Aelodau’r pwyllgor yn bresennol
Committee members
in attendance
|
Mohammad Asghar
|
Ceidwadwyr Cymreig
Welsh Conservatives
|
Jocelyn Davies
|
Plaid Cymru
The Party of Wales
|
Mike Hedges
|
Llafur Labour
|
Sandy Mewies
|
Llafur
Labour
|
Darren Millar
|
Ceidwadwyr Cymreig (Cadeirydd y Pwyllgor)
Welsh
Conservatives (Committee Chair)
|
Julie Morgan
|
Llafur Labour
|
Jenny Rathbone
|
Llafur Labour
|
Aled Roberts
|
Democratiaid Rhyddfrydol Cymru
Welsh Liberal
Democrats
|
Eraill yn bresennol Others in
attendance
|
Gawain Evans
|
Dirprwy Gyfarwyddwr Cyllid, Llywodraeth
Cymru
Deputy Director of Finance, Welsh Government
|
Richard Harries
|
Swyddfa Archwilio Cymru
Wales Audit Office
|
Syr/Sir Derek Jones
|
Ysgrifennydd Parhaol, Llywodraeth Cymru
Permanent Secretary, Welsh Government
|
Peter Kennedy
|
Cyfarwyddwr Adnoddau Dynol, Llywodraeth
Cymru
Director of Human Resources, Welsh Government
|
David Richards
|
Cyfarwyddwr Llywodraethu, Llywodraeth
Cymru Director of Governance, Welsh Government
|
Huw Vaughan Thomas
|
Archwilydd Cyffredinol Cymru
Auditor General for Wales
|
Swyddogion Cynulliad Cenedlaethol Cymru yn
bresennol National Assembly
for Wales officials in attendance
|
Fay
Buckle
|
Clerc
Clerk
|
Claire Griffiths
|
Dirprwy Glerc
Deputy Clerk
|
Joanest Varney-Jackson
|
Uwch-gynghorydd Cyfreithiol
Senior Legal Adviser
|
Dechreuodd y cyfarfod am 09:02.
The
meeting began at 09:02.
|
Cyflwyniadau, Ymddiheuriadau a
Dirprwyon
Introductions, Apologies and Substitutions
|
[1]
Darren
Millar: Good morning,
everybody. Welcome to today’s meeting of the Public Accounts
Committee. A few housekeeping notices: if I could just remind
Members and witnesses that the National Assembly for Wales is a
bilingual institution and welcomes contributions to proceedings in
either English or Welsh, as Members and witnesses see fit. Of
course, there are headsets available for amplification, and these
can also be used for the translation facilities. If I could
encourage everyone to switch off their mobile phones or put them
onto silent mode, and remind everybody that, in the event of a fire
alarm, we should follow the instructions of the ushers. I know that
Members have received guidance on the changes to rules for making
oral declarations of interest. Are there any declarations before we
go into the meeting proper?
|
[2]
Sandy
Mewies: Yes, Chair. I am a
Commissioner of the National Assembly for Wales and therefore
don’t take part in discussions outside the Commission about
that—[Inaudible.]
|
[3]
Darren
Millar: Thank you for
that, Sandy. We’ll note that in the Record.
|
09:03
|
Papurau i’w Nodi
Papers to Note
|
[4]
Darren
Millar: Item 2, then:
papers to note. We have two papers to note. We’ve got the
minutes of our meeting held on 29 September. I’ll take it
that that paper is noted. Then, we’ve got some additional
information from the National Library of Wales as a follow-up to
the evidence session that we had with them. So, we’ve got
some information on the relationship with Geldards, the legal
advisers, some information on redundancy costs, and the framework
document by which they award contracts. There’s also a note
in there on their investment policy. Can I take it that those are
noted? Yes.
|
09:03
|
Craffu ar Gyfrifon 2014-15: Cyfrifon
Blynyddol Cyfunol Llywodraeth Cymru 2014-15
Scrutiny of Accounts 2014-15: Welsh Government Consolidated Annual
Accounts 2014-15
|
[5]
Darren
Millar: Item 3, then:
scrutiny of accounts for 2014-15. We’re going to be taking a
look this morning at the Welsh Government’s consolidated
annual accounts. I’m very pleased to be able to welcome the
Permanent Secretary, Sir Derek Jones, to the table this
morning—welcome, Sir Derek; David Richards, director of
governance at the Welsh Government; Peter Kennedy, director of
human resources at the Welsh Government; and Gawain Evans, deputy
director of finance at the Welsh Government. Welcome to you all.
We’re very pleased that you’ve given us the time this
morning to have a look at your consolidated accounts. Obviously,
this is the second year in which we’ve undertaken this
exercise as part of the new working practices that the committee
decided to adopt a couple of years ago. We had a briefing from the
Wales Audit Office and the Members’ Research Service on some
of the areas that we wanted to question you on, but, Sir Derek, did
you want to make any opening remarks before we go into questions
from Members?
|
[6]
Sir
Derek Jones: Yes. Thank you,
Chair. Bore da, bawb. Good morning, everybody. Can I say here,
first of all, that I’ve got a bit of a dodgy throat this
morning, Chair? I expect the committee’s used to people being
lost for words. If I am this morning, that will probably be part of
the reason. Just very briefly, because I know there are bound to be
lots of questions and plenty of tough scrutiny in that, which I
can’t really expect to enjoy, but I do, nevertheless, welcome
the opportunity to engage with the committee on the accounts. The
Welsh Government’s consolidated accounts are never going to
hit the bestseller lists, although, possibly, we’ll come back
to accessibility and readability later on.
|
[7]
A
popular read or not, the accounts are a really important insight
into the work of the Welsh Government as a whole. I think
I’ve mentioned to the committee before the weight of
accountability that I feel as principal accounting officer in
signing off the accounts every year. There is some satisfaction in
being able to sign off a decent set of accounts with an unqualified
opinion from the auditor general—decent; not perfect. But, as
to that weight of accountability—£15 billion-worth of
the public’s money under management and tens of thousands of
transactions every year across a wide range of complicated
programmes and projects—I just welcome anything that helps to
promote understanding of that aspect of my business.
|
[8]
Finally, Chair, I
think the underlying theme hasn’t changed since last year:
downward pressure on public finances, generally
and—it’ll probably emerge in discussion—tensions
across the board, really, in terms of managing increasing demand
and expectation and an ambitious programme with rather less money.
I’ll stop there.
|
[9]
Darren
Millar: Before I bring
other Members in, can I just ask about the format of the accounts?
Obviously, they’re in a very similar format, and in fact they
appear to have not changed at all, really, in any great way,
compared to last year. Yet, you gave the committee some assurances
that you’d try to improve the format to make them more
accessible to the public in response to one of our recommendations.
Could I ask you why there doesn’t appear to have been any
inching forward?
|
[10]
Sir
Derek Jones: I might ask my
colleague, Gawain, in a moment, to mention an inch or two forward,
but you’re quite right that there’s been no major
change in the presentation of the accounts, but it is still our
intention to deliver on that commitment. The financial reporting
advisory board has a project and expectation for Government
accounts across the board, that, from the next financial
year’s accounts, will show significant improvement in
accessibility and readability. We’re working closely with the
Wales Audit Office to do that. It is a matter of balance, because
the accounts need to work as a document of record and be auditable
on that £15 billion-worth of the public’s money, but I
think our view, like the committee’s, is that they could
be—well, they could probably be shorter—simpler and
with a stronger narrative. I hope the committee can expect to see
that for the next round.
|
[11]
We had
intended to be moving a little bit more quickly than that, but
something else intervened in the form of the Treasury, which
brought forward the date for the compilation of the
whole-of-Government accounts, and so we had to make a priority of
that, which means that we haven’t made as much progress as
we’d hoped to this year, but we are on track for the
FRAB’s target date.
|
[12]
Darren
Millar: So, we’ll
notice a significant change in the next year, or our successor
committee will. Can I just ask you, as well, as you wrote to us
recently about the simplification of accounts project, whether that
is the project that you’re referring to?
|
[13]
Sir
Derek Jones: Yes, that’s
the project.
|
[14]
Darren
Millar: So, you are
committed to delivering on that project and providing more
accessible financial accounts in the future for public and Assembly
Member scrutiny.
|
[15]
Sir
Derek Jones: Yes, but—and
I’m looking at the auditor general—they have to remain
a good and accountable record.
|
[16]
Darren
Millar: Of
course.
|
[17]
Sir
Derek Jones: So, as I said, I
don’t think they’re ever going to be a popular read,
Chair, but, at the moment, I think that, at 60 pages, in terms of
length, they compare reasonably well with other bodies. But, there
are a lot of complex notes at the back of that and I think some of
those we can probably afford to dispense with; we have removed
some, but probably some more, and, as I say, try to create,
perhaps, a stronger and more accessible narrative, even, perhaps,
at the expense of some simplification, from the auditor’s
point of view.
|
[18]
Darren
Millar: You could always
produce a summary document, of course, to go alongside the
financial accounts. I’m going to bring in some Members, now
who want to ask some follow-up questions—on this particular
issue, is it?
|
[19]
Julie
Morgan: Yes, on this
particular issue.
|
[20]
Darren
Millar: Okay. I’m
going to bring Julie in and then Jenny.
|
[21]
Julie Morgan
continues: I just wondered if
you had any way of assessing who actually reads these
accounts—any way of measuring whether any genuine members of
the public do read them, or are likely to read them if you changed
and made them more accessible?
|
[22]
Sir
Derek Jones: They’re
published on our website, and so I think—. I don’t have
the number with me, but I think probably we’d be able to find
out what volume of inquiries are made of the accounts on the
website, but not who those readers or interested parties might be.
I suspect that the public, by and large, does not take an
interest.
|
[23]
Julie
Morgan: I think it would
be interesting to have that information in terms of who actually
just looks at the accounts, in numbers.
|
[24]
Sir
Derek Jones: I’d be happy
to write to committee on that, Chair—unless any of my
colleagues know more about our readership. I don’t think they
do.
|
[25]
Darren
Millar: It’s not
like a Jackie Collins novel, as I think you said at the start.
Jenny Rathbone.
|
[26]
Jenny
Rathbone: Just on
sustainability, the Well-being of Future Generations (Wales) Act
2015 is going to apply to the Welsh Government as much as any other
public organisation, and although you’ve given some figures,
there’s no narrative as to what you’re actually doing
about improving your scar on the world landscape. I suppose
electricity, this year and the previous year, was up on the one
before that, 2012-13, so what are you doing to reduce your
greenhouse gas emissions? Are you generating any of your own
electricity? If not, why not?
|
[27]
Sir
Derek Jones: There are two
things, Chair. The point about the future generations Act is
absolutely correct, and it does bind my Government service as well
as other public bodies in Wales. The point that I was going to make
earlier was that I don’t think the accounts would ever be, or
should be, a substitute for an annual report on the programme for
government, which I think most Governments will make these days.
