Hansard

Thank you. The member of the commission who was due to accompany me was substituting for the commission's chairman, who is also indisposed. I am getting a bit concerned, although I am feeling fine at the moment. However, we would have liked very much to have had a member of the commission present today, out of courtesy to the committee, and I apologise.I have circulated to members an outline of what I propose to say. I will give a brief presentation and will then be happy to answer questions.The Accounts Commission was established in 1975, when the regional and island district councils were created. The commission's original remit was the audit of local government only. In 1995, its remit was extended to include the audit of national health service bodies. I have provided a leaflet, which gives a quick guide to the commission, that I thought members might find useful. Members of the commission are appointed by Scottish ministers. The commission then appoints a controller of audit, which is a separate statutory office.The commission secures the audit of all Scottish councils and joint boards, as well as NHS trusts and health boards. It does that by appointing auditors to each of the bodies; the auditors report to the controller of audit, who has the duty of reporting to the commission. The total funds under audit are in the region of £12 billion a year. Half the auditors are directly employed staff and half are appointed firms of accountants.When the controller of audit makes a statutory report on a matter arising from the audit, the commission has the power to conduct hearings and to make recommendations. I will come to that process in greater detail in a moment or two.Other functions of the commission include carrying out and reporting on value-for-money studies, the publication of performance information in local government—the annual statistics—and work on management arrangements that contribute to the best-value agenda.The most recent development that affects the organisational structure of the commission is the provision in the Public Finance and Accountability (Scotland) Bill—which has completed stage 3 in Parliament—for the creation of a new body, which will be called Audit Scotland. The commission will continue to exist as a board and will perform its functions in local government, but the staff of the commission will merge with the staff of the National Audit Office in Scotland to create a single body that will carry out auditing work across the public sector.We are grateful for the invitation to speak about the bill. The commission has been involved in discussions since the Nolan committee investigation into local government, to which the commission gave evidence when the committee was in Edinburgh. Subsequently, the commission commented on the Government's proposals, in particular the consultation paper on the new ethical framework.We welcome the emphasis that is being put on propriety and conduct in local government and Scottish public life in general, as well as the proposals for the new ethical framework. The commission's view is that the general standards of stewardship and financial management in local government and the NHS in Scotland are high. The commission believes that that is a tribute to the ethical and proper conduct of councillors, board members and officers in a range of public bodies. However, that does not mean that there are no examples of improper conduct or poor stewardship. There is, therefore, a need for a robust system to deal with instances of failure. While we do not perceive there to be a general problem, we believe that a process is needed.One of the essential elements of the public audit model applied by the commission is an objective external regime that can report in public. We are pleased to note that the bill provides for such a system. Given that there are only 32 Scottish councils—compared with the situation south of the border—which have all their functions in common, there is a strong argument for having one national code of conduct and one process for policing it. There are one or two practical concerns about the implementation of the regime, but they do not detract from our general position of support for the proposals.The commission has argued consistently for a review of the code of conduct governing councillors' behaviour; the proposals in the bill are therefore welcome. The number and nature of Scottish councils provide good reasons for having one code of conduct that applies to all councillors. We will be happy to be part of the consultation process for the development of such a code.It is important for councillors to have a single source of clear advice. At the moment, it is not particularly helpful that the sources of advice range across acts of Parliament, national codes and local codes produced by individual councils. We welcome the approach and general principles that are set out in the consultation paper. In particular, we welcome the emphasis on the duty to uphold the law, questions of propriety and accountability, the stewardship of public funds and honesty in relation to interest. Those are all areas in which the commission has an interest.We welcome the idea that there should be a single source of comprehensive guidance on declaration of interests, which can be a difficult area for councillors and members of public bodies. For many of them, that issue is not at the forefront of their minds and the need to declare an interest may arise rarely, if at all, during their period of public office. It is not something that they necessarily deal with daily. It is particularly helpful, therefore, for the advice and rules to be clearly expressed and easily available from one source. The current regime is complex and sometimes difficult to interpret.I said that I would go into greater detail about the Accounts Commission's reporting process, which may be of interest in the context of the standards commission. Each local authority and health body has an auditor, who is appointed by the commission and performs the role of external auditor. The auditor's work includes consideration of value for money, propriety and legality, which are part of the public audit model; that gives the auditor a wider remit than would be expected for auditing a commercial public limited company. It is not just a question of checking that the figures add up.The Accounts Commission appoints each auditor and has an independent statutory officer, called the controller of audit, who reports to the commission. The controller of audit produces different types of reports. Some are general reports about issues that have arisen in all, or a number of, local authorities, for example the annual overview of local authority