The Scottish Parliament: - Scottish Commission for Public Audit

1st Report, 2007 (Session 3)

Report on Audit Scotland’s Budget Proposal for 2008-09

Presented to the Scottish Parliament and published pursuant to section 11(9) of the Public Finance and Accountability (Scotland) Act 2000.

Robert Brown
Derek Brownlee
Angela Constance (Convener)
George Foulkes
Charlie Gordon (until 20 September 2007)
Hugh Henry (from 26 September 2007)

1. In this report, the Commission reports on: Audit Scotland’s audited accounts and report for the year ended 31 March 2007; its proposals for the application of end-year flexibility to financial year 2007-08 through the Autumn Budget Revision; and the expenditure proposals of Audit Scotland for the financial year 2008-09. It also provides a summary of the Commission’s recent work, in accordance with section 12(4) of the Public Finance and Accountability (Scotland) Act 2000 (the Act).

2. The Commission is a public body established under the Act. The Act provides for the Commission to consist of, “the member of the Parliament who is for the time being convener of the Audit Committee and 4 other members of the Parliament appointed in accordance with standing orders”. Rule 3.13 of Standing Orders provides for four members to be appointed to the Commission by the SPCB, having regard to party balance and having secured the agreement of the Parliament to a motion proposing the membership.

3. The appointment to the Commission during Session 2 of Margaret Jamieson, Cathy Peattie, Margaret Smith and Andrew Welsh ended on the dissolution of the Parliament. Brian Monteith, as convener of the Audit Committee, was also a member of the Commission in Session 2.

4. In June 2007, following approval by the Parliament, the SPCB appointed Robert Brown, Derek Brownlee, Angela Constance and George Foulkes to the Commission. Charlie Gordon became a member of the Commission following his choice as Convener of the Audit Committee. He was replaced in this capacity by Hugh Henry in September 2007.

5. The Commission is supported administratively by a Secretary and an Assistant Secretary (currently the Senior Assistant Clerk to the Finance Committee and the Assistant Clerk to the Audit Committee respectively). The Parliament’s Head of Internal Audit also provides advice to support the Commission in its work.

6. The Commission’s main responsibilities are to: examine the proposed budget of Audit Scotland; appoint an accountable officer for Audit Scotland; appoint the auditors of Audit Scotland; initiate value for money examinations into Audit Scotland; and consider the audit and value for money reports and ensure such reports are both laid before the Parliament and published. The Commission has met four times since June 2007.

7. At its first meeting this Session, the Commission appointed Angela Constance to preside over its meetings and act as its Convener. During the summer recess the Commission held an away day, at which members met with the Auditor General for Scotland and the senior management of Audit Scotland and with representatives of HW Chartered Accountants, appointed by the Commission as external auditors of Audit Scotland. The Commission considered its remit, work programme and working practices.

8. The working practices of the Commission are not governed by Standing Orders in the same way as parliamentary committees. Schedule 3 of the Act provides that the Commission may determine its own procedures. However, in September 2007 the Commission agreed that, to assist in the transparency and understanding of its work, it would continue with the practice of Session 2 and adopt a number of the procedures used by parliamentary committees.

9. In June 2007 the Commission received, and arranged for the publication of, Audit Scotland’s annual report and audited accounts for the year to 31 March 2007. In September, the Commission took evidence from the Auditor General, representatives of Audit Scotland’s management team and from HW Chartered Accountants. Detailed comment on that evidence begins at paragraph 13 below. The Commission also took preliminary evidence in September on Audit Scotland’s proposals for the Autumn Budget Revision for its 2007-08 budget and for the budget for the 2008-09 financial year.

10. In November and December, the Commission took evidence on and considered Audit Scotland’s expenditure proposals for 2008-09 in more detail. Comment on that evidence begins at paragraph 39 below.

11. Section 25(4) of the Act empowers the Commission to initiate an examination into the economy, efficiency and effectiveness with which Audit Scotland has used its resources in discharging its functions. In December, the Commission also considered proposals from the external auditors to undertake follow-up work to a 2006 review of Audit Scotland’s fees and charges. No decision has yet been taken, but any such follow-up work is likely to be undertaken in early 2008.

12. The Commission wishes to record its thanks to Audit Scotland and HW Chartered Accountants for their co-operation with it throughout the year.

