SP Paper 960 (Web)
Contents
Report
Foreword by the Convener
Session 4 Statistics
Introduction
Public service reform
Managing early departures
Police
Scottish Fire Service
Colleges
Health and social care integration
Financial and performance reporting
Devolved Scottish public sector accounts
NHS Highland
Management of patients on NHS waiting lists
Project Management
Major capital projects
Management of ICT projects
NHS24
CAP Futures programme
New powers
Working practices
Scottish Government progress reports
Annexe A
EXTRACT FROM THE MINUTES OF THE PUBLIC AUDIT COMMITTEE
Remit and membership
Remit:
The remit of the Public Audit Committee is to consider and report on—
a. any accounts laid before the Parliament;
b. any report laid before or made to the Parliament by the Auditor General for Scotland; and
c. any other document laid before the Parliament, or referred to it by the Parliamentary Bureau or by the Auditor General for Scotland, concerning financial control, accounting and auditing in relation to public expenditure.
Membership:
Paul Martin (Convener)
Mary Scanlon (Deputy Convener)
Colin Beattie
Nigel Don
Colin Keir
Stuart McMillan
Tavish Scott
Richard Simpson
David Torrance
Session 4 Legacy paper
Foreword by the Convener
1. The work of the Audit Committee is always varied and interesting. We are responsible for scrutinising the effectiveness of public spending across all devolved policy areas and ensuring value for the tax payer’s money. In recognition of our important role, we are one of the Parliament’s statutory committees.
2. During this Session, one of our primary aims in holding the Scottish Government publicly to account has been to raise the profile of our work. We have been successful in this by a combination of effective and incisive questioning of witnesses, timely follow-up work and publicising what we do through social and other media.
3. We regularly raised and publicised concerns about data collection and quality, project management - in particular ICT projects - and the governance arrangements that must underpin all decisions on public expenditure.
4. During this session we considered 68 reports by the Auditor General for Scotland or the Accounts Commission. 18 were reports on accounts and 50 were reports on economy, effectiveness and efficiency. We took evidence from 549 witnesses, undertook 29 inquiries and published 20 Committee reports.
5. We initiated our own inquiry into the audit arrangements for the new devolved and proposed powers for Scotland and published our findings and recommendations.
6. This session of the Parliament has been a busy one. The advent of further powers will mean that the next session of the Parliament is likely to be busier still. Effective audit scrutiny, through the Public Audit Committee, will continue to be crucial.
Session 4 Statistics
Introduction
7. Tightening public sector budgets and the advent of new powers and responsibilities, not least the Scottish Rate of Income Tax, mean the importance of the Parliament’s scrutiny work in the area of audit and the work of the Auditor General for Scotland cannot be understated.
8. This report highlights some of our key work during this session and suggests issues that the incoming committee will wish to pick up.
9. Our work this session broadly fell under four headings:
- public service reform,
- financial and performance reporting
- project management.
- new powers
Public service reform
10. Tightening public sector budgets have led to structural reforms in key public service policy areas. For example in policing with the move to a single police service, in the college sector with the reduction from 37 colleges to 20 and the creation of 13 regional boards and in health and social care towards a more integrated way of delivering services. Mergers to create new bodies and workforce changes including early retirements and voluntary redundancies were used as ways to generate savings.
Managing early departures
11. In 2013 we considered a joint report by the Auditor General for Scotland (AGS)/Accounts Commission Managing early departures from the Scottish public sector. Significant sums have been spent on public sector early departure schemes and it is vital that they provide value for the public purse. We identified a lack of transparency and consistency particularly in relation to settlement agreements and the use of confidentiality clauses.1
12. As a result of our scrutiny, the Scottish Government introduced new arrangements for settlement agreements and undertook to report back to us. In February 2016 we noted the Scottish Government’s initial report following the first year of operation of the new arrangements. We have asked the Scottish Government to continue to report annually to the Parliament on settlement agreements and lodge the reports with SPICe.
13.We recommend that the incoming Committee considers the Scottish Government’s next report on settlement arrangements.
Police
14. The Scottish Police Authority (SPA) and Police Scotland were established in 2013. The new structure brought together eight police forces, the Scottish Police Services Authority (SPSA) and the Scottish Crime and Drug Enforcement Agency into two new national bodies – the Scottish Police Authority and Police Scotland. This was a major reform of a key public service and the most significant change to policing in Scotland since 1967.
15. In May 2014 we published a report (including minority/dissenting statements by some members) on the efficiency and effectiveness of the planning for the new police arrangements and structure.
16. In January and February 2016 we took evidence from the new Chief Constable and the Scottish Police Authority on the 2014/15 audit of the Scottish Police Authority. For the second year running, the AGS had reported significant issues arising from the audit of the accounts. The accounts were incomplete, of poor quality and subject to substantial changes. The AGS advised that stronger leadership was required strategically and in financial management.
