Audit Committee,

Meeting date: Tuesday, May 31, 2005

Official Report 227KB pdf

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Accounts Commission

I welcome members back for agenda item 5, for which I am pleased to welcome Alastair MacNish, who is the Accounts Commission's chairman, and his team, which I will run through for everyone's benefit. We have Caroline Gardner, whom the committee knows well and who is the deputy auditor general and controller of audit; David Pia, who is the director of performance audit in local government; Gordon Smail, who is the senior manager of performance audit; and Bill Magee, who is the secretary to the Accounts Commission.

The evidence session's purpose is to provide an update on performance and best-value issues in relation to local government. This is the second of the committee's annual evidence sessions with the Accounts Commission; the first took place in April last year.

Members are reminded that, as agreed, when the committee takes evidence on local authority matters, its interest will focus on local authorities' performance nationally and not on individual local authorities' performance.

I invite Alastair MacNish to make an opening statement.

I thank the committee for the opportunity to share some of the key findings of the "Overview of the local authority audits 2004" and to say a few words about progress on the best-value audits that I promised last year.

First, on a positive note, the overview confirms that financial stewardship among authorities remains sound, in general. We made that statement last year, too. It is important to stress that that remains sound.

Secondly, for the fifth consecutive year, council tax collection rates have improved throughout Scotland. Our collection rate was initially 9 or 10 per cent behind that in England, but we have now halved that difference. Scottish local authorities' collection rate was 92 per cent, although England's rate is 96 per cent. For five years in a row, progress has been made on council tax collection. Members may note that that has had quite a lot of publicity. Councils are trying to collect more and it is hoped that that will continue.

Thirdly, it may not have been obvious from the report, but 500,000 more attendances were made at council pools and leisure centres throughout Scotland. That is good news about local authorities' provision for the health agenda and healthy living.

On the flip-side, although the waste recycling rate has increased to 12.3 per cent, which is an increase of 2.7 per cent, it is still well short of the Executive's target for 2006 of 25 per cent. I know that much work is taking place and that much money is being spent, but we still need to concentrate efforts on achieving at least that target in all councils by 2006.

One major advantage of our joint studies with the Auditor General for Scotland was the major report on road maintenance, which highlighted serious problems in most councils of meeting their road maintenance responsibilities. The background to that is that emergency repairs continue to be made. Patching is the order of the day, rather than structured remedial work through a planned programme. That remedial action is now required urgently. We stress that we would like each council publicly to declare annually the condition of the road network in its area and the maintenance backlog. If that information were published annually rather than appearing in findings from a report, that would keep the matter in the public eye and in front of the councils. Moving down that road would be another step in the right direction.

Audit committees have been established in all councils, but their effectiveness in several councils remains questionable. A major reason for that is the lack of relevant management information, which hampers proper scrutiny. Often, the committees' remit is too narrow and is far from clear. The Audit Committee would empathise with the question of how committees that are not given the right information can properly scrutinise bodies. Much work is still required on audit committee structures in local authorities throughout Scotland.

At the centre of recent media attention have been balances and reserves. General fund balances increased by 20 per cent in 2004 to £384 million. A misconception was held about the Accounts Commission's report and the controller of audit's report. We questioned not the level of reserves, but whether each council had a clear and transparent policy on reserves, which they should explain to the public in their area. There are various reasons for having reserves, such as hypothecated expenditure and keeping a prudent reserve for emergencies. However, the policy needs to be spelled out to the public in each area. As long as they are spelled out and are clear, reserves and balances will be challenged appropriately, whether the reserve is 1 or 10 per cent. That is the message that we are trying to convey. I felt slightly embarrassed, because there were one or two council leaders—City of Edinburgh Council's leader, for example—whose reserved balances are clearly explained and are at prudent levels, but because the overview lumps everything together it looked as if all councils were being criticised for that. I wanted to set the record straight in giving evidence today.

Turning briefly to governance in local government, we are pleased that elected members are becoming more involved in best value and community planning, in which they have a statutory duty to be involved. However, more relevant training and support is necessary. It is all very well giving elected members a statutory duty, but you also have to give them appropriate training and support, whatever area they come from.

