Audit Scotland warns of £85m Scottish police funding gap
Audit Scotland has warned of "significant issues" in Scottish police accounts, with a potential funding gap of £85m developing by 2018/19.
Auditor General Caroline Gardner said Police Scotland and the Scottish Police Authority "must provide stronger leadership" on financial management.
The report came as the Inspector of Constabulary warned of budget savings impacting on police effectiveness.
The SPA said "immediate action" would be taken over "weaknesses" identified.
The group is to appoint an interim chief financial officer to oversee the management of the SPA and Police Scotland.
Deputy Chief Constable Neil Richardson said the "overall performance of Police Scotland remains strong".
Finance secretary John Swinney also announced an extra £55m of funding for police in this week's draft budget.
Audit Scotland has submitted its second report of the year to the Scottish Parliament on the Scottish Police Authority's 2014/15 accounts.
The report said that incomplete records and poor financial management delayed the audit of SPA's accounts, and "substantial corrections" were needed before completion.
Ms Gardner said that while some progress had been made towards creating a long-term financial strategy, it had been slow.
She said this was "critical" as the SPA and Police Scotland could face a funding gap of about £85m by 2018/19.
She said: "I first reported on the need for a long-term financial strategy for the service in November 2013. What was once important has now become critical, given the scale of the challenges ahead.
"The Scottish Police Authority and Police Scotland must collectively provide stronger leadership in strategic and operational financial management. This is essential if they are to deliver effective modern policing for the public and ensure their long-term financial sustainability."
SPA chairman Andrew Flanagan said "immediate action" would be taken to address the weaknesses identified in the audit, including the appointment of an interim chief financial officer in January.
He said: "We fully acknowledge the recommendations in the audit report that significant improvements are required in financial processes and controls within policing. Audit Scotland has described the issues identified in the audit as exceptional.
"I agree and the SPA board has today taken immediate action to address them.
"The immediate objectives are to get our financial house in order to avoid a further critical audit report; to grip cost saving initiatives and minimise forecast overspend within the current financial year; prepare a policing budget for 2016-17 within the available resources announced this week by the Scottish government; and prepare a financial strategy that will provide policing with a sound basis on which to evolve a broader policing strategy for Scotland."
Deputy Chief Constable Richardson said: "As the HMICS annual report highlights, the overall performance of Police Scotland remains strong with officers and staff committed to providing a good service to our communities. It also praises the leadership and commitment of staff at all levels of Police Scotland in what has been a challenging year for the service.
"We acknowledge the ongoing demands on cyber crime and Police Scotland devotes substantial resources to preventing and dealing with online crime.
"Police Scotland remains committed to delivering effective local policing, building public confidence and ensuring equitable access to specialist services."
Meanwhile, Inspector of Constabulary Derek Penman warned in his annual report that the need to save money could reduce the effectiveness of officers.
He said Police Scotland continued to provide good service to communities despite challenging circumstances, but warned that budget pressures could affect that.
He welcomed a commitment to maintaining an additional 1,000 officers, but said they needed to be deployed in operational roles.
He said: "In the absence of a long-term vision of policing, a wider workforce strategy and a clear financial strategy, there is a real risk that financial savings will continue to focus primarily on reducing police staff."
Mr Penman also said there should be a "wider discussion" around police funding and a "re-forecasting of achievable savings", which he said could potentially offer greater flexibility on how police budgets could be spent.
A spokeswoman for the Scottish government said police budgets had been protected in the draft budget announced earlier in the week.
She said: "The commitments given in this week's Scottish government draft budget to increase the police revenue budget in real terms in every year of the next parliament - amounting to £100m, plus an additional £55m for change and transformation work in the next financial year - will put the police budget on a sustainable footing for future years."
However, opposition parties at Holyrood hit out at the "worrying" report.
Scottish Conservative MSP Alex Johnstone said it was "very difficult for Police Scotland to plan properly for the future and ensure our streets are safely patrolled while facing a black hole of tens of millions of pounds".
Scottish Labour's justice spokesman Graeme Pearson said the report "records the disarray that is the SPA", adding: "To have no robust financial management or strategic plan to deliver on behalf of Police Scotland is nothing short of criminal."
Alison McInnes of the Scottish Liberal Democrats added: "The Scottish government might have hoped to avoid scrutiny by sneaking these accounts out on the last day before the Christmas break, but we need urgent answers over how these problems will be addressed."