“National performance audit reports—themes and programme”
Item 4 is consideration of the paper “National performance audit reports—themes and programme”. I welcome to the panel Angela Canning, along with the Auditor General and Barbara Hurst. I invite Mr Black to introduce the paper.
Thank you, convener. As we are coming to the end of the parliamentary year, I thought that it might be useful to present a report that would help the committee to think about its areas of interest in relation to the forward programme of Audit Scotland and to pull out some of the themes of our reports over the past few years. We take a great deal of care to put the programme together within a strategic framework. The paper tries to summarise the audits that we have done and to highlight some of the risk areas that we have identified through our work that might help to shape thinking about the way forward.
Our published reports and our work in progress can be grouped under five key themes, which we have captured in the paper: managing reductions in public sector budgets; investment, including both capital investment and the important area of spend-to-save investment or investment in preventative services; partnership working; user focus and personalisation; and environmental auditing, which we touched on earlier. Under each theme, the paper highlights the risks that we have identified through our work. Where relevant, we have also indicated areas in which we are keeping a watching brief with a view to carrying out performance audit work in the future.
The first major theme, managing reductions in public sector budgets, might also be described as maintaining financial sustainability. As we all know, finances will continue to reduce for some years yet and new ways of working will be needed. There are some key risks associated with, for example, reactive and short-term financial planning to meet budget targets, an inability to develop people in line with their new roles—we touched on that briefly when we discussed our annual report—and not paying attention to the key leadership and management skills that are needed for managing in a time of austerity.
It is difficult to see how managing budget reductions cannot remain an important theme for audit work in the future. The reports in the pipeline in this area include a report on prescribing in general practice, which will highlight the scope that there is for further efficiency savings, and a review of workforce planning, which will consider how reductions in staffing have been managed.
Under the second theme, investment, committee members will recognise the risks that are associated with not managing major capital projects to time and cost, and with giving insufficient attention to realising the benefits of major projects. There is an equally important risk associated with failing to maintain assets such as roads, schools and hospitals. I have sometimes used commonplace language about passing on our problems to our children and our grandchildren in the form of potholes, poorly maintained buildings and so on.
On preventative services, it occurs to me that there is a major risk that investment will fail to act as a genuine lever for change. I am not saying that this will happen, but there is a risk that preventative spend money will end up being used to put a sticking plaster on existing services, because of the difficulty of getting serious service redesign in place sufficiently quickly. We have projects under way in the area that might fit into the theme. Our forthcoming report on reducing reoffending will look at the extent to which funding is focused on achieving the best outcomes—we have looked at the policy area in the past. Also, for the first time, there will be a major project to provide an overview of social and public sector housing.
The third and fourth themes—partnerships and user focus—are linked. As I am sure the committee recalls, we have done a considerable body of work on partnerships, perhaps the most significant of which was the report that we published a year ago on community health partnerships. The report contained challenging messages and the committee took a great deal of interest in the issue. The most significant issue is that partnerships really must be able to demonstrate that they are genuinely adding value through better outcomes, better services and improved efficiency. It is important that partnerships do not lose sight of the efficiency drive, given the financial challenges that lie ahead. If partnerships do not deliver added value in the way that I described, they are at risk of being regarded as an unnecessary level of bureaucracy. There is no doubt that much senior time at management and practitioner level is taken up in participating in partnerships of one kind or another.
Audit Scotland will keep a close eye on progress on the integration of health and social care, which is a major initiative. As I noted in the paper, the Cabinet Secretary for Finance, Employment and Sustainable Growth has asked the Accounts Commission to lead work on developing an audit approach that contributes to improvement in the performance of community planning partnerships. The work is being undertaken by Audit Scotland on the commission’s behalf. I have emphasised the need for the work to be done in close collaboration with the Auditor General, so that progress and performance can be reported at a high level to the Parliament. Therefore, I sit on the internal steering group that is developing the work in Audit Scotland.
