Local Government and Regeneration Committee

Meeting date: Wednesday, March 5, 2014

Official Report 501KB pdf

---

Work Programme (Auditor General for Scotland and Accounts Commission Briefing)

Item 2 is a briefing from the Auditor General for Scotland and the Accounts Commission on their work programme. I welcome Caroline Gardner, the Auditor General for Scotland; Douglas Sinclair, chair of the Accounts Commission; and Fraser McKinlay, controller of audit and director of performance audit and best value at Audit Scotland. Does any of the witnesses want to make some opening remarks?

Thank you, convener. It might be useful to the committee if I spend a few minutes describing the public audit model and how it works. There are three component parts to it and they each have separate roles to play.

The Accounts Commission, as you know, is the public’s watchdog for local government. It operates independently of Government and councils and it reports in public.

The Auditor General for Scotland is, in a sense, Parliament’s watchdog and audits every part of public expenditure apart from local government and fire and police boards. However, we no longer have fire and police boards. That area is now Caroline Gardner’s responsibility.

The third part of the public audit model is Audit Scotland, which was established to provide services to the Accounts Commission and the Auditor General.

It is a complex and unique model. I thought it might be helpful to the committee to explain its component parts.

Thank you very much, Mr Sinclair. Do any of the other witnesses want to add anything?

The other points will come out in questioning, convener. We are happy to leave it to you.

We have just had an evidence-taking session on the draft community empowerment (Scotland) bill. Of late, the committee has had a great interest in community planning partnerships and how they deliver—or not, as the case may be. Recently, the Accounts Commission did three audits of community planning partnerships. How do you intend to follow those up and are there any plans to audit other community planning partnerships in the near future?

We are in the process of undertaking work in five other community planning partnerships: Glasgow, Moray, Perth and Kinross, West Lothian and Orkney. The first report, which will be on the Glasgow community planning partnership, should come to the commission in May. When we have completed those five audits, the Accounts Commission and the Auditor General will issue a national overview report on our findings in relation to those five CPPs, as we did for the first three.

Perth and Kinross might be a bit surprised that it is getting a CPP audit. The fifth one is actually the Falkirk partnership. It is probably better just to put that on the record.

Douglas Sinclair is absolutely right. We are in the process of doing those five audits. We undertook an independent evaluation of the first three audits and have learned the lessons for how we go about the audit work. We will publish the reports of the next five through the year.

We are following up the first three audit reports locally. As you know, we have auditors who, every year, audit councils, health boards and other key partners. We are keeping an eye on progress. We have not committed to publishing a follow-up audit report on those CPPs, but if we have any concerns about progress in any of them, we have the option to report. We continue to monitor the situation and will keep a close eye on how they are progressing.

Are you geared up for auditing the transfer of assets and other possible changes under the draft community empowerment bill?

Yes, we are. It is fascinating territory. I do not mean to suggest that it does not have implications and that we will not have to think hard about how we do these things, because we will.

It was welcome to hear the minister emphasise the importance of good governance and accountability in a way that supports what CPPs are trying to do rather than gets in the way of it. We would be supportive of that.

Clearly, there is an interest for audit in all that. People would rightly expect the commission and the Auditor General to have a close handle on what happens to public assets. However, as was made clear in the previous evidence-taking session, if we take asset transfer as an example, our primary interest will be in the quality of the business case that supports the move. It is not for auditors to comment on the rightness or wrongness of it, but we would absolutely expect to see a strong and robust business case where assets are transferred, particularly where it involves assets being transferred for less than market value. We would want to see a strong and clear case for the wider public value of such a move. As long as that is in place, it will be okay from our point of view.

In the past, many of us have seen situations in which asset transfer or lease was mooted and it was suggested to elected members that they should not approve it because audit would come down on them like a ton of bricks. I hope that there will be some flexibility in dealing with asset transfers and a recognition that the lease cost or sale of the asset may not garner a huge amount of money but may save the public quite a lot in future years. Would you like to comment on that?

