Cynulliad Cenedlaethol Cymru

Yn ôl i Chwilio

Y Pwyllgor Cyllid

Finance Committee

05/07/2018

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

David Rees AC
Jane Hutt AC
Mark Reckless AC
Mike Hedges AC
Neil Hamilton AC
Simon Thomas AC Cadeirydd y Pwyllgor
Committee Chair

Y rhai eraill a oedd yn bresennol

Others in Attendance

Alison Gerrard Aelod o'r Bwrdd, Swyddfa Archwilio Cymru
Board Member, Wales Audit Office
Huw Vaughan Thomas Archwilydd Cyffredinol Cymru, Swyddfa Archwilio Cymru
Auditor General for Wales, Wales Audit Office
Martin Peters Pennaeth Cyfraith a Moeseg, Swyddfa Archwilio Cymru
Head of Law and Ethics, Wales Audit Office
Matthew Hockridge Pennaeth Cynllunio ac Adrodd, Swyddfa Archwilio Cymru
Head of Planning and Reporting, Wales Audit Office
Steve O'Donoghue Cyfarwyddwr Cyllid, Swyddfa Archwilio Cymru
Director of Finance, Wales Audit Office

Swyddogion Cynulliad Cenedlaethol Cymru a oedd yn bresennol

National Assembly for Wales Officials in Attendance

Ben Harris Cynghorydd Cyfreithiol
Legal Adviser
Bethan Davies Clerc
Clerk
Georgina Owen Dirprwy Glerc
Deputy Clerk
Owen Holzinger Ymchwilydd
Researcher

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Dechreuodd y cyfarfod am 09:15.

The meeting began at 09:15.

2. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
2. Introductions, apologies, substitutions and declarations of interest

Bore da. Croeso mawr i chi i gyfarfod o'r Pwyllgor Cyllid. Croeso i Archwilydd Cyffredinol Cymru ac aelodau’r bwrdd a staff. Byddem ni’n gofyn mewn eiliad i chi ddatgan eich enwau a chyfrifoldebau jest ar gyfer y Cofnod. Ond, mae gennyf hefyd gais gan y swyddogion technegol yma. Os oes gennych chi ffôn symudol gyda chi, a wnewch chi ei roi ar airplane? Rŷm ni’n hedfan y bore yma, fel maen nhw’n ei ddweud. A wnewch chi ei roi ar airplane mode, os yn bosib, os gwelwch yn dda? Mae’n debyg ein bod ni’n dioddef o ryw ymyrraeth dechnegol o bryd i’w gilydd. Ond, cais fynna.

Good morning. A warm welcome to this meeting of the Finance Committee I welcome the Auditor General for Wales and members of the board and staff. I'll be asking you, in a moment, just to state your names and roles for the Record. But, I also have a request from the technical officers here. If you have any mobile phones, could you put them on airplane mode, please, if possible? Apparently, we have some technical interference from time to time. That's a request, there.

4. Adroddiad Blynyddol a Chyfrifon Swyddfa Archwilio Cymru ac Archwilydd Cyffredinol Cymru ar gyfer 2017-18 a Chynllun Blynyddol ar gyfer 2018-19: Sesiwn dystiolaeth
4. Wales Audit Office and the Auditor General for Wales's Annual Report and Accounts 2017-18 and Annual Plan for 2018-19: Evidence session

Os caf i ddechrau gyda’r archwilydd cyffredinol a jest gofyn i chi ddatgan enw a phawb arall, wedyn. Diolch yn fawr.

If I could start with the auditor general and ask you to just state your name and then everyone else. Thank you.

Huw Vaughan Thomas, Archwilydd Cyffredinol Cymru. Mae'n ddrwg gennyf, mae'n rhaid imi gadw'r ffôn arno, oherwydd mae fy offeryn clyw'n gysylltiedig â fo.

Huw Vaughan Thomas, Auditor General for Wales. I apologise, but I have to keep my phone on, because my hearing aid is attached to it.

Dyna pam ddywedais i 'os yn bosib', wrth gwrs.

That's why I asked only if it's possible, of course.

Alison Gerrard, non-executive member and chair of the audit committee.

Bore da. Steve O’Donoghue, director of finance and human resources.

Bore da. Matthew Hockridge, head of planning and reporting.

Diolch yn fawr i chi ac, os cawn ni, diolch yn fawr am yr adroddiad arferol. Fel arfer, byddem ni’n gwneud hyn, wrth gwrs, yn yr hydref pan fyddwn ni’n gweld y cyfrifon a phopeth gyda’i gilydd, ond, erbyn hynny, byddwch chithau wedi mynd fel yr archwilydd cyffredinol. Felly, rŷm ni’n croesawu’r cyfle i holi am yr adroddiad nawr.

Byddwn i jest eisiau holi, i ddechrau—. Mae’r adroddiad yn sôn am flaenoriaethau strategol newydd. A ydych chi mewn sefyllfa i amlinellu beth yw’r rheini, yn eich barn chi, ac ym mha ffordd y byddech chi’n barnu eich bod chi wedi cyrraedd y blaenoriaethau newydd ai peidio?

Thank you very much, and thank you very much for the usual report. Usually, we'd be doing this in the autumn when we see the accounts and everything together, but, by that time, you will have gone, as auditor general. So, we welcome the opportunity to ask you about the report now.

I'd just like to ask, at the outset—. The report talks about new strategic priorities. Could you outline what those are, in your opinion, and in what way you think that you've met those new strategic priorities or not?

Yn gyntaf, rydw i’n credu bod yn rhaid imi gyfeirio nôl a hoffwn i jest danlinellu rhai pethau sydd wedi digwydd dros y cyfnod, os caf i. Mae gennych chi nawr adroddiad o gyfrifon Swyddfa Archwilio Cymru, sydd yn llawer iawn mwy manwl na’r rheini ddaru i mi eu hetifeddu. Felly, mae’n gadael chi i weld beth yw ein blaenoriaethau ni a ble rŷm ni’n mynd. Rŷm ni wedi derbyn cymeradwyaeth genedlaethol o ran safon ein cyfrifon.

Y peth yw, mae’n rhaid i ni, bob blwyddyn, edrych i weld beth yw ein blaenoriaethau ni ac os oes rhaid newid. Rŷm ni eu gwneud nhw dros gyfnod o dair blynedd, yn edrych ar bethau strategol ac yn dod â nhw, yn flynyddol, i mewn i’n cynllun ni, ac mae’r cynllun yna ger eich bron, hefyd. Matt?

First of all, I think I have to refer back and I'd like to just outline some things that have happened over the period, if I may. You now have a report of the accounts of the Wales Audit Office that is far more comprehensive than the ones I inherited. So, it allows you to see what our priorities are and where we're going. We have received national approval of the standard of our accounts.

The thing is, we have to annually look at what our priorities are and whether we need to change. We do that over a period of three years. We look at strategic things and we bring them, annually, into the plan, and that plan is also in front of you. Matt?

In terms of our strategic priorities, the priorities we reported against in this annual report and accounts 2017-18, we provided some detailed information about how we progressed against those priorities in the appendix to the annual report and accounts. In the annual plan, then, you've got the updated version of those priorities. So, we review the priorities on an annual basis, and they also appear at the front of the annual report and accounts as an indication of where we're going now.

So, in terms of the 2017-18 plan, yes, we feel that we've made good progress against those priorities, as outlined in the appendix. In terms of 2018-19, the current plan, I wouldn't say we've completed any of the priorities yet, but we're making good progress against them so far.

And, more generally, the indicators, you've achieved 22 of the 35. I think last time around it was 24 of the 35. It's not a huge difference, but a couple of them look a bit like outliers, particularly the one on staff satisfaction with how their performance has been evaluated. Is there a particular reason for that, do you feel, or is that just a blip? What explains the one or two examples like that?

With the staff ones, we changed the basis under which we were measuring them. In prior years, we developed our own, and there's always a challenge when you've got something that you can't compare with others. So, this year, we went for the civil service scheme, and therefore have adapted the civil service answers to our own. And I think, basically, we've got comparators on that one. On 'their performance evaluated fairly', 81 per cent agreed with the statement in the civil service one; 13 per cent said 'neither agree nor disagree'. But that response was 16 per cent higher than the civil service average and 11 per cent higher than what the civil service will regard as their upper quartile. So, we are performing well, and I think, therefore, we've got a more realistic measure than we had previously.