17. The Cabinet Secretary for Justice has asked the Scottish Police Authority to undertake a review of governance arrangements by the end of March 2016. We received assurances from the Scottish Police Authority that it is taking steps to address the failings. It is extremely important that the Scottish Police Authority is able to satisfy us that it has effective governance and accountability systems in place.
18. We recommend that the incoming Committee maintains a close watch on this and seeks an early update from the Scottish Government and the Scottish Police Authority on the outcome of the governance review.
Scottish Fire Service
19. Eight fire and rescue services merged to form the Scottish Fire and Rescue Service (SFRS), a single body accountable to the Scottish Parliament. In May 2015 we considered a report by the AGS on the Scottish Fire and Rescue Service. We were concerned that a significant funding gap of £42.7 million was predicted by 2020, with no long-term financial strategy in place to address it.
20. Since then the SFRS has been working on a long-term financial strategy to be in place by April 2016. Audit Scotland will monitor progress and the incoming committee may wish to satisfy itself that appropriate arrangements have been put in place.
Colleges
21. The AGS reports annually to the Parliament on colleges. Colleges have gone through a process of reform and restructuring to reduce duplication, improve links with employers and achieve year on year savings. We have continued to press the Scottish Government and the Scottish Funding Council (SFC) to provide more detail on the savings achieved. The AGS is due to report again on colleges in the summer of 2016.
22. Although the college reform and merger process was reported to have generally progressed well, there were a number of significant governance failings particularly around severance payments. We questioned how effective the SFC’s oversight was of the college merger process. We were critical of the lack of clear guidance and direction provided by the SFC. £58 million was provided by the SFC to support the merger process. Most of this was used to fund voluntary severance schemes.
23. During 2015 and 2016 we reported on North Glasgow College and Coatbridge College. In both cases, governance arrangements fell considerably short of what was expected.
24. At Coatbridge College the failings were particularly serious. Our conclusion was that there had been collusion between the former Principal and the former Chair. We called for the severance payment made to the Principal to be recalculated and the over-payment to be returned. We passed our report to the Police and the Office of the Scottish Charities Regulator (OSCR). We hope that our work and actions sent out an important message to all those in the public sector charged with the stewardship of taxpayers’ money.
25. In late 2015, the Scottish Government established a college governance task group to address the failings. We recommended that the group consider carefully what sanctions should be available to the SFC and what further powers the SFC needs in order to be effective. The task group is due to report shortly. We also recommended that the Scottish Government look again at the operation of the Scottish Funding Council and the effectiveness of its supervisory role.
26. We recommend that the incoming Committee considers the college good governance task group report and the measures proposed to improve college governance and rebuild confidence in the arrangements.
27. We recommend that the incoming Committee continues our scrutiny work of the Scottish Government and the Scottish Funding Council particularly to identify where savings have been achieved as a result of college mergers and how savings will continue to be found year on year.
Health and social care integration
28. Another planned area of significant public service reform is in health and social care. In 2014 we looked at care provision for an ageing population and published our report Reshaping care for older people. In 2016, we are halfway through a 10 year Scottish Government and COSLA programme aimed at improving services for older people by shifting care towards anticipatory care and prevention.
29. There is now a statutory requirement for health and social care to share budgets and resources. New integration authorities are to be operational by April 2016. In January 2016 we considered a performance report by the AGS/Accounts Commission on the initial transition year of integration. A number of risks and challenges were identified. The AGS plans to report to the Parliament again after a year of operation of the new arrangements.
30. In March 2016 the AGS/Accounts Commission published a joint report identifying new local models of care including case studies. In the remaining time available to us, we were not able to consider this report.
31. Given the intended scale of health and social care reform, changes will impact on everyone who accesses health or social care in Scotland. The incoming Committee is likely to want to consider the joint AGS/Accounts Commission report on changing models of health and social care and future reports on the operation of the new arrangements to ensure that sufficient progress is being made.
Financial and performance reporting
Devolved Scottish public sector accounts
32. Clear, transparent and comprehensive public sector financial and performance reporting is vital. The Scottish Government and other public bodies have been developing how they do this but more progress is needed.
33. The AGS has consistently reported on the importance of consolidated accounts for the whole of the Scottish public sector. It is becoming increasingly important to understand the overall position of the devolved Scottish public sector as a whole, but there is no single set of accounts that shows the position. In the absence of easily accessible, aggregate information it is extremely difficult for elected members, taxpayers and others to have a clear picture and understanding about public spending and the longer-term implications for public finances.
34. We have asked the Scottish Government to provide an update of its progress in this area on a number of occasions. In evidence to us in November 2015, the AGS said that this is becoming increasingly urgent, given the new financial powers that are coming to Parliament.
