Graphical version

SCOTTISH EXECUTIVE

[Previous] [Contents] [Next]

  
Financial Issues Advisory Group Report
 
 
6. AUDIT ARRANGEMENTS
 
6.1 This section sets out FIAG's recommendations in relation to the auditing arrangements for the Scottish Parliament. FlAG believes the role of audit is crucial to delivering the key principles at paragraph 2.8 above. In particular, the role of audit is central to providing Parliament with the information it needs to judge the probity and value for money of the actions of the Executive. The arrangements for audit will provide a cornerstone of the Parliament's financial arrangements and will provide the checks and balances necessary for accountability.
 
6.2 In September 1998, FlAG issued a consultation paper on its draft proposals for the future of the public audit service in Scotland in relation to:
  • arrangements for statutory audit of financial statements;
  • arrangements for value for money (vfm) audit; and
  • possible models for the delivery of the audit function.
 
6.3 A short analysis of responses to consultation together with a description of the existing system are at Annexes I and H respectively. The broad shape of FlAG's proposals were overwhelmingly endorsed and the recommendations which follow take account of respondents' views where applicable.
 
Role of Committees in relation to Audit
 
6.4 At Westminster, the Committee of Public Accounts (PAC) makes a series of reports to the Parliament. One of these reports usually relates to accounts for which budget amendments will be required, another gives the Committee's views on the NAO budget for the next financial year. The others present the results of the Committee's enquiries into Departmental accounts, but most of the reports relate to matters raised by the C&AG's vfm examinations.
 
6.5 FlAG believes it is essential the Parliament has a powerful Audit Committee, independent of the Executive. Its remit has been set out at paragraph 3.8 above.
 
6.6 FlAG does not believe, however, that the Audit Committee should be the only committee of the Parliament able to consider reports from the Auditor General for Scotland. As discussed at paragraph 3.8 above, the appropriate subject committees should consider many vfm reports. This would have the advantage of:
  • encouraging subject committees to take responsibility for investigating performance and vfm as well as policy; and
  • both the Audit and subject committees would be able to develop respective expertise in relation to financial/vfm audit.

6.7 The Group recommends that:

  • vfm issues should be dealt with by the Audit Committee, a subject committee or a combination of the two as is appropriate;
  • the Auditor General for Scotland should co-ordinate the vfm programme and (as set out in statute) consult as appropriate; and
  • recommendations of committees should not be binding but the Executive should be required to publish a response within a specified timescale (FIAG recommends 2 months) and should be required to report progress on the actions that are agreed.
 
Statutory audit of financial statements
 
6.8 At Westminster, the Treasury lays Appropriation Accounts before Parliament. These accounts, which are prepared initially by Departments and audited by the Comptroller and Auditor General (C&AG) report the spending by Departments compared with the funds authorised by the Commons.
 
6.9 The C&AG is appointed by the Crown and by virtue of his/her office is an Officer of the House of Commons. The C&AG carries out on behalf of the House of Commons statutory audit of the following financial statements:
  • accounts of the transactions of the Consolidated Fund and National Loans Fund;
  • all Appropriation Accounts (other than that relating to NAO);
  • all Trading Fund accounts rendered under section 4(6) of the Government Trading Funds Act 1973;
  • any accounts required to be audited under section 3 of the Exchequer and Audit Departments Act 1921; and
  • any accounts for NDPBs and other bodies audited under statute or under administrative arrangements.
 
6.10 FIAG recommends that the Scottish Parliament be invited to set out in statute equivalent arrangements for statutory audit of financial statements together with a timetable for their presentation. The AGS should be responsible for the presentation of accounts to Parliament. However the appointed auditor should sign individual accounts.
 
The Audit of Regularity and Propriety
 
6.11 FlAG notes the observation of the Public Audit Forum that public audit not only involves providing an opinion on the financial statements (including statements of internal financial control where appropriate) prepared by public bodies, but also covers issues of regularity and propriety. In doing so it can contribute positively to the corporate governance arrangements of public bodies; that is, the high level management systems which enable public bodies to operate effectively with due regard to regularity, propriety and good value for money.
 
