Audit Committee, 19 Dec 2007

Meeting date: Wednesday, December 19, 2007

Official Report 103KB pdf

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Section 22 Report

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“The 2006/07 audit of the Scottish Arts Council”

Agenda item 3 is on a section 22 report. We have responses from the Minister for Europe, External Affairs and Culture and from the accountable officer. Do members have any comments to make before I invite comments from Audit Scotland?

I should feel reassured by the letter from Sir John Elvidge, as it states that there is a "dedicated sponsor team" in the division of the directorate that dealt with the issue, which has

"regular liaison and close relationships"

within

"a clearly defined framework of financial accountability and performance management",

with

"a wide range of support … in the form of written and oral guidance",

as well as "training events".

I should feel reassured, but I do not because, apparently, in spite of all the training and liaison, the people who were involved did not know about or pick up on a payment that clearly contravened the "Scottish Public Finance Manual". The issue is simple: somebody in that division came across a new situation but did not say, "What do we do here?" and look up the manual. I am not convinced that the letter helps us, because it is simply a reiteration of the procedures. I would like to know that, given that many other quangos and bodies are being fed finance, the system ensures that when such situations crop up, people at least read the manual and do what they should do.

I am not terribly satisfied with the blocking reply that we have received from Sir John Elvidge. It does not really answer the point that we made. What assurances can we get that such a situation will not arise again and that the systems are in place to prevent it?

That is a fair point. Andrew Welsh is right: there is a degree of complacency—although I do not know whether that is the right word. It is as if what is being said is, "Okay, there is a problem, but it won't happen again and don't bother asking any more." Andrew Welsh is right to say that we need more than that. This should not have happened and I do not detect anything in Sir John Elvidge's letter that indicates that it could not happen again. Auditor General, do you wish to comment?

The parties in the Government recognise that a mistake was made. The question is whether the governance structures are robust for the future, particularly with the forthcoming merger between the Scottish Arts Council and Scottish Screen to form creative Scotland.

The auditors do not think that the response is unreasonable—mistakes happen—but we need to ensure that the governance framework is robust and strong during the transition to creative Scotland. For example, we understand that the Scottish Arts Council's director of finance will be leaving soon and that it intends to make an interim appointment until creative Scotland is set up. That is not a criticism of the organisation, but it points to the fact that it needs to be quite vigilant, as does the sponsor department, to ensure that the arrangements are managed well and competently until creative Scotland is fully fledged.

I am not playing the blame game here, but a chief executive's early retiral is unusual and I would have thought that someone would have asked how to deal with it and said, "Let's look up the ‘Scottish Public Finance Manual', which will tell us." That clearly did not happen in this case, but we are told that all the systems and training are in place. We need to be alert, not so that we can blame anyone, but to ensure that the system works as it should.

Okay. Can we do much more, Mr Black?

Frankly, I do not think that the committee can do much more at this stage. The concerns that you have expressed on the basis of my report have had an impact in the Government; there is no doubt about that.

We just have to tell creative Scotland, "No more creative accounting."

Yes. We can also pass the issue to the subject committee for information and any consideration it might want to give to the structural changes that are taking place.