Y Pwyllgor Cyllid

Finance Committee

22/09/2022

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Mike Hedges
Peredur Owen Griffiths Cadeirydd y Pwyllgor
Committee Chair
Peter Fox
Rhianon Passmore

Y rhai eraill a oedd yn bresennol

Others in Attendance

Adrian Crompton Archwilydd Cyffredinol Cymru
Auditor General for Wales
Ann-Marie Harkin Cyfarwyddwr Gweithredol Gwasanaethau Archwilio, Archwilio Cymru
Executive Director of Audit Services, Audit Wales
Kevin Thomas Cyfarwyddwr Gweithredol Gwasanaethau Corfforaethol, Archwilio Cymru
Executive Director of Corporate Services, Audit Wales
Laurie Davies Pennaeth Gwasanaethau Busnes, Archwilio Cymru
Head of Business Services, Audit Wales
Lindsay Foyster Cadeirydd Archwilio Cymru
Chair of Audit Wales
Ruth Glazzard Yr ymgeisydd a ffefrir gan y Gweinidog ar gyfer cadeirydd Awdurdod Cyllid Cymru
Minister's preferred candidate for chair of the Welsh Revenue Authority

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Christian Tipples Ymchwilydd
Researcher
Georgina Owen Ail Glerc
Second Clerk
Leanne Hatcher Ail Glerc
Second Clerk
Mike Lewis Dirprwy Glerc
Deputy Clerk
Owain Roberts Clerc
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.

Cyfarfu’r pwyllgor yn y Senedd a thrwy gynhadledd fideo.

Dechreuodd y cyfarfod am 09:30.

The committee met in the Senedd and by video-conference.

The meeting began at 09:30.

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

Croeso cynnes i bawb. Dwi jest eisiau check-io efo Ruth—

A warm welcome to everybody. I just want to check with Ruth—

Does the translation work, just in case?

Ydw hwnna'n gweithio rŵan? Ydych chi'n clywed fi'n siarad? Dyna fo. Gwych. Croeso cynnes i bawb ac i bawb sydd yn gwylio hwn o bell. Rydan ni yn broadcast-io'n fyw ar Senedd.tv bore yma, ac mi fydd record. Rydyn ni wedi cael ymddiheuriad gan Rhianon Passmore; mae hi'n mynd i fod yn hwyr yn cyrraedd, felly fe wnawn ni ei gweld hi pan gyrhaeddiff hi. Oes gan unrhyw un unrhyw ddatganiadau o—? Declarations of interest. Na. Gwych. Ocê. 

Is that working for you now? Can you hear me speaking? Yes. Excellent. A warm welcome to everyone and to everyone watching this meeting remotely. We are being broadcast live on Senedd.tv this morning, and the Record will be published as usual. We've had an apology from Rhianon Passmore, who is going to be late to the meeting, so we'll be seeing her later. Does anyone have any interests to declare? I see that no-one does. Okay.   

2. Papurau i’w nodi
2. Papers to note

Fe wnawn ni symud ymlaen felly i eitem rhif 2. Eitem rhif 2 ydy'r papurau i'w nodi. 

We'll move on, therefore, to item No. 2, which is papers to note.

So, the papers to note is item 2. Does any Member want to pick anything up at all? Otherwise, we'll note the papers. 

We'll note the papers, and keep them for when the Minister visits us. 

There we are. Papers to note 6 and 7, we will pick up with the Minister, I believe next week, when she comes in to give evidence. So, that's fine. 

3. Gwrandawiad cyn penodi Cadeirydd Awdurdod Cyllid Cymru