6.12 In considering regularity, public audit must ensure that financial transactions comply, where appropriate, with: the legislation that authorises them; regulations issued by a body with the power to do so; Parliamentary authority; and Treasury authority.
 
6.13 The concept of propriety is closely connected with public and Parliamentary expectations as to the way in which public business is conducted; for example, in relation to standards of conduct and behaviour. Public audit helps to ensure that public bodies meet their statutory and ethical duties to the public and other stakeholders in an open and evenhanded manner. FIAG recommends the Scottish Parliament be invited to set out in statute a role for the Auditor General for Scotland in examining issues of regularity and propriety in public expenditure.
 
Value for Money Audit
 
6.14 Under section 6 of the National Audit Act 1983 the C&AG may examine the economy, efficiency and effectiveness (the vfm examinations) with which any body to which the section applies has used its resources in discharging its functions. The Auditor General for Scotland will require to have similar functions under the Scotland Act.
 
6.15 In addition, section 7 of the National Audit Act states the C&AG also has the right to carry out vfm examinations in any authority or body appointed, or whose members are required to be appointed by, or on behalf of; the Crown, in any year in which the body receives more than half its income from public funds. The Act specifically does not entitle the C&AG to question the merits of the policy objectives of the department, authority or body concerned.
 
6.16 The decision as to whether and what he or she reports is a matter for the C&AG. The Auditor General for Scotland enjoys similar freedom under the provisions in the Scotland Act. However, in choosing his or her subjects, the C&AG takes factors into account such as the size, nature and general importance of the subject, whether or not Parliament has already been made aware of the financial and other issues involved and the extent to which the particular case illustrates wider weaknesses in systems of financial information and control. The C&AG does have a responsibility when selecting topics, to take into account of any proposals made by the Committee of Public Accounts.
 
Performance Management
 
6.17 There is an issue concerning the extent of the auditor's remit in relation to audit of the performance of bodies and the usefulness of specific interventions. FlAG believes that the auditor should be entitled to encourage bodies to improve their performance and considers the auditor's role should include validation of output and performance indicators. FlAG is clear that such a role should not extend to the selection of economy, efficiency or effectiveness measures themselves since this would be tantamount to steering policy. However the auditors should be entitled to comment on whether the indicators that have been set are appropriate and complete in relation to policy objectives. Auditors should be entitled to
exercise and report on performance indicators within the context of financial audit, where indicators are recorded, and in vfm work.
 
6.18 FlAG acknowledges the fact that the Accounts Commission does specify some
national performance indicators for local authorities. However, local government operates in
a different environment from other areas of the public sector.
 
6.19 FIAG recommends that:
  • the auditor's role should include the validation of performance measures within the context of financial audit and vfm work.
  • auditors should be entitled to comment on whether indicators that have been set are appropriate and complete in relation to policy objectives, but they should not set indicators.
 
National Health Service Audit
 
6.20 In the current system, auditors appointed by the Accounts Commission audit NHS Trusts and Boards while the C&AG audits the NHS consolidated accounts and those of the Department of Health. Both the Accounts Commission and the C&AG undertake vfm examinations. FlAG sees logic in transferring all responsibility for NHS audit to the Auditor General for Scotland and so recommends. This is consistent with lines of democratic accountability, confirming the Accounts Commission as auditor for expenditure under locally elected bodies and the Auditor General as the Scottish Parliament's auditor for expenditure under the Scottish Executive. It recognises that the NHS will come under the Scottish Executive and will allow the AGS to offer the Scottish Parliament a seamless NHS audit service. It may generate a small saving on audit costs and reduce the audit burden on NHS bodies.
 
6.21 The proposed transfer recognises that the Scottish Parliament is likely to show more detailed interest in the NHS than is possible at Westminster. The work of the Accounts Commission in developing the local audit approach in the NHS can be preserved, and the cross-cutting work between the NHS and local government will be protected, particularly in the "Audit Scotland" model proposed later in this report at paragraph 6.42. Audit fees for NHS work would continue to be met by the audited health service bodies.
 
