Official Report 555KB pdf
The next item is to take evidence from the Auditor General for Scotland on his section 22 report on Historic Environment Scotland. We are joined by Stephen Boyle, Auditor General for Scotland, and Lisa Duthie, audit director for Audit Scotland. Welcome to you both. I understand that you will be giving a short opening statement, Auditor General.
Good morning to the committee. I am very grateful to join you and I thank you for the invitation to speak to you about “The 2024-25 audit of Historic Environment Scotland”, which is a report that I published last month under section 22 of the Public Finance and Accountability (Scotland) Act 2000.
The report brought to Parliament’s attention unacceptable governance at Historic Environment Scotland, including weaknesses in procurement, personal data breaches and unclear processes for the distribution and use of complimentary tickets for events at its venues. It also identified arrangements that we considered unacceptable in respect of the archive house project. That project has continued to incur expenditure despite being cancelled in 2024 and the decision to end it was not supported by either appropriate governance or scrutiny in the organisation.
I note that Historic Environment Scotland is navigating a period of significant instability and challenge. During 2025, it operated without a chief executive or accountable officer for almost six months. Although I recognise the complexity of the situation, I believe that the Scottish Government should have appointed a substitute accountable officer to provide the continued necessary leadership and accountability during that period.
I appreciate that the committee knows many of the matters relating to Historic Environment Scotland well. It will have seen that a new chair is in place, together with a recently appointed interim chief operating officer. It is critical that strong controls are now put in place to prevent the risk of fraud and to demonstrate that value for money is being achieved. During the annual audit process, the appointed auditor, Lisa Duthie, who is with me this morning, will continue to monitor developments, including any progress towards the implementation of audit recommendations. As is usual following section 22 reports, I will give further consideration to whether any follow-up reporting to the Parliament on progress is needed.
I am happy to be here, and I look forward to answering the committee’s questions.
Before I bring in colleagues, I will ask a simple question. How surprised were you with the extent of the failings that were uncovered by your report?
They are unusual circumstances for a public body. As I regularly say to the Public Audit Committee when I produce a section 22 report, most public bodies in Scotland are well run. They receive clean audit opinions and, although recommendations are included in many of the annual audit reports that are produced by their auditors, they are certainly not of the scale or significance of those in the audit report on Historic Environment Scotland.
The report sets out that there are many matters to address in terms of Historic Environment Scotland’s leadership, governance and internal control environment and that the organisation can put in place the necessary, proper and rigorous arrangements so that it can do what it is there to do and provide its vital services. What is particularly relevant in this context is that it is an organisation that generates more than £70 million of additional income for public services in Scotland. That is unusual in scale for a public body, and it perhaps illustrates the point that even more rigorous arrangements are necessary in such circumstances.
The unusual circumstances prompted me, particularly given the strength of the content of the auditor’s report, to prepare this report for the Parliament.
You say that it is unusual. Given your experience, how would you place the problems that you have uncovered at Historic Environment Scotland in the context of the wider picture of the problems of other public bodies that have been subject to a section 22 report in recent years?
The problems at Historic Environment Scotland are towards the challenging end of the spectrum, if I can put it in those terms. I prepare statutory reports—section 22 reports—on an annual basis. Every year, I prepare a statutory report on the Scottish Government. Although a section 22 report is sometimes characterised as a “what went wrong” report, I prepare them to support parliamentary and public interest in the scale of the activities and spending of the Scottish Government. Other reports are more in that alternative category, setting out where events have gone wrong in a public body.
Many challenges are set out in today’s report for the organisation to focus on, but the report’s aim is particularly to guard against risk and to highlight the need for effective governance and scrutiny and for high-quality internal controls in the organisation, given the range of activities that it deals with. Historic Environment Scotland is not just a public body delivering services; it has large-scale commercial activity going on inside it—not in a subsidiary—and it needs to get those arrangements strengthened, monitored and improved.
You suggested that it was at the worse end of the spectrum. Would you say that it is the worst case that you have dealt with?
It is hard to pin that down when comparing with other section 22 reports. There are other reports—including some that I have produced in recent years—that show significant deficiencies in how a public body was run. They have parallels with the report before the committee today. Rather than saying that the report rests on a particular side of the spectrum, I will say that, as I hope is clearly set out in the report, there are many issues to be addressed.
We welcome the new chair of Historic Environment Scotland’s response to the section 22 report and his intention to review the organisation’s effectiveness and culture. When I gave evidence to the Public Audit Committee on the report around two weeks ago, culture was discussed, and I was pleased that the chair is including that, as part of the review process, that is being undertaken. Although resolving the issues is necessary, I do not underestimate their scale. They are complex issues of leadership and governance for the organisation, under the leadership of the chair, to address.
I am conscious of time, but I think that there is interest in this issue, so I will move on to Stephen Kerr.
How did this happen to Historic Environment Scotland? What is your assessment? Maybe that is a question for Lisa Duthie, because she has got into the forensic details of the organisation. How on earth did we get to this place?