13. In accordance with section 25(3) of the Act, the Commission is required to receive a report on Audit Scotland’s accounts, together with a report from qualified auditors.

14. At its meeting on 19 September 2007, the Commission took evidence on Audit Scotland’s annual report and audited accounts for the year to 31 March 2007 from Robert Black, Auditor General for Scotland (who is the accountable officer for Audit Scotland), and Russell Frith, Director of Audit Strategy, Audit Scotland.¹

15. Further evidence was provided by Richard Gibson of HW Chartered Accountants (the external auditors of Audit Scotland) who gave the Commission assurances that he and his team had received all the information and explanations required by them to form their unqualified opinion on Audit Scotland’s annual accounts.

16. HW Chartered Accountants advised the Commission that the two internal control weaknesses identified in its management report (identification of fixed assets and methodology for valuation of work in progress at year end) are minor recommendations for improvement rather than areas of concern.² The management report indicates that a system to improve asset tagging was scheduled to begin in autumn 2007 and a review of the methodology for valuing work in progress will be carried out to ensure estimates are valid, accurate and consistent.

17. In its report on the 2007-08 budget proposal³, the Commission raised the issue of a pension liability for former staff of the former Local Government Ombudsman prior to the establishment of the Scottish Public Services Ombudsman (SPSO). The Commission subsequently examined the matter in some detail. Whilst legal advice confirmed that responsibility for the pension remained a liability to be met by Audit Scotland, it had not made provision for this liability. The Commission notes that the Scottish Government has not yet brought forward subordinate legislation to transfer the liability to the SPSO as originally intended, and notes that Audit Scotland has provided for a liability of £319,000 in its audited accounts for 2006-07.

18. The Commission sought explanations from the Auditor General and Audit Scotland management on a number of specific matters arising from the annual report and accounts and these are outlined below.

19. The Commission noted a number of points in relation to the staffing of Audit Scotland and the development of its business. Staff turnover was significantly higher in 2006-07 than in 2005-06 (8.5% compared to 2.2%). The average staff complement for 2006-07 is stated as 267, compared to an average of 279 in 2005-06. The accounts also show a significant increase in training costs - £752,000 in 2006-07, against the £561,000 originally budgeted for the year and the £433,000 spent on training in 2005-06.

20. Audit Scotland explained that the main reason for the increase in training costs was significant investment in management development training. Whilst this programme is continuing in the current year, future training costs are expected to reduce slightly as the programme nears completion. The Auditor General explained that the focus of the organisation and the nature of its business had developed significantly over recent years from mainly financial audit to include more ambitious value-for-money studies. He stated:

21. The Commission asked how the impact of Audit Scotland’s work on the efficiency of the wider public sector is measured and assessed. There has, to date, been no assessment of the extent to which an increase (or, indeed, a reduction) in spending by Audit Scotland might have a consequential impact on efficiency and value-for-money in the public sector bodies it audits.

22. The Auditor General advised that there are a number of ways in which he is trying to assess the impact of Audit Scotland’s work, using various criteria. The Commission acknowledges that it may be difficult to distinguish Audit Scotland’s impact on the accountability, financial stewardship, efficiency and service delivery of public bodies from other influencing factors. However, the Auditor General stated that, “We would like in our next annual report to present as clearly as possible what our impact on that wider dimension has been.”⁵The Commission welcomes this development and looks forward to considering this material.

23. The Commission sought clarification of the way in which Audit Scotland’s business cycle influences the accounts, raising questions which arose from a number of trends in Audit Scotland’s accounts.

24. Income in 2006-07 from charges to audited bodies was significantly less than both the amount originally budgeted and the amount received the previous year. This remains the case even after allowing for the restatement of the figure for 2005-06 and fee rebates of £500,000 made to audited bodies in 2006-07, both of which are a result of changes to the VAT position of Audit Scotland.

25. The accounts show a very significant increase in cash held at the year end (£1,666,000 compared to £454,000 the previous year). HW Chartered Accountants explained that a part of this was due to a significant VAT repayment, in the region of £845,000, which was received immediately prior to the year end and largely paid out to local authorities shortly after the year end⁶. This was a specific one-off reason why the balance sheet for 2006-07 looks slightly unusual.