09:20

I think, Chair, if I can add to that, we recognise that there's a degree of dissatisfaction around our annual appraisal process, so we're currently looking at switching to an ongoing process through the year and we'd certainly hope then to be able to improve that indicator further.

If I can add one more thing, the key difference is that, previously, we measured this indicator more on an exception basis, by staff reporting as part of the performance appraisal process. We didn't feel that that was the best way of measuring it. A better way is through an anonymous survey, so we asked the question—. This year, we undertook a staff survey in complete alignment with the civil service people survey, and that question was in the survey completely anonymously. It was expected that the percentage would change a little bit, but, as Huw said, it does benchmark very well. However, we are looking to improve performance in that area.

Would it be fair to assume that you now have, to a certain extent, a new baseline for comparison for the future?

And just to confirm, you said that all the questions you're asking, in that regard, of staff are aligned with the civil service—

Entirely. We use the entire core baseline questionnaire that's used in the civil service. We also added a few Wales Audit Office-specific questions. The performance appraisal process we will be looking at in our recently published people's strategy—it's one of the key areas in our people's strategy that we will be looking at—we're constantly looking at updating and improving that.

If I could particularly ask of the board: you had the effectiveness review, so are you able to update us on how that is being implemented and what milestones you're looking at to see achieved?

The review was actually undertaken not last year, but the year before. 

It was actually just before I was a board member, but I understand there were just a couple of outstanding actions, one of which was about making sure that board member appraisals were properly undertaken, which is now completed, and also making sure that our board discussions had a strategic focus. Quite recently, we've actually been piloting a new approach to our board agendas to make sure that we give sufficient time to really focus on a big strategic matter. I think, so far, it's been successful, but obviously we'll continue to look at how our board agendas work just to make sure that we are properly looking at things, not just on the surface, but really getting under the skin of particular items and giving ourselves time to really do that properly.

And I think that, at the last session we had with you, you talked about an assurance map as one of the tools that the board was using. Can you tell us a little more about how that might have been utilised by the board in particular, particularly for, perhaps, challenge purposes as well?

Yes, of course. Because I was chair of the audit and risk committee and I've got an NHS background, assurance mapping was obviously a key issue within the NHS, particularly making sure that we've got assurance across all the objectives. Really, it was something that I thought we could probably make some good use of within the Wales Audit Office as well. It's very much a tool; it's not something that's published and is glossy—it's a tool that we use proactively. We use it at our audit committee in terms of making sure that we are also deep-diving in particular areas where we think we need to actually have a look whether we've got full assurance.

Also, the board looks at it to determine its agenda to make sure that we are giving all aspects, aligned to risk, of where we need to focus on. And also, for this coming year, our internal audit programme now is also aligned to making sure that, where we need more independent assurance, that's also built into a key part of the internal audit programme, going forward. But it's very much a working document, a working tool, which we see as something live rather than a glossy, published document.

09:25

The structure of the assurance map is set out on page 60 of the annual report and accounts in terms of headings, but each of those has three levels of assurance in order to actually allow the audit and risk committee, in the first instance, to decide exactly how well risks are being controlled and performance measured. As Alison said, periodically the audit and risk committee does deep dive into a particular area. The assurance map is a tool that we've been also recommending to other audited bodies.

Excellent. You do get a brownie point for a non-Brexit use of 'deep dive'. [Laughter.]

I would happily welcome an alternative phrase. 

I shan't be asking either about Brexit or about deep dives. Can I say, the elected employee members' terms of reference, there seems to have been some change to those and I wonder if you could explain the thinking behind that? I understand it relates to the remuneration HR committee's self-assessment, and follows that.

I can pick up that one. I think there might be a misreading of what's included. It's on page 61. The committee's terms of reference have changed, rather than the employee board members' roles. What the committee came to the view of during the year was that—as part of our simplifying the arrangements that we have for governance and the way we work and the way we empower people through the organisation to make decisions and deliver what's needed—the board, from the top down, simplified its scheme of delegation and then, through to management level, simplified the arrangements for the management committee's operation, through to the schemes of delegation to budget managers, and, indeed, the financial management handbook was simplified as well.

The remuneration committee felt that it could move from the position of approving every single HR policy change to one of just considering novel and contentious changes to policies, which makes a lot of sense in terms of the committee's workload, and again freeing up the organisation to just crack on with more simple changes. But, as part of that, the committee realised that the elected member—or the employee member—was excluded from a lot of the discussions the committee was having due to conflicts of interest. The committee wanted to be clearer that it was only where there's a direct conflict of interest that the employee member would be excluded from the discussions, and that means that the employees' voice will be heard a lot more in future meetings. 

Following the self-assessment, guidance was apparently required to ensure the committee's assurance role was not undermined. I wonder why that was and if there have been any instances where perhaps that role may have been undermined previously.

It was linked to some of the discussions that were had around the voluntary exit scheme that we ran at the end of last year, in accordance with good practice. In fact, one of the auditor general's own reports said that any exit payments above £95,000 should quite rightly get considerable scrutiny. Those went through the committee, but because we weren't expecting to receive exit applications above that value, a committee meeting hadn't been scheduled. So, a lot of the discussion happened outside of a formal meeting through correspondence and telephone calls. I think the committee quite rightly said, 'We need to rethink that for the future.' The committee is now undergoing a post-project learning exercise, taking views from staff through to management through to the committee's own views, and we'll build that into any future schemes we run.

Rather than the voluntary exit scheme you describe with payments including above £95,000, was any consideration given to compulsory redundancies or perhaps a tougher assessment of people in the organisation as to whether they're performing at the necessary level for every job in order to reduce size in that way without recourse to such large payments to persuade people to leave?

I'd say we have very robust arrangements in place for performance management and I touched on those earlier. At the moment, it's an annual performance appraisal, with discussions through the year. We want to change that to make sure that issues are picked up early, where there are issues. We've got good relationships with our trade unions, where we agree changes to policies, such as with capability and disciplinary. I would say that in the majority of cases we've got high-performing, talented staff, and non-performance is a very low issue in the organisation.

09:30

Perhaps I ought to just explain the two departures that were agreed at £95,000 plus. In the case of one of these, we agreed the departure of one of our directors. We have not replaced that director's post. Rather, we have distributed the work. He was a financial audit director. We redistributed the work around the organisation, including the two directors who previously—including Steve—were regarded as corporate services directors, so that there is a wider spread of directors engaged in audit works. We were able to do that, and that is, if you like, why we were able to get a payback period—a very short one on that.

In the case of the other director—sorry, it wasn't another director; it was a senior manager—we agreed to that departure because we had run short of Welsh-speaking senior managers, and we will be replacing with a particular requirement 

bod y Gymraeg yn hanfodol. 

that Welsh is essential.

With my departure, we have, over the last three years, seriously reduced the number of Welsh speakers at a senior level, and we do need it to interface with some of our councils.  

So, to clarify: you've paid over £95,000 to one manager to persuade them to leave, so you can replace this presumably non-Welsh speaker with someone who speaks Welsh.

We agreed somebody's request for voluntary early retirement. The payment was within the civil service terms. But the reason that we agreed to that was to allow us to effectively perform, because we were getting criticism from some of our local councils. So, that was the basis on which that person was agreed.

Finally from me: your strategic risk profile includes one risk I think that is described a 'severe' impact, potentially, and another as a potential 'major' impact. I wonder if you could clarify what those two risks are and what's being done to mitigate them.

Yes, certainly. I'm not sure of the order, but one relates to the fact that every year we are dependent on getting the cash to continue operations. The second relates to our diversity as an organisation.

Yes, the two are—. One is realise the benefits of a diverse workforce and the second one is about insufficient funds through fees and through the Wales consolidated fund. One of the things that we do at the audit and risk committee is actually look at some of these in more detail, to make sure that the controls are in place and are sufficient, and that we challenge management robustly, to make sure that these are mitigated as far as possible. We are looking continually, specifically, at these very high-risk areas. 

So, would one example of mitigation be this pay-off of over £95,000 to someone so as to bring in a Welsh speaker instead? Is that seen as increasing diversity, or is the Welsh language not related to the diversity target?

