Audit Scotland (Work Programme)
We will receive a briefing from the Auditor General on the Audit Scotland forward work programme and performance audits for 2007-08 in particular.
The committee will recall that we consulted you last year on the forward work programme as part of a comprehensive consultation exercise that we carried out with almost 400 bodies across Scotland that are stakeholders in the work that we undertake. The response was very positive and we received several useful suggestions about how our proposals might be developed.
What you have before you today is a report that outlines our work programme through to the end of 2008, although some of the topics will be reported on in 2009. The schedule is flexible because we must take account of unforeseen factors. It is not entirely clear when it will be best to slot some of the studies into the programme, but we have committed to covering them at some time over the next couple of years.
There are some completely new projects and some follow-up studies on which work is already in progress and the results of which will be reported in the next few months. Some of the studies are specifically for the Accounts Commission because they focus purely on local government. A number of them that cover the rest of the public sector are being undertaken for me. However, one of the most significant parts of the programme is the joint studies that we now undertake. They reflect Audit Scotland's ability to look across the public sector as a whole. As committee members are well aware, many of the big challenges of delivering better public services involve public agencies joining up. Joint and cross-cutting studies feature prominently in our forward programme.
It is important that the range of work that we undertake reports on major themes in the delivery of public policy. Therefore, members will see in the programme performance audits that relate to environmental sustainability, education performance, the health service, workforce issues and community safety. All are important public policy areas.
We have also included projects that will contribute to post-legislative evaluation, which I think will grow in significance—that is recognised within the Parliament. Post-legislative evaluation is about considering the impact of policies that were implemented through legislation in the earlier years of the Parliament. It is also important to have projects that reflect the aims of best value. Last, but by no means least, I have made a commitment that we will continue to monitor the efficient government agenda through the audit process and report on it in future years.
The completion dates for some of those projects has to be uncertain at this point, because we must retain the flexibility to respond to issues as they arise. Nevertheless, I hope that the report gives you a good general indication of the areas in which we will be working in the next two years in response to the extensive consultation that we undertook.
I am not sure whether this is a question; perhaps the Auditor General could regard it as user feedback. I have found it interesting to follow the evolution and development of Audit Scotland's work programme over a number of years. The preamble to "Audit Scotland Programme of Performance Audits 2007/08" understates the shift that has taken place. There is a need to communicate the extent to which the approach is shifting. I have heard and read about the move towards taking a thematic approach, looking at the quality of public services from the user's perspective and undertaking more joint studies with other bodies. Those are dramatic changes, but the reader of the report could be forgiven for missing those messages and simply seeing the list of topics. There is a good story to tell and it needs to be told wherever it can be, to give the public a sense that the audit process is growing, evolving, developing, improving and learning from experience.
Thank you for those comments. Two or three thoughts occur to me. First, it has taken a few years for Audit Scotland to develop the capacity to deliver in some of these areas. I am a great believer in underpromising and overdelivering, rather than the reverse. I am pleased with the way in which Audit Scotland is now getting to grips with some of the big thematic issues in the joint studies. I agree entirely that the quality of services as experienced by users is fundamental to the whole concept of best value.
We should take on board the point that we should find ways of demonstrating our work more fully. My main thought is that I am convinced that the programme of work will provide a body of evidence that is primarily of value to the committee in the next session of Parliament. We are already seeing a trend whereby a number of the reports are being picked up by the subject committees. Therefore, there is an issue to do with how best we can use the resources of Audit Scotland and the work of the Audit Committee to inform, with good solid evidence, some of the work that is undertaken by the subject committees. That is something to consider for the future.
