 I welcome members of the press in public to the second meeting of the Public Audit Committee in 2016. That is always present to ensure that their electronic items are switched to flight mode so that they do not affect the work of the committee. I will move to agenda item number one, which is the decision in taking business in private. The question is that we take agenda items number six and seven in private. Are we all agreed? I move to agenda item number two, which is the section 22 report, the 2014-15 audit of the Scottish Police Authority. We would like to welcome today our panel, which is Caroline Gardner, the Auditor General for Scotland. Gillian Willman, who is the Assistant Director and Mark Roberts, who is the Senior Manager of Audit Scotland. I understand that the Auditor General has a brief opening statement. I take this opportunity to wish the committee happy new year. Convener, I am presenting this report on the 2014-15 audit of the Scottish Police Authority under section 22 of the Public Finance and Accountability Act 2014. 2014-15 was the second year of operation for the SPA and Police Scotland. The SPA's accounts include the financial results of the Police Service of Scotland. I would like to highlight two issues to the committee. The first is the appointed auditor's opinion on the SPA's 2014-15 accounts. The accounts are unqualified, but for the second year running, Gillian Willman, who I appoint to audit the accounts, has expressed a modified conclusion on those matters on which she is required to report by exception. She concluded that adequate accounting records had not been kept during 2014-15 for some aspects of property, plant and equipment. Overall, the audit was very challenging to complete due to the poor quality of the unordited accounts and major problems with information contained within the fixed assets register. In our experience of auditing public sector bodies, that is exceptional. The second issue is the continued lack of a long-term financial strategy for policing in Scotland. I first recommended that the SPA and Police Scotland should develop an agree a financial strategy in November 2013. I drew the Parliament's attention to the lack of progress last year in my section 22 report on the 2013-14 accounts, and I am doing so again now. While some progress has been made, as detailed in my report, it has been slow. The SPA now plans to agree a long-term financial strategy for the next decade by the end of March 2016. The Scottish Government's draft budget for 2016-17 provides an increase in funding for the Scottish Police Authority. It will assist in meeting some of the immediate financial pressures, but it does not remove the need to continue to find savings and, particularly, to develop an agree a long-term strategy to secure the financial sustainability of policing. Together, the SPA and Police Scotland represent one of our most important public services. In 2014-15, they spent over £1.7 billion of public money and held assets valued at more than half a billion pounds. Collectively, they must provide stronger leadership for strategic and operational financial management if they are going to be able to put policing on to a sustainable basis for the future. I will report to Parliament again next year on the SPA's progress in managing its finances, after the conclusion of the audit of the 2015-16 accounts. Alongside me, Gillian Wolman, who audits the accounts of the SPA on my behalf, and Mark Roberts, who leads on policing and justice within Audit Scotland, and, as always, convener, we will do our best to answer questions from the committee. For continuing calls, I will clarify the record that David Torrance has indicated as apologies for today's meeting. Can you clarify for the record what the sum would be, the budget sum that would be allocated to Police Scotland on an annual basis? The amount that was spent in 2014-15 was around £1.7 billion in total, so it is a lot of public money. Would you consider that, given the scale of that public investment, that maintaining of records should be a pretty standard practice? Should it not, even in a challenging position that they find themselves in as a resolved merger? It should be a standard practice for any public body spending, public money, but as you suggest, convener, particularly for one responsible for such large amounts of money and providing such vital public services. What kind of explanations would you have been given during this process for reasons why the records were not kept to the standard that they should have? I will ask Gillian Warman to talk you through that as the person responsible for carrying out the audit. Thank you. I am happy to respond to that particular question. Fixed assets, or now known as property, plant and equipment in the financial statements, is always a significant part of the audit for every public sector body. You will recall last year, with the statutory report on the 13-14 accounts, I already drew attention to the fact that the accounting records for property, plant and equipment was not adequate. This year, a very significant exercise was undertaken by the Scottish Police Authority and Police Scotland to bring all the underlying fixed asset registers together. If you recall, there were 10 organisations, eight of whom were joint police forces at that time. It was a very significant exercise to bring together all those records. There was a new system, asset 4,000 being used, and that is a system that we are familiar with in other large public sector bodies. However, the exercise overran in terms of time. We were unable to undertake the audit work in a timely fashion. It was very late in some months after the financial year end that we undertook the audit work and we found a number of errors when we undertook the work. We had to work very closely with officers highlighting those issues. At one point, we withdrew from the audit for them to undertake a corrective action plan to improve their accounting records in the area of fixed assets. We returned to the audit and carried out additional audit work. More than was planned and more than would be normally the case in order to gain the necessary assurance about the results with respect to fixed assets by the end of the day in the financial statements. It is a technical process that you followed as an auditor. If you look at it from a public perspective, it is an organisation that is responsible for £1.7 billion worth of funds. Most people would probably expect that the maintenance of assets that you are referring to would be pretty basic. Is it not? Is it that challenging? We did have every expectation that we would find better accounting records this year relative to last year, and it is our expectation. Is there a potential loss to the public pass as a result of the poor maintenance of the records? Could we be losing money as a result of that? Could there be fraud? No. As a result of our audit work, we undertake a series of audit tests to be assured as to the nature of all the transactions. We had no concerns with respect to the regularity of expenditure, so that is not a criticism that we made of any potential loss. However, the point that I am making is that, if you cannot keep basic records, it does not speak volumes for the effectiveness of your organisation to make better use of the public funds that are available to you. If you cannot do that, there is not much point. How do you deploy resources in the appropriate areas if you do not even know where your assets are? Yes, certainly in our statutory section 22 report, we have highlighted that it is important to keep accurate records of all fakes' assets, because we have to ensure that they are effectively managed and protected, that they provide the necessary management information for decision makers, and to ensure that best value is derived from those assets within the stewardship of the Scottish Police Authority in Police Scotland. I thank the Auditor General for the clarity of the report and the answers that you have already given. Is the SPE financially incompetent? The committee may recall that I reported on the reform process back in November 2013. At that stage, one of my major conclusions was that there was a lack of clarity in the roles of SPE and Police Scotland, particularly in relation to things like the management of finances, long-term financial planning. It is fair to say that there has been progress in clarifying those roles and making sure that they were appropriate people to carry out the functions required of them both since then. However, the report that you have in front of you today and the report that I produced at the end of 2013-14 demonstrates that that progress is lower than I would like to see. Indeed, you have already said and the convener has already questioned what you have described as the poor quality and incomplete nature of the audit. To me, that just sounds like they are just straight incompetent. They are not up to this, are they? £1.7 billion of public money and you have said what you have said in the report today. Why should we have any confidence in them that this is going to get any better? In my November 2013 report, I did highlight that this is one of the most significant reform programmes that we have seen since devolution. There is no doubt that that was the case. Taking eight former regional police services, merging them into one and bringing together different accounting systems and different approaches to financial management was always going to be a challenge. I concluded that those challenges were made more difficult by the slow progress that was made initially and the lack of clarity about the roles of the two organisations that make up policing in Scotland now. It has now become critical that the shortcomings that are outlined in my report here are genuinely addressed. There is a chance for a new start with a new chair of the authority and a new chief constable in place, but a financial strategy is not a nice extra to have. It is critical to ensure that policing remains financially sustainable in future. I asked one of those at the time and I had to produce a minority report to do it, but I certainly do not take any credit in saying that I told you so, but someone did say that this was all that was going to happen and it has come to pass. When will they get this right? This is two years now where you have produced a very clear report as to the financial failings of the SPA. Do you have any expectations that next year it will be better? I was encouraged by the response of SPA to my report when it was published before Christmas in accepting fully the findings that I have made and outlining their plans to move forward to resolve those issues. It will not be straightforward to do that. The deadline that they set themselves for the financial strategy is challenging. We are not far away from March 2016 and Gillianna Marker is washing progress closely on my behalf, as you would expect. I am sure that that is all true. Who is responsible for this? Who ultimately is responsible? There is an accountable officer for the SPA responsible to Parliament for the use of resources in the normal way and the overall reform process is a complex thing which both the chair of the authority and the chief constable have responsibility for. There is the responsibility for the lack of clarity over the positions of the SPA versus the Police Scotland itself. Of course, it is a Government matter, that is a Government's feeling to provide that clarity, which is something that we pointed out in November 2013. My November 2013 report did highlight the lack of clarity then. There has been some progress since, and as the committee will know, the cabinet secretary has asked the new chair of the SPA to carry out a review of governance, which may touch on some of those issues. Locking the proverbial door off as well and truly bolted. You mentioned in paragraph 11 that the account state that the expenditure in a number of areas accounted for £46.5 million compared to a budget of £67.5 million. I think that your report goes on to say that it is not clear