26. The Commission notes the explanations for these fluctuations. However, it is clear from the audit report that a significant proportion of the movements on the balance sheet arise from the timing of invoicing to audited bodies.⁷ The annual report notes that income generated each year is dependent on how far advanced audit work is at financial year end, and Audit Scotland stated that its billing timetable may mean that significantly more fee income is received in one financial year than another. The Auditor General emphasised that the audit year runs from November to October while Audit Scotland’s financial year is from April to March, in line with other public bodies.

27. The overall effect in 2006-07 was income of £720,000 less than the previous year, while expenditure was £640,000 higher. The net result of these movements might have been expected to cause some difficulty. However, the result was a net funding requirement from the Scottish Consolidated Fund of £6,056,000, compared to the £8,472,000 that Audit Scotland had requested through its 2006-07 original budget and in-year revision. Despite the fluctuations in income and expenditure identified, Audit Scotland only used 71% of the funds sought. Audit Scotland explained that a significant proportion of this gap arose from a saving of £875,000 on pension costs which arose from an accounting adjustment.⁸

28. The Commission acknowledges that a snapshot at the financial year end can be unrepresentative where certain balances are dependent on the phasing of invoicing to audited bodies, and that some degree of fluctuation is likely. It also notes that the Auditor General emphasised the importance of the statutory requirement that Audit Scotland is broadly to break even taking one year with another, indicating that the appropriate use of end-year flexibility (applying previous years’ underspends to the current year’s budget) is central to this.

29. However, the Commission sought further clarification of the nature and effect of the fluctuations in order to understand the funding requirements of Audit Scotland more fully. The Commission welcomes the Auditor General’s recognition that its approach to budgeting “makes the picture both difficult to present and more complicated than is ideal”.⁹ The Commission, therefore, asked the Auditor General to provide further explanation in writing of the budgetary implications of Audit Scotland’s business cycle.¹⁰ The issue is considered further in discussion of the 2008-09 budget proposal at paragraph 53 below.

30. Audit Scotland sought approval to carry forward £1,541,000 of revenue end-year flexibility (EYF) and use this to fund a number of cost pressures and developments. Total underspend for the year to 31 March 2007 was £2,416,000. As identified in paragraph 27 above, £875,000 is directly attributable to savings in pension costs arising from an accounting adjustment. Audit Scotland has not requested that this specific saving be carried forward.

31. In evidence, Audit Scotland explained the main budget headings in which the underspend has arisen. It stated that it arose from a combination of over-recovery of income (i.e. where audits were further progressed at year end than originally planned and where some audit fees were agreed at a higher level than the indicative one used for budgeting)¹¹ and underspends on certain expenditure headings (mainly in staff, consultancy and legal costs).

32. Of the £1,541,000 revenue EYF being sought, Audit Scotland stated in its written proposal that £480,000 is required to be carried forward as a result of its fee strategy. However, the Commission notes Audit Scotland’s statement that reference to a fee strategy is to general principles considered when setting fees. There is no strategy set out in a specific document as such. In evidence on 28 November 2007 it stated that “£400,000 is planned to flow through EYF into the fee strategy for next year”¹². The written proposal also states that an estimated further £200,000 of revenue EYF will be applied to meet Audit Scotland’s share of proposed landlord works at 18 George Street.

33. Audit Scotland intends to use the remaining revenue EYF of £861,000 to fund a range of projects under the heading “Developing the Business”. These include the introduction of International Financial Reporting Standards, supporting and responding to the Crerar Review, developing Best Value in local Government following an external review and developing Best Value across the wider public sector. The budget proposal does not explain how Audit Scotland plans to apportion the £861,000, or what the additional funds for these initiatives will seek to achieve and what targets are being set.

34. Audit Scotland is also seeking to carry forward the full £1,043,000 of capital EYF available to it. Audit Scotland advises that £620,000 of this £1,043,000 is already committed to refurbishment works at 18 George Street and the remaining £423,000 will be used to support equipment replacement projects, including printers, photocopiers and video conferencing facilities.

35. This £423,000 appears to be expenditure in addition to the original capital budget of £523,000 for 2007-08, and the proposed £533,000 capital for 2008-09, – both of which are already said to be primarily for a programme of rolling IT replacement. It is not clear how this level of capital expenditure relates to savings in equipment replacement generated by Audit Scotland's commitment to assess the useful lives of computer equipment every 4 years as opposed to every 3 years.

