Accounts Commission Annual Report 2007/08

Introduction
The past 12 months has seen a period of significant change for local authorities and their partners:

•	The introduction of Single Outcome Agreements under the COSLA/Scottish Government concordat. 
•	The Scottish Government’s response to the Crerar report on the external scrutiny of public services in Scotland which signals a commitment to streamlining scrutiny of local government services with Best Value as a key organising principle. 
•	The political changes brought about through the 2007 parliamentary elections which have led to high levels of turnover of elected members and changes in political balance in many Scottish councils.

We have taken great care to conduct our business in a way that takes account of how these factors affect local government, and the complex challenges they can create for council members and their staff.

Our annual overview report found that, overall, local government in Scotland continues to improve. Councils are facing and addressing significant challenges and we particularly welcomed increased recycling, higher council tax collection rates and the general picture of sound financial reporting.
 
However, there are continuing pressures on resources.

The drive for continuous improvement in services continues and the Best Value audit process – whereby all councils are audited on a rolling basis – is now a key part of this. 
 
At a time when there is an emphasis on coordinated scrutiny and on reducing the scrutiny burden, the Accounts Commission is already able to demonstrate its commitment to this way of working. In areas where we have a shared interest with the Auditor General for Scotland we publish joint reports on topics of significance at a national and local level. In the past year these included a report on the state of school buildings, an examination of the way calls to the police are handled, the extent to which our waste is being managed sustainably and a review of how the free personal and nursing care policy has been implemented.

We also continue to publish reports on issues facing individual councils, such as our findings on the handling of the redundancy of the chief executive at East Lothian Council. 
  
As part of our wider commitment to democratic scrutiny, I have given evidence to two committees of the Scottish Parliament – on our police call management report to the Finance Committee and on our overview report to the Audit Committee.

During the year, the Commission itself has seen some important changes. 

Alastair MacNish retired in September 2007, after serving for six years as chair of the Commission. I would like on behalf of the Commission to thank Alastair for his invaluable contribution to our work. This included overseeing the introduction of the Best Value regime into local authorities. Other changes saw Mahendra Raj leave and Michael Docherty, Adrienne Kelbie and James King join the Commission. Bill Magee retired from the position of Secretary to the Commission after many years of excellent advice and service, and Catherine Coull was appointed as Secretary.
 
We commissioned an independent review of the Best Value audit process for councils. The review was an important milestone for the Commission. It concluded that the Best Value audit process is well established, credible and has been effective in contributing to improvement. We welcomed the recognition that councils, in the main, have found it a challenging and useful process. Importantly, the report also identified a series of challenges for improving the audit in the future:

• 	The need for a stronger outcome focus from reports.
• 	An increased emphasis on self assessment.
• 	The need for a more proportionate and flexible audit approach.
• 	An increased emphasis on community leadership.
• 	Better use of benchmarks and existing good practice.

In response to this, the Commission has carried out a programme of meetings with councils and other key bodies such as COSLA, SOLACE and the Scottish Government to discuss these areas. The Commission is currently considering a Best Value improvement plan to take this forward and this will also be the subject of consultation.

The Scottish Government’s response to the Crerar report identified the Accounts Commission as having a key role in helping to take forward some of Crerar’s recommendations, and we have now been invited to do so by the Cabinet Secretary. The Commission is currently developing a plan for achieving the more streamlined scrutiny envisaged by Crerar and the Scottish Government.

This is our first annual report since I was appointed chair of the Commission in November 2007. We have a challenging agenda ahead of us. I look forward to working closely with Commission colleagues, Audit Scotland, local government and partners in the course of the next 
few years.

What we do
The Accounts Commission was established in 1975 to secure the audit of Scottish local government and to consider reports arising from that audit. The Commission’s original functions have developed and its responsibilities are now:

•	to secure the audit of all accounts of local authorities and associated bodies either by employed staff of Audit Scotland or by firms of accountants

•	to secure the audit of the performance by local authorities of their Best Value and Community Planning duties

•	to consider reports made by the Controller of Audit, to investigate all matters raised and to conduct hearings where appropriate

•	to undertake or promote Best Value studies in local authorities

•	to give directions to local authorities on performance information

•	to make recommendations to Scottish ministers and to local authorities, and to impose sanctions on individual officers and members responsible for illegality

•	to help advise Scottish ministers on local authority accounting matters.

