Independent auditor’s report

to the Commissioner for Ethical Standards in Public Life in Scotland, the Auditor General for Scotland and the Scottish Parliament

Report on the audit of the financial statements

Opinion on financial statements

We have audited the financial statements in the annual report and accounts of Commissioner for Ethical Standards in Public Life in Scotland for the year ended 31 March 2020 under the Scottish Parliamentary Commissions and Commissioners etc. Act 2010. The financial statements comprise the Statement of Comprehensive Net Expenditure, the Statement of Financial Position, the Statement of Cash Flow, the Statement of Changes in Taxpayers’ Equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and as interpreted and adapted by the 2019/20 Government Financial Reporting Manual (the 2019/20 FReM).

In our opinion the accompanying financial statements:

• give a true and fair view in accordance with the Scottish Parliamentary Commissions and Commissioners etc. Act 2010 and directions made thereunder by the Scottish Ministers of the state of the body’s affairs as at 31 March 2020 and of its net expenditure for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union, as interpreted and adapted by the 2019/20 FReM; and
• have been prepared in accordance with the requirements of the Scottish Parliamentary Commissions and Commissioners etc. Act 2010 and directions made thereunder by the Scottish Ministers.

Basis for opinion

We conducted our audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)), as required by the Code of Audit Practice approved by the Auditor General for Scotland. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We were appointed by the Auditor General on 31 May 2016. The period of total uninterrupted appointment is four years. We are independent of the body in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Non-audit services prohibited by the Ethical Standard were not provided to the body. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern basis of accounting

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the body has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about its ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Risks of material misstatement

We have reported in a separate Annual Audit Report, which is available from the Audit Scotland website, the most significant assessed risks of material misstatement that we identified and our conclusions thereon.

Responsibilities of the Accountable Officer for the financial statements

As explained more fully in the Statement of the Accountable Officer's Responsibilities as the Accountable Officer, the Accountable Officer is responsible for the preparation of financial statements that give a true and fair view in accordance with the financial reporting framework, and for such internal control as the Accountable Officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Accountable Officer is responsible for assessing the body’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless deemed inappropriate.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, intentional omissions, misrepresentations, or the override of internal control. The capability of the audit to detect fraud and other irregularities depends on factors such as the skilfulness of the perpetrator, the frequency and extent of manipulation, the degree of collusion involved, the relative size of individual amounts manipulated, and the seniority of those individuals involved. We therefore design and perform audit procedures which respond to the assessed risks of material misstatement due to fraud.

A further description of the auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Other information in the annual report and accounts

The Accountable Officer is responsible for the other information in the annual report and accounts. The other information comprises the information other than the financial statements, the audited part of the Remuneration and Staff Report, and our independent auditor’s report. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon except on matters prescribed by the Auditor General for Scotland to the extent explicitly stated later in this report.

In connection with our audit of the financial statements, our responsibility is to read all the other information in the annual report and accounts and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Report on regularity of expenditure and income

Opinion on regularity

In our opinion in all material respects the expenditure and income in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers.

Responsibilities for regularity

The Accountable Officer is responsible for ensuring the regularity of expenditure and income. We are responsible for expressing an opinion on the regularity of expenditure and income in accordance with the Public Finance and Accountability (Scotland) Act 2000.

Report on other requirements

Opinions on matters prescribed by the Auditor General for Scotland

In our opinion, the audited part of the Remuneration and Staff Report has been properly prepared in accordance with the Scottish Parliamentary Commissions and Commissioners etc. Act 2010 and directions made thereunder by the Scottish Ministers.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Performance Report for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Scottish Parliamentary Commissions and Commissioners etc. Act 2010 and directions made thereunder by the Scottish Ministers; and
• the information given in the Governance Statement for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Scottish Parliamentary Commissions and Commissioners etc. Act 2010 and directions made thereunder by the Scottish Ministers.

Matters on which we are required to report by exception

We are required by the Auditor General for Scotland to report to you if, in our opinion:

• adequate accounting records have not been kept; or
• the financial statements and the audited part of the Remuneration and Staff Report are not in agreement with the accounting records; or
• we have not received all the information and explanations we require for our audit.

We have nothing to report in respect of these matters

Conclusions on wider scope responsibilities

In addition to our responsibilities for the annual report and accounts, our conclusions on the wider scope responsibilities specified in the Code of Audit Practice are set out in our Annual Audit Report.