An important element in many of our performance audits has been the interests and perspective of service users. That is something that I feel very strongly about. There is nothing like hearing how service users themselves rate the services that they receive, and that must be one of the most important improvement tools of all. A number of our reports have service users at their core, in particular the report on children in residential care that we produced several months ago. Many of our health reports have the same emphasis.
Finally, we have the theme of environmental auditing. Conceptually, that is a bit different from the other themes in our work programme, but it is an important area for audit, particularly given Scotland’s aspiration for a transition to a low-carbon economy and the financial implications for public bodies of their climate change duties. We have planned a couple of important audits in the area: one on renewable energy and one on local bodies’ response to climate change.
I hope that that overview was useful in refreshing members’ understanding and thinking about the overall shape of the programme under the five themes. I encourage members to reflect on the programme and perhaps have a conversation with my successor after the summer recess on your perception of how we might flex and improve the programme of work. Barbara Hurst and Angela Canning, who take the lead with me in shaping the strategic approach, are here to listen to what you say and answer your questions.
Thank you. You said “flex”. The paper is clear on the strategic framework in which you develop the work programme and how your reports relate to it, but there are occasions on which the Auditor General and Audit Scotland undertake unexpected pieces of work, for reasons of urgency or topicality. In 2010, for example, you produced a report on the gathering. I see that an interim report on the Edinburgh trams project was planned, but the Scottish Government asked you to undertake your initial report on the trams project back in 2007. In this year’s programme, there is also to be a report on national health service waiting times, which has arisen out of what happened in NHS Lothian in particular.
Are you satisfied that there is enough flexibility in the programme to allow you to respond to the more urgent, unexpected or unplanned demands on your time? Does the fact that you have a strategically developed programme make it difficult for you to make space for that kind of work?
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I will give you a high-level response and then ask Barbara Hurst to give you a fuller answer to that.
I offer the committee the assurance that, over the years, whenever issues have arisen that have required Audit Scotland to engage, we have managed to fit them into the programme. Generally, we have simply adjusted the timing of pieces of work and have not lost significant pieces of work from the programme to accommodate others—we tend to slide things to the right. For example, as the schedule on page 13 states, we have brought the piece of work on waiting times in and we are pushing back for a little while the modern apprenticeships work. That is mainly because we require an expert team of people who really understand health systems to do the NHS waiting times work and that team was set to go. For that reason, we have had to push back the modern apprenticeships work. That is typical of what we do.
However, a caveat for the future is that we are taking 20 per cent, in real terms, out of the resources of Audit Scotland over the spending review period, which means that things will become tighter and it will be more difficult for us to respond on an ad hoc basis.
We are keen to have the capacity to respond to issues of public interest that might not have been on our radar as we were developing the programme. As the Auditor General says, the most common approach is for us to move one of our existing projects for later reporting. We have scoped our report on modern apprenticeships and have given the bodies that we will be auditing time to ensure that they have the data that we need. We will go back to the report in the autumn.
Over the past couple of years, we have worked hard to get a genuinely rolling programme partly to ensure that we are able to respond when we need to. There would be no point in looking at waiting times in a year’s time when people want answers now. We are keen to retain that approach.
In the short time that I have spent on the committee, it has become clear to me that the committee is concerned about what the process is for returning to an issue to see whether progress has been made after Audit Scotland has produced a performance audit report and made recommendations, which the committee often agrees with. A counter-example is that, in addressing the recent report on commissioning social care, the Auditor General pointed out that it was the sixth time that many of the recommendations had been made and that, every time the integration of health and social care was examined, very little progress seemed to have been made. Are there going to be changes in the way in which you work, or are there things that you think should happen, to ensure that the work that you carry out is efficient, effective and not in vain?
I can answer that on a number of levels.
As this will be my last meeting, I want to begin by highlighting something that I really believe in: the importance of the Parliament’s Public Audit Committee and its role in holding others to account. We must never forget and must fully appreciate its importance. After leaving Tayside Regional Council and coming into this line of work, I was briefly controller of audit at the Accounts Commission and, speaking quite frankly and plainly, I felt a sense of frustration at the fact that we—Barbara Hurst was with me in those days—kept producing early-doors performance audit reports that had pretty small impact. It was very easy for busy people who were running major services to read them, say, “That’s a really interesting and useful report,” and then put them on the shelf.