what the remaining £21 million was spent on. Have you been able, since your report, to find out what that £21 million was spent on? I will ask Gillian to come in on that. As we say, of the £67 million that was covered in the annual report, it was clear what £40 million had been spent on. It was not clear about the other £21 million. Again, back in my November 2013 report, I highlighted the importance of being clear how the reform budget was being used, as well as how the core police resources were. Gillian, is there anything that you would like to add on that? Thank you. Certainly, the accounts show that £67.5 million was spent during the year 1415 on reform-associated activities. Only £46.5 million has been identified under specific headings. The other £21 million is being unable to distinguish that expenditure from normal operational expenditure. It was spent, but it is difficult to distinguish it from other expenditure during the year. When you asked the police authority to say what they spent £20 million of public money on, they could not tell you. It was aggregated with normal operational expenditure and not distinguished out to something specific associated with the reform activity. Your auditing view should have been quite specific. Should it have been auditable in that sense? I think that the management commentary on the annual accounts is an opportunity to demonstrate where specific reform monies have been used, because it was just for a finite period of three years to demonstrate that that investment is achieving a specific return at a time of transition for the organisation. I could not agree more. My suggestion is that it is pretty financial income. I would not get away with that. Most businesses would not get away with spending £20 million unless they do not actually know when they cannot see how they spent it. Why should this public body spending taxpayers' money get away with it? I will conclude if I may by saying that, as I reported in November 2013, that was a specific budget to support reform. As Gill said, it will not be available indefinitely and therefore it is important that it is not underpinning continuing expenditure. That was a major reform programme that was promoted and accepted by Parliament. It is important that it is clear how the reform budget is spent. I will finish with the committee, but would it be fair to say to the general that this is not the only example where vast amounts of public money have been spent on reform. You have concluded to us on a number of other occasions across a number of other reform processes that we are not absolutely precise as to where that money was spent. It is a wonderful budget to set up if you are on the end of it and using it, is it not? The other example that I can recall reporting in those terms is the FE college reform. It clearly is important to demonstrate the way specific funding is used in that way. As Gill said, it is not always easy to do that because funding is being spent on headings like staffing and investment in IT systems in the same way as it would be for day-to-day management. That is why it is important to be clear from the beginning how it will be reported. If someone asks, the SPA asks for a budget of £67 million from the Government for reform and then cannot see how they have spent it, that is extraordinary. Is the Government not care about those things? Do they not mind that £67 million or £46 million is spent and people understand that, but another £20 million just goes into a black hole and no one knows where it has gone? That is appalling use of waste of public money, is it not? I do not think that I can add to what I said. I reposted in 2013. That should be transparency and we have not seen it before. I could agree with that. I think that it was a couple of years ago that this committee took the unprecedented step under the chairmanship of Hugh Henry to write a minority report because we had very, very, very serious concerns about the SPA and about the whole measure process. I just wanted to say, Auditor General, that what you have said today is that you are encouraged by the response of SPA. I have to say that in the long evidence sessions between Vic Emery and Stephen House, etc., I remember being encouraged by what they were saying, that they had a long-term financial plan, they had a financial strategy, they had their efficiency savings all set out, convener. Three years later, there is still no side of a financial strategy. All the responses, assurances and reassurances that we were given three or four years ago really did not mean a thing. I do not want to use the word that they lied to the committee, but what we were told was in place, convener, at that time under the chairmanship of Hugh Henry, according to your report today in terms of the long-term financial strategy, and I would like to ask about the efficiency savings that we were promised. According to this report, none of what they promised us was in place was actually there. We are still looking for financial strategy and the promised efficiency savings three years later. Would you agree with that? I understand your concern, Mr Scanlon. What I was referring to was specifically the response to this report immediately before Christmas, with the new chair of the SPA accepting my findings and outlining a plan for responding to it in the past. I do understand the concern. It is also important to say that we have seen some progress being made, but progress has not been rapid or wide-ranging enough to address the challenges that we know policing in Scotland faces, which was one of the drivers for reform in making sure that it remains financially sustainable in the time of tight resources and growing demands on policing. That is why it is so important to have a robust financial strategy that demonstrates how that circle will be squared. My point is that three years later what we were told was in place three years ago and we are still looking for it. The press has been slow. My report certainly says that. It is not now in place. You are absolutely right. I think that what I am concerned about is that, in paragraph 1, accounts in complete and poor quality, you use the word that this is exceptional. How bad is this? How exceptional is this in terms of the public sector? That is quite a guarded word to use. It is extremely unusual. As the committee knows, I appoint the auditors of every public body in Scotland outside the local government sector. We, every year, take stock of the experience of doing the audits of the quality of financial reporting and financial management. It is exceptional to find a case like this, whereas Jill has described that she had to suspend the audit, go away and allow time for the SPA to correct the problems in its accounts before she could go back and do the audit work. That is very unusual. Despite correcting the work that they were doing, we still have £21 million on accounted for. We do not have a breakdown of that £21 million of the reform budget, and Jill has modified her experience in relation to the status. Having been here, I think that most parties, perhaps apart from Tavishes, supported the major process. We supported it in terms that there would be more front-line policing, there would be more sharing of resources, more sharing of expertise, we would have economies of scale in procurement and we would have better estate management. I am struggling to find the efficiency savings that were promised, but I would like to highlight the overspend for this financial year of £25.3 million. On paragraph 14, you could deliver revenue savings and one-off capital receipts of £22 million to £34 million. If there was reasonable financial management, I appreciate its capital receipts and its non-recurring savings, but my concern is that there is an overspend of £25 million. It could have a capital receipt that could wipe out that overspend, at least for this year. My concern is the front-line policing and maintaining the police numbers in the future. Where does the money come from for a £25 million overspend? It could come from the capital receipt. It is unlikely to come from the poor financial management, so where will it come from and where are the efficiency savings that we were all promised? That was the reason why we gave it our vote. I will ask Mark to talk you through our current understanding of the financial position where efficiencies have come from and what we know about plans for the future. In terms of the long-term savings that were proposed to reach £1.1 billion by the end of 2025-26, the existing savings made to date in terms of running costs if extrapolated out would contribute towards meeting those long-term savings. As the committee may record, there were additional cost pressures built in that were not taken into account in the initial plans, so those still exist and additional savings will have to be found. As the Auditor General has made reference to previously, there are additional pressures on policing in terms of new demands, which are all very well publicised, so that will create more cost pressures in the long term. That ultimate £1.1 billion saving will probably need to be greater in order to reconcile those various factors. In terms of the current year, in terms of the £25 million projected overspend, that figure comes from an update that was provided to the SPA in October. Currently, our understanding is that the SPA and Police Scotland are working hard to work out how they can resolve that within the course of the current year. That will, of course, be a focus for the 2015-16 audit that Gillian and her team will conduct. Will the SPA have to go to government for brokerage in order to—like the NHS of the overspender budget—is it the same process for the police? Do they have to get a loan from government to cover the shortfall? I think that the SPA has been very clear that they are very, very determined to make sure that they will be able to deliver a balanced budget by the end of the financial year. Overspend of £25.3 million, there will be cutbacks and efficiency savings between October and April to get rid of that projected overspend, and they will balance their budget by the end of March. The SPA asked officers to go back and work out a plan in order to be able to deliver a balanced budget by the end of the financial year. In general, is it a disappointing report although there is some progress being made, but not far from quickly enough? Has the structure of the finance area been properly put in place? Is it adequate? I will ask Gillian to talk you through her views of that. She is much closer to the workings of the finance function in both SPA and Police Scotland and has engaged with the audit committee of the SPA over time. As the Auditor General highlighted earlier, back at the time of the November 2013 reform report, we were still observing and reporting that the corporate services area was areas subject to much discussion and deliberation before settling on a particular structure. There are finance functions in both Scottish Police Authority and Police Scotland, and part of the time clearly the authority is there holding Police Scotland to account, but for the purpose of the preparation of the financial accounts there is but one set of financial accounts. That is led by the Scottish Police Authority in the preparation, and the chief constable of Police Scotland must co-operate for the preparation of those financial statements. There are clearly very significant systems within the control of Police Scotland, where 98 per cent of the spend is processed, but nevertheless it is the accountable officer of the SPA, who is ultimately accountable for all of the spend, for all of the £1.7 billion. We have reported in our long-form report to the Scottish Police Authority that there are tensions in those structures and processes, but nevertheless we would have expected them to have worked better for the purpose of preparing quality financial statements to be presented to external audit and for the smooth running of the external audit and for a completely clean, unqualified audit