Audit Committee Inquiry
At our most recent meeting, the committee considered its work programme and agreed to include consideration of a request from the Audit Committee for changes to its title and remit. The Audit Committee made that request because, in its view, the committee's current remit and title did not properly reflect the range and depth of its activities. We agreed to invite the convener of the Audit Committee and the Auditor General for Scotland to give evidence. I welcome to the meeting Hugh Henry and Robert Black, along with Tracey Reilly, who is the clerk to the Audit Committee.
We have a fairly good idea of what the Audit Committee is looking for, but Hugh Henry and Mr Black may wish to make a few opening remarks.
Thank you, convener. Our proposal comes to you as a result of work that our predecessor committee did in the most recent session of Parliament and the reflection on previous experience that the present Audit Committee undertook in the early days of the current session. The proposal has cross-party support and we think that it is uncontentious.
It was felt strongly that the committee's present title was something of a misnomer, and that to some extent it gave the wrong impression about what the Audit Committee did. If we were to ask anyone what an audit committee does in an organisation, they would probably say that it considers the details of accounts and any discrepancies, and challenges decisions. To a large extent, that is not the function of the Parliament's Audit Committee. We felt that a change of title would better reflect the broad description of the work that the committee undertakes.
We have an interesting situation with our current inquiry into the Western Isles Health Board, in that some of the correspondence that we have received from members of the public and ex-employees of the board reflects the view that the Audit Committee should consider detailed transactions, detailed decisions and exactly how money was spent. Those functions are the responsibility of an internal audit committee, rather than the Audit Committee of the Parliament. We and the previous committee felt that changing our name would better reflect our broader responsibilities.
In relation to the committee's remit, there would be implications if we stuck to the exact letter of the law—as was the case for the previous committee. That would prevent the committee from discussing some of the work of the Auditor General for Scotland. He consults the committee each session on the Audit Scotland forward programme. Technically speaking, if we did not effect a change in remit, we might not be able to participate in that. Although the draft forward work programme may be published, it is not actually laid before the Parliament, nor is a report made to the Parliament on it. It could be argued that our scrutiny of that programme and of the work of the Auditor General is ultra vires in terms of our remit, because that work is not laid before the Parliament, nor is a report made to it.
Audit Scotland often carries out consultations. A current example is the Government consultation on the formation of the Scottish futures trust. That will have implications for how accounts are audited and how local government and other public bodies conduct themselves. It could have implications for the public audit regime in Scotland. However, technically, because that consultation and any discussion documents that come from the Auditor General are not laid before the Parliament, it could be argued that they lie outwith the committee's remit. If, hypothetically, any amendments were to be made to the Public Finance and Accountability (Scotland) Act 2000 in the future, consideration of any legislative change would arguably also be beyond the committee's remit.
We think that there is a tidying-up job to be done. There is an argument for better reflecting the work that the Audit Committee has done over the past eight years and for better describing its functions and responsibilities through a change of name.
Do you wish to add to that, Mr Black?
Mr Robert Black (Auditor General for Scotland):
No, but I am happy to help the committee with any questions.
It would be helpful if members could indicate whether their questions are for both Hugh Henry and Mr Black, or whether they wish either of them to answer.
You explained, Mr Henry, why the title of the Audit Committee needs to be changed, in your opinion. Going back a bit further, can you give us some background information about why the Audit Committee was given the remit that it got when the Parliament was established?
Mr Black might be better placed to throw light on that. The committee's original remit was based on the report of the consultative steering group and, in particular, on the report of the financial issues advisory group. The CSG report recommended that the Audit Committee's remit should be to
"consider financial audit reports commissioned by the Auditor General for Scotland"
and to
"monitor matters of regularity and propriety within the Parliament and Executive."
The report continued:
"In addition, the Audit Committee may, separately or in conjunction with the relevant subject Committee when this is appropriate, consider the findings of value for money studies commissioned by the Auditor General for Scotland."
I think that it was felt at the time that the work of the Executive or Government and the work of the Parliament should be considered objectively, and that we should ensure that the rules were being followed properly and that money was being spent properly. There was a desire to apply the highest possible standards to the use of public funds in Scottish life.