The starting point is to refer you to the appendix of our section 22 report, which sets out the extent of the instability in leadership over the period of time in question. A number of the matters that we refer to and have reported on today fall within that period. That starts with the interim appointments, when the previous director of finance and corporate services and chief executive left, and then the appointment of a permanent chief executive in September. Subsequently, there is her absence and the lack of an appointment of a substitute accountable officer in that time.
So the management of HES’s affairs has been pretty unstable for a considerable period of time. We are talking about more than two years.
Do you mean the leadership?
Yes, the leadership.
There has been instability in the leadership dating back to 2023.
The Auditor General has highlighted the six-month period when Historic Environment Scotland did not have an accountable officer. This question is not directed solely at you, Lisa. In your professional judgment, at what point did the lack of an accountable officer go from being understandable to being unacceptable?
The first thing that I would reference is the correspondence that the committee has received from the cabinet secretary and the evidence that the committee has taken from the cabinet secretary and his officials. As we have set out in our annual audit report and in the section 22 report, this was a fluid set of circumstances. An organisation will not necessarily know straight away how long a chief executive is going to be absent. We also understand, and it is set out in the correspondence, that there was something of a to and fro about prospective acting or interim arrangements, and they were also interrupted by the early resignation of the former chair of Historic Environment Scotland.
Those are all contextual points, but what we have before us is an organisation that was going through a challenging time and operating without an accountable officer. The Scottish Government should have appointed a substitute or acting accountable officer during that period. It should have acted sooner than it did.
We also disagree with the assertion that, when the accountable officer returned to work, they were able to discharge their duties solely in respect of the annual report and accounts. Since then, the accounts have been signed by discharging them in response to the section 22 report. We are quite clear—indeed, it is not just me; the Scottish public finance manual is quite clear—about what the duties of the accountable officer are. Those duties cannot be distilled down to a transaction here or there. They are all-encompassing personal responsibilities that are set out for that person by the permanent secretary of the Scottish Government.
What matters is that there should now be a period of response and stability, and clear lines of accountability through an accountable officer as quickly as possible, so that the organisation can move on and bring stability back.
Just to update the committee and those who are watching the proceedings—there will be a few, because the issue has generated a lot of interest beyond the organisation—how would you describe the current arrangements for an accountable officer in HES? Who exactly is carrying out all the totality of those responsibilities as described in the Scottish public finance manual?
I hope that the committee will know that the chief executive has returned to work with Historic Environment Scotland, but in a limited capacity. I will bring in Lisa Duthie to say a bit more about the specifics, but we understand that they were initially to discharge those responsibilities in respect of the annual report and accounts, and now they are working in response to the section 22 report and external engagement.
Alongside that, as I mentioned in my opening remarks, the chair of Historic Environment Scotland has also brought in a chief operating officer to provide leadership management for the executive leadership team. I would describe that as a hybrid, but I do not think that that hybrid is fully captured in the Scottish public finance manual. Ultimately, you cannot delegate the responsibility of being an accountable officer; it still resides with the individual who is appointed by the permanent secretary. At the moment, Mr Kerr, we have something of a hybrid-style arrangement, but I am not clear that it maps fully across to the requirements of the SPFM.
10:15
I do not want to put words in your mouth, and you would not let me anyway, because you are very accomplished, but HES does not appear to satisfy the requirement of the Scottish public finance manual in having an accountable officer as things stand, because there is no contingency for hybrids.
It will be for the organisation to assert how it is meeting those requirements. Lisa Duthie might have a view—she has been around the organisation more regularly than I have—but I cannot quite reconcile the very specific duties of an accountable officer with the arrangements that HES currently has. It has senior, credible people in the organisation, but not necessarily in an arrangement that is consistent with those delegations.
You cannot delegate that role; there has to be a named individual, according to the Scottish public finance manual.
That named individual is the chief executive.
But they are not fulfilling that role.
My assertion would be that I am not clear how HES can discharge those responsibilities with the nature of the duties that it is currently able to fulfil. As the committee knows, there are on-going circumstances that we refer to in the report, including complex human resources matters in the organisation.
Yes, we might come to those, but I know that time is restricted. Lisa, you have been referred to a few times—do you want to come in?
The Auditor General has set out the current arrangements, including the fact that the chief executive is back at work in a somewhat limited capacity. Importantly, a chief operating officer has been appointed for a six-month period. That individual is leading the executive leadership team and the day-to-day operations, and is bridging the gap between the executive leadership team and the accountable officer.
I appreciate that, but I am going to assert something, which is that, under the provisions of the Scottish public finance manual, there is not a clearly defined person who is fulfilling the role of accountable officer as per the manual and the requirement. You have used diplomatic language, but I am interpreting it that way. Please jump in and say that I have completely misinterpreted what you said, if that is not the case, but it sounds to me as though we are in an unsatisfactory position, where delegations that are not permitted are going on, and there is someone in a role who is not in a position to fulfil the full measure of the accountable officer role.