opinion on those financial statements. There are clearly tensions with that structure. In terms of the response to the statutory report, which the Auditor General of Scotland received at the end of December 2015, it was clear that the Scottish Police Authority is putting an interim chief financial officer into place to assist with progressing and improving processes going forward. I believe that that is to address some of those tensions in the structure. Chief financial officers are whatever before. Wasn't there a whole series of them and wasn't that a problem in the past? We reported in our, at the conclusion of the 2013-14 audit, specifically in the Scottish Police Authority that there was a series of interim directors of finance for the Scottish Police Authority. The information that has been intimated to us in December 2015 is that there will be an interim chief finance officer, which is a role, which is senior to both the two directors of finance in SPA and Police Scotland, with a number of priorities, one of which is to address the projected deficit through to March 2016, and another area is for the improvement of the accounting records. Isn't this just adding another layer of management? A previous layer of management didn't work, put somebody above them and see if it works then? It's certainly an additional post in relation, in addition, as Jill said, to the two directors of finance in the SPA and in Police Scotland. The rationale is that it's there to deal with the specific short-term challenges that the policing service faces at the moment and to carry through to the implementation of the governance review that the new chair of the SPA is carrying out. You said in the report in paragraph 24 that the SPA and Police Scotland must collectively provide stronger leadership. Who's ultimately responsible for providing that leadership? As I've said to the committee, in formal terms, the Accountable Officer is the chief executive of the SPA, accountable to Parliament for the use of resources by SPA and Police Scotland. However, the structure that we have in place with the Scottish Police Authority and Police Scotland means that there needs to be real clarity about who's responsible for what, how they work together and how that enables the Accountable Officer to fulfil his responsibilities. There seemed to be the same problem that we had before. The changes that were put in place after my November 2013 report represented a movement in the right direction, but it's clear from what we've seen in our old work and the financial pressures that policing in Scotland is facing that they haven't had the desired effect yet. I think that that's very much one of the impotences behind the governance review that the cabinet secretary has asked the new chair of the SPA to carry out. In paragraph 8, we're talking about the introduction of the single fixed asset register, asset 4,000. Clearly, this process has not been completed in terms of your audit report. Is asset 4,000 going to be the answer? Will it do the job? I'm happy to respond to that. We are familiar with asset 4,000 from other audits that we have covered with large public sector bodies across Scotland, but it was going to be a very significant exercise in order to implement it. It was the project to implement it that took an extended period of time, and they did not have time to carry out the necessary quality reviews before the external audit team came along and found a number of challenges and problems with the integrity of the data that was there. Is, on paper, at least the information? Has it been input into asset 4,000, and they're just now working through any discrepancies? Would that be the correct... Yes, and in fact that's what was happening at the time of the audit. Yes, I'd like to understand the structures because we are now into our third year, and if we haven't got the structures right now, I think that the committee is trying to suggest that, you know, if we haven't got it right now, aren't we actually going to get it right? So there are two directors of finance, there's now another interim chief finance officer been appointed, director of finance and SBA, director of finance in the public, in the police authority, in the Police Scotland itself. Is there also an audit committee for the police authority? Is there something similar in Police Scotland? No, just the one, please, just the one, I see that Gillian is nodding. Are you satisfied that the governance structure, the general structure is now right, or should there be a permanent chief finance officer over the two directors of finance? I'll preface very briefly Dr Simpson by saying that we are aware that the cabinet secretary has asked for a governance review to look at exactly these sorts of questions and then ask Gill to give you her professional view on what's working at the moment and what might be needed in future. That may help, and if you can say whether you're being consulted about that because it seems to me your input from the experience of doing an audit with different finance officers, different interim chief, whatever it is, you've got the continuity, which doesn't seem to be there. Certainly as part of our annual audit each year we produce a number of reports and we have made a number of recommendations with respect to the finance functions for the two organisations, and indeed yesterday I had colleagues from the audit team meeting with officers to see how they were implementing those recommendations, and throughout this process those recommendations are intended to improve clearly the structures and processes that are in place to make them more effective. We welcome that a governance review is being conducted and we have been consulted as a key stakeholder for that governance review at this stage, both in writing and in meetings, with the team that are supporting the chair of the Scottish Police Authority in undertaking that governance review. I think that in terms of our proximity to the two clients and what's going to be the right structure for going forward, there's no doubt that there has to be an understanding and a will and a shared ownership for the financial accounts, which after all is the reporting in public of the financial performance of Scottish Police Authority, including the results of Police Scotland. We feel it's a leadership issue in order to ensure that there's that ownership, that quality and that professionalism in order to have a satisfactory outcome each year with the preparation of the financial accounts. That leadership has to come from the new chair and the new chief constable, presumably. That's very helpful. I wonder if you could be willing to supply the committee with your observations so that the successor committee next year can hold to account the second set of aspirations that things are going to be right. If we can see your recommendations and then look at them in terms of the governance report and the changes that are made in the course of that following that report, then this committee will have the opportunity to see whether three years on some progress is a little more speedy. We can certainly provide the committee both with Giles annual audit reports that set out her observations over the last two years and the response that we have made to the governance review about the issues that need to be addressed by the review. I want to very briefly go back to the 21 million. Any organisation that I've been involved in and I've chaired charities so that I'm aware of being the equivalent of the accountable officer, that when you receive funds that are, in charitable terms, we used to call them restricted, so you have unrestricted and restricted funds and the restricted funds had to be used for the purpose for which they were authorised and they had to be audited separately. I just don't understand why an organisation as big as this with presumably very well-paid finance people don't actually have these as restricted funds that are clearly determined and not thrown into operational use. I am very concerned that throwing them into operational use means that they will not have those funds in two years' time and if it's simply being absorbed into the general running, then it won't be taken into account in determining future budgets. There's no formal requirement for those funds to be restricted or treated separately or audited separately, but that's very much why in November 2013 I recommended that there should be transparency about how they were used. I think that concern remains a real one, a live one, because in the draft budget announced by the Deputy First Minister before Christmas, part of the additional funding for the SPA was a continuation of the reform funding of, I think, £55 million. That clearly will go some way to helping to address the outstanding issues around police reform, but it's critically important that they aren't being used to underpin continuing expenditure given that the financial sustainability is still an open question in the absence of a financial strategy. Should the Government not have actually said that this is a restricted fund, they do it for charities, third sector a health account for much smaller sums? Should they not have said that this is a restricted budget, you must not use it for general operational things, you must identify it? It's not a common practice to place those formal restrictions on the way funding is provided, but it absolutely would be good practice in reform programmes where there's specific money being provided for a specific purpose to require clear reporting about how it's used. That's why I've highlighted the issue in my report. Lastly to paragraph 19, because going forward I think that things are really very critical. I'm slightly surprised that in your report because we do rely on Audit Scotland to give us a much broader view than simply the money. It's actually all about how the organisation is functioning. The major problem for us in Parliament has been a question around the use of police officers, an expensive resource on which there are to be no compulsory redundancies, the use of that resource in an inappropriate way within call centres. There have been significant complaints by the unions that the events of the M9 and those deaths were associated with the inappropriate use of poorly trained police officers, poorly trained in relation to the call centre function. I'm slightly surprised in your report that you haven't addressed the inefficiencies that are there as a result of the requirement that compulsory redundancies can only apply to the poorer paid staff and not to the police officers. In addition to that, although there aren't compulsory redundancies, there is anecdotal evidence that I have certainly had that senior police officers have been encouraged to take voluntary redundancy in order to reduce costs and to bring in much less experienced officers, and that seems to me to be very damaging in terms of the overall efficiency of the organisation if you are removing senior officers at a fast pace in order to replace them with junior officers who cost a lot less. There is no commentary on either of those two issues, and I wonder if you'd like to make a comment on them. Certainly, Dr Simpson. The report and the one that you considered 12 months ago are both produced under my powers under section 22 of the Public Finance and Accountability Act. They are very specifically on matters arising from the annual financial audit of the authority. My November 2013 report was produced under my other set of powers, section 23, which is the powers under which I can look at the efficiency and the effectiveness with which money is spent. It's worth noting that the report was produced alongside the chief inspector of constabulary's annual report on policing in Scotland for 1415, and his report focused on some of the issues that you're describing. We will continue to work very closely together to make sure that our reports are complementary to each other as they were in this instance. Mark will be able to tell you a little bit more about the way in which we're staying close to the