accounts. Sometimes reports are produced in the public interest, because the controller of audit believes that something—which is not necessarily improper or illegal—needs to be brought to the public's attention. Finally, there are special reports, which the controller of audit produces when he takes the view that something illegal has happened, or when there has been a loss of public funds due to negligence or misconduct. In any of those circumstances, the controller picks up from the auditor's activities and makes a formal report to the commission.The commission then has the power to hold a hearing. Given that a special report can lead to surcharge, the affected parties involved have rights and can require a hearing to be held. The hearings are held in public, in the area of the local authority concerned.The procedure at hearings is designed to be relatively informal—the commission decides on the procedure, as there are no statutory rules on how hearings should proceed—while protecting the rights of the individuals involved. The hearings do not operate as a court—there is no prosecution and defence. Through a process of questioning by Accounts Commission members, the procedure is designed to establish the facts to the satisfaction of the commission and to give the individuals involved the opportunity to express their point of view on the controller's report. After the hearing, the Accounts Commission has the power to make recommendations, either to councils or to Scottish ministers. In the case of special reports, it is possible for the commission to recommend surcharge of members or officers, which can be put into effect only if the minister makes an order.In the case of special reports, if a point of law arises, there is a statutory power for the Accounts Commission to state a case to the Court of Session. As with other institutions, it is possible for individuals to seek a judicial review of the commission's proceedings. That is a different process from that in England and Wales, where it is the individual auditor of the council who conducts hearings and makes decisions on surcharge. We believe that the Scottish system avoids the difficulty that has been described south of the border as the auditor acting as prosecutor, judge, jury and executioner all in one. Under the Scottish system, there is a clear separation of the investigative and the decision-making roles. When the controller of audit makes a report to the Accounts Commission, they drop out of the process of advising the commission; as its secretary, I advise the commission. The commission has made a practice of ensuring that its secretary has a legal qualification, to enable it to take advice as the process goes forward. I hope that that description is helpful. Regarding the standards commission proposals in the bill, many of the features of the commission are similar to those of the Accounts Commission, but there are differences. The members of the Accounts Commission and of the standards commission will be appointed by ministers. They will have a separate statutory investigating officer, who will make formal reports. The chief investigating officer role is similar to the role of controller of audit, although matters will come to their attention through different routes. The controller of audit draws from the audit process and, presumably, the chief investigating officer will draw from complaints. The standards commission may hold hearings in a similar way to the Accounts Commission, and will also be subject to judicial review. As far as the differences are concerned, it is interesting to note that the bill provides for the standards commission to appoint its chief investigating officer, but the consultation paper says that that is likely to change to a position where that appointment will be made by the Executive. That is different from the Accounts Commission, where the controller of audit is appointed by the commission itself. Another significant difference is that the standards commission will be given power to impose sanctions directly on councillors, whereas the Accounts Commission makes recommendations only to Scottish ministers. The rationale for the Accounts Commission position is that the ultimate decision is made by a democratically accountable minister. We have also noticed that, under the law of defamation, the standards commission and the chief investigating officer and their staff are to be given absolute privilege. That is similar to the protection given to the ombudsman, but is lacking for the Accounts Commission and its employees. You might regard that as a marker—obviously, it is not a matter for this bill. The other difference is that the funds for the standards commission will be provided by ministers, whereas the Accounts Commission is funded by a levy on the bodies that it audits. Those bodies pay an audit fee, depending on the activity that is undertaken. Our main detailed concern about the proposals is that a multiplicity of agencies will be involved in the process. That might lead to intervention by different agencies in the same situation. There might be an investigation by the ombudsman, in which the standards commission, with its chief investigating officer, and the Accounts Commission, with its controller of audit, are involved. It is conceivable that the police might also be involved, either under the existing law or under the proposed new offence of misuse of public office. We all understand that when the field of play is crowded with players, it can lead to some confusion. That is perhaps more true if the field is overcrowded with referees.Another concern related to the potential overlap of jurisdiction is that separate agencies investigating the same set of facts might reach a different conclusion. There may well be good reasons for that happening, but the public might perceive that there is some confusion in the way in which the matter is dealt with. Under existing arrangements, there is already the potential for that to happen. By and large, the various agencies deal with that by good communication and by co-ordination of their activities. We do not think that that needs to be solved in the legislation. We are likely to suggest that there ought to be a clear understanding—perhaps a protocol—among all the agencies involved. Clearly, their independent judgment has to be left untrammelled, but it should be possible to reach an understanding with the various agencies about conducting investigations together, thereby not imposing an undue burden on those who are being investigated. Subject to those practical issues, which we still need to work through, the Accounts Commission welcomes the clear emphasis that is being placed on propriety and conduct in public service.