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Item 2 is evidence on the "Overview of the local authority audits 2008". I welcome John Baillie, who is the Accounts Commission's chair; Caroline Gardner, who is the deputy auditor general and controller of audit; and Gordon Smail, who is a manager at Audit Scotland. I ask John Baillie to make a brief opening statement.
I thank the convener for inviting us to brief the committee on the local authority overview report for 2008. I will make a short opening statement, after which we will be pleased to respond to questions.
Thank you for that opening statement.
Good morning. Your report makes interesting if, at times, difficult reading. I am looking at what it says about single status and equal pay, on page 21. There are many concerns about those, which, I think, we all share. I would like to consider some of the detail in the report and how local authority services have been affected.
I will deal with that question first and then pass it on to Caroline Gardner.
As Mr Baillie said, we ensure through the annual audit process that our auditors consider what progress each of the 32 councils has made and the wider impact on things such as achieving changes in people's jobs—for example, getting greater flexibility in people's work roles in return for additional money being made available, so that people receive equal pay and single status is achieved. We also ensure that the auditors consider the effect on the wider personnel function in councils. For example, we have often found in our best-value audits that councils that have managed to implement single status agreements have not made as much progress as they would have liked on staff surveys and other aspects of personnel work because so much effort has gone into achieving single status.
I appreciate that information. However, you say that nine of the 32 councils still have to reach a final agreement. Good progress seems to have been made, but it seems to me and to others that the remaining councils are in danger of losing some of that progress, given the litigation that is carrying on back and forth. I am therefore not sure that, in definitive terms, we are as far ahead as you may wish to indicate that we are by saying that only nine agreements are still to be completed. I would appreciate your views on that.
I will deal with your first question first, on the progress that is being made. You are absolutely right. The fact that nine councils still have to reach a final agreement is a significant problem. Nine out of 32 councils is a big proportion—almost a third—and we know that the longer the risk is left open, the more difficult it will be to resolve matters, because the case law keeps evolving and the settlements that were acceptable two years ago are not acceptable for the future. Things get harder.
It is claimed that £1.6 million has gone on legal services—money that could otherwise have gone on front-line services. I am sure that we all feel that the figure will rise, unfortunately. Has Audit Scotland had any thoughts on the level that the figure may rise to?
I do not think that we can help you to quantify that any further. We are looking at the costs incurred by individual councils, but the figure given in the overview report is clearly an estimate at this stage. The estimate that was made by the trade unions earlier this year is as good an estimate as exists, despite all the caveats that surround it.
I seek clarification from the witnesses. The committee has heard in evidence that six councils have yet to reach an agreement. I note that you have used the phrase "full agreement". Are the nine councils to which you referred half way or three quarters of the way through the process? Are you confident that the figure is nine, and not six, as we have heard?
Our figure is nine, as of the end of May, which is obviously very recent. We have the names of the councils and we could compare notes with you outside if that would help.
On the issue of legal costs, we have heard evidence that some of the claims in the system are very strong. We are anxious that such claims are evaluated. Would your organisations have a role in that evaluation? That might ensure that no unnecessary action was taken on claims, which might assist in clearing up some of the human resources and morale problems that you have mentioned.
Auditors work with each council on a rolling basis, and part of that work involves testing the councils by asking them what they are doing to ensure that the claims going through the system are the right ones. However, you will understand that our staff are not lawyers, and that councils take their own legal advice.
Is such evaluation being done with all local authorities just now?
We want to ensure that councils themselves are going through the process of testing that the claims in the system are the right ones. We are not evaluating the claims; we are asking the councils what they are doing to evaluate the claims.
How many councils are involved in that?
Our auditors are asking the question of all 32 councils, but the financial year, and therefore the audit process, has started only in the past six weeks. I cannot give you a full answer yet.
Good morning. Your overview report covers a heck of a lot of material for us to try to digest. In paragraph 44 on page 15, you mention the dramatic reduction in ring fencing and say:
I am afraid that that is another question directly into Caroline Gardner's quarter.