It would be absolutely desirable for the organisation to move on from these arrangements as quickly as possible, so that it has a clear accountable officer who is discharging all the responsibilities that are set out in the SPFM. We are not in that position at the moment.
The committee’s role, obviously, is to scrutinise the Scottish Government, and in the case of this example, a non-departmental public body and the role of the cabinet secretary who is directly responsible for the body. I think that your section 22 report clearly states that the Scottish Government did not act in a timely way, or even in an urgent way, to deal with these issues.
In the report, there is talk about ratings going from green to amber to red. Is the situation still the same if HES does not have an accountable officer, by the definition of the Scottish public finance manual? Are we still at red?
It is my understanding that it is. The traffic-light flow changed from green to amber in May 2025, and then from amber to red in August 2025.
Are we still at red?
That is my understanding. If there is an update, I can come back to the committee in writing.
So we have still not had action from the Scottish Government or the office of the cabinet secretary to remedy the situation where a significant and very important body in Historic Environment Scotland is operating at a red status.
I would not say that we have not seen action. There has been the appointment of a new chair and chief operating officer, which brings some stability to the organisation and allows it to respond not just to the events outlined in our reports but to concerns raised by others, for example about the internal audit function. Although I agree that the issue with the accountable officer needs to be resolved, there has been a response.
The traffic-light grading that the Scottish Government gives to its sponsored bodies is a decision for portfolio accountable officers to arrive at through their own assurance processes. It is unusual for an organisation to be red—that is a decision for the portfolio accountable officer—but, given the circumstances, I am not altogether surprised that it has remained red. We would hope to see evidence in 2026 of progress that would allow HES to de-escalate that situation.
At the very least, though, the cabinet secretary should have acted to ensure that a substitute accountable officer was in place, but we still do not have that.
As I mentioned, I have seen the correspondence that sets out some of the to and fro about why, in the Scottish Government’s view, circumstances transpired that did not lead to a substitute accountable officer being appointed. As I have said this morning and have clearly set out in our report, we think that, at some point, a decision should just have been taken. During the audit and accounts process, but also just for day-to-day operations, there needed to be a level of clear lines of accountability and oversight that only an accountable officer discharging all of those responsibilities can satisfactorily attend to.
You mentioned other issues, such as the toxicity of the workplace, which has been widely reported. We express our gratitude to those who have been courageous enough to whistleblow about the toxicity of the organisational culture in HES. Two positive things have happened: the appointment of Sir Mark Jones—who no doubt has his hands full, as he has a contract for only two days a week—and a brand-new chief operating officer. However, do you have any concerns that it will require something more than that to deal with the ingrained nature of the toxicity of the organisation and its culture? Do you have a view, for example, on whether there ought to have been, before now—or at least now—some form of external, independent review of the organisation and its workings and culture?
I will turn to Lisa Duthie in a moment, because she has insight into the capacity of the organisation’s leadership in these circumstances.
I welcome the fact that, in response to the audit findings and allegations made by whistleblowers, the organisation has initiated a review of its effectiveness and culture. We hope that that review, which we understand is due to run until this spring, concludes swiftly.
Is that an internal review?
Lisa Duthie can share some of the details that we have. We understand that HES is bringing in an experienced leader from outside the organisation to run the exercise. Again, that feels like a positive development in response to the need to tackle the issues.
My one caveat is that some of these issues are really complex. I appreciate that the committee has seen some of the correspondence—the allegations will require an in-depth process. There is always a balance to be struck. We want it done quickly, of course, but we also want it done properly and thoroughly. I will turn to Lisa for further insight on how that translates into the capacity of the leadership of the chair and chief operating officer.
I understand that the review of the effectiveness and culture of Historic Environment Scotland has commenced. An external person has been appointed to carry out the review, which, if it progresses well, we expect to be concluded around May 2026.
As the Auditor General has mentioned, with the appointment of a new chair and chief operating officer, and two interim board members for 12 months, a number of actions have been taken to resolve the current situation. It is probably also worth pointing out the principal risks that Historic Environment Scotland recognises in its own annual report and financial statements. One of those is people and culture. Specifically on the actions that are being taken to mitigate that risk, there is the wellbeing pulse survey that the organisation undertakes as well as on-going engagement with staff and a people strategy, so that we can see a recognition of the risks that exist, particularly around culture, and we can see action being taken to resolve that.
Okay. I have one final question, which is a continuation of the discussion about the current state of the organisation. I have perhaps dwelt for too long—I do not know—on the accountable officer, but that seems like one of the crucial issues coming out of the section 22 report. There is also the issue of internal financial controls in relation to things such as the 400 purchasing cards, which seems an extraordinary number in an organisation with, if I remember correctly, 1,200 employees. What has changed in the past month in relation to the issues that you highlighted that relate directly to internal controls?