It is probably no great surprise that I want to offer thoughts about the report on "How government works: major capital projects", which is due to be published in spring 2008. We have touched on that issue a few times. A great number of capital projects from trams to airport rail links are going on around Edinburgh. It has always been a concern to me that, given the length of time that such projects take to get from concept to fruition, we may be missing a trick if we do not have internal and external staging posts. It should not be only the Executive or the promoter that examines whether a project is on track in terms of cost and best value. My question is whether Audit Scotland should do that, given that I am talking about on-going processes. I want to investigate whether you think of your work in this area as being a backward look at what has happened in specific projects or a wider approach. Should Audit Scotland have a role in major capital projects while they are on-going, which is potentially a radical departure for you? Some of the projects take the best part of a decade to get from a general acceptance that they will go ahead to the point at which, after the fact, you can consider how far they went over budget and whether they provided best value for money.
The extent to which the audit resource can comment in real time on the planning of major capital projects is one of the most significant and problematic issues for Audit Scotland and me to consider. We may have a role in that, but I would not want to step into it without reaching a well-informed understanding with the Scottish ministers and the Executive, and the Parliament, about an appropriate role for Audit Scotland in such matters.
To go back to first principles, it is clearly the responsibility of accountable officers to put in place proper systems for planning, managing and implementing capital projects. As part of that, they are responsible for ensuring that they have good robust evidence to inform the process and, last, but by no means least, that they have in place a good risk assessment that allows for and quantifies as far as possible the risks that are associated with issues such as possible unforeseen increases in costs. However, we have dipped our toe in such work in the past. The most significant example of that is undoubtedly the Holyrood project. At the request of the Audit Committee in the first session of Parliament, we undertook a series of reports in real time as the project progressed, for reasons that I am sure we all recall clearly. I like to think that those reports provided a public account of what was happening in the project and guidance about how project planning and management might be improved in real time. However, that was probably an exceptional case and we are certainly not resourced to carry out such work for other major capital schemes. We must consider carefully the proper accountabilities of the Executive versus those of the audit process.
Another area in which we have been active is private finance initiative and public-private partnership schemes. I expect the auditors who are appointed to individual public bodies to monitor major schemes and to provide in their final reports a commentary on whether the procedures and systems that are in place for taking those major decisions are fit for purpose. However, that stops short of providing assurance on the numbers, because we are not resourced to do that. That role is for the management of those public bodies.
A third matter on which we have carried out recent work, as I am sure Margaret Smith will recall, is the transport spending programme, on which we provided an overview. The general message that we gave to the committee in our report was that, with major road schemes, the final cost has been by and large in line with the tender prices.
Of course, the major capital spend on the public transport schemes still lies ahead. Such schemes are different from more conventional road schemes in which one goes to tender, takes the tender prices, decides what the estimated cost is and budgets for that cost. There are issues to do with providing assurances on major capital projects to the Parliament. For that reason, we will progress a study that will consider in the first instance the Scottish Executive's control, sponsorship and management of major projects and that will monitor progress against time and cost budgets. However, for the reasons that I have given, I am reluctant to get into real-time evaluations. We are not resourced to do so, and doing so would confuse accountabilities. That said, I am concerned about ensuring that Audit Scotland adds as much value to the process as it can, and there should therefore be dialogue on the matter with the Executive and the Parliament over the next few months. I apologise for giving such a long answer, but the issue is important.
I want to pick up on a couple of things that you have said. I think that we would all agree that the Parliament building is an exceptional case, but there was a way into the process for Audit Scotland, through a request by the Audit Committee. You were involved with the project for a long time. Given your reluctance to carry out real-time evaluations, did the Executive and others accept that your consideration of the Parliament project at key points along the way as opposed to taking a day-to-day, hands-on approach had a certain value? Was that why Audit Scotland was invited to come on board?
When your study considers good risk assessment, for example, will it provide a general evaluation of the information about projects that is made available to the Executive and the Parliament? If we cannot rely on Audit Scotland to do such things for public transport schemes in particular—you made a distinction between those schemes and other schemes—we will essentially rely on Scottish Executive civil servants or external consultants. From my involvement in such matters, I know that much of the information comes from external consultants who are, in effect, on the payroll of the scheme's promoter. Does any evaluation take place not only of whether information from external consultants represents good value for money but of whether it gets risk assessments right?