The short answer is no, we have not done that. There should be some saving to councils from not having to report back to the Scottish Government on how they have used ring-fenced funding. However, the bigger saving or improvement relates to councils' ability simply to use funds more flexibly. Rather than having to spend money on a particular set of services or staff groups, councils can think about what they are trying to achieve and the best things that they can do to contribute to that. Audit Scotland does not aim to measure that. We think that councils may want to do that for their own purposes, since the reduction in ring fencing is such an important part of what they have been asking for from Government for years.
So that is not something that is likely to be in your work programme.
That issue is considered at a certain level every year as part of the annual audit work. Good financial management dictates that people should be very clear about what it is that they want to do, and they should ensure that their budgets, staff and so on follow that.
Can we expect a judgment from Audit Scotland in future that will result in all 32 local authorities aiming to align their budget process with their commitments at the national level? Is such an exercise likely to happen? I realise that there are two aspects to that. First, there is the policy aspect: does local government agree with the national objectives? Secondly, however, assuming that local government attempts to implement the national objectives, there could be two reasons why, ultimately, they are not implemented: lack of funds and poor financial planning or financial mismanagement. Our job as a committee is to discern which is which.
To a certain extent, you can already see that in the 32 best-value audit reports that the Accounts Commission has published. Some councils—West Lothian is a good example—demonstrate very well that they move money around to meet the priorities that they set themselves. Other councils have a much more historical and traditional approach to budgeting, and it is hard to see money moving to follow priorities. I add the caveat that most of the best-value audits were done before the advent of single outcome agreements, and were therefore primarily about the things that the council and its community planning partners had agreed in the community plan.
That work will be helpful and useful. Audit Scotland's role in the process seems to be increasing.
We are conscious of the potential for conflict, which the Accounts Commission considered closely before I took up the invitation to join the initial high-level group on outcome agreements, which is now the concordat oversight group. It is an old cliché that auditors come in after the battle and bayonet the wounded. Our view was that it would be more useful for us to join the group and do what we could to ensure that the governance, accountability and reporting arrangements were robust when they were put in place, rather than to do the easy task of coming along afterwards to report that the arrangements were not good enough.
For a few years, the Accounts Commission and Audit Scotland have been going on about the need for councils to have proper performance management and proper performance management reporting. Those arrangements are just as valid when dovetailing them with reporting on single outcome agreements as they were before the single outcome agreements were adopted. The basic machinery must exist to provide services and to monitor the production of those services—to measure their quality and cost and whether they are delivered effectively and efficiently. Concerns have existed for some time about the extent to which councils are improving their performance management and reporting on that. The issue is mentioned in the 2008 overview report and has of course been mentioned in previous overview reports.
Audit Scotland's name is not on the "Interim Report on the 1st Phase SOAs in 2008-09" and Audit Scotland is careful about its contact with the oversight group, but we were told last week that Audit Scotland is content with the report.
We have made it clear that the interim report on progress to April 2009 is by the Improvement Service. The overview report says clearly that single outcome agreements are a medium-term development. Nobody would get them right in 2008-09, but we hope for and expect further development in the agreements that have just been made between councils, community planning partnerships and the Government for 2009-10. That development will continue.
So it was unfair to suggest that you were content with the interim report.
It is not unfair to say that we are happy with the interim report, but that report is by the Improvement Service. Our work will focus on the individual council reports that are due to be published in September.
We know that you have several concerns, which is why we were surprised that you could be content with the interim report, which says little in its 12 pages. We know from your "Overview of the local authority audits 2008" that you are concerned about accountability and governance, the connection with communities and the failure to understand communities. We are getting back to the crux of your involvement with the oversight group as a scrutinising body. What support and drivers are you providing to get us to a stage at which we can monitor and understand the outcomes?
We contribute to the guidance that the oversight group has produced on single outcome agreements. For us, the most significant piece of guidance was the one that was published in February on governance, accountability and public performance reporting because it seems to us that the Accounts Commission's interest primarily lies in ensuring that all the partners involved in an outcome agreement are properly accountable for the resources that they put in and the results that they achieve. We will not be a position to take a view on that until September, when councils and their partners report on progress on the first set of outcome agreements.
Have you a view on the four bullet points that appear under the heading "Actual Outcomes" in the interim report, which last week's witnesses said Audit Scotland was content with? Have you given any advice about how those outcomes could be better described, measured and presented to the committee?
