Holding to account and helping to improve in times of austerity

Robert Black

221 January 2011Holding to account and helping to improve in times of austerity

Main themes

• Audit, inspection and regulation and the new public management

• The Scottish Public Audit Model (SPAM)• Recent developments • Questions for the future

321 January 2011Holding to account and helping to improve in times of austerity

The New Public Management

In the UK…

• Decentralisation of management authority• Market-style frameworks• Public choice• Accountability to taxpayers and citizens through performance reporting• Independent assurance from auditors and regulators

In Scotland…

• High-profile policy divergence• A move away from choice and contestability• Emphasis on direct service delivery and partnerships• Emphasis on outcome agreements• Audit reporting to Scottish Parliament

421 January 2011Holding to account and helping to improve in times of austerity

Audit, inspection and regulation

Reasons for the “audit explosion”…• Asymmetry of information (principal agent problems)• Complex accountability in the public sector• Public appetite for eliminating risks• Media headlines about service failures

Reasons for streamlining scrutiny• Reducing the burden of regulation• Cost savings• Stronger risk assessments• Commitment to localism

521 January 2011Holding to account and helping to improve in times of austerity

The public appetite for regulation

Media stories about bad things happening

The need for…

• Protection (eg. failures in children’s services)• Assurance on standards of services (eg clinical and cleanliness standards in hospitals)

And support for telling the truth to power

621 January 2011Holding to account and helping to improve in times of austerity

Audit inspection and regulation

Audit covers the whole organisation: corporate governance and management; the financial statements and financial systems; performance and reporting.

Inspection is directed at specific services: performance standards, legislative and professional requirements; the needs of service users.

Regulation is the ‘authorisation’ or ‘registration’ of bodies to undertake regulated activities; monitoring their compliance with statutory requirements and professional standards; may also include the prescription of compulsory activities and price controls.

Auditors have a particular focus on the whole organisation and the use of resources; and provide a continuous presence at local level.

Inspectors focus on professional staff and standards, and tend to investigate in greater depth on a periodic basis.

Audit is independent whereas Inspectorates are directly accountable to Ministers.

Economic regulation (Scottish water industry) is concerned with efficiency

721 January 2011Holding to account and helping to improve in times of austerity

SPAM

Direct reporting line to Scottish Parliament, through AGS

Independent appointment, quality control and payment of auditors

Auditors apply a Code of Audit Practice approved by AGS and Accounts Commission, and supported by PAC

Wide scope of audit…• Annual audit reports on the Scottish Government consolidated accounts and on 200+

public bodies• Covers financial statements and management, governance and performance systems• Over 20 performance audits and Best Value audits last year • Performance audits of whole systems and delivery chains

821 January 2011Holding to account and helping to improve in times of austerity

Public audit: hierarchy of expectations

FacilitatingForesight

Increasing Insight

Promoting Performance and Efficiency

Assuring Accountability

Combating Fraud

921 January 2011Holding to account and helping to improve in times of austerity

Framework for a BV audit of a public body

1021 January 2011Holding to account and helping to improve in times of austerity

Shared Risk Assessments

‘Crerar’ review of local government scrutiny arrangements: a new gatekeeper to:• Improve scheduling and co-ordination of local government scrutiny activity• Minimise duplication and overlap in planned scrutiny activity• Make better use of shared information and intelligence• Jointly identify and promote good practice• Promote innovative and flexible scrutiny responses• Deliver tailored scrutiny plans which reflect local risks and circumstances (including financial

pressures facing councils and partners)

This has delivered:• National scrutiny plan for local government• 32 Local Area Networks in place • 32 Assurance and Improvement Plans 2010-13• 38% reduction in strategic scrutiny work in councils compared to 2008 • Some innovation and changed practices • Better understanding of financial and other risks

And in the NHS:• Audit Scotland priorities and risks framework • Stronger audit focus on major risks • Almost 20% reduction (real) in audit costs by 2014

1121 January 2011Holding to account and helping to improve in times of austerity

Questions for the future

The public value of audit • “where was the auditor?”• “please help us to improve”

Managing risks in a time of spending cuts – a political as well as an executive challenge?

Performance and efficiency incentives in the Scottish public sector – what needs to change?

Scotland performs – how to link outcomes to outputs and inputs? Redesign and innovation in Scotland’s public sector – how to make it

happen on a big scale?