
• how forecasts and other estimates are made
• how potential liabilities are assessed and monitored
• the clarification of complex accounting issues.

Auditor General for Scotland, Caroline Gardner, said:“Scotland will soon enter a new era of fiscal and financial autonomy as the Scotland Act is implemented over the next three years and the Scottish Parliament gets new tax and borrowing powers. Comprehensive, transparent and reliablefinancial reporting will become even more important for public accountability and confidence.

“Public bodies’ audited accounts are a sound base, but they do not give a complete picture of what Scotland’s devolved public sector owns, owes, spends and receives. The global financial crisis highlighted the importance of having a thorough understanding of a government’s assets and liabilities and of the key risks to a government’s financial position.

“The Scottish Government needs to further develop its financial reporting in discussion with the Scottish Parliament. This report is a contribution to that process. It illustrates key issues and suggests particular areas for consideration, such as the forecasting of tax receipts and the long-term consequences of funding assets from borrowing.”

See the full report at
http://www.audit-scotland.gov.uk/docs/central/2013/nr_130704_financial_reporting.pdf