As well as the work that we carried out on the electronic purchasing cards during the year, internal audit carried out a detailed review of the use of those cards. I refer in my annual audit report to its recommendations. That was a limited assurance report and there were nine recommendations in it that were accepted by the management of Historic Environment Scotland, so we expect to see progress against those. The report was issued in August and it went to the audit, risk and assurance committee in November time, I think. We will follow up on it as part of our 2025-26 audit.
Do you have any idea whether any of the recommendations that were accepted have now been actioned? Will we see a reduction in the proliferation of purchase cards?
We have not yet followed up on those recommendations, but we will do that as part of our 2025-26 audit. Also, there is a meeting with the audit, risk and assurance committee in February, at which we would expect to see a status update on all internal recommendations within the organisation.
I appreciate that we are short of time and I have taken up a lot of time. I am grateful to my fellow committee members for allowing me that indulgence, but I should probably stop there. Thank you.
Thank you, Mr Kerr. Neil Bibby is next.
To go back to the convener’s opening questions, I think that similar issues were identified in the Water Industry Commission for Scotland, which led to a Government review and changes. At the same time, there have obviously been serious issues at Historic Environment Scotland.
I asked the culture secretary when he was last here discussing it what assurances we have that such cultural and financial issues are not happening in other parts of the culture sector, and he said that there are no such issues in other parts of the sector. I appreciate that you have 200 public bodies to look at, but what confidence can we have that these issues are not replicated in other parts of the culture sector specifically?
The assurance that I can give the committee this morning is that a section 22 report is rare. We do not just do an audit of the accounts in the public sector in Scotland. We also do what we call a wider scope audit—we look at financial management, financial sustainability, governance and leadership and value for money. An audit is not foolproof, but those warning signs are not being set out through our audit work on other public bodies.
It has been mentioned already this morning that some of the sponsorship arrangements within the Scottish Government are another indicator, or a temperature test, of how public bodies are performing. You mentioned the Water Industry Commission for Scotland, which is one of the most significant examples in recent years of a public body with challenges, but such examples are unusual.
We think that the arrangements through public audit and, for the most part, sponsorship, are working, although there is still work to do on sponsorship arrangements with public bodies.
As I set out in “The 2024/25 audit of the Scottish Government Consolidated Accounts”, which I referred to earlier, it is clear that the Scottish Government has made progress on sponsorship, but there are still aspects to be tackled around the sophistication of sponsorship and how that can work effectively. As you would expect, I am not in a position to give a blanket assurance that these issues are not being replicated. However, I will invite Lisa Duthie to come back in to speak about findings from previous parliamentary inquiries or audit reports and the extent to which they were used by Historic Environment Scotland, which might be of interest to the committee.
10:30
Some of the issues that we raised in our report were brought to my attention through the risk assessment process of the audit early on, by both the previous appointed auditor and Historic Environment Scotland’s internal audit service—specifically, the issues with electronic purchasing cards that you can see. As auditors, we would regularly carry out high-level risk assessments in this area. Quite often, that is not material to the audit, so, as you would expect, we do not carry out detailed testing, but I would expect that it would come up through the risk assessment if there were an issue.
Auditor General, you talked about “unacceptable weaknesses in … governance” at HES. I think that sometimes when the word “unacceptable” is used—not by Audit Scotland but in the political sphere—it does not really mean anything. Governments will say that a situation is unacceptable, but then accept the situation. I am not criticising you here.
You have talked about unacceptable weaknesses and the desire for HES to move on from its current arrangements in relation to the accountable officer as soon as possible. We have had a situation, as you have said, with invoices for farewell dinners, non-compliance with foreign travel policy, poor monitoring of expenditure, and 400 credit cards being issued to staff, with almost £2 million spent on those credit cards.
What powers do you and the Scottish Government have to turn an unacceptable situation into an acceptable one? Obviously, the desire is for HES to get its own house in order, but ultimately, what powers do you and the Scottish Government have to ensure that we get those changes?
Those powers are quite different. My powers are set out in the Public Finance and Accountability (Scotland) Act 2000. I have no powers of intervention. My responsibilities allow me to report publicly on matters arising under section 22 of the 2000 act, through an annual audit, which we have done in this case, or under section 23, whereby I undertake wider value-for-money studies on particular topics across public services.
I will return to the question about the Scottish Government in a moment, but you made a point about “unacceptable” governance and referred to a number of instances of that. For completeness, the substance of those are: the absence of policy arrangements, and of compliance where there are policies on hospitality, the allocation of complimentary tickets, procurement arrangements not always being followed, data breaches in the organisation, which are being investigated, and there not being a formal register of interests for senior leadership in the organisation. Those are all points on which we have made recommendations, and they can be fixed. They are not terribly unusual or complex issues that cannot be resolved. I think that, in many respects, it is not so much a case of my having powers; it is a case of following proper processes and having effective policies in place and implementing them. That keeps the public body safe; it keeps people who work for the public body within parameters in which they can operate safely.