Perhaps I can reinforce what Fraser McKinlay said. All three of us in the public audit system in Scotland—me, the Accounts Commission and Audit Scotland—are very committed to upholding the importance of good governance, good accountability and transparency but also to ensuring that those things support rather than get in the way of better services and better outcomes for communities throughout Scotland. That is not to say that governance and accountability do not matter; rather, they should support the things that people are trying to achieve. We are keen to ensure that the auditors whom we appoint understand that and do not allow audit to be used as an excuse for the right things not happening in the right way.

I did not say that auditors were making the excuses; I said that some council officers were.

Mr McMillan has a wee supplementary question.

Yes. I want to follow on from that point and the minister’s comments in the previous session.

On the transfer of assets, the minister stipulated that it is not necessarily the case that an asset could be sold. There could be a better leasing arrangement. If there are to be improved leasing arrangements, will you still play a full role in the auditing of those arrangements, or do you suspect that your roles might be a wee bit different or a bit more withdrawn?

In a sense, the same answer applies almost regardless of what the model is for the transfer. We would want to ensure that the process and the governance, and how they are set up in the business case, are right, and that the authority, whichever public body has the asset and is transferring it, knows how it will monitor that. For example, in the previous discussion, the issue that the community group or groups taking on the asset should be equipped to do so came up. There is a big capacity-building agenda as part of the process to ensure that people who take on an asset can run it, whether they own it or it is leased. As you say, our interest will be in the arrangements for that and ensuring that they are all in place as we would expect.

As the bill progresses, we will certainly need to think about how we make clear the Accounts Commission’s and the Auditor General’s expectations on some of these things. That would certainly help, as we are moving into new territory. We must also recognise that risk is attached to some of this stuff and that, as the Auditor General said, we need to handle that sensitively.

I have a general question about reports. The most recent report that I read was the South Ayrshire one.

That was a best-value report.

Yes. How much attention do folk from outwith the bodies that have been audited pay to the reports? Common sense tells me that it would be wise for folks to keep on top of things by looking at what is going on elsewhere, but that often does not seem to be the case, and we see the same things cropping up in reports all the time. Is the circulation of the reports wide enough? Do bodies pay due attention to them?

I think that the answer to that is yes. In the case of the South Ayrshire report, to which you referred, the commission’s findings were strong, and they attracted a lot of local media publicity.

I think that the reports are carefully read by every council in Scotland. Every chief executive and leader looks at the findings, assesses their council against them, and asks whether there are issues in their council that would cause difficulty as a consequence of the commission report. I think that the reports have a considerable impact, that councils are well aware of the powers that are open to the commission, and that we can, if a council is totally dysfunctional—as the convener knows—hold a public hearing. Councils would not welcome that; it is not in their interests. Their interest and the commission’s interest is in ensuring that the messages in the commission’s findings are taken on board and we can see clear improvement. That is why, in the case of South Ayrshire, we have asked the controller of audit to come back and report to the commission on progress.

You say that every chief executive and council leader will read the reports. I am not entirely convinced in the latter case, judging from past conversations. There is a difference between reading reports and comprehending exactly what is being said and getting the recommendations that are often contained in them. Is there perhaps still a need for better training in order to understand certain aspects of the work that you carry out and, beyond that, the recommendations that you make?

Could you be more specific?

For example, I was able to comprehend from reading the South Ayrshire report where there were difficulties and the recommendations that you made. It might not be the case that every councillor and elected member understands every aspect of what is written in that report. From my perspective, audit is a Cinderella-like area in some regards. There is probably not enough training for elected members in this area. Would you like to comment on that?

I do not wish to sound defensive, but I am not sure that we could have been any clearer or plainer in our findings. We said that the council lacked a corporate plan. We said that its scrutiny arrangements were inadequate. We said that there was a lack of clarity about the roles of the leader and the chief executive. We said that performance management was inadequate. Those are fundamental building blocks of best value. If people cannot understand, they clearly do need a lot more training.

