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The Scottish Commission for Public Audit

1st Report 2001

Audit Scotland Budget 2002-2003

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SP Paper 461

Session 1(2001)


Scottish Commission for Public Audit


Patricia Ferguson (Convener)

Annabel Goldie

Margaret Jamieson (Appointed 13 September 2001)

Keith Raffan

Andrew Welsh

Secretary to the Commission:

Anne Peat

Assistant Secretary to the Commission:

Seán Wixted


The Commission reports to the Parliament as follows-

1. The Commission met on 23 October 2001 to consider Audit Scotland's budget proposals for 2002/03. In terms of section 11(9) of the Public Finance and Accountability (Scotland) Act 2000, the Commission must examine Audit Scotland's proposals for its use of resources and expenditure and report to the Parliament on them.

2. At its meeting on 23 October 2001, the Commission took evidence from Mr Robert Black, Auditor General for Scotland, Ms Caroline Gardner, Deputy Auditor General for Scotland and Ms Diane McGiffen, Director of Corporate Services, Audit Scotland.

3. In our report last year,1 we observed that it had not been possible to conduct as thorough a review of the expenditure proposals for 2001/02 as we would have liked, largely due to the format of the budget documentation presented to us. We were therefore pleased to note that this year's submission was much improved both in terms of format and the detail of information provided, allowing us to examine the figures more thoroughly.

4. In our first report2 on the expenditure proposals for 2000/01, we mentioned our concerns about Audit Scotland's VAT status. Last year we noted that negotiations with HM Customs and Excise continued and we hoped for an expeditious resolution, however we were dismayed to note that far from resolution being reached during the last year, it had been necessary for a new submission to be made.

5. The delay in resolving this matter has caused a number of difficulties for Audit Scotland and as a result, Audit Scotland considered it prudent to provide for a potential VAT liability of £1.25m in its budget submission. Whilst we accept that it is expedient to make adequate provision in budget

documents pending resolution of this issue, the Commission is prepared only toauthorise this sum if it is ring-fenced and accounted for separately from the balance of the budget provision as approved and is used only for the purposes of VAT payments.

6. The delay has obvious implications for funding and for the Commission's considerations of Audit Scotland's expenditure proposals. In recognition of this, the Commission offered to contact the Treasury in order to ascertain whether any more could be done to bring this matter to a conclusion. Before any action was taken however, a response from HM Customs and Excise was received.

7. The full implications of HM Customs and Excise's letter are still being assessed by Audit Scotland and their advisers who are likely to seek further clarification. On the basis of the evidence currently available, the Commission considers that the provision of £1.25m may still be required in 2002-03. We are prepared to approve it on the terms set out in para 5 above.

8. In so far as the balance of the proposed expenditure is concerned, we observe that overall, an increase of £1.162m is sought on what was voted for 2001/02. We were advised that this year's budget has been calculated from a zero base and that in broad terms the increase is represented by the provision for VAT of £1.25m as previously mentioned, £0.663m in respect of the costs of central performance work on the NHS and an allowance of 3% for inflation.

9. In analysing the breakdown of the cost of audit, we are aware that financial systems are still being put in place in order that accurate costings of the various types of work can be made. We welcomed the assurance that more accurate assessments of the costs of the various types of performance audit would be available in future.

10. More information is currently available on the costs of audits of accounts and the Commission has been able to undertake a comparative analysis from the information provided by Audit Scotland. The Commission notes that the audit of a local government account costs more than twice as much, on average, as the audit of a central government account. We were advised that a uniform standard of public audit is now being applied across all public bodies in Scotland and that this had been developed around the Accounts Commission (i.e. local government) model.

11. We recognise that the cost of audit will depend largely on the size of an organisation, the nature of its activities and the audit approach adopted. We are nevertheless concerned that the adoption of the local government model could imply an increase in the level of audit resources required. The Commission will carefully monitor the difference in costs in the various sectors and will be concerned to ensure that any increase in budgetary requirement represents value for money.

12. The Commission also considered the corporate plan of Audit Scotland which represents the link with spending and anticipated outcomes. We noted that resources are now in place in terms of staffing and systems and that a set of key performance indicators have been developed. In due course, the annual report of Audit Scotland will detail progress against these indicators and we look forward to sight of this.

13. We are aware of proposals to extend the scope of Audit Scotland's work and perhaps to provide services to Committees other than the Audit Committee. The budget presently approved for Audit Scotland funds the activities covered by the Public Finance and Accountability (Scotland) Act 2000. We are concerned to ensure that Audit Scotland concentrates on these core activities and we recommend accordingly that any proposals to extend Audit Scotland's remit recognise the additional resource requirement involved.


14. We draw the Parliament's attention to the observations made and recommend that Audit Scotland's bid for a budget of £5.899m for the year 2002/03 should be approved by the Parliament, on the understanding that the provision of £1.25m for VAT is set aside and "ring-fenced" for this purpose alone.


1 SP Paper 228

2 SP Paper 115

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