Use of our report

This report is made solely to the parties to whom it is addressed in accordance with the Public Finance and Accountability (Scotland) Act 2000 and for no other purpose. In accordance with paragraph 120 of the Code of Audit Practice, we do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties.

Pat Kenny, CPFA (for and on behalf of Deloitte LLP)
110 Queen Street
Glasgow
G1 3BX
United Kingdom
7 October 2020

The audit process

Requirement for accounts

The accounts for the financial year ended 31 March 2020 have been prepared in accordance with the Accounts Direction given by the Scottish Ministers on 22 May 2012 in pursuance of Section 22(1) of the Scottish Parliamentary Commissions and Commissioners etc. Act 2010 (the 2010 Act). The Accounting Officer authorised these financial statements for issue on 1 October 2020.

Disclosure of information to auditor

As Accountable Officer with effect from 1 April 2019, the Commissioner is not aware of any relevant information of which the auditor is unaware. The Commissioner has taken all necessary steps to ensure that she is aware of any relevant information and to establish that the auditor is also aware of this information.

Audit

The accounts are audited by the Auditor General for Scotland in accordance with section 22(1) of the Scottish Parliamentary Commissions and Commissioners etc. Act 2010. The Auditor General appointed Deloitte LLP as external auditor.

Auditor’s Fees

The external auditor’s remuneration for the year was £12,600 (2018/19: £12,900). External audit received no fees in relation to non-audit work.

The Commissioner confirms that the annual report and accounts as a whole is fair, balanced and understandable and that she takes personal responsibility for the annual report and accounts and the judgments required for determining that it is fair, balanced and understandable.

Authorisation

Caroline Anderson FCA
Ethical Standards Commissioner

Date: 7 October 2020

Remuneration report

The Commissioner for Ethical Standards in Public Life in Scotland is appointed by the SPCB with the agreement of the Scottish Parliament. The Commissioner’s remuneration is set by the SPCB.

Caroline Anderson was appointed Commissioner with effect from 1 April 2019 for a period of five years. From 1 April 2014 until 31 March 2019, Bill Thomson was appointed Commissioner.

During the year 1 April 2019 to 31 March 2020 the Commissioner was employed on a full-time basis and drew a single salary. The Commissioner’s salary and pension entitlements are set out in the table below.

Single total figure of remuneration

The ‘Salary’ category covers both pensionable and non-pensionable amounts. It includes gross salary and, if awarded, overtime, recruitment and retention allowances, taxable allowances and any ex-gratia payments. It does not include employer National Insurance or pension contributions.

There were no benefits in kind or bonus payments paid in 2019/20 or 2018/19.

Pension arrangements

The Commissioner’s post is pensionable. Under the terms of her appointment, arrangements could be made for the Commissioner to join either the Civil Service Pension Schemes or for the equivalent pension contributions at the rate set by the Cabinet Office for the Civil Service Pension Schemes, to be paid into an approved scheme of the Commissioner’s choice.

The Commissioner’s application to join the Civil Service Pension Schemes is currently pending. The employer contribution rate for 2019/20 was 27.9% and contributions of £20,777 will be made for 2019/20 (2018/19: £18,984).

Remuneration Ratio

Public sector bodies are required to disclose the relationship between the remuneration of the highest paid director in the organisation and the median remuneration of the organisation’s workforce. Total remuneration includes salary, non-consolidated performance-related pay, benefits in kind as well as any severance payments. It does not include employer pension contributions or the cash equivalent transfer value of pensions. It is based on annualised, full-time equivalent remuneration of all staff (including temporary and agency staff) as at the reporting date.

Staff members annualised, full-time equivalent remuneration fell in bands ranging from £20-£24,999 to £75-79,999. The banded remuneration of the highest paid director (the Commissioner) in 2019/20 was £75-79,999 (2018/19: £75-79,999). This was 2.24 times (2018/19: 1.47) the median remuneration of the workforce, which was £34,549 (2018/19: £52,679).

In 2019/20, no employees (2018/19: Nil) received remuneration in excess of the Commissioner.

Staff report

Employee numbers and gender breakdown

The average number of full time equivalent (FTE) persons employed by the Commissioner during the year was as follows:

As at 31 March, the Commissioner’s office employed:

* A senior manager is defined as being the equivalent of a member of the Senior Civil Service.