The issue is not so much our role as auditors specifically—although that is an important part of the framework—but the continuing need to ensure that councillors understand their role in scrutinising and challenging performance. Our auditors who audit councils are often involved in briefing audit committees on their role, helping them understand the role of external audit as opposed to that of internal audit. All of that work happens locally. If there has been an election and new members are being brought on to committees, we routinely do that as part of a briefing and induction process.

There is always more that we can do. As the Accounts Commission chair said, when we find examples such as that of South Ayrshire, where some of the basic building blocks are not in place, that obviously gives us cause for concern. We are not in a bad shape although, as I say, there is always more that we can do.

This committee’s scrutiny does not always involve going into individual reports but, given that we have opened up the South Ayrshire report, I ask for some views on the report that was published in October 2013 on Argyll and Bute Council, in which you refer to the political leadership, the problems in the political structures and the make-up of that authority. In your role as the Audit Commission—

The Accounts Commission.

Sorry, Mr Sinclair—the Accounts Commission. I am referring to your role in monitoring the political make-up of a local authority and the democratic functions of an elected council. I am talking about how elected members operate, not about the officials of the council. Is it pertinent to criticise the political leadership of a local authority?

I am not going to talk about specific councils, which is not the role of your committee, as you rightly say. In more general terms, the commission absolutely accepts that political differences are the stuff and life-blood of councils, with different political groups having different views as to priorities.

The issue that we were trying to articulate is that when political differences are of such an extent that the good business of the council cannot be transacted, the public lose confidence in the council and the thing is dominated by extreme political differences, such that the council, even if it does not become dysfunctional, moves towards that, it is appropriate and right for the commission to draw attention to that. As I said, we absolutely accept that there is a right for political groups in councils to disagree, but we have made the point repeatedly—it comes from our work—that even where there are political differences, councils that have a shared vision of where the council should go are better placed to deliver best value and enjoy the confidence of their communities.

10:30

Convener, I want to take this a stage further. Mr McKinlay mentioned briefings and induction training for new elected members. The issue for me is how many new or returning members participate in those briefing and training events. My experience of a particular local authority is that only a fraction of the elected members participate. The local authority that I am referring to runs regular training events, but fewer than 10 per cent of the members turn up to them. How do you square the issue of induction and training to allow elected members to understand their roles and responsibilities, given that members do not bother to turn up? In particular, some of those who have been around for 30 or 40 years say, “We’ve seen it all and done it all. We don’t need somebody to come in and tell us how to do it in the future.”

It would be short sighted to say that, because local government is not a static business. We touched on arm’s-length external organisations, which did not exist 20 or 30 years ago. The complexity of local government is increasing all the time, and we encourage and exhort councillors to take up training opportunities.

It is to the loss of any individual councillor if he feels that he knows all the answers, whether he is a new councillor or a long-standing one. People cannot do the job without training, as they need to understand the fundamental parts of their role, which are at the beginning and end of the process. The councillor’s role is to set priorities and policies, to allow management to deliver them, and then to hold management to account for their implementation. The role involves the start and the end—the setting of policy and then the scrutiny. That is the fundamental role of councillors. If councillors do not understand that, the council will not operate effectively. In effect, they will make the council’s task and operations much more difficult than it needs to be. If councillors are well trained and they and officers understand the role, the council is better placed to achieve best value.

We have reported on the matter countless times. A key bit of evidence that we look for when we do audit work in councils is the training and development that is offered and—more important, as Mr Wilson says— the extent to which that is taken up. There is definitely a horses-to-water thing in some cases.

Good councils look at the timing of their events and consider whether it is appropriate and will encourage as many councillors as possible to come along and whether they are putting on events that are of particular interest. Anecdotally, from memory, I note that events on things such as how to fill in expenses forms seem to be pretty well attended in councils, but other events are less well attended.

As the chair of the Accounts Commission said, we always ask for information on training and we will continue to push for it to ensure that the leaderships of councils are fulfilling their obligations.

There is also a point about the complexity of ALEOs. When a councillor is appointed to an ALEO, his responsibility is to the ALEO and not to the council. People need training to understand the complexity of that role, because when the councillor goes back into the council chamber, they are still a member of the council. They have to accept that they are playing different roles in different organisations. It is now a complex world. [Interruption.]