I think, therefore, that the Public Audit Committee plays a vital role in what I would call closing the accountability loop. You receive a report from the Auditor General, consider the evidence, ask questions of me and my colleagues and, where appropriate, the accountable officers and mandate those officers to take action and get back to you. As the committee is well aware, the permanent secretary is required to report to the committee regularly on capital programmes. The Public Audit Committee’s role in closing the accountability loop and its added value in creating a climate in which people to respond to our work are enormously helpful and, indeed, vital.
Secondly, I point out that we have revisited certain public policy issues two or three times; prescribing is a good example, and I could name others. Such an approach certainly helps. Indeed, I am confident that, the next time that general practitioner prescribing is examined, we will find that further progress has been made.
Thirdly, I believe that, as the years have gone by, we have become better at doing our job. For a start, we now try to ensure that our reports contain practical recommendations for consideration and action by accountable bodies and, in what I believe is a good move, we have also developed a system of impact reports to find out whether our work is actually having an effect. That said, there is still some way to go to ensure that our reports are always followed up as fully as they might be and the recommendations acted on. The long saga of commissioning social care is probably as good an example as any of that but, as we point out in our paper, there has been significant movement in that respect with the proposed new health and social care initiative.
I apologise for my rather long answer, but the question is an important one.
As well as that, we are also ensuring that every time we publish a report we provide the local auditor with information packs. We provide information to non-executives containing questions for local bodies and have got into the way of producing checklists for bodies to assess their own performance. We are trying to build all that into the routine everyday audit process.
All of that is welcome and, in recent years, I have certainly seen positive changes in that direction.
We have discussed at length whether, in fact, Audit Scotland is even able to carry out follow-up verification audit work with some of the bodies that it works with. Truth be told, it probably cannot, but something that we might have missed is the suggestion that someone, perhaps the Scottish Government, should require public bodies to report back, after a reasonable period of, say, a year, about how they have taken up Audit Scotland’s templates, recommendations, checklists and so on. Sometimes—perhaps all the time—we do not get that kind of feedback from the public bodies that Mr Black’s team spend a considerable time examining, and we rarely see a report about how, a year on, they have implemented some of Audit Scotland’s recommendations. Perhaps that area should be strengthened, because it would take that burden away from Audit Scotland and put it more where it belongs, with the public body itself.
We are certainly aware that, in the health service, there is a strong push from the centre to health boards to demonstrate what they are doing on the back of many of our reports, which is a positive development. That is probably the best example.
So that does not happen across the board.
I suppose that, in a sense, it is easier in the health service.
That is an interesting issue. The committee might wish to consider over the summer months and into the autumn whether more can be done on that.
We have available to us the new format of report-backs. We have identified a number of issues in recent reports on which we will get a report back in 2013. When we come to discuss the committee’s way of working after the recess, it is definitely worth putting on the agenda the issue of ensuring that the committee plays its role in trying to ensure that recommendations are acted on.
I have two questions. The first relates to Mr Black’s observations about the Cabinet Secretary for Finance, Employment and Sustainable Growth asking the Accounts Commission to look into community planning. I entirely endorse that move, as it is sensible. Can I take it that the report that Audit Scotland brought to us on economic development and the concerns that we expressed as part of our consideration of it will be taken into account in that exercise?
Yes.
My second question is on environmental auditing, which is the final stream of flex, or whatever Mr Gray called it earlier.
That was the word that the Auditor General used.
Right. I am glad that that is on the record.
Audit Scotland is considering doing a report on renewable energy and another on how public bodies deal with emissions. Another parliamentary committee is looking into the issue of renewable energy in huge detail so, if I had a choice, I would choose the latter topic. My view is that the biggest challenge to public bodies in Scotland will be implementing the climate change legislation that the Parliament passed not so long ago. It would be enormously helpful—not so much for parliamentarians but for those bodies—to have work done on that. If there is a balance in the work, it should be towards that issue rather than renewable energy, given that a parliamentary committee is already doing work on that.
