Scottish Public Finance Manual

The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers to provide guidance on the proper handling and reporting of public funds.

Annex 2: 3E examinations

Statutory basis

1. The Auditor General for Scotland (AGS), under section 23 of the Public Finance and Accountability (Scotland) Act 2000 (the PFA Act), may initiate examinations into the economy, efficiency and effectiveness (3E examinations) with which certain bodies have used their resources in discharging their functions. These bodies include any where there is a statutory requirement for the AGS to undertake or arrange for the audit of the accounts and any specified by order under section 23 of the Public Finance and Accountability (Scotland) Act 2000 (the PFA Act). 3E examinations are also commonly referred to as "section 23 examinations / reports", "value for money (vfm) examinations / reports" and "performance audits / reports".

Scope of examinations

2. The AGS may examine not only the arrangements for securing economy, efficiency and effectiveness. They may also directly examine individual projects, programmes or other activities. However, under section 23(9) of the PFA Act, in carrying out the examinations the examiner is not entitled to question the merits of the policy objectives of the body in question. This reflects the principle that the merits of government related programmes and projects are primarily a matter for Ministers. Nonetheless, the accuracy and completeness of information on the basis of which policy decisions are reached, the means by which objectives are pursued, the implementation arrangements and controls, the costs incurred and the results achieved are all legitimate subjects for 3E examinations.

Conduct of examinations

3. A protocol between the SG and Audit Scotland covering the arrangements for carrying out and clearing 3E examinations undertaken on behalf of the AGS is reproduced at Appendix B. Other bodies subject to 3E examination by the AGS should establish appropriate procedures with Audit Scotland, as and when required. Where an examination covers both the SG and a body or bodies sponsored by the SG it is important that there is close liaison between the parties concerned.

Scrutiny of draft reports

4. Bodies subject to 3E examinations will be given the opportunity to comment on draft reports. This will take place formally at the "final draft" stage but key contacts may, at the discretion of the examiners, be given sight of earlier drafts. Draft 3E related reports should be examined extremely carefully with regard to factual accuracy and any interpretation, opinion or conclusion, whether implicit or explicit, with which bodies disagree should be challenged. The overall presentation and balance of the report should also be challenged where bodies consider that undue or insufficient emphasis is being given to any specific point. Comments on draft reports should be cleared by the relevant Director of Finance (or equivalent) and, at the "final draft" stage, by the relevant Accountable Officer. It is of course for the examiners to decide what will ultimately appear in published reports.

Publication of reports

5. Embargoed copies of 3E related reports will be provided to relevant bodies 2-3 days prior to publication. Official responses to the publication of 3E related reports should where possible avoid comment that could pre-empt evidence to the Public Audit Committee. Press briefing should therefore normally be restricted to acknowledging the publication of the report, noting that it may be considered by the Public Audit Committee, quoting or paraphrasing material in the report setting out the body's position, providing relevant information and correcting any mis-statements of fact or interpretation in media coverage.

Public Audit Committee

6. The AGS is not obliged to report the results of 3E examinations to the Scottish Parliament but it should be assumed that all such reports will be laid before the Parliament and considered by the Public Audit Committee.

Implementation of recommendations

7. The relevant Accountable Officer should ensure that, following publication, 3E related reports are formally considered by the body and that all agreed or accepted recommendations are implemented within a reasonable period of time.


Page updated: May 2011

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