One of the few benefits of getting older is that you have been around a while and can draw on your experience to answer questions such as Marlyn Glen's. As I am sure the committee is aware, the Scotland Act 1998 contains a general requirement that the Scottish Parliament should make arrangements for audit accounts and related matters to be considered by the Parliament. It was for the Parliament to decide how to do that.
I was a member of the financial issues advisory group that fed into the CSG, and our starting point was the well-tried-and-tested system that had been around for many years in Westminster. Committee members are well aware of the powerful Public Accounts Committee. The organisational architecture in the Scottish Parliament was designed very much along the lines of the PAC. The arrangements are very similar indeed. The FIAG did its best to advise the CSG—which in turn advised ministers and Parliament—on how such matters should be organised. Things have worked extremely well.
The PAC is well known as the Public Accounts Committee. Perhaps we should all have thought a little more carefully at the time about what title would be appropriate for a committee of the Scottish Parliament that, as Hugh Henry said, holds public bodies to account for their use of resources. I share the committee's feeling that the Audit Committee's name conveys the sense that the committee looks only into the spending of the Parliament at its own hand. In fact, the committee publicly holds to account all the departments of central Government, and all the health bodies and other public bodies in Scotland. It would therefore be a happy accident if the Scottish committee was also called the PAC, because people understand that sort of language. The committee holds accountable officers to account for the use of resources. I hope that that background information is helpful.
I have some questions on the role of the Auditor General and the Accounts Commission. Would the Audit Committee consider it beneficial to have the power to consider reports from the Accounts Commission? If so, why?
That question was not considered by the Audit Committee in the previous session of Parliament, and the committee has not discussed it since I became convener. Within its remit, the committee already has the authority to consider, in terms of the public purse, how local authorities operate collectively. However, I do not think that it would be appropriate for the committee to scrutinise each individual council. The present proposals contain no such desire. I feel that the present relationship is the right one and I am aware of no discussion of a need to change it.
I have another question that is probably for you. The Audit Committee's session 2 legacy paper details how the previous Audit Committee engaged with the Accounts Commission and considered performance and best-value issues in relation to local authorities. Would changing the committee's remit formalise that relationship?
I am not sure. Tracey Reilly, who is the committee's clerk, or Bob Black, who is the Auditor General for Scotland, could probably answer that question better than I could. I was not involved in producing that paper, so I am not sure of all the thinking that influenced it. However, I detect nothing in what has been said that would change or formalise practices.
Tracey Reilly (Scottish Parliament Directorate of Clerking and Reporting):
As Hugh Henry says, since 2004, the committee has held an annual evidence session with the Accounts Commission following the commission's publication of its overview of all the local authority audits. That allows the committee to explore local authorities' performance collectively and nationally and to explore best-value issues, on which the Auditor General may wish to expand. However, I detect no desire or need to formalise the relationship or change practice further.
If a special case occurred that involved one local authority, would it ever be appropriate for the committee to look into that?
I am not sure whether it would be within the committee's remit to do that. The committee's interest has focused on the performance of local authorities nationally and not on individual local authorities' performance. We do not intend to change that.
The Accounts Commission was established a long time ago under the Local Government (Scotland) Act 1973. That act is still on the statute book and it charges the Accounts Commission with oversight of the audit of local authorities and with making reports on that. The commission is served by Audit Scotland, for which I am the accountable officer, but reporting work on individual councils goes to the Accounts Commission.
When the new audit arrangements were being put in place for the establishment of the Scottish Parliament, it was felt—I was a leader in the line of argument—that it would be inappropriate for democratically elected councillors to appear before parliamentary committees to be held to account for what they did with their mandate in local authorities. At the least, that might be a recipe for constitutional tension. As a result, the Accounts Commission has remained, although its role has evolved with the introduction of best value and so on.
The Audit Committee's remit extends to matters that relate to the laid accounts of public bodies; that does not include local authorities, which are covered by separate legislation, so the committee may statutorily consider only accounts that are laid by the Scottish ministers and reports that I make on value for money. That establishes the committee's remit. I understand that nothing in the proposals will alter any of that, so the fundamental building blocks will remain the same.
The local government overview report is prepared by Audit Scotland on the Accounts Commission's behalf. As the Audit Committee's convener mentioned, that report considers the overall use of resources and performance in local government. Almost as a courtesy and an administrative convenience, a conversation takes place every year between the committee and the Accounts Commission's chair on the major issues in that report, but that is intended more to promote awareness of the significant issues.
