Audit Scotland	
Annual review
2012/13

Who we are
Audit Scotland is a statutory body that carries out audits and investigations for the Auditor General for Scotland and the Accounts Commission.
The Auditor General for Scotland secures the audit of the Scottish Government and other public bodies in Scotland, except local authorities, and is independent of the Scottish Government and Scottish Parliament. 
The Accounts Commission checks how well Scotland’s local authorities perform. It operates independently of local and central government. 

What we do
Our vision is to be a world-class audit organisation that improves the use of public money.
We provide independent assurance to the people of Scotland that public money is spent properly and provides value for money. We aim to achieve this by:

•	carrying out relevant and timely audits of the way the public sector manages and spends money
•	reporting our findings and conclusions in public
•	identifying risks, making clear and relevant recommendations for improvement, and following these up.

Our year

26 performance and Best Value audits published
Reduced our audit fees by10%
214 annual audits undertaken
100% of audits completed on time
£85 million cumulative impact of the National Fraud Initiative in Scotland
More than 718 reports produced for the 214 public bodies audited
Staff served on 32 external bodies and working groups
88% of colleges praised the quality of our audits
100% of NHS bodies praised the quality of our audits

Welcome

Welcome to Audit Scotland’s annual review for 2012/13.
The challenges facing Scotland’s public sector are tough. Public bodies are dealing with continuing reductions in resources, and ever-growing demand and rising expectations for services. Scotland is also preparing for a new era of increased financial and fiscal autonomy.
In this environment, making the best use of public money and the need for independent and effective audit are more important than ever. In the past year we have continued to sharpen the focus of our work; we are clear that what we do needs to align with the pressures and priorities of the public sector and the services it provides to Scotland’s people. We have continued to refine and develop our audit approach. During 2012/13, we launched a number of projects to strengthen our ability to respond to the changing environment, and ensure we keep pace with people’s expectations and the ways they access and use information.
We also have a responsibility to get as much out of our resources as possible and deliver value for money. We have continued to deliver on our promise to reduce the cost of audit by at least 20 per cent in real terms over the four years to 2014/15. We have also seen change at the top, with Caroline Gardner succeeding Robert Black as the Auditor General for Scotland. We thank Bob for his significant contribution to public audit and to establishing Audit Scotland as a respected and influential organisation.
Through all of this we remain committed to world-class audit work that improves the use of public money and ultimately public services, and this review provides many examples of that.
We made good progress during 2012/13. We will continue to develop as we prepare for the many challenges ahead for ourselves and the wider public sector.

Ronnie Cleland
Chair of Audit Scotland Board

Caroline Gardner
Accountable Officer and Auditor General for Scotland

Helping to improve by holding to account

Our auditors work closely with public bodies. We hold bodies to account for their use of public money and provide assurance to the public that organisations spend properly and get value for money. 
Our auditors work with organisations to help them improve and provide feedback on performance. We bring an objective, professional view and a commitment and enthusiasm to improving public services.
Our work involves us in many different areas. For example, many public bodies are restructuring to reduce costs and improve efficiency. During 2012/13, we encouraged bodies to improve workforce planning, be clearer about restructuring costs, and ensure services are sustainable. We helped others improve the transparency of their financial reporting and performance monitoring. We encouraged bodies to strengthen their financial planning, for example by highlighting weaknesses in their income forecasts, identifying software errors affecting financial statements, or helping them better plan major work programmes.
Our work can highlight mismatches in funding and spending. Many public bodies are trying to change the services they deliver, and we work with them to ensure they identify and manage the risks involved.
In 2012/13, we signed off the accounts of all public bodies without any qualifications.
We are reducing the fees we charge public bodies. We have cut the costs of our work for the third year in a row and reduced fees by ten per cent for the last full audit year.

214 bodies audited: 
77 Central government
77 Local government
37 Further education
23 NHS

88% of colleges praised the quality of our audits:
	% positive responses	
Overall quality of service	88	
Impact of audit on:	
Financial sustainability	50	
Transparency of reporting (financial and performance)	88	
Value for money	19	
Governance and financial management  	75	
Overall audit impact	75  (Finance Directors)
94  (Audit Committee Chairs)	
Impact of national performance report(s)	75	

100% of NHS bodies praised the quality of our audits
	% positive responses	
Overall quality of service	100	
Impact of audit on:	
Assurance and accountability	93	
Planning and management	73	
Economy and efficiency	60	
Effectiveness and quality of services                              	67	
Overall audit impact	87 (Finance Directors)
93 (Audit Committee Chairs)	
Impact of national performance report(s)	65	