So, as the Act comes into force next year, the Welsh
Government’s programme for government will need to report
against the seven goals in the Act, and make sure that our
programme for government aligns with the requirements of the Act.
So, the annual report would be where you would see most of the
description of policy and project activity around that, but the
accounts do report on some hard numbers on sustainability issues. I
think they tell a reasonably good story, but I’m not sure
that perhaps the strongest element comes out in the accounts, which
is to do with the rationalisation of our estate, which has produced
a reduction—I think the figure is about 30 per cent—in
our carbon footprint, and that is our biggest contribution, I
think. I don’t think we do generate any electricity. There
was an unsuccessful attempt at a wind turbine at our offices in
Aberystwyth, as I recall, but generally speaking, not. But I think
we take some pride in the achievements on estate rationalisation,
and some of the figures in the table, in the accounts, I think are
reasonable.
|
[28]
Jenny
Rathbone: Your food
composting figures have gone up substantially. What happened
there?
|
[29]
Sir
Derek Jones: I really
don’t have an answer to that.
|
[30]
Jenny
Rathbone: Okay. For the
previous two years they were going down, and now they are going
back up: 38 last year, 59 this year. Tonnes. You know, in a world
of scarce resources, what are we doing to ensure we’re not
wasting things?
|
[31]
Sir
Derek Jones: I’m
confident that our practice hasn’t changed, so there will be
some other factor that I simply just don’t know the answer to
this morning, Chair, but I’m happy, again, to write to the
committee.
|
[32]
Darren
Millar: Thank you very
much for that. Can I bring in Jocelyn Davies now,
please?
|
[33]
Jocelyn
Davies: I think the point
being there, of course, is that it’s very good you’re
composting, but it would be good if it wasn’t wasted to begin
with. Maybe you’ve changed your contractor and people
don’t like the food, if it’s gone up by several
tonnes—the waste.
|
[34]
Sir
Derek Jones: I was wracking my
brains very briefly to think what might have accounted for the
change, but I don’t think we have changed our policies at
all, Peter?
|
[35]
Mr
Kennedy: The only thing I
can point to—and as the Permanent Secretary said, we will
write and give an explanation—is that we did identify a
little over a year ago now that, with a lot of our recycling,
there’s a lot of cross-contamination across the bins. So, it
might not be the answer, but—
|
[36]
Jocelyn
Davies: You might be
separating it out better.
|
[37]
Peter
Kennedy: We’ve
tightened up on that component.
|
09:15
|
[38]
Jocelyn
Davies: That wasn’t
what I wanted to ask you about; I wanted to ask you if you
wouldn’t mind expanding on the timing difference between NHS
consumption of resources and the cash draw-down, because obviously
that led to an £86.8 million underspend in health and social
services, but it’s due to a timing issue. Can you explain
that?
|
[39]
Sir
Derek Jones: Well, I think
probably Gawain will need to help me, but I think it is provision
made in anticipation of draw-down by health boards, which, for
practical reasons at their end, didn’t occur. Gawain, can you
provide any further detail?
|
[40]
Darren
Millar: It’ll be
automatic, Gawain; don’t worry about the mike.
|
[41]
Mr
Evans: Thank you. Yes,
with health, because it’s a grant for health, it’s
treated almost as a cash grant, whereas the accounts elsewhere are
on a resource basis. So, there are a number of reasons for that
figure in terms of the underspend against the ambit, but one was
very much a time difference, in that the health service
didn’t draw down the cash that was available for them to draw
down.
|
[42]
Jocelyn
Davies: It had been spent,
in effect, but it hadn’t been drawn down.
|
[43]
Mr
Evans: Yes. One of the
reasons, for example, would be that they had committed to resources
and they had effectively accrued for those costs, but they
hadn’t had to pay the bills at the time of the year-end, so
they didn’t draw down the cash.
|
[44]
Jocelyn
Davies: Okay. The summary
of resource account and the statement of comprehensive net
expenditure have significant aggregate figures—I know that,
on the Finance Committee, we get a split between resource and
capital spending, but for the purpose of this document—. So,
for example, £13.7 billion of grant to external bodies is
shown as a single figure in note 6.
|
[45]
Sir
Derek Jones: Sorry, could you
point me to the page in the accounts?
|
[46]
Jocelyn
Davies: In note 6, so
I’ll tell you what page it is now.
|
[47]
Sir
Derek Jones: Note 6 is probably
42.
|
[48]
Darren
Millar: Our pack page
157.
|
[49]
Jocelyn
Davies: Yes, 157 for us,
42 for you. So, on note 6, then, £13.7 billion as a single
figure. I know there’s got to be a balance between how long
the document is and how much information it gives, but if
that’s your answer, I’m sorry, but that isn’t
going to cut it with us. I don’t think £13.7 billion
tells us very much, does it?
|
[50]
Sir
Derek Jones: I agree.
It’s called ‘grants’, and this is traditionally
the way it’s been presented in this part of the accounts, but
I think it’s unhelpful, too, because we’ve been doing a
lot of work on grants recently. There’s now an annual grants
report, which comes to the committee, and the committee has quizzed
us quite hard on that. In that report, you’ll see a proper
breakdown of the type of grants involved. This includes the rate
support grant to local authorities, for example, which is a huge
block of expenditure, but it also includes rather more sensitive,
much smaller grants, it includes hypothecated grants, and I think
it should be on the list for the simplification project. But,
again, as you say, if we’re going to make it shorter, perhaps
a reference to the accompanying annual grants report would be one
way of doing it, or a simple pie chart, perhaps, as a
visual.
|
[51]
Jocelyn
Davies: Yes, because, as
you say, you’re going to have some very large and some very
small. I’m sure other Members will have questions on
aggregate figures.
|
[52]
Sir
Derek Jones: Gawain wanted to
add something on that.
|
[53]
Mr
Evans: On that particular
issue, it was one of the minor changes we made, looking forward to
the end of 2015-16, with the change in the financial reporting
management, as part of simplification. So, perhaps, as the
Permanent Secretary has indicated, we made the change in line with
what was recommended. With our position with grants, perhaps we
made that change without considering what it would mean in terms of
that transparency. But, as I said, it was one of the changes that
was recommended as part of the simplifying and streamlining
project.
|
[54]
Jocelyn
Davies: It is difficult to
get the balance right, isn’t it, between having a short
document and making sure that transparency is still there? Why
don’t you include within your accounts the more detailed
expenditure analysis contained in the outturn report that, again,
comes to the Finance Committee? That information does need to be
scrutinised and, as you mentioned earlier on, it is important for
audit. Even though we don’t expect every member of the public
to be poring over this, there will be some people who will be
interested—academics and so on—in what goes on in
public life and what goes on in money. They are large sums, and it
is the public’s money, after all.
|
[55]
Sir
Derek Jones: I don’t know
how much agreeing I can do without undermining my credibility here,
but I agree with that point, too. As Chair of the Finance
Committee, you will have received a letter from the finance
Minister that sets out the outturn report in slightly different
terms from way the same numbers are presented in the accounts. And
I think that some alignment of those two things would be beneficial
to the accounts, if we can include that again without overly
expanding them, then I think—. I think the main difference is
probably the way that the ambit is presented.
|
[56]
Jocelyn
Davies: If I can go to
note 18, which is, I think, page 53 in your pack. Is it 53? Is that
note 18?
|
[57]
Sir
Derek Jones: Yes.
|
[58]
Jocelyn
Davies: That’s 168
for us. The statement of financial position in that note shows that
provisions have continued to rise significantly in recent years,
and they stand now at over £700 million. Can you tell us why
there’s been a significant increase there?
|
[59]
Sir
Derek Jones: Provisions have
gone up for two main reasons. The largest item is the health risk
pool, which is essentially provisions made against the contingency
of medical negligence cases. The second, as I recall, and
completely different, is the provision about our contractual
relationship with the Ministry of Defence on the St Athan site. If
I’ve got that wrong, Gawain would be waving at me so I think
those must be the two main items that have cause the increase in
provision.
|
[60]
Jocelyn
Davies: With the Welsh
risk pool, what was the thinking in no longer having that accounted
for separately, because we used to be able to see that
separately?
|
[61]
Sir
Derek Jones: I don’t
know, unless it’s also part of the drive to try and simplify
and shorten the notes, Gawain.
|
[62]
Mr
Evans: It wasn’t
actually reported through to us. When we consolidated the health
information, we ran the changes that they’d made as part of
trying to streamline the accounts, and so we didn’t report it
because it wasn’t reported through this time, and we
didn’t follow up on it.
|
[63]
Jocelyn
Davies: I can see why
there’s simplification, but we used to see that separately
and stuff about St Athan and the Welsh risk pool lumped together
doesn’t tell me, I don’t know, as much as perhaps that
I’d like to know. Sorry, Chair.
|
[64]
Darren
Millar: Just on this risk
pool business, then, you’ve itemised this in previous years.
I’m not aware of any changes to NHS accounting or reporting
requirements that mean that they are no longer itemising any risks
associated with individual NHS organisations. There must have been
a deliberate decision not to report this information, mustn’t
there?
|
[65]
Sir
Derek Jones: In the
accounts.
|
[66]
Darren
Millar: Yes.
|
[67]
Sir
Derek Jones: I think Gawain was
just explaining that.
|
[68]
Darren
Millar: Gawain.
|
[69]
Mr
Evans: I think, from
memory—I would have to check and come back to the
committee—I don’t believe it was reported through
separately from the consolidated NHS position to us this year. I
will check that.
|
[70]
Jocelyn
Davies: But you know how
much the NHS are paying out to people that have been damaged by
them in negligence claims and that’s something that has been
scrutinised—you’ve been questioned on it, the NHS have
been questioned it—and we’ve seen this figure rising.