Where we fit in
There are 12 members of the Accounts Commission who are appointed by Scottish ministers following a public appointments process. The Commission operates independently of local authorities and of the Scottish Government and reports in public. 

The Commission is responsible for the audit of all local authorities and associated bodies (such as fire and police joint boards). It also supports improvement in local government and seeks evidence that councils are achieving best value. Each year, the Commission publishes information on how councils are performing against a number of indicators, which allows elected members and the public to compare performance within and across councils. The Commission can make recommendations and reports to Scottish ministers. The Commission also has powers to take action against councillors and council officials if they break the law or if their negligence or misconduct leads to money being lost.

The Commission, together with the Auditor General for Scotland, is supported in its work by Audit Scotland which was set up to provide services to both. The performance of Audit Scotland is reported separately in its annual report, which can be found at www.audit-scotland.gov.uk

The Commission
John Baillie (chair) 
Appointed: November 2007 
Term ends: October 2010
Chair of Audit Scotland Board. Member of the Reporting Panel of the Competition Commission. Former partner in a big four accountancy firm. Visiting Professor of Accountancy at Glasgow University.

Isabelle Low (deputy chair) 
Appointed: October 2001 
Term ends: September 2009
Former senior civil servant. Former member of the State Hospitals Board
for Scotland. Currently a member of the Scottish Consumer Council. Member of the Statistics Commission. Member of the Audit Scotland Board and chair of its Audit Committee.

Alan Alexander 
Appointed: October 2002 
Term ends: September 2008
Emeritus Professor of Local and Public Management, Strathclyde
Business School. Former chair of Scottish Water. Member of Economic and Social Research Council and chair, Postwatch Scotland. Non-executive chair, Distance Lab Ltd.

Owen Clarke CBE
Appointed: September 2003 
Term ends: September 2009
Former head of Inland Revenue in Scotland/North of England and former chair of Scottish Ambulance Service. Currently holds two non-executive posts within the Scottish Government.

Jean Couper CBE
Appointed: October 2002 
Term ends: September 2008
Director of K3 Consultants Ltd. Former managing consultant with Price Waterhouse and Ernst & Young. Former chair of Scottish Legal Aid Board, Vice chair of Health Education Board and past member of the Police Advisory Board. Deputy chair of the Ombudsman Service Ltd.

Ann Faulds 
Appointed: September 2003 
Term ends: September 2009
Partner in Dundas and Wilson CS LLP, Solicitors. Former solicitor in Central Regional Council.

Keith Geddes 
Appointed: October 2002 
Term ends: September 2008
Policy director for a consultancy firm. Former leader of Edinburgh and Lothian Regional Councils and former President of COSLA. Deputy chair of Scottish Natural Heritage. Chair Greenspace Scotland.

Iain A Robertson CBE 
Appointed: September 2003 
Term ends: September 2010
Chair of Scottish Legal Aid Board, Independent member of the
BERR Legal Services Board. Chair of Coal Liabilities Strategy Board. Former group strategy director of Anglian Water Group and chief executive of Highlands and Islands Enterprise.

Douglas Sinclair 
Appointed: February 2007 
Term ends: September 2009
Former chief executive of Fife Council and chief executive of COSLA. Chair of the Scottish Consumer Council.

James King
Appointed: November 2007 
Term ends: October 2010
Member of the Management Board of Glasgow’s Metropolitan College. Former financial director for the Royal Mail in Scotland and Northern Ireland. Previously worked with Glasgow Council and later with Falkirk Council in the posts of chief internal auditor then assistant finance director. Non-executive director of the NHS National Services Scotland Board.

Catherine Coull 
Secretary to both the Accounts Commission and the Audit Scotland Board, and is also responsible for legal and procedural advice.

Michael Docherty (not shown in line-up) 
Appointed: July 2007 
Term ends: June 2010
Former chief executive of South Lanarkshire Council with over 20 years experience of senior management in local government.

Adrienne Kelbie (not shown in line-up) 
Appointed: November 2007 
Term ends: October 2010
Director of Operations for the Big Lottery Fund. Previously the Scotland director for Community Fund. Also held the position of member of the Scottish Consumer Council.
Two members left the Commission during the year: 
Alastair MacNish (chair) 
Appointed: September 2001 to September 2007
Chair of Audit Scotland Board. Former chief executive of South Lanarkshire Council. Previously held a number of posts in Strathclyde Regional Council including deputy director of Social Work. Served as chair of the Leadership Advisory Panel.