Approach
 
6.22 The NAO takes a structured approach to vfm examinations, supported by a handbook and an extensive range of guidance (although these are developed internally and are not governed by statute). Similarly, the Accounts Commission employs a variety of audit and study methodologies and follows an approved code of practice governing the appointment and activities of auditors.
 
6.23 Generally the C&AG includes in his reports all matters on which he considers Parliament should be informed. The contents of all reports are always discussed with the audited bodies before publication to ensure that the facts are complete and are fairly
presented. Any comments or opinions which the Department does not accept should be made clear and the Department's differing view should also be stated.
 
6.24 The points above are matters of good practice and are not set down in statute. FIAG believes similar good practice should be developed and adopted in Scotland and this will be an early task for the AGS. However the Group concludes it will be important that such practices are flexible and capable of adapting to changing circumstances. Therefore it is not proposed that the Parliament legislate on these matters.
 
Rights of Access
 
6.25 There is also the question of access rights for the Auditor General for Scotland and the related issue of whether he or she should take over certain audits in the interest of consistency. FlAG has looked at the position of bodies which fall broadly into four categories as follows:
  • central government bodies - i.e. essentially the Scottish Administration;
  • public bodies receiving grants from Ministers;
  • local spending bodies; and
  • contractors.
 
6.26 On the first of the categories above, the Scotland Act requires legislation to provide for proper accounts to be prepared by the Scottish Administration; for these accounts to be audited by the Auditor General for Scotland or his appointees and for access by persons undertaking audits to such documents as they may reasonably require. The issue is therefore not one of access rights, but of whether the Scottish Parliament should provide an explicit right to explanation which is enjoyed by the C&AG and laid down in auditing standards.
FIAG recommends it should do so.
 
6.27 The second category above, includes non-departmental public bodies, health boards, further education colleges and local authorities. (These are not exhaustive.) The auditing arrangements of these bodies at present are a mixture:
  • local authorities and the health boards are audited by auditors appointed by the Accounts Commission;
  • some NDPBs are audited by the C&AG (normally under statutory arrangements);
  • some NDPBs are audited by auditors appointed by the Secretary of State (and after devolution by the Scottish Ministers);
  • some NDPBs are incorporated under the Companies Acts. These are audited in accordance with the Companies Acts; and
  • the governing bodies appoint auditors of further education colleges.
 
6.28 Where C&AG is not the auditor, the Government has arranged for right of access either by agreement (most NDPBs) or statutorily (further education colleges).
 
6.29 The present arrangements will either continue under devolution or the existing statutory rights of the C&AG together with his rights of access will be amended (by the Scotland Act) to the AGS. The issue for the Scottish Parliament is to consider whether to introduce its own legislation to deal with some of the inconsistencies raised above. FlAG believes it should.
 
6.30 FIAG therefore recommends that existing audit arrangements for public bodies receiving grants from Ministers should be made more consistent where this is within the competence of the Scottish Parliament. In particular, FIAG recommends making the AGS responsible for audit appointments for all NDPBs and further education bodies (FIAG has already recommended (at paragraph 6.20) that the AGS should take over the audit of health bodies). This would not include NDPBs incorporated under the Companies Act.
 
6.31 In addition there should be statutory rights of access for the AGS to all public bodies receiving funds directly or indirectly from the Scottish Consolidated Fund including public sector companies, with the exception of local authorities for whom separate arrangements should continue to apply.
 
6.32 Turning to local spending bodies, this category includes bodies which are funded not by Departments directly, but at second hand through funding bodies. The main categories are NHS Trusts, local enterprise companies, the universities and housing associations. Again, existing audit arrangements are varied:
  • the auditors of NHS Trusts are appointed by the Accounts Commission (although FlAG recommends a change (see 6.20);
  • local enterprise companies are all incorporated under the Companies Acts and audited under that legislation; and
  • the other bodies have a variety of constitutions.
 
6.33 Again, the issue is whether the Scottish Parliament might wish to take the opportunity to rationalise arrangements in its legislation and FIA G believes it should.
 
6.34 Therefore the Scottish Parliament should be invited to legislate to provide a consistent statutory right of access for the AGS to all local spending bodies, subject to any body being significantly dependent for its income on public funds or statutory levies.
 
