Urgent action is needed to get to the bottom of a £3.3 million shortfall in Moray Council’s early learning and childcare budget.
Councillors asked internal auditors to look into the deficit when it came to light earlier this year.
The £3.3m black hole has been caused by higher than anticipated demand for free nursery places, which has been expanded so three and four-year-olds as well as eligible two-year-olds can get a placement of up to 1,140 hours a year.
This has resulted in the need for more staff and extra lunches.
Along with the increasing cost for additional support needs and higher hourly payments for external childcare providers, the total adds up to £1.9 million.
In addition, changes to the Scottish Government funding formula for its flagship policy has seen a £1.4m drop in the grant for Moray.
In a report going before councillors next week, auditors call for an urgent budget review of the service so inconsistencies can be picked up quickly.
They recommend financial management training for the early learning and childcare manager and the chief education officer, a review of catering costs as well as looking at the number of children registered for nursery placements to calculate demand and asses costs.
A review of staffing and recruitment at council run nurseries should be carried out, with the findings of an ongoing review into additional support needs used to work out the cost of meeting children’s needs.
Benchmarking the costs of delivering the service against other local authorities should be done to flag up any variances.
In his report, audit and risk manager Dafydd Lewis called for a zero-based budgeting exercise to be carried out as a “matter of urgency” with officers starting from scratch to verify and justify all spending needed to provide an expanded early learning and childcare service.
He said: “Determination of demand for places should be undertaken based on predicted numbers of children and the number of hours requested.
Review of £3.3m gap a ‘matter of urgency’
“With increasing staffing costs, partnership provider payments, additional support needs and meal costs currently indicate a £1.9 million shortfall for 2022-23 separate from any Scottish Government funding reduction.
“These cost areas need to be fully analysed, reviewed, and forecast based on reliable demand indicators.
“However, the Scottish Government has recently indicated a reduction in the grant award.
“If council funding remains the same, this will result in a projected overspend of £3.3 million in 2022-23.”
The report will go before members of the audit and scrutiny committee on March 30.