On the Scottish Government’s powers, sponsorship has been mentioned a couple of times. Scottish Government officials provide sponsorship, engagement, support and challenge to the public bodies that they work with. Ultimately, ministers will also have powers to direct public bodies; there has been some discussion in recent years about that being done through written authority or ministerial direction. There is, therefore, a range of alternatives that the Scottish Government can deploy.
I think that there is probably a level of complexity well below that, too. Those are arrangements that can be fixed. It might take the independent review longer to conclude its investigation of some of the cultural factors, but I do not see in this report an insurmountable number of issues that should derail the organisation while it is addressing them.
You mentioned the reasons that the Scottish Government has given for not appointing a substitute accountable officer. Obviously, you will have had conversations and correspondence with the Scottish Government and HES on that issue. Mr Kerr asked Mr Robertson in a parliamentary question whether the Scottish Government
“will publish the correspondence it received from Audit Scotland regarding the reported governance failures of Historic Environment Scotland”
and Mr Robertson replied:
“The Scottish Government did not receive any direct correspondence from Audit Scotland”.
I do not know whether that means that he has received indirect correspondence. He went on to say:
“Further correspondence from Audit Scotland on the Section 22 report may have been received directly by Historic Environment Scotland.”—[Written Answers, 15 January 2026; S6W-42703.]
Are you able to publish the correspondence that you have had with the Scottish Government or HES, so that we can understand the reasons that you have just cited for their taking particular positions?
Sure. I am very happy to set out how that operates for the committee, and Lisa Duthie might want to explain it from the perspective of the annual audit process, too.
When I received the auditor’s annual audit report, a number of weeks before publication, I read it—as I do with all the annual audit reports that auditors produce—and decided that there were matters of significance that, in my view, warranted the preparation of a statutory report. Lisa Duthie, together with Audit Scotland colleagues, supported the drafting of that report, and I then sent that draft document to Historic Environment Scotland—which makes it correspondence, in effect—as part of what we call a fact-checking process to allow HES to confirm the factual accuracy and offer any other thoughts and comments.
That process is set out, but the cabinet secretary is correct: we do not write to the Scottish Government in that regard. That is correspondence that we have with the individual public body.
What we do not do, proactively, is publish the drafts of our reports. We would consider and reflect appropriately on any request to do so, either from this committee or from a member of the public, through the freedom of information procedure. The point, though, is that the process does not happen with the Scottish Government; a statutory report is on an individual public body, and that is where the correspondence resides.
If you would be content, and if it would be helpful, I will invite Lisa Duthie to say a bit more about the clearance of the annual audit report.
I can add a small amount of detail on the scope of the section 22 report. Once the Auditor General made the decision, the report’s scope was issued to one of the directors of Historic Environment Scotland—obviously, the chief executive was absent at the time—and I requested in that email that it be shared with the full executive leadership team as well as the sponsor team for information. So, that team would have been notified at the same time.
In the context of our engagement with both Historic Environment Scotland and the Scottish Government throughout the chief executive’s absence, my colleague Carole Grant, who is an audit director for Audit Scotland and engagement lead for the Scottish Government audit, engaged directly with the sponsor team on their understanding of the position and what action was being taken to identify a substitute accountable officer on the Historic Environment Scotland side. I had various engagements with the former chair of the board, members of the executive leadership team and the chair of the audit, risk and assurance committee. So, there was substantial engagement during that period.
Thank you.
I call Mr Harvie, to be followed by Keith Brown.
Good morning. I, too, was going to ask about the lack of the appointment of an interim accountable officer. I agree that there seems to be a lack of clarity about what happened in that case, but I am also concerned about the lack of clarity about what is supposed to happen. Any public body might find that their accountable officer has to go on leave tomorrow for any number of reasons and, from what we have heard, what is supposed to happen then seems unclear to me.
You told the Public Audit Committee last week that it was your view that
“a clearer intervention ought to have happened at a far earlier date”.
You also said:
“It is the responsibility of the permanent secretary, as the principal accountable officer of the Scottish Administration, to appoint the accountable officers of public bodies”.—[Official Report, Public Audit Committee, 14 January 2026; c 9.]
The word “responsibility” might be open to interpretation. Obviously, the political responsibility rests with the cabinet secretary, but it is unclear to me where the decision is made.
Angus Robertson previously said:
“At various stages there have been interactions with the board to explore whether there should be an interim accountable officer in place, but given that it has not been clear … exactly when the chief executive might return to office … the progress of such a replacement has not been taken forward by the board of Historic Environment Scotland.”
Later in the same meeting, Kenneth Hogg told us that the board
“discussed the on-going situation with the chief executive’s absence”
and whether it
“could progress to appoint an interim chief executive, if that is what the board felt that it wanted to do.”
He said:
“I repeated that I had met with the candidate that they had put forward as a potential appointee for an interim or acting chief executive role. I confirmed that we had said that we were happy to appoint that person as the accountable officer, although the board subsequently did not appoint.”—[Official Report, Constitution, Europe, External Affairs and Culture Committee, 6 November 2025; c 7, 24.]