Public performance reporting is improving, but I have to say that the material lacks balance and, not surprisingly, is heavily weighted towards good news rather than what needs to be improved. There has to be a better balance, but as chairman of the Accounts Commission I would say that. It might have been different in a previous life.

Finally, I would like to say a few words on best-value audit. We have audited and reported on four councils. Reports on a further four councils will be out in the next two months, one of them in a couple of days' time. By the end of the year, a third of all councils will have been audited. The conclusion so far is that councils have made a genuine commitment with their self-assessment—the first part of the process—which has been open, frank and honest. That is a major step forward in achieving best value and improvement in service. As a result of the audits, we have agreed individual improvement plans with each of the councils, and Audit Scotland will continue to monitor that process. It will not just go away; we shall then monitor in detail the improvement plans that are created. In addition, we have made a commitment to meet each council after the audit is complete, to go over the findings and the improvement plan. For example, on Thursday I shall be meeting representatives from North Ayrshire Council, the second council to have its audit finalised.

My opinion is that the best-value regime is the most effective vehicle that we have for improving the quality of service provision across the whole public sector, not just local government. I leave you with that thought, and I am happy to answer any questions.

Thank you, Mr MacNish. Before we ask questions, I remind members that copies of the best-value audits for North Ayrshire Council, Shetland Islands Council and Stirling Council were circulated in advance of the meeting. Members also have copies of the report, "Overview of the local authority audits 2004". However, members should bear it in mind that the overview report is not laid before the Parliament, so we are not in a position to report on it. Nevertheless, it helps to inform the committee of the work of the Accounts Commission.

I have two questions. The first is about best-value audit, to which you referred and which is of interest to the committee. Can you say at this stage that best value is having an impact?

The realisation by councils of the statutory duty that is placed on them became more relevant in itself. I have to say that the first four councils to undergo a best-value audit have made a genuine effort, and I hope that the next four will also make such an effort. Even the councils that have come out with good reports have identified areas in which they can improve. I therefore feel positive and am reassured that the councils are trying hard and that the process will bring about improvement. It will take time. It does not matter what you put in place; it will not happen overnight and some councils will take a lot longer than others. All that I will say is that I do not believe that any council will get away with not taking best value on board and treating it seriously. If we fail to insist on that, we are at fault and the councils can easily walk away from the process. The very fact that they have signed up to the regime and are now—to judge by the example of the councils that we have dealt with so far—totally committed to it is in itself a step in the right direction.

You mentioned that it might be helpful—not just for the councils, but for the public—if councils had clear policies and provided clear information on the levels of local authority reserves and the state of local authority roads. Do you have the power to help that to happen, or would it require instructions from a minister to begin to get such information as a matter of course?

We have no direct power to do that. However, I must say that, in the four years that I have been in my post, the councils have taken on board everything that we have highlighted in reports. Since the report on the road maintenance backlog, which we produced jointly with the Auditor General, each of the authorities has made a significant input. That has not fully solved the problem and there is still a long way to go, but at least the councils have taken the suggestions on board. The very fact that the issue of public announcements has been raised means that councils will not be able to avoid it because we will come back next year and say exactly the same thing if they fail to take action. Why would a council not make an announcement on the state of the road network, given that the public see the roads and know what is in front of them? It makes eminent sense to do that, but, if a council did not go down that road, we would raise the issue formally in the findings of the best-value audit. The best-value audit centralises the issues that matter to the local population in relation to local government provision.

It is obvious that effective scrutiny is crucial to financial stewardship. The overview report states:

"More needs to be done to improve the timing and quality of financial information provided to elected members to enable them to monitor service performance and the overall financial position."

Do examples of best practice exist in that regard? How can councillors be assisted to learn?

