SNP MSP Willie Coffey asks about the relationship between Audit Scotland and the National Audit Office.

Ms Gardner says there previously was a clear edge between the two organisations and their auditing, but it is "becoming more ragged."

The auditor general says HMRC are now collecting a Scottish rate of income tax meaning the lines are becoming more blurred.

Mr Coffey asks if Ms Gardner has appeared in front of Westminster committees yet.

Ms Gardner says she has not been invited to do so as yet, but representatives of the National Audit Office have appeared before Holyrood committees. 

Image source, bbc

Ms Gardner says the Scottish government could be more explicit about the things that are on their radar and increase transparency.

The auditor general say it should be starting to think through how much Scotland depends on EU funding and looking at scenarios of how much Scotland will get back.

Conservative MSP Dean Lockhart says the oil and gas downturn could be classified as a Scotland specific shock.

Mr Taylor says the provisions set out in the fiscal framework are around relative levels of GDP.

Committee Convener Bruce Crawford asks what is considered as a fiscal shock. 

Ms Gardner says there is an explanation in the fiscal framework of what is considered to be a shock and what the figures would be to trigger this.

Mr Taylor says it is about the balance between the UK GDP and Scottish GDP

Ms Gardner says the fiscal framework has three elements: 

• capital borrowing powers
• revenue borrowing powers
• Scotland's reserve

The auditor general says the current accounts don't show the full picture of borrowing.

She says it is important that there is transparency.

Image source, Sc

Ms Gardner says the outcome is often clear but it is not always clear how the government will get there.

She welcomes the target review in the NHS.

The auditor general says it is important to have joined up measurements and targets and plan how this will help to achieve the outcome.

Image source, bbc

SNP MSP Ivan McKee asks about the unpredictable revenue streams due to the devolution of income tax powers.

Mr McKee asks what data should be used to drive changes to the budget process.

Mark Taylor from Audit Scotland says there is a wider range of tools for governments to decide what to do.

Mr Taylor says it will take time to get a real understanding of the real patterns of tax.

Scottish Greens Co-convener Patrick Harvie asks the auditor general to talk around the impact of participatory budgeting and the affect that would have on her own role. 

Ms Gardner says we have seen in the Community Engagement Act that there is a requirement for participatory budgeting. 

The auditor general says getting participatory budgeting right will move Scotland a long way forward. 

Mr Harvie says it feels like we are a long way away from it and asks how it will work and at what level.

Ms Gardner says it will have to work at every level and that it needs to be embedded in the way the parliament and government do their business. 

Image source, bbc

SNP MSP Maree Todd asks what a world class transparent fiscal system look like.

Ms Gardner says the budget cycle is crucial.

The auditor general says there are great examples of citizens budgets that provide information to interest groups.

She says good public finances and good public spending can benefit the country.

Scottish Labour MSP James Kelly asks what the committee should see as the key points in terms of reconciliation.

Auditor General for Scotland Caroline Gardner says there is a need for more frequent financial reporting.

Ms Gardner says reconciliation will happen at the end of the financial year or well after in some cases such as income tax.

She says the committee must consider what the response will be to changing economic circumstances because forecasts can never be exactly right, so it is important to have plans in place for if the figures are more or less than the forecast. 

Labour MSP James Kelly says there must be accurate financial reporting with the new revenue raising and borrowing powers coming to Holyrood.

Auditor General Caroline Gardner says the budget cycle needs to be seen as a whole and there is a chance that it could be better integrated in the future.

Mark Taylor from Audit Scotland says a medium term financial strategy would be at a broader level than the current spending review.

Mr Taylor says shifts to preventative spending could be detailed and interaction with the public and politicians increased.

He says the strategy is not a substitute for the budget, but it provides a high level context for those conversations.

Ms Gardner says the Fiscal Commission would play an important role.

Ms Gardner says there needs to be longer term thinking about public spending, beyond one year.

Image source, PA / BBC

The auditor general says in New Zealand they have a longer term financial strategy for public finances.

This shows what can be done, says Ms Gardner.

Ms Gardner says the Scottish government will have to take a more strategic approach to public finances and will have to manage far more financial risk.

The Scottish and UK governments reached a financial deal enabling new powers for Holyrood in February.

Negotiations over the fiscal framework have been going on since March 2015, with a lengthy deadlock over the issue of Scotland's block grant.

Confirming a deal had been done, First Minister Nicola Sturgeon said "not a single penny" would be taken from the Scottish government's budget.

Details of the deal will be published soon so Holyrood scrutiny can begin.

• What is the fiscal framework and why does it matter?

Auditor General Caroline Gardner says the Scottish Parliament's financial powers are changing substantially at the moment.

Ms Gardner says the fiscal framework will be crucial to this.

She says there will be increasing fiscal responsibility and financial risk.

Ms Gardner says we should be aiming for world class public finances.

Image source, Getty Images

The committee takes evidence on Scotland's fiscal framework from:

• Caroline Gardner, Auditor General for Scotland
• Mark Taylor, Assistant Director, Audit Scotland