Average sickness absence

The average sickness absence per person was as follows:

The average rose sharply this year due to a small number of periods of unusually lengthy sickness absence.

Staff policies for disabled persons

The Commissioner is committed to providing a fair and inclusive workplace free from discrimination, that promotes equality of opportunity for all. As part of standard recruitment practice, applications are encouraged from all people with protected characteristics including those with disabilities.

The Commissioner is committed to recognising and valuing what everyone has to offer. This includes a commitment to improving our policies and practices on disability. We are aware of our equality duties under the Equality Act 2010. In our policy development and our decision making we consider the implications for staff who are protected under the Equality Act.

This year we have had a greater focus on mental health and well-being, with the development of policies and practices to support all staff, but in particular those with mental health issues.

Employee costs

Salaries include a provision covering the value of outstanding leave (the leave accrual) and the cost of any exit packages.

As a result of the restructure, a number of staff members left under voluntary severance terms during the reporting year.

Provision of Information to Employees

The Commissioner has adopted the principles of openness and participation in the organisation and places a high level of importance on both informing and consulting staff. The Commissioner does so by providing access to relevant documents, through oral and written briefings, by staff meetings and events. Information is only withheld where this can be shown to be justified or where a duty of confidence is owed to a third party.

Staff pension arrangements

Pension benefits are provided through the Civil Service pension arrangements.

The Civil Service pension arrangements are unfunded multi-employer defined benefit schemes in which the Commissioner’s office is unable to identify its share of the underlying assets and liabilities. A full actuarial valuation was carried out as at 31 March 2016. Details can be found in the ‘Government Actuary’s Department Civil Service Pension Scheme Actuarial Valuation as at 31 March 2016’ available here - http://www.civilservicepensionscheme.org.uk/about-us/scheme-valuations/.

For 2019/20, employers’ contributions of £87,100 were payable to the Civil Service Pension arrangements (2018/19: £77,800) at one of four rates in the range 26.6 to 30.3 per cent (2018/19: 20.0 to 24.5 per cent) of pensionable pay, based on salary bands. The scheme’s Actuary reviews employers’ contributions every four years following a full scheme valuation. The results of its most recent valuation are published in the document detailed above.

The contribution rates reflect benefits as they are accrued, not when the costs are actually incurred, and reflect past experience of the scheme. Outstanding scheme contributions at 31 March 2020 amounted to £10,355 (2018/19: £6,733).

Employees can opt to open a partnership pension account, this being a stakeholder pension with an employers’ contribution. No employers’ contributions (2018/19: Nil) were paid to an appointed stakeholder pension provider in 2019/20. Employers’ contributions are age-related and range from 8.0 to 14.75 per cent (2018/19: 8.0 to 14.75 per cent) of pensionable pay. Employers also match employees’ contributions up to 3 per cent of pensionable pay. In addition, no employers’ contributions (0.5 per cent) (2018/19: Nil, 0.5 per cent) of pensionable pay, were payable to the Civil Service Pension arrangements to cover the cost of the future provision of lump sum benefits on death in service and ill health retirement of these employees. There were no contributions due to the partnership pension providers at the reporting date (2018/19: Nil). Contributions prepaid at that date were nil.

No persons (2018/19: No persons) retired early on ill-health grounds; the total additional accrued pension liabilities in the year amounted to nil (2018/19: Nil).

Further details about the Civil Service pension arrangements can be found at the website http://www.civilservicepensionscheme.org.uk/.

Authorisation

Caroline Anderson FCA
Ethical Standards Commissioner

Date: 7 October 2020

The information in this section covering salary, pension entitlements, fair pay disclosure and analysis of staff numbers and costs is subject to audit.

Governance statement

The Commissioner, as Accountable Officer, is personally responsible for this governance statement which covers not only the accounting year to 31 March 2020 but extends to the date on which the accounts are signed. This statement aims to depict the internal control structure and resource management processes used during this period to support the achievement of organisational aims, objectives and statutory duties whilst safeguarding public funds and assets.

This statement has been informed by:

• an in-depth internal review of governance and operational legacy arrangements which was instigated by the Commissioner in April 2019 and continues at this date,
• guidance during the reporting year from the Advisory Audit Board (AAB),
• external auditor’s opinion,
• feedback from the senior management team.