And it’s a concern for people, because obviously that’s
not been spent on healthcare—that’s on paying
compensation to people who’ve been damaged by the NHS. It
would seem to me that there’s never been a call from the
public or from us or from anybody that I know to say that we really
shouldn’t be reporting this as a separate amount, because
it’s been specifically separated out for
criticism.
|
[71]
Sir
Derek Jones: There should be
complete transparency on these figures. They’re not
separately listed in the accounts under provisions, but I’ll
write to the committee, Chair, and explain how those numbers are in
the public domain.
|
[72]
Jocelyn
Davies: Okay. And if there
is any influence by you over the NHS on how they keep that figure,
I hope you would be prepared to—. I’m sure it’s
something that we’d want to stress with them.
|
[73]
My
last question’s on note 22, which is on page 57—losses
and special payments. What are the reasons for the increases
there?
|
[74]
Sir
Derek Jones: We’re
changing our approach to losses and special payments, so I
don’t think that this increase, which is significant,
reflects a fundamental change in losses; it’s to do with sort
of the speed with which we decide that a liability is not going to
convert into a payment for us, and to write it
off—
|
[75]
Jocelyn
Davies: So, if somebody
owes you money, they’ve gone bust or whatever, and
you’re not going to get it.
|
[76]
Sir
Derek Jones: Yes, rather than
see those sorts of amounts stack up, as it were, in a large and
disaggregated liabilities figure. But, the other side of the same
work is to pursue debts more effectively. So, we’ve
centralised our debt management. I did look for this in our
accounts and I was rather disappointed to find that debt management
doesn’t feature in the accounts, because I think the latest
recovery of debt figure was £77 million, which, over the last
three years or so, is up by about 50 per cent, I think. So, I think
this is a good approach, to be a bit more decisive about when to
write off and a bit more decisive about recovery at the same
time.
|
[77]
Jocelyn
Davies: About pursuing if
you can, but not wasting time trying to pursue something
that’s frivolous.
|
[78]
Sir
Derek Jones: Yes, something
that’s a lost cause.
|
[79]
Jocelyn
Davies: Okay, thank you;
that’s me covered.
|
[80]
Darren
Millar: A few Members want
to come in on supplementaries, so I’m going to bring you in.
Mike first, then Oscar.
|
[81]
Mike
Hedges: I have two
supplementaries. You talked about the £86.8 million
underspend. If I’ve got it right, health boards are running
accrual accounts and they only get the money drawn down when they
need to pay it. Is that correct?
|
[82]
Mr
Evans: Yes. Effectively,
they request a draw-down of cash from the Welsh
Government.
|
[83]
Mike
Hedges: Sorry, but they do
request a draw-down when they make the order, to fit according
their accrual accounts, or do they request a draw-down when they
spend it, when they have to pay the bill?
|
[84]
Mr
Evans: They request a
draw-down. The grants are paid to health as and when they need it,
rather than when they place an order or a commitment. So, the cash
forecasting for health is different to the resource
accounting.
|
[85]
Mike
Hedges: I won’t
pursue that point very much further, but it is quite possible, in
any one year—. You have an £86.8 million underspend this
year; it’s quite possible, depending on how the orders go,
when this £86.8 million has to be paid in this year, if 100
per cent of the money allocated for the next year is spent, and it
is spent during the year and it isn’t not drawn down, then
you can actually have an overspend up to £86.8
million.
|
[86]
Sir
Derek Jones: This is a cash
management issue, I think, Gawain, rather than resource management,
so it wouldn’t be an overspend on resource; it
would—
|
[87]
Mike
Hedges: It would be an
overspend on cash; you’d spend more cash than has been
allocated.
|
[88]
Mr
Evans: The cash is only
an element of that ambit difference for this year. Some of the
variants on that £86 million—and we can provide a full
breakdown—are non-cash items and annually managed
expenditure. So, it’s a combination of items that actually
contribute to that £86 million.
|
[89]
Mike
Hedges: Can you provide
that note, but can you also provide it for the previous year so
that we can actually have a comparator across?
|
[90]
Mr
Evans: Yes.
|
[91]
Mike
Hedges: The other area is
details in the accounts. I know it’s quite possible to get
full details, because you follow the money to health and you follow
the money from health to health boards, and you follow the money to
local authorities and you get the local authority budgets. So, you
can follow the money, as we have done in this committee, looking at
other bodies which are funded, like the sports council. You can
follow the money with a huge number of other people’s
accounts. But, don’t you think it would be helpful if you
actually had links to where people can follow the money?
|
[92]
Sir
Derek Jones: Do you mean online
links?
|
[93]
Mike
Hedges: Yes. So, if you
want to follow health, you give the link to the health boards. You
know how much each health board has been given, so you can actually
follow the link there and you can keep on going down to the bottom
level. I wouldn’t want you to publish every health
board’s accounts within your accounts, or every body that you
fund into the accounts, but actually having links so that people
can follow the money.
|
[94]
Sir
Derek Jones: I’m not an
expert at all in IT, but I think that’s a very interesting
suggestion, and I’ll need to follow it up. ‘Why
not?’ I think is my first response—probably not
perfection, but to be able to establish some kind of online link
from our online accounts to other bodies’ accounts where
that’s relevant.
|
[95]
Mike
Hedges: Once you’ve
seen where they money’s gone, people can just follow the
money. You can, but you don’t make it easy.
|
[96]
Sir
Derek Jones: Can I say
something briefly about cash management? This arises out of what
looks like poor cash management because there’s £86
million that wasn’t drawn down. Again, I’d welcome the
opportunity to write to the committee, I think, on this, because
cash management is a slightly obscure, but important aspect of
running the business; it’s monitored closely by the Treasury,
for obvious reasons. The Treasury keeps a league table of all
Government departments, and the extent to which they do or
don’t manage their cash accurately. I think we are in the
premier league—top five in terms of cash management
performance across the UK.
|
09:30
|
[97]
Mike
Hedges: And just a final
question: why don’t you provide the money at accrual
stage?
|
[98]
Sir
Derek Jones: I think, probably,
that would just be highly transactional, and so we’d be
passing cash over very, very frequently.
|
[99]
Mr
Evans: When the accrual
stage happens with health, it can be days, weeks or months before
their cash is actually needed to settle that invoice. It can take
quite some time for invoices to actually be submitted by a
supplier, for example. So, the health boards will plan their cash
on when they’re expecting to make a payment, rather than when
the accruals take place.
|
[100]
Mike
Hedges: But why? The cash
is there, you are holding it, why can’t the health boards
hold it, which would mean that you have the money out, and you know
exactly where you are in cash terms?
|
[101]
Darren
Millar: Wasn’t
this—or a large proportion of this £86
million—essentially cash that you didn’t know how much
you would need to account for until the health boards had drawn up
their accounts for the year, and demonstrated that they had a gap?
That was the situation, wasn’t it?
|
[102]
Sir
Derek Jones: Yes, it was an
estimate of what the requirement could be.
|
[103]
Darren
Millar: Yes. Is that okay,
Mike?
|
[104]
Mike
Hedges: I don’t
think I’ll get any further.
|
[105]
Darren
Millar: Okay. I’ll
bring you in in a second, Jenny, after Oscar.
|
[106]
Mohammad
Asghar: Thank you very
much, Chair. It’s only just clarification on the consolidated
accounts on 31 March. Under ‘non-current liabilities’,
the ‘other liabilities’ column is virtually £20
million—£19.6 million.
|
[107]
Jocelyn
Davies: On page
29.
|
[108]
Mohammad
Asghar: It’s page
144 for us.
|
[109]
Darren
Millar: It’s on page
29.
|
[110]
Mohammad
Asghar: Is it there just
to balance the books, or is there something really in
it?
|
[111]
Sir
Derek Jones: Gawain, have you
got that query? Can you help me with it?
|
[112]
Mr
Evans: Yes. Sorry, did
you say ‘current liabilities’?
|
[113]
Mohammad
Asghar: Yes. This is under
‘other liabilities’. When you look under
‘non-current liabilities’, it is the last one. Under
‘notes’ you’ve put 21, it is below that.
‘Other liabilities’—there is no note for
it.
|
[114]
Darren
Millar: This is the
£19.6 million.
|
[115]
Mohammad
Asghar: Yes.
|
[116]
Darren
Millar: Yes, it’s
the only one without a note, isn’t it? What does that consist
of?
|
[117]
Mr
Evans: Oh, right,
yes.
|
[118]
Mohammad
Asghar: Is it just to
balance the books?
|
[119]
Jocelyn
Davies: [Inaudible.]
|
[120]
Mohammad
Asghar: Yes.
|
[121]
Darren
Millar: Are you able to
send us a note?
|
[122]
Sir
Derek Jones: I don’t
know, Chair. If Gawain can recall, perhaps he’ll let us know
later; otherwise, I’ll write to you.
|
[123]
Darren
Millar: I have to say,
I’m a little bit concerned—we’ve got lots of
notes coming in our direction—that you weren’t more
prepared for some of these questions this morning. I have to say,
if something’s not got a note against it, I would expect you
to have a note, ready to share with this committee. Jenny
Rathbone.
|
[124]
Jenny
Rathbone: I just wanted to
pick up on the point there made by Mr Evans. You said that
suppliers are often slow to submit their invoices, and I’m
struggling to understand who these suppliers might be that are slow
to submit their invoices. Because I think that’s a problem
with the whole situation around NHS accounting, is that it’s
really unclear at what point—you know, how well the NHS is
managing its money. This system of not actually passing the money
over until they’ve said, ‘I’ve got to pay this
invoice’, sort of makes it more difficult to track how
challenging their financial situation is. So, who are these
suppliers that don’t submit invoices on time—are they
other NHS bodies?
|
[125]
Mr
Evans: Sorry, I
didn’t mean they were slow, but it’s obviously up to a
supplier, when you contract a supplier, and they’re due to
invoice—. With any organisation, it’s very much up to
that supplier as to when they actually then submit. So, I
didn’t mean that individuals were slow, but it’s
obviously beyond the control of health, or any organisation, as to
when that’s supplied. Some will be very prompt, others could
well take slightly longer to do that.
|
[126]
Jenny
Rathbone: I can imagine a
health board wouldn’t bother to chase somebody who
hadn’t submitted their invoice, but I’m trying to
understand why any organisation, having delivered the goods,
doesn’t instantly submit the invoice.
|
[127]
Mr
Evans: I can only speak
from previous experience in terms of working with suppliers, where
some of them do it for their own cash flow purposes, for example.
If they’ve got a number of contracts, and they’re
effectively awash with cash in a particular month because of
payments, they could defer for cash flow purposes. So, there might
be a number of reasons why—
|
[128]
Darren
Millar: I’m sorry,
but I’ve never come across a single organisation that feels
so much awash with cash that they don’t bother invoicing,
particularly organisations who have more money. I mean, the more
money they have, the worse they tend to be at chasing the cash up.
You’re sending us a note on this, aren’t you? I’m
not convinced it’s all suppliers.
|
[129]
Sir
Derek Jones: I’ll ask
Gawain to stop digging. I think his point really, in response to
Jenny Rathbone’s question, is that it’s a practical
matter outside the control of the health department when suppliers
submit their invoices to health boards and when they’re paid
and, so, estimates have to be made.
|
[130]
Jenny
Rathbone: Okay. Well, I
think there’s a general concern about the alacrity with which
health bodies charge each other for work undertaken, for example,
Cardiff and Vale University Local Health Board, who have tertiary
referrals and need to then recharge people for that work. If
that’s not being done in a timely fashion it’s really
difficult to track how difficult the financial situation of health
boards is.
|
[131]
Darren
Millar: Is your question
on this, Jocelyn?
|
[132]
Jocelyn
Davies: It’s on
this. I mean, sometimes, you speak to suppliers who say that the
people they’re contracting with say, ‘We don’t
want to pay you for three months, don’t invoice me for three
months’. But, you’re saying this is not a case of the
health boards asking people or having an arrangement with people
not to pay them in the 30 days that is recommended for public
bodies.
|
[133]
Sir
Derek Jones: No.
|
[134]
Darren
Millar: Wait a second,
Mike, is it on the health issue?
|
[135]
Mike
Hedges: Yes.
|
[136]
Darren
Millar: Go on then, Mike,
very quickly.
|
[137]
Mike
Hedges: When I served on a
health board, which was in the days when there were more health
boards than there are now, every month they would charge the other
health boards for tertiary services. I was involved in Morriston
and Singleton, and Morriston probably has the second largest number
of charges outside of its own area and every month that was done.