35. In December 2015, the Permanent Secretary and Director-General Finance gave evidence to us on the consolidated accounts. We received an undertaking that the Scottish Government would share proposals for progressing Scottish consolidated accounts for the whole of the public sector with us and the Finance Committee in the early part of 2016.
36. There is not yet, in our view, either a clear commitment to realising the AGS recommendation for public sector consolidated accounts, or a clear plan for taking forward any other specific proposal to enhance financial reporting.
37. We recognise the significant work required to realise the new financial powers for Scotland and the arrangements that will underpin them. In our view there must be a clear plan and timetable for development of financial reporting and the Scottish Government must make public its commitments.
38. Whole of Government accounts are prepared at UK level. We would like to see a similar approach for the devolved Scottish public sector to provide a clear view of liabilities and assets and enable better decision-making. The Scottish Government has signalled its willingness to engage with the Parliament on this issue and we must now see firm commitments and action.
39. In our view there must be a clear plan and timetable for development of financial reporting and such commitments should be public. We recommend that the Scottish Government and Audit Scotland work together on this and bring their proposals to the incoming Committee.
40. We found our evidence session with the Permanent Secretary on the consolidated accounts useful. We would suggest that this is an annual evidence session in the incoming Committee’s work programme.
NHS Highland
41. The audit of NHS Highland’s accounts for 2013/14 disclosed inadequate financial management and reporting. We uncovered poor data and audit trails and weak governance. The weaknesses led to NHS Highland requiring additional funding from the Scottish Government (brokerage) in order to break even.
42. During our investigation into the failings, the Committee met formally and informally in Inverness. Our subsequent report made a number of recommendations to NHS Highland about improved financial management.
43. We asked the AGS to provide us with a progress report by the end of 2015. We were pleased to note that NHS Highland had taken the necessary steps to improve its financial forecasting and reporting. However, despite the improvements, further work is required to develop better long-term financial planning at NHS Highland and to reduce reliance on non-recurring savings.
Management of patients on NHS waiting lists
44. Accurate reporting of performance against waiting time targets for patients on NHS waiting lists is vital. In 2013 we considered a report by the AGS and undertook our own inquiry to consider the issue in more detail.
45. A system of coding is used when a patient cannot attend an appointment. In 2011 NHS Lothian was found to have mis-used the code system to manipulate its performance figures. Some patients were unknowingly waiting longer than they should have been. NHS Lothian falsely reported it was meeting the targets in nationally published reports.
46. We were pleased to note that Audit Scotland found no evidence of widespread manipulation of waiting lists. We recommended that the Scottish Government set out the core audit data that NHS health boards must gather and that this should include better information around and more consistent use of the codes.
47. We considered an update report by the AGS and we reported again in 2014. We were concerned that, due to delays in updating IT systems and implementing new guidance, it had not been possible to fully scrutinise all waiting times across Boards.
48. We have invited the AGS to comment on the quality and range of data recorded on NHS waiting time performance in future NHS finances reports.
Project Management
Major capital projects
49. During this session we received 6-monthly reports from the Scottish Government on its Major Capitals Projects investment programme. We worked with Audit Scotland and the Scottish Government to develop an appropriate reporting template.
50. We considered the most recent Scottish Government report in October 2015 and took evidence from the Scottish Government‘s Director General Finance. The Office for National Statistics (ONS) has been conducting a number of reviews to establish whether certain projects should be classified as public or private sector. The outcome of these reviews could have significant implications for the Scottish Government.
51. The next 6-monthly Major Capital Projects Progress report is due in summer 2016. When considering that report, the incoming committee will wish to receive an update on the impact of ONS classification decisions.
Management of ICT projects
52. Public sector management of ICT projects has been an on-going area of interest for the Committee. A recurring theme has been the public sector’s difficulty in identifying, recruiting and retaining public sector staff with the right skills to manage ICT projects. We were disappointed that the Scottish Government did not undertake an assessment of this skills gap across the public sector until August 2014.
53. In September 2015 we took evidence from Scottish Government officials on the AGS report Managing ICT contracts in central government an update. We followed this up during our evidence session with the Permanent Secretary in December 2015.
54. We remain concerned about the level of specialist skills in the public sector to equip it to manage and deliver ICT projects successfully.
NHS24
55. The new NHS24 call-handling system was launched in October 2015 and then suspended in November 2015. It is due to be relaunched in the summer of 2016. As at October 2015 there was an overspend of 55 per cent against the original budget of £75.8 million. We were told this was due to changes in the contract specification and costs associated with the delay in implementing the system. It is clear that there have been significant failures of oversight and management and substantial delays and cost overruns.
56. We took evidence from former and existing accountable officers in the early part of 2016 and subsequently took evidence from the relevant Scottish Government accountable officers at our penultimate meeting on 24 February 2015. We were told that when the new call-handling system is lodged in summer 2016, NHS24 should be financially sustainable and not require any further brokerage.