Yes, as John Baillie said, guidance on performance management and public performance reporting was published last year. That guidance takes a step back and considers how councils and their partners should unpack an outcome and ask what contribution each of them can make to it and what that means for the services that they provide, the money that they put in and the ways in which they engage communities. When we examine individual councils as part of the best-value process, that is exactly what we will consider. In September, we should be able to tell what is happening from the 32 progress reports from councils.
In the interim report from the Improvement Service, we have four bullet points under the heading "Actual Outcomes". The guidance indicates that more explanation should have been given of what those actual outcomes were and how they were achieved and measured. Should you not have expressed concern that, under the existing guidance, the Improvement Service could have given us more information than four bullet points in a 12-page document?
The concern that you express is related to timing. That report was published in April 2009, which was immediately after the end of the financial year that was covered by the first set of single outcome agreements. We are clear that, come September 2009, and increasingly in future years, councils should be able to demonstrate not only what outcome target they have set themselves but what they are doing to work towards that outcome. At this point, that information is not publicly available and it is not contained in the interim report, but our expectation is that it will become available and that the quality of information will improve as time goes on.
With all the indicators in all the single outcome agreements, the Improvement Service took time to mention four actual outcomes, which came as four bullet points on a piece of paper. You are saying that the information to substantiate those actual outcomes is not available.
I am saying that it certainly should be available when councils report in September on their individual single outcome agreements, and we will seek to ensure that it is available as part of our best-value work.
So are we saying that, in September, under actual outcomes, we will have a better, page-by-page explanation and, if it falls short of that, it will not be good enough?
We hope so. We fully accept that single outcome agreements are a long-term process, and we will seek to ensure that councils go beyond simply stating an outcome as an aspiration to having plans and milestones for how they will get there. We will report on our analysis of the outcomes as part of the best-value audits of individual councils and in next year's overview report, which will follow the publication of those individual reports on outcome agreements in September.
I made a general point about the best-value process, the annual audits and the machinery of performance management, all of which support the reporting on single outcome agreements. As people become more practised in measuring outcomes, reporting and the extent of reporting will improve, as will the confidence with which people will be able to speak to the achievement of outcomes. The performance management systems and the other aspects that I mentioned will underpin that. The single outcome agreements are a particular way of focusing the Government and local authorities' main aims.
Single outcome agreements are the key delivery measure, as I understand it. The Local Government and Communities Committee is a scrutiny committee and the Accounts Commission is a scrutiny body. Why are we not working in partnership to drive the process, so that we and, more important, the public can understand what outcomes and priorities have been set and why, and why budgets are being shifted? We are both involved in scrutiny, but you seem to be more concerned with being part of the oversight group than with your scrutiny role.
Let me clarify that the Accounts Commission is not part of the oversight group. As you know, the commission and Audit Scotland work hand in glove but are separate organisations, for good and proper reasons. Audit Scotland is involved in so far as it can bring its valuable expertise to the oversight group—that is why that circumstance has arisen.
It is important that the position is clear. The convener is right to say that we have a common interest in scrutinising how well the single outcome agreements are being delivered and what effect they are having on people's lives in communities throughout Scotland. However, until councils produce their progress reports in September, it will be too soon to take a view on that. There has been a progress report on the process; in September councils will report for the first time on what they are doing. We look forward to coming back to the committee at that point to discuss the matter.
I want to explore how authorities will develop their programmes, given the financial pressures on them. In your report you talked about the influence of local decision making in setting priorities and responding to local demands. Bob Doris mentioned the removal of ring fencing, which means that there are fewer pressures from the centre, but the concordat created national pressures. How are councils responding to the issue of national versus local pressure? How could the situation be improved?
It seems to me that, if the Government's aims and national priorities have been dovetailed into each single outcome agreement, each local authority will have agreed how to address those priorities in its area. The question is the extent to which the local authority has managed its affairs to enable those aims to be achieved—I think that that is what lay behind your question. How much change has been needed to achieve the outcomes that were identified in a particular local authority's agreement? Have money and other resources been organised to enable those outcomes to be achieved? We will know the answer to those questions pretty soon, because the audit season is upon us and all sorts of people are diddling away to see what is happening.
I will complement what John Baillie has said and seek to drill down a bit further.
