Audit Committee, 08 Feb 2005

Meeting date: Tuesday, February 8, 2005

Official Report 199KB pdf

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Section 22 Reports

Item 2 is a briefing to the committee by the Auditor General on the section 22 reports that are listed on the agenda. After I have read out the titles of the reports, the Auditor General will provide us with a summary of and comments on them. The reports are "The 2003/04 Audit of the Scottish Children's Reporter Administration"; "The 2003/04 Audit of Forest Enterprise Scotland"; "The 2003/04 Audit of the Water Industry Commissioner for Scotland"; "The 2002/03 Audit of the Water Industry Commissioner for Scotland"; "The 2003/04 Audit of the Scottish Commission for the Regulation of Care"; "The 2003/04 Audit of the Scottish Executive Consolidated Resource Accounts"; "The 2003-04 Audit of the NHS Pension Scheme Scotland Accounts"; "The 2003-04 Audit of the Scottish Teachers' Pension Scheme Accounts"; and the Scottish Executive consolidated resource accounts for 2003-04. That is quite a large list.

As members know, the accounts were due to be laid before the Parliament no later than the end of December last year. The section 22 reports that I may make relate to the audited accounts, which are now with the Parliament. That is why a cluster of such reports appears at this time of year.

With the convener's agreement, I will offer brief comments about each report. If it helps the committee, I will pause after each comment in case members have questions. I will deal with the reports in the order in which they appear on the agenda.

I will start with the 2003-04 accounts of the Scottish Children's Reporter Administration. In 2003-04, the Scottish Children's Reporter Administration received additional funds to help it to recruit extra staff to work on front-line services and the administration of children's hearings. It engaged the services of a recruitment company, but it did not undertake a formal tendering exercise. In that year, it spent £216,457 on the recruitment company's services. The value of those services exceeded the European Union procurement threshold above which competitive tender should be sought. The auditors therefore qualified the regularity audit opinion.

Forest Enterprise Scotland is a relatively new body, which was established in April 2003 as an executive agency of the Forestry Commission Scotland. Its role is to manage the Scottish forest estate in accordance with economic, environmental and social objectives that the Scottish ministers set. Forest Enterprise's main trading activity is harvesting and marketing timber commercially.

The Forestry Commission sets financial targets for Forest Enterprise that reflect the net loss that Forest Enterprise makes on its operating activities and the cash consequences of that deficit, together with the net costs of other Forest Enterprise activities. Forest Enterprise reported an operating deficit and a cash deficit in excess of its targets, but I should emphasise that the operating deficit would have been close to the target of about £17 million but for the impact of a loss of £6.4 million on the revaluation of its assets.

Forest Enterprise's financial performance is closely linked to the income that it generates in timber sales. The Forestry Commission provides about 10 per cent of the United Kingdom's timber requirements at market prices. Timber prices are close to their lowest point ever in real terms and, as a consequence, the Forestry Commission has increased its deficit funding of Forest Enterprise. The expectation is that that deficit funding will be required for the foreseeable future. Auditors will clearly have a continuing interest in that.

I will take the water industry commissioner for Scotland's accounts for 2003-04 and 2002-03 together and start with the 2003-04 accounts. In March 2004, the water industry commissioner's office advised the Scottish Executive Environment and Rural Affairs Department that its expenditure for 2003-04 was likely to exceed its budget. After investigation, the department identified a breakdown in financial controls, as well as scope for better financial monitoring, and highlighted the lack of an internal audit function and an audit committee. The department provided additional funding of £141,000 at the end of March 2004. The commissioner's office has taken action to strengthen the organisation's financial procedures and controls and I am pleased to report that that action is being taken to address shortcomings, but I shall expect the auditors to keep such matters under review as part of the 2004-05 audit.

In the prior year—2002-03—the commissioner's accounts were not laid in time to comply with statutory deadlines. The draft accounts had several problems, including the impact of computer problems and a requirement by the department that the commissioner's office should obtain an actuarial valuation of its share of the assets and liabilities of the relevant pension scheme—the Falkirk Council superannuation scheme, of which it is a member.