36. The Commission considers that EYF should not be used as a mechanism for funding routine expenditure items such as IT equipment renewal, but that these should be provided for in the normal budget. The Commission, therefore, recommends that a greater degree of detail should be provided by Audit Scotland on the precise purposes for which any future proposed EYF will be used.

37. The Commission remains surprised at the extent to which reliance on EYF is built into Audit Scotland’s budgeting assumptions, particularly given that Audit Scotland is a relatively routine business which can predict and negotiate its income flow more than most public bodies. This would be easier to assess if the Commission was able to examine a specific fee strategy document. The Commission recommends that Audit Scotland should review its approach to fees with a view to organising its funds in such a way as to minimise routine reliance on EYF, and that it should produce a written draft fee strategy.

38. The Commission notes Audit Scotland’s request for approval of £1,541,000 of revenue and £1,043,000 of capital underspends to be carried forward by means of end-year flexibility through the Autumn Budget Revision. The statutory instrument providing for this, in conjunction with revision to the Scottish Government’s budget, has now been approved by the Parliament. The Commission considers the general principles associated with Audit Scotland’s use of end-year flexibility in more detail at paragraph 53 below.

39. Under section 11(9) of the Act, 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. At its meeting on 28 November 2007, the Commission took evidence on Audit Scotland’s proposed expenditure for 2008-09 from Robert Black, Auditor General for Scotland (who is the accountable officer for Audit Scotland); Russell Frith, Director of Audit Strategy, and Diane McGiffen, Director of Corporate Services, Audit Scotland.

40. Audit Scotland’s proposed total net expenditure for 2008-09 is £25,957,000. Its estimated income from charges to audited bodies is £19,240,000. The total resource requirement (expenditure which is payable out of the Scottish Consolidated Fund) for 2008-09 is £7,250,000 - a net operating cost of £6,717,000 and capital of £533,000.¹³ The Commission explored a number of issues in evidence.

41. The proposed travel and subsistence budget represents an increase of 5.6% over the corresponding 2007-08 budget figure. Audit Scotland explained that the increased figure represents a more accurate reflection of actual costs, whereas there had been “an element of understating previously” in this budget line.¹⁴ The Commission notes the explanation that travel costs may rise in the early years of audit appointments as direct contact with clients is at a premium, and welcomes the assurance that the trend is not likely to continue at this level of increase in future years.

42. However, the explanation of a previous understating of budget highlights a presentational issue. Currently, the format of the budget proposal does not contain sufficient information to compare budget bids with actual out-turns for previous years. In addition, the heads under which the budget proposal is presented do not allow any like-with-like comparison with the annual accounts. The Commission acknowledges the previous efforts made by Audit Scotland to improve presentation of its budget proposals to aid the Commission’s scrutiny, such as inclusion of a statement of direct and in-direct costs. The Commission, therefore, recommends that Audit Scotland considers how it would be possible at the year end in future to show actual expenditure against budget, and in future budget proposals to show out-turn for the last completed financial year and projected out-turn for the current year. The Commission welcomed Audit Scotland’s explanation of the various monthly and quarterly internal budget monitoring procedures, and requests this documentation for the current year and last financial year in order to assist its understanding of the budget and the extent to which it relies on EYF.

43. The Auditor General wrote to the Commission on 31 October 2007, outlining Audit Scotland’s international work and its policies relating to governance of the associated expenses. In evidence the Auditor General emphasised that while Audit Scotland is committed to this work, resource commitments are kept comparatively small. The Commission wishes to record that it commends this international work and recognises the important role it can play in supporting the establishment of good governance, particularly in developing countries and emerging democracies.

44. The budget bid estimates a staffing complement of 293 FTE at April 2008, and states that this is a net reduction of one. The Commission asked for an explanation of this, given that the 2006-07 audited accounts state that there was an average of 267 FTE staff (+ 11 agency staff) in that year. Audit Scotland explained that the accounts present an average of staff in post throughout the year, taking account of vacancies. The budget presents the planned full complement. Staff turnover throughout the year will ensure that the figure shown in the next annual report and audited accounts is lower than 293. Budgeting is based on a full complement, and making allowance for a projected vacancy rate that has been increased in the light of recent experience.