Have the resources that have come from central Government to local authorities enabled them to deal with the demands and local pressures that you have identified, or has the money been allocated purely to meet national priorities?
It is hard to say for sure at this stage. We know that councils face different circumstances and pressures, but until they have been through a rigorous process of examining the demands that they face and how they might meet them, and until they have discussed the matter collectively with Government, none of us will know the answer to your question.
I suspect that I am not alone in finding it difficult to decide whether the changes that councils make are efficiencies or reductions because they do not have adequate resources—cuts by any other name. How can we understand whether a council is responding effectively and making efficiencies or whether it has problems?
You are right to say that it is difficult to distinguish clearly between efficiencies, cuts and changes in the volume of services. A couple of years ago, we published a report on the first efficient government programme, which identified some of those problems. On the back of that, we are doing a piece of work across the public sector that will look not just at efficient government but at managing efficiencies in response to the current financial climate. That will give assurance to both the committee and the Parliament about what is happening, and it will give guidance to councils and other public bodies on how they can improve. I cannot answer the question at this stage, but we know that it is real and have work in hand that we hope will shine some light on it.
It comes back to the point that I made about performance management reporting and information. If that can be relied on by both senior officers and elected members, it will allow for better scrutiny and provide an answer to Mary Mulligan's question.
My final question concerns a related matter. The report makes the point strongly that little progress has been made on sharing of services between local authorities. How could that approach benefit local authorities by allowing them to make efficiencies?
The Accounts Commission homed in on the issue after going through a draft of the report. We say in the report that we were disappointed to see that there has been a relatively small amount of progress on shared services. In the meantime, we have inquired further into the barriers to shared services. They include issues such as equal pay, which we discussed at the beginning of today's session. Equal pay is difficult enough to achieve within a council, but what happens if councils put together a partnership or some form of shared service and people compare the different pay rates? We sense that potential partnerships and shared service operations might be held up a little because of apprehension about that issue.
There are fundamental issues around the definition of shared services. There are good examples in local government that have existed for many years, such as joint committees and Tayside Contracts. The focus tends to be on how councils work together to share services, but the idea of shared services also applies to the way in which individual councils bring together payroll systems. We need to consider what we mean by shared services, and look at some of the issues and barriers that Mr Baillie mentioned.
I am conscious of time, so I will not explore that issue further at the moment.
I have a question on the efficiency savings that have been made to date. If I understand you correctly, we are not in a position to assess those efficiency savings as genuine, as we do not have a means of judging that. Is that the case?
Are you referring to the efficiency outturn report?
My question relates to whether we can measure what is an efficiency saving and what is a cut. We are often told that there have been efficiency savings of 2 per cent, but I gather from the answer to Mary Mulligan's question that we are not currently in a position to judge whether they are genuine efficiency savings. Is that correct?
That would have to be the answer if we were considering the entire range of 32 councils across Scotland. Some councils are much better at that than others. I ask Caroline Gardner to fill in the blanks.
We know, as Mary Mulligan said, that there are difficulties in identifying and measuring what is an efficiency saving and what is a cut. In many cases, demand is increasing at the same time that costs are increasing or reducing, so it is hard to be clear about whether people are getting more for the same money or the same output for less money.
So if the Scottish or UK Government imposes an efficiency saving, there are no means of measuring whether that is actually an efficiency saving or a cut.
It is not that there are no means; it is more to do with the fact that some councils and public bodies are good at tracking what else is changing so that they can show it as an efficiency saving, while others are not so good.
But currently the easier option is to make cuts, as Mary Mulligan mentioned.
I am not sure that council chief executives and leaders would agree that it is the easy option, but it is not possible to be clear about whether something is a true efficiency as opposed to a cut or a reduction.
Before I come to my main question, I would like clarification and confirmation that the interim report on single outcome agreements, to which the convener referred and that Ms Gardner mentioned was produced by the Improvement Service, was actually produced on behalf of the concordat oversight group, rather than just by the Improvement Service.
I spoke earlier about the different roles of the members of the concordat oversight group, and the committee heard last week that the core members of the group are the Scottish Government, COSLA and SOLACE. The report was produced by the Improvement Service at the request of the concordat oversight group, but we are not signatories to the report in the same way that we are signatories to the guidance. Our interest, as I said, is in the reports on progress that are due to be produced by the 32 councils next September.