Mahendra Raj 
Appointed: October 2001 to September 2007
Professor of Finance at Aberdeen Business School. Editor of Studies in Economics and Finance. Member of the reporting panel of the Competition Commission for UK. Member of the Scottish Legal Aid Board. Former consultant to the Commonwealth.

Retired:
Bill Magee 
From the position of Secretary to the Commission in 2007, after more than 12 years of excellent advice and service.

There is a register of Accounts Commission members’ interests which is open for inspection in the offices of Audit Scotland and which can be accessed on the website at http://www.audit-scotland.gov.uk/about/ac/members.php 

Financial 	stewardship
Local government in Scotland continues to improve. Councils are facing and addressing significant challenges. We particularly welcome increased recycling, higher council tax collection rates and the general picture of sound financial reporting. The drive, however, for continuous improvement in services continues and there are continuing pressures on resources. The Commission will continue to provide assurance to ministers and the public on the way public money is used in councils.

The modernised audit approach in local government is now fully embedded. It focuses on the key priorities and risks in local authorities, ensuring that audit activity is targeted at the issues that really matter to officers, elected members and the public. In November 2007, Audit Scotland published the Priorities and Risks Framework (PRF), which is a tool for auditors to use when planning the audits of local government bodies in Scotland on behalf of the Commission (see box). 

The Controller of Audit summarised the outcome of the local authority audits for 2006/07 in the overview report published in February 2008. The report provides a useful summary of the main issues in local government and is used to inform our future work programme.

The Commission made and published findings on the overview report, recognising the general improvement achieved. However, councils will need to increase their focus on key areas to meet significant challenges ahead. 

For example, the report demonstrated that:

• 	scrutiny was more embedded than before. However, councils will have to keep the improvements in decision-making and scrutiny under review to make sure they are effective
• 	there was a further improvement in council tax collection with 94 per cent of the amount due for 2006/07 being collected
• 	waste which is recycled and composted, increased from 24.7 per cent to over 28 per cent during 2006/07. Sustainable waste management was the subject of a major report by the Commission and the Auditor General.

However, the Commission also recognised that the overall context for councils is one of continuing change and pressure on resources and if the councils are to meet the challenges ahead, they have to increase their focus on a number of key areas including:

• 	supporting and developing leadership skills
• 	demonstrating the net benefits of community planning
•	taking a more strategic approach to resources, which informs and integrates finance, workforce and asset planning.

The Commission supports the findings in the Crerar report on scrutiny and audit and inspection. This report highlights the need for more streamlined scrutiny based on robust self-assessment and we welcome our role in taking this forward in local government. 

Feedback from local authorities continues to be positive on the overall quality of service and positive effect of the audit. The independent 2006/07 local authority audit quality survey showed that 97 per cent of respondents agreed the auditor provided a high quality of service and the audit made or will make a positive impact on finances, standards of governance, internal control and service delivery.

Best Value
When the audit team has completed its Best Value audit work the Controller of Audit makes a statutory report describing the outcome and her conclusions. The Commission considers each report and makes its findings, which are published. The council must meet to consider the report and findings and make a formal response, usually including an improvement plan.

During 2007/08 the Accounts Commission made findings on two Best Value audits and two follow-up audits. In addition, the Commission decided to hold a public hearing due to the concerns expressed by the Controller of Audit in Aberdeen City Council’s Best Value audit report. Following the hearing the Commission can make findings, which may include recommendations to the council and/or Scottish ministers. All councils will have had a Best Value audit by April 2009.

Below is a summary of the reports published in 2007/08 on the audit of Best Value and Community Planning.

West Dunbartonshire Council: progress report
January 2008
In this follow-up study to the previous year’s Best Value report, the Accounts Commission acknowledged the council’s increased commitment to continuous improvement and the progress made by the council within a fairly short timescale.

East Lothian Council
October 2007
East Lothian Council made limited progress in establishing Best Value. The Accounts Commission findings indicated that the council had a very good opportunity to introduce change to address the major issues it faced.

Clackmannanshire Council
September 2007
This report found Clackmannanshire Council faced a number of significant challenges specific to its  circumstances.

The Moray Council: progress report
August 2007
In this follow-up report the Accounts Commission acknowledged improvement in the council’s corporate leadership and strategic direction, but said that there were still areas of concern.