operational and value-for-money impact of the decisions that are being taken about staffing and other significant matters. As the report says in paragraph 14, the SPA intends to produce its long-term workforce strategy by the end of this financial year, which we would expect to address some of the issues that you raise about the use of officers operating in what have previously been more non-officer roles. One of the real challenges that SPA and Police Scotland face is the large amount of their expenditure that falls within staff costs as they have identified it in their statement of long-term financial intent. It's 86 per cent of the total cost of which the overwhelming majority is police officer costs. Given the other constraints that they have on them, they are relatively restricted in their action, but in terms of the operational impact that that has, that very much falls within the realm of HMICS, who we work with very closely. We meet on a quarterly basis and uncoordinate our work and our engagement with SPA and Police Scotland. That's very helpful. Just one small comment that's interesting. You refer to the fact that crime is down by 41 per cent, but of course it's down by 41 per cent in England, where they've cut the number of officers very significantly. Police officer numbers are not the main driving factor in relation to the reduction in crime. It's a worldwide phenomenon in the developed countries. I think that there is a complete myth around that, which is very damaging to the organisation going forward. I have a couple of questions about asset 4000. One of the things that struck me just reading this and listening to the evidence earlier on this morning was the timescales for the audit process that took place. Before I go on to those questions, when we had the single forces beforehand, did they have their own asset registers or did they populate the asset 4000? The previous forces all had their own fixed asset registers. In terms of this particular process and asset 4000, when was the request to the SPA, when was that request put to SPA to start to undertake the inputting of the data into asset 4000? When did your audit process start in that particular instance as well, please? SPM Police Scotland came into existence for the first financial year of 1314, at which point one would expect progress to be made for pulling together key financial systems. We reported at the end of 1314 that fixed asset registers not only had not been brought together as one, the individual ones had not been kept up-to-date during 1314. During 1415, when they embarked upon pulling everything together into asset 4000 as the one fixed asset register to the new national organisation, it was two years' worth of data that had to be drawn in, given the fact that the individual ones had not been maintained during 1314. It is an absolutely normal part of the annual audit process to carry out audit work on the fixed asset register of an organisation. It would not be a request that we would place to them to progress with it. They clearly needed to progress with it for their own purposes. We would normally carry out interim audit work before the financial year end to carry out work on systems of internal control, and we would carry out audit work after the year end on the actual transactions and balances. For the year 1415, we could not carry out any interim audit work on the new fixed asset register because the project was still under way and a period of transition. When it came to the final accounts audit, we could not commence our audit testing at the planned date. It started six weeks into the final accounts audit, and that was the reason for the protracted nature of the 1415 account and the fact that we concluded it much later than intended. Is it fair to say then that, with the process that you have attempted to go through, because of the inherent legacy issues of the single forces and the fact that there are asset registers themselves that were not up to date, the situation that you have faced as your auditor has made your job that bit tougher and the fact that you could not complete the audit process that you wanted to do? I want to make a point of clarification on that point. At the time of the last year of the legacy forces, which was the year 1213, they all received unqualified audit opinions on their financial statements. During the first year of the new organisation, 1314, it would be very ambitious to have achieved one fixed asset register during the year 1314. Consequently, as a compensating arrangement, you would have expected all of the legacy fixed asset registers to have been kept up to date, and that would have been the basis for our audit work for 1314. However, that was not the case. It is not criticism associated with the period prior to 1314. I will heartily accept and agree with the point regarding the asset register that it should be up to date. I am not trying to dispute that point in any way, shape or form, but I am just trying to establish and understand exactly why you faced the issue that you did and why the SPA did not manage to get into that position of actually having that filled up to date asset register. I am trying to really understand why that was the case. Yes, there is no doubt that it was a big exercise over now 24 months to get one asset register that is accurate and up to date. There was certainly a project in place during 1415 to do so, but it did not progress at the pace that was necessary for them to have achieved a good outcome by the conclusion of financial year 1415. In terms of pushing me on the point as to why that is the case, it is a question that the two finance structures took time to put the right people in the right place, but it was late that they were assigned people to carry out the work. There was a project in place, and different people were assigned roles to progress it, but they did it in quite a disparate fashion. There was no one person taking ownership for the whole project at the end of the day, and there was a lack of quality review about the data that had been input. Consequently, when we carried out the audit work, we were the first to encounter a number of errors and problems and had to report that back to officers, which they then had to correct for. In terms of that particular finding, had the SBA utilised, was it internal staffing fullest or did it bring in external contractors to undertake this particular piece of work? The work was largely taken forward by Police Scotland Finance staff, and we have said in our long-form report to the Scottish Police Authority ourselves, to local level, that there was a failure of quality assurance over the work that was carried out there, and there was a failure of scrutiny by the Scottish Police Authority about to fix the asset records. We talked a lot about the systems, and I wonder if I could go to the real value of what is involved in that asset schedule. I will come back to a subject that I have asked about in other contexts. In other words, the real valuation of the assets, their saleability, whether any of the assets is used to anybody else, whether their replacement costs are appropriately measured, whether any of the black hole in the future could actually be filled by selling assets, buildings tend to be overvalued in practice. I think that you know where I am trying to go, Auditor General. Yes, and you are absolutely right to ask the question. The reason why we have highlighted the failings in the asset register is not because we are being counted to get excited by those sorts of things, but because it should be a really important source of information for making exactly those decisions, and it could well be a source of savings that will help to make policing sustainable in the future. I will ask Jill to talk you through the way the valuation process works and how that ties into the questions that you have asked there. The Scottish Police Authority has accounting policies with respect to the valuation of its fixed assets. As we have highlighted, the value of fixed assets is now running at some half a billion pounds in the financial statements of the organisations. A number of valuations were carried out relating to the financial year 2014-15. However, they were carried out very late in the day, and a number of accounting entries were made after the year-end in connection with those assets. For certain ones, there were impairments in value, and those are recognised in the 2014-15 accounts. That is another area where a number of errors were made in the accounting entries after the valuations were processed. That is again where the external audit team had to engage with key members of staff for correcting entries after the valuation of assets. We are comfortable that the organisations are up to date with their accounting policies for the valuation of land and property buildings. Does that imply that you are comfortable that they are up to date with the replacement cost or the upgrading cost of the assets that they need in the long term? We are content that they are compliant with their accounting policies on occasions that is a depreciated replacement cost value and other times that is an existing use of value, and we are content with the arrangements that they put in place and they used external experts for those valuation exercises. Can I go beyond that? I appreciate that auditing is about asking yourself whether things are consistent with an accounting policy. I guess that my question to the Auditor General is whether the accounting policy actually fits the task of having a police force that is going to be able to do its job this year, next year, five years or ten years? Is this not a business that is going out of business? Is this a business that has got to be able to operate for ever and ever? That is why the asset register is so important and I would link it back to the financial strategy. One of the underpinning strategies is around property and other major fixed assets. It is clear that bringing together eight regional police services into one national police service may bring the opportunity to dispose of some assets to sell them and potentially to invest in others to have better more fit for purpose buildings and assets on which to deliver the service, but without having both an up-to-date asset register and a financial strategy it is not possible to do that. In some instances that might mean a change in the valuation basis. If you decide that you don't want this police station any more and you want to dispose of it and invest in something else, your valuation base may well change to something that is more appropriate for us that is held for disposal, but you need the information to be in place to be able to make those decisions and to account for them to this committee and to the public effectively. My last point then, convener, would be, are you confident that those who are making these judgments understand what you have just said about changing the basis of valuation to fit the need? Clearly they have to have an asset register, so they have to have up-to-date valuations. I have no problem about that. If they haven't got them, they haven't got the basic information, but are you confident that the management structure at the moment and the people involved is actually able to take account of the need to have the right accounting system and the right accounting protocols in such a way that we do have a long-term police Scotland? Jill may have a comment on this. My view is that people will almost certainly understand that in principle, but it is not until you start doing the work of the underpinning asset strategy and the decision-making that comes from it that that becomes something that people are doing in practice and understand the implications of. In a sense, you can only do it in practice, as you will start to think about the choices that you are making. Thank you, convener. I am obviously happy to hear to you all as well. Obviously there was a stand-off when the setup was happening in Police Scotland about VAT, and I noticed that you mentioned it in paragraph 11. I learned