6.35 The final category is that of contractors. This is a thorny issue which has proved sensitive at a UK level. On the one hand, there is little justification for Departments' auditors having access to the books and records of contractors simply because officials use their services. But on the other, there is a clear need for access where a contracting company itself is carrying out financial transactions on behalf of a Department. FIAG recommends that there should be no statutory right of access. However rights of access will be required in some circumstances. In these cases the right of access should be agreed during contract negotiations.
 
Delivery of audit functions
 
6.36 FlAG has considered the case for and against separating financial audit from vfm audit. At present both the National Audit Office (NAO) and Accounts Commission combine vfm and financial audit. The main advantages and disadvantages are noted below.
 
6.37 Advantages of separation of the two audit types include:
  • auditors could develop more specialisms;
  • practitioners of each type could develop their own corporate identity and distinctive relationship with audits, reflecting the different nature of work undertaken; and
  • it would give auditees and the public a clearer picture.
 
6.38 Advantages of integrating the two types of audit might be that:
  • it ensures that poor performance revealed by a vfm study is monitored and followed up through the audit process;
  • it ensures economic and efficient commissioning of work using common core expertise and economies of scale;
  • current vfm methodology is audit based;
  • it avoids the risk of duplication and gives a single contact point for stakeholders, as well as minimising disruption;
  • financial audit work can inform the selection of vfm examination topics and vice versa; and
  • it helps appointed auditors attract high quality staff.
 
6.39 Having weighed the advantages and disadvantages of each option, FIAG comes down on the side of continuing with an arrangement which integrates financial audit and vfm This maximises the possibility of economic and effective commissioning of financial audit and vfm work using core expertise, greater critical mass and economies of scale as well as enabling better co-ordination of work and career prospects for staff.
 
Audit Delivery
 
6.40 More generally, FlAG has considered how best to deliver the audit function following devolution. This is an issue which requires to be resolved as quickly as possible. It will be necessary for these matters to be settled in good time to enable the Scottish Parliament to
make arrangements, including its rules for the appointment of the Auditor General for Scotland.
 
6.41 Central to the Group's consideration is the need for any model to meet the following criteria:
  • consistency with the Scotland Act. The Auditor General for Scotland is to be an individual person, rather than a corporate body;
  • the capability to preserve the autonomy of local government as a separate democratically accountable tier of Government; and
  • sufficient flexibility to meet any longer term changes which the Scottish Parliament might wish to make in the relationship between local government and the Scottish Parliament (for example, in the light of the McIntosh Commission's report or its own deliberations down the line).
 
6.42 In addition, the arguments made above in relation to locating vfm and financial audit within the same office are equally pertinent more generally. There is the issue of whether continuing the current arrangements with two separate delivery agencies (i.e. the NAO in Scotland and audit staff of the Accounts Commission) would deliver the critical mass required. FIAG believes not and is persuaded there is a strong case for merging the current staff of NAO in Scotland and audit staff of the Accounts Commission to form one audit delivery agency (Audit Scotland).
 
6.43 FlAG envisages both the Auditor General for Scotland and the Accounts Commission would commission audit work from the agency as well as from private sector auditors. An individual auditor would report both to the audited body and to the Auditor General for Scotland or the Controller of Audit as appropriate. The Auditor General would report to the Scottish Parliament. The Controller of Audit would continue to report to the Accounts Commission.
 
6.44 FlAG considered the detailed implications of merging the staff of the Accounts Commission and National Audit Office in Scotland. New arrangements must recognise the democratic accountability of local government, and the legitimate and distinctive interests of the Accounts Commission, the Controller of Audit and the Auditor General. They must also make best use of existing resources and minimise bureaucracy and cost increases.
 
6.45 The creation of the Scottish Parliament and the Auditor General for Scotland will introduce new structures and costs regardless of creating Audit Scotland. The Scottish Parliament may expect a similar service to that provided to Westminster by the C&AG, including briefings on a range of financial matters, briefings for answers to Parliamentary Questions, support for Committee hearings and replies to letters from MSPs and members of the public. In addition, demand from the Scottish Parliament for reports from the Auditor General for Scotland may be higher than the two sessions each year that the Committee of Public Accounts in Westminster spend on Scottish matters. These issues are, of course, for the Parliament to decide.
 