Independent review of the Best Value audit process
This report was commissioned by the Accounts Commission as part of its wider review of the progress of the Best Value and Community Planning council audits. The study was undertaken by a team from Cardiff and Edinburgh Universities and was based on consultation with stakeholders. It was published in July 2007.

Following the publication of the independent review, the Accounts Commission has been developing its thinking on the development of the audit of Best Value and Community Planning. The Commission has been consulting with councils and other key stakeholders such as COSLA, SOLACE, Scottish Government and the Scottish Consumer Council. The Commission has committed to further consultation on the emerging approach later in 2008.

Development of Best Value
The Accounts Commission is in the process of developing its future approach to the audit of Best Value and Community Planning. In doing so it is building on a range of influences:

•	The independent review of the Best Value audit process.
• 	Feedback from Accounts Commission consultation events with councils, COSLA, SOLACE and other stakeholders.
• 	The Scottish Government’s response to the Crerar scrutiny review.

Based on the outcomes of these activities, the Accounts Commission is working on its Improvement Plan for the development of Best Value 2. The Best Value Improvement Plan uses as its starting point the key principles identified by the Accounts Commission to underpin the design of Best Value Round 2 (see page opposite).

The key principles for the next phase of the Best Value audits:
• 	A stronger focus on outcomes and community leadership, as well as corporate performance.
• 	Reflecting the experience of citizens and service users.
• 	Demonstrating community leadership. 
• 	More proportionate and risk-based audit approach, founded on self-assessment.
• 	Improved audit reporting and transparency of process.
• 	Improved sharing of good practice.

Performance Audit
The Accounts Commission has the power to conduct studies and issue reports on performance in local government. Many of those reports are produced jointly with the Auditor General, which reflects the changing nature of public service delivery.

In addition to planned studies, reports are also produced in response to events. For example the Controller of Audit conducted an investigation under section 102(1) of the Local Government (Scotland) Act 1973, on the voluntary redundancy of the chief executive of East Lothian Council. A statutory report was presented to the Accounts Commission, which found that the council’s processes fell a long way short of the standards expected of public bodies. 

Accounts Commission reports
Overview of the local authority audits 2007
February 2008
In this report, the Accounts Commission recognised the improvement achieved by local government in Scotland. It highlighted progress in services and the need for an increased focus on key areas to meet the challenges ahead.

There are two 2007/08 Accounts Commission studies still in progress which will be reported at a later date:

•	Asset management in councils – The aim of the study is to evaluate the extent to which councils manage their assets to ensure effective service provision and achieve value for money. 
• 	Equalities – The aim of the study is to examine how councils have implemented their race equality duties. An important aspect of the study will be to consider the experience of service users and citizens from ethnic minority communities.

Statutory report
East Lothian Council: Departmental reorganisation and voluntary redundancy of the chief executive
June 2007
This report found that processes fell a long way short of the standards expected of public bodies. The Accounts Commission emphasised the wider lessons to be learned.

Joint reports with the Auditor General for Scotland
Improving the school estate
March 2008
Billions of pounds have been spent over the past decade on over 200 new schools and many school improvements. The Scottish Government and councils need to draw up detailed plans to ensure all the remaining schools are fit for 21st century education.

A review of free personal and nursing care
February 2008
Free personal and nursing care needs to be better planned, managed and funded for it to continue to benefit older people in the future. Demand will grow with the projected increase in the older population in Scotland.

Police call management: An initial review
September 2007
Scotland’s police receive almost 16,000 calls a day and people are generally satisfied with the service when they call 999 or a non-emergency number. However, forces cannot show whether new systems they have installed are delivering value for money.

Sustainable waste management
September 2007
There has been a huge increase in the number of recycling schemes, services and facilities. But to meet EU Landfill Directive and Scottish Government targets, councils need to increase their recycling rates and achieve rapid reductions in the volumes of waste going to landfill.

Dealing with offending by young people: performance update
August 2007
Increased funding and a stronger focus on youth justice services over recent years has delivered some positive changes. However, it is still not possible to demonstrate clearly that resources provide value for money and are being used effectively.

Managing long-term conditions
August 2007
The NHS in Scotland can improve the care it gives to people with long-term illnesses by better targeting resources, further developing community-based services and driving a national strategy.

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ISBN 978 1 906752 03 3