I will turn now to the accounts of the Scottish Commission for the Regulation of Care for 2003-04, which I would like to consider together with the Scottish Executive consolidated resource accounts for 2003-04. The report on the accounts for the Scottish Commission for the Regulation of Care, which is usually referred to as the care commission, relates to the commission's role in registering housing support services, a matter that is addressed more fully in my report on the Scottish Executive resource accounts.

I have been able to give a clean audit certificate on the Scottish Executive consolidated resource accounts for the year to 31 March 2004. However, I decided to issue a report to bring to the attention of the Parliament matters relating to expenditure on the supporting people grant, which continues to be an issue of some concern. I will therefore take a moment or two to advise the committee of the content of my report.

The Scottish Executive introduced its supporting people policy in April 2003. As I am sure members know, that is an integrated policy and funding framework for housing support. Housing support covers a variety of services, including sheltered housing for older people, housing schemes for people with learning and physical disabilities or who have mental health problems, and refuges for homeless people or people who are escaping domestic violence.

Previously, such services were funded from a number of sources, including housing benefit. Under the new arrangements, local authorities, working with partners such as health organisations, are responsible for assessing the levels of need in their areas. Local authorities may either provide housing support services themselves or commission them from contractors. The Housing (Scotland) Act 2001 states:

"The Scottish Ministers may pay grants to local authorities towards expenditure incurred by them in providing"

relevant

"housing support services."

Under the Regulation of Care (Scotland) Act 2001, the care commission is responsible for

"furthering improvement in the quality of care services",

which includes housing support services.

The providers of 14 different types of care services, as listed under the Regulation of Care (Scotland) Act 2001, must apply to the care commission for the registration of each service that they provide. The requirement for the providers of each type of service to register is being introduced in stages. The Regulation of Care (Scotland) Act 2001 gave a six-month period of deemed registration before providers were required to submit an application for registration. That was intended to give a period in which the care commission could identify what services required to be registered and to develop procedures for making the applications.

I ask members to bear in mind the critical date of 1 October 2003. Providers of housing support services that were required to be registered had to apply to the care commission by that date for registration. Services that were in operation prior to that, as at 1 April 2003, were deemed to be registered right through to 31 March 2004 provided that the required applications to register were made before that critical date of 1 October 2003. Local authorities could continue to make payment for contracted services after 1 October 2003 only if the service provider had made an application for registration to the care commission before that date. The Scottish Executive Development Department considers that, on 1 April 2003, there might have been about 100 persons or organisations, including local authorities, providing around 1,600 housing support services, each of which was separately registrable. However, reliable information on that is not available—that is simply an estimate from the department.

Because of the complexity of housing support services, it was necessary to get agreement with individual service providers on the number of applications for registration that they were each required to make. The care commission therefore adopted a two-stage approach to the registration process. That was in order to save providers from submitting applications that might have been unnecessary and expensive for them, as each application had to be accompanied by the required fee.

The first stage involved a decision on whether a particular service required to be registered. The care commission would invite the service provider to submit the necessary number of applications. In the second stage, the care commission would determine the applications. However, by the critical date that I mentioned—namely 1 October 2003—the first stage discussions had not proceeded far enough to allow the care commission to determine the appropriate fee so that service providers could be invited to submit applications.

The consolidated resource accounts show that the Development Department paid £406 million of the supporting people grant to local authorities during the financial year 2003-04 to fund expenditure on housing support services. In the period from the critical date of 1 October 2003 to the end of the financial year on 31 March 2004, the department paid £203 million to local authorities. That expenditure by the department in the form of grant to local authorities was incurred properly in accordance with the Housing (Scotland) Act 2001. However, because no applications to register housing support services were received before 1 October 2003, expenditure by local authorities on registrable housing support services was not in accordance with the terms and conditions set out in the act.

Local authorities estimate that they incurred expenditure of about £225 million after 1 October 2003. As a consequence, the auditors of 28 local authorities drew attention to the failure to comply with the statutory requirements. Although there were a number of discussions between Scottish Executive officials and care commission staff, not until the financial year 2004-05 did the Executive become aware that the deemed registration of providers had not continued beyond the end of September of the previous year—30 September 2003—as originally intended.