The two risks that we're most concerned about with diversity—and, obviously, you've got overall risk and you have within it—is, first of all, the representation of women in senior bands, the top four bands in the organisation, and also the representation of black and minority ethnic in our workforce. We are taking steps in terms of how we are tackling these through our people strategy, and those risks that are ahead of us is why we're needing to address the people strategy in that direction. But I would stress that we took advantage of somebody's desire to leave early to allow that person to leave early in order to improve our ability to interface with our audited bodies. 

So, in terms of—. One of our risks is articulated as the need to realise the benefit of having a more diverse workforce. In terms of mitigating action we're taking, in April 2018 we published our strategic equality plan on our website. If you look in there, objective 5—one of our strategic equality objectives—is focused specifically on taking a strategic approach to addressing our gender pay gap and other structural pay gaps. In terms of mitigating action, it's listed there. We'll review our recruitment and assessment approaches. We're going to advertise all management band and senior leadership team vacancies on an external basis. We're developing coaching and mentoring opportunities for all staff, including particularly aspiring managers and leaders, with a particular focus on under-represented groups and giving further consideration to other potential actions we can take. That's where the key mitigating actions for that risk are listed.

09:35

Could I just add to that, Chair? We've got a real tension in that there has to be the opportunity. So, we're taking all of these steps, but, at the same time, over the last three years, we've reduced senior posts by six posts in three years. So, those opportunities have been taken away. And quite rightly, we're under pressure from our audited bodies to be as efficient and cost-effective as we can be, and we've taken the opportunity to reduce our senior manager levels. Therefore, that loses the opportunity to promote others into those roles. 

Thank you. Just moving on with the issues around staff and workforce. Average sickness absence, actually, has increased in 2017-18 by a day, compared with the previous year. Are you aware of or are you able to comment on the factors that might reduce that figure in future?

Yes, and it's a pity we've slipped back to the Assembly average. Steve, do you want to—?

We certainly look at benchmark levels to see if there's anything we can learn from those and I engage with the other UK audit bodies regularly to share good practice around our arrangements. It was pleasing that our short-term absence had reduced last year from the year before. I think what we've identified there is the opportunity to promote flu jabs more, to tackle some of the flu instances that we've experienced, because there were higher levels of flu last year, and we do provide that through our staff benefits package.

In terms of long-term absences, there were a relatively few number of staff involved. We've looked to see if there's a pattern across them, in case it's one part of the business, but there is no pattern. What we have in there are examples of surgery and then recuperation. And I'll be honest, our driver is around supporting those staff to get well so that they're ready to come back to work, rather than trying to force them back early when they're not well enough, but it might help us hit our key performance indicator target.

And as I said to the committee before, we've got a range of measures in place to support staff—our employee assistance programme and our health screening that includes mental health assessment. We were delighted earlier this year to secure a bronze standard in the corporate health standard. We've signed the Time to Change pledge and we've introduced both mental health champions and a well-being officer role into our health and safety adviser's role. So, I feel we're doing all the best practice work that we can to support staff, but inevitably there are occasions when staff are unwell. 

In terms of sickness, the average is a very poor number in some respects, because a small organisation can be skewed—two people are involved in a car accident, they're off for several months, and you've increased your number of days sickness lost by one. That's something over which you had no control and the people concerned had no control. Have you thought, if you need to produce an average for comparison, whether it's worth looking at median and mode data in terms of sickness absences, so you can actually see what's the most likely length of time people are off with the mode and what is the normal length of time for people to be off? Otherwise, one heart attack, one cancer and a car accident, and all of a sudden you may have gone up by an average of two or three days, over which you have no control. 

Absolutely, and I remember you making the point when we were here back in November, and we looked at those alternatives. What adopting a different model would mean is a lack of comparability with others. So, when we looked at it, and dug in a bit further, we came to the view that the indicator matters less than what the indicator's telling us. And the indicator got us to look at the short-term absence levels, where we came to the view that they were around the benchmark level, and with the longer term absences whether there was a trend to be concerned around, and there wasn't.

The point I was trying to make was: the average is something you have to publish because you compare with others; the median and mode give some understanding of how you get to that average. I just ask you to give further consideration to whether publishing them alongside that might be helpful.

09:40

Okay, yes, we'll do that. 

I think I'm heartened by the fact that you talk about wider, for example, mental health and well-being measures that you're taking, as well as the physical surgery and physical health issues, which perhaps can come and go in terms of the impacts they would have on sickness absence. It's good to hear about that wider perspective.

The annual report also includes information about board member remuneration. We do note that the expenses for the chair have almost doubled compared with 2016-17. It's been a busy, hectic year, but I'm sure there's an explanation for this and the controls, obviously, that we need to have around these expenses.

It's been—. Well, I was going to say—[Inaudible.] We have actually, over the last year, been engaging more with the other audit offices in the UK and, inevitably, that means overnight stays in Belfast and Edinburgh in particular. I think that's useful because, whilst the auditor generals have attempted to meet fairly regularly, each organisation has a slightly different board structure, and I think we can learn from each other's to make improvements there. Certainly, Isobel came back from Scotland with a number of ideas that we are still working through. I think I'll just caution you. Her increase isn't quite the double. The doubling comes from the way in which the tax and national insurance impact on that as well, but it is an increase.

Yes, well, I think it's useful to clarify that point in terms of the particular circumstances, but clearly we need controls. We've already commented—you commented on the two approved exit packages for 2017-18, but we've got seven voluntary exits. I mean those two approved were for over £100,000, but I'm looking at the seven voluntary exits. Also, if you look at the average number of full-time equivalent staff, it's increased by three, compared to 2016-17. So, we've got to make sure we understand. You know, we've had a bit of a conversation about this in terms of diversity, Welsh language et cetera, but can you assure us that the voluntary exits agreed are for roles that the organisation can manage without and that new roles aren't being created that could either directly or indirectly replicate those roles subject to voluntary exit?

I can assure you in terms of the roles that, with the exception of the one that I talked about, we've always looked for payback in terms of the months before we can recover cost and add it to our overall savings target. You talked about the contrast between the numbers increasing and people being allowed to depart. We actually now have far more trainees than we've had in the past. We're moving, as I mentioned last year, into the apprenticeship areas. I recall you asked me in terms of apprentices about making sure that we reached out to the—shall I say non-usual market? We are doing that. We're aiming to get to the harder-to-reach people who wouldn't perhaps have considered careers in professional accountancy, and we are talking to an organisation, a charity, that does this particularly in relation to legal services, and they are moving into looking at making sure that they're going to [correction: at how they're going to] they're going to operate in Wales. So, we're talking to them about making sure that we can take advantage of their skills in reaching out and bringing in apprentices. I think it is a real challenge in the future.

It does mean a change of work pattern within the organisation because it isn't that apprentices and trainees come in and do the same as existing staff. Clearly, they contribute towards that, but we also want them to actually make us more effective and see whether we can get some of their work coming back to help us [correction: their working helping us] at an earlier stage. And we are looking at that as we come up this year to considering our future contracting strategy.

09:45

Thank you. I think just one good thing that we note in your report is the fact you've brought down the cost of the bought-in services by 10 per cent—research and consultancy. We discussed this last year, as far as we can understand, so how have you managed the reduction in terms of those bought-in services?

Well, thank you, but I think that might be misplaced thanks.

What it is is it's the second—. We have a two-year cycle for the national fraud initiative, and this is the second, or the low year, of the NFI, which—

Hopefully—[Inaudible.] Are we going to see any change in terms of the next benchmarking?

Yes. Sorry, the NFI is the national fraud initiative study. We take part in a two-year cycle with the other UK audit offices and other enforcement agencies. It is a whole series of data matching, which we have to buy in from—I forget which one; it's the Cabinet Office currently running it.

I, last year or certainly at some point during this last year, have raised issues about barriers to women progressing within the Wales Audit Office, and we have got the situation of a predominantly female workforce, but, in terms of directors, I think it's still only eight men and two women. You've already commented on diversity and what you're trying to do to address this, but I think, actually, there's less analysis of diversity in this plan than there was in the previous plan. So, can you update us? You've talked about a report being published in April, but we understand there's a report coming through in the summer. I think it's important that your annual account reporting does account for this crucial area, because it's still work to be done.