Is that not the case at the moment?
|
[138]
Sir
Derek Jones: I really
don’t know.
|
[139]
Darren
Millar: They would be
netted off against one another, wouldn’t they, in any case in
these accounts? But, I’m sure we can take that up with
individual health boards, Mike.
|
[140]
Can we
just return to this issue of losses and special payments if
that’s okay? You’ve mentioned, Sir Derek, that
you’re trying to improve the debt collection rates and that
you’ve changed you’re policy, shall we say, in terms of
writing off some of the unrecoverable amounts that would have been
hanging around in the accounts for a long time in the past.
Obviously, there’s been a significant increase in the number
of cases this year. You’re explaining that in terms of
policy, but, you know, we’re talking an additional £5
million. Now, we know what three items were because there’s a
note to the accounts on the following page—page 58—the
Tryst Engineering Company and Desk Link Office Furniture
administration and liquidation cases. How long was it since those
original invoices were drawn, if you like? How long had those been
hanging about in the accounts? Had they been there for a number of
years or did they happen within the year? Did those two particular
companies go into administration in the year?
|
[141]
Sir
Derek Jones: These are losses
that exceed £300,000. So, they won’t necessarily have
been incurred in the year. They’re just registered for that
reason. I think I understand the issue that, perhaps, you’re
probing at, Chair, which is, you know, whether we started to get
slack about businesses going bust.
|
[142]
Darren
Millar: Yes,
absolutely.
|
[143]
Sir
Derek Jones: No. You may want
to come on to it later under the more general heading of grants
management where, as I mentioned earlier, the committee has tested
us quite a lot. I think we have made good progress on grants
management. The balance, as always, is between the need to
undertake some risk but to do it with eyes open and in a properly
controlled way. The media pick up cases of—
|
[144]
Darren
Millar: We’ll come
back to grants management in a second. I’m asking
specifically about what are described as ‘losses and special
payments’. So, you’ve had three items which have been
specifically itemised in the notes. I just would like to know when
those original receipts were initially expected in, if you see what
I mean.
|
[145]
Sir
Derek Jones: I don’t
know—
|
[146]
Darren
Millar: Have they been
hanging around for five years and you’ve just written them
off this year because of the change in policy?
|
[147]
Sir
Derek Jones: I really
don’t know off hand when the debt was first
registered.
|
[148]
Darren
Millar: You can send us a
note on those two. The final one is a strategic drug stores write
off of drugs or vaccinations, I assume, because their shelf life
expired.
|
[149]
Sir
Derek Jones: Yes.
|
[150]
Darren
Millar: What is wrong with
the management of your strategic drugs stores that it stocks up on
£3 million worth of drugs or vaccinations and then has to
write them off? It’s an extraordinary cost.
|
[151]
Sir
Derek Jones: Any drug will have
a finite life, and, if not used by that time—. There are some
recycling arrangements, but it may simply have to be written off.
Some of these drugs are reserved for things like pandemic flu, so
they are held for good reason but may not be used, and, after a
period of time, have to be either destroyed or
reprocessed.
|
[152]
Darren
Millar: So, what were
those drugs that were written off, do we know?
|
[153]
Sir
Derek Jones: I think we do,
although it might take a moment to find the note
in—
|
[154]
Darren
Millar: Have you got a
note there, Gawain? I saw the permanent secretary look in your
direction.
|
[155]
Mr
Evans: I’ve
categorised into three in terms of that breakdown. We had
antivirals, antibiotics and then just general consumables. So, they
were categorised just into those three groups.
|
[156]
Darren
Millar: It seems a very
large number to write off in an individual year; much larger than
in the previous year, any write-offs. I accept that some drugs,
some antivirals, will come to the end of their shelf-life
periodically, but it does seem rather a significant jump, given
that you’ll be purchasing this stuff on an annual
basis.
|
[157]
Sir
Derek Jones: I agree. I noticed
it myself, and the answer is to do with the pandemic flu
antivirals.
|
[158]
Darren
Millar: So, it was
predominantly—
|
[159]
Sir
Derek Jones: So, it
wouldn’t be the sort of thing that you would see year in,
year out, as it were, or a steady base—
|
[160]
Darren
Millar: So, you’ve
had to restock with those, this year, have you?
|
[161]
Sir
Derek Jones: Well, I
don’t know that a decision’s been taken about that,
Chair. This is very much health board public health territory. A
judgment would have to be made about likelihood and risk, and
I’m not sure that those judgments have been made or that the
restocking has taken place.
|
[162]
Darren
Millar: So, are we without
these antiviral drugs, then, at the moment, should there be a
pandemic?
|
[163]
Sir
Derek Jones: I don’t know
the answer to that, Chair.
|
[164]
Darren
Millar: That’s a bit
disconcerting, isn’t it? You’ll send us another note,
no doubt, to tell us what the situation is.
|
[165]
Jocelyn
Davies: You’re not
going to win on this one, Derek. Whatever you do is going to be
wrong, now, isn’t it?
|
[166]
Sir
Derek Jones: We’re in
good hands, I think, as far as public health is concerned. I simply
don’t know what judgment’s been made about restocking
antiviral drugs. I am offering to send you more notes than I would
want to, Chair. But, as I said, it’s a very large,
complicated field, and we have moved from antiviral drugs to
composting and other matters. We are as well briefed as we can
be.
|
[167]
Darren
Millar: Okay. I
understand. We’ll look forward to the receipt of another
note. I’m going to bring in Oscar now.
|
[168]
Mohammad
Asghar: Thank you very
much, Chair. On a light note, Derek, could you please summarise the
internal governance framework at Welsh Government and how this
provides the accounting officer with the necessary
assurance?
|
[169]
Sir
Derek Jones: I’m sorry,
could you point me to the page in the accounts, Oscar?
|
[170]
Mohammad
Asghar: I repeat again:
please could you summarise the internal governance framework at
Welsh Government and how this provides the accounting officer with
the necessary assurance, please?
|
[171]
Sir
Derek Jones: Yes, this is a
really interesting and important question. I’ve said
it’s a sobering accountability, for me, to sign the accounts,
and I do rely on a system within the organisation to put me in a
good position to do so. The essence of it is line-management
responsibilities. So, I seek, from my immediate management reports,
statements of assurance on systems and processes, and they, in
turn, from their reports, have a very effective internal audit
system—I’ll ask David to come in in a minute—and
each important area of business also has the corporate governance
committee, which operates with non-executive directors to help
provide assurance for the main areas of business. So, I would
summarise the Government’s arrangements in that way. David,
is there anything that I have missed?
|
[172]
Mr
Richards: We work very
closely with Wales Audit Office; our internal auditors liaise
closely. We have a decision-making structure, we have a board with
non-executives and sub-committees under it. We have a suite of
guidance control documents, which is simple—no, it’s
not simple, but we’re trying to make it simpler. So, the
mechanics are there. We accompany that with a programme of training
and development of staff, because, of course, you can have the best
guidance in the world in an organisation, but it’s no good if
people aren’t actually following it. And, then, Derek gets
assurance from line-management assurance, for which we have a
system of internal control framework—which means getting
responses from the whole of the organisation on how the year has
gone in terms of governance—from the corporate governance
scrutiny, from the reports from internal audit and from the reports
from external audit. Effectively, you triangulate when you do the
system; you put all of these things together, and then Derek can
form a basis on signing his accounts.
|
09:45
|
[173]
Mohammad
Asghar: How are you
improving project-management capability within the Welsh
Government, and what processes do you have for reviewing contracts
before they expire to ensure that the best value-for-money options
are taken forward?
|
[174]
Sir
Derek Jones: There’s been
a lot of work done over recent years on project and programme
management, and we have established a centre of excellence for
project and programme management, which used not to exist. I think
that has probably got us to the point where we need to be, so that,
when we identify an important project or programme—wherever
it might be—we’ve got expertise to deploy on it. So, I
feel reasonably comfortable with the current position on that.
I’m not sure how to respond to the second part of the
question, which is: how do we look at—
|
[175]
Mohammad
Asghar: How you review the
contracts.
|
[176]
Sir
Derek Jones: —repurchasing
or reprocuring?
|
[177]
Mohammad
Asghar: Well, actually
both.
|
[178]
Darren
Millar: Just to put a bit
more meat on the bone, the committee has had some concerns about
the preparation, if you like, in advance of contracts expiring,
that the Welsh Government does, or the absence of some preparation
in one department in particular. During our work on the north-south
air link, for example, we expressed some concern about the
timeliness of cracking on with reprocuring or deciding whether to
move forward with another contract. Can you give us some assurances
that that’s not a feature across Welsh Government?
|
[179]
Sir
Derek Jones: Well, yes, I think
so, but I’m not complacent about procurement, Chair, Oscar.
The goods and services that my organisation purchases every
year—everything from biros to IT consultancy—amounts to
about £0.5 billion. Given our current financial circumstances,
I’m looking very closely at that to see whether we are
actually extracting full value for money. I’ve established a
work stream under the ‘Preparing for the Future’
programme, with the head of the National Procurement Service as the
senior responsible officer reporting to me on that, to establish
that we do indeed have the right kind of, sometimes, pretty
hard-nosed approach, actually, to procurement, and that, if the
public services are feeling the pinch financially, we’re
making sure that we’re getting absolutely best value out of
our contractors. So, I’m not saying ‘job done’ on
this, but I think we have identified it as somewhere where we may
be able to get better value for money for the taxpayer.
|
[180]
Mohammad
Asghar: Do you use
external advice to challenge, evaluate and strengthen board and
committee decision-making processes?
|
[181]
Sir
Derek Jones: I mentioned
earlier that we have corporate governance committees that are
responsible for supporting and challenging the management in all
the important areas of business, and they have external
non-executive directors that are there precisely to bring that out
of the civil-service focus on what we’re doing.
|
[182]
Mohammad
Asghar: Finally, the
governance statement notes that the board has been reconsidering
its approach to the way it treats risk, highlighting the promotion
of a more innovative, less risk-averse culture. Can you briefly
summarise how this system is changing?
|
[183]
Sir
Derek Jones: I can summarise it
as being I’m definitely in a no-win position here. One the
one hand, the civil service tends to be criticised for being too
risk-averse; on the other, for being too slack in its due diligence
when something goes wrong. I don’t think either is true. I
have been trying to increase the civil service in the Welsh
Government’s appetite for controlled risk taking—I
think that’s necessary if we’re going to secure optimum
benefits from everything we do—but it needs to be
well-managed risk.
|
[184]
Risk
registers are kept corporately. My board considers a risk register
monthly and so do the main operating groups in the organisation.