Your first question was about whether we would respond to invitations to become involved in projects. It is true that an essential pre-requirement for my asking Audit Scotland to be involved in the Holyrood project was a formally recorded invitation from the Audit Committee that was endorsed by Scottish ministers. On that basis, the Parliament and the Executive requested us to consider the project. It was therefore entirely appropriate for us to do so.
The Holyrood project exercise was extremely resource intensive for us, and other projects had to be pushed somewhat to the side. It took place in Audit Scotland's first year in existence. We were establishing a new organisation, so the period was extremely demanding. However, the significant point for the present purposes is that involvement at that level does not come without costs, so it must be carefully thought through. That said, in any circumstances in which the Parliament, particularly with the support of the Executive, wanted Audit Scotland to consider an issue such as the one outlined by Margaret Smith, we would think about it carefully.
In my initial comment, I said that the issue is complex and challenging for us. A significant consideration is that when the Executive employs consultants, it is employing experts. Audit Scotland is not an expert in everything. We have certain core skills in public performance reporting, but we are not in a position to second-guess the work of consultants. At the heart of what the committee might reasonably expect the Auditor General to do from his current resources is using the on-going audit process to provide an assurance about the procedures and systems that are being put in place by the Executive to plan and implement major projects.
I have another interest to declare: I am a member of the Howard League for Penal Reform. I notice that prisoner population is one of your projected studies. That is very welcome indeed. The programme states:
"We will also compare, where information is available, how prisoner numbers are managed in other countries."
Have you mapped out the subheadings for that part of the investigation yet?
Not at this stage. We are still at the scoping phase for that study so we are not yet in a position to provide any information.
When do you think that the study will start?
Perhaps Barbara Hurst can recall what the timing is for the study.
We are doing quite detailed desk research on the subject at the moment, so I think that we will have a project brief within the next couple of months. We should start work in earnest over the summer and be able to report later.
Obviously, the prisoner population rises and falls and that is all down to the determination of the courts. Will the study brief include sentencing by courts and individual sheriffs and judges? Will it also examine the change in policy towards putting greater emphasis on the rehabilitation of prisoners?
It is appropriate for Audit Scotland to undertake that study because we are particularly well placed to examine the whole system. We can consider the impact of sentencing policy on prisoner numbers, but it almost goes without saying that it would be well beyond our brief to comment on the sentencing policy itself.
The committee will recall that we have already undertaken a limited piece of work on rehabilitation and training in the Scottish Prison Service. We reported on that some time ago. We therefore have a ground of knowledge from which we can go further as part of a wider and more ambitious piece of work.
My other question is about the study on strategic procurement. My interest lies in some of the issues that have been raised with me by small and medium-sized enterprises in my constituency. They can understand the procurement reforms that are contained in the McClelland report, but they believe that there is insufficient understanding of the impact on the local economy of going down that road and cutting them out. Will the study consider those issues or will it look only at how strategic procurement is delivering best value for that stream?
Margaret Jamieson has expressed concerns about that issue in the past, and it is entirely reasonable that we should undertake to do our best to consider it. The core of the study is the consideration of the McClelland reforms and the action plan that they outline in effect. The aim is to examine how that is implemented. Given the concern that has been widely expressed about the impact of the plan on small and medium-sized firms, we should see when scoping the study whether we can throw any light on the area.
That would be welcome.
I have a question about a report that is not in the book. Earlier, you spoke about having to undertake reports at the request of the Executive, the committee and others. I notice that for further and higher education you will look only at estate assets. Recently the committee conducted an inquiry into Inverness College and made a wide range of recommendations. The financial situation at James Watt College of Further and Higher Education will not be a surprise to you or to members of the committee. A report that has been made available to me, as an Ayrshire MSP, claims that the college has an historic deficit. That led me to contact the clerks to the committee because, according to my recollection, in eight years there has been no section 22 report on James Watt College. I am concerned about someone using the term "historic deficit", because previous years' accounts do not substantiate the claim that there was a deficit. Will you look at issues of that sort? I do not have the official further education development department report, but I have a leaked document. Reading it was like rereading the report for Inverness College. We have made recommendations that the Executive has accepted, but sometimes I wonder whether people out there listen to us. I am sorry about the rant.
