Public Audit and Post-legislative Scrutiny Committee

Meeting date: Thursday, March 4, 2021

Official Report 560KB pdf

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Scottish Government Support and Sponsorship Arrangements (Key Audit Themes)

Item 3 is on key audit themes—Scottish Government support for public bodies. I welcome our witnesses from the Scottish Government: Paul Johnston, director general for education, communities and justice; Sharon Fairweather, director, internal audit and assurance; and Catriona Maclean, deputy director, public sector reform, public sector and third sector. I understand that Paul Johnston would like to make a brief opening statement.

Thank you. I am grateful to the committee for the opportunity to discuss the action that has been taken by the Scottish Government to improve the engagement between sponsor teams and public bodies. Over the lifetime of this Parliament, a number of audit reports have highlighted the need for strong relationships between public bodies and their sponsor teams to ensure good governance and accountability. The public must have confidence that public bodies are operating effectively, focused on their purpose and objectives, spending money wisely and taking time to learn and improve. I welcome the recognition from the Auditor General for Scotland earlier this year, speaking to this committee, that

“For the most part, the vast majority of the arrangements work effectively, with public bodies delivering what is expected of them and having an appropriate level of support and challenge from their sponsorship team.”—[Official Report, Public Audit and Post-legislative Scrutiny Committee, 14 January 2021; c 22.]

The Auditor General also stated that the Government is taking steps to improve the consistency in sponsorship arrangements. Most bodies are functioning well, including through the enormous challenges that Covid-19 has brought, and I pay tribute to the staff, the board members and the sponsor teams for the work that they have done to secure this. However, each report that the committee has considered over this session provides scope for learning and improvement. I have seen the ways in which improvements have been made in each case following the section 22 report and the highlighting of issues by the committee.

I am joined today by Catriona Maclean, who leads the team that is providing support to sponsor teams and public bodies across Scotland. We now hold regular events for all sponsor teams to come together and share learning. The most recent event was in December 2020, when I shared learning from the recent issues that have arisen with Bòrd na Gàidhlig and we collectively looked at the lessons that had been learned from a previous audit scrutiny. I have spoken directly to every sponsor team at these events and I have summarised to around 100 sponsor team leads what I see as vital issues, summarised as five Cs.

The first is compliance: a sponsor team must ensure that the legal and operational frameworks are being adhered to. The second is capacity: it is essential to ensure that sponsor teams have the resources that they need and, in turn, that we support the body in having the resources that it needs. The third is clarity: governance and accountability arrangements must be set out clearly in a framework agreement that is monitored, reviewed and updated where needed. The fourth is communication: there must be clear lines of communication between the Scottish Government and the sponsored body, including attendance at board meetings and frequency and purpose of engagement. The fifth is culture: it is very important that there is a culture of strong, open and trusting relationships between public bodies and sponsor teams, which enables issues to be identified and resolved at an early stage.

Thanks in part to the scrutiny and challenge from this committee, we now have an enhanced package of support in place for sponsor teams and further work is in hand to build on that. A short review is under way to take stock of the context that we now find ourselves in: learning from Covid-19, seeking to capture good practice and ensuring that we are doing all that we can to learn the lessons that have been highlighted through this Parliament. I am keen to look at ways in which we can develop further our early warning systems to ensure the rapid escalation of issues that might arise. I am also keen to support leadership development in our public bodies.

Scrutiny and assurance activities will always have an important role to play alongside the support that we offer. To that end, I am joined by Sharon Fairweather, the Government’s director of internal audit and assurance. She will be able to describe the audit activity that has taken place and is planned alongside the assurance activity that is taking place on information technology projects. I am happy to follow up on any of those matters.

10:00  

Thank you. I ask Graham Simpson to open the questioning for the committee.

Thank you, Mr Johnston. That was a really useful opening statement. I found it quite encouraging to hear about some of the work that you have been doing.

I will run through some of the reports that you mentioned—we have seen a number of them. There were reports on colleges in 2017, in relation to which the then Auditor General told the committee that

“the ability to spot problems early and tackle them seems to be very variable.”—[Official Report, Public Audit and Post-legislative Scrutiny Committee, 18 May 2017; c 14.]