The strategic equality plan was published in April, so that's our four-year plan with our equality objectives. Each year, under the Equality Act and the associated Welsh regulations, we prepare an annual equality report, and we aim to publish that as soon as possible after our annual report and accounts. So, we intend to publish our equality report, which contains a full breakdown of our employment information by all protected characteristics, where appropriate, in terms of workforce diversity and structural pay gaps. That will be published, as I say, in October 2018. In the annual report and accounts for 2017-18, what we were finding previously was that we were duplicating what's in the equality report in the annual report and accounts, and, in the interest of streamlined reporting, we didn't want the same thing in two different reports, but it's our intention to report that as soon as possible after. So, hopefully, it gives you assurance that, if you have a look at our equality report that's coming up in October, then you'll get all the information you need.

Some of these staff changes as a result of the voluntary exits—is that going to have an impact on this sort of imbalance between the top and the rest of the organisation? Is there an opportunity there?

Shall I come in? I think there's no overnight fix here. What we've set out in our strategic equality plan is a medium to long-term commitment to improve the diversity. We've got our new auditor general starting in July, of course, and we'll be having discussions through the board with the new auditor general about his aspirations for diversity by the end of his tenure. Certainly, at our management committee strategic discussion last week we again focused on diversity and, as Huw said earlier, we flagged that our two priorities are around gender diversity and ethnicity diversity as well, and the need to take more action to change that.

And just to add, really, it is one of the areas where we, as I said, are really going to have to put some focus on the board, because we have got this obviously in-built dilemma, when there's low staff turnover, about how you particularly increase gender mix at senior management level. And, as I say, we described it as sort of a medium to long-term plan in terms of the actions, but how long are we, I guess, prepared to wait, and what is the medium to long term if there are no natural staff movements? And, on this, I guess it comes back, almost, to the Welsh language issue, about: would you be looking, potentially, for voluntary exits to speed those processes up? But there would obviously be a cost to that. So, that is something I think the board is going to have to take some significant discussion on if there isn't natural turnover in that medium term.

09:50

We have not, but we have prioritised talking to Chwarae Teg, and other organisations, to see what more we can do. I think we've set it out in the report around how we are relooking at job descriptions as well, because we've become aware that some of the terminology we use in our job descriptions might actually provide some bias around interest in applying for those roles. So, we wouldn't want to dissuade anyone from applying because of that language in how we describe the roles.

—looking at the Chwarae Teg Agile Nation and their latest benchmarking on fair work that, certainly, the Assembly Commission signed up to, the Welsh Government and lots of public and private sector bodies, because it is a way of supporting women in career development.

The point I was going to emphasise is that a particular problem is the senior manager and director bands. It's the top four in the organisation. I wouldn't say that, therefore, everything else is fine below that, because we need to encourage the continued flow-through, but we're balanced, except at those levels. And, of course, they are the levels that are so visible for the organisation.

Thank you. Well, that's progress. Just finally from me, I was just looking at the net resource outturn in your annual report. It's showing other costs as £174,000 higher than in your estimate for 2017-18. You say this is due to increased depreciation costs and staff conference. As you highlighted that, we just need to look at this staff cost and the staff conference—what specifically resulted in this being a higher level than estimated?

Thank you. I think it's worth noting that our spending in 2017-18 was £50,000 lower than it was the year before. And what your question's highlighted to me is perhaps a presentational change for our next year's accounts, because on the other cost line—

On the other cost line, we've got a built-in efficiency savings target there of £300,000, and, in reality, those savings are achieved across the other headings that you'll see in the table on page 89. So, we put the budget in one place for the savings target, but actually achieved those savings across all budget lines. 

The two elements that were higher than budgeted—as mentioned there, depreciation was higher just because of the particular capital assets that we purchased in the year. Those weren't all foreseen at the time that we laid the estimate, which is six months before the year starts.

And the staff conference, we moved away from our usual format of a one-day conference to split it over two days, and that was in response to staff feedback around the need to spend more time together. That's on the basis that we're an all-Wales organisation and it's very rare that all our staff are in one place at the same time. So, it proved a very cost-effective way to bring us all together, but it did exceed the budget that we'd set for it.

I can assure you it wasn't the costs of the Chair of this committee attending, or the Chair of the Public Accounts Committee attending, the staff conference. [Laughter.] But, Mark Reckless, you wanted to follow up.

Auditor general, you referred to allowing people to leave, and, Ms Gerrard, you referred to voluntary exit and said that there's obviously a cost to that, and then referred to a need to encourage flow-through, I think, of people. Surely—I mean, that's not generally the case in the private sector. Isn't there an issue that, in your organisation, and perhaps elsewhere in the public sector, there is a culture and an expectation of voluntary redundancy schemes with large pay-offs if people leave? Surely people can leave whenever they want, subject to their notice period, to go elsewhere, and the fact that they don't very often, and wait there until they get paid to leave, doesn't that raise issues as to value for money in the public sector?

The terms for compulsory and voluntary exit from the civil service are the same [correction: can be the same]. So, the difference is how you get to that route. And, we stick—. We have to honour the terms that the civil service sets for us so that it's not doing something separate.

I think in the private sector redundancy is sometimes used as a means of allowing the rebalancing of the workforce. The issue is the terms and those terms are not in my gift, but I hear your point.

09:55

But, surely, how many people you employ and at what level are under your control, and, if you're finding that you're not getting flow-through of people, doesn't that suggest that you're employing people at unnecessarily high levels and salaries if they never choose to leave your organisation and have natural flow-through that would allow you to make some of these changes without these big pay-offs?

Well, can I say, when I arrived eight years ago, the organisation had very little movement over a period of five years since its establishment? We've now had that movement. We've got people—. I talked about trainees. We clearly take advantage of other people departing, or particularly, sometimes, being, if I can use the word, 'poached' by other Government departments and the National Assembly and so on, which is all to the good, because it is allowing that movement. But sometimes there are people who do require persuasion to depart and voluntary early retirement is a way in which we can actually get that movement. It's certainly been a means by which we've been able to reduce the senior levels of the organisation.

Yes. Yes, it is. The director post is paid back within 14 months [correction: 16 months].

I threw my voice well then. [Laughter.] Audit fees for the year are £533,000 lower than outlined in your estimates. Why?

I think I can almost direct you to the external auditors' comments. We have to allocate work. It doesn't mean to say that we won't necessarily be charging out those fees, but they sometimes are not in the year that we need them or had allowed for them, initially. In some cases, of course, because of the way in which we have to estimate—for example, in the estimates you'll get, we estimate that we'll have such and such a level of fees coming in, but if we don't need to do that work, or it's cheaper, then there's less fee that comes in. I'd be more concerned if it was the other way around, that our fee income was greater, because there would be two: that we were bringing work forward into year that actually ought to be somewhere else, and, secondly, why are we charging more fees. So, that's the mix that is there and you saw from the external auditors that they look every year to see where, indeed, the fees ought to be allocated.

I think it's a matter that we did need to get on the record here, as other people who are looking through those may well be asking themselves that question. So, we've done that for them.

A question that I think is perhaps more important: £143,000 is recognised under 'provision for liabilities and charges', relating to an over-charging in a prior period by a contractor firm. Within the Wales Audit Office, you were aware that the cost appeared to be high for these audits. So, you thought that they were high; you ended up having a refund. Why don't you go into further detail on these? You know, roughly, what most audit fees should be, don't you, just from experience? So, why wasn't there a more detailed examination prior to its being paid?

There are, in fact, three areas that have arisen here, which, if I was still here, I'd be taking into account in the contracting strategy next year. There are three areas and they all concern the big four firms. I think, in one case, there's an issue that we have relied on the big four having their own quality processes that are overseen by professional bodies and our lesson from that is that we will not, in future, rely on that; we will subject them to our own quality processes. In this case, we should have taken action earlier. I'll be quite clear: we should have taken action after month 1, when we thought, 'This is a bit high for two councils.' Month 2 came in and it should have been stopped at month 2, by saying, 'This is exactly the same as the previous month.' But it wasn't until month 3 that actually action was taken. Now, we're clearly taking steps internally to prevent that happening. It does mean that we have a complicated bit of us, in the first instance, reimbursing the authorities concerned and, secondly, recovering costs from the external firm of accountants.

10:00

The councils came out of pocket and I think it's right that we signal to them that they are due this money and we get it back from the firms.