from the fact that there was no agreement and that the Scottish force has to and is the only force that has to pay VAT. One thing that I am a little bit unclear of is how much they are actually paying. Off the top of my head, I cannot remember exactly what the VAT liability was in 1415. I do not know whether Jill has the number to hand from the accounts. I would say that it is in the region of 20 to 23 million, but we can confirm that. Another question that has been buzzing around for a little while is the way the pension scheme is set up. Would that be correct in saying that the pension scheme is a UK-wide scheme? I can respond to that. In the annual accounts, there is a separate set of accounts for the police pension scheme. The nature of the scheme is that it is similar throughout the United Kingdom, but there is a set of annual accounts specific to the Scottish police pension scheme and it is associated just with officers, and it is in the annual accounts. One of the questions that I have heard asked in the past was the liabilities, particularly from the legacy forces. Some doubt as to whether or not those were a part of, although audited in Scotland, that it was a UK-wide scheme. Is that correct? The police pension scheme in Scotland is an unfunded scheme. That is similar to the national health service and the Scottish teachers superannuation scheme. It was clearly going to be a step change when the eight forces merged together. For the year 1314, seeing that unfunded liability for the first time, it was a figure of £12 billion. This year, for the year 1415, the unfunded liability altogether in the accounts is now £15 billion. That is a 20 per cent increase in the liability. Unlike the NHS and the Scottish teachers superannuation scheme that is underpinned by Westminster, the scheme is specific to Scotland. I just clarify that this is simply since Police Scotland started to exist. The legacy forces were completely separate as well. Is that correct? The legacy forces all had a pension liability, so if you were to add up the eight up until the year 1213, it would be a figure similar to what the aggregated figure was when the new merged force came into being in 1314. There has not been any change to the scheme. It is just that it is one set of accounts now, shown within the Scottish Police Authority's accounts. Was that always separate from the forces in the pension scheme in England and Wales? That is what I am trying to do. Before we finish, I will ask a couple of questions in connection with the report that you referred to the constraints and some of the challenges that face the future of the SPA and one of them is particulars in relation to a non-compulsory redundancy policy. Do you think that that is sustainable? The legislation that governs my role, convener, specifically prevents me from commenting on the merits of policy. What I said in my report in November 2013 was that both the non-compulsory redundancy policy and the 17234 officer commitment reduced the flexibility that the SPA and Police Scotland have in balancing their finances in the future. That is a statement of fact, which remains true. You are just asking me in terms of the asset register and the fact that some of the information has not been recorded as part of the asset process. What examples could we be referring to that have not been registered? I know that when we talk about assets, we can mean buildings, you know, plant, but could you give me some examples of, I mean, have there been buildings that were within the assets so that they have not been registered anywhere that maybe the Police Scotland weren't aware that they were even existing? By the conclusion of the audit, we were satisfied as to the adequacy of the accounting records when we finished the audit on December 3. Prior to then, we did find problems with the accounting records. Sometimes it was due to the actual figures that had been drawn in. Sometimes we found that the appreciation charges hadn't been included. Sometimes we found that there were elements that had been capitalised that ought not to have been included in the fixed asset register. A station or something that wasn't no longer in operation but had not been recorded or was there something significant? No, there weren't big items of land and buildings that had been overlooked in the way that you suggest. We did find problems with including movements in the valuation of the land and buildings but not big emissions such as you suggest. Thank you. I thank Auditor General for that report. Can I just say we are going to a brief five-mount suspension? Cary Coving colleagues, can I now move to agenda item number three, which is evidence on the AGS report entitled health and social integration. I would like to welcome once again the Auditor General, Caroline Gardner, Claire Sweeney, the senior manager and Rebecca Smallwood, who is the performance auditor and Gordon Neil, who is the portfolio manager. I understand that the Auditor General would like to make a brief opening statement. As you know, the Public Bodies Joint Working Scotland Act set out a framework for NHS boards and councils to integrate some of their health and social care services. This is an ambitious programme of reform, which will in time affect most people who use health and social care services. The Act creates 31 new partnerships known as integration authorities across Scotland, one for each council area and a joint authority between Clackmannershire and Stirling councils. Those integration authorities must have delegated responsibility for budgets and services by April of this year. The report that I bring to you today looks at progress being made in advance of this deadline. It is the first of a planned series of three reports and it is also related to my annual overview reports on the NHS and my forthcoming report on changing models of health and social care. The scale of reform brought in by the Act is very significant, covering services with budgets of over £8 billion a year that affect the lives of people right across Scotland every day. We found widespread support for the principles of integration from those involved with implementing the changes. All 31 integration authorities are expected to be operational by the deadline of 1 April 2016. Despite this progress, there are some significant risks that need to be addressed if integration is going to fundamentally change how health and social care services are delivered. We found evidence that integration authorities might not be in a position to make a major impact in 2016-17. In particular, difficulties in agreeing budgets and uncertainty over longer-term funding mean that comprehensive strategic plans are not yet in place. The report also highlights other important issues. For example, the complexity of governance arrangements means that it will be hard for staff and people who use services to be clear about who is responsible for care. Workforce issues are also significant. There is a risk of inheriting a workforce that has been organised in response to budget pressures as opposed to strategic needs. There are risks around the different terms and conditions for NHS and council staff and problems with recruiting and retaining GPs. We make a number of recommendations in the report. Those are intended to address the risks that we have highlighted to develop integration before the 1 April deadline. For example, we recommend that integration authorities should be clear about how governance arrangements will work in practice, particularly when disagreements arise. That would include clear statements on the roles and responsibilities of the integration authority and its individual members, the council and the NHS board, and ensuring that the members of the authority receive training to prepare them for their roles. That will help to minimise the risk of confusing lines of accountability and potential conflicts of interest, as well as making clear who is ultimately responsible for the care provided. As always, convener, my colleagues and I will do our best to answer the committee's questions. I will go straight to Richard Simpson. It is a useful first report. Mary Scanlon and I have been around long enough to have experienced the joint futures programme in 2001, which failed effectively. I am interested particularly in the budgetary side of it, because it seems to me that if that is wrong, there will be major problems. All the anecdotal stuff that I am hearing is that those joint boards are likely to start with the possibility of absolutely huge deficits if they are going to carry out their functions. The budgets, of course, have to be approved by the Cabinet Secretary for Health and Well-being. Those budgets have to be in places that I understand by April and approved by April. Are you satisfied with the progress that is being made in approving those budgets? Without them, we are really not going to get very far. Is it likely that those budgets will be more than the budget for 2016-17? Your report on the health service has been critical about the failure to have long-term planning rather than year-to-year planning. Here we are going into a new setup, which does not even have a year's plan. We highlight in the report the importance of getting both next year's budget and the strategic financial plan in place for the longer term for exactly the reasons that you are highlighting, Dr Simpson, and it is one of the things that is not yet in place. We know that health boards and council social care services are already under significant financial pressures, both because of the pressures on the finances for public services more generally and the demographic pressures that they are facing. That will make it more challenging. That is one of the reasons why having the budgets in place and having governance arrangements that will be clear about how the budgets are used is so key. Those are the two key things that we are highlighting in this report. I will ask Claire to talk to you through a bit more about what we know about the progress that is being made and our sense of optimism or otherwise about the chance of having it in place in the way that you described by April. We recognise in the report that it is being very challenging for partnerships to get this far. As you note, this is the first in three reports that we plan to carry out on integration. We are looking at the very early stages of them getting arrangements in place before they begin the work, as it were. What we have seen so far is that the schemes were signed off and approved by ministers in line with the timescales that were anticipated. The intention is that all budgets will be in place by 1 April. We understand and highlight in the report that there are risks and challenges around this. We observed a number of difficulties in negotiating those relationships between partners in various places across the country. At the moment, we think that it is likely that the budgets will be in place on time. That is not to underplay the difficulty and the discussions that are going on at the moment about things like, for example, which parts of the acute budgets for hospitals will be included within the new arrangements. There are clearly substantially difficult conversations taking place to enable the partnerships to be in a place to get on with the job as at 1 April. In 2008-09, the integrated resources framework system was beginning to be set up. I understand that it has a new name, but, effectively, that was the background information that should have been providing information leading up to integration. We are seven years on from that, and I am disappointed that, in paragraph 89.90, you say that the data-sharing arrangements are not yet in place. That surprises me, because that integrated resources framework should have been providing that information by now in considerable detail. I know that there were difficulties at the local level initially, but it should have been evolving. Has that not been adequately resourced by the Government? What has been the failure by the Government to provide this anticipatory information? We