In the broad sweep of things, the political responsibility obviously rests with the cabinet secretary, but does the decision rest with Scottish Government officials or with the board of the public body? On the absence of a decision, is it simply the case that no decision was made rather than there having been a positive decision not to appoint?
I will try to address all your points, Mr Harvie.
I know that it is a bit multidimensional.
I appreciate that, so please come back to me if I miss anything in relation to the points that you have raised.
We have seen examples of interim accountable officers being appointed in public bodies at periodic intervals. For every appointment of an accountable officer—the permanent secretary is the one who makes the appointment—a letter is sent to the individual, because it is a personal responsibility. In the Scottish public finance manual, the personal responsibility of accountable officers is very clear. As I mentioned, I see that correspondence at periodic intervals—for every single appointment of an accountable officer, whether permanent or interim, I am included in that correspondence, as is the Public Audit Committee.
That is part of the reason why I am surprised that, notwithstanding the fluid set of circumstances that were set out by the cabinet secretary and Mr Hogg and in the correspondence that the committee received, a view was not taken at some point that the situation with HES not having an interim or substitute arrangement to bring stability had been going on for too long. I recognise the fluidity that you referred to, which is described in the correspondence, in relation to sourcing potential candidates and the question of the board’s responsibilities relative to the Scottish Government’s. However, I do not think that the absence of a decision helped the circumstances that the organisation was facing.
I appreciate that and agree with it, but I am still keen to understand where the decision rests. You clearly said that the permanent secretary makes the appointment, but at what level is the decision taken about whether an appointment is to be made? In that circumstance, is it taken by the board of a public body or by officials in the Scottish Government? Is it made by ministers, or by the permanent secretary?
I do not believe that it is made by ministers. That is my understanding. I believe that it is made at official level. A couple of factors are relevant: the first is that it almost always—
Do you mean Scottish Government officials?
Yes. My apologies.
The comments in the previous meeting suggest that the decision was made by the board.
10:45
I will clarify. The chief executive is almost always the accountable officer for a public body, although that is not the case in a couple of rare examples. The chief executive is also an employee of that organisation. You typically have a recruitment process, run by the board of the organisation, that appoints a chief executive. Once that process has been completed, it feeds through to the Scottish Government officials and sponsor team, who then make the necessary recommendation to the permanent secretary.
Therefore, I accept that there are dual interests at play. Perhaps there needed to be consensus, but if consensus could not be reached, it was ultimately for the Scottish Government to appoint a permanent secretary, who would have been an interim or acting employee of Historic Environment Scotland.
I am still looking to make a distinction. Does the Scottish Government, through the permanent secretary, appoint somebody, and who first makes the decision that an appointment is to be made? Is it the responsibility of the board of a public body, in this situation, to determine whether it believes that an appointment is necessary?
Ideally, you would have a consensus. This case is an extreme example that tests the mechanics and detail of the Scottish public finance manual, because not everything is written down. Typically, when an accountable officer is to be absent for a month or more, an interim is appointed, but it is not the board that appoints the accountable officer. Although you want the board to agree, in our view, where there is no consensus, that responsibility ultimately resides with the Scottish Government officials.
The responsibility not only to make the appointment but to decide whether an appointment is to be made—is that right?
Yes, that is a fair assessment.
Thank you.
I will suspend proceedings for a couple of minutes.
10:47
Meeting suspended.
10:49
On resuming—
Welcome back. We continue our evidence session with Stephen Boyle, the Auditor General, and Lisa Duthie.
I have two brief questions. I do not have the full report in front of me; I just have a précis of your section 22 report. At the beginning of your evidence, you mentioned that the archive house project had been abandoned but that expenditure continued to be made on it. Have you found out the reasons why that was the case?
Good morning, Mr Brown. In the report, we set out that we did not consider the scrutiny or governance around the cancellation of the archive house project to be good enough. Decisions were made without full papers being presented to the board to be considered or a full discussion being held with the executive leadership team.
That helped inform our overall conclusion about the quality and effectiveness of governance and leadership in the organisation, which needs to be addressed in the wider review of culture and effectiveness, as is set out in the audit recommendations. Lisa Duthie can set out some of the detail on that for the committee.
As we know, in May 2024, a situation report was drafted by one of the directors of Historic Environment Scotland that set out some of the difficulties that the project faced at the time. Some of those difficulties, such as the increasing cost of the project—the cost had almost doubled to more than £20 million from the original estimate of £10 million—and the governance challenges, are set out in our report.
As we said in our report, from what we could see, the situation report was not shared with the board at the time, so we were not able to see what scrutiny and challenge had taken place in order to reach the decision. We know that the executive leadership team had sight of the report, but we know that the transparency around that decision did not follow because we were unable to see a record of the discussion or, ultimately, the decision that was made.