Reporting in public on the quality of services

We carry out performance audits across the public sector for the Auditor General for Scotland and the Accounts Commission, and report on these in public. We do this to provide analysis of whole systems and public services, focus on areas of particular public interest, and give the public and decision-makers a complete picture of particular sectors.
Our work highlights areas where services can improve within existing budgets or where money can be saved without affecting the quality of services. In 2012/13, we made recommendations to further improve GP prescribing that could save up to £26 million a year. Similarly, we made recommendations to better target the £128 million Scotland spends annually on reducing reoffending, which costs Scotland £3 billion a year.
We also identify examples of best practice and how public bodies can learn from events. We reviewed a number of ICT contracts and found common trends, such as a lack of ICT expertise within bodies and weaknesses in management. Following our audit of several recent mergers, we published a good practice guide to help the public sector with future mergers. We also produce baseline reports to inform sectors of their current position and future challenges. This year we reviewed the state of finances in colleges and the NHS.
Our work often prompts political debate and media coverage. The Scottish Parliament formally debated our audit of waiting list management in the NHS, and the Parliament’s Public Audit Committee (PAC) called key Scottish Government and NHS executives to answer questions. The audit appeared in more than 200 items of media coverage in a fortnight.
We publish our findings and report on them to the Scottish Parliament for central government and NHS audits, and the Accounts Commission for local government work. The PAC held five inquiries into issues we raised, and the Commission published findings on ten of our audits.

Potential annual savings of £26million in GP prescribing could be generated from our recommendations:
The NHS has implemented many of the recommendations we have made in previous reports on GP prescribing, and spending has been generally well managed in recent years. However, we estimate that further annual savings could be made without affecting patient care:
£12m – reducing drug wastage 
£8m – reducing the use of drugs considered less suitable for prescribing
£2m – increasing generic prescribing
£2m – only prescribing more expensive versions of drugs to patients who have a clinical need for them
£2m – achieving the targets in the national therapeutic indicators

2 Cross-sector audits:
Health inequalities in Scotland
Reducing reoffending in Scotland

4 Local government audits: 
Protecting consumers
Major capital investment in councils
Overview of local government in Scotland
National Scrutiny Plan for Local Government 2012/13

3 NHS audits:
Scotland’s colleges: current finances, future challenges
Managing ICT contracts: An audit of three public sector programmes
Learning the lessons of public body mergers

3 Central government audits: 
Management of patients on NHS waiting lists
Prescribing in general practice in Scotland
NHS financial performance 2011/12

Working with others to target improvement

This year we published our first audits of Community Planning Partnerships (CPPs). We reported on three individual CPPs, as well as producing an overview of the direction and issues for CPPs nationally. This was a new stream of work in an area of major public importance. We formed specialist teams from across Audit Scotland to design and carry out a tailored approach, and worked with other inspection agencies.
Scotland’s police and fire services faced major changes in the past year as they prepared to merge into single organisations in April 2013. During 2012/13, on behalf of the Accounts Commission, we completed the Best Value audit programmes of fire and police forces, including overviews of both services. Our work focused on the characteristics of efficient and effective service delivery and the principles of governance and accountability that will be important under the new structure. We carried out the police audits alongside Her Majesty’s Inspector of Constabulary for Scotland.
Councils are facing tougher challenges, particularly in dealing with budget pressures. In our annual overview of local authorities we highlighted several issues, and welfare reform in particular. 
The Best Value programme in local government continues to have impact. For example, the follow-up audit of Shetland Islands Council found the council making significant progress in tackling issues we have raised in previous years. We work with other scrutiny bodies to agree a shared view of the performance and risks at each council. This helps us target our resources at priority areas, and work with public bodies to improve services.
We continued the ‘How councils work’ series of publications, aimed at helping councils manage the financial pressures they face. We published two reports: on using cost information and on managing performance.