57. It will be for the incoming Committee to follow this up and establish what the final costs are for this project. The audit of the accounts for 2015/16 will present an opportunity for the AGS to provide an update.
CAP Futures programme
58. A new CAP programme commenced in 2015. The Scottish Government developed a new IT system to underpin the programme and manage payments. The original business case estimated the total cost for the overall programme at £102.5 million. As at March 2015 the estimated total programme spend was £178 million. Delay and increased costs raise questions about the value for money. The current programme runs until March 2017.
59. We took evidence from Scottish Government officials in September 2015 and noted an update report from the AGS. More recently, we have been made aware of concerns about the speed at which payments are being processed. The Cabinet Secretary is providing weekly written progress reports to the Rural Affairs Climate Change and Environment Committee. Audit Scotland continues to keep the CAP Futures programme under review as part of the annual audit process.
New powers
60. The new and proposed powers for the Scottish Parliament require new audit frameworks. Throughout this session, we considered the audit and accountability arrangements that must accompany the new powers. We need to ensure that the Scottish Parliament can continue to hold to account those who collect and spend public money.
61. Our work demonstrated that early consideration of the audit arrangements is vital to ensure robust and transparent reporting to the Scottish Parliament from the outset. This is particularly important when accountability is shared between UK and Scottish Governments and bodies.
62. In June 2015 we published our response to the Scotland Bill 2015 and sent it to the Secretary of State for Scotland, the Cabinet Secretary for Finance, Constitution and Economy, Audit Scotland and the National Audit Office. Our response set out key overarching guiding audit principles for the provision of Scottish-specific data and commented on each relevant UK public body or new function. We invited and received helpful views on our recommendations.
63. The Scotland Bill 2015 is still under consideration. The incoming committee will wish to pick up this work in due course.
64. A key new power of the Scottish Parliament is the Scottish rate of income tax (SRIT). In a report of 2012 we set out our initial views on the new audit arrangements for SRIT.
65. The SRIT will be collected by Her Majesty’s Revenue and Customs (HMRC) using existing pay-as-you-earn (PAYE) and Self-Assessment tax collection systems. The National Audit Office, through the Comptroller and Auditor General (C&AG), has a statutory requirement to report annually to the Scottish Parliament on HMRC’s rules and procedures for the assessment and collection of income tax. We also asked that Audit Scotland provide additional assurance.
66. We welcomed the commitment given by the C&AG to appear before the Public Audit Committee to give evidence on these reports. We considered the first report in January 2016 and took evidence from the C&AG, the AGS and HMRC.
67. We recommend that the incoming committee continues this practice and that consideration of these reports from the C&AG and the AGS forms part of the committee’s annual work programme.
Working practices
68. Up until the final six months of this session, the Committee generally met fortnightly with additional meetings as required. More recently, particularly as a result of our colleges work, we moved to weekly meetings.
69. The Committee’s workload is largely dictated by the number and type of AGS reports laid. It is likely (given the expected devolution of further powers) that there will be an increase in the number of reports coming forward next session. It will be for the incoming committee to monitor its workload and decide how frequently it wishes to meet. Our experience suggests that fortnightly meetings are unlikely to provide sufficient time for adequate scrutiny of AGS reports.
70. The Public Audit Committee is the primary committee tasked with considering AGS reports. There is also a role for subject committees, particularly when undertaking post-legislative scrutiny.
71. We recommend that the incoming committee closely monitors its workload with the expectation of a move to meeting more frequently.
Scottish Government progress reports
72. The Scottish Public Finance Manual provides for the Public Audit Committee to request reports from the Scottish Government on progress in implementing recommendations made by the Committee in its reports, twice per session.
73. The Committee identifies which recommendations to include when considering responses to its reports. The purpose of the progress reports is to enable the Committee to satisfy itself that that its findings and recommendations lead to identifiable action by the Scottish Government.
74. During this session we received reports in May 2013 and May 2015.
75. We recommend that the practice of the Scottish Government reporting twice per session continues and, in due course, the incoming committee decides when it would like the reports and which of its recommendations should be the subject of the reports.
Annexe A
EXTRACT FROM THE MINUTES OF THE PUBLIC AUDIT COMMITTEE
5th Meeting, 2016 (Session 4), Wednesday 10 February 2016
Legacy paper: The Committee considered and agreed its approach to the legacy paper.
6th Meeting, 2016 (Session 4), Wednesday 24 February 2016
Legacy paper: The Committee considered and agreed the content of its legacy paper.
Any links to external websites in this report were working correctly at the time of publication. However, the Scottish Parliament cannot accept responsibility for content on external websites
Footnotes:
1 A settlement agreement is a legally binding agreement entered into by an employer and employee to resolve an employment dispute.
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