So, we’ve recently, with the help of a new head of our
internal audit service, been reviewing that risk-register approach
and whether it’s actually giving us everything we need. We
think, probably, we could improve it. My view of risk registers is
that they can, actually, be a bit of a trap. If you think that, if
you’ve put a risk on a register, you’ve dealt with it,
then you haven’t. So, the register just needs to be a
reminder. They need to be alive; you need to be constantly changing
them and rethinking whether your risk pattern has changed and, as I
say, the board debates risk on that basis quite frequently, but, at
the moment, we are waiting for some proposals from our head of
internal audit. David, do you want to say anything more? It’s
not a major change; it’s just a refreshment, I think, of our
approach.
|
[185]
Mr
Richards: Just to add to
that, I think we’re trying to be a bit more sophisticated in
our risk appetite. So, what’s the risk appetite of the Welsh
Government? Well, it depends on what we’re talking about. So,
there are very key things—obvious things, like cash
management—where we want to be seriously risk-averse, but
there are other areas where there’s scope for just new
innovative ways of doing things, where you’d want to have a
stronger risk appetite, because the rewards might be greater. So,
we’re trying to be more sophisticated in the way that we
apply different criteria of risk to our different
activities.
|
[186]
Darren
Millar: Okay, Oscar? Was
it on this issue, Julie?
|
[187]
Julie
Morgan: Yes. I just
wondered if you could give us some examples of the new sort of
innovative ways of doing things that are more
risk-averse.
|
[188]
Sir
Derek Jones: That are more
risk-averse?
|
[189]
Julie
Morgan: Less risk-averse,
sorry. Yes, less risk-averse.
|
[190]
Sir
Derek Jones: We’ve done
this mainly through the grants management programme, where
we’ve established a centre of excellence to provide training
and advice for officers right across the organisation who are
involved in grants management, just to help them to get the balance
right and to make it clear that risk is acceptable, provided that
it’s well controlled. I think—can I be really
frank—that some of the poundings that have been taken by my
predecessors or other officials about losses of public funds
through things going wrong on grant schemes or individual grants
had led to a reluctance, sometimes, to undertake what would be
perfectly appropriate risk if it were well managed. So, it’s
often just a matter of training and presentations to explain to
grant managers how they can make that balance. Is that a good
description?
|
[191]
Mr
Richards: Yes.
|
[192]
Darren
Millar: Can I just ask,
seeing as you’ve touched on these grant-related
issues—? Obviously, we’ve had a positive impression as
a committee from the annual grants management reports that
we’ve received that things have been moving forward, that
improvements have been made, things have been tightened up but that
appropriate risks have been taken. But there have been some
examples of organisations in the media where the arrangements seem
to have been quite sloppy, if I can use that word. So, there was an
autism grant, for example, that was made—a relatively small
award—to an organisation. The award letter was issued after
the date at which the organisation was expected to respond back to
say whether it was going to accept the grant or not. I mean, unless
they invented time travel, that would have been an impossibility.
The financial information attached to the grant application was
just a couple of figures, without a breakdown to support the need
for resources. The actual award was given to a different
organisation than the one that made the application. So, there are
still issues, aren’t there, in the way that grants are
awarded? What confidence—. What assurances can you give to us
as a committee that this is an isolated example, that it’s
not something that is a regular feature of grant
awards—I’ll bring you in in a second, Mike—and
that we won’t see these things on a regular basis? Can you
also confirm that you always receive written applications with
sufficient justification from people when grant applications are
being made—you know, that people aren’t just phoning up
asking for money and it’s being doled out on a
whim?
|
[193]
Sir
Derek Jones: I think I can give
you that assurance. You asked for several along the way there,
Chair—
|
[194]
Darren
Millar: Yes.
|
[195]
Sir
Derek Jones: I don’t
accept ‘sloppy’ as a general description of the way our
grants are managed—
|
[196]
Darren
Millar: Good.
|
[197]
Sir
Derek Jones: —and I think
that the work that the committee’s seen through the grants
management process stands up and has put us in a better position
generally. There will always be some cases that go wrong. So, if
you’re seeking an assurance that that will never happen, I
can’t provide it. There will be cases where things go wrong
or a firm goes bust—. I suspected you might ask me this
question, so I asked myself the question, ‘Well, how do I
know that this is effective?’ We can keep track of these
figures, if you like, but, in recent years, we’ve made over
1,000 grant offers from which we currently have 14 cases where
we’re seeking some kind of recovery. If we keep track of
those figures, we should know whether we’re doing okay or
not. I don’t think I could tell you what the right level was
but I think that that creates a sense of proportion about the
problem that we’ve got here, but we will never completely
eliminate that. I think that our grants management now is generally
far less risky than it was. We can still improve the grants
management programme. It’s still at work.
|
[198]
The
particular case of the autism grant I noticed in the media as well
and asked for some advice about whether it demonstrated some
problem. I don’t think I know as much about the case as you
do, Chair, but the advice that I received was that—and this
is not untypical of some of the difficult areas; you have a very
good cause, and a well-meaning, usually charitable or third sector
organisation pursuing that good cause, but maybe not the most
robust organisation in terms of financial management—. What
to do? The grant applicant in this case was a new and a small
organisation. The officers examining it decided that, because of
that, it would be best not to make the grant to the body that had
actually applied, but, by agreement with it and its parent body,
which had a more robust financial management capability, the grant
was therefore made to the parent body, the parent charity. That
explained, to my satisfaction at the time, the media report that I
picked up, which seemed, on the face of it, a bit odd, which was
that a grant had been made not to the body that had applied for it
but to another one.
|
[199]
The
other details you mentioned, I’m not familiar
with.
|
[200]
Darren
Millar: Yes. In terms of
timing differences, David Richards—award letters being given
and responses requested at dates that have long gone—is that
typical?
|
[201]
Mr
Richards: No, it’s
not, and it’s not good practice, Chair. Whether there was a
particular reason behind this—and sometimes there is;
sometimes there are conversations that go on with the grant
applicant, which actually sort of change the timings—I
don’t know for this particular case, but we will look at
it.
|
[202]
Darren
Millar: And just that
final question, then—the robustness of the information
required from grant applicants as part of any grant application
process with the Welsh Government—again, with that particular
example, there was very scant financial information. I’m
hoping that that, again, is not typical of the grant applications
that are made to the Welsh Government and granted.
|
[203]
Sir
Derek Jones: It won’t be
typical because there’s no standard grant application. They
vary enormously in terms of size, scale and complexity. I think,
again, in terms of not being overly risk averse, we do try to match
proportionately the administration, the checking, and the paperwork
to the risk, both in terms of the sum of money involved and the
nature of the organisation that we’re funding. So, it
won’t be exactly the same set of paperwork for every type of
grant. It will vary. I hope, actually, that, in some cases, if
it’s a small amount of grant to a reliable organisation, we
do keep the paperwork to a minimum.
|
[204]
Darren
Millar: Okay. Thank you
for that. Mike, was it on this issue? Because I’m going to
bring Sandy in.
|
[205]
Mike
Hedges: Yes, on this
issue. As you know, there are lots of organisations that apply for
grants, and the Welsh Government is just one of the organisations
that they are applying for grants to. As you probably remember,
when we did an investigation some time ago regarding an
organisation that passed the risk with one part of the system, if
that was then accepted, the risk was passed for everybody, and some
people are making relatively small grants, where—. The amount
of risk that you’re prepared to take for £5,000 is
probably less than the amount of risk that you’re prepared to
take for £5 million. So, can you just give me an assurance you
are still risk assessing the Welsh Government part of any grant,
even when others have already agreed grants?
|
[206]
Sir
Derek Jones: Was this a
European structural funds project? If it was, I think I recall
it.
|
[207]
Mike
Hedges: Yes. It was one up
in Bala.
|
[208]
Sir
Derek Jones: ‘Yes’ is the
answer.
|
[209]
Mr
Richards: The heritage
centre.
|
[210]
Sir
Derek Jones: Yes. We need to
protect our interests regardless of whether someone else purports
to have carried out due diligence.
|
[211]
Mike
Hedges: Because what
happened there was that once one person agreed it, everybody just
sort of thought, ‘It’s been done by one’, and we
ended up with things not working out as well as we would have
liked.
|
[212]
Sir
Derek Jones: Usually, I think
it’s the other way around, actually. If the Welsh Government
has done its due diligence and thinks it’s okay, others will
feel able not to.
|
[213]
Darren
Millar: Okay. Sandy
Mewies.
|
[214]
Sandy
Mewies: Thank you, Chair.
Morning.
|
[215]
Sir
Derek Jones: Good
morning.
|
10:00
|
[216]
Sandy
Mewies: Figures show that,
during 2014-15, total staff numbers, as you’re well aware,
I’m sure, went up by 59 in the Welsh Government compared with
the 2013-14 figures. At the same time, there’s a table that
shows us that there were 132 redundancies in 2014-15 and they cost
quite a lot of money, the way that they were paid out. I think
there’s a figure of just under—
|
[217]
Darren
Millar: Six million
pounds.
|
[218]
Sandy
Mewies: Individually, it
worked out at somewhere around just under £48,000 per person
when people took redundancy.
|
[219]
Sir
Derek Jones: Yes, that sounds
about right.
|
[220]
Sandy
Mewies: Yes. So, on the
face of it, there’s an inconsistency there, isn’t
there? I know you were looking for flexibility, and there were
people being made redundant to achieve that, but, overall, the
figures have increased. So, I wondered if you could just explain
why the staffing increase was necessary and whether you feel that,
if you go on now using managed redundancies to meet certain
criteria, that is sustainable. Would it, perhaps, be better to
consider that, instead of making people redundant, they’re
retrained and redeployed to fill the vacancies—that do have
to be filled, and I think we all accept that? It’s bringing
those two things together, looking at the consequences and the
reasons for them.
|
[221]
Sir
Derek Jones: I think the two
things are reconciled in a phrase, by ‘skills mix’.
Perhaps I should start at the beginning. I’m watching and
managing staff numbers very, very carefully at the moment;
financial pressures are such that I have no option. I therefore
know the latest figures I have from August this year—staff
numbers, 5,188. The forecast for the end of the year will be lower
than that—probably about 120 lower—at 5,118.