A report in 2018-19 on Community Justice Scotland raised a number of questions about the support that the Scottish Government had provided to the board.

There was a 2017-18 report on the Scottish Social Services Council, which concluded that the council

“had not followed good governance or project management in undertaking its digital transformation project.”

We heard earlier about Bòrd na Gàidhlig—we know all about that.

A report on the Scottish Public Pensions Agency raised a series of concerns about the management of the pensions project.

The 2018-19 audit of Disclosure Scotland raised concerns relating to governance—again—financial reporting and management of a new IT system.

Of course, we have also had a number of section 22 reports on national health service boards, including NHS Tayside in particular, on which we looked at a report last week.

You mentioned a number of reports in your opening statement, but you also said that you are taking measures to tackle what seem to me to be systemic problems. Can you or one of your team tell us in a bit more detail what exactly has been done to address those issues?

In a moment, I will turn to Catriona Maclean, who heads the team that is seeking to ensure that support is given to all sponsor teams. Before I do that, I will say a little about the specific issues that you mention, because I think that it is important that I do so.

All those reports raise significant issues that have been taken very seriously indeed. In every case, work has been done within the body itself to ensure that improvements take place. In the regular course of my role as portfolio accountable officer, I have sought assurance on the progress that is being made with each of those bodies.

When I have looked at subsequent audit reports on those bodies in the area for which I have responsibility, I have been struck by the way in which significant progress has been noted. I will not go through them all in the interests of time. However, I know, for example, that the committee has looked carefully at the Scottish Police Authority over the years, and I was pleased to see that the most recent audit described improvements in financial management, stability and leadership, and progress in organisational governance. The subsequent audit of Community Justice Scotland, which the committee has also considered, referred to good progress on the agreed actions.

I think that it is very clear that, where specific issues are raised, swift and determined action is being taken by the bodies and there is clear oversight of that by the Scottish Government.

Nonetheless, we would all much prefer that the issues did not arise in the first place and that, where issues arise, lessons are learned so that they do not arise with other bodies. I fully accept that. That is why we are strengthening the programme of support to sponsor teams. Catriona Maclean can say a little more about that, with your permission, convener.

Good morning. As Paul Johnston said, it is quite heartening to know that, in most cases, our public bodies are working well. However, we know that there is more to be done, and we have a continuous programme of improvement. That is not a one-off—it is something that we do regularly. In the last number of years, we have carried out about 40 training events for sponsor teams and for board members. We try, where possible, to pool the learning from what is working well in the sponsor ecosystem; we also look to see where we can learn from areas where it is not working well and build that into our work programme.

For example, in the coming year, we will carry out a number of actions. I think that Mr Johnston provided the committee with an outline of our workplan for this year, which includes sponsorship training. That training will be delivered by David Nicholl, who is a well-respected individual and has great knowledge of good sponsorship. The training will cover a wide range of things and will be in two parts. One part will be for someone who is new to sponsorship and will introduce the roles and responsibilities, what to look out for and how to sponsor well. We will also have an advanced programme for those who have more experience of sponsorship, which will focus on scenarios of what might happen when things go wrong, how to escalate them and so on. We want to cover the wide range of learning that is available to our sponsor teams. The modules and the training have been developed in conjunction with Audit Scotland and the Standards Commission for Scotland.

That is really useful. Other members will have more specific questions but I will put another question to Paul Johnston. Is there anyone—it might be you, Mr Johnston—who has overall responsibility for sponsorship arrangements across the Scottish Government?

That is set out in the “Scottish Public Finance Manual”. The provisions of the manual make it clear that, ultimately, it is for each portfolio accountable officer to be assured that sponsorship arrangements are working effectively in their area. That is why I have a particular interest in all the bodies in the education, communities and justice portfolio. It is my responsibility to delegate to individual directors and deputy directors the duties that they must exercise as sponsor directors. I also happen to have within my area the team that provides support across the Scottish Government. That is the team that Catriona Maclean leads. It is the responsibility of individual directors general to assure themselves that appropriate sponsor relationships are in place in their area.

As part of our governance, we have an annual process whereby each director general provides assurance, or, indeed, identifies any issues, to the principal accountable officer, who is the permanent secretary. Any issues are then highlighted as part of our overall governance framework. As the Auditor General has mentioned, sponsorship issues have been identified as an overall corporate issue for the Scottish Government; that is referred to in the Scottish Government’s consolidated accounts this year.