have been tracking the developments of the integrated resource framework for a number of years, and we have absolutely identified in the report and previous reports that that kind of information is central to making a success of the changes. What we have observed over the years is that that has moved from that developmental approach, tested out in various areas, to a much more systematic approach now, where that information is collected centrally and is reported out to all partnerships. For example, one of the big more recent developments has been the Government supplying the information to partnerships around people who are high users of NHS and social care services. We have had some really helpful conversations with various partnerships across Scotland, particularly in Teaside, where they are using very detailed information based on the centrally held data, bringing together health and social care information to give a much more rounded understanding about what the real challenges are to get beyond some of the high-level national stats to think what does this mean for individuals living on a particular street or people who really do need to access health and care services on a regular basis. We are seeing a move forward and a support to partnerships so they do have the information they need, but you are right that there are still significant areas of development that need to be addressed very quickly if partnerships are to really make the difference that the vision of integration was intending. You have satisfied the Government through the ISD and are now providing this information to an adequate level to allow the outcome stuff, which you refer to, to be actually looked at Partnerships have better information now than they have had before in terms of making those decisions locally. The Auditor General has made a reference to a report that we are currently working on around models of health and social care, and what we will do in that report is get under the skin of some of those national data sets and bring forward examples of local partnership working, where they have brought data together locally, overcome the challenges that we mentioned in this report and started to focus on exactly where the pressure points are across the health and social care systems. We have seen that develop over time. It is big and it is challenging, but the information is there to a quality that it was not before. The other aspect of this is, of course, the national care standards, because unless you know what standards you are applying, the whole thing becomes rather irrelevant. Those have not been modified since 2002. The Health and Sport Committee called on the Government in 2012 to produce new care standards. As far as I know, we still have not got them unless you know differently. Here we are going into the most significant reform since 1948 in the health service and social care service, and we do not have national care standards against which to set it. Maybe it is a policy issue that cannot be commented on, but it seems to me to be something that, without that data, both the integrated resources framework or whatever it is now called and the national care standards, the new organisations are really fighting an uphill battle to get the governance arrangements in place that they need. We refer to the national care standards in paragraph 92 of the report. There is currently a consultation under way about the overarching principles that should apply to the new standards. The Government's plan is that the standards themselves will then be in place sometime during 2017, so work is under way, but you are right that they are not yet in place in a refreshed way since the original ones from 2002. How is the successor committee to this committee and the health and sport committee going to be able to hold the IAs to account against a set of standards that are now 14, 15 or 15 years out of date? I think that that is a question that is better and directs to the Government than to us. General, clearly this report highlights the fact that there are significant challenges in what is a very major and ambitious project. I am looking at paragraph 35 on page 19 and I am looking at your comments about the guidance that is provided by the Government and that three Ayrshire IGBs have gone ahead in advance of that guidance. What are the implications for that? I think that the point that we are making here is that some of the guidance was later than would have been ideal for the partnerships to be able to use it. Clare, can you pick up what that means for the partnerships that did go ahead before the guidance was available? The characteristic of how the reforms have developed to date has been an awful lot of consultation and an awful lot of engagement with the partners involved. In a sense, what we have been reporting on over the last few years is a building of similar issues. In a sense, a lot of this was not new. Partnerships were already working towards some of the core standards that have been set nationally around keeping people safer in their own homes. They were very familiar with a lot of the reporting that was already in place. I think that one of the challenges around the guidance coming later means that partnerships did start off from a place without having that guidance in place. The consultation that is on-going and that they will continue to have discussions around performance reporting as they understand that that is still happening has been helpful, but it does mean that some partnerships went a little bit earlier in terms of publishing some of the information. There is a risk that that does not fall in line with the guidance. I would say that the overall ambition is common across all partnerships. They understand that the core aims of the reforms are about keeping people safer at home, a general shift away from unplanned emergency admissions to better care in the community and all that entails for the GP services, community services. There is an understanding about the general approach that everybody is aiming towards, but there is a risk that the guidance came later for some partnerships than would have been ideal. Given the fact that there seems to be a common understanding of the approach and so on, in paragraph 42 it says that the scope of the services being integrated varies widely across Scotland. Why is that? The reforms were designed to allow for local flexibility to address local issues, so we would expect to see quite a lot of variation in terms of some of the particular measures that have been used at a very detailed level and some of the services that have been integrated. For example, if a particular local area had a problem with drug and alcohol services, you might expect to see much more being talked about and a much greater focus from the resources, the money, the staff and the initiatives to improve some of the performance around drug and alcohol services than perhaps in an area that had that less of a priority for them. That is fine and that is right, but what we recognise in the report is that there are inherent challenges with that in having a focus on outcomes at a very local level, which drives the entire system. That is fine, but there is a real challenge in tying that up with what we know nationally about what works well, sharing good practice and a general oversight about how the system is performing across health and social care services. There are real challenges in there for the partnerships and for government to work through. Do you expect to see those variations locally? In the same paragraph, you are saying that there is a risk of fragmented services in some areas, but fragmented services are a bit different from just having local variations. That is right. One of the things that we are concerned about there and we have highlighted in the report is our risk that there is a focus on reform of those services that are included with integration and that there is a separation or a different direction of travel for those services that fall outwith the integrated partnership arrangements. One of the things that we have highlighted is that it is very important to establish in those very clear senses of good care and clinical governance that there is real clarity about who is responsible for delivering what services and crucially that people within the local areas really understand what is entailed in all of this, in what way will their services change and improve and that their voices are heard as much as the professions that pay a key role? I understand that there has to be local variations because there are different priorities in different areas. I understand that, but a lot of the core elements of this should be common. What I am thinking is how are we going to measure the success of those bodies if there are no common indicators there? There will be core indicators in the sense that there will still be a series of national measures and targets. They will still exist although they will shift and change over time. There will be the nine national outcome measures that we have detailed in the report. Those are key to looking across the entire system and seeing what impact the changes in the reforms are having. Those are the twin tracks that will give you that national picture about how the reforms are having an effect locally. In response to Richard Simpson's point, you have in paragraph 73 that out of the 31 authorities only six had agreed budgets by October. Given that we are now into January, what progress has been made on that figure? Things have improved. There are on-going discussions. I am not able to give you an exact number about how many budgets are in place. We looked at progress as up to October last year, so we will keep in touch as things develop. It is something through the local financial order at work, as much as the national value for money work we want to keep a close eye on. I remember well Richard Simpson and I sitting on the First Health Committee when we put through the health and community care, which brought forward the policy of free personal care. At that time we had thousands of what we call bed blockers delayed discharge, and the reason that NHS couldn't get them out was because I had to wait till the end of the financial year until the councils had money. At that time I remember clearly that every ounce of evidence that we had said that there should be a single budget. What the committee did not agree on, or what we did not recommend, was who should hold that budget, but a single budget was agreed. We moved on to pool budgets and aligned budgets. On page 30 and 31 you are now talking about set-aside budgets and different planning cycles. When you say 31 out of 32 authorities, the 32nd one of course is Highland, NHS Highland and Highland Council. Now they have this lead authority model. I appreciate that the Scottish Government hasn't recommended one particular model, but I have quite a lot of experience of that model. I am now able, if someone comes and says that my mum is in Regmore hospital, I know exactly who to go to. There is no passing the buck or passing the budget. Should we not be a bit more robust? In 2001 we were asking health, NHS and councils to work together. Fifteen years later the Scottish Government, and I support them, because of this unwillingness to work together, I have had to bring forward legislation to get people to talk together. We find that it is difficult to agree budgets. Is it the case that the NHS is still allegedly hiding behind patient confidentiality in the case that they are not willing to share information, a point that Richard Simpson brought forward? I am saying that legislation is enough to say, let's have integrated authorities. We have seen by this report that they cannot agree. Should we go a step further and say that the Highland model is the type of model where we need one budget, one responsibility, one accountable officer, instead of trying to sit round the table and not be able to come to an agreement? We have had Highland in place for a while now, and I think that it is perhaps a good model. I recognise