£18.7billion Spending by Scotland’s councils in 2012/13:
£5.3bn – Education
£3.8bn – Social work
£3.7bn – Housing
£3.3bn – Roads, environment, culture and planning
£0.9bn – Police and fire and rescue services
£1.7bn – Other services and operating expenditures
Latest audited figures from 2011/12 accounts

5 Best Value police audits: 
Best Value in police authorities and police forces in Scotland: Overview report
Strathclyde Police Authority
Fife Constabulary and Fife Police Authority
Central Scotland Police and Central Scotland Joint Police Board
Dumfries and Galloway Constabulary and Police Authority

4 CPPs:
Improving community planning in Scotland
Community planning in Aberdeen
Community planning in North Ayrshire
Community planning in Scottish Borders

2 ‘How councils work’ reports:
Managing performance: are you getting it right?
Using cost information to improve performance: are you getting it right?

2 Best Value 2 audits:
Comhairle nan Eilean Siar: A follow-up report
Midlothian Council

1 Best Value fire and rescue audit:
Best Value in fire and rescue services in Scotland: Overview repor

Our organisation

By careful planning, we are on track to reduce the cost of our work and the fees we charge public bodies by at least 20 per cent in real terms over four years to 2014/15. In 2012/13, we reduced our fees by ten per cent for the last full audit year.
We continue to work towards our goal of providing a world-class audit service. 
We held a series of small ‘Re:Connect’ sessions with all our staff to discuss the progress we had made on issues highlighted during our ‘Connect’ staff consultation process in 2011/12. Through these meetings, we also agreed our five core values: 
•	Independence and integrity
•	Valuing people
•	Quality
•	Cooperation
•	Great communication.
Our corporate plan update for 2013, published in January, sets out the key projects and priorities for the calendar year.

Audit Scotland’s work is overseen by: 
Our board:
Ronnie Cleland, Chair of the board
John Baillie, Chair of the Accounts Commission
Caroline Gardner, Auditor General and Accountable Officer for Audit Scotland
Katharine Bryan, Independent non-executive member
John Maclean, Independent non-executive member
Robert Black (until 30 June) , Auditor General and Accountable Officer for Audit Scotland

Our management team:
Lynn Bradley, Director of Corporate Programmes and Performance
Russell Frith, Assistant Auditor General
Barbara Hurst, Director of Performance Audit
Fiona Kordiak, Director of Audit Services
Diane McGiffen, Chief Operating Officer
Fraser McKinlay, Director of Best Value and Scrutiny Improvement and Controller of Audit
+ Caroline Gardner, Auditor General and Accountable Officer for Audit Scotland

We are accountable to the Scottish Parliament through the Scottish Commission for Public Audit (SCPA).

260 staff (WTE):
	12/13	11/12	10/11	
Staff (whole-time equivalent)	260	255	275	
Staff turnover (%)	8.6	12.27	8.2	
Sickness absence per person (days)	5.95	4.77	4.89	
Training days per person (days)	7.81	8.26	9	

50% Male/50% Female staff:
	12/13	11/12	10/11	
Male staff percentage	50	49.8	49	
Female staff percentage	50	50.2	51	

Our finances
Audit Scotland’s accounts are independently audited on behalf of the SCPA, which appointed Alexander Sloan Chartered Accountants to carry out the audit.

Financial summary
Income	
£000	2012/13
% total	
£000	2011/12
% total	
£000	2010/11
% total	
Fees paid by local authorities	11,419	66	11,797	63	13,429	64	
Fees paid by health bodies	3,506	20	3,818	20	4,523	21	
Fees paid by further education colleges	     538	3	598	3	560	3	
Fees paid by Scottish Government and sponsored bodies	 1,780	10	1,851	10	2,020	10	
Bank interest	      52	1	       17	-	5	-	
Miscellaneous	43	-	324	 2	506	2	
Other finance income (pensions)*	(26)	-	288	2	(39)	-	
Total	   17,312	100	18,693	100	21,003	100	
							
Expenditure	
£000	2012/13
% total	
£000	2011/12
% total	
£000	2010/11
% total	
Staff and members’ costs	   14,131	59	14,356	56	15,501	58	
Fees and expenses paid to appointed auditors	     5,036	21	5,935	23	6,255	23	
Buildings, rent and depreciation	     1,698	7	2,138	9	2,223	8	
Operating costs	3,100	13	3,033	12	2,877	11	
Total resource requirement	 23,965	100	25,462	100	20,507	-	

Direct funding from Parliament	
Required
£000	2012/13
Available
£000	
Required
£000 	2011/12
Available
£000	
Required
£000	2010/11
Available
£000	
Net operating (cost)	    (6,653)	(7,048)	(6,769)	(7,765)	496	(7,295)	

* Other finance income is comprised of income from expected returns on the local government pension scheme assets less the interest payable on the scheme liabilities.