I think so as well, but I wouldn't trust the big three firms on almost anything. I've seen what they do with Carillion. I saw what they did with Robert Maxwell. They might follow what they call the best accountancy practice, but it's not something that many of us actually understand. But my next question is: £44,000 is recorded under losses and special payments as a refund due to two audited bodies for fees paid in 2014-15, relating to audit work that was not completed to a satisfactory standard. Are we going back to the same three big firms?

Well, it's not to say—. It is one of them. We have engaged at national level with the firms and we're in exactly the same process as I just indicated in relation to the previous question. We actually had to do a lot of work on that particular body. In fact, we had to do a lot of work on the same type of body across Wales.

No, we're talking fire authorities.

I was going to ask you this question and you might not wish to answer it, but if your performance was the same as those bodies that we've been talking about now, what would you expect us to do?

I'd expect to be in front of you answering questions about the inadequacy of my audit.

So, and this is probably a question you won't want to answer, but I'll ask you rhetorically: is there not something wrong that we don't have an outside body checking on some of these very large firms who are failing continually?

I should say that we had a debate on Carillion and Capita yesterday in the Assembly, so, just to put it in context of some of the debates we've had recently here.

Right. I've already indicated what our immediate response is, namely that we will subject them to our quality processes in future, and I'd indicate that while we were doing that, we relied on their internal processes given their status and so on. But it is raising questions for me, as to whether, going forward—and I talked earlier about the trainees and apprentices—contracting out is the strategy that the Wales Audit Office needs to pursue. That is a subject matter that will have to be discussed after I've gone, but it is raising concerns for me.

So, could I just ask you a couple of questions arising from that? Clearly, you have to pass this on to the new auditor general now in terms of lessons learnt here, and the board plays a role in doing that. Secondly, presumably, from the board's point of view, your risk assessment to date has assumed that the professional companies are professional and have similar standards to yours and you benchmark the same way, but clearly you can no longer do that, and as the primary audit office for Wales you have to be absolutely sure that you get those standards and there's an element there. But, thirdly then, what do you do in terms of, as Mr Hedges said: we can bring you here and ask you questions, but who's scrutinising these companies? You mentioned escalating to a national level at least in one case, so where are you taking this in terms of pursuing questions about what I assume would be a poor trail of verification within that particular company?

If I can indicate, in one case, engaging with the relationship partner, who essentially interfaces with us, identified that there had been an error within the organisation. That's an error that we're now having to pay and reimburse each other. 

In relation to the work that required refund of the audit fees for work in the past, we actually called in the NIAO from Northern Ireland in order to double-check our views on the accounts. We then talked to the relevant partner at a national level to ask whether they too accepted the fact that their work had been not up to standard on this occasion. So, that is the way in which we engaged on that. But as I said, in future, we will be subjecting them to our own quality assurance process, in the same way that I subject my staff in the work they do. So, they will be more tightly controlled.

10:05

But that does put a little bit of extra responsibility and costs onto you, I assume. 

It does. The figures don't include the extra time that is being taken.

We tend to agree to—

That's a quid pro quo sort of thing, is it? Yes, I understand. I'm assuming, from the approach you've taken in the accounts and the annual report and the way you've reported it this morning, that you don't want to name the partner.

But, nevertheless, I wanted the invitation to be put on the record. But, you want the relationship to be ongoing with some of these companies, I understand that. Is that okay, Mike?

I'd like to turn to the annual plan for next year, 2018-19. With the new auditor general arriving very soon, there's a possibility that his priorities may not be exactly the same as yours, as set out in your strategic objectives. I don't know if you've had a meeting as yet, informally or formally, with him to see if your minds are aligned. If he does take a view that he wants to do something else, is there enough flexibility built into the system to accommodate that?

The reason why I decided to tender my resignation at this point was indeed to allow the incoming auditor general a chance to set his or her own priorities when it came to the estimates. With the estimates comes the business of next year. That's really where the main bit is in terms of the programme of audit work. In terms of those studies, I've commenced a consultation—a great public consultation, hopefully—in terms of getting ideas and thoughts, which he'll be able to take ahead. It will be this autumn that Adrian will need to bring to PAC his recommended shortlist for future studies. Inevitably, there's a lead-in time so that he'll be able to actually influence the direction of travel for the estimates and for next year. The reality is, at this point in the year, the work is already engaged and his changes will take a little while to go through.

All right, very good. There are a number of changes to key performance indicators in the plan compared with the previous year. Can you tell us how you're ensuring comparability with previous years, so that we can identify improving or declining areas?

Yes. The changes we've made are more about which are key performance indicators and which are performance indicators. What you see in the plan is what the board and the auditor general have agreed. They considered what should be the framework of key performance indicators that are kept under very close scrutiny throughout the year. However, we haven't actually got rid of any former KPIs this year, what we've done is just slightly downgraded them to performance indicators, but we still record and monitor those indicators.

If I can outline the key changes we've made, other than the slight restructure, we've replaced a number of individual leadership, cultural and social indicators with the thematic indicators from the civil service people survey. Whereas previously, if you like, we cherry-picked a little bit from the civil service people survey which indicators we would use and we included them in short staff surveys, this time we have the full suite of around 60 civil service people survey questions. So, what we've done is, instead of using individual indicators—which we still monitor and we still present a report internally to all staff on—in terms of our key performance indicators, we are now reporting at the thematic level because we have got the full suite of measures. So, we haven't lost any information in that sense. We've got a much richer and broader suite of measures, which enable very much more robust benchmarking.

The other thing you might have noticed is that we've removed several of our environmental performance indicators, in terms of key performance indicators. However, we still monitor all of the ones we previously did, and we report on them, as you will have seen in the sustainability report section. So, we will still report on them publicly on an annual basis. So, we haven't lost those. We have just slightly demoted them. We have retained two of them as key performance indicators—on emissions and Green Dragon status.

The third area: similarly, we undertake a stakeholder survey. That's usually on a biannual basis. We've actually broadened the range of questions that we include in that survey. However, we are not including them all as KPIs. But, if you notice through the report, we do report on them individually where it's appropriate to do so, to give yourselves and the general public context. On page 23, there is one of the outcomes of the stakeholder survey on good practice work. On page 27, there's one on working well with external review bodies. On page 30, there's stakeholders' perceptions of how well we run the business. So, it is in there. It's just that we are not using them as our suite of KPIs, which are formally reported to the board and management committee each quarter.    

10:10

Well, I have to confess that I haven't drilled down into the detail sufficiently to make much sense of what you've just said, but it sounded impressive anyway. But, what I would like you to do is to tell me how these KPIs are more clearly aligned with your overall objectives. What is it that's changed in practical terms? 

What has changed in practical terms is that, previously—and we had feedback from the board—it would have been useful to see how particular groups of KPIs directly aligned to delivery of the four objectives that we have, in terms of the two public authorities: the Wales Audit Office and the Auditor General for Wales. So, the auditor general has three objectives: to provide assurance, to offer insight and to promote improvement, broadly speaking. The Wales Audit Office's overall objective is to be a well-run organisation that's a great place to work. So, what we've done is—

Yes. In the annual plan, on page 16, we've grouped the indicators into three groups. The delivery and impact indicators are very much about the auditor general's objectives. It would be very difficult to align individual indicators to individual objectives, because in any particular piece of audit work, you typically provide some assurance, some insight and promote improvement to some degree. 

Leadership and culture are very much both public authorities. They relate to the delivery of the functions of both the Wales Audit Office and the auditor general. The managing the business indicators then are very much focused on how the Wales Audit Office is run. So, that's how we've attempted to align them more fully with our objectives.

Thank you very much for that. Can I turn to a different topic now?

Just before we do that, I think there might be a change of official, just to illuminate that. Just to be clear, we'll move on to the Public Audit (Wales) Act 2013 and look at that now.

Just in case, do you have any more questions on the performance indicators?

Well, Neil Hamilton didn't. We still have a second left. Any other Members with further questions on that, or are you content to move on? Yes, I think we're okay to move on.

5. Trafod cynigion i ddiwygio Deddf Archwilio Cyhoeddus (Cymru) 2013: Sesiwn dystiolaeth
5. Consideration of proposals to amend the Public Audit (Wales) Act 2013: Evidence session

So, just to be clear, we are taking advantage of the fact that you are here. Rather than having two sessions, we'll wrap up two things in one session. The Public Audit (Wales) Act 2013, you've talked in the past about some of the weaknesses of that Act. We asked you to produce further information. You produced a draft Bill for us and also an explanatory note, I should say—some significant work. Thank you for that. That's the bit that we are now going to look at, and I think Neil still has the questions. Indeed, yes, thank you. Diolch yn fawr.