That’s around about 1,000 fewer civil servants than were in
the organisation at the start of the last Assembly when there was a
large merger actually, a major merger process of outside bodies.
So, the first point I want to make is that, although you’ll
see differences between years, the overall trend is a
reduction.
|
[222]
In
recent years, and since I’ve been in this post, I’ve
had to balance two quite difficult requirements: one is to meet
budgets and control costs, but the other is to have the skills and
capabilities in the organisation that Ministers required. When I
arrived, I did have quite a lot of feedback from Ministers to the
effect that they saw skills gaps and there were one or two very
obvious pinch points—the legislative programme in particular,
given the lack of drafting lawyers and other legal services. And
there were other areas where recruitment was necessary to bring in
specific skills: lawyers, I’ve mentioned; planners;
business-facing people with commercial skills; procurement skills;
translation skills. Now, those are all areas where it’s
unlikely to be possible to upskill within the organisation. So, for
that reason, I’ve been having to—. Actually, Peter
hasn’t dug me in the ribs; I think they’re probably not
redundancy cases, but they’re voluntary exits in order to
both keep costs down but also create some headroom for the kind of
recruitment that will be needed.
|
[223]
It
hasn’t been a perfect operation and, in the last couple of
years, there was some growth that I had not planned and targeted,
so I’ve needed to put a stop to that, which is why
you’ll see, if—. I hesitate to offer to write to you. I
don’t think I need to, because I’m pretty confident
about the figures; they will be really low this year. I don’t
have any plans for further voluntary severance, but I can’t
absolutely rule it out. Difficult decisions are going to be taken
across the Government, I’m sure, in the light of the spending
review announcement at the end of November. I’ll have to see
what kind of budget Ministers can afford for the
administration.
|
[224]
Sandy
Mewies: So, really, what
you’re saying is that you’re looking for flexibility,
but, in fact, the policies and the strategies that you’ve
been using over years, and will continue to use, are also flexible
because of the oversight that you are keeping of the position and
the new skills that are needed for the future.
|
[225]
Sir
Derek Jones: Yes. I won’t
be let off the hook at all within the organisation on reskilling
and upskilling where it’s possible—trade union side not
least, but generally speaking. As well as professional skills, we
do need a flexible and capable what we might call ‘general
civil service cadre’ that can adapt to new responsibilities,
and we have a training and development plan in place. I mentioned
briefly the ‘Preparing for the Future’ programme that
I’ve introduced, because all of these pressures are really
going to be quite a challenge, but one of the work streams is on
leadership and capability, and that will be looking at,
‘Well, what sort of skills do we need?’ We’re
building a Welsh treasury, for example, at the moment, and
that’s a new responsibility—some retraining, but some
recruitment is needed to staff that adequately.
|
[226]
Sandy
Mewies: And what sort of
discussions do you go through to identify, for example, under the
‘Preparing for the Future’ exercise, which director
generals were retained, and what severance terms were
agreed?
|
[227]
Sir
Derek Jones: I inherited a
director-general group of seven. Relatively early on as permanent
secretary I decided there was an economy that could be made in the
corporate services centre of the organisation, where there were two
director-general roles. I changed that so that there would just be
one director-general role for corporate services, and one DG post
was deleted from the organisation. Following that, the merged
corporate services was able to release a substantial amount of
resource from efficiency savings. I think it was 20 per cent of the
total £7 million of resource that was then released from the
corporate centre to some areas of front-line business that I knew
were under pressure. More recently, though, I felt that, although
the director-general arrangements were functional at six, they
probably weren’t absolutely optimal in terms of economy of
administration, and so, knowing the sort of pressures that were
ahead, I took a decision to reduce that to three roles. One is
director general for health and social services, and the other two
for all other services—economy and natural resources on the
one hand, and education and public services. For those three
departures, voluntary severance arrangements were necessary. I
thought very hard about the costs and the benefits, but I’m
very satisfied about the economy that will produce. The payback
period for the severance amounts is around about a year.
Peter’s saying less.
|
[228]
Mr
Kennedy: Ten
months.
|
[229]
Sir
Derek Jones: Ten months. So the
payback period on those particular posts is good. The saving, just
on those posts, over a five-year period, would be between £2
million and £3 million. But that’s just those posts. My
main ambition in making this change was further rationalisation
within the organisation as a whole. Every department, every
directorate-general would have its own services, its own operations
group, its own finance leads. By bringing them together, I can make
a significant economy. Just over the summer, we’ve released
from the new groups about £1.5 million of resource, again, to
go to priority areas. So, so far, the signs are
encouraging.
|
[230]
Sandy
Mewies: And has the senior
management restructure had an impact on gender balance, do you
know? Has that been considered?
|
[231]
Sir
Derek Jones: Well it has,
unfortunately, at director-general level. One female director
general was one of those that departed. I’m very conscious of
that. But director-general level is a very small group. If, as I
have been, I look at the senior civil service as a whole, which is
the main leadership group, the gender balance is 40 per cent, 43
per cent female.
|
[232]
Mr
Kennedy: It’s
currently at 44 per cent. The specific point—if that’s
okay, Derek—on the impact of the change, looking across the
SCS cadre is, oddly enough, it had a positive impact, going from
43.1 per cent to 46 per cent, but that’s really because one
female left and two men left. The overall piece has changed;
it’s increased to 44 per cent, but that’s as a
consequence of other changes not linked to the
restructuring.
|
[233]
Sir
Derek Jones: I’m not
comfortable with it, because at that level, it is noticeably three
blokes. There’s nothing I can do about that, but there are
other things that I can do. Actually, I’ve already made a
commitment for the senior civil service as a whole to reach 50:50
by 2020—that challenge. The DG group is the DG group, but the
governance of my organisation is the responsibility of its board.
That includes the three directors general, but also other staff and
non-executive directors, and the board is somewhere where I can
also look to improve gender balance. I think it’s currently
30 per cent.
|
[234]
Sandy
Mewies: Thank you.
Finally, Chair, if you’ll allow me, there was an increase in
sickness absence in 2014-15.
|
[235]
Sir
Derek Jones: There
was.
|
[236]
Sandy
Mewies: I know you do
staff surveys and other things, but what are you doing, what action
are you taking to identify the reasons and what are you doing about
it?
|
[237]
Sir
Derek Jones: I’m not
happy with the sickness levels in the organisation. I wasn’t
happy with them when they were about 7.2 per cent a year ago, and
it’s gone up to 7.9 per cent. I’m tracking it in-year,
and there’s one month where it’s gone up again.
It’s not easy to know quite what the explanation for this is,
and I don’t want to exaggerate it. It’s not a terrible
situation. The Chartered Institute of Personnel and Development
publishes a report on, amongst other things, sickness absence in
the public sector, and the benchmark figure that they’ve
published is 7.9 per cent, which is pretty much exactly where we
are. I know that we are about mid-table, looking across the civil
service as a whole as well, but I just don’t feel comfortable
with benchmark or mid-table on something like this. I think our
organisation is, generally speaking, a safe and good place in which
to work, and so I’m looking for top quartile, at least, on
this.
|
[238]
About
a year ago, Peter, I think, I asked for some steps to be taken; for
example, identifying which parts of the organisation had higher
than our average sickness rate, and asked the heads of those
divisions to report regularly. We’ve introduced some training
and development for managers. I think some of this should be
relatively straightforward: return to work interviews, phone calls
by managers when people are off sick. Since taking that action, as
I said, the committee won’t be amused to know, and neither am
I, that actually it looks as if the figures might have gone up a
bit. So, I’m really not satisfied and I’m going to be
pressing pretty hard on this.
|
[239]
The
final thing is it tends to be short-term sickness absence that is
susceptible to this kind of improvement, and one of the noticeable
things here is that long-term sickness has increased. Some of that
is actually very, very sad—people who are genuinely very,
very ill for a long time and sometimes don’t survive their
illness, but I don’t know why our long-term sickness figures
have increased at the moment, and we need to check them very
carefully.
|
[240]
There
is a view that what we’re seeing here are pressures of work
and staff pressures. That’s a view. There’s no evidence
of it, and I’m not currently buying that, because in my
experience some of the busiest and most hard-pressed teams have the
best morale and the lowest levels of sickness, if well managed. So,
I don’t think that it’s an easy equation between tight
staffing, high levels of work and high sickness, although, as I
say, some people would make that argument.
|
[241]
Darren
Millar: Thank you for
that. Julie Morgan, you want to come in.
|
[242]
Julie
Morgan: Yes. Going back to
some of the earlier questions that Sandy asked, how difficult is it
and has it been to balance the tight financial circumstances that
you referred to, and the ever-changing role of Welsh Government,
with the increased devolution and the Wales Bill coming on-stream
now? How do you actually work that out?
|
10:15
|
[243]
Sir
Derek Jones: It hasn’t
been easy and I’m not claiming to have worked it out
perfectly. And I’m not sure that we’ve yet managed the
most testing period. The next Wales Bill is proving a bit
controversial at the moment. But I think the best expectation is
that, sooner or later, that Bill or something like it will reach
the statute book and that will involve not only devolution of
financial responsibilities, which we already
have—tax-raising, for example—but also for other policy
and operational areas, such as devolution of large-scale energy
consenting, for example; devolution of responsibility for ports in
Wales; devolution of rail franchising. These are large, complex new
areas of business that we will have to manage—I think rather
more, if anything, than the ones that we’ve already taken on.
So, doing all of that—. And I’m also conscious
there’s an election coming next year, so there’ll be a
fresh programme for government, which is always a good challenge.
So, we’ll have a fresh programme for government, we’ll
have new responsibilities being devolved to the organisation and
we’ll have to manage those well in probably what will be a
shrinking budget. So, I think, you know, the next few years will be
pretty testing, which is why I’ve established the
‘Preparing for the Future’ programme.
|
[244]
But
I’m not at all daunted by that scenario, as long as we do
plan properly. The evidence is that this organisation, if we go
back to the beginning of devolution, has been able to manage an
absolutely transformational change from pre to post; it just
requires good, organised staff work.
|
[245]
Julie
Morgan: So, in terms of
the staff, you’re obviously setting up a treasury function.
Do you see yourself doing anything similar to that—another
sort of new field?
|
[246]
Sir
Derek Jones: In a lot of cases,
I think the new responsibilities will settle in reasonably
naturally and won’t necessarily require a formal programme.
The treasury was a bit different, so we do have a formal project
and programme management system, a senior responsible officer, a
programme manager, a panel and the Minister has an external
advisory group on tax matters, because making a good job of raising
the Welsh Government’s revenues is a big, complex and
important task. I don’t think every new devolved
responsibility will require the same heavy duty approach, but some
might; rail franchising might well require something
similar.
|
[247]
Julie
Morgan: Thank you, and to
go back to the staff and the staff survey that has taken place, you
say that performance improved in 22 out of 72 core questions
compared to the previous survey.
|
[248]
Sir
Derek Jones: I did, and
I’ve looked into this subsequently, not, unfortunately, in
time to change the drafting of the report. Twenty-two—.
