A recent Audit Scotland report, Major Capital Investment in Councils, reviews the types and success of capital investment spending methods among Scottish councils, together with council performance in delivering major capital projects. Focusing on 63 major capital projects completed since 2009, and worth over £5 million each, the report assesses how well capital was invested, whether the projects were delivered within cost and timeframe targets, and how the projects were managed. It found that projects were largely delivered within or close to budget, despite initial cost estimates being too low, but that projects often experienced delays.
The report highlights that since 2000/01 councils have invested £27 billion in real terms in building and maintaining assets and infrastructure: £23 billion from their capital budgets and £4 billion from private finance methods. This large-scale investment in schools, social housing, sport and leisure centres and more was in response to a long-term decline in the condition of council assets, coupled with the need to develop new infrastructure. In the three years ending March 2012, councils invested in 121 major capital projects worth £3.5 billion; the majority of this money (£2 billion) being used to improve schools.
Included with the report is a good practice guide, issued under the Accounts Commission's How Councils Work series, to advise councillors and officers on how to obtain the right information to ensure that projects are delivered on time and within budget. Key recommendations are that Councils should:
| ||develop long-term investment strategies; |
| ||balance the costs, risks and rewards of using borrowing or private financing for such strategies to ensure plans are financially sustainable and help each council achieve value for money; |
| ||actively look for opportunities for joint working with other councils, community planning partnerships and other public bodies to improve the efficiency of their capital programmes; and |
| ||improve the quality of capital project and programme information that is provided to councillors, such as the annual financial performance against the capital budget; risk reporting (including identification, likelihood, financial impact and actions taken) and assessments of intended and realised benefits. |
The report highlights that information sufficient to scrutinise capital investment methods effectively has often been lacking. It stresses the importance of providing information to councillors and officers so that projects are delivered on time and within budget.
With large amounts of public money being focused on capital investment (there are 203 major capital projects currently underway with a net value of £5 billion), and with councils' capital investment due to be cut in the next two years and uncertain in the longer term, the report provides valuable guidance to councils on how to best manage their investment methods going forward in order to achieve project targets whilst also securing good value for money for the taxpayer.
To read the report in full, please click here.