10:15

Yes, thank you very much. You've produced a comprehensive explanation of your proposed Bill and the changes that you think would improve the current audit regime. Can you confirm whether there is a consensus among the staff and board members that the Act does need to be changed and that the changes that are proposed are agreed by everyone?

Yes. Good. Obviously, as an outgoing auditor general, the new auditor general will have to sign in to this as well. Have you had any discussions with him about it?

Yes, as part of Adrian's induction process, we've run over what we have been doing in this regard. I don't think I can speak for him, but just to say that he is on speed with this.

Well, if the auditor general is on speed, I'm not sure what that means, but still—[Laughter.] I did grow up in the 1960s, but—[Laughter.]

You have provided some idea of the costs and benefits that may be generated through the changes that you propose. Do you feel, on the basis of this, that the draft Bill will provide value for money?

And how much of these savings will be cash savings, do you think?

Well, there's a reasonable expectation that there will be savings that will affect our estimates and our fees in future. Now, we've indicated that that's in the region of £55,000 to £75,000 a year. Over the term of an auditor general, that will be about £0.5 million all told. You won't be able to see cash coming out of that order each year in the estimate because some of this is shared across fees, but it should take the pressure off fees. It might enable some reduction in fees. It might enable some reduction in the estimate, provided, of course, that all these things are put in place.  

And it should also make the job of the external auditors a little bit easier.

But it's not possible at this stage, I suppose, to produce any concrete estimates.

We've done our best to try and identify reasonable estimates of what the savings are. I mean, some of these processes that we are talking about are quite diffuse. A large element of it is the amount of time that managers spend supervising staff, making sure that they are booking their time to the right codes and things like that. We don't actually have a very detailed set of job codes that record how well people are booking to job codes. There is a— 

But overall you could say that this will reduce the administrative burden and, therefore, implicitly, it is bound to reduce costs, to a greater or lesser extent.

A saving to the public purse.

I just wondered, has the board formally looked at what we have before us today, in terms of the board itself?

And hence Isobel's and my joint signatures are on this.

Thank you, Chair. This paper—obviously, we discussed it back in March. What I want to try and work out is whether legislation is the only way in which this can be done. Have you looked, since March, at anything else other than legislation? Are there ways in which we can improve this without needing the legislation? 

I think that, as we said in March, there were things that we can do. The main thing is moving from fee-based funding of the audit of the Welsh Government, the Assembly Commission and the ombudsman. We call that notional fees. That is something that is possible without legislation, but that really is the only thing that is possible without legislation. The other thing is what we are already doing, which is making the best of what we've got, which is offsetting between years and offsetting between functions where there is more time needed, say within a year compared with our original estimate. 

10:20

The problem with that is that that exceeds our powers, and we are doing it in the hope that we won't be challenged.

Okay. What I'm trying to work out is whether all the elements within the proposed changes to the legislation are necessary or whether some of them could been done without a change in legislation. 

There's nothing that we put into the draft Bill that can be achieved another way.

And it is a very small—well, in my experience, a very small amending set of proposals. And we've done it simply because this is, I'm afraid—. You've asked, or I remember Eluned Morgan asking the question when she was on the Finance Committee—. There is no other way round, I'm afraid. There is a need for some amendment of the 2013 Act.

I can understand that for some of the points. I'll come on to a couple of other points in a minute that I might be a little bit less comfortable with. On the fees arrangement, I totally understand your fears of 'just for cost' being a lot more than cost. I understand the challenge. Should we be looking at some form of level to ensure that it doesn't become basically a cash cow in one sense? Should we be looking to ensure that, whilst it would be not more than cost—. It could be a problem, because you have to then do the process of going back on the refunds, and that adds additional costs, as it happens. Should we be looking at some cap to ensure that we don't see excessive situations arising?

I think I'd answer: why do you think something different is needed in Wales that the other UK audit offices don't need? I know this is putting it back to you, but what we're doing is moving us onto the same basis as the other three UK audit offices. I think if you just look at the column inches of legislation that apply to the way in which I have had to operate the fee regime in Wales—. And I recognise that perhaps there was concern in the past that required such safeguards to be put in, but I think that we've probably now reached maturity of the audit office and that we are, I would say, to be trusted in this to operate the same regime as the rest of the UK. I'd also put into that one, in terms of it being a cash cow, that, over the eight years that I've been auditor general, we've reduced expenditure by 30 per cent of the Wales Audit Office in real terms. So, I think that we do drive down our costs and you hold us to account for that. So, I don't think that you need to do any more in capping individual fees.

Well, there's no relation because, at the moment, we have to approve fees, but this takes out our role and involvement in that totally.

No. No, you still approve the fee scheme. The fee scheme will still need to come to you. We're not changing that at all. What we're doing is changing in the legislation the fact that we cannot exceed the cost per function.

That's right. You've still got the fee scheme control and you've still got the estimate as a control, because all the money that we raise in fees and use—you approve the use of that through the estimate. The other thing is that we're not completely taking the equivalent of the no-more-than-for-cost rule away. We are putting in a similar cap to that which applies in Audit Scotland, which is that, taking one year with another, the costs and fees must be broadly equivalent. So, there is still a discipline; it's just a little bit more flexible so as not to bring us into the situation that we currently face of having to provide refunds and offsets and things like that.

Okay. You also include the requirement that the fees payable must be paid by the person to whom the function of the exercise relates. Can you explain why that change is included?

It's really because the two go together. You can't remove the no-more-than-for-cost rule without addressing that issue of the fee being paid by the person to whom it relates. It does introduce a bit more flexibility, in that, for example, if we needed to equalise on a postcode basis or between, say—. The first body that is subject to a new form of audit test would face higher costs in terms of the work that we have to do than subsequent ones. This allows us a bit of smoothing between audit bodies so that there's a bit more equity, if you like, between who comes first and who comes after.

10:25

It was one of the reasons why, in the estimates two years ago, you agreed that we could draw from the consolidated fund in terms of pilot work on the the Well-being of Future Generations (Wales) Act 2015. That allowed us to do the pilot work that we need to do in any kind of new audit work and avoid charging the body concerned. We'd have struggled otherwise to get people to volunteer.

Otherwise, the fee would have had to include, if you like, the sort of—not experimental but the set-up costs, which really relate to quite a narrow piece of legislation, but everyone would have had to—. You would have had more complaints, I'm sure, and we'd have had complaints as well.

Can I go on to a couple of other points, Chair, that I think I want a bit more clarification on, to make me feel comfortable? Quoracy is one of them. You've identified in your introductory paper and explanatory notes, to an extent—more in the introductory bit because the explanatory notes are very weak on this—why you think we need to change the quoracy, because there have been occasions when, quite understandably, somebody may not be able to get there because of various traffic conditions or an illness. So, they are totally understandable, but you then could end up with a situation where we are giving permission for the non-executive directors to be in a minority, in a sense. Do you think that actually fits in with the Public Audit (Wales) Act 2013? Is it really fitting in properly?

There is a challenge to get the quorum rule right. I think that there are various options. One is to set quorum at the level so that the numbers are equal, so that there's no less a number of non-execs than execs, but I think there's also scope to explore this in terms of the actual nature of what we're so far calling 'executive members' but which aren't really of one class because they're not executive members in the usual sense. So, we could explore various quorum options. It's going to be much harder to get that right on the face of legislation if it were put on the face of legislation, but if we are allowed, as most bodies work, to devise our own quorum rules, if there is a mistake then it would be easier to put right.

I think we have to go back to say that, when it was first introduced in legislation, it seemed right because it required two NEDs to be absent before the quorum hit. As soon as we added another employee member—and we're not actually arguing that we shouldn't have—we've run into this problem that it's one absence and we have a problem. So, I think the only way around it is either some convoluted bits of legislation that say, for this purpose, that the elected employee members shall be deemed to be equivalent, or the alternative is to allow the WAO to set its own quorum.

And it would put it on the same footing as Audit Scotland and many other public bodies.

The excuse—[Inaudible.]—of putting it on the same footing as somebody else—[Inaudible.]