In July 2004—into the next financial year—the Scottish Executive Health Department wrote to all known providers of housing support services, urging them to apply for registration by 29 September 2004. At the same time, the Lord Advocate confirmed that as long as providers of housing support services submitted applications for registration to the care commission by that date, they would not be liable for prosecution for providing an unregistered care service. By early December 2004, the care commission had registered 1,210 services out of 1,284 valid applications received.

In August 2004, the regulations made under the Housing (Scotland) Act 2001 were amended to remove as a temporary measure the requirement for providers to be registered before they could receive payment. The Scottish Executive has also presented to Parliament proposals in the Smoking, Health and Social Care (Scotland) Bill to rectify the position on a retrospective basis in relation to both the operation of unregistered providers and the payments made to them by local authorities where they did not comply with statutory requirements.

The findings that I draw from those events are as follows. First, the regulation of housing support services was started without reliable information about the size of the sector and a robust understanding of the work involved in identifying the number of services requiring applications. It was therefore understandable that the care commission decided to adopt a two-stage process for registration. However, that meant that it would take longer to generate formal applications.

Secondly, given the complexity of housing support services, the deemed registration period of only six months was too ambitious. The care commission, working with the sector concerned, will need to scope carefully the remaining services that are due to be brought within regulation, such as adult placements.

Thirdly, it appears that there was poor communication between the care commission and the Scottish Executive. It is therefore important for the care commission to submit to the Scottish Executive regular progress reports on the registration of all new care services.

Finally, it is worth saying that the problem could be seen as no more than a technical problem, but I am aware that, in general terms, it has caused difficulties within the service and a lot of anxiety and uncertainty that could have been avoided by better planning. The supporting people policy is still in the course of implementation and I expect the auditors to continue to monitor the supporting people expenditure programme and the value that it provides and, if necessary, I shall report again to Parliament.

I shall mention briefly together the national health service pension scheme Scotland accounts for 2003-04 and the Scottish teachers pension scheme accounts for 2003-04. The reasons for the reports on those pension schemes are similar. Both schemes are unfunded. By that I mean that the employer's pension contributions and other receipts are not invested to create funds to pay pensioners. Income is credited to the schemes' revenue accounts, but the cash received is transferred to the consolidated fund. Pension payments, along with transfers out of the schemes, are met from the consolidated fund. When income is received from employers for pensionable service, that increases the scheme's liability to pay the employee as a future pensioner. That is an important point to bear in mind. That increase is charged to the scheme's revenue accounts. In both accounts, the resource outturn for 2003-04 exceeded the resource budget. That led to a qualification on the regulatory audit opinion, which arose for a technical reason to do with the calculation of a prior year adjustment being received too late to enable an increase in the budget act provisions. There was also a higher than expected level of employers' pension contributions, which led to a corresponding increase in the current service pension costs.

Both accounts are also qualified on the grounds of what auditors call a limitation in the scope of the audit. There was a statutory requirement for a full actuarial valuation of both schemes' liabilities to be conducted every five years. The Government Actuary's Department has been unable to carry out a full valuation since 1996 in respect of the Scottish teachers pension scheme, and since 1994—more than 10 years ago—in respect of the NHS pension scheme, because of deficiencies in the pension data provided to the Government Actuary's Department for evaluation purposes. Without a more recent full actuarial valuation, the evidence that was available to the auditor was limited and therefore the auditor was not able to confirm that the scheme's liabilities were not materially misstated.

Finally, I shall mention briefly something that is not on the agenda, for a good reason: the fact that there is no report on the audit of the accounts of the Scottish Parliamentary Corporate Body for 2003-04. That is because the accounts obtained a clean audit certificate and there has been a significant improvement in the control environment since I last reported to the committee on the previous year's accounts. I welcome that and wish to place it on the record.

Thank you for that briefing on the section 22 reports. I intend to invite members of the committee to raise any questions that they have about the individual section 22 reports, which I shall run through so that we can take them in order. I propose to leave the Scottish Commission for the Regulation of Care and the Scottish Executive consolidated resource accounts to the end, as I suspect that that is where many of the questions may arise, and we can deal with other matters first. First, are there any questions with regard to the Scottish Children's Reporter Administration?