45. Audit Scotland’s budget also states that two new staff will be required to undertake local government benefits work transferred from the Department for Work and Pensions. In evidence, Audit Scotland stated that the cost of these posts will be met by increasing its fees for local government audits, which local authorities would be able to meet as a result of receiving their share of £200,000 which is being transferred from the UK Government to the Scottish block.¹⁵

46. In its proposal, Audit Scotland has identified £260,000 in cash releasing savings, including reductions of £183,000 in various central budgets. It explained that these targets relate to areas such as external consultancy, and legal and audit expenses. The Auditor General stated that, “I am satisfied that Audit Scotland is doing pretty well in containing the costs of audit to the public sector.”¹⁶

47. However, the explanations given in evidence for the efficiencies indicate that they might better be regarded simply as underspends and savings against certain budgeted expenditures (such as consultancy, and legal and auditor expenses) rather than being defined as efficiency savings.¹⁷

48. The Commission noted that Audit Scotland has a programme of internal best-value reviews, and that its budget proposal shows that indirect costs have reduced since the previous year through efficiency measures. Audit Scotland has also bench-marked its costs using a model developed by all the UK public audit bodies, and is confident that it compares well. Nonetheless, the Commission notes that, although not bound by Scottish Government efficiency targets, Audit Scotland should be an exemplar to the public sector in Scotland and this budget proposal has not committed it to meet the 2% per annum efficiency target that is now expected of all other public bodies.

49. The Commission acknowledges that sharing key backroom services with other organisations is a complex issue for Audit Scotland, given the requirement to avoid compromising its independence and scrutiny function. However, the Commission notes that Audit Scotland does not appear to have given any direct consideration to whether these issues can be overcome and, if so, the savings that might be achieved. This may be an important issue to explore further, given the review of audit, inspection and scrutiny bodies undertaken by Professor Lorne Crerar.

50. The Commission invites Audit Scotland to consider, in the light of the comments above, how it can further clarify its approach to planned efficiency savings and recommends that it examines the possibility of making savings through shared backroom services. The Commission also recommends that Audit Scotland clarifies whether it can meet a 2% efficiency target, and explains the assumptions behind its decision on this.

51. The proposed budget states that one of its principal assumptions is the need to comply with the introduction of IFRS for the preparation of accounts for 2008-09. Audit Scotland advised that the main component of this is likely to be the need to accrue for the cost of unused holidays, which is likely to result in a one-off additional resource requirement of over £500,000. Audit Scotland suggests that this may potentially be added to the 2008-09 budget by an Autumn Revision next year.

52. The Commission notes that this is a one-off cost relating to changing the basis of recognition of staff costs and that managing it thereafter is a matter for the normal budgeting exercise. However, the Commission notes that the £500,000 figure appears to be a high one for an organisation of Audit Scotland’s size. The Commission recommends that Audit Scotland considers and reports to it further on any management measures which would ensure that this amount is kept to an absolute minimum.

53. The Commission’s main concern in considering Audit Scotland’s budget proposal was to understand the effect of the business cycle – and the pattern of fee income and use of EYF to support that – on its approach to budgeting. The Commission has noted earlier in this report the particular issues in relation to the audited accounts for 2006-07 and the Autumn Budget Revision. However, the Commission also sought to examine the principles behind the approach.

54. Recent audited accounts show that Audit Scotland has repeatedly required significantly less funding than the amounts requested. The 2006-07 accounts show that the funding requested to be available from the Scottish Consolidated Fund in 2006-07 was £8,472,000 but that only £6,056,000 was required. In 2005-06, £4,696,000 was required, against £6,474,000 requested. This has resulted in requests to carry forward significant sums of EYF. In 2007-08 the sums noted in paragraph 38 above (£1,541,000 of revenue and £1,043,000 of capital) were requested. In 2006-07, £1,778,000 of revenue EYF and £1,525,000 of capital EYF were requested.