6.46 The Auditor General for Scotland is likely to require staff to provide corporate services (policy development, press and public relations), purchasing and quality assurance, Parliamentary support, administrative and clerical support. These central services would also continue to be required by the Controller of Audit and the Accounts Commission. So FlAG recognised the need in creating Audit Scotland, to develop a model which would provide these services at minimum cost.
 
6.47 FlAG therefore examined the current resources of the Accounts Commission and the National Audit Office in Scotland, the implications of the Auditor General for Scotland supporting the Scottish Parliament and the implications of creating Audit Scotland.
 
6.48 The current budgets of the Accounts Commission and the National Audit Office in Scotland are £10.6 million and £2.17 million respectively. Included within these are £3.86 million and £116,000 respectively on fees to private firms providing 50% of audits in local government and the NHS and 12% in central government.
 
6.49 The Accounts Commission and the National Audit Office in Scotland employ 158 and
41 staff respectively. Most deliver audit services, but both organisations also require central support. The National Audit Office in Scotland is largely dependent upon London headquarters for these services, and FlAG understands that it is unlikely that London resources could be released because Scottish support is only a very small proportion of their work. The Accounts Commission employs 31 staff who provide technical advice and support, develop the Code of Audit Practice, procure and quality review audits and follow up and report significant matters arising, and provide personnel and training, financial administration, information systems, media and publications, and secretarial and administrative support services.
 
6.50 FlAG looked at four key issues in developing a model for Audit Scotland:
  • whether the function of Chief Executive implies a further new post or extension of another post;
  • the extent to which central services can be streamlined in a single unit supporting the Accounts Commission, the Controller of Audit and the Auditor General, as opposed to setting up separate functions;
  • the need to preserve the best audit approaches under the new structure, including the capacity to conduct cross-cutting work; and
  • staff terms and conditions, accommodation and information technology.
 
6.51 Appointing a separate Chief Executive for Audit Scotland would have significant cost implications, and add bureaucracy. FlAG considered whether the Auditor General for Scotland or the Controller of Audit might undertake this role, and came to the view that it would be more appropriate for the Auditor General to do so. This would preserve the independence required under the Scotland Act, recognise the distinctive position of the Controller of Audit in relation to local government matters and bring oversight more clearly under the Scottish Parliament.
 
6.52 FlAG recognises that such a solution would require safeguards to protect the service to the Accounts Commission. This point was made strongly by the Commission. FlAG considers that this can be achieved by:
  • the pressure brought by the Accounts Commission's continuing role in commissioning audit services for local government, and quality assuring the services delivered. This pressure will apply equally to Audit Scotland and private sector providers. Similar pressure in New Zealand led to improvements in both the cost and quality of audit services provided by the public sector provider -Audit New Zealand;
  • seeking a role for the Chairman of the Accounts Commission as an adviser to the Public Accounts Commission;
  • including a representative of the Accounts Commission on the Management Board of Audit Scotland, as a non-executive; and
  • including the Controller of Audit, on the Management Board of Audit Scotland.
 
6.53 FIAG recommends that the Auditor General for Scotland be made Chief Executive of Audit Scotland, with safeguards to protect the legitimate and distinctive interests of the Accounts Commission and the Controller of Audit.
 
6.54 The Accounts Commission, the Controller of Audit and the Auditor General for Scotland will all need access to central services, including purchasing and technical advice. Separate provision implies costly duplication and the risk that individual central units might lack the critical mass to retain appropriate expertise. Again, FlAG looked for a solution that safeguards the different interests of the Accounts Commission, the Controller of Audit and the Auditor General for Scotland whilst providing an economical, flexible and adaptable service. FlAG believes that a single central support service unit, separate from Audit Scotland, reporting to both the Auditor General for Scotland and to the Accounts Commission, can provide such a solution. A key aspect of this approach is the separation of purchasing and quality assurance from audit delivery, so that the Auditor General and the Accounts Commission get independent advice on the relative merits on in-house and external supplies of audit services.
 