I wonder whether Bob Black could explain why the Scottish Children's Reporter Administration did not realise that there needed to be a formal tendering process. Is there an explanation of why that was not recognised? It is a matter of standard EU procurement rules, is it not?

Generally speaking, the section 22 reports are reports on the accounts, so we have not done a full audit examination of the pattern of events that led up to them. If members of the committee are interested in further information that we cannot provide today, we will obviously get hold of it. I certainly would not want to mislead the committee on any matters that have not been discussed and fully cleared with the people involved. I will have to refer to my audit teams if I am to attempt to answer such questions.

I have two comments. One is that I believe that it was a genuine oversight. The other point is that the final total was an accumulation of extending existing contracts, so it is not the case that one contract was let for that sum. It grew over time.

What are the consequences of not conforming to the European rules?

I am told that the EU has said that it is not an issue, but that the mistake should not be repeated.

Wrists and slaps come to mind.

As there are no more questions on the Scottish Children's Reporter Administration, we come to the audit of Forest Enterprise Scotland.

I presume that the £6.358 million that was lost through the revaluation of assets relates mainly to trees and that the figure is predicated not just on present value but on future value. Therefore, the figure could go up or down.

Yes, particularly as the typical life cycle of the assets is 50 or 60 years.

What does the phrase "deficiencies in pension data" in the section on teachers' pensions mean?

We have not got to that yet; we are still considering the report on Forest Enterprise Scotland.

I beg your pardon. I had a flashback there.

As there are no more questions on Forest Enterprise, we come to the audit of the water industry commissioner's accounts for 2002-03 and 2003-04.

The report is in some ways damning. The commissioner's office has no internal audit function or audit committee, even though the commissioner pronounces on Scottish Water's financial performance, compares it with that of companies south of the border and has made robust criticisms of Scottish Water. Is there an explanation of why the commissioner failed to put in place proper financial procedures in his organisation?

We cannot answer that question directly. I am pleased to note that the Environment and Rural Affairs Department has identified the issue and that the commissioner has responded accordingly and is putting in place the appropriate controls that one would expect in any public body.

So an internal audit is standard practice.

It is.

The report mentions that the problem was caused by a computer virus. I presume that the system is now secure, but why was it not secure in the first place?

We cannot answer the question about why it was insecure in the first place.

Is it secure now?

Clearly, a significant failure in the system prevented the office from generating accounts that were suitable for audit. We are advised that the problems have been sorted.

What kind of virus was it?

I am sorry, but we do not have that level of detail.

Was there a flaw in the system or was the virus introduced?

The financial systems were provided by a third party and the virus was in its system. I do not know the name of the virus.

We now move to the accounts for the NHS pension scheme and the Scottish teachers pension scheme.

Why is this the first time that the difficulty with the actuarial valuation has been raised with us, given that the valuation is supposed to take place every five years and that, for the NHS, the previous one was carried out in 1994?

The auditor reported the lack of a Government Actuary's Department full actuarial valuation in previous years, but the matter came to a head in 2003-04 when, in accordance with the new financial reporting standard 17, the accounts for the first time were required to disclose on the balance sheet the value of the scheme's liabilities. That new reporting standard required a qualification, but the matter had been reported in previous years as a concern.

Obviously, the concern would have been raised with the various bodies. Did they make no attempt to address it?

That goes back to the previous question that Andrew Welsh asked on the problems that were experienced. The problems arose when the previous pension administration system was being replaced by a new system in 2000. There appeared to be a two-year gap between the old system being switched off and the new system going live, which meant that two years' worth of membership changes were not updated. It also led to a mismatch between membership data submitted annually by the employers and the information held by the Scottish Public Pensions Agency, which administers the pension scheme. Efforts to investigate the data mismatch and address the backlog of membership changes were disrupted as a result of the SPPA's relocation to Galashiels.

Have any irregularities been reported with the data mismatch? Given that the updating of data was two years behind, were inappropriate claims made?