Therefore, it is fair to say that there is no one figure—there are a number of you, but you all talk to one another.

Yes, we are all members of the Scottish Government’s corporate board and the Scottish Government’s executive team, and we all report to the principal accountable officer, who is the permanent secretary. We are all given our responsibilities by the permanent secretary and in turn are required to give an account to the permanent secretary of how those responsibilities are being discharged.

Thanks very much.

I realise that you cannot provide this detail today, but it would be useful for us to get a list of all the sponsoring departments in the Scottish Government and what the budget is for running each. It seems to me that, if you add it all together, it is quite a substantial overhead.

I remember that the late Professor John P Mackintosh wrote a book many years ago arguing that, even then, too many functions of government were carried out by agencies that are much more difficult to hold to account from a parliamentary point of view. His argument was that some functions are far better done in-house. You would not need a sponsoring department; those functions would just be done by, in this case, the Scottish Government. Getting an overview and a list of sponsoring departments across the Scottish Government and how much each costs would indicate the important issue the public resources that are being used by that function. A future public audit committee might want to look at that in more detail.

Yes—I can see that that is an important point. I shared with the committee some pretty basic information. My apologies if you are already well sighted on that material, but I thought that it might be helpful to provide that overview of what the public body landscape looks like. We are, of course, working within the framework of the legislation passed by Parliament for many of those bodies—legislation that sets out their status and their relationship with the Scottish Government.

I can take that request away. I have looked at the position fairly recently and I know that sponsor teams vary in size and seniority. In some cases, there will be one person; in others, there will be a small team. If we are to provide you with overall numbers, I should add the important qualification that sometimes the sponsor team will have quite a range of responsibilities in addition to sponsoring a particular body. However, I am happy to take the request away. I agree that sponsorship is an important function of government. More than 100 bodies are set out in the overall public body landscape, so significant resource goes into the sponsorship function.

That would be very helpful. Thank you very much.

I want to explore some of the detail of how the sponsor system works on the ground. A very obvious question is how sponsor figures gather intelligence. I looked at what you produced for Bòrd na Gàidhlig. Do sponsors physically attend all the board meetings? Do they have a risk register for the organisations, with checklists of the type of things that they should be looking for? Do such things exist?

The starting point is to look at the framework document. As we described in the earlier session, there is a model framework document, which is not prescriptive around issues such as attendance at board meetings. That needs to be agreed between the Scottish Government and the sponsored body and in many cases depends on the issues that the body is dealing with.

For example, on Bòrd na Gàidhlig, as we are mindful of the issues that were raised in the audit report, the up-to-date framework agreement makes it clear that the Scottish Government will attend all board meetings as an observer. It also sets out the range of engagements that will take place regularly between the sponsor team, the deputy director, the director and Bòrd na Gàidhlig.

There are other bodies where, as a matter of course, the Scottish Government attends the board meetings, and others where it does not. However, in every case, I look to the framework document to set out the terms of engagement between the Scottish Government and the body in question. For example, in my area, I have attended the board meetings of some bodies annually rather than attending every meeting. That is all set out in the terms of engagement between the Scottish Government and the body.

10:15  

Sorry, Colin, but Catriona Maclean would like to come in on this point, if you would like to hear her.

Sure, of course.

I would like to build on what Mr Johnston said about attendance at board meetings. You asked about risk registers. In our guidance, we have a risk profile, which is provided to the sponsor team. That profile is completed by the sponsor team and covers all sorts of different elements of a body, from finance to engagement, relationships and so on. Sometimes the team completes the profile itself, but we encourage that to be done along with the body so that there is a joint understanding of the risk profile.

Would an alarm bell sound for the sponsor figure if there was a lack of challenge by board members? The committee has seen that issue on a number of occasions.

We would certainly want to identify that in the risk profile as an area of concern or as something that needed to be discussed.

Sponsor figures are the eyes and ears of the Scottish Government. How do you make sure that they are doing their job and all the things that they should be doing?