55. Audit Scotland states that it needs to utilise EYF to minimise the potential for volatility of increases in fees and charges. The Auditor General emphasised that Audit Scotland is not permitted to hold reserves and cannot overspend. He stated that the ability to use EYF is, therefore, a “very important smoothing mechanism to keep the business on course”¹⁸ and can be regarded as “what we might call working capital to see us through the business cycle”¹⁹. The Auditor General further stated that, “We will always have an issue with in-year underspend. I therefore guess that we will continue to request the use of EYF, as we have done every year since Audit Scotland was established.”²⁰

56. However, Audit Scotland did acknowledge that repeated use of EYF may be a problem. Audit Scotland stated that, if it had not had the pensions adjustment of £875,000, a downward trend in the gap between resources requested and those actually used would have been started. Audit Scotland stated that, “The figure is higher than we would like it to be and we are taking steps to try to get it down, for example by lowering the fee increases for the next audit year.”²¹

57. Audit Scotland also advised that measures had been taken to address this issue in its 2008-09 proposal by reducing some budget lines. In evidence Audit Scotland stated that, “In constructing our proposals for the next year, we believe that we have ended the need to use end-year flexibility for fees and charges – at least for the foreseeable future.” ²² However, the Commission is not clear how this relates to the Auditor General’s cover letter to the provisional 2008-09 estimate, which stated that “Our ability to keep the fee increase down is also dependent on our being able to carry forward our underspend for 2006-07 in the usual way.”²³

58. The Commission also notes in this regard that Audit Scotland’s budget proposal states that it is based on a decision to reduce the fee increase for 2007-08 audits to 2% from the 3% previously intimated to audited bodies. The budget proposal does not explain the reasoning for this, and it is therefore not entirely clear how decisions on fee increases are being matched to costs. However, the net result is that Audit Scotland’s proposed total net expenditure for 2008-09 represents a 0.3% increase on the previous year’s proposal, but the total resource requirements from the Scottish Consolidated Fund are a 2.0% increase. Over recent years, although its customer base has not changed significantly, the proportion of its funding that Audit Scotland is seeking from the Scottish Consolidated Fund is increasing gradually.

59. The Commission acknowledges Audit Scotland’s explanations for the prudent carry forward of some underspend. However, the Commission is not clear how the level of EYF regularly being requested is all necessarily required for managing the business cycle. When asked what the impact would be if the Parliament did not endorse the use of EYF in an in-year budget revision, Audit Scotland stated that “we would be left £400,000 short in our budget for income over the next 18-month audit cycle”.²⁴ This is a relatively small proportion of the EYF actually being requested.

60. The Commission acknowledges the undoubted complexity of matching the audit and financial years. However, Audit Scotland accepted that, compared to many private and public sector businesses, its business framework is relatively stable and predictable, with fixed client numbers and few bad debts. The Auditor General’s letter of 12 October 2007 indicates that a significant portion of the fluctuations in Audit Scotland’s finances, and the resulting use of EYF to support its fee strategy, results from conscious decisions about the way in which it chooses to manage its business cycle.

61. The Commission acknowledges and supports Audit Scotland’s desire to minimise administrative costs for public bodies. However, the Commission considers that Audit Scotland can maintain this while achieving a more steady flow of fee income that might help to minimise the extent to which it is subject to the level of year-on-year fluctuations the Commission has noted. The Commission has made recommendations on Audit Scotland’s fee strategy at paragraph 36 above.

62. The way in which approval to apply the total available EYF is being sought appears to suggest that it is significantly in excess of what is required to deal with smoothing of fee increases and other business needs. There appears to be little prospect of it all being used this year and it may, therefore, be expected to be a recurrent carry-forward. Reducing the high level of EYF has the potential to provide a one-off saving to the public purse.

63. Alternative approaches to reducing the level of underspend appear to be dependent on a reduction in fees to audited bodies. The Commission acknowledges that some of the underspend has arisen from income from these bodies in the past. However, using it to reduce fees makes it very difficult to understand the correlation between Audit Scotland’s costs and the fees it charges, and also makes it very difficult to assess efficiency in the business.

64. The Commission has found it extremely difficult to gain a full understanding of the flows of funds. It considers that Audit Scotland’s pattern of budgeting appears to have a number of important implications for transparency and scrutiny. Relying on EYF in-year for budgeting means that it is difficult for the Commission and the Parliament, at the time they consider the budget bid, to have a clear picture of what the total funding requirement for the year will actually be. The Commission, therefore, recommends that Audit Scotland should examine thoroughly what it would require to move to a more consistent budgeting that does not rely so heavily on EYF.