Not to our knowledge.

I am interested in receiving further information on the impact of relocation. A significant number of relocations have taken and are taking place. We have an example of a relocation that contributed materially to significant operational disruption and potential cost. It is important to have an understanding of that, although it is not the major question that I wanted to ask.

Precisely where do responsibility and accountability lie for the management of major public pension schemes? I accept that the SPPA is tasked with administering the schemes, but there are clear financial and operational implications for major public services and it would be useful to have more of an understanding of the level of information to which accountable officers for the various public services have access, as well as the level of responsibility or decision making. Can you clarify that, please? That question addresses more than just the two schemes that are in front of us. It also covers fire service pensions and so on, with which I am sure there are parallel issues.

Accountability for the two pension schemes rests with the accountable officer of the Scottish Executive Finance and Central Services Department, who at the moment is Andrew Goudie.

That is a third place. There is the SPPA, there is the relevant department—be it the Education Department or the Health Department—and there is the accountable officer of the Finance and Central Services Department. Is there not an issue if no one person is charged with the task? I say that not just in relation to the point that you have brought to our attention, but more generally in relation to the management and financial planning of such pension schemes, which are hugely significant elements of public expenditure.

Having clear accountability and responsibility for such schemes is important, because—aside from the need to safeguard the welfare of scheme members—the schemes are unfunded and therefore the impact is on public spending. I imagine that the view is taken that it is for the pensions agency to administer the scheme, in effect on behalf of the accountable officer. However, I sense from your questioning that your concern is with the elapsed time since revaluations were instituted and completed. That must be, and should be, of concern to the accountable officer.

Which accountable officer?

The accountable officer in the department.

The Finance and Central Services Department?

The one who is responsible for signing these accounts.

For the record, my concern is wider than the issues that you touched on in your report. If—and I stress the word "if"—the work of Audit Scotland has flagged up questions about where responsibility lies in such matters, I would like to know whether that has wider implications for other aspects of the management and planning of the schemes. Is that concern founded or not?

There are two aspects that we should be clear about. The administration of the scheme is the ultimate responsibility of the accountable officer for the Finance and Central Services Department. However, I think that you are talking about the wider question of financial planning and management in services such as the national health service. One of the things that we are interested in exploring in more detail is how the Health Department is carrying out its responsibility for long-term financial planning, picking up issues such as future pension liabilities as well as drug costs and salary costs. As our integrated overview reporting develops, we will examine the linkage between what the Health Department does and what health boards are doing. I hope that that will pick up the question of the way in which resources are being planned for future liabilities at this point.

If the head of the Finance and Central Services Department is the accountable officer for this purpose, does that imply that he or his department are undertaking any wider programme of work to ensure that, across Scottish public services, the highest standard of management of these arrangements is being adhered to and that appropriate forecasting and future planning are taking place? Or are such things being considered purely on a departmental or sector-by-sector basis?

It is not unreasonable to suggest that that question could best be answered by the accountable officer.

I suspected as much.

Having said that, as you will be aware, there are a number of schemes that receive a great amount of funding and which are covered by the audit process that is administered by Audit Scotland on behalf of the Accounts Commission. Because those large schemes are subject to our annual audit, assurances can be given in relation to some of them, for example that which concerns local government employees. There are a variety of schemes in Scotland. The major distinction among them is between the unfunded schemes, of which the teachers scheme and the NHS scheme are the largest, and the funded schemes, of which far and away the largest is the local authority scheme. Different circumstances apply to those two types of schemes.

With regard to the future, can you assure us that the situation is now fixed or are the problems likely to continue?

With regard to the past—I declare an interest at this point, as I am a member of the Scottish Parliamentary Corporate Body—I can think of a massively complex situation involving enormous numbers of individual amounts of money. It seems to me that it would be enormously time consuming and difficult to go back over that situation. How easy is it to solve such past situations?

The SPPA expects to be able to provide the relevant data to the Government Actuary's Department to ensure that the full 2001 actuarial evaluation is completed by the spring of 2005. That is the latest information that we have.