I can pick that up. Ultimately, that takes us into the good management and leadership of people in the organisation. Every member of staff, whether they are part of a sponsor team or discharging some other responsibility, should have very clear objectives set. They should be having a monthly conversation, at least, with their line manager and a regular process of performance reviews. If a member of staff has sponsor responsibilities in their role, the effective discharge of those responsibilities will be discussed regularly with their line manager. Good line management is the principal way in which these matters are dealt with. The specific responsibilities of sponsor teams are set out in the framework document that governs the relationship between each sponsor team and the sponsored body.

Clearly, it is important that an appropriate distance is kept between the public body and the sponsor team. We do not want one official to be too long on the job of supporting one body, because that can lead to issues. How do you make sure that the sponsor figures do not become too close to the sponsored public body? Is there a system of rotation, for example? How does that work?

There is not any formal system of rotation, although most civil servants move role from time to time; indeed, sometimes there has been criticism that there is too much movement. There is a balance to be struck. There is a benefit in civil servants building up a real knowledge of a body and a real understanding of its purpose, the issues that it is dealing with and the stakeholders that it works with.

There is a tension at times. You will recall, I am sure, that we have faced the charge of being too distant from a body; at other times, we are accused of being too close to a body. I say that not to trivialise the issue; I am saying that it is really important that we work to get the balance right in terms of distance from the body.

In all cases, we must respect the statutory frameworks within which the body operates. That will generally include being very clear that the chief executive of the body is the accountable officer and that the chair of the body has statutory responsibility for its oversight. As has been clear from the committee’s scrutiny, the chief executive will be directly held to account for the body’s performance.

What would you consider a reasonable time period for a sponsor figure to be attached to a body—two years, three years, four years?

It is not possible to be prescriptive about how long an individual should be working as a sponsor lead. It depends in some cases on the particular skills that the individual brings, but it is commonplace for staff to move to different roles or to take on new responsibilities every few years in the Scottish Government.

You have said already that sponsor figures get all sorts of training and so on in the lead-up. Do they do scenario training? So many scenarios have come forward to the committee that we would not want to see happen again. Do you use those in the training?

Yes, we absolutely do. Sometimes those real-life scenarios are the most useful thing, as they help to bring the training alive. In the recent events that we have held for all sponsor leads—as I mentioned, at times we have had more than 100 sponsor leads in attendance—we have used the live scenarios that have been raised through audit reports and considered by this committee. We have invited the sponsor teams, and at times members of the bodies, to come and describe the learning that they have taken from the issues. The feedback that I have had is that that sometimes has been the most effective and most compelling way for other sponsor teams to recognise the importance of grasping the issues that have been raised in audit reports and by the committee and ensuring that that learning is taken into the sponsor relationship that the particular team has with its body. It is vital that that learning is based on real scenarios. We have invited Audit Scotland to participate in a number of those sessions, so we have the benefit of its perspective and the perspective from internal audit.

I have a final question about how sponsor figures operate. Are they briefed to maintain regular contact with staff at all levels? We have seen in previous scenarios that a great deal of the intelligence that they are gathering could come from staff, who frequently know a great deal about what is happening that maybe the board does not.

Typically, engagement will take place with the board and with staff in the body. It will depend on the size of the body and on the range of connections. The Scottish Police Authority is a body that I have worked quite closely with and there are a number of colleagues in the sponsor team who are working with quite a number of staff in that body. There will be a lead on finance in regular contact and there might be a lead on strategy in regular contact. There will be a number of links into the body, particularly in the case of the larger bodies.

If your point is about gauging the views of staff more generally at all levels in the organisation, that is not something that a sponsor team would typically do. We would expect to see the results of the annual staff surveys that all bodies should be carrying out, which should serve as an important indicator of the overall wellbeing of staff in the organisation and highlight any particular issues or concerns.

You may have covered this a little bit in the broad-ranging discussion before, but what would be the typical grade of the individual undertaking a sponsorship role? Is there a minimum grade for that person and what key skills do you look for in the individual? Are there enough people willing to do the role? Is it something that someone is appointed to, or are they asked to do it? Are they volunteers, or is it just that they are told to do it?