I suspend the meeting for a few seconds.

10:34 Meeting suspended.

10:34 On resuming—

Please ensure that all mobile phones in the room are switched off. Not only is it an annoyance when they go off, but they interfere with the broadcasting equipment.

Mr Sinclair, do you want to continue?

I think that I made the point, convener.

On the point about membership of ALEOs, elected members are accountable because they are subject to the ethical standards in public life structure. Would an elected member of an authority who was placed on the board of an ALEO be accountable under that structure for decisions or actions that they took in pursuance of their directorship of that ALEO, or would that structure not apply to the individual when they acted as an ALEO board director?

I am not sure whether the witnesses can answer that question, which goes a little beyond their sphere, but Mr Sinclair wants to attempt to answer.

If a company was involved, the individual would have obligations under the Companies Act 2006.

I am testing the position. The issue of decisions that are made goes back to an earlier discussion about ALEOs delivering services with public money, which normally comes from local authorities. Could public money be used in a way that might run contrary to a council’s objectives?

That goes back to the point about the effectiveness of a council’s scrutiny of an ALEO. Public money is still involved and a council still has a responsibility to follow the public pound and ensure that the money is properly spent. That touches on how effective a council’s arrangements for scrutinising an ALEO are.

It is not new for councillors to have different responsibilities. In the old days, when we had police and fire joint boards, elected members who were appointed to such a board had a duty to that board and not to the council that appointed them. The concept is not new.

Some elected members thought that they were to represent only the views of the authority that appointed them.

That goes back to training.

Of which there is a lack in certain places still.

The last overview report that I read suggested that there is a way to go on the effectiveness of community planning partnerships—[Interruption.]

I have to suspend the meeting because of interference with the broadcasting system. I would like any electronic device that is switched on to be switched off. That applies to people in the public gallery, too—please check your phones.

10:37 Meeting suspended.

10:37 On resuming—

I apologise to Mr Rowley for the interruption, but I could hear the interference, which affects the broadcasting system hugely.

The overview report on community planning partnerships suggested that there is a way to go. We know that the community empowerment bill, which the minister talked about, is coming. Where is community planning at? What are the outstanding issues?

It was interesting that scrutiny performance was mentioned. Many local authorities have strong and powerful scrutiny committees that do a job of work. They are led by councillors who are not in the administration, to ensure effective scrutiny. That is less applicable to community planning partnerships.

A community planning partnership brings together different bodies, which sign up to a set of strategic objectives and outcomes but see that as something separate when they go back to their organisations. Where are we at with community planning partnerships? What is your take on pooling finances and getting them to follow the agreed priorities?

One of the main findings in the report that was published last March was that, in some places, community planning is starting to make an impact by bringing together the key players to develop the vision of what they want to improve for their area, their community and different parts of communities. We made the clear point that, to make that happen, community planning partnerships need strong leadership locally and nationally. In the parts of Scotland where the system is less well advanced, a lot of what needs improvement is different behaviours.

We have to consider not just the budgets but the resources that people have to bring to bear on the problems. Earlier, the minister talked about participatory budgeting. The new guidance on community planning partnerships that was published last year talks about meaningful pre-consideration, which means bodies sharing information on their budgets before they are agreed. We think that that is important, but there is a step before it that involves each of the partners being clear about the staff, buildings and other assets and services that they have available. Each partner should think about what they can bring to the table, whether they are trying to improve the quality of life for older people or give children the best start in life in the early years.

We need to move on from having a community plan and a single outcome agreement to being clear about who is going to do what, what the expected improvement is and how the partnership will monitor so that, if the intended effect is not produced, things can be changed to make progress. We think that that is most important at that stage.

What can we do to try to make that happen? Community planning partnerships have been around for a number of years. At one point, the finance secretary said that, if necessary, he would legislate to make some of those things happen. We know that it should happen, but it is not happening.