Indeed, not necessarily. Can I just bring in Mike, because he might—?

It's not abnormal in public bodies to have a majority of non-executive directors, and it's not abnormal for them to need to be a majority for decisions to be taken. In some respects, I'm glad that Hugh is going now because I can say this with absolute safety: there's an ability of chief executives in organisations to pressurise the non-executives in order to do something that will benefit the chief executive. And if you haven't got a non-executive majority at the meeting, that pressure can make the decisions that might not be good ones.

Surely an alternative way would be to ask for another non-executive director, to increase the number of non-executive directors by one, which would have the same effect. As I say, I'm glad he was going because he cannot take any of this being meant personally because he won't be involved in it. But I think there is a danger of somebody who's in charge, who has power over those people who are working in the organisation, to use that power in such a way that they can get something through because there's not the majority of non-executives there. So, could I ask that you perhaps consider adding one to the non-executive that would then make up for the additional one we added to the employees?

10:30

I think that would be one way round, but it means more extensive changes in the legislation because of the way that, for example, if I'm right, the chair has to be appointed from among—. You might want to revisit those bits of legislation to allow for the separate appointment of a chair, which would be the easiest way, because you then leave the numbers of the NEDs standing where they are in the legislation.

The other thing is, of course, you're adding expense by adding another non-exec, and it's quite—it's not a great deal—but the board is starting to look a bit large for a relatively small organisation.

The other point I would make is that we still have a majority of non-execs, and it's the non-execs that will, essentially, hold the majority when it comes to making the rules. So, I don't think it is very likely that the non-execs will settle on a quorum rule that is to their disadvantage.

The other question, of course, is: why don't you reduce the number of executives? If you don't want to add one more to it, why not reduce the number of executives? You've got the two employee representatives, which this committee was very keen on having, and unanimously supported—why not reduce one of the others?

Well, the others is me, as auditor general, and I do need one other director present because if I'm absent, there's no director.

But there could be a non-voting director. I haven't been to or seen any of your meetings, but I would imagine that people who aren't directors come in to report to the board, as used to happen, in my case, on the health boards. So, why can't that person come in as a non-voter?

I remain unconvinced of the merits of allowing there to be a non-executive to be in either parity or minority, and I'm just looking at two alternative ways of either increasing the non-executive or reducing the number of executives. But at some stage, I would feel—I would not be able to support a Bill that changed the quorum in such a way that the non-executives were not in the majority.

This would be an issue that we'd explore if we were to pursue a Bill, of course, and there'd be consultation and all sorts of options could be then brought forward.

But this Bill wouldn't reduce the number of non-execs; they would still be in a majority.

Which is the key—. Having a majority, as Jane Hutt knows as a former Chief Whip—having a majority and actually having a majority in the Chamber are not necessarily the same thing.

Although it's a bit more comfortable these days for the Chief Whip, I think. We'll go back to David now I think.

I can concur with Mike in most senses, and I just want to clarify—do you have a voting position on—?

Yes. Because the way in which the legislation—

The way in which the legislation was created—there are two bodies, and often the reports, and we've touched on one of them, are joint reports, so I have to vote for my own, as it were. But I have a voting position.

It's perhaps worth mentioning that, in practice, I don't think there have actually been any votes. Decisions are generally done by consensus. 

10:35

That is always the case. We always seek a consensus, but there's always the possibility—

And we have to take care of that possibility. The other question I've got is on the interim reports, and, again, I understand the costs associated with interim reports and your continual requirement to be producing interim reports and the burden that that places upon people. I suppose what I'm trying to say is that, at the moment, the proposals, I understand, remove the need for all interim reports. Perhaps we should be looking at something where there should be some reasonable alternative where an interim report is based upon a requirement or a request from something like this committee, so that interim reports could be—it wouldn't be unreasonable to be considered that way.

Years ago, I remember Parliamentary Counsel telling me, 'Don't put into legislation something you can already do, because it immediately raises doubt as to whether you could've done it.' It does seem to me that I cannot conceive of an accounting officer refusing a request from the Finance Committee to deliver a report. That seems to me both outside the accounting officer's memorandum, to start with, and also, really, to start creating real problems. 

I think the problem we've got is that the interim report is phrased—. At least one has to be presented. And, in reality, the material—well, you've seen the material; it is not really consulted and it duplicates stuff that you see in justification for estimates, because it comes at roughly that point of the year. And no other body, as far as I've been able to track down, has such a requirement in legislation.

I think it's fair to say that they're routine, but the question is what the relationship should be to ensure that a report can be delivered, if necessary.

You could just do it. You don't need to find a bit in legislation that says, 'Where can we do it?' The Assembly committees can ask the accounting officer to appear before them.

And there's more flexibility in that approach as well, because, currently, what's in the interim report is specified in the legislation, whereas you could perhaps ask for something that's a bit more tailored to your particular interests.

Huw, you've always been very reasonable and fair in my dealings with you, both through the Public Accounts Committee and the Finance Committee, but it's not going to be you for much longer, and I don't know the person taking over, so I have no comment, but that person will not be there forever either, and we need something that stands the test of time. What about having something in there that says that the Finance Committee can request an interim report at any time? We could end up with an auditor general sitting there and saying, 'You have no right to request this. Look at the Act. The Act says that I don't have to report.' Quite often, having dealt with somebody very reasonable over seven years, you have to think about what would happen if somebody unreasonable was sitting in that chair, and would there be any reason why we couldn't specifically give the Finance Committee the ability to ask for an interim report?

It seems to me that there are two steps that are possible, short of legislation: (1) put it in the accounting officer memorandum and (2) put it in your Standing Orders. Those are under your control in a better way than if it appears in legislation, which then requires some primary legislation.

A gaf i jest ofyn i chi, yn olaf—? Rŷm ni’n ddiolchgar am y gwaith rydych chi wedi’i wneud ar hyn, ond, wrth gwrs, rŷch chi wedi paratoi Bil sy’n delio â phroblemau sy’n deillio o Swyddfa Archwilio Cymru ac Archwilydd Cyffredinol Cymru. Rŷch chi’n ymwybodol bod y pwyllgor yma hefyd wedi wynebu rhai problemau gyda’r Ddeddf bresennol. Un penodol oedd adeg cyflwyno neu ohirio cyflwyno cyfrifon Cyfoeth Naturiol Cymru a dwy reol, fel petai—darn o gyfraith a rheoliadau’n dod yn benben â’i gilydd. Rydym ni hefyd yn wynebu rhai problemau—wel, nid problemau, ond yn sicr prosesau hirfaith mewnol ymysg rhai o’r pethau sydd yn deillio o’r Ddeddf, yn y ffordd rŷm ni’n gorfod bod, fel pwyllgor, yn rhan annatod o brosesau, yn hytrach nag, efallai, y system a ddylai fod lle mae pwyllgor yn arolygu, mae gyda chi fwrdd, mae'r bwrdd yn gallu adlewyrchu ac yn rheoli—system aeddfed, os liciwch chi. Mae'n deillio o'r ffaith bod y Ddeddf wedi codi o sefyllfa benodol, ac rydym ni'n derbyn hynny.

Felly, er eich bod chi wedi paratoi'r Bil drafft yma mewn ffordd sy'n gyfyngedig i'ch materion chi, a ydych chi'n ymwybodol o unrhyw un o'r ymatebion hyn, neu a fyddech chi am i'r archwilydd a'r swyddfa newydd, wrth fynd ymlaen, drafod rhai agweddau hefyd? Achos os ydym ni'n bwrw ymlaen gyda chyfle deddfwriaethol, mae'n gwneud llawer mwy o synnwyr i roi tipyn bach yn fwy o gig arno fe, nid yn unig i ateb eich problemau chithau ond y problemau neu'r anawsterau mae'r pwyllgor yn eu hwynebu o bryd i'w gilydd yn ogystal.

Can I just ask you, finally—? We're grateful for the work that you have done on this, but, of course, you've prepared a Bill that deals with problems that stem from the Wales Audit Office and the Auditor General for Wales. You're aware that this committee has also faced some problems with the current legislation. One, specifically, was at the time of submitting or postponing laying the accounts of Natural Resources Wales and two rules—a piece of legislation and regulations that came head to head with each other. We are facing some problems—well, not problems, but we are certainly facing long processes internally regarding some of the things stemming from the legislation, in the way that we, as a committee, have to be an integral part of the processes, perhaps, rather than the system whereby a committee can supervise, and you have a board, and the board can reflect and manage—a mature system, if you like. It stems from the fact that the legislation arose from a specific situation, and we accept that.

