Was there choreography between CEO and Audit Scotland on Castle Toward

Why did Audit Scotland dig itself into such a hole in declining to investigate the Castle Toward affair as thoroughly as Argyll and Bute Council had itself asked them to do?

Why did the council want to bring in Audit Scotland – and why did they agree so ballsy a set of terms of reference for the audit commission?

Why had the CEO strongly advised councillors against this?

Why did the CEO take such a long time to communicate formally to Audit Scotland the council’s agreed request for the commission to investigate the entirety of the Castle Toward affair?

Why were Audit Scotland worried that  their ‘independence’ as the council’s appointed external auditor might be prejudiced if they carried out an investigation under the council’s given terms of reference?

The exchange of letters

On 7th February 2013, Argyll and Bute Council’s Chief Executive, Sally Loudon, wrote to Fiona Mitchell Knight, Assistant Director of Audit at Audit Scotland, asking, on behalf of the council, for a ‘Review into matters concerning Actual Reality’.

The Chief Executive went on to specify the terms of reference of this review – which had been agreed at a council meeting on 20th December 2012. These were:

‘In respect of the Council’s dealing with AR [Ed: Actual Reality] during the period of April 2009 to March 2010 relating to the premises at Castle Toward;

  • Did officers act in line with policy direction from Elected Members?
  • Did the Council comply with its legal obligations under Health and Safety at Work Act 1974 and the Electricity at Work Regulations 1989?
  • Did the Council know about risks but do nothing about them, prevent action being taken to highlight those risks and prevent AR addressing them?
  • Did the Council take appropriate action once it was made aware of AR’s allegations in December 2009?
  • Has the Council achieved best value in its dealings with AR?
  • To examine the Member/Officer relationship with Actual Reality, including as necessary all correspondence and emails in the period from 2009/2010 to date regarding the Castle Toward/ Ardentinny sale.

No one can suggest that these terms of reference were anything but unusually searching; or that, had a full investigation been carried out on these terms, it would have had to lay to rest the corrosive concerns and allegations that are obstructing any hope of action to create legitimate public trust in this council.

No one can also suggest that these terms of reference left much ‘wriggle room’ should those whose conduct is under question genuinely have something to hide.

Ms Mitchell-Knight, however, replied, on 28th February 2013:

‘We have considered the issues that you raise in the terms of reference part of your letter, in the context of our audit responsibilities and duties, as prescribed in Audit Scotland’s Code of Practice. Whilst responding to the council’s request for assistance, you will appreciate that as your appointed external auditor, Audit Scotland’s independence cannot be prejudiced through any work we carry out in this area. In this context we do not consider it is appropriate that Audit Scotland carry out work to cover the terms of reference as stated in your letter.’

It would be good to have an evidenced argument as to why Audit Scotland perceived that acting under these terms of reference had the potential to ‘prejudice’  its ‘independence’?

It is superficially difficult to understand how such an investigation could possibility have prejudiced the commission’s independence as external auditor – had the review requested been conducted objectively, thoroughly and without prejudice.

Was Audit Scotland’s fear of perceived prejudice in doing this work under these terms of reference rooted in potential accusations from Actual Reality, from the general public in Argyll – or from the senior officers and council leader involved?

The CEO notes at the start of her letter to Ms Mitchell-Knight on 7th February, that they had had ‘previous discussions’ around this issue; so there may well be a sub-text of some kind to the auditor’s concerns about and resistance to actioning the requested review.

Was this a choreographed exchange?

It would be naive not to consider whether this entire exchange was choreographed in advance between the Chief Executive and the auditor, during the ‘previous discussions’ they had had.

After all, what we are seeing is the CEO presenting an uncharacteristically bullish council framework for an investigation, all flags flying for transparency; and a cautious auditor, refusing the ‘let it all hang out’ review requested by the council – but offering just the sort of minimal and limited review which the senior council figures involved in the matter would undoubtedly have preferred.

Whatever the stage management may or may not have been, the fact is that the ‘audit trail’ – a matter of constant professional concern in both these quarters – is of documents attesting to the CEO’s communication, as tasked, of the will of an unusually fearless council; the auditor’s cautious offer of something more limited; and the result that key figures in the council needed.

This result saw Audit Scotland conduct a tightly ring-fenced review of the property disposal procedures – a matter that was never really an issue; followed by a clean bill of health on that limited and less relevant matter – a clean bill claimed by the council leadership, in writing to elected members, to be an all embracing endorsement of everything the council had done.

It is worth  noting that this letter from the Council Leader and Depute Leader to councillors was sent as strictly confidential, under threats of breach of Code of Practice for any disclosure. Had For Argyll not got hold of a copy of it and published it, Audit Scotland would never have known that the Council Leader was presenting their narrow-focus review result as a blanket clearance for the council’s handling of this entire affair.

Audit Scotland were then in a position where the Controller of Audit, Fraser McKinlay, had to write to the Council Leader to ‘clarify’ the commission’s position.

The timeline

It is known from a comment posted on a For Argyll article that Councillor Michael Breslin had a private meeting in Glasgow on 11th December 2012 with COSLA CEO, Rory Mair and Argyll and Bute CEO Sally Loudon. At this meeting both CEO’s strongly  ‘advised’ him not to take concerns about the Castle Toward affair to Audit Scotland. This establishes the Council CEO’s stance on that date.

Interestingly, Councillor Breslin reported that at a meeting a short time before this, between himself and the COSLA CEO, Rory Mair advised  him to get Audit Scotland involved – but then denied this in front of Mrs Loudon. It is fair to ask whether she had changed his mind in advance of the meeting with Councillor Breslin?