Thank you for that clarification.
I will take the bulk of the question and others will fill in.
Just to follow that up, it could be argued that, when you refer to continuous professional development, you are referring to the competence of elected members to deal with the issues that are before them. What do you propose to do about elected members who might be felt to have failed to participate in CPD or not to have the competence to deal with the issues on which they are asked to decide?
All that the Accounts Commission and Audit Scotland can do is keep drawing attention to the issue. It is fair to say that COSLA and the Improvement Service have also been considering it for some time—I think that they produced a report in 2006 that advocated some form of almost compulsory development. That issue is therefore not the territory, so to speak, of only two bodies, because several bodies are making the same point. All that the Accounts Commission and Audit Scotland can do is continue to lobby, shout about and draw attention to CPD and let others who make the decisions in the executive process take up the fight.
Good morning, everyone. I was interested in the earlier discussion about your role in the concordat oversight group and the emphasis that you have placed on the importance of good governance, performance management, accounting, reporting and all the rest in relation to the single outcome agreements. Of course, the concordat is more than just the content of the 32 single outcome agreements. Will you describe how you see the accounting, reporting and monitoring process in relation to the specified set of commitments on pages 4 and 5 of the concordat and what your role is in that respect?
I say briefly that it starts with the foundations about which I have been speaking. I will not belabour the point about performance reporting and so on, but instead invite Caroline Gardner to take up the question.
Three elements of the concordat need to be properly monitored, accountable and transparent. The first element about which we have spent time speaking this morning is the 32 single outcome agreements this year between community planning partnerships and the Government. We are due to see the first progress reports on them in September.
I am glad to have that clarification and categorisation, which suggests to me that the concordat oversight group in this context is a misnomer, because it oversees only one of the three categories of the concordat that you just described.
I agree, but with the caveat that I would reverse the order—it is necessary to first have a report that auditors can then audit. That is the case for financial statements and the single outcome agreements. There would need to be a report on progress against the commitments, and then it would be possible to audit them. We have not yet had that conversation with Government.
So we need a report that we can then audit—I understand that that is the normal order of things. You might correct me, but it is my understanding that there is no mechanism to produce any annual report on progress towards the achievement of those objectives. Is that correct?
That is a question that you need to direct to the Government. We are not aware of an annual report. It might be that another form of reporting would be appropriate, but the starting point for audit would be the progress report that is produced by the Government, which could then be the basis for audit.
I do not quite understand how you can say that you want to be proactive, which I think you said in response to Mr Doris's question, and that you should get involved at the start because there is no point in standing on the sidelines, in relation to only one aspect of the concordat and your participation in the concordat oversight group.
The background to your concern is the way in which the concordat oversight group was formed. You heard last week from Scottish Government representatives that the group was formed from a merger at the beginning of this year of the previous high-level group on outcome agreements with the existing concordat oversight group. Our membership specifically relates to the single outcome agreements, and I was invited to join the predecessor high-level group.
You say that we should address the question to the Government, but I understand that, as your report says, the Accounts Commission and Audit Scotland are independent bodies that can use publicly available information and their own inquiries to decide what to audit and report on. Is that correct?
It certainly is correct. The best starting position for all of us is a report that has been produced by the people who are accountable for spending public money, whatever that is connected to—whether that is outcome agreements, concordat commitments or the run-of-the-mill services that bodies provide every day. An audit can then report against that. We might be in that position and, with the Government's agreement on how the concordat commitments will be reported on, an audit can then provide assurance. If that does not happen, you are right to say that the Accounts Commission can ask Audit Scotland to do work on the concordat commitments separately, but we are not yet in that position.
So the pace of your decision making is in effect determined by the Government's pace of decision making. If the Government sits back and says, "No—we won't have any annual report and we won't produce something that's capable of audit," we will lie in a state of limbo, despite the importance of the commitments, which are supposed to drive key aspects of policy nationally and locally.
I do not think that that interpretation is fair. The first move lies with the Government. If that move is not made, audit can step into the requirement to have such assurance, but I am not sure whether we are in that position yet.