The most important aspect of the remit of Audit Scotland and the Accounts Commission is to ensure probity in council areas. That is the reassurance. Unless elected members are given proper, relevant and accurate performance management information, how can they make policy decisions on strategy in their council areas? That is an issue on which dramatic improvement is required, although there are examples of best practice throughout Scotland and the Convention of Scottish Local Authorities is working closely with councils to implement best practice in all areas.

Because of best value, the overview report from the controller of audit and the Accounts Commission will change and best practice will appear more and more. That is preferable to going back into history, which is always a danger. We are already 12 months on from the year 2003-04, but we can make progress by using best practice, which is the only way in which the councils that are at the lower end of the scale of provision will be able to step up their performance. COSLA is working closely with local authorities to try to bring that out. Also, the Improvement and Development Agency should, I hope, be a significant help.

Will the provision of the appropriate information require investment in technology or software, or can it be achieved from within existing resources?

The easy answer to every problem is that technology will solve it, but, in my 30 years of work, technology has never solved anything. However, it can be a great aid if it is in the right place and it properly reflects needs. The danger is that it can set us off on a tangent. To be serious, of course technology can help. Councils throughout Scotland have invested a lot of money in technology, although whether that has always been done wisely is another matter. However, the information exists; it is for the officers in council areas to produce it in a form that allows proper decision making by the senior elected members in the council.

I have a brief comment to make and then will ask a couple of questions. I welcome the helpful points that Mr MacNish made about local authorities' general fund balances and reserves because I had concerns about some of the media comments on that. Having been in a former life a local councillor trying to find money for emergency circumstances, I know just how valuable it is to have money to deal with such circumstances. The criticism of the local authorities that do not have such money was quite difficult to take in the recent comments about local authorities that are responsible and which do have that support. I welcome your comments about that.

My questions are about two areas that you mentioned. One is about waste recycling. I note your comments about how local authorities might struggle to meet the 2006 target. Is that because local authorities are being asked to plan their recycling in regional groups rather than individually? Does that add to the problems that they are having in bringing about the substantial changes? I recognise that having a recycling plant next door is not the most favourable option for many people and that there can therefore be problems in establishing them, but we will leave that aside.

When you look at community planning, do you think that the ability to work in the authority across a range of areas, as well as working outside the authority with partners in the public sector, is producing value for money in the decisions that are being made, the projects that are being developed and the response that local authorities, as the lead bodies, are able to give to developing services?

I will deal first with community planning. A tremendous amount of work has been put into the principles of community planning, for which local authorities have a statutory duty, as do health authorities and other partners. In practice, delivery of joined-up community planning has a long way to go. Although there are individual examples, an awful lot more work is needed. Audit Scotland is doing another study on community planning.

We are very keen to get out the first statutory performance indicators. The danger with that, however, is that one could make them so bland that the exercise would produce very little new evidence, which is a bit like the previous item that the committee discussed. The indicators need to be relevant and pertinent, so we are taking more time to try to ensure that the statutory performance indicators are more accurate.

Joined-up working on waste recycling has been successful in parts of Scotland where some of the highest rates of recycling are found. However, we are carrying out a formal study on that and it is due to be completed—

The waste management study will be completed in 2006. The community planning study will be completed at the end of 2005.

Both studies are ongoing.

I should declare an interest as a non-financial director of East Ayrshire employment initiative, which is funded by a local authority and it is an external organisation.

I am aware that you have said that a report called "Following the Public Pound" will be available and you said that there is an issue in relation to control and accountability of external organisations—you made a very general statement about that. The auditors also indicated that they have concerns that action is required, but no auditor has qualified any local authority accounts. How can you balance those two views?

"Following the Public Pound" highlighted a major issue about the many councils that had transferred their leisure services into trusts to avoid rates—

And compulsory competitive tendering.

Yes, the desire to avoid CCT was one of the main reasons for such transfers. However, many of the transfers were done quickly because councils were frightened that the curtain would come down, so there is a question about whether the transfers were totally thought through. Our concern is about councils' ability to exercise the same degree of control over and scrutiny of the large external bodies. We asked for a report after "Following the Public Pound" but, to be honest, the report did not satisfy us because it did not answer the questions. That is why we asked for the report to be enlarged upon. It is due soon.