That is a useful comment. We are aware of the work that is going on in the Parliament. We would not even finalise the scope for the renewable energy work until that committee reports, because we do not want to second guess what might come out of that. We agree that the climate change duties on public bodies are important, for environmental and financial reasons. We want to give enough time to allow the bodies to demonstrate what they are doing, so we do not want to begin too early. We are thinking about starting the work relatively soon, but reporting in 2013-14, which would enable that to happen.
Paragraph 6 on page 2 of the briefing states:
“We would welcome thoughts from the committee about further potential areas for audit.”
I confess that I am new to the committee. An issue that concerns me in local government but which we do not hear much about—so maybe I should not be concerned—is debt. For example, Highland Council has a debt of £761 million and annual interest payments of about £36 million. I have done a rough calculation, which shows that the council tax of pretty much everyone who lives in Inverness goes to servicing the debt. In answer to a recent parliamentary question, I was told that the overall total in Scotland is more than £14 billion. Am I wrong to be concerned about that? Is that just the way that councils normally work? I am simply asking for your advice.
That issue is important in relation to financial sustainability. My financial colleagues are looking at the different ratios that are used to assess financial sustainability. That issue is within that, so it is something that we are looking at. Caroline Gardner, the new Auditor General, is interested in what we can do through the financial audit to develop our thinking on such issues. It will be on our radar.
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Should it be a cause for concern, or should I just accept that that is the reality of local government?
The language that we like to use is that it is clearly an area of risk that requires to be monitored.
Well done. I can see why you have been the Auditor General.
In the previous discussion, I raised the issue of management standards. I would not expect Audit Scotland to recommend that particular management standards be used, but perhaps it could recommend that public sector bodies use whichever ones they find appropriate. My experience over the years is that it is a bit hit or miss whether public sector bodies adopt formal, recognised management standards. Maybe we could move towards asking the public sector to adopt recognised management standards that have proved over the years to be effective ways of delivering the work that they do.
Is there any scope in the programme to look at procurement? It can be a difficult subject, but it has featured on a number of occasions in the committee over the years. Could Audit Scotland look at whether we get value for money from procurement processes and whether they are fit for purpose? I know that procurement is covered in legislation, but there might be an opportunity for us there, perhaps through the capital programme work.
It is certainly a strand of Audit Scotland’s strategy.
As part of what we were just talking about—local audit follow-up—we asked all our auditors to do some work on procurement. We are just getting the findings now and we are evaluating those. There may be a small publication out of that or we may decide to go into particular areas. It is certainly a big subject.
Good.
That is something that we can raise in our dialogue with the new Auditor General.
If there are no further comments, I suggest that the committee notes the report.
As has already been noted, this is Bob Black’s last appearance as Auditor General at the committee. Before we release the Audit Scotland witnesses, I put on record the committee’s thanks to him and our appreciation for his service over the years. Bob has not only built the role up but built up the effectiveness, efficiency and reputation of Audit Scotland—including its international reputation—which has been recognised today. That is very much to his credit.
The key thing is that Bob’s role as Auditor General has paralleled the beginnings and early years of devolution. Because one of the core arguments for devolution back in the 1980s and 1990s was that the efficiency, effectiveness, direction and accountability of the public sector in Scotland should lie in Scotland, the quality of audit available to us has been crucial for the Parliament and the Scottish people in delivering on that aspiration.
The fact that we spend so much, if not all, of our time arguing about how much more the Parliament should have responsibility for, is, if nothing else, an indication that devolution has worked. Although audit, and the quality of audit, may not always make the headlines, it has been central to the credibility of the Parliament as an institution. Bob’s role over the years has been significant and he has discharged his duty in exemplary fashion.
It remains for the committee to wish you well in your retirement. As I am sure many others have said, our hope is that it is not too quiet and peaceful a retirement, because you still have a big contribution to make to Scottish public life. Thank you.
Thank you for your kind words. I appreciate them very much.