1.1 In June 2006, Scottish Ministers commissioned Professor Lorne Crerar to evaluate the current systems of regulation, audit and inspection (referred to in this report as 'external scrutiny') and complaints handling. Professor Crerar was also asked to make recommendations on a framework for the future external scrutiny of public services, including:
- The purpose, principles and role of effective external scrutiny, including clarifying who the customers and beneficiaries are;
- Governance arrangements;
- How external scrutiny and complaints handling can better support continuous improvement in public services;
- How external scrutiny and complaints handling can be more efficient and better co-ordinated;
- The priorities for change;
- Any legislative or organisational changes that would be required to implement the recommendations.
1.2 A small team was established to support the Review, staffed by secondees from public sector organisations and from the Scottish Government. A panel of experts was also identified to provide advice and challenge:
- Dr Clive Grace, University of Cardiff
- Professor Christopher Hood, University of Oxford
- Michael Lennon, Glasgow Housing Association
- Professor Sandra Nutley, University of Edinburgh
- Professor Ellie Scrivens, University of Keele
- Douglas Sinclair CBE, Chair of the Scottish Consumer Council
- Scope of the Review and approach adopted
1.3 The Review was commissioned as a key initiative within the wider public service reform agenda in Scotland. The recommendations made within this Review are complementary to other areas of work being pursued within the reform agenda, such as the desire to create models of service delivery which:
- Are more personalised to the individual;
- Place more emphasis on outcomes rather than process measures to drive performance improvement;
- Include devolution of responsibility for the delivery of services to the front-line; and
- Reduce unnecessary bureaucratic burdens.
1.4 The timeframe for the Review was initially 12 months and this determined the approach we used. Early consultations with key stakeholders indicated that the Review would add most value by articulating the purpose and unique role of external scrutiny and by identifying a set of principles to govern its operation. We were clear from the beginning that it would not be possible to conduct an in-depth analysis of all aspects of the current system in only 12 months and so it has not been possible to undertaken a detailed diagnostic of individual scrutiny organisations or scrutiny regimes. We have taken an overview and make recommendations for the whole scrutiny system and for the complaints handling system.
1.5 In this Report, we begin by describing the following in relation to external scrutiny:
- The context in which it currently operates;
- What its role and purpose should be;
- Its beneficiaries;
- The principles under which it should operate; and
- Concerns about how existing arrangements fail against these principles.
1.6 We then go on to describe the place of external scrutiny in a future framework for performance management, including how it should be applied in the future and the key issues to be considered before it is applied.
1.7 The report concludes with a separate examination of complaints handling - an important activity aligned, and complementary, to external scrutiny.
Areas outside scope
1.8 We considered external scrutiny to be audit, regulation and inspection undertaken by a body distinct from the one being scrutinised. While some activities undertaken by the Scottish Government will often be considered by the body being scrutinised to be "external scrutiny", we have focused on the scrutiny undertaken by bodies normally seen as being one step removed from the Scottish Government ( i.e. public bodies, executive agencies and bodies that report directly to the Parliament).
1.9 The Review's scope does not include scrutiny undertaken by UK and international organisations, or professional regulation. It has also not considered contract compliance arrangements between local authorities and suppliers of services, which can include monitoring arrangements that place compliance burdens on providers. We have required to focus upon areas of public service that are subject to greatest intensity of scrutiny and account for most of the public expenditure in Scotland, these being:
- Local government;
- Social care; and
- Social housing.
1.10 We took a significant quantity of evidence from a wide range of stakeholders. We have synthesised all of the evidence received in reaching our conclusions. We have not responded to all points of detail, but have considered the issues that were most important to stakeholders, and which were most relevant to the remit of the Review.
1.11 We carried out a mapping survey of potential external scrutiny organisations, taking detailed evidence from 36 of these.
1.12 We commissioned specific research:
- 'Literature Review to Inform the Independent Review of Regulation, Audit Inspection and Complaints Handling of Public Services in Scotland', by DTZ Consulting & Research;
- 'Scrutiny and the public: Qualitative study of public perspectives on regulation, audit inspection and complaints handling of public services in Scotland', from Ipsos MORI and an academic team led by the University of Edinburgh; and
- 'Literature Review on the Consumer Approach to Scrutiny', from the Scottish Consumer Council.
1.13 Although not commissioned by the Review, we benefited from other research and evidence:
- The Scottish Consumer Council submitted a paper 'Scrutiny and the Consumer';
- COSLA, SOLACE and the Improvement Service submitted a research report on behalf of Local Authorities - 'External Audit and Inspection Arrangements in Scottish Local Government' by;Brodies LLP Management Consultancy;
- Audit Scotland submitted two reports. 'The cost of external scrutiny of public services in Scotland: a preliminary analysis', and 'Risk-based and proportionate scrutiny'; and
- The Scottish Public Services Ombudsman ( SPSO) submitted 'The;Place of Complaint Handling in the Scrutiny Landscape'.
1.14 The commissioned research reports, submissions, and other papers are included as annexes to this report and a full list is in Appendix I. The annexes are available on the Review website and on a CD Rom with published hard copies of this report.
1.15 We also took the views of stakeholders in a series of seminars, events and meetings with key stakeholders. We also gathered evidence through questionnaires:
- We held four regional discussion events (Aberdeen, Edinburgh, Glasgow and Stirling) in May to discuss both the improvements suggested in the Review Interim Report and a national framework for external scrutiny. Over 200 people attended these events. A summary report on the events and attendance lists are in Annex L;
- Evidence was taken from service providers. All health boards and around 200 care or social housing providers, as well as 35 independent health care providers were offered an opportunity to contribute evidence to the Review, through workshops (from Inverness to Dumfries), forums, submissions and questionnaires;
- A range of key stakeholders including SPSO, inspectors, Commissioners, local authorities and Scottish Consumer Council, participated in a forum to explore ways to improve complaints systems;
- We took advice at a one-day forum from a group of academics recognised as experts in public services;
- The Chair had individual meetings with the Scottish Government, the Parliament, scrutiny bodies, service providers, the voluntary sector, and other representative bodies and spoke at conferences and seminars throughout the Review;
- Views were also sought from around 30 sponsor and policy teams across the Scottish Government, who either established or sponsored scrutiny bodies;
- We were informed by the UK and Welsh Governments' reviews of external scrutiny and associated reforms;
- We had regard to the findings of the Finance Committee's Inquiry into Accountability and Governance. 1 We also drew on submissions from other groups and organisations.
1.16 We recognise that the terminology used to describe the strands of external scrutiny is often open to interpretation. We have tried to be clear about what we mean throughout this report. We used the practical definitions below to describe the various elements of existing external scrutiny.
1.17 Regulation focuses on providing a licence to operate, enforcement of legislation and regulations, and monitoring the quality of services provided. Regulation may also include elements of service inspection, and can be designed to drive up quality as well as to enforce standards.
1.18 External audit is the periodic external scrutiny of corporate governance and management; financial statements and underlying financial systems; and performance, performance management and reporting of public bodies.
1.19 Inspection is periodic, targeted scrutiny of specific services, to check whether they are meeting national and local performance standards, legislative and professional requirements, and the needs of service users.
1.20 Complaints handling is the independent investigation of complaints about public services carried out by a range of commissioners and ombudsmen and other public bodies with specific roles and responsibilities.
1.21 We have covered complaints handling in a separate chapter ( chapter 11). We have concluded that complaints handling is not in itself "external scrutiny", but it must be closely aligned with it.