We’re actually quite proud of the staff survey results in the
Welsh Government, which on 90 per cent of the questions that the
survey asks we benchmark better than the civil service average. The
same survey is done essentially around all the UK Government
departments. But I think a bit of public relations has crept into
the drafting here, because it’s true that 22 out of 72
questions went up, but as many went down.
|
[249]
Julie
Morgan: How many went
down?
|
[250]
Sir
Derek Jones: It was about the
same, and that, therefore, is not a balanced presentation. I will
take some credit for the next paragraph, however, which does flag
up that some areas went down and one of the ones that we were
worried about was skills and development. Actually, this is
pertinent to Sandy Mewies’s question to me earlier. The staff
don’t necessarily feel they’re getting the
opportunities for skills and development that they would want. So,
the report says that overall scores on learning and development
declined slightly on the previous year. They also went down on
‘Do you feel adequately paid?’ and ‘Do you feel
you have the time to carry out your work?’ Those sorts of
areas of questioning went backwards. Overall engagement is still
good, and so even where scores went backwards on the year, that
figure I mentioned, on 90 per cent of the indicators, there’s
a greater level of staff engagement in Welsh Government than in
most Government departments. Since it is a good story, I wish I had
presented that figure in a more balanced way.
|
[251]
Julie
Morgan: Well, thank you
for clearing that up. With the improvement, could you just tell us
a few of the areas that have improved?
|
[252]
Sir
Derek Jones: The one
that’s foremost in my mind is a curious one, because,
although, generally speaking, the engagement was also good, one of
the areas where we fell below the civil service benchmark was the
extent to which staff believed that we took action on the basis of
the survey results. So, I focused on that and tried to make
everybody understand that these good results didn’t just come
in and get filed, but that I and the management team paid attention
to what the results were telling us and took action on them, and
that was one of the big improvements in the scores. I think we have
notes on other areas that improved, Peter.
|
[253]
Darren
Millar: Do you publish the
findings of the survey?
|
[254]
Sir
Derek Jones: Yes.
|
[255]
Darren
Millar: They’re
available—
|
[256]
Sir
Derek Jones: It’s all up
on the website, and we do that along with all of the Whitehall
departments as well, so people can make comparisons.
|
[257]
Darren
Millar: Sorry, you wanted
to bring Peter Kennedy in.
|
[258]
Mr
Kennedy: Two areas that did
increase were learning and development and pay and reward. They
increased for us, but also we outperformed the civil service in
those two areas.
|
[259]
Sir
Derek Jones: No, learning and
development, Pete, declined slightly on the year; you’ll have
to come up with another.
|
[260]
Darren
Millar: I’m sure
that Members will take an interest in the published report. Did you
have any further questions, Julie?
|
[261]
Julie
Morgan: So, you’re
going to continue to act on the survey, then, so that you keep that
score up high.
|
[262]
Sir
Derek Jones: Yes. It will be
tough going in the light of everything that I’ve just been
talking about. I’m not at all complacent about getting good
feedback, but the baseline position is, I think, staff who feel
genuinely engaged, so that whey they come to work they’re not
just processing some paper or managing a grant scheme, but see the
connection between that and what matters in the world outside. And
I think that’s what tends to buoy the staff engagement
scores. But as they say in the financial health warnings, these
figures can go up and down.
|
[263]
Darren
Millar: Can I just ask, as
a follow-up to the questioning on the reorganisation within the
Welsh Government at the senior level with the directors
general—? One of the policies that is reported in your
accounts, on page 10, our page 125, says that
|
[264]
‘The
Constitutional Reform and Governance Act 2010, requires Civil
Service appointments to be made on merit on the basis of fair and
open competition.’
|
[265]
Can I
just ask you to confirm: were all of the new posts that were
created advertised? Were they advertised externally? How did you
ensure that there was fair and open competition? So, for example,
the new consolidated director general posts.
|
[266]
Sir
Derek Jones: No, they’re
not new posts in the sense that they’re better paid or
anything of that kind. There were six; it was going down to three.
A preference exercise was carried out; the three serving directors
general took up three of the—
|
[267]
Darren
Millar: Even though the
responsibilities were much wider?
|
[268]
Sir
Derek Jones: Yes. Well,
it’s a tough business, Chair, and you could argue that with
those greater responsibilities should come greater remuneration,
but I took the view that, to a degree, those jobs would be their
own reward.
|
[269]
Darren
Millar: I don’t have
an issue with the same level of pay; those individuals might. The
point I’m making is: was there fair and open competition for
those new, much wider posts, given the significant differences
between them and the previous posts?
|
[270]
Sir
Derek Jones: It wasn’t
necessary. The free and fair and open competition is for entry to
the service, and so, within the service, it may be that the best
thing to do is to have an open competition; it may be best to have
an internal competition, or, as in this case, close to a redundancy
situation, to match people to roles. So, it isn’t a case of
people joining the service, and it isn’t essential to have an
open competition.
|
[271]
Darren
Millar: If there’d
been a change in the pay rate, would there have had to be an open
competition then?
|
[272]
Sir
Derek Jones: Peter will help
me, but, I think, not necessarily.
|
[273]
Darren
Millar: Some people will
find it a bit odd that this was an internal exercise, rather than
an advert out for other individuals to take an interest in these
two new posts.
|
[274]
Mr
Kennedy: The range of
responsibilities are different for the—
|
[275]
Darren
Millar: Yes.
|
[276]
Mr
Kennedy: If I say the two
that remain—because there wasn’t an awful lot of change
on the DG health space, so there was a fairly obvious match, I
would suggest, into that role. When we looked at designing the new
structure, and we created the jobs themselves, and had them
evaluated, they fall within the senior civil service pay band 3
range, so there’s no question about advertising at a higher
salary. I suppose the only reason that we would consider doing that
is if they were fundamentally different, into a different sphere
altogether, and that we didn’t have the skills internally.
It’s a standard approach when we reconfigure—you reduce
by x number of posts, there’ll be a preference exercise with
the individuals at that level, and, hopefully, things match up. And
by ‘things match up’, I mean the individual’s
preference, their skillset and their ability to carry out the
activity.
|
[277]
Darren
Millar: So, can you just
clarify—? The Permanent Secretary has just suggested that
this fair and open competition is just for new posts, for entry
into the civil service, rather than posts that you want to
advertise just within it.
|
[278]
Mr
Kennedy: We’re
governed and audited externally on the Civil Service
Commission’s principles, which require entry into the civil
service to follow three principles—fairness, openness, and
appointment on merit. Whilst that isn’t applicable in the
same way internally, we do follow the same fairness and merit
arrangements, but, when you’re going through a restructuring,
to go from six to three, we do match people into posts if
there’s no requirement to compete. And a requirement to
compete would come about—. Going from six to three, on one
level, is easy, if everybody’s preference lines up, and the
skills mix remaining is appropriate; if it doesn’t, or if it
didn’t, say three hadn’t decided that they would accept
an exit, then we would have run a limited competition for the posts
remaining.
|
[279]
Darren
Millar: But not
externally.
|
[280]
Mr
Kennedy: Not necessarily
externally.
|
[281]
Sir
Derek Jones: There are plenty
of external competitions that are arranged, even where it
isn’t absolutely necessary according to the civil service
code, but where it just makes good business sense. So, if
you’re after skills that you don’t think are readily
available in the organisation, open competition is the way to
go.
|
[282]
Darren
Millar: Okay. Jenny, was
it on this issue?
|
[283]
Jenny
Rathbone: No, it was on
another issue.
|
[284]
Darren
Millar: Okay, go on, bring
it in.
|
[285]
Jenny
Rathbone: On page 59 of your
report, you’ve listed a number of minor subsidiaries for
which no trading results are disclosed in these consolidated
accounts. Now, some of them I know, some of them I don’t
know. Are their accounts available separately? Some of them
I’ve found—Hybu Cig Cymru accounts for 2013. Do they,
every year, each of these separate companies—
|
[286]
Sir
Derek Jones: Yes. They’re
companies, so they file their accounts.
|
[287]
Jenny
Rathbone: Okay. The Welsh
Government Transport Company—what do they do? I looked them
up, and it just said ‘nothing available’; it just told
me they were in Treforest.
|
[288]
Sir
Derek Jones: It’s a very
new set-up, in order to, as far as we can, assess the best way to
deal with rail franchising, in particular. And so, that’s a
company where my staff are the directors.
|
[289]
Jenny
Rathbone: Okay. And are all
of these subsidiaries set up because they have the potential to be
trading? Obviously, Hybu Cig Cymru does.
|
[290]
Sir
Derek Jones: We haven’t
come on to arm’s-length bodies, generally, and I’m not
sure there’s time. It’s quite difficult territory to
make a decision about, with a particular piece of
business—what is the best way to manage it, should it be done
entirely internally, should it be done through a contract with an
external company, say, or something else? In this case, the
decision is a transport company. Hybu Cig Cymru, as you say,
trades. So, there’ll be different answers according to
different business needs. The reason I describe it as tricky
territory is because you have to decide what the governance
arrangements should be for custody of public money through
different chains of management and accountability. I know this is
something the committee, and the audit office, indeed, have been
thinking about as well, and so have we, because we’ll
probably need to be doing more of this kind of thing in future. But
every time we do, it seems to raise a new question of
accountability.
|
10:30
|
[291]
Jenny
Rathbone: Okay, it’s
something we might come back to.
|
[292]
Darren
Millar: Can I just ask,
while we’re on this particular subject—? Career Choices
Dewis Gyrfa Ltd is listed, including their financial performance.
They’ve suffered a significant loss in the year, according to
the accounts, and their share capital and reserves have changed
significantly within the year as well. Could you just give us a
couple of lines on what has caused that—anything in
particular?
|
[293]
Sir
Derek Jones: This is also a new
set-up—. We don’t know off hand, Chair.
|
[294]
Darren
Millar: Okay, perhaps if
you can send a copy of their accounts to us, if they’re
available.
|
[295]
Just
one final area, then. Paragraph 57 of the report, on page 23,
refers to an increase in the number of cases under review by the
counter-fraud service within the Welsh Government. Obviously,
people reading that will be, perhaps, a little alarmed to read that
there has been an increase in the number of cases under review. It
says that some of them are long-standing investigations and some
are new referrals. Can you just provide an explanation—how
many cases are we talking about? What’s the potential value
of those cases? Where are they at? How many are being referred to
the police?
|
[296]
Sir
Derek Jones: Eighteen—
|
[297]
Darren
Millar: Eighteen
cases.
|
[298]
Sir
Derek Jones: —cases of
suspected fraud. Can I say, first of all, that this is fraud, or
suspected fraud, perpetrated against the Welsh Government, not from
within it, just in case there’s any doubt about that? Fraud
hasn’t been a major problem for the organisation over the
years, and again, to give myself some perspective, looking at this,
18 is actually only 0.3 per cent of the organisations that we fund.