the sense of frustration about the slow progress that is made in this very difficult area. There is no doubt that it is difficult. In Exhibit 2, on page 11 of the report, we give a brief history of integration of these services in Scotland. It is a long list of initiatives leading up to the 2014 act. It is important to say that there are some things that are different now. There is, for the first time, a statutory requirement to have a shared budget and shared resources. In the past, that was not a statutory requirement. It is something that was encouraged. There is a requirement to focus on the outcome measures rather than on activity and the sorts of things that might come in before. It is important for the people who use these services to be involved in designing their own care for the first time. All of those are new things that come with the legislation. Having said that, your question about whether legislation is enough to make it work in practice, in my view, it is never enough. Legislation can provide a very useful underpinning, but it does require people to be willing to work together for some give and take for a genuine commitment to shared planning for the benefit of the people who use these services. In time, that will be all of us. The question about whether everyone should be following the Highland route is one that we cannot answer. The legislation clearly provides for the two different models. It is very interesting that everywhere except Highland is going for the integration joint board approach rather than the lead agency approach. We are continuing to watch with interest how all of this plays out in practice. I said in my introductory remarks that this is the first series of three reports that we plan to produce as the legislation is fully implemented. In a sense, I hope that we will be able to answer exactly that question as that work progresses about which model is better. Within the 31 integration joint boards that we are seeing, which of those are having the most impact on changing things for people? Given that the NHS budget has been largely protected—although we know that there have been efficiency savings and so on—but it has been largely protected in comparison to the huge challenges that we read day by day in local authorities and the savings that they have to make. Given the pressure on councils and perhaps not quite so much pressure on the NHS, is that leading to difficulties in agreeing budgets? Can I throw in this point back in 1999, 2000 and so on? We were always told that there were cultural differences between the NHS and social work that did not really understand each other and spoke different languages and different jargon. Is that still an obstacle to making this work? I will ask Gordon to come in at a moment on both points. I will just kick off by saying that one of the risks that we highlight here is the risk that not only are councils and health boards trying to do this at a time of tight finances and rising pressures, but, as you say, because of the additional pressure on councils, they have responded understandably by reducing staff numbers and outsourcing large numbers of care staff. That raises the risk that the staff that the new integration authorities inherit are not designed around how they would best deliver joined-up services, they are designed around how people have been managing against the background of the pressures that they have been facing over a period, and that will be a challenge for the authorities. There are also, as we know, different terms and conditions in a range of ways that can make that more tricky. Gordon, would you like to add to that in terms of what you have seen in cultural differences as well as staffing differences? You are right to suggest that the NHS has had relatively protected status. It has been a policy decision for a number of years, and social work has had to compete against other council services. Certainly, among the people involved in the integration authorities, there is at least a perception that the NHS side of the integration authorities will have more protected status. There is a concern, again, with perception—we will have to see how that will pan out in the future—but a perception that social work staff might be more at risk if the shape of the workforce has to change in future years. There is a perception that it is easier to downsize the social work side than the NHS side. There are cultural differences that do come through. We can see it already. There are the obvious ones. The politics, local authorities are very political animals. The very local authorities have a different perspective. There are also more subtleties in that local authorities are more used to outsourcing and using the private sector. About a quarter of care staff come from the private sector, whereas that is not the case in the NHS. There are cultural differences that will have a profound impact. I just say that, on that point, you mentioned the voluntary sector quite a bit, as well as the private sector. Is there potentially a risk to that outsourcing to the voluntary sector organisations such as crossroads and others who have provided excellent care over many decades? Is there a risk to that, given that the NHS is perhaps not as accustomed to outsourcing work? Now that they are sitting with the budgets as well? There is a risk of that. We have had a fair bit of contact with the voluntary sector as we are doing this work. It is still relatively early days, but certainly from some of the voluntary sector people that we spoke with, they did not feel that they were being engaged enough at locality level in the strategic planning. From their perception, there is a risk that they are getting excluded at the moment, and it is seen as an NHS local government agenda. Can I just ask about the points that you make on GPs and GP recruitment? 86 and 87 you specifically mentioned the concerns about workforce planning in terms of delivering integrated care, given the shortage of GPs we have. Just how significant is that? How much of a danger is that problem? GPs we know are central to getting health and social care when well integrated and making sure that people are kept safe and healthy in their own homes. They are key to avoiding unnecessary admissions, making sure that people who are vulnerable in different ways get the care that they need at home and that it responds to their changing needs, and they are key to getting people safely discharged if they do need to go into hospital. We have reported elsewhere on the pressures on the GP workforce, particularly in my annual overview report of the health service. We think that it is a significant enough issue that we are planning some more specifically on workforce in the health service, and GPs will be a key part of it. I am not sure as much more we can do to quantify that just now, but we do identify it as a risk for exactly those reasons. No, I am sure that is very fair. You say at the bottom of 87 that it will be many years before the measures will have a significant impact on the measures being the Government's interventions in order to try to tackle GP recruitment shortage. If it is many years, it is meant to be up and running now. That suggests that there is a fundamental issue between the availability of full-time permanent GP staff right across Scotland—it is not just my pot of worlds—right across the country and the practical implementation of this policy. That sounds to me like quite a big problem. It would be a challenge whether this policy were in place or not. We know that GP recruitment and retention are a problem for a whole range of reasons, and it is not one for which there is a quick fix. I have a recent issue there. Absolutely. Okay, many thanks. Thank you. In paragraph 26 and also paragraph 27, you highlight the scrutiny element of the IGPs. I was previously on the local government committee, and one of the things that came up there and which all the Scotland has produced reports on is the benchmarking tool. In terms of the local government activities into the integrated joint boards, will they be covered under the benchmarking tool that is in operation? I suspect that they will not be a major part of the benchmarking operation, other than in general terms, through things such as corporate support services. The benchmarking project is one that is now owned by local government and has made big strides because of that. The primary means for benchmarking this policy is the nine outcomes and the supporting performance indicators that we outline in the report. I think that they are very much more focused on the quality of care that people receive and their experience and the experience of staff involved in the services. The benchmarking project may be able to make a contribution, but it will be at the margins. Can I just pick up on the same aspect that I mentioned under the previous item? Are you confident, Auditor General, that the asset registers and all the substantial, very substantial capital assets are going to be properly assessed and valued and managed? I am conscious that local authorities and the health service are trying to fill some of their financial gaps by selling some of those land and assets. We know through the annual audit process that the asset registers of the 32 councils and the 14 territorial health boards are fit for purpose at the moment, with the occasional exception. There is a question about how far those assets will be transferred into the integration authorities. They may well continue to be held by the health boards and councils. The question then comes up about who is accountable for the decision-making around them and whether there may be conflicts of interest for the members of the authorities. Claire, do you want to say any more about that? We see very strongly in the report that there needs to be very clear systems in place to be very explicit about who is responsible for what. In a sense, looking at the reforms at this very early stage, we were able to make recommendations about some of the risks that we were seeing coming through. In a sense, until we look at the goal live, until the financial audit starts, until we start to see how the partnerships are operating in practice, we do not have that level of detail yet. What we are advocating very strongly in this report is the need for that to be very, very clear from the outset. That is something that we will continue to look at as the partnership arrangements develop. Thank you. I will come back to that just a moment. I wonder whether I could then take us to another subject dear to this committee, which is IT systems. Presumably, if there are 31 integration joint boards, there are potentially 31 IT systems, all of which will be separately maintained, re-procured and will not talk to each other. Am I being too cynical? Is there any prospect that any of this will be integrated? I think that you are absolutely right to flag the concern. Our expectation is that, to start with, the authorities will continue to use the systems that are in place within the councils and the health boards for managing care services and health services. Over time, if an integration happens, there will certainly be a real push to have much more integrated and fit for purpose information systems that move on from there. I think that it is too early for us to see that being a priority for any of the integration authorities that we have looked at, but it is very much on our risk register for something that we want to keep abreast of. There is a real risk that, because there are fewer health boards than there are local authorities, a health board will find that it is trying to interrogate two, three or possibly four local authority systems, all of which are different. In a sense, they are already doing that, not directly, but if you are working in the Royal Infirmary of Edinburgh and trying to arrange the discharge of an older patient with complex care needs, you will have to be working with information and staff from four different councils at least before you start looking further afield. In some ways, I