Councillor Breslin and then Council Leader, Roddy McCuish, rejected this ‘advice’ and at the Council meeting on 20th December, the meeting to which the CEO refers in her letter to the auditor, the Leader’s majority administration voted to bring in the auditors and agreed the remarkable terms of reference above.

It is then curious that so major a decision taken by the council on 20th December 2012 – with plenty of time for the CEO to notify Audit Scotland before the Christmas break, was apparently not notified until 7th February 2013. It would be reasonable to consider whether this was the period during which her ‘previous discussions’ with the auditor, mentioned by the CEO in her letter of 7th February, were taking place?

Why would the CEO have changed her mind after 11th December, when she so strongly advised  Councillor Breslin against going to Audit Scotland?

If, as must be the probability, she remained of that view, it would explain the length of time it took her formally to transmit to Audit Scotland the council’s decision to ask for so wide ranging an investigation.

This would support the ‘choreographic’ interpretation of these two letters.

Then there’s the politics and the psychology

Cutting to the chase on this:

There is mutual bad blood – well earned on both sides – between the SNP group of councillors and the current Council Leader, Dick Walsh. They shafted each other at different stages of the cataclysmic and formative ‘school wars’ in Argyll and the Isles in 2010-11.

During that time, senior officers and the Chief Executive can be shown to have advised the council badly, leading to the financial and reputational damage to the council from that high profile conflict; and from the council’s eventual withdrawal from statutory consultation of 25 profoundly flawed school closure proposals.

This situation saw:

  • The SNP group, who had walked out of their role as junior partner in a Walsh administration during the ‘school wars’, vowing to sack the CEO [they had reason] if they were elected to local power in the May 2012 elections.
  • Councillor Walsh and his administration being voted out in that election – and the SNP group leading, for the first time, a coalition administration.

Now go back to September 2008 – the month in which the new CEO, Sally Reid, as she then was, took up her post at Argyll and Bute Council. Markedly inexperienced in what was a pretty stratospheric promotion from being Head of HR at Midlothian – and with a competitive and bitter losing candidate for the post as one of her most senior officers, Ms Reid badly needed advice, guidance and support from a knowledgeable and safe source.

That source was the canny Council Leader Dick Walsh who looked after the needy new CEO in a progressively strong working alliance born of dependency on her part and political convenience on his. That relationship has, however, grown into one of easy personal friendship between them and their families.

Consider the position of CEO Sally Loudon in the aftermath of the May 2012 council elections.

Her performance in the school wars had been both poor and apparently partial. She was not secure in her job and knew it. She had seen her staunch ally, Councillor Walsh, unhorsed in that election. She was on her own as she had not been since she arrived. She was facing an incoming coalition led by a group who had sworn to sack her – with a case they could have made stick had they acted decisively and at once.

But they were rookies too and ironically the people they needed most to guide them in the infancy of their governing were the two senior staff they had vowed to remove – the Chief Executive and the Executive Director for Customer Services.

They stayed their hand – and such action later on would have lacked credibility.

The CEO and the SNP group have no reason to respect or trust each other – and they do not.

Take that situation into December 2012, where, just over 6 months into their administration, the SNP group had received a serious complaint from Actual Reality about the previous council administration’s conduct of matters around the closure of Castle Toward.

This was always one of the murkier episodes in Councillor Walsh’s administration prior to losing power in May 2012.

It would be naive to imagine that the SNP-led administration that succeeded him would be other than keen to pursue vigorously allegations which have now found expression in Actual Reality Trustee, Dr Christopher Mason, making a formal complaint about Council Leader Walsh to the Commissioner for Ethical Standards in Public Life – a career second.

It would be equally blinkered to imagine that the CEO would not be seriously exercised to defend the position of her professional prop and saviour in Kilmory, Councillor Walsh.

A reasonable interpretation of setting these conflicting needs against the known facts is that:

  • The SNP’s delight at having Dick Walsh on the ropes was the birthplace of that extraordinarily energetic and open set of terms of reference they voted through on 20th December 2012. They had nothing to lose and they felt they had plenty of reason to hope that an investigation of the kind they had framed would profoundy embarrass the former [and present] Council Leader and the Executive Director for Customer Servces.
  • The will to defend her one genuine ally in the council was the source of the CEO’s opposition on 11th December 2012 to bringing in Audit Scotland. It accounts for the length of time before she made a formal approach to Audit Scotland in passing on the council’s agreed request for a large scale investigation into Castle Toward. It would explain why it is hard to see the exchange of communications between the CEO and Fiona Mitchell Knight of Audit Scotland, as other than the choreographed creation of a helpful audit trail to cover pre-agreed inaction.
  • The auditor’s concern about any prejudice to the independence of Audit Scotland would have focused on probable allegations of prejudice from the Executive Director and Council Leader whose actions would necessarily have been under serious scrutiny; and since we have seen the highly selective narrative provided by the CEO as a briefing for Audit Scotland on Actual Reality / Castle Toward / Ardentinny and the Council, it is easy enough to see how the commission was gulled into thinking there was nothing much to investigate.

This is the best hypothesis we can find to account for the facts and the phenomena.

In the end, the only credible reason why Audit Scotland would have avoided an investigation would have been if it had been confidentially presented to them as a politically motivated range-finding attack in a council faction fight; and one where there was no serious reason for action.

The reality is that it may well have been a politically motivated attack – but that does not mean that there was and is no substantial reason to investigate the matter thoroughly. Perhaps it makes that need more urgent, if reputations prove to have been wrongly undermined.

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