We said in our submission to the pre-consultation on the community empowerment bill that we think that the proposals in it should help. However, the Government cannot legislate for people’s behaviours or for their willingness to be transparent about the resources that they have. There are questions about governance and accountability of the partnerships that could do with more thought, on issues such as where people will be held to account for doing what they say they will do or for not engaging in the first place.

Another point in that submission was about ensuring that, in the interaction between community planning partnerships and the new health and social care partnerships or partnership working under the Children and Young People (Scotland) Bill, the different strands of policy pull in the same direction to avoid the risk of people signing up to a single outcome agreement or community plan on paper but in practice being pulled in slightly different directions. More can be done through legislation and there are areas for further development in governance and accountability at local and national level.

Douglas Sinclair might want to add to that.

I echo Caroline Gardner’s point about culture. The community planning partnership is a complicated model. The Government has proposed that councillors and non-executive members of the health board will have a scrutiny role, which is the point that Mr Rowley touched on. However, councillors and non-executive health board members do not have the same role. Councillors have much more of an executive role than the non-executive members of a health board have. Similarly, the chief executive of a health board has much more substantial power than the chief executive of a council has. The chief executive of a health board is the accountable officer. We are putting together round a table people who have different roles and expectations. Some of that needs to be worked through so that people reach a basis of trust and a good culture and then move on.

Secondly, we need to be clearer about where community planning partnerships can add the most value. There is a sense that they are the dustbin for everything, but they cannot be, because there are the health and social care partnerships. Community planning partnerships need to focus on where they can add value, and engage in debate on that to bring clarity.

The simple question is whether you have detected any change or improvement since the guidance was changed.

I would say that we have absolutely detected that. As we said in the report that the commission and Auditor General produced last year, there is a recognition that something needs to change. We have the guidance and statement of ambition and subsequent bits of guidance, and people on the ground are responding to that positively. However, the process is tough. In particular, it will take people a while to genuinely get to grips with the resources issue.

Mr Sinclair touched on health and social care partnerships. I think that I said earlier that there is a view that, financially, they are being set up to fail. Right now in councils, budgets for social work and older people, which are to be transferred, are overspending. Health budgets are also overspending and there is no evidence that acute funding is starting to transfer across to community funding. How do we pull the two budgets together? Are those partnerships being set up to fail because there is simply not enough money to meet the growing demand that comes from demographic change and from trying to move people out of hospital and into the community? How can we start to see that transfer from acute care into the community, for example, if that is the direction that the policy says that we are going in?

10:45

There are a couple of points to make. It is always harder to make partnership working work when money is tight than it is when there is more money going into the system. It is natural for people to be concerned about the resources in their organisation, their staff and the services that they are required to provide. There is a real challenge in making community planning, the health and social care partnerships and other partnership working work in that context.

As we say in the report on care for older people that we published jointly two or three weeks ago, there are particular demographic pressures. The population is getting older at quite a fast rate, which brings more demand for both health and social care, as you have described. In the report, we identify some good local examples of people in health—in both primary and acute care—and in social care sitting down and saying, “For this quite small group of older people, what can we do not just to get them discharged from hospital more quickly when they are ready, but to avoid admissions that are not needed?” We know that that can make a real difference both in improving care and in shifting the shape of services.

The open question is how health and social care partnerships will manage the same thing when their focus is primarily on services in the community, whether those are healthcare services or social services. We cannot leave the question of the acute hospital and acute hospital resources out of that. The dialogue needs to be about care in the round even though the focus of the partnerships is primarily on community-based services. We have still to see how that will work through. As Douglas Sinclair hinted earlier, the community planning partnership must have a role in setting that vision for the area as a whole, and it needs to make clear in each part of Scotland how it links with the health and social care partnership even though the Government has made it clear that there is no hierarchical relationship.

Given your responsibilities as the Auditor General and the chair of the Accounts Commission, how are you co-operating to deliver the audits, which will be quite new? Is there any conflict, or is it all rosy with the pair of you?

The work that we did on community planning audits, which involve the council and the other parts of the public sector for which Caroline Gardner is responsible, provides a good model that we can use in auditing health and social care. It is really important that health and social care partnerships start off not by saying that they do not have enough money, but by asking how they can get better value from the money that they currently have and how they can redesign jobs and services so that they can take a more integrated approach for the clients who need that.