I am very aware of the concern in Parliament and among the public about the situation at James Watt College. I will take a moment or two to remind members of what we have said in the audit process in the past.
The first year in which we had responsibility for the college was 1999-2000. In that year, it returned a fairly healthy surplus of more than £500,000, but at the time it had an accumulated deficit of £1.8 million. That pattern was set in the early days. Some of the early concerns that we expressed related to the need for the college to take on significant borrowing of more than £8 million in 2000, on an annual income of £23 million. We highlighted the fact that there was a risk at the college.
In 2001, we mentioned James Watt College again in our overview reporting. The issue about which we were concerned at three colleges, one of which was James Watt College, was the significant debtor balances arising from delays in the payments relating to European Union funding. The college was clearly under significant pressure.
In the various overview reports and in the work that the committee has undertaken, we have encouraged the Scottish Further and Higher Education Funding Council to be more proactive and strategic in its oversight of the colleges' business plans and issues of on-going concern. It has done so and has set up a team called FEDD—I forget what that stands for, but it is a wonderful title—which is more engaged with colleges than we are. Against that background, we need to be tuned into the need to avoid excessive auditing and inspection. We have worked hard to develop good working relationships with the funding council, given that it has developed a capacity in the area, and have good communication arrangements with it. The funding council is now quite active in requiring colleges that are under pressure to put in place recovery plans.
As I am sure the committee will be aware, one of the colleges where a recovery plan has been required is James Watt College, because of the operating deficits that have emerged. For the record, the situation in James Watt College that we reported in our last overview of the FE sector was that it had a small accumulated surplus in 2005 and was forecast to have a small surplus again in July 2006, so the situation has gone downhill quite rapidly in the past year. That is why the funding council is actively engaged with James Watt College. We do not yet have the final audited accounts or the final report from the auditor on the college, but I intend to consider seriously issuing a section 22 report once the accounts are laid in Parliament.
I welcome the comments on FEDD. However, my concern, which I think is shared by other committee members, is that it was perhaps not quick enough to act in relation to Inverness College. We all hoped that Inverness College would be the wake-up call to it. However, from the report on James Watt College, it seems that although there was a "high-level systems report" in March 2006, it was not updated until November 2006, despite the fact that the financial performance of the college went rapidly downhill in that period. The viability of a college is at risk.
My other concern, which was also an issue at Inverness, is about the information that was provided by the principal to the board. It appears that the shutters are down out there and nobody is implementing our recommendations. One of the issues that the committee had was that it was up to the colleges to take on board our recommendations. We perhaps need to pursue the matter. However, I am happy that the Auditor General is going to consider issuing a section 22 report once he has got the external auditor's report, because that would alleviate some of the issues that the staff and local politicians are concerned about.
I can probably say on behalf of the committee without fear of contradiction that we would hope that the recommendations that we made with regard to Inverness College have been taken on board and have had some effect. It seemed at the time that the report that we published was useful and that the inquiry process was helpful both to Inverness College and to the funding council. Obviously, it is necessary to wait until reports are published, not least the audited accounts, which the Auditor General can consider, before any action can be taken on James Watt College. No doubt a legitimate copy of the FEDD report will also be available at some stage if a future Audit Committee requests to see it.
It is proper to raise those issues on the agenda, but they may be revisited by the committee at a later date. We do not even have to put it in the legacy paper, because if the matter requires to be considered, it is the committee's duty to place it on the agenda. I thank Margaret Jamieson for bringing the issue to the committee's attention and the Auditor General for informing the committee of the process, the history and how he can respond once the evidence is before him.
Are there any other questions before we close the item on the forward work programme? I thank the Auditor General. I hope that it has been a useful exercise for him to explain the work of Audit Scotland in the next year.