Has Audit Scotland picked up on any difficulties in relation to other schemes, or are the two schemes in question the only ones that have been hit by the lack of information with regard to financial reporting standard 17, which was introduced only two or three years ago?

There are no other qualifications on any other scheme for that financial year.

So the matter is linked to the loss of information in relation to the two schemes.

In essence, the concern is that, because the actuarial evaluation has not been carried out, there is a limitation on the assurance that the auditors can give about the financial state of the schemes.

Has the actuarial evaluation been done on all the other schemes that you have inspected?

I would expect that to have been done. If it had not been done, the auditors would have made a report.

Our final area of questioning is the section 22 reports on the audit of the Scottish Commission for the Regulation of Care and the related audit of the Scottish Executive consolidated resource accounts. We have received quite a lengthy and detailed explanation from the Auditor General with regard to those reports.

Was one of the difficulties in identifying the support services that were being provided the fact that the services themselves—even down to individuals—would come in different packages, meaning that it was difficult to identify a strand of services because of the way in which they were intermixed? Towards the end of your presentation, you talked about a change to the requirement in August 2004 and a proposal for future changes. Are you confident that that will address the difficulty that was identified in recognising the services and being able to register them and cost what was being paid out?

I preface my remarks by saying that we are not expert in this scheme. As I said earlier, we have not carried out a full audit examination of the underlying processes and systems.

It is true to say, as Mary Mulligan points out, that the scheme is a complex one, in which the packages of care can involve drawing upon a variety of services. The care commission faced a challenging task in understanding fully the range of services that were involved and the implications for the registration of providers. We have received assurances from the care commission and the Development Department that the situation is now being better monitored and that communication has improved. As I remarked, we will continue to monitor the situation through the audit process.

It seems to me that it was overambitious to think that the care commission could establish the monitoring process within six months. Did that come down to the Executive's decision, or was it down to the commission?

You are correct to say that the timescale was overambitious—I agree with that view—however, without further investigation and examination, I would not wish to apportion responsibility for that decision. Nevertheless, if the committee so decides, we can look further at that matter.

My question is similar to Mary Mulligan's. Which of the three organisations that were involved was responsible for trying to evaluate how many different service providers needed registration? Where was the breakdown in the delivery of that? Who was responsible for informing the service providers of what was required? It is difficult to understand where the responsibility lay.

Part of the problem was the introduction of an entirely new system, under the Regulation of Care (Scotland) Act 2001, in an environment in which recorded information about provision before the new policy was implemented was very poor.

Where did the responsibility for that information lie? Did it lie with local authorities or with Westminster? A lot of the funding came from Westminster previously.

It is a Westminster scheme. When we considered the matter, the parallel with independent learning accounts came to mind. As committee members may recall, that scheme, which was based on very good principles, was devised at Westminster and then taken over for application in Scotland. Imperfect information was provided to the Scottish Executive for the implementation of that scheme, and there were other problems with its implementation in Scotland.

But who was responsible for handing over the information? That is what I am trying to get at. Did Westminster hand over the information to Scotland, given the fact that Westminster was handing over the programme to be run by the Scottish Executive?

I am sure that the Scottish Executive would have been expected to know what services and service providers existed in Scotland prior to the implementation of the scheme.

So this is similar to ILAs in some ways.

Some general parallels can be drawn.

Should not we be very cautious about making such comparisons, given that the registration arrangements, as distinct from the supporting people scheme, were devised here in Scotland? Is not this, first and foremost, an issue about the registration process?

I would not disagree with that statement.

Has any work been done to assess the general efficacy of the registration process and, indeed, its cost effectiveness? You said towards the end of your statement that this could be seen as a technical problem, but that it has caused people problems within the system. What practical problems has the fact that registration was not in place caused either to staff or, arguably more important, to service users, given that registration had not been in place previously and that registration has taken a bit longer to kick in?

I am sorry, but I do not think that we are well placed to answer questions about what is happening out in the system, because we have not done a full study of that area. It is clear, however, that anxieties and concerns will have been raised by the fact that local authorities had been paying money, which was not regular, and by the prospect that service providers could be found to have accepted payments unlawfully, because they were not registered. Happily, the Lord Advocate removed that concern last summer, but it is reasonable to conclude that there must have been a period of anxiety and concern for those who are involved in service provision. There may well have been a consequential effect on service users' confidence in the new system as it was being implemented.