We are due to publish the national report around the end of this year. We are at the second stage of the work at the moment.

I cannot say that there is a major problem, but we are uncomfortable that we do not seem to have the same handle on following the public pound through third parties—which receive large chunks of money—as we have in respect of the probity of councils. That is all that we are saying; we are not pointing the finger. The overview report mentions a couple of examples in which a surplus jumped to a deficit, but that can happen anywhere, such as in local authorities' direct services. There is some unease about the situation, so we need to consider in more detail how such trusts operate and whether the councils have in place proper checks and balances in respect of what is, in effect, public money. The jury is still out on that, but we will come back to the committee when we have an update.

I want to take that a stage further. I accept wholly that there might be an issue about trusts that were established some years ago in order to circumvent competitive tendering, but some of the other organisations are companies limited by guarantee. As such, they are required to have independent auditors and their directors are bound by company law. Those two different sorts of organisations both receive funding from local authorities. How will you deal with that?

The picture is complicated because it involves examination of both the council and the recipient organisation, which might be a trust, a company or a voluntary organisation. The study is examining how council money has been applied. "Following the Public Pound" may be a bit of a misnomer, because we are interested not just in how the money is spent but in whether value for money is obtained. Our focus is on whether the monitoring arrangements on the council side ensure that public money is being used properly.

As Margaret Jamieson rightly said, some of the organisations are separate legal entities that fall outwith the audit remit of the Accounts Commission and Audit Scotland. Such companies are subject to a separate audit regime, so we do not seek to interfere with that. The point is that substantial sums of money are going outwith the audit regime of the Accounts Commission and Audit Scotland. The guidance in "Following the Public Pound" sought to ensure that councils that enter into such relationships put in place sufficient monitoring arrangements to ensure that there is probity and value for money in the use of public funds. The issue that the report will consider is the extent to which such monitoring is happening and how effective it is.

I am comfortable with that explanation.

I have three or four questions about the report, but I will start with the section entitled "Approach to Best Value". Paragraph 23 states:

"Early findings from Best Value audits indicate that councils have been slow to develop systematic performance management arrangements."

Paragraph 24 goes on to state:

"Overall, councils' systems have a long way to go to meet the characteristics set out in Exhibit 3."

What is causing that slow progress? What action is the Accounts Commission taking to ensure that that is speeded up?

It is difficult to do that when only four councils have been reported on. The trend for the next four reports is different. Dundee City Council will be included and, before the end of the year, Glasgow City Council will be included. We have a mix of councils at the moment, but that mix is not quite right. Once we get a bigger picture for the whole of Scotland, we will see that better information requires to be given to elected members in several council areas in order for them to make proper judgments.

Figures can be produced, but they must be meaningful and relevant to the decision making of senior elected members in particular. Local government audit committees can play a major scrutiny role. My fear is that in many councils the audit committee's remit is too narrow. Even if their remit was broader, the committees would still need more relevant financial and performance information at service level.

Why does that robust information not exist at the moment? What are the impediments to progress in this area?

More work requires to be done by officials in each council area. The corporate management teams need to work on that and to take the requirement for information more seriously. That is coming out in the best-value audit reports. It will come out—as time goes on—that individual councils' senior management are not delivering what the elected members require.

Are those requirements not being given enough importance by the officers or by elected representatives?

It is a chicken-and-egg situation. If I was an elected member, I would expect the information that comes from officers to be accurate, appropriate and relevant to the strategic decisions that were being made by me and my fellow members. My first port of call would be officers. If elected members do not ask for the information and seem comfortable giving bland answers, the onus then also falls on them. It is a twofold issue. The elected members are equally responsible for ensuring that they get proper information. If Audit Scotland produced for the Accounts Commission information that I did not think was adequate for our decision making, it would go straight back to Caroline Gardner, in her capacity as controller of audit, and to the team. There is no difference with local government. Situations can arise in which senior elected members are looking for information that is not forthcoming.