But, it’s clearly, you know, worrying and very problematic
when it happens. We have a good counter-fraud unit in the
organisation headed by a former police officer, but they are under
some pressure, and it’s not because there’s a great
deal more fraud coming our way, but these are some rather
complicated cases.
|
[299]
Of the
18, nine are in a particular area which I’d rather not
mention, if you wouldn’t mind, Chair. And, it’s the
evidential requirements for pursuing these possible frauds
that’s putting some strain on our counter-fraud unit. So,
we’ve had to take some steps to support them, and the
internal audit, I think, is making some staff available, David, to
help counter fraud. We’ve also carried out a training
programme to equip more people with the kind of understanding and
skills they need to take part in a counter-fraud investigation. So,
it’s not a huge problem; there are some pressures at the
moment on administration, but I think we’re dealing with
them.
|
[300]
Darren
Millar: So, just so that
we can compare, as a committee, how many cases were there in the
last financial year? You say you’ve got 18 at the
moment—how many were there last year?
|
[301]
Sir
Derek Jones: I think it was
about half that number.
|
[302]
Darren
Millar: That’s a
significant increase, isn’t it?
|
[303]
Sir
Derek Jones: And, I think,
probably, in one particular area.
|
[304]
Darren
Millar: When you say
‘area’—geographical area or area of
business?
|
[305]
Sir
Derek Jones: A bit of both,
actually.
|
[306]
Darren
Millar: Right. Okay. Can I
ask one final question? I’ll bring other Members in.
I’m alarmed to hear that there’s been such a
significant increase, and specifically if it’s tied to a
particular area of business or, potentially, a specific
geographical area. But, can you tell me what the value, the
potential value, of this fraud may or may not be? What’s your
upper estimate of the potential total—
|
[307]
Sir
Derek Jones: I
don’t—.
|
[308]
Darren
Millar: —loss to the
taxpayer? I mean, are we talking millions? Tens of thousands,
hundreds of pounds—what are we talking about?
|
[309]
Mr
Richards: It’s
potentially millions, Chair. But, it’s also potentially a
very, very small amount. It depends hugely upon how police
investigations progress, and the extent to which the police then
decide, with the Crown Prosecution Service, whether they’re
going to proceed to a prosecution. Then, the separate thing is, how
much of a potential loss the police decide they actually want to go
after, because sometimes the police will decide they will simply
prosecute on the basis of an amount of money where they’re
confident they can get a successful prosecution, rather than the
amount of money. So, it’s a very difficult area to forecast,
I’m afraid.
|
[310]
Sir
Derek Jones: These are suspect
cases. They’re not losses, Chair, and up to a point, I
suppose I’ve got to say that we need to make it as difficult
as possible for anybody to try to defraud the Welsh Government,
but, ultimately, we can’t stop people trying. What I think we
do quite successfully is prevent them. I do recall, actually, our
counter-fraud unit being given some compliments by a judge in a
court case recently, where the work that had been done in my
organisation had been very effective in dealing with an attempted
fraud. So: very watchful, not a huge problem, but on guard, I
think, at all times. Again, in terms of grants management and
training and development: good procedures and good practices that
close down opportunities for fraud.
|
[311]
Darren
Millar: But you’re
satisfied that the counter-fraud service, as you’ve said, has
got the capacity to be able to deal with the work that’s on
its plate. If its workload has doubled, which is the impression we
have, then don’t you need to be appointing—?
|
[312]
Sir
Derek Jones: I think I said we
had recognised that they were under pressure—
|
[313]
Darren
Millar: You’re
giving them support from internal audit.
|
[314]
Sir
Derek Jones: —from the
evidential requirements. I’ve corresponded, actually, with
South Wales Police on this, just to make sure that we’re well
aligned on these things. So, I think: alright for the moment, but
we’ve got our eye on it.
|
[315]
Darren
Millar: Okay, so,
you’re engaged with the police. All 18 cases, no doubt, have
been reported to the police. Jocelyn Davies, you wanted to come
in?
|
[316]
Jocelyn
Davies: I was going to ask
about the value, because I notice that you took some time to tell
us it was 0.3 per cent of the number of organisations, but, of
course, as we were talking earlier about aggregating grants
together, if it’s worth a lot of money, then it doesn’t
matter whether it’s one case. I can understand you’re
not able to tell us that at the moment, but perhaps we’ll
come back to this after, hopefully, successful court
proceedings.
|
[317]
Darren
Millar: On that note,
I’m afraid the clock has beaten us. If I can thank you, Sir
Derek, David Richards, Peter Kennedy and Gawain Evans, for your
attendance at the committee today. We’ll look forward to
receiving the copious notes that you’ve promised to provide
on different matters.
|
[318]
Sir
Derek Jones: Can I not go until
I respond to that, Chair?
|
[319]
Darren
Millar: Of
course.
|
[320]
Sir
Derek Jones: I have promised
the committee more notes than I think ideal. Really, it seems that,
on the accounts, there may be an inevitability in that. Normally,
at a session like this, I would hope that we would be sufficiently
well briefed to answer all of the committee’s questions, but
this is a massive and complex undertaking. As I said, I welcome the
opportunity to engage with the committee on the accounts.
We’re pretty well briefed, but there will be things where we
can’t, on the day, provide a detailed answer.
|
[321]
Darren
Millar: Perhaps I’m
not being as charitable as I ought to be. I do appreciate your
attendance; we really appreciate the offer to send us further
information, as well, and we’re very grateful for the answers
that you provided to the committee when we’ve been
challenging on some of these issues. You’ll be sent a copy of
the transcript of today’s proceedings. If there are any
inaccuracies in that transcript, please let the clerks know and
we’ll ensure that those records are amended. Thank you very
much indeed.
|
[322]
Sir
Derek Jones: Thank you,
Chair.
|
10:38
|
Cwrdd â’r Heriau Ariannol sy’n
Wynebu Llywodraeth Leol yng Nghymru: Gohebiaeth y Pwyllgor
Meeting the Financial Challenges Facing Local Government in Wales:
Committee Correspondence
|
[323]
Darren
Millar: Moving
on, then, to item 4: meeting the financial challenges facing local
government in Wales. We’ve had a further response from the
Welsh Government—from the new accounting officer, Owen
Evans—in relation to our further correspondence with the
Welsh Government on facing financial challenges. Can I take it that
that is noted? We’ve got a commentary, as well, to note from
the auditor general.
|
[324]
Mike
Hedges: May
I just make a brief point on reserves? General reserves are
straightforward. Other reserves—. I know Swansea council, for
example, has a building-repair fund, which it draws down from to
fund the repair of buildings. I also know that when road
improvements take place, there are compensation payments being made
and, obviously, the money is put into reserves. Whether it would
help if local government provided the sort of level of detail that
I used to get on exactly what each reserve is there for and how it
is intended to spend it over a period of time—. I’m yet
to see a local authority that doesn’t have an ICT replacement
fund, and, if there is, it’s going to have a big bill
sometime in the near future. So, I think that, for the Welsh
Government to understand the position of reserves and how
they’re used, I think it would be helpful if they asked local
authorities to provide that level of detail. I don’t know
whether the auditor general agrees.
|
[325]
Mr
Thomas: I
entirely agree. In fact, the recommendations we made in the
original study were that the local councillors need to understand
why reserves are written in and to be comfortable with
that.
|
[326]
Darren
Millar: I think, again, to
be fair to the Welsh Government, it’s a much better quality
of response than we’ve had previously in terms of some of the
issues that we’ve been raising with them. So, we’re
unlikely, I think, to revisit this particular subject probably
before the end of the Assembly term, but at least it’s on a
better note that we leave it.
|
[327]
Jocelyn
Davies: Have we come
across Owen Evans before?
|
[328]
Mr
Thomas: Education.
|
[329]
Darren
Millar: Yes.
|
[330]
Mr
Thomas: I think he
appeared before us—
|
[331]
Jocelyn
Davies: Deputy Permanent
Secretary.
|
[332]
Darren
Millar: Yes. He came in to
give us evidence on teachers’ absence. I’m not sure if
you were here at that particular time, Jocelyn, sitting on the
committee.
|
[333]
Jocelyn
Davies: Yes. I
didn’t know—Deputy Permanent Secretary; I didn’t
know—
|
[334]
Darren
Millar: Yes, there are two
deputy—three deputy permanent secretaries—
|
[335]
Mr
Thomas: They’ve
retitled ‘director-general’ as ‘deputy permanent
secretary’.
|
[336]
Jocelyn
Davies: Ah, right,
okay.
|
[337]
Darren
Millar: This is part of
what we were exploring.
|
[338]
Jocelyn
Davies: So, that’s
what they’re called now—deputy permanent
secretaries.
|
[339]
Darren
Millar: Yes.
|
[340]
Jocelyn
Davies: Right, okay.
That’s fine.
|
10:41
|
Ymateb i Ddiwygio Lles yng Nghymru: Llythyr gan
Archwilydd Cyffredinol Cymru
Responding to Welfare Reform in Wales: Letter from the Auditor
General for Wales
|
[341]
Darren
Millar: Item 5: responding
to welfare reform in Wales. Again, we had the Welsh
Government’s response in our papers last week. We’ve
got a commentary now, from the auditor general, on that response.
There are some issues that the auditor general is suggesting we
follow up in correspondence with the Welsh Government. Can I
suggest that we take this forward? Are Members content? Yes, okay.
Excellent. We’ll do that.
|
Cynnig o dan Reol Sefydlog 17.42 i Benderfynu
Gwahardd y Cyhoedd o’r Cyfarfod
Motion under Standing Order 17.42 to Resolve to Exclude the Public
from the Meeting
|
Cynnig:
|
Motion:
|
bod y pwyllgor yn
penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â
Rheol Sefydlog 17.42(vi).
|
that the committee
resolves to exclude the public from the remainder of the meeting in
accordance with Standing Order 17.42(vi).
|
Cynigiwyd y cynnig.
|
Motion
moved.
|
[342]
Darren Millar: Item 6, then. I’ll move the motion under
Standing Order 17.42 to resolve to exclude the public from the
remainder of our meeting and for items 1 and 2 of our meeting on 6
October. Does any Member object?
|
[343]
Mr Thomas: On the sixth.
|
[344]
Darren Millar: On 12 October. My notes are incorrect. On 12
October. Does any Member object? There are no objections, so
we’ll move into private session.
|
Derbyniwyd y cynnig.
Motion agreed.
|
|
Daeth rhan gyhoeddus y cyfarfod i ben am
10:42.
The public part of the meeting ended at 10:42.
|
|
|
|