In my annual audit report, I recommended that the planned lessons learned review of the archive house project should be completed before any further funding commitments are made. I am pleased to say that that review has been undertaken by the internal audit service. It was issued on 29 December, and we expect to see action taken following it.
To go back to my point, did you find out what the continuing expenditure was after the project had been cancelled?
Yes. In our report, we set out that £2 million was written off when the decision was made—it was money that had been spent on archive house that could no longer be capitalised. We also identified another £900,000 that related to project closure, and part of that would have been termination fees. Additionally, there is the on-going lease of archive house, which does not break until 2029, and we understand that use of that accommodation is limited. Further to that, the short-term solution is the lease of John Sinclair house, and Historic Environment Scotland is incurring costs in relation to that as a temporary solution.
I have previously expressed this view in the Public Audit Committee, but the extent to which the Auditor General’s role has changed since it was first conceived surprises me. The range of things that you now comment on is much greater than it used to be. This morning, I think that I heard you on the TV talking about how the police should best marshal its resources to fight crime.
Given that, I ask you to go a wee bit beyond what you would normally comment on. You said at the start that Historic Environment Scotland is pooling about £70 million of money from external sources. It is certainly my view—I think that it is also, to some extent, the committee’s view—that the body could do an awful lot more with that. It has failed to properly exploit and capitalise on its resources, by which I mean its buildings and genealogical resources.
Did you come across anything in your report that pointed to such underresourcing and what the body could do about it, or do governance issues impact on its ability to properly exploit its resources? I wonder whether you have any views on that.
I am happy to address the points that you raise, Mr Brown.
Lisa Duthie will have an insight into the commercial activities, but we have not done an audit. What is unusual is that commercial activities are becoming more prominent in public bodies. I have recently reported on some of Scotland’s colleges, a topic that I appreciate that you are familiar with, and on some of the activities of organisations such as Historic Environment Scotland that are engaging in more commercial activities to generate revenue for their organisation or the wider public sector.
I will generalise here, but we are finding that public bodies are trying to do that under the public sector body structure and it is not always working to the best effect. They are not having the necessary safeguards in place around culture and some commercial activities. Public bodies need to consider carefully whether they have the right structure, processes and policies in place when they are engaging in commercial activity.
On the importance of making best use of resources—Mr Brown mentioned the audit that was published this morning—I did a joint report with His Majesty’s Inspectorate of Constabulary in Scotland on best value in policing in Scotland. That report looks at resources in organisations in the round and at how policing in Scotland is using the resources that are at its disposal. The powers are set out in the Police and Fire Reform (Scotland) Act 2012.
The wider scope audit that public auditors in Scotland use gives an opportunity to look more holistically at how public money is being used and what outcomes are being achieved. We set that out through our work programme. A section 22 report is based on an annual audit and the results from the annual auditor’s report. As I mentioned earlier, section 23 of the Public Finance and Accountability (Scotland) Act 2000 gives an opportunity to look more broadly at how public money is being spent on a more thematic basis.
I am giving consideration to my work programme and, as I am required to do, I will engage with Parliament in the next session to consult on it. I am going through that process and will consider your helpful suggestion about commercial activities and making best use of resources, not just in policing, of course, but across the piece.
That was my final question, but I have a quick comment on that.
We have different views on the extent to which your office ranges across public activities, but I would certainly welcome the routine examination of where public bodies can do an awful lot more through their entrepreneurial activities, especially when, like Historic Environment Scotland, they have remarkable and unique resources. I would be interested to see what that report says.
I think that I am right in saying that the Cabinet Secretary for Constitution, External Affairs and Culture has previously said words to the effect that he has taken the reins off Historic Environment Scotland to allow it to do that. Any suggestions about what kind of structure would be best able to facilitate that would be useful.
I am always careful about boundaries. My role is not to advise public bodies on independence, but I recognise your point. Historic Environment Scotland agreed a new framework with the Scottish Government in 2024 and, as you rightly say, that gives HES more licence to make best use of its resource.
As I say, either on an individual basis but probably on a more thematic basis, I will give careful consideration to how resources are being used to best value, effectively, across the services that I am responsible for auditing.
We have time for some brief follow-up questions. I know that Mr Kerr wants to come in.
I agree with Keith Brown about the potential of Historic Environment Scotland. It is a huge asset and my follow-up question is about those assets.
In your report, you describe
“a culture of non-compliance”.
Have you conducted any kind of formal review of the governance of health and safety and asset management compliance? I ask that because, earlier this week, whistleblowers disclosed that there had been some issues with legionella at Stirling castle.
Other people in the organisation have told me that they know that the asset management team at HES has raised, under the traffic-light system, red-rated concerns about health and safety on many occasions. I am told that there is a catalogue of concerns. I have not seen any of that, so I am raising it with you. Have you have looked at that? Is that part of what you describe as the “culture of non-compliance”?
I am told that the health and safety reports—those concerns about asset safety—have been regularly made over many years, but have been routinely set aside and ignored, with nothing done with them. Is that something that you have looked at, or is it something that you would look at?
