When the auditor calls

“There’s not a day when I’ve been sorry to be home!” Caroline Gardner, the Auditor General for Scotland, was speaking in her office in Edinburgh’s George Street. It’s a grand space, but she is looking forward to an imminent move to a setting more conducive to team working.

“It was the toughest 12 months of my career, no doubt about it,” she said of her appointment as Chief Financial Officer of the Turks and Caicos Islands in 2010, Some might balk at the idea of a job in the Caribbean being tough; the British Overseas Territory boasts “world class hotels, spas and restaurants, stretches of un-crowded beaches and vibrant coral reefs”.

But when Gardner landed there it was a mired in debt and corruption. A UK judge-led inquiry had found “a high probability of systemic corruption in government and the legislature and among public officers.

“It appears, in the main,” said his report, “to have consisted of bribery by overseas developers and other investors of ministers and/or public officers, so as to secure Crown Land on favourable terms, coupled with government approval for its commercial development.”

Gardner turned over some stones and found things: “Horrible things! They had suddenly found themselves in a huge financial crisis. It was a combination of the banking crash – they rely heavily on tourism, obviously, which dropped like a stone – but also the accounts had not been reconciled for two years.

“You would open a drawer and find huge invoices for roads that had been built and ports that had been renovated but no one knew if they had been paid, whether the contracts had been properly entered into and whether the work had been done or not. The systems for collecting taxes were not functioning and there had been a complete breakdown in public confidence in public services – for example, if you sent a letter you couldn’t guarantee it might not be opened along the way – and people were reluctant to pay taxes.”

Gardner’s arrival was also set in the historical context of slavery and colonialism. As the crisis took hold, the islands’ parliament was dissolved and a governor appointed by the Queen: “The people were very reluctant to be back under UK Government control,” said Gardner. “The political situation was fraught; the elected government had been suspended, the parties were antagonistic. There were also problems with drugs coming into the islands and illegal immigration.”

The Foreign Office undertook a risk assessment exercise to assure her safety while she and a team from the Department for International Development (DIFD) unravelled the tangle of mismanagement.

“Some people recognised that the position was damaging and would only get worse unless something was done, but they tended not to speak out. And people were worried for understandable reasons. Public servants depended on jobs and pay. The tourism industry worried about reputation. A big part of the islands’ expenditure went on scholarships for students to study overseas, which were very popular locally.”

But with a refinancing package put in place by DIFD, Gardner set about balancing the books and instilling a culture of sound financial governance. “It really did make me appreciate how much we take for granted public services that work,” said Gardner of her return to Scotland.

Gardner’s belief in their importance is deep rooted; she began work as a trainee accountant with Wolverhampton Borough Council and developed “that sense of having the potential to make a difference for families or older people who are struggling”.

She moved into an auditing role and then to Scotland in 1995 with the pre-devolution Accounts Commission. After a spell there, the establishment of the Scottish Parliament brought a new framework for public sector financial accountability. Gardner was Deputy Auditor General from 2000 until her appointment to the Turks and Caicos Government in 2010. She was made Auditor General in 2012.

For an organisation which could make or break political fortunes, it’s an interesting time: “We recognise that the political context at the moment in Scotland is not a normal one as we head to September. Everything we do in terms of public audit is more contentious than it would normally be and is used more noisily by politicians of all persuasions.

“I think what’s most important for us is that we continue to use our position, which is a privileged one, to produce reports which are independent and are seen to be authoritative and credible. We take that very seriously. We have got the expertise to look at Scotland’s public finances, where the money is spent, what we all get for it as citizens, taxpayers and service users, and provide information which stands up to that sort of challenge. It always has done and we put a lot of effort into making sure that it will do.”

On the day in June that we meet, the Accounts Commission’s report on pupils’ performance was being batted back and forward in Parliament; Labour leader Johann Lamont accused the Scottish Government of having it “watered down”, an accusation rejected by First Minister Alex Salmond.

Commenting in general about their role, Gardner said: “We will always correct inaccuracies in the way our work is used and we do work hard to make sure that it is communicated out to the wider public, with media, interests groups, conferences, and so on. It really is important we don’t end up being part of the political fray. Our value is in being independent and being seen to be impartial. That doesn’t mean we are disengaged but it does mean that our independence is the first thing we have to maintain.”

Does that maintenance of distance create an issue working with the organisations that Audit Scotland, the Accounts Commission and Gardner, as Auditor General, hold accountable? “Our independence is critical to doing our job but a lot of people think that independence means disengaged, arm’s-length, not talking to people. I think that’s absolutely the wrong way round.

“We are more able to be independent and more likely to do work that improves the use of public money and makes things better if we understand what a public body is trying to achieve, the challenges it’s facing, the approaches it’s taken. One of the things we have done as part of the ‘one organisation’ approach in Audit Scotland is to really make sure we understand, from the level of an individual audited body right the way up to the Scottish Government’s whole programme, what are the priorities, who are the key people, what’s working and what’s not, the pressures that people are facing.

“It does have its tensions; people tend not to be overjoyed when the auditor rings up and says: ‘Can we come and see you next week?’, but I really believe that it makes us genuinely better able to do our job and better able to support improvement. An informal discussion is very different to a formal audit. We are not trying to catch people out and we need to make sure we have got people that can ask good questions, listen to the answers and then ask the follow-up questions; deepening their understanding, rather than starting off with what they think is the answer and asking questions that are intended to confirm it.

“That open mind combined with what we auditors call ‘professional scepticism’ is really important. You are trying to explore what’s really happening and come up with evidence from a range of sources that will tell you. That can be complex but it’s what makes the job interesting.

“It often demands a lot of our staff and the people we are auditing but it is a much more effective way of working than the old cliché of turning up after the battle and bayoneting the wounded; that’s not in anyone’s interests. We are not going with the assumption that nothing ever goes wrong; some things always do in every organisation and walk of life – public and private.

“If a body is having a problem, what we are interested in is, first of all, did it occur because something unexpected happened; did they go through all reasonable planning or was that planning inadequate? We report in context and we also include examples of good practice.

“That’s not always what gets reported, and again, that’s the way of the world, but it’s important we take that fair and balanced approach.” 

Gardner and the staff of Audit Scotland in Edinburgh will soon be working from one office instead of two (it used to be three), after the expiry of a 15-year lease. It will help support the cross-discipline, team approach Gardner has been keen to foster.

A different working environment and, come September, a different political context? “We have been thinking on that, as every public sector organisation and every company has been, and I guess what’s interesting is how much will be the same after September, whatever happens.

“We know that money will continue to be tight for the next few years, that we will continue to have a demographic change, with implications for public services, and we need to make sure we tackle the pockets of inequality and deprivation in Scotland. That will be the same, whatever happens.

“We are also preparing for the implementation of the Scotland Act which will give the Scottish Government control over some taxation, so there will be the need to forecast and collect taxes, the need to manage financial volatility that they have not had in the past, and some borrowing powers which will demand a reputation for sound financial management and prudence.

“We can help to contribute to that and our work will be all the more important. We have to work hard to make sure that we are in a position to respond flexibly and quickly, whatever happens, whether that’s independence, more devolution or continuing with the Scotland Act. It’s about making sure that we are as well placed as we can be to respond to that on behalf of public services and the people of Scotland.”