think that bringing that to the fore through the integration authorities could be a positive, but it also does bring the risk, as you highlight, of attention being diverted into managing the challenges of an IT system rather than managing the care of the people involved. That leads me back to the issue of who is responsible for what and how we can see that going. I am conscious of the previous item on our agenda. We were talking about Scottish Police Authority and Police Scotland. They are separate because the chief constable has to have operational independence, and we understand that, but we also recognise that it has caused some problems in recent years. Surely we can see coming the same kind of problem, and this is not meant to be a comment on any individual person when people at the head of the health service are trying to work with people at the head of the local authorities. I am not telling anybody anything that is not entirely obvious. My question is from what you are seeing. I recognise that you cannot answer a policy level, but do we seem to have good models as to how that might work and good examples of how people can divide that up and still come to good decisions? Are you looking at the same thing that I am looking at, which seems to be the vast majority of cases that are prospectively a problem simply because people have split responsibilities? We have tried in this report to highlight exactly that risk. I entirely understand the policy rationale for saying that the answer to this is not wholesale or real organisation, let us work with what we have, 14 health boards and 32 councils, and then putting the integration authorities in place to bring services together around the key groups of people affected. As I say in the report, that brings complex governance arrangements, it brings with it a risk of unclear responsibilities, unclear accountabilities and a risk of conflicts of interest. That is why we are recommending at this stage, before they take on their operational responsibilities in three months' time, that those things really need to be pinned down. As you say, we have seen in the case of policing in Scotland the impact that that can have. Those are another group of very significant public services spending lots of money affecting people's lives. I am keen to see those arrangements clarified now to avoid the risk of those effects happening as those reforms roll out. Am I there for this? Is the final one expecting you to do something to audit those arrangements before we get too far down the road? Again, that is why this is the first in a series of three planned reports, so that we can stay close to what is happening in practice. We will come back to stage two once the arrangements have been in operation for a full year. We have a further piece of work scheduled for the later to look in the longer term at what impact the reforms have had. That is our plan in terms of the national performance order work around that. Of course, there will be local order work that happens as a routine throughout the process of the parent bodies, indeed, as much as the new arrangements once they are established. We also will have on-going discussions with all parties involved as the reform starts to take effect. As the Auditor General has said, it is a big risk and we want to stay very close to that. I will just ask for the conclusion that we have referred to in terms of the partnership arrangements for a number of years. I remember going back to even when I was a counciller in the late 90s, and there were social inclusion partnerships, which were about local health boards forming partnerships with local authorities. Even then, the tensions existed because, effectively, there were two health budgets and local authority budgets. Those tensions continue. I cannot see any evidence that those tensions in any way have allowed any progress to go forward. Other than on the face of it, everyone presents a picture of partnership, but in practice there are significant tensions. I know in different authorities that it has been a significant challenge. If we had one budget for this process—for example, I am not asking you in the policy terms of this, but if, for example, local authority was responsible for healthcare, as we have seen and happened in the distant past, would that make it much easier to audit and ensure that it is taking forward? We would not have those two elements of two budgets by which both authorities are responsible for. As Mrs Scanlon highlighted in her question, one of the options under the legislation is to have that lead agency model in Highland. The council is responsible for all children's services, the health board is responsible for services for older people. Only Highland has chosen to go down that route, and I think that it is an interesting question as to why that is. In the other 31 integration authorities, they will have to have a single budget for money and resources staff and so on, which is a new development that has never been a statutory requirement before in the long history of initiatives and approaches to trying to get integration. It may make a difference and, as you say, there are challenges and tensions there. We have tried to highlight the risks that we think need to be managed now before the first of April, and we will, as Clare said, continue over the next 12 months to look at what happens, but I cannot give you any definitive answer about what we will see in that work. We have finally talked about the public having confidence, and we have talked about transparency in those arrangements. I defy any member of the public to interrogate that and say that he understands what is going on in the local health partnerships, because even for those who are well informed in that, I think that being completely aware of what is in place locally is extremely challenging. Most members of the public want to know how to access local services, and even that is a challenge because of the complex arrangements that have been put in place for various reasons. Does that not present a challenge as well in terms of auditing how effective those organisations are being? It is complex. I would say that, if that works well, people will know how to access the services that they need, and it should not matter to them who is responsible at the end of the day for providing them. If what you need is available readily at the quality that you need at the time, that is what matters to most of us. The challenge is what happens if it does not work well, and particularly who is responsible in formal terms for the quality of care, as well as for the money that is spent. That comes back to the recommendations that we have made about clarifying that before 1 April, so everybody who relies on those services gets what they need. You have already said that GPs are fundamental to that. They were very disengaged from the community health partnerships. Have they all been abandoned now to be replaced by the integrated joint boards or the integrated authorities? Has that happened? What about their staff? Were they made redundant? Are there costs involved in those reformations? That was not a reform programme that led to the redundancy of the staff involved. I think that the staff are attending to be the people who are continuing to deliver services, and some of them will be moving into the integration authorities in terms of managing their responsibilities, but that is something that we will be picking up in the next phase of this work. Thank you. I thank the general for our briefing. Can we now move to agenda item number 4, which is the section 22 report of the 2012-13 audit of North Glasgow College? Can I seek views from colleagues on the responses that were received? Mary Scanlon. Given that we have been looking at Coatbridge College and announcing our report today, there are some similarities between the issues at North Glasgow, in particular relating to Scottish funding council guidance. Given the work that we have done on Coatbridge and the wider college sector and the response that we have received from Paul Johnson, I think that the work that we have covered in Coatbridge covers many of the issues that were of concern at North Glasgow College. I am quite happy to leave it there. I do not really see where we can go on this from here. I would suggest that we note it and agree with what Mary is saying that it is in tandem with the Coatbridge issue. The issues that the SFC and the Government are addressing here are very similar. David Scott. I agree with my colleagues, but I just want to pick up the one bit of the answer from Lawrence Howells in the letter to the clerk from the funding council on severance payments. We still have not had the full breakdown of that table that we were promised in a caution, as I cannot even remember when, in November, October or sometime in the autumn. I really do not think that it is acceptable for the funding council not to provide us with information that the committee has asked for. Therefore, the only thing that I would add to Mary and Colin's points is that we should write formally to Lawrence Howells saying, give us the information. Can I just note that the fact that this has come through this committee has been highlighted to the Government across several different colleges has actually gotten to the point of reflecting on how some of that needs to be looked at. There is a task force sitting there looking at it and I think that we should recognise that that has been progressed by the committee and, as colleagues say, just leave it there for the moment. Howells' comments about his answer to our question about support and issuing guidance et cetera was extremely weak. I think that that weakness really does give me concerns going forward as to whether the organisation is fit for purpose. First of all, we have requested that information that Tavrey Scott referred to on a number of occasions, and we have asked for complete information. That is not the first time that, as convener of the committee, I have had to highlight the fact that information has not been received from the Scottish Funding Council. I will write to it and remind it of the importance of providing such information and how helpful it is for the committee to have that information so that it can carry out its responsibilities. I think that it should reflect on that. I also support Richard Simpson's comments on the responses from the Scottish Funding Council to advise that it did not reassure the guidance but only reminded the colleges of the guidance. Given that they were processing over £53 million worth of public money as part of those seven arrangements, I think that the reassuring of the guidance and not reminding them of the guidance would have been more effective. It is simply not good enough now that the horse has bolted to say, well, we will have a look at doing that in future. It was a serious feeling in the part of the Scottish Funding Council. I think that we have recognised that in our court bridge report, but, again, for the funding council not to have carried out what would have been a pretty minimal task in terms of administration to simply remind the colleges of here is the copy of the guidance. It would not have been beyond them, given the resources available to them to provide such information. Is the agreement then, colleagues, that we will note the correspondence, taking into consideration the recommendations that we set out in the co-bridge report? Is that great? Thank you. Obviously, we will write to the funding council reminding them of the information that we require in respect to the table that was required. Colleagues, we move to agenda item number five, which is the response on the Scottish Government to the AGS report entitled deficiency of prosecuting criminal cases through the share of courts. We have a number of options. We can note the correspondence that we have received. Are there any further actions? Is it agreed that we should note the correspondence? As agreed previously, we move to agenda item number six, which is moving the committee into private session.