What action has the Accounts Commission taken to ensure that such information is forthcoming?

The best-value audits will spell that out as each council is reported on. Watch that space—you will see it happening. The situation will vary among councils, but this is where the best-value regime has the greatest impact: we can see the genuine improvement that is made.

It is a throwaway line to say, "We don't have the right information." If we can target why and where information is inadequate, that can only help. In particular, it will help with the detailed improvement plans that councils must draw up with us. Those plans include target dates against which councils' actions will be monitored. It will not be a matter of waiting three years to do the monitoring; depending on the state of the council in question, monitoring will be conducted over three months, a year or however long is required.

The next part of your report is about compliance with audit committee principles. Are you satisfied with the rate of progress in that area? There is obviously a long way to go.

No, we are not satisfied. There is a lot of work to be done. Where the audit committees are performing their duties in a way that we believe would be helpful to the council and to residents of the local authority area, that has clearly been beneficial. Sometimes, it might be just a matter of their having merely paid lip service. Two or three years ago, we said that councils must create audit committees and have proper scrutiny. I was about to say that everybody rushed away to set them up, but not everyone did. It has taken an inordinately long time for some councils to set up audit committees. Sadly, some of them still have very narrow remits, and proper scrutiny is not—

Could you explain that? I am unclear about what you mean when you say "narrow remits".

Their remits are narrow in that the information that they deal with might be purely about budgetary control and not about whether the policy that the council has laid down is the policy that is being carried out in actual delivery of service. It is clear that each council has a policy, in which they state what they will try to achieve—X, Y and Z. Audit committees have a scrutiny role, and financial information is issued monthly, so there is a requirement to determine whether councils' strategies are being carried out. That is a significant role because the leadership of councils is challenged in that process. Members will be aware of such situations, given their own remits: it is not necessarily comfortable for the leaders of councils to be challenged from within.

If we are to improve services in an area, that work requires to be robust and we are saying that many councils need to make a step change. Some of them are well advanced along the road and are open about the scrutiny role and the audit committee principles, but many councils have a long way to go. I hate to return to the point, but that will be highlighted as the best-value audit reports on individual councils come through.

The question that we ask in reply to that is: what action have you taken to speed up the progress of the councils that are well behind the game? Does publication of the best-value reports impact on the audit committee principles and the need to get that right? Is that the only tool that you have or are there other ways in which you try to encourage progress?

That is always a difficult question. We do not have a gun at the head of local government. Local authorities recognise that we are genuinely independent and that we have no axe to grind. We do not speak on behalf of anyone other than the residents of the local authority area and we are not dictated to by anyone. If we return to a local authority the following year and things have not moved forward, that is highlighted in media coverage and in the statements that I and my colleagues make.

In the first year, we said that there had been little progress. Since then, there has been significant progress, but we still have a long way to go. I would rather encourage people along the road. If we say, "You must do this", they will play the game, but they might not act in a way that represents best value.

The new tool in the Accounts Commission's armoury is the follow-up process to the best-value audit reports. There have been a couple of examples in which the audit report has identified that the audit committee is not fulfilling the principles that are set out in the overview. In those cases, the improvement plan that has been agreed with the local authority contains specific actions to drive up performance and to ensure that the audit committee meets the remit in the future. If that does not happen, the Accounts Commission has the power to report on that and, if necessary, to make recommendations to ministers. The improvement plan is a key part of ensuring that action takes place on the back of the shortcomings that have been identified.

If the Parliament's Audit Committee is not happy with a report that comes before us, we summon the accountable officer. Does the Accounts Commission have the power to do that? Also, who is the accountable officer in a council? Is it the chief executive or the finance officer?

The accountable officer of a council is the chief executive, although the position under section 95 of the Local Government (Scotland) Act 1973 is that the finance officer is accountable. Along with the leadership of the council, the chief executive is a major player in self-assessment and so is in the middle of the equation. They are questioned, interviewed and challenged by the best-value audit team before a final report is produced. When we meet a council after the best-value audit is released, we meet the chief executive, the leader of the council and the leader of the opposition. We have left that open so that we can meet the full council, but we insist that all parties in the council be represented so that everyone hears what we are concerned about and what we are pleased about. It is not a closed meeting.