It is important that we are clear about this. In your view, would the concerns arise from the fact that, technically, there was an issue of non-compliance in terms of statute rather than from there being any evidence of a practical impact on the quality or level of service that was being provided?

We have no evidence that there has been a practical impact on the level or quality of service. That does not mean, of course, that there has not been a consequence. On the other hand, it is probably worth saying that, to safeguard the continuity of service delivery, a pragmatic decision was taken, which was perfectly understandable, to continue spending the money so that the services were provided.

Could the situation to which you referred have been the result of a lack of understanding of the complexity of setting up the care commission and the Scottish Social Services Council and of how those bodies would relate to other areas of the Executive?

It is fair to say that the care commission had an extremely challenging agenda when it was established. There was a very short lead time between the commission's establishment and its assumption of responsibilities for registration in a number of areas. Certainly, the commission faced enormous pressures at the time. It is also fair to say that, in advance, no one fully appreciated the complexity of the registration process.

But surely civil servants, in advising ministers, would know exactly how much work was on-going within the care commission and how quickly the people there would have to set up systems and processes, without burdening them with the complexities of the Housing (Scotland) Act 2001 coming into force as well?

I think that that question would be best asked of the Executive department.

Are any financial liabilities outstanding as a result of the majority of the payments being deemed illegal until the Lord Advocate's ruling?

No. I am aware of nothing arising as a result of the problem with legal registration.

There are no court actions in view.

We are unaware of any such events.

The matter comes down to the accurate control of, and financial accountability in relation to, more than £225 million of public spending. You said that you have received assurances that the situation is being monitored better and that communication has improved. When will the system be fully operational? Is there a light at the end of this tunnel?

By the end of last year, the majority of applications for registration had been cleared. We do not know what has happened since December, but it would be reasonable to assume that the very small balance that was left has been cleared by now.

The role of Westminster and the Scottish Executive in all this has been mentioned. However, the other major party involved is local government. Do you want to comment on that aspect? After all, we are focusing on the question whether services were delivered at that time and the procedures that local authorities were asked to go through. Were local authorities concerned about whether services were being registered? Were services being delivered?

Before the Regulation of Care (Scotland) Act 2001 was enacted, local authorities provided a range of services under the supporting people programme. Unfortunately, the records of those services were kept in such a way that they could not have allowed a good information base to be created for the new legislation.

Another problem was that services were provided out of housing support, not by the local authorities. As a result, the picture was quite complex. Indeed, the legislation that was passed in 2001 was introduced partly to rationalise the system and to establish the care commission to register all providers, which would be known to the local authorities and could receive proper payments. Before the system came into being, the pattern of service delivery was complex and not very clear.

So you are not aware that any particular local authorities faced problems. The problem was simply that, across the board, it was difficult to break up the packages and have them registered.

I am sorry, but we are unable to give you an objective analysis of the situation in individual local authorities.

You have emphasised the scale of the task that was involved in processing the number of applications for registration that were required within the available timescale. I take that point, but during the audit process did you examine the method of registration? Was there any scope for a lighter touch that would have allowed applications to be processed more quickly, or could nothing further have been done to reduce the time that needed to be spent on each?

I am sorry—we have not looked at that. That would require a separate study.

If there are no further questions on this item, I thank the Auditor General and his team for trying to answer our questions on the section 22 reports and laid accounts. I remind the committee and the wider audience that, more than a year ago, section 22 reports did not appear on the committee's agenda. The fact that they are now brought to the Parliament's attention represents a significant advance in the transparency and accountability of the public bodies in question. Of course, that does not necessarily mean that the Auditor General and his team will be able to answer all our questions.

Under item 5, when we discuss in private our reaction to the information that we have received, we can decide whether we want further information to be made available and whether we need to take further evidence in that regard. I thank the Auditor General and his team for raising the matters with us and I look forward to the committee's discussion.