Presented to Parliament and published on 28 November 2002.
Annabel Goldie (Convener)
Tom McCabe (Appointed 7 March 2002)
Secretary to the Commission:
Assistant Secretary to the Commission:
The Commission reports to the Parliament as follows-
1. In terms of section 11(9) of the Public Finance and Accountability
(Scotland) Act 2000, the Scottish Commission for Public Audit
("the Commission") must examine Audit Scotland's proposals
for its use of resources and expenditure for each financial
year, and report on them to the Parliament.
2. The Commission met on 20 November 2002 to take evidence
from Mr Robert Black, Auditor General for Scotland; Mr Russell
Frith, Director of Audit Strategy, Audit Scotland; and Ms Diane
McGiffen, Director of Corporate Services, Audit Scotland. In
reaction to points of clarification which arose from this meeting,
Audit Scotland submitted further briefings on 26 November 2002.
The SCPA met on 27 November 2002 to consider its draft report
on Audit Scotland's budget proposals for 2003/04.
3. The Commission received an initial budget submission from
Audit Scotland on 2 September 2002 and a revised submission
on 12 November 2002. Audit Scotland made it clear in providing
oral evidence that the budget submission dated 2 September should
not have been considered as its formal budget submission for
4. In its revised submission of 12 November, Audit Scotland
estimated that its resource requirement for 2003/04 will be
£6.424m. This is an increase from £5.899m for 2002/03,
although this figure included a sum of £1.25m to be ring-fenced
for VAT. In reality, a more accurate comparison would be between
£6.424m for 2003/04 and £4.649m for 2002/03 (i.e.
£5.899m minus £1.25m). This equates to a budget increase
of £1.775m or 38.1%.
5. Audit Scotland explained that there were three main reasons
for the increase:
· Statutory work (e.g. inflation, pay
settlements, additional work etc) - £920,000
· Provision for VAT - £325,000
· Implementation of Best Value in Local
Government - £500,000.
6. The Commission sought clarification of the bid for resources
of £500,000, to enable Audit Scotland to deal with increased
demands which will arise from the Local Government in Scotland
Bill. The Bill, which has just completed stage 2 and is expected
to come into force in April 2003, provides for new duties for
the audit of best value, most of which will fall to Audit Scotland
on behalf of the Accounts Commission.
7. Following investigation, the Commission is satisfied that,
provided the Act comes into force as expected, Audit Scotland
is entitled to provide for expenditure on this function. The
Commission considers, however, that Audit Scotland should pursue
with the Scottish Executive the extent to which all or part
of this expenditure should be charged out to local authorities.
8. A second matter on which we sought further clarification,
related to a request in Audit Scotland's budget submission for
a contingency allowance of £135,000.
9. Audit Scotland explained that the difference between the
audit year (November - October) and the financial year (April
- March) created severe budgetary pressures at the financial
year end. Audit Scotland confirmed however, that the provision
it had incorporated in its proposals represented their best
estimate of the additional costs which would arise at that time
and is contingent only to the degree that Audit Scotland could
not identify at this point in time the individual audits on
which such costs would arise. The Commission is content to approve
the provision on this basis.
10. The Commission notes that in each of its financial years
to date, Audit Scotland underspent its approved budgets. Indeed,
in 2001-02, a sum of £217,000 remained undrawn from the
Consolidated Fund. For the future, the Commission recommends
that, in its budget proposals, Audit Scotland should explain
how such balances are treated, either carried forward under
end-year flexibility procedures or surrendered to the Consolidated
11. One final point of concern to the Commission relates to
the fact that Audit Scotland made an initial budget submission
on 2 September, as discussed in paragraph 3.
12. In accordance with the Budgeting Process Agreement between
the SCPA and the Finance Committee (SP Paper 157), a copy of
Audit Scotland's budget submission dated 2 September was provided
to the Members of the Finance Committee and to the Minister
for Finance and Public Services. The revised submission of 12
November was also sent to the Convener of the Finance Committee
and the Minister for Finance and Public Services. In both cases,
Audit Scotland was made aware that the Finance Committee and
the Executive had been informed. The SCPA informed both parties,
because the Executive needs to have advance warning of Audit
Scotland's budget, as this has prior call on the Scottish Consolidated
13. Given the existing agreements between the SCPA and the
Finance Committee, we are keen to establish that there should
only be one budget submission from Audit Scotland considered
by the Commission, as was the case last year. Although we acknowledge
Audit Scotland's evidence which stated that there was a great
deal of activity which resulted in the revised submission being
made to the SCPA, we are also pleased to note the Auditor General's
assurances that, in terms of next year's submission, it should
be possible to adhere to the timescales that are presently set.
14. Finally, we would like to acknowledge and compliment Audit
Scotland on the fact that it is attempting to manage a zero-based
budget, in a context where its workload is increasing greatly
without the organisation necessarily showing a corresponding
growth in its manpower.
15. We draw the Parliament's attention to the observations
made and recommend that Audit Scotland's bid for a budget of
£6.424m for the year 2003/04 should be approved by the