Ms Gardner, do you think that everything is rosy between you and the Accounts Commission in terms of your joint audit work?

We are absolutely committed to working closely together. Douglas Sinclair said in his opening remarks that the audit framework is unique in the United Kingdom, and that is true. It means that we can look together right across the range of public services and from Scottish Government resourcing right down to how money is being spent in a local community or by a local general practitioner. We do that by working together through the good offices of Audit Scotland, and we have demonstrated our ability to join up in the same way as public money needs to join up.

Can I ask one more question, convener?

It must be very brief, Mr Rowley, as other members are waiting.

I want to pick up on the point that Douglas Sinclair just made and a point that was made earlier. One of the most helpful reports that I have read in the past year or so is the report by the Society of Local Authority Chief Executives and Senior Managers on benchmarking across Scotland. I agree with the suggestion that the health and social care partnerships must look at how, by pulling together those organisations, they will make savings as well as deliver better services and meet growing demand. That is a massive challenge. How can you help with benchmarking?

Please answer briefly, Mr McKinlay. Mr Rowley is new to the committee and probably does not know how much work we have done on benchmarking.

Actually, I do.

You probably know that the commission was very keen on—indeed, it was a major driving force behind—the SOLACE-COSLA local government benchmarking framework, as it is now known. We are delighted to see that up and running—it has been published and is increasingly being used. Our role is, first, to ensure that, on behalf of the commission, we are satisfied that what councils are doing and what they are reporting enable us to fulfil our statutory duties and allow comparison between councils over time. Increasingly, councils are using that information to improve services.

We will return to benchmarking shortly.

I will be quick because I think that all my questions have been answered. I was heartened to hear earlier that you feel that the culture has changed since May 2013. That is all I have to say.

Any comments on that?

No.

No.

Going through the planned audits for the coming year, I notice that although quite comprehensive work has been done recently on ALEOs, there does not seem to be any mention of ALEOs in the work programme. In the city of Aberdeen, which I represent, an arms-length trading company was established recently to operate adult social care services. That is unique in a Scottish context, although there have been some high-profile examples south of the border and it would be fair to say that the performance of those organisations—how they have operated—has been mixed. Is it on the agenda of either the Accounts Commission or Audit Scotland to look at the Aberdeen arms-length company, given its unique nature compared with the other arms-length organisations that exist?

In paragraph 7 of our work programme brief, we mention the “How councils work” series. One of the reports in the series was on ALEOs—“Arm’s-length external organisations (ALEOs)—are you getting it right?” That report encouraged councils to examine carefully why they were setting up an ALEO, to ensure that they managed the risk and to ensure that they had good governance in place. The report has been extremely helpful, as indeed have all the other reports in the “How councils work” series. It is ironic that the Accounts Commission is not an improvement agency and yet the reports that have probably had the most impact on councils have been from the “How councils work” series.

We have asked the controller of audit to come back with a further report on ALEOs across Scotland. We want to get a handle on why councils have established ALEOs. Is it about saving money or is it about service improvement? We want to get a better handle on how the governance arrangements are operating across councils and we will draw conclusions from that report. I think that it is scheduled for May.

The work programme brief that you have in front of you focuses only on the performance audit work. As we say in paragraph 1 of the brief, we will be doing a lot of other work on local government but the brief focuses on the national performance audit programme.

I do not seek to diminish sport and cultural services in any way, shape or form but I raised the issue because the new company will provide care. When care is being provided, particularly when it is for some of our most vulnerable citizens, there is a need to ensure that effective governance and scrutiny arrangements are in place for any organisation or body that is set up. I am heartened by the fact that the Accounts Commission and Audit Scotland at least appear to be cognisant of the issue.

I am one of the few members of the committee who has not previously been a councillor, so sometimes I have questions that may seem a wee bit daft laddie. However, I do not think that members who are councillors or former councillors could ask those particular questions.