So, although you prepared this Bill in this draft form in a way that's restricted to your issues, are you aware of any of these responses, or would you wish for the auditor general and the new office, as they go forward, to discuss some issues also? Because if we do press ahead with this opportunity with the legislation, it makes much more sense to put some more meat on the bones, not only to respond to your problems but to the barriers that the committee also faces from time to time.

10:40

Yn gyntaf, rhaid dweud ein bod ni wedi paratoi'r Bil ar sail cyfarfod ddaru'r cadeirydd a minnau ei gael â'r Prif Weinidog, pan ddaru Carwyn ddweud y byddai'n iawn os oedd yn Fil byr, oherwydd problemau ynglŷn â deddfwriaeth Brexit yn y dyfodol. Wrth gwrs, mae yna bethau eraill. Rwy'n cofio pan ddaru ni gyflwyno'r Bil, pan ddaru Jane baratoi am y tro cyntaf y syniadau—roedd yn mynd i fod ail ran i'r ddeddfwriaeth, yn edrych ar symleiddio a dod â chysondeb drwy bethau ynglŷn ag archwiliadau yng Nghymru. Felly, rwy'n credu bod yna le i ledaenu hyn, ond chi sy'n gwybod faint yw maint y ddeddfwriaeth rydych chi'n gallu ei gael drwy'r Senedd. Rwyf i wedi paratoi rhai pethau. Rwy'n ymwybodol bod yna broblemau ddaru chi eu cael yn ystod penodiad aelodau'r bwrdd a'r cadeirydd, a hwyrach y byddwch chi eisiau edrych arnyn nhw hefyd. Ond heblaw am hynny, rwyf i wedi ysgrifennu atoch yn dweud bod yna rai pethau eraill yr hoffwn i weld tipyn bach yn fwy o gysondeb arnyn nhw, ond mae e lan i chi faint o amser sydd gennych chi.

First of all, I have to say we have prepared the legislation on the basis of a meeting that I and the chair had with the First Minister, when Carwyn said that it would be okay if we had a short Bill, because of problems in terms of Brexit legislation in the future. Of course, there are other things. I remember when we introduced the Bill, when Jane prepared for the first time the ideas, there was going to be a second part to the legislation, looking at simplifying and bringing consistency in relation to audits in Wales. So, I think there is scope to broaden this out, but you know how much legislation you can get through the Senedd. I have prepared some things. I'm aware that there are problems that you had during the process of appointing the board members and the chair, and maybe you will want to look at those as well. But aside from that, I have written to you saying that there are some other things I'd like to see more consistency on, but it's up to you how much time you have.

Ie, ond yn eich barn chi, pe bai'r hyn sydd yn y Bil drafft yma, sydd yn Fil byr iawn—pe bai'r rheini yn cael eu cyflawni, a fyddech chi wedyn yn teimlo bod, o leiaf am y cyfnod nesaf gyda'r archwilydd newydd a'r bwrdd, gynsail sefydlog wedyn? Nid ydych chi'n mynd i ddod nôl mewn rhyw bum mlynedd arall, Cynulliad arall, a gofyn am ragor.

Yes, but in your opinion, if what was in this draft Bill, which is a very short Bill—if they were achieved, would you then feel that, at least for the next period for the new auditor general and the board, you have a foundation that is robust there, that you're not going to come back in another five years, another Assembly, to ask for more?

Wrth gwrs, mae e lan i'r archwilydd cyffredinol newydd ynglŷn â—

Of course, it's up to the new auditor general—

Ond gyda'r holl brofiad sydd gyda chi erbyn hyn—[Chwerthin.]

But with all the experience that you have up until now—[Laughter.]

Rwyf i yn credu ein bod ni angen y rhain. Dyma'r rhai sydd wedi creu'r mwyaf o broblemau inni fel swyddfa yn ystod y pum mlynedd mae'r ddeddfwriaeth wedi bod mewn grym.

I do think that we do need these. These are the issues that have created most problems for us as an office during the five years in which this legislation has been effective.

Ocê. Unrhyw gwestiynau pellach gyda phobl? Na. Os felly, a gaf i ddiolch i chi am y dystiolaeth heddiw ar y ddau bwnc, mewn ffordd, ac wrth gwrs nodi y byddwn ni'n cyflwyno'r trawsgrifiad i'w wirio? A gaf i hefyd fanteisio ar y cyfle—dyma'r tro olaf y bydd Huw Vaughan Thomas gerbron y pwyllgor yma, felly rydym ni'n ddiolchgar iawn i chi am eich gwasanaeth fel Archwilydd Cyffredinol Cymru, ac mae'n siŵr bydd y pwyllgor am eich llongyfarch chi hefyd am eich bod chi wedi cael eich urddo yn ddiweddar iawn, ac mae'n siŵr eich bod yn deilwng yn sgil yr holl waith sydd wedi cael ei gyflawni? Mae'n siŵr na fyddwch chi'n ddiarth, fel sy'n cael ei ddweud, ym mywyd cyhoeddus Cymru, ac rydym yn edrych ymlaen at eich gweld chi mewn cyd-destun gwahanol. Ond hoffwn i fynegi diolchiadau ffurfiol y pwyllgor am y cydweithrediad parod rydym ni wedi ei gael gennych chi, ond hefyd gan y bwrdd, y cadeirydd, sydd ddim yn bresennol heddiw, a'r staff o bob math sydd wedi helpu'r pwyllgor yma yn y gorffennol. Diolch yn fawr iawn i chi.

Okay. Any further questions? No. Therefore, can I thank you for the evidence today on the two subjects, and of course note that we will be submitting a transcript for you to check? Could I also take advantage and say that this is the last time the auditor general will appear before this committee, and we're very grateful to you for your service as the Auditor General for Wales, and we note that, and I'm sure that the committee will want to congratulate you as well that you were honoured very recently, and I'm sure that that's deserved given all the work that you've done. I'm sure you'll be involved in public life in Wales, and we look forward to seeing you in a different context. I'd like to extend our formal thanks as a committee for the ready co-operation from you, but also from your board, the chair, who is not present today, and the staff who have helped this committee in the past. Thank you very much.

Diolch, Gadeirydd. Rwy'n ddiolchgar am y sylwadau yna. Rwyf i wedi mwynhau fy nghyfnod fel archwilydd cyffredinol. Rhaid imi ddweud roedd y blynyddoedd cyntaf tipyn bach yn fwy anodd nac yr oeddwn i'n disgwyl, ond, serch hynny, rwy'n credu bod y ddeddfwriaeth ddaru Jane ei chyflwyno a'r ffaith bod yna fwrdd—gallaf i adael swyddfa archwilio sy'n parhau ac sydd ddim jest yn ddibynnol ar natur a chymeriad yr archwilydd cyffredinol.

Thank you, Chair. Thank you very much for those comments. I have enjoyed my period as auditor general. I have to say that the first couple of years were rather more difficult than I'd expected, but, despite that, with the legislation introduced by Jane and the fact that there is the board—I can leave an audit office that will continue, and won't be just reliant on the nature and the character of the auditor general.

Mae hynny yn gyffredin rhyngom ni, mae'n siŵr gen i, felly diolch am hynny.

That's a common thought among all of us, I'm sure. So, thank you very much for that.

6. Cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o weddill y cyfarfod
6. Motion under Standing Order 17.42 to resolve to exclude the public from the remainder of the meeting

Cynnig:

bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â Rheol Sefydlog 17.42(vi).

Motion:

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.

Os caf i ofyn i'r pwyllgor: a ydych chi'n hapus i gymeradwyo cynnig o dan Reol Sefydlog 17.42 i fynd i mewn i gyfarfod preifat? Diolch yn fawr iawn i chi. Awn i mewn i gyfarfod preifat. Diolch yn fawr.

Could I ask the committee, therefore: are you happy to go into private session under Standing Order 17.42? Thank you very much. We'll enter a private session now. Thank you.

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 10:44.

Motion agreed.

The public part of the meeting ended at 10:44.

Archwilio Cynulliad Cenedlaethol Cymru