The system works well. It is time consuming for the Accounts Commission, but it adds tremendous value. We promised the council leaders that, regardless of whether the report is damning or is full of praise, we would meet them. We take the flak if they think that we have been unfair or over the top. Justification of our findings is part of our remit.

There is a substantial variation in the general fund balances as a percentage of net costs of services at 31 March 2004. What is the right level?

The right level is the right level. I know that that is a "Yes, Minister" answer, but we are talking about the level that is right for a community. If a council has hypothecated money that cannot be spent in that year, but which it knows can be spent in the following year, it has to keep back the money. If a council thinks that 2 per cent, 3 per cent or whatever is a prudent level for emergencies, it retains that level of funds. Part of our concern is that if a council does not know what its balance will be at the end of the year, we will of course have a problem, which takes us back to performance management information.

If a council has not spent the money in the appropriate year, the money is lost. Although better neighbourhood services can spend money as quickly as they get it, they have to spend it wisely—people cannot have a pot of money thrown at them and then go out and blow it. They have to plan so that money is spent appropriately, which could take six months.

It would be absolutely crazy for any organisation to come along and say to a council, "You didn't spend that money this year. That's disgraceful." However, we need to see that councils have at least thought things through and that they have explained their decisions to their public. No council will attract the media headline, "Council tax could have been halved" if they have explained exactly why they retained the money. It would then be up to the public to decide whether the explanation is legitimate.

And that should be part of the council's annual report.

Yes. This year, we will do a lot more work in the audit on how reserves and balances are made up, and on decision making and on whether it was transparent. The 2005 overview report will contain much more information in that respect; we will glean it separately, outwith the statutory audit process.

Very good.

I realise that the remit of the report means that you are quite tightly constrained in terms of what you can and cannot report. Obviously, councils are to be congratulated on making progress on recycling. That said, the recycling figure is definitely an underestimate because it does not include community recycling. The cross-cutting review of community planning partnerships could take that into account; it could look at ways to improve things in the future.

It would be useful to have the figure for the total amount of what is called "waste"—which I call resources—that goes to landfill. There is a serous possibility that the figure is still going up. What I am trying to get at is that we cannot make a judgment of how we are doing on the bare figure alone.

No, that is a fair point. We need to clarify the figures to make sense of the issue. I have a clear indication that a lot of effort is going into this area and that councils have not dismissed the target as being impossible—indeed, some councils have achieved it already and others are working hard to do so. Everywhere I go, I see a massive improvement in what councils are trying to do. Perhaps David Pia will comment on landfill.

As we said, we are carrying out a performance study on waste management. We will look at the role that local authorities play in developing waste management strategies and at their performance. Part of the study will address wider issues, such as that which Robin Harper highlighted. He is correct that the performance indicator figure refers specifically to council recycling and we are aware that much more recycling than that goes on. We will be interested in examining the contribution that council waste recycling makes to the wider frame of things.

If I may, I will take a step back and ask about the broader context within which Scottish local authorities now work, particularly in the post-devolution era. I ask you to share with us what the local authorities may have shared with you about the impact on local government of the various measures that Parliament and the Executive have taken. Obviously, I do not expect you to comment on the policies; I am thinking of the process.

Clearly, the sheer volume of policy initiatives in recent years has been significant, as have the amount of regulation and the demands for monitoring and information even outwith statutory requirements, an example of which we heard in our earlier conversation about community care. Obviously, very different relationships now prevail at political level and at civil service level. I would be grateful if you could give us a sense of what best practice there might be on the national scale that might enable us to help our 32 local authorities to achieve best value?

That sounds similar to the question that you asked last year.

Surely not.

It is a difficult question to answer from the Accounts Commission's standpoint, but that did not stop me last year.

I was careful to frame my question in such a way that I was asking you to tell us what local authorities had said to you.

Local authorities feel that they are the most scrutinised and inspected of all of the public sector organisations and they wonder whether that always adds value. I share that view passionately—we have to be careful. It is great for one quango to say that, but unless we ensure that we keep scrutiny at a minimum, officers will spend an enormous amount of time filling in paper, which happens at the moment. That message has come through strongly from the officers and elected members in local authorities. I take that on board. All the strategies and edicts that come from Parliament must be judged in terms of whether they will increase best value and value for money in the local area.

Local authorities have told us that, although they are always pleased to get money, it would be better if the money were more structured and were allocated in advance of the purpose for which it is allocated. That is partly why balances increase, why hypothecated money is not spent and why the public are frustrated. More co-operation when there are new initiatives would help significantly to alleviate that problem.

On the process of resource allocation, could you—without reference to any specific service or policy area—share with us any observations about what good practice might look like with regard to the difficult balance that must be struck between national and local needs when deciding that something is a priority, working out what resources are required to facilitate the delivery of a new policy priority and deciding when those resources can be released into the system? Hypothecation comes into that, but it is only one part of the jigsaw. Could you share with us any insights into that process, which comes up time and again in the thinking of this committee?

I will make a brief comment before allowing Caroline Gardner to comment.

I believe that the issues that face every council area are unique to that area. There are many similarities between areas, but a new initiative might not necessarily be the most important issue in that community. The Scottish Executive has to take that on board.

One of the things that we are considering in community planning is how partnerships can strike the balance between their critical role in delivering national priorities and ensuring that they have room to agree and work on local issues that matter to their communities. It is important that they can flex their resources in order to meet both those aims. There has to be a mechanism by which they can deal with their priorities and the actions that flow from them.

We have said several times that we are doing more work on particular areas. We have begun highly focused work on funding for initiatives that comes from the Executive. We want to find out how we can learn from experience and ensure that such money is allocated as effectively as possible and in a way that does not place unreasonable demands on councils and their partners locally. We want to focus on what the money is being used to achieve and how we can evaluate its impact. There are two levels of involvement, both of which probably matter.

You mentioned community planning, to which Mary Mulligan and others have already referred. How and when can we get a clear understanding of what discernible impact community planning is having on the ground? You address the issue in your overview report and I know that a further study will be done, but it strikes me that it will be quite a few years before some of that work has been completed. Can we use a lighter touch to get a sense of what is happening? A number of us have concerns—perhaps as a result of anecdotal evidence—that a great deal of process and paper are being generated. I think that you are going to tell me that I asked about that last year as well; if nothing else, I am at least demonstrating consistency. Even if I asked about the issue last year, another year has elapsed. In a sense, that is the point. We all want the community planning process to develop improvements for people locally. How and when might we be able to reach some assessment of whether it has done so?

I have a concern about the time that it will take to get solid information on community planning, the impact that it is having and the joint working that is taking place. That is why I am inclined to get one or two quick statutory performance indicators, even if they are not perfect. We could give caveats to go with them. Even to do that would not be easy, because the issue is highly complicated.

I want to say a little more about the study. It will report at the end of this year, which is not very far away. It will describe what is happening with community planning by pulling together the information that is available, which will provide evidence on the amount of work and time that are being spent on it. It will also identify how community planning partnerships are saying that they will evaluate their performance, so it will give us some information about the measures and indicators that can be used.

We are doing that work because the commission acknowledges that it has a role in identifying community planning performance indicators. Although the task is complex, completing it should give us some measures that will help us to examine performance. The longer-term impact of community planning is a more complex matter.

Rather than getting the planning partnerships to evaluate their own impact, will you, as part of the work that you are doing, ask local people to assess the impact of community planning?

We will not ask people directly about that. Our work will describe what different community planning partnerships are doing to evaluate their performance.

I share Susan Deacon's concern. I do not know how we do it, but we need to make progress as quickly as possible so that we can report solidly on what is happening on the ground. A lot of effort has gone into the paperwork and the principles, but the practical implementation has some way to go. Audit Scotland, the Auditor General and the commission need to try our best to push forward that agenda because it is easy to get a bland reply on the progress that is being made. Community planning is a vital area, to which a massive amount of resources has been allocated.

I have a few small follow-up questions. As you will have noted from our discussions with the Auditor General, we are frustrated about our ability to drill down to track how local government delivers policy initiatives from the Executive. I take it that the process of best-value audits is central to being able to get good-quality information on delivery. Once the best-value audits have been completed, that should help to inform the committee and give us reassurance. When do you expect that that information will be available throughout Scotland?

Unfortunately, it will take three years for the best-value audit to be completed across all authorities. By 2006, we will have broken the back of the first set of best-value audits, but 10 to 12 authorities will still have to be audited. By that time, there will be a clear trend in the information that is required for the committee to be able to drill down. We have already noticed that the councils are learning from the first four best-value audits and are trying to set their houses in order. That is great; it is the best news that we could get. The councils are saying to themselves, "Wait a minute—we are way behind in this area." Best value is being eked out from the authorities whose audits have been completed. They are saying, "Here is the improvement plan that we have introduced, even when we thought that we were doing quite well."

We hope that that will enable the committee more easily to assess how Government initiatives are being implemented on the ground. However, that will take some time. This is an important process of information sharing. As and when we are able to update the information, I am happy to come back to reassure the committee or to give further information that would help your deliberations. The Auditor General does that consistently, but I have no difficulty with that from the point of view of the commission.

You gave us a useful briefing on best value before the procedure started. As you have reported to the committee, four audits have been published—a further two are due soon and by the end of this year you will have completed a third. We would need a response from you on timing, but it may be useful for the committee to have an interim briefing on what lessons are being learned at this stage.

I would not suggest that we should wait until 2007 to update the committee—I would be away then, anyway. I am happy to give the committee an interim briefing. Again, we would have to come up with general findings on the principles that are emerging, rather than specific findings on best value in individual councils, which would be a more awkward road to go down. However, I am happy to report back to the committee—that process helps me in respect of the commission reporting back to the commissioners and I am sure that it will help my colleagues from Audit Scotland.

We will negotiate a suitable timescale for that with you.

Four best-value reports have been published and two are shortly to be published. Over the past six or seven weeks, I have been reading about the Inverclyde Council report in the Greenock Telegraph. Why is that?

I have my own ideas of how the Greenock Telegraph managed to get an advance copy of the controller of audit's report, which will be a public document. We are not talking about the commission's findings, which come out on Thursday—that is the part that we would answer to. My understanding is that the leak to the Greenock Telegraph came from within the council. As is appropriate, we will make no comment until Thursday. The commission findings will be published at one minute past midnight on Thursday.

There has been quite a lot of discussion at today's meeting about council reserves and balances. As you have explained, councils have reasons for those. An example might be keeping funds available for flood prevention programmes that are planned for but have not yet been initiated. Those are sensible precautions. Bearing in mind that the committee does not consider individual councils but is interested in the general picture and therefore in trends, are you concerned that there is a trend towards less explanation being given of the reserves and balances or—even worse—a trend towards imprudence in those reserves and balances?

We would take on board the balances trend each year in the statutory audit of the council area. If we thought that there had been imprudence, that would be shown in the auditor's statutory report. If we had concerns about the level of balances across the Scottish authorities, we would say so. However, we are not saying that at the moment; we are saying that things must be transparent and clear and that policies must be laid down. As a result of the 2004 overview report, we are going into far greater depth in the 2005 overview report so that there is much more specific information about each council area. I assure members that, if we have concerns, they will be identified and made clear in the commission's report. At the moment, all we are saying is that local authorities require to be prudent and transparent in what they let the public in their areas see.

I thank Alastair MacNish and his team for addressing the committee and for giving members a briefing, which I am sure has been helpful. We will be in touch in due course about a briefing later in the year on the best-value audits.

That concludes consideration of agenda item 5. We will now consider in private agenda item 6, which is on the Auditor General for Scotland's section 22 reports.

Meeting continued in private until 12:30.