There should always be senior civil service oversight of the sponsorship arrangement. We expect that as part of the guidance that we provide to sponsor teams, so there would be a deputy director or a director ensuring strategic oversight. Typically, the deputy director would be responsible for forming the team that works to them and provides the day-to-day engagement with the body. The grades of the team members vary depending on the size of the body but, typically, there are a range of grades below the senior civil service.

I am not aware of any issues in attracting and recruiting members of staff who wish to serve as sponsor team members. I think that it is a very rewarding, satisfying role, in which people get a perspective of what our public bodies are doing and how they are delivering and contributing to the delivery of important outcomes. Certainly, there are no issues there. You may be aware that we have huge demand when we advertise roles externally for policy functions in the Scottish Government, so there are no particular issues there.

As I think I mentioned earlier, it comes down to the line manager clearly specifying the duties of the postholder and their objectives, ensuring that the postholder has access to support, advice and training, which is co-ordinated by Catriona Maclean’s team, and ensuring that their performance is monitored through our performance management systems.

Is the deputy director what we would call the sponsor figure, who then has a team?

Yes. We call them the overall sponsor lead—I think that that is the correct term.

When we were talking about how many years someone spends in the role, were we talking about that individual?

Yes, and certainly deputy directors will typically move role every few years. They are the overall strategic lead for sponsorship and they will have a small team working with them.

I think that you said earlier that each portfolio accountable officer has responsibility for the sponsorship role in that area. Is there a commonality of skills and roles for sponsoring figures? The portfolio accountable officer does not set their own determination of what a sponsoring figure should be, but it would be the same throughout all the portfolios.

Catriona Maclean would like to come in.

I was going to build on what Mr Johnston said and it might go some way to answering the question that has just been asked. The sponsor role should be similar across the whole of the organisation. One of the ways to strengthen that position that we are considering is by creating sponsorship as a specialism course that people can undertake and then get recognition for the skill set that they have developed. That should help to create a consistent approach to sponsorship across the organisation. We are at early days in thinking about that, and that idea has to be tested in the organisation, but it is something that we think would be of advantage to try in order to improve and build on the good practice that there is and give recognition to that good practice.

It seems to make sense to have consistency. I think that you mentioned earlier somebody called Mr Nicholl to do with the training—is that right?

That is correct, yes.

Who is that person and what is he going to do?

The person’s name is David Nicholl. He is a director of On Board training, which is a recognised organisation that provides high-quality training for board members and the type of sponsor arrangements that we have. With him and others, we are developing a training course that will be delivered not just once but over a number of ways through all the sponsor teams in the Scottish Government. We hope that we will have those courses in place within the next month to two months and we will then invite our sponsor teams to participate.

Is that an external person?

10:30  

Yes, he is external, but he has detailed experience of providing support to boards and dealing with some of the issues that arise when bodies have difficulties.

How do you monitor the performance of a sponsor figure doing their role effectively? Is there some form of appraisal that assesses their performance specifically as a sponsor figure?

That should form part of an individual’s general approach, but it is something that we recognise we could strengthen. We want to check in with internal audit to see whether there is a way of codifying that more and having a process in place whereby we can monitor it more effectively over the piece. Each individual sponsor team will be monitored during their performance and that will be reported to the portfolio accountable officer as part of that process.

I have a final point for Paul Johnston. It sounds as if the sponsor figure is perhaps not being assessed or appraised on their sponsoring activities against whatever the role definition is. I agree that it is good that you might do it, but is it not being done at the moment?

The system that Catriona Maclean has described works effectively, in my view, and is taken incredibly seriously. That is the regular monitoring of performance. If one of your duties is sponsor team leader or sponsor team member, it is absolutely to be expected that your performance of that duty will be monitored as part of your performance management. I accept that there is always scope for us to learn and improve, and I welcome the work that Catriona Maclean’s team is taking forward, which is exploring whether we should strengthen this area further with training modules, undoubtedly, but potentially also with quite a robust annual accreditation exercise. That will ensure that we are recognising the importance of all sponsor teams keeping their knowledge and skills up to date and learning the lessons that come out of the scrutiny of this committee and the important work of internal and external audit.

I think that appraisal is always good for the employee and the employer, so thank you.

As there are no further questions from members, I thank you all—Paul Johnston, Catriona Maclean and Sharon Fairweather—for your evidence this morning.

10:33 Meeting continued in private until 11:17.