6.55 FIAG recommends the establishment of a single central support service unit, separate from Audit Scotland, reporting to both the Auditor General for Scotland, the Accounts Commission and the Controller of Audit. However, any party would be able to withdraw from this arrangement if they had concerns about the unit's independence or its effectiveness.
 
6.56 It will be essential to preserve the best audit approaches under the new structure and the capacity to undertake cross-cutting studies. There is much similarity between the audit methodologies of the Accounts Commission and the NAO, including adherence to the model promoted by the Public Audit Forum. Integration is not likely to cause major difficulties. It would be straightforward to adopt existing approaches initially and then migrate towards one best practice approach over time, and there are likely to be benefits in terms of developing studies which cut across traditional boundaries and better match service delivery.
 
6.57 FlAG envisages that the organisational model could take the following form.
 

graphic
 
6.58 Variations in terms and conditions of staff appointments between staff in post at the Accounts Commission and the NAO are unlikely to present major problems on integration. Staff are likely to be covered by Transfer of Undertakings Protection of Employment Regulations (TUPE) provisions.
 
6.59 The NAO occupy a central office in Edinburgh. The headquarters of the Accounts Commission are also in Edinburgh, with field staff located in offices in Edinburgh, Glasgow, East Kilbride, Glenrothes, Inverness and Aberdeen. Some accommodation issues need to be addressed in the short term, and it may be possible to move NAO staff to the Accounts Commission headquarters when extra floor space appears on the market. Costs of integrating accommodation are likely to be small.
 
6.60 Information technology is central to the operations of both the Accounts Commission and the NAO. There is synergy in terms of office systems such as word processing, spreadsheet and presentation software. It is unlikely that there will be a significant requirement for resources additional to those contained in existing budgets. The cost of integration is likely to be small.
 
6.61 The advantages of the model described above are that:
  • the combination of the current staff of NAO and the Accounts Commission to form one audit delivery agency would achieve economies of scale and assemble expertise;
  • the model is relatively straightforward;
  • different reporting routes, through the Auditor General to the Parliament and the Accounts Commission to the Executive are retained; and
  • the constitutional position of local government is recognised.
 
6.62 In FlAG's view, it is important retain the position of the Accounts Commission which is intended to recognise the autonomy of Local Government, and its separate democratic legitimacy. In due course the Scottish Parliament will, of course, have the opportunity to consider in detail its future relationship with Local Government in due course.
 
6.63 FIAG recommends that once the Consultative Steering Group has firmed up its views on the way forward, working groups be established to look at these issues. FIAG considers that the early appointment of the Auditor General as recommended in paragraph 6.65 would help resolve some of the more immediate issues and facilitate a smooth integration of the staff involved.
 
Appointment of the Auditor General for Scotland
 
6.64 Section 70 of the Scotland Act provides for the appointment of an Auditor General for Scotland, who will undertake similar functions to those of the Comptroller and Auditor General at Westminster. These are:-
  • issuing credits for the payment of sums out of the Scottish Consolidated Fund (this means that in practice, payments from the SCF cannot be made without prior approval by the AGS);
  • examining, certifying and reporting on the accounts of the Scottish Parliament, and
  • carrying out examinations into the economy, efficiency and effectiveness with which sums paid out of the Scottish Consolidated Fund are used.
 
6.65 It will be necessary for the Scottish Parliament to make rules in relation to the appointment of the Auditor General for Scotland. FlAG advises that though there is no requirement to audit financial statements before 1 April 2000 there are pressing issues (such as the establishment of Audit Scotland) to be dealt with before then. Therefore FIAG recommends that the A GS should be appointed as early as possible.
 
6.66 The Scotland Act provides that the AGS will be appointed by Her Majesty following a nomination by the Parliament. However, further consideration is required in relation to the appointment process.
 