As committee members may well know, Audit Scotland issues in my name a regular flow of reports that the Audit Committee considers and which relate to how well local government is doing on, for example, delivering free personal care, to mention a current issue. It is perfectly appropriate for the committee to consider in the round how such a policy is working, but it would be inappropriate for that committee to call before it a local authority about whose performance concern was felt. The Accounts Commission would handle that.
I think that I understand. Are you saying that it would be inappropriate for the committee to consider an Accounts Commission report on a local authority?
Yes; in an individual case, it would be. For example, there have been occasions when local authority reports have not been signed off. A recent example concerns Inverclyde; for something like three years in a row, there were concerns about the local authority's accounts, but it would not be for the Audit Committee to call in that authority and question it on its performance. That would not be appropriate.
Would you refer it to the Accounts Commission?
No. The Accounts Commission has a separate function with regard to a specific local authority, and it exercises that function on the basis of the statutory powers to which Robert Black referred. It is not for the Audit Committee to get involved in that.
Okay.
My final question is for the Auditor General. If the proposed changes go ahead, what effect might there be on Audit Scotland, given that it supports the work of both the Auditor General for Scotland and the Accounts Commission?
There would be no material effect on the work that we do. It is as simple as that.
I skipped over a question that Dave Thompson was going to ask, although it may have been answered, at least in part, by the Auditor General's previous answer.
Mr Henry, your letter mentions the need to
"clarify that the committee is entitled to consider policy and legislation on wider public audit issues".
You specify two areas as examples—scrutiny of public finance under the Public Finance and Accountability (Scotland) Act 2000, and
"matters relating to the format of the accounts of the Scottish Government."
Those are outwith your remit, but you want them to be pulled in. Can you give us some other examples of issues that the committee would want to consider, or which it feels that it should consider but cannot at present?
I gave them earlier, but I will repeat them.
First, during each session, the Auditor General consults the committee on Audit Scotland's forward work programme. Technically, that could be beyond the committee's remit because the draft forward work programme is not laid before the Parliament, nor is a report made to the Parliament on it. It could therefore be argued that the committee should not do that, but I think that it is in the interests of the Parliament and the public for the Audit Committee to discuss the forward programme with the Auditor General.
The second example is the committee's ability to engage with Audit Scotland on any consultations that it has undertaken. The specific example that was mentioned was the current Government consultation on the formation of the Scottish futures trust, which could have significant implications for the audit function. Again, given that Audit Scotland consultations are published but not laid before Parliament, it could be argued that it is outwith the Audit Committee's remit to reflect on what Audit Scotland is consulting on.
Thirdly, there was the hypothetical example about any future changes to the Public Finance and Accountability (Scotland) Act 2000 that might preclude the committee from making any consideration of them.
That is it—you want to extend the committee's remit to cover those three issues. If the remit were to be changed, would it not allow the committee to cover other issues outwith those three?
Such as?
I do not know; that is why I asked. I wonder whether the change would allow the committee to look into all sorts of other issues that we have not thought of but which the committee might have thought of. Are you saying that you want the committee's remit to be changed to cover those three issues?
You asked what matters we might consider and I gave three examples. We are not seeking to change the remit so that it says that the committee will consider those three matters. The danger of being prescriptive in the remit is that we would end up with a detailed list of what the committee covers.
We are not proposing hugely to alter the way in which the committee works. It is clear from our work programme that the committee continues to work in the way that it has done in the past. However, I cannot tell you what might come up in the future. In 18 months' time, something might come up that you or I had not anticipated.
If it would help, I can give an example of something that I would almost certainly want to take to the Audit Committee for consultation. I am thinking of the introduction of international financial reporting standards, which will be a duty on all public bodies. The issue is technical and I am sure that the committee does not want to go into it, but it could have significant implications for how we do auditing and how we report to the Parliament through the Audit Committee. A degree of formality should be reflected in the committee's powers, to allow it to receive a discussion paper from me on that topic, so that it can reflect on the matter and perhaps prepare a paper for the Finance Committee, which might be the lead committee in that regard.
I could give examples of other matters that come up from time to time, such as the audit of private finance initiative contracts.