Your work programme shows that you will be out looking at Scotland’s public finances and the borrowing and treasury management in local government, as well as school education. One thing that has struck me in recent years is the budget process that takes place within the local authorities; I am not sure whether the process is the same across all 32 local authorities, but I am aware that in some authorities the administration announces the budget on the day that the budget will be voted upon. There is not a tremendous amount of scrutiny that could take place in such a situation. In the national budget process, the Government of the day produces its draft budget, which then goes out for discussion and consultation.

From an auditing perspective and from the perspective of examining the local authorities’ performance—notwithstanding the public scrutiny element and the level of public engagement—if a different budgeting process took place in local authorities, would that help the populace within each local authority area as well as helping you to ensure that the public pound is being spent wisely and perhaps better? At the same time, some of the local political differences might be a bit less—I know that the latter point is not an issue for you.

First, broadly speaking, the timetable and the process are the same, but each local authority manages the process slightly differently. For example, some councils set up a budget working group, which is typically made up of members of all the political parties.

Our sense is that the budget cycle has improved over the past few years. In fact, I think that the people who are involved in the process would tell you that it virtually never stops. There is a constant process of looking ahead as budgets reduce. It is a more complex exercise and some councils are undertaking priority-based budgeting or zero-based budgeting—whatever they would call it. Different models are in use, but broadly speaking I would say that, if anything, it is getting a bit better. Even if the formal budget proposal is made public on the last day, there is a reasonably good chance that quite a lot of work has been done leading up to that.

Mr McMillan mentioned in passing the public engagement aspect. That is a hugely important part of the exercise. Again, I think that lots of councils are improving on that. There is a long way to go when we are trying to engage communities in a meaningful conversation about what the priorities are for council spend. That is quite a big ask. It is still very much on the consultation end of it, which is good, but I think that there is a way to go.

Our interest, obviously, is first and foremost in councils setting a balanced budget, which they all managed to do. We then look at the process and, importantly, the information that councillors have at their disposal when they are making quite important decisions, particularly around savings gaps. Increasingly, budgets will identify how much is required to be saved over X number of years. The robustness of that data is an important part of our interest as well.

First, in many councils there is now a coalition, so it is not a case of a single party coming forward with a budget; the budget has often been through a pretty complicated and protracted coalition process.

Secondly, we will publish shortly, in our “How councils work” series, a paper on option appraisal. We are trying to encourage councils to get behind the cuts. We are asking them, before they make a cut, whether they have critically examined whether there is another way to provide the service. They should not assume that the way in which they do it at the moment is the only way to do it. Someone else might be able to provide a service that costs less or is of better quality. Increasingly, councils are having to do that. To date, they have in a sense balanced their budgets by cutting their manpower, which is not sustainable in the long term. They must get in behind the budget cuts and ask whether there are different ways of providing the service. They have to demonstrate transparent value for money.

I will pose the same question that I posed in the earlier private session. What role do you have in scrutinising the public pound with the urban regeneration companies?

We do not audit the urban regeneration companies directly. There are parallels with some of the conversations that we have had today about ALEOs. However, where we have powers collectively is through following the public pound. If the URCs are funded, as I think that many of them are, via a combination of councils, Scottish Enterprise, Highlands and Islands Enterprise—a variety of sources of public funding—we can trace that spend. It is a bit more complicated, but we can do it.

We continue to keep future performance audit work under review. The committee has in front of it our 2014 programme, but we are already thinking about what 2015-16 might look like. Economic development, and the economy, is always an important part of our programme development work, so we are happy to feed the role of the URCs into that thinking.

The briefing paper for today’s meeting says that the annual local government overview report is due out later this month. Are there likely to be any surprises in that report?

No. We are saying that the messages are the same: the agenda of continuous improvement, and the importance of good governance, good accountability and understanding roles and relationships. However, they are none the worse for being repeated.

Thank you for your evidence. I hope that the Accounts Commission and the Auditor General will be able to co-operate fully with the new landscape that we are embarking on or, in some cases, have embarked on. All the best for this year.

10:59 Meeting suspended.

11:05 On resuming—