6.67 FlAG recommends broad principles for the appointment of the Auditor General for Scotland as follows:
  • recruitment should be through open competition;
  • the criteria to be used in selecting the candidates should be published and should be included in the advertisement and particulars of the post; a panel should be appointed to deal with the matter. It should be chaired by the Presiding Officer who will appoint the other members of the panel having regard to overall party mix. The panel should include the respective chairs of the Public Accounts Commission, and the Audit Committee. The Parliament should consider whether arrangements should be made to enable the appointment of independent assessors to the Panel; and
  • selection procedures should reflect Nolan principles.
 
Auditor General's Salary
 
6.68 There is also the issue of setting the pay of the Auditor General for Scotland. The salary and superannuation details of the C&AG are set out in section 1 of the Exchequer and Audit Departments Act 1957, as amended by the Parliamentary and Other Pensions and Salaries Act 1976 and the Superannuation Act 1972. Essentially, the pay of the C&AG is tied to that of a Permanent Secretary in the Civil Service until the House of Commons passes a resolution to set a different amount.
 
6.69 In 1995, the Government introduced arrangements replacing fixed salaries for Permanent Secretaries by a wide pay band (currently about £96,OOO-£164,OOO). A Remuneration Committee sets the appropriate salary within the band for each Permanent Secretary on the basis of job weight and performance. The effect of this change has been that the C&AG's pay is no longer aligned to a fixed salary and there is no statutory mechanism for placing it within the broader pay band. However, it would not be appropriate for the Executive to determine the pay of the C&AG and this point also applies to other Officers of Parliament. So as a temporary expedient, since 1995, all four Parliamentary officers are paid the salary of a High Court Judge which currently falls within the range of Permanent Secretaries' pay.
 
6.70 FlAG has looked at two options for setting the pay for the Auditor General for Scotland as follows:
  • Option 1. Tying the Auditor General for Scotland's salary to a Civil Service grade in the same way as C&AG's. This would have the benefit of a read across to UK arrangements (and also those in Northern Ireland where the NI C&AG is linked to the pay of a Group 5 judge). However, it is doubtful how robust the rationale is in terms of a detailed analysis of the responsibilities of the post.
  • Option 2. The Scottish Parliament makes up its own mind. This has the benefit of allowing the Parliament the maximum discretion to set the Auditor General for Scotland's pay. The disadvantage might be that, in the absence of advice, it might be difficult to justify any particular figure the Parliament agrees.
 
6.71 FIAG recommends option 1. The salary set should be commensurate with similar posts elsewhere such as the C&AGfor Northern Ireland.
 
The Public Accounts Commission
 
6.72 FIAG recommends that there should be a Public Accounts Commission, which would consist of Members of the Scottish Parliament. The Chair of the Audit Committee should be one member. The Commission would take advice from outside professionals as necessary, notably from the AGS and the Chair of the Accounts Commission.
 
6.73 The Public Accounts Commission would have commissioning and funding responsibilities in relation to public audit similar to the Accounts Commission at Westminster. Its main responsibilities would be:
  • to appoint the AGS;
  • to scrutinise budget proposals submitted by the AGS; and
  • to appoint auditors for the activities of the AGS and Audit Scotland and to receive and consider their audited accounts.
 
6.74 It would in principle be possible for the Audit Committee or the SPCB to undertake these tasks rather than a separate body.
 
6.75 It is FIAG's view that the Audit Committee should not have these responsibilities. There are two reasons for this:
  • First, the AGS's independence, set out in the Scotland Act, could be compromised if his or her main Parliamentary "customers" in the Audit Committee were also responsible for determining his or her pay and rations.
  • Second, the Audit Committee is likely to have an interest in maximising the resources devoted to audit and scrutiny of all kinds. An independent body should preferably therefore be responsible for proposing the level of resources allocated to these activities.
 
6.76 The SPCB could discharge these tasks without causing problems of this kind. However, the commissioning and funding of public audit is a somewhat specialised function probably best undertaken by a specialised committee with the advice of special professional advisers.
 
6.77 A possible compromise would be for the Public Audit Commission to be a subcommittee of the SPCB. This would have the advantage that the Commission and the SPCB would be well placed to judge the allocation of resources between professional services (including value for money studies) provided by the audit bodies and other professional work commissioned by the Parliament's committees.
 

[Previous] [Contents] [Next]