I was not suggesting that the remit be prescriptive; I just wondered what other areas the committee might consider and how wide ranging it might be when it gets its wings.
Dave Thompson's question reflected the committee's concern to get a feel for how the committee's remit might be extended. We do not want to be overly prescriptive, but we must keep an eye on the rights of other bodies and the remit that is allowed.
What is the Audit Committee's relationship with the Scottish Commission for Public Audit? Might the proposed change impact on the commission or create an overlap of responsibilities?
I do not think so. If anything, the change would help to clarify the relationship between the Audit Committee and the SCPA, by making clear that the Audit Committee is responsible for considering wider public audit issues. As you know, the SCPA is not a formal parliamentary committee and its main area of responsibility is the examination of Audit Scotland's proposals for the use of resources. The SCPA does not do a full internal audit, but it considers how Audit Scotland is working, whereas the Audit Committee is responsible for considering the work that Audit Scotland produces and its wider implications. There would be no overlap.
My memory is as long as Mr Black's is and I remember the early days of the Parliament. We wanted to get things right but to leave open the possibility of making changes.
I want to ask about the Audit Committee's relationship with other parliamentary committees. Is there a role for the Audit Committee in post-legislative scrutiny on value for money? If so, are you content that the potential for overlap with the Finance Committee could be managed to ensure that there was effective scrutiny rather than duplication?
It would be genuinely important to avoid any duplication. There have been—and there will be—occasions on which the Audit Committee initiates work that is ultimately of interest to another committee. That is proper, and should continue. We support the use by subject committees of Auditor General and Audit Committee inquiries, as part of their remit.
There has been some discussion about the value of post-legislative scrutiny. It could be argued that the Parliament, over its first eight years, was overly concerned about making up for lost time, and about initiating and implementing, and that it has not stopped to look back at the implications of what has been done. I do not think that it would be for the Audit Committee to conduct full post-legislative scrutiny of how individual pieces of legislation have impacted on wider society.
However, if there were issues about the use of public resources, that might be a matter for the committee. A current example is that this week the committee will consider a report from the Auditor General on free personal care and its impact. We might consider the implications for the public purse of the mental health legislation that we introduced, which was widely hailed as groundbreaking. The Adults with Incapacity (Scotland) Act 2000 was a significant piece of legislation, but what are its financial implications? Are the resources being accounted for? How are bodies coping with the impact of the legislation? It would not be for the Audit Committee to consider the detail of the 2000 act to see what it does in relation to the rights of the individual, but if there are financial implications it may not be a bad thing for the committee to comment at some point, as the Auditor General reports.
Could the Audit Committee consider thematic issues without changing its remit?
No. As I said in response to Dave Thompson, if the committee has to stick specifically to reports that are made to or laid before Parliament, it cannot do anything like that. It would be wrong to suggest that any change would mean that we could ditch anything that has been done over the past years, and just undertake thematic inquiries. The pressure of the work that comes through from the Auditor General and Audit Scotland is such that there is not always a lot of time to consider other issues. However, from time to time it might be important to consider something in a broader sense.
My question is probably for Mr Henry. How do you see the Audit Committee maintaining its independence from Government, and how can it maintain the neutrality of its work?
One of the important things that is built into the rules is the requirement that the convener of the Audit Committee must not be a member of any party that is in government. Beyond that, you would have to rely on committee members. We all engage in party politics, both in and outwith committees. However, one of the strengths of the Parliament since its inception has been the fact that members have taken the committee's work and their responsibilities as committee members seriously. I suspect that that will continue, regardless of party loyalty or allegiance.
I have worked closely with the Audit Committee since the Parliament was created. I say confidently to this committee that there has never been an occasion on which the Audit Committee has become involved inappropriately in party-political or policy issues. It fulfils the extremely important role of holding the accountable officers and chief executives who spend budgets to account for the proper use of resources. It has never crossed the boundary inappropriately, and I can envisage no circumstance in which it would.
That concludes our questions. Thank you for coming along. We will see where the matter goes from here. I hope that members found that evidence helpful in coming to a view on what action to take. We will consider the issue further at a future meeting. I ask members to note paper SPPA/S3/08/2/2, which was issued with the agenda and indicates that we await a response from the Conveners Group. I ask members to agree to consider in private at future meetings our approach to the proposals and any draft reports.
Members indicated agreement.