Why not?
Because we do not yet know the Government's plans for reporting on the commitments and we are only just at the stage of agreeing the second round of single outcome agreements.
I can tell you the Government's plans on the basis of the evidence that the committee has heard. According to Mr Mair of COSLA, COSLA trots along every two months for a private meeting with the Cabinet Secretary for Finance and Sustainable Growth at which the commitments are discussed. No papers or outcomes are published. The rest of us sit here, completely in the dark, while they carry on their private meetings about whether they are achieving all the high-level objectives. Is that not what is happening?
That is the current basis on which the commitments are being monitored; I do not know the Government's plans for publishing performance against them. If the public performance reporting that the commission expects of councils is not undertaken, you are right to say that audit can fill the gap. However, the starting point should be to ask the Government what its plans for public reporting are and to follow up with what might be needed at that point.
The single outcome agreements are supposed to link everything together, but 15 local authorities made no reference to the target to reduce class sizes
I hope I can clarify the issue a little. The first stage in advancing the process is for the Government to decide what it wants to be reported. If that is not acceptable, I presume that people will say, "That's not good enough—we want other things to be reported." That issue will be determined one way or another.
The concordat is an agreement between local authorities and the Government. All 32 councils in Scotland are, allegedly, signed up to the specified set of commitments. Is it not possible for your organisation to carry out some reporting work, irrespective of what the Government says and the time that it takes to make up its mind to do anything? We have a set of objectives, so can you not decide to produce a report this year on the progress to date on the specified set of commitments? Can you not just do that of your own account? What do we have to wait for?
You are right that we could do that on the basis of deciding to do a particular report. However, I was trying to make a distinction between a report that would be under the aegis of statutory machinery—with the Government referring it to us, as it refers the best-value work that is part and parcel of the current round of regular work—and an ad hoc report that we would simply go off and do. My concern about an ad hoc approach is that it would not be ad hoc, because the work would obviously have to be done every time such a report was produced.
Excuse me, Mr Baillie, but there is no such thing as every time a report is produced. There is one agreement.
Yes, indeed.
Right. There is one agreement that has two pages setting out a specified set of commitments. That is your starting point. Everything in the specified set of commitments can be analysed and reported on within the framework of the reports that you produce on local authorities, because the local authorities have made those agreements. I do not understand why your organisation does not exercise its independent statutory powers to audit the progress on that set of commitments. The concordat might not be legally binding, but we are told that it is a politically binding commitment that has been made by all 32 councils in Scotland.
I have not explained very well the distinction that I was trying to draw. At present, the Accounts Commission commissions work from Audit Scotland among others on best value and the annual financial statements. The Accounts Commission is required by statute to secure that work, but there is no such provision in law for the Accounts Commission to secure the audit or review—call it what you will—of each single outcome report that might be produced annually. There is no opportunity in that context.
I am not talking about the single outcome reports; we may be at cross-purposes here. Caroline Gardner identified three elements in the concordat. I am not talking about single outcome agreements and single outcome reports; I am talking about the specified set of commitments on pages 4 and 5 of the concordat, with the commitments made by 32 councils on what they are going to achieve in partnership with the Government—obligations that they willingly and publicly took upon themselves in areas for which they have responsibility. At the moment, there is no mechanism for reporting and therefore auditing what is going on and what progress is being achieved.
I understand the distinction that you are drawing. Thank you—that has helped my understanding. No mechanism currently exists for reporting on the comprehensiveness of the commitments. I will hand over to Caroline Gardner.
You say no mechanism currently exists, but I do not quite understand—
David, we are running out of time. Would Caroline Gardner like to make an additional comment?
I would like to add to what John Baillie has said. It is likely that we will, at some point, report on progress against the commitments. We can do that through our powers to audit the 32 councils and through the overview report that I produce, as controller of audit, at the request of the Accounts Commission.
One final—
David, we need to move on. We can also write to the Cabinet Secretary for Finance and Sustainable Growth.
One final question—
David, you missed an earlier discussion when we said when we would finish this evidence session. Unfortunately, we need to move on, although I am sure that this issue will run and run. We will be able to write to the cabinet secretary about producing a report that would allow the witnesses to develop their work.
Meeting suspended.
On resuming—