65. The Commission draws the Parliament’s attention to the observations and recommendations contained in this report. The Commission requests that Audit Scotland provides a formal response to this report, detailing the action it intends to take to address the recommendations.

66. Taking account of these comments, the Commission recommends that Audit Scotland’s proposal for total net expenditure of £25,957,000 and total resource requirement from the Scottish Consolidated Fund of £7,250,000 for the year 2008-09 be approved by the Parliament.

1. Decision on taking business in private: The Commission agreed to take agenda item 6 in private.

2. Commission working practices:The Commission considered and agreed its approach to certain working practices.

Audit Scotland Annual Report and Accounts for the year to 31 March 2007 and Auditor’s Report on the Accounts: The Commission took evidence from—

4. Audit Scotland’s response to the Commission’s 1st Report 2006 on Audit Scotland’s Expenditure Proposals for 2007-08, and 2007-08 Autumn Budget Revision: The Commission took evidence from—

5. Audit Scotland’s provisional budget estimate for 2008-09: The Commission took evidence from—

6. Audit Scotland evidence: The Commission considered the evidence taken at agenda items 3, 4 and 5 and agreed to write to Audit Scotland seeking further information on a number of issues arising from the evidence sessions.

1. Convener: In the absence of the Convener, the Commission agreed that Derek Brownlee should chair the meeting.

2. Decisions on taking business in private: The Commission agreed to take agenda item 4, and future consideration of a draft report on Audit Scotland’s Budget Proposal for 2008-09, in private.

3. Audit Scotland’s Budget Proposal for 2008-09 and Autumn Budget Revision 2007-08: The Commission took evidence from—

4. Audit Scotland evidence: The Commission considered the evidence taken at agenda item 3 to inform the preparation of its report on Audit Scotland’s Budget Proposal for 2008-09.

Audit Scotland’s Budget Proposal for 2008-09: (in private): The Commission considered a draft report to the Parliament on Audit Scotland’s budget proposal for 2008-09. The Commission agreed the report, subject to specified changes being made, and agreed arrangements for its publication.

¹ The annual report and accounts can be accessed on the Commission’s web-page at:
http://www.scottish.parliament.uk/s3/committees/scpa/documents/FINALAUDITEDACCOUNTS2006-07.pdf

² The management report can be accessed on the Commission’s web-page at:
http://www.scottish.parliament.uk/s3/committees/scpa/papers-07/scpap07-02.pdf

³ Scottish Commission for Public Audit, 1st Report 2006, Audit Scotland’s Expenditure Proposals 2007-08, SP Paper 663 http://www.scottish.parliament.uk/corporate/scpa/reports-06/scpar06-01-01.htm

⁴ Official Report, 19 September 2007, Column 14

⁵ Official Report, 19 September 2007, Column 24

⁶ Official Report, 19 September 2007, Column 22

⁷ Official Report, 19 September 2007, Column 20

⁸ Official Report, 19 September 2007, Column 18

⁹ Official Report, 19 September 2007, Column 10

¹⁰ The Auditor General’s response, dated 12 October 2007, is available on the Commission’s web-page at: http://www.scottish.parliament.uk/s3/committees/scpa/papers-07/scpap07-03.pdf

¹¹ Official Report, 28 November 2007, Column 33

¹² Official Report, 28 November 2007, Column 35

¹³ The full detail of Audit Scotland’s expenditure proposal is available on the Commission’s web-page at: http://www.scottish.parliament.uk/s3/committees/scpa/papers-07/scpap07-03.pdf

¹⁴ Official Report, 28 November 2007, Column 41

¹⁵ Official Report, 28 November 2007, Column 45

¹⁶ Official Report, 28 November 2007, Column 46

¹⁷ Official Report, 28 November 2007, Column 46

¹⁸ Official Report, 28 November 2007, Column 42

¹⁹ Official Report, 28 November 2007, Column 42

²⁰ Official Report, 28 November 2007, Column 34

²¹ Official Report, 19 September 2007, Column 17

²² Official Report, 19 September 2007, Column 26

²³ Letter dated 11 September 2007, available on the Commission’s web-page at: http://www.scottish.parliament.uk/s3/committees/scpa/papers-07/scpap07-02.pdf

²⁴ Official Report, 28 November 2007, Column 42