Governance framework overview

This report and accounts cover the year ended 31 March 2020.

Caroline Anderson was appointed Commissioner for Ethical Standards in Public Life in Scotland and Accountable Officer from 1 April 2019.

Given the independence of the Commissioner’s Office and its relatively small size, the scheme of controls inherited does not feature formal oversight structures such as governance boards and committees, which are commonplace in larger sponsored entities and public authorities.

Instead the Commissioner’s scheme of control historically relied on “in-house” features including:

• The Commissioner’s role as Accountable Officer.
• The Commissioner’s management team, individual members of which have delegated authority to make decisions as set out in the Commissioner’s scheme of delegation.
• Bi-monthly meetings of this team, chaired by the Commissioner, at which strategic and operational issues were considered. 
• Frequent informal management team meetings handling operational matters on an ad-hoc basis.
• A system of internal financial accountability which follows agreed administrative procedures and a structured system of delegation and accountability.

These “in-house” controls were supplemented by external scrutiny as follows:

• External financial audit; The Commissioner’s accounts for the year ended 31 March 2020 were audited by independent auditors appointed by the Auditor General for Scotland in accordance with section 22 of the Scottish Parliamentary Commissions and Commissioners etc. Act 2010. The Auditor General has appointed Deloitte LLP as the Commissioner’s auditor for the five-year period from 2016/17 to 2020/21.
• Advisory Audit Board (AAB); the AAB, whose members are drawn from the SPCB’s Advisory Audit Board, provided the Commissioner with advice on audit and financial issues on a purely discretionary basis. In the year to 31 March 2020 the AAB met with the Commissioner on three occasions, providing guidance regarding the prior year accounts.

Governance enhancement going forward

The governance framework will be supplemented by an internal audit function, plans for which have been delayed since the onset of the pandemic.

The Commissioner has initiated liaison with the intention of entering a shared service agreement for provision of internal audit services. An internal audit programme providing comprehensive coverage of key risk areas is to be designed and implemented. Findings from this internal audit program will help inform assessment of the robustness and adequacy of the governance and internal control framework going forward.

Key aspects of the governance framework

Finance

The Commissioner’s office is funded through the Scottish Parliament and, each year, submits an evidence-based budget bid for scrutiny and approval. The budget is based on the requirements of the strategic and annual business plans as well as projections of anticipated appointment activity and prior year performance. The budget is reviewed and approved by the Commissioner prior to submission to the Scottish Parliament to ensure that it demonstrates best value.

The Commissioner operates a scheme of delegation which outlines the type and level of authority delegated to specific staff members. These provide clear guidelines for the Commissioner’s financial management and are supported by a set of financial instructions.

Financial management controls were in place during the year for purposes of identifying and managing financial variances from budget. As part of the restructure, a further revision of the scheme of delegation is in progress to reflect the new staff complement, so ensuring clear guidelines for financial management going forward.

Strategic and business planning

During 2019/20, the office worked to its Strategic Plan 2016 - 2020 supported by an annual business plan. The annual business plan outlined the objectives for the year. Both documents are published online and progress against the objectives is described in the Performance section of this document. A new Strategic Plan for the 2020-2024 period was issued on 31 March 2020 and will be supplemented by a business plan which reflects both the office restructure and altered working arrangements facilitating unbroken service throughout the past and any future lockdown.

Risk management

A risk management policy and risk register were in place during the previous year, in addition to which the incoming Commissioner identified further key risks at 1 April 2019 as detailed below:

• A backlog of proposed breach investigation reports regarding local councillor complaints, equal in number to that heard by the Standards Commission in an average year.
• Post vacancy equivalent to 71% of onsite complaints handling staff, including the Senior Investigating Officer. 
• Significant delay in deployment of a new complaints case management system, with consequent diversion of the residual on-site staff.
• The processes and procedures for complaints handling required review and modernisation, including remodelling of the associated staff complement.

The above issues were addressed by the incoming Commissioner through restructuring of the complaints management function and by embedding dynamic risk management as a presiding factor in daily and periodic operational and strategic decision making.

Overall assessment of effectiveness of governance arrangements

By embedding risk management as a key focus within the decision-making process, future risks are anticipated well in advance, comprehensively identified, assessed and mitigated. The overall enhanced governance approach already in operation will also further strengthen risk management going forward.