11:00
I will bring in Lisa Roberts shortly. There are a couple of important points to set out about our role. The first is on the organisation itself. We know that its investigations are on-going, and it is important that those are completed swiftly.
One key part of an audit is that it is based on compliance with the code of audit practice that the Accounts Commission and I set for public auditors in Scotland. The other key part of an audit is compliance with international standards on auditing. One of those standards requires auditors to make an assessment of whether a public body is complying with relevant laws and regulations. Clearly, health and safety will be prominent in that process for an organisation such as Historic Environment Scotland.
Lisa Duthie can set out some of the detail, but the issue is about those two parts. The organisation itself must evidence its compliance with health and safety. Of course, the Health and Safety Executive—the regulator—will have a very important role in that respect, too.
Timing is important here. Many of the issues—the concerns—have come to light during 2025. Audit is typically a retrospective affair, so many of the views in our report take us to the end of March, or when the audit was concluded last year. There are some live matters, but, as Lisa Duthie rightly said, we will continue to follow those up and, as part of our audit on laws and regulations, take our view about the compliance of the public body with its own responsibilities. Again, if I—
I perfectly understand that many different aspects of HES have come under your ever-watchful eye, hence the section 22 report. However, I have to confess this one specific issue—the culture of non-compliance—has come to me very late.
Lisa, do you want to come in?
From my perspective, I am aware from attendance at Historic Environment Scotland’s audit, risk and assurance committee of the issue that you are describing. I would point you to HES’s “Annual Report and Financial Statements 2024-25”, which sets out the principal risks for the organisation, one of which is “Health, fire and safety.” The document states:
“A programme of work is underway to implement a centralised health, safety and compliance governance system by 31 March 2027.”
As part of the annual audit, we continue to review all the risks that the organisation is facing, but not all of them fall within the wider scope audit.
Are you confirming that you are aware of the catalogue of issues and of the longstanding concerns about noncompliance in asset management?
I am aware that the organisation has identified a risk, but it has not been an area of focus for the audit.
Could it be? Would that be possible? Would you be able to do that?
That is something that we can give consideration to together. I am also mindful of, as we mentioned once or twice this morning, the work of internal audit.
Most fundamentally, it is the responsibility of management to discharge and satisfy themselves that they are managing their resources effectively, and that, at an absolute minimum, they are meeting health and safety and fire regulations, too. It goes back to the point that we have spoken about in relation to leadership—executive and non-executive—and there being some aspects that are so fundamental that they require on-going close monitoring and attention. I agree that health and safety and management are at the very top of that list.
I think that you have put your finger on the issue. It is about the integrity of the management structures and processes, and about the quality of the leadership itself—the personal qualities of leadership that are required. Clearly, there has been a long-standing weakness in HES in those fundamental areas.
That is why I am raising the issue of Audit Scotland applying its forensic approach to these matters, because, as you say, they are central to the incredible asset base that HES has a stewardship of and responsibility for—what Keith Brown rightly highlights as Scotland’s treasure, and something that we should be making the very most of for the good of our country. Is it worth me writing to you separately on that, or is this conversation sufficient?
You are, of course, more than welcome to do so, as is any member, but I am very clear on your views.
As I mentioned to Mr Brown, we are giving consideration to our work programme, which can encompass the wider, more thematic review. There is also the option for Lisa Duthie, during her audit, to monitor and to reflect on progress against the recommendations. As Lisa has mentioned, the fact that the issue is identified as a risk means that it will, I am sure, be subject to further consideration by the audit and risk committee, by management and by the board, and we will reflect on what that means for future audit work.
I very much appreciate that. One whistleblower told me—this individual is known to me and is genuine—that they were genuinely concerned that, one day, someone at work or a visitor would be injured or worse. Obviously, we do not want that to happen. That is why I am raising the issue at the end of this session, as well as the failures that result from the “culture of non-compliance”, which runs pretty deep in the organisation and has done for a while.
I have one final question, Auditor General. You will be aware that we are taking evidence from the Cabinet Secretary for the Constitution, External Affairs and Culture and his officials next week. What would you wish to hear from the Scottish Government about the governance of HES and the findings in your report?
Far be it for me to suggest to the committee how to discharge its work, but I would be interested to know about the arrangements for a substitute accountable officer. In respect of the role of the Scottish Government, that feels like the most pertinent topic.
As I mentioned, we will follow up, through our usual channels, on the progress of the implementation, primarily through the annual audit of HES. We also have on-going dialogue through our audit of the Scottish Government, and the sponsorship arrangements are in place as well. I am content that we have a range of opportunities to do this, and I hope that your session with the Scottish Government goes well.
That is helpful. You still think that there is a lack of clarity over the process for a substitute accountable officer.
Yes. I hope that we have been clear on that, convener.
Thank you very much for your contributions, which have been extremely helpful.
Meeting closed at 11:08.