Public Audit Committee

Meeting date: Wednesday, June 20, 2012

Official Report 474KB pdf

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Annual Report (Audit Scotland)

We move to item 3. The Auditor General is still with us, as is Ms Hurst, the director of performance for Audit Scotland. Mr Black, do you want to introduce the annual report?

Convener, as you remarked at the beginning of the meeting, this will be my final appearance at the committee as the Auditor General for Scotland, so I take particular pleasure in having the opportunity to present the Audit Scotland annual report for the past financial year. I hope that you will agree with me that the picture of Audit Scotland’s performance as presented in the report is reasonably positive, and that we have managed our financial performance as effectively as we can. We also have to recognise that Audit Scotland is operating in the same financially challenging environment as everyone else and that the need for robust public audit has never been stronger than it is at the moment, and that will be the case in the future.

If I may, I will briefly highlight some of the key points in the report. I sometimes talk about the Audit Scotland iceberg. By that I mean that the Public Audit Committee tends to see the tip of the iceberg, namely the performance audit reports and the overviews, and so on, which are formally laid before the Parliament. Beneath the surface there is a large volume of activity that is undertaken by the Audit Scotland team and the firms who partner us in our audit work. As we itemise in the annual report, we have produced more than 200 final audit reports in the past year, all of which were completed in time. We have also produced several hundred other reports for the 200 or so public bodies that we audit.

Coming back above the surface to the visible part of the iceberg, we published 27 reports on performance and best value audits, many of which have been presented to the committee. We like to think that much of our work is about not just holding public bodies to account, but helping them to identify areas for improvement. The report on mergers that I have just presented to the committee is perhaps a typical example of that.

A couple of years ago, Audit Scotland started exposing itself to the best companies review, which is a rigorous independent review of an organisation. Audit Scotland has achieved and retained one to watch status, which is quite a significant achievement. We also value the fact that we have the two ticks accreditation from Jobcentre Plus for our work.

We are committed to consulting widely with our principal stakeholders and I put at the top of that list the Public Audit Committee and the Parliament. We now have a rolling work programme to which, from time to time, new pieces of work are introduced. We think that that has gone pretty well this year.

A few months ago, we published our corporate plan, which covers the period 2012 to 2015. It is available on our website. It is an attempt to resonate with the risks, challenges and opportunities that we see are out there in the public sector.

As recently as yesterday, we discussed with the Scottish Commission for Public Audit our financial performance, but I should mention that we continue to deliver efficiency savings amounting to more than £3 million. For a relatively small professional organisation, that is a tribute to the commitment of my staff in playing their part in getting costs down and maintaining quality in the public sector.

As ever, I will be very happy to answer questions, and Barbara Hurst is here because her special area is the performance audit work that we do for you.

I open up the item to colleagues who want to comment or ask questions.

11:00

It is commendable that you take part in the best companies review. Are Government departments and local authorities involved in that? Is that common in the public sector? If it is not, should it be?

Participation is not very common; organisations must elect to take part in the review. The initiative applies across the whole United Kingdom. If you are interested in knowing more, I can arrange for a note to be passed to you.

Given what we have heard in the past few months, if Audit Scotland has found that review to be of enormous benefit, I thought that it could benefit others. However, if they have to decide on the matter themselves, it is up to them.

We have found the review to be of huge benefit, because it involves a fine-grained and detailed analysis of the organisation’s strengths and areas for development.

I will put my question in another way. Would many public sector organisations benefit from participating in the best companies review?

I would certainly commend the model to other public sector organisations. It provides a good way to find out the true strengths and areas for development in an organisation.

I have a question about Audit Scotland’s trainee programme. Audit Scotland is and should be the gold standard of audit, so it has an important role in training future generations of auditors. I note that you had 10 trainees who

“completed their qualifications during the year, and three won prizes”.

Given that you—like every other public body—are reducing staff numbers, how are you managing to sustain the trainee programme?

Thank you for that question, which raises a really important issue for not just Audit Scotland, but all public bodies. When any organisation looks for quick efficiency savings, it looks to payroll costs and reducing staff numbers—we can see that across the public sector. One risk of that is that professional capacity and knowledge will be lost in that process.

We took a strategic decision that we had to sustain the graduate intake, to develop the resource for the future. Our graduate trainee programme has therefore been pretty well safeguarded through that process. Because our voluntary early release scheme has worked quite well, it has provided an opportunity for internal promotions of people at lower grades, which frees up space for bringing in trainees.

A hugely important issue is having financial skills in the public sector. I have spoken occasionally at conferences in Europe. As you know, convener, quite a number of people and delegations come from elsewhere in the world to see what we do in Audit Scotland. We need to recognise that a great strength of the public sector in the United Kingdom is that every public body has financial professionals in it, which is not necessarily the case in other public systems. For the future, it is vital to find ways of developing good-quality financial expertise in the whole public sector and not only in Audit Scotland. We are committed to maintaining that.

We are now the single largest trainer of public sector finance people in Scotland. Quite a number of our people go elsewhere in the public sector, so they get a good training with us and sometimes move on elsewhere.

I thank Mr Black for his report, which, as he said, is his final report to the Parliament. It has been shown over a number of years that not only the Parliament but the public sector rely on Audit Scotland, given the sharp focus of its reports and the positive improvement agendas that they always contain. That is a credit to Mr Black as the leader of the organisation. We should put that on the record.

On the international dimension of Audit Scotland’s work, the report states:

“In 2011/12, we worked with 15 organisations but turned down 12 other requests.”

Audit Scotland’s reputation is growing far and wide and the interest in your activities and work is extending to other countries. Is there a constraint on your international work, given the budgetary situation? Should we be considering how that aspect of Audit Scotland’s work can be extended and developed in future?

There is a constraint. When we started the venture of doing some work with other countries, we put a tight limit on it. I cannot recall the numbers off the top of my head, but it was the equivalent of a couple of hundred thousand pounds of staff time for everything that we do in the area. We thought that that was reasonable. We must not lose our focus on our main day job, which is holding to account, helping to improve and reporting to the Scottish Parliament, but for the reasons that we have itemised in the report and elsewhere, we thought that it was a good thing to share our knowledge and skills with other countries where that is appropriate, and also to learn from them, which we do. To be frank, I think that we contribute more than we get, because our model is a strong one.

Because we limit the resources, we will receive only a certain number of delegations each year. Everyone who is involved has a day job and it is important that we ensure that their work is not adversely affected.

There is a report on our international work on our website, but I am happy to circulate copies to committee members. I think that it is an interesting read.

Thank you.

There is much to be welcomed in the report. I have looked in particular at the information about those who are involved in your organisation. It is commendable that you have the two ticks disability symbol accreditation, which you mention in the information on diversity and equality, and that 50 per cent of your staff are female. However, are you concerned about the senior level of your organisation? With the exception of one, the board comprises only middle-aged, white, male representation, and when we look at the board plus the senior management, not one of the 11 senior individuals is from a black or visible minority background. Does that give you cause for concern?

It is something that the Audit Scotland board, I and the management team are very concerned about. Again, if you look on our website, you will see a full report on our policy in relation to ethnic minorities and disability. We have a robust policy in that area. Clearly, we operate within the limit of the people who express an interest in and are suitably qualified for our work, but we work hard at that. You might want to have a look at the report on our website. If you have some difficulty in finding it, please do not hesitate to get in touch with me.

I appreciate that, and I will take up your recommendation to look at the website. Do you have a breakdown of the staff who work in the organisation? Do you keep a record of them by diverse background?

Yes. That is all available on our website.

Thank you. I will certainly have a look at that.

Is there any capacity within the graduate recruitment programme that you mentioned to try to change the lack of diversity from the grassroots of the organisation upwards?

Yes—that is a fair point, and I am sure that it is something that we can take on board for the future. The graduate recruitment programme is an open one and it is widely advertised across the further and higher education sectors, but the point is certainly worth thinking about.

As we have no further questions, I suggest that the committee notes the report. We thank the Auditor General for providing it.

11:10 Meeting suspended.

11:20 On resuming—