The internal control systems previously featured gaps and weaknesses, most notably:

• An incomplete audit trail existed in relation to certain records in the complaints-handling function of the office.
• Working practices regarding the management and supervision of staff, including the review and limitation of actual working hours, gave rise to control weakness in this specific area.

These internal control issues were addressed and resolved by the initial phase of the restructure.

I was appointed as Commissioner and Accountable Officer as at 1 April 2019. As such, I have considered the systems of internal control, risk management and governance as outlined in this statement, and my assessment is one of moderate assurance during the early months of the year, moving to full assurance thereafter.

Authorisation

Caroline Anderson FCA
Ethical Standards Commissioner

Date: 7 October 2020

Statement of Accountable Officer’s responsibilities

Under paragraph 22 of the Scottish Parliamentary Commissions and Commissioners etc. Act 2010 the Commissioner must prepare annual accounts for each financial year, in accordance with any directions given by the Scottish Ministers. The Scottish Ministers have directed the Commissioner to prepare accounts in the form and on the basis set out in the Accounts Direction (Appendix 1).

The accounts are prepared on an accruals basis and must give a true and fair view of the Commissioner’s affairs at the year-end and of its net resource outturn, application of resources, changes in taxpayers’ equity and cash flows for the financial year.

In preparing the accounts, the Commissioner is required to comply with the requirements of the Financial Reporting Manual (FReM) and in particular to:

• observe the Accounts Direction issued by the Scottish Ministers, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis
• make judgements and estimates on a reasonable basis
• state whether applicable accounting standards, as set out in the FReM, have been followed, and disclose and explain any material departures in the accounts; and
• prepare the accounts on a “going concern” basis, unless it is inappropriate to presume that the office will continue in operation.

The Scottish Parliamentary Corporate Body (SPCB) has appointed the Commissioner as Accountable Officer. The relevant responsibilities as Accountable Officer are set out in the Memorandum to Accountable Officers of other Public Bodies issued by the Scottish Government and published in the Scottish Public Finance Manual. These include the propriety and regularity of the public finances for which the Accountable Officer is accountable, the keeping of proper records, and safeguarding the Commissioner’s assets.

As Accountable Officer, I can confirm that:

• as far as I am aware, there is no relevant audit information of which the Auditors are unaware
• I have taken all the steps that I ought to have taken to make myself aware of any relevant audit information and to establish that the auditors are aware of that information
• the Annual Report and Accounts as a whole is fair, balanced and understandable
• I take personal responsibility for the Annual Report and Accounts and the judgements required for determining that they are fair, balanced and understandable.

Commissioner’s report

Officeholders

The officeholder is entitled ‘Commissioner for Ethical Standards in Public Life in Scotland’.

Caroline Anderson was appointed as Commissioner and Accountable Officer for a period of five years, with effect from 1 April 2019.

Senior Management Team (SMT)

The Commissioner has a dual role; to investigate complaints about the conduct of MSPs, councillors, board members of public bodies and lobbyists and to regulate the public appointments process. These functions are performed by two separate teams led by a Director of Investigations and Solicitor to the Commissioner and Public Appointments Manager respectively. The Commissioner’s office is further supported by a Head of Corporate Services.

Advisory Audit Board

In addition, during the year ended 31 March 2020 the Advisory Audit Board (AAB) provided advice to the Commissioner on governance and financial issues in relation to the prior year’s annual report and accounts. Members of the AAB are drawn from the SPCB’s Advisory Audit Board.

Register of interests

The Commissioner’s office maintains a register of directorships and other significant interests as held by the Commissioner and staff. The register is maintained to provide openness and transparency and to ensure that actual and perceived conflicts of interest can be identified and addressed. The register is updated regularly and is available on request. No significant interests were held during 2019/20 or 2018/19. A similar register of gifts and hospitality is also maintained.

Fraud, bribery and corruption

Our policies and procedures on fraud, corruption and bribery include the Anti-Fraud policy, our code of conduct, the terms and conditions for the supply of goods and services and the broader financial governance arrangements.

We declare any fraud, whistleblowing or control failure incidents to the Advisory Audit Board and this forms part of the annual assurance process. In 2019/20 and 2018/19 there were no instances of fraud or bribery identified or detected in the Commissioner’s office.

Personal data related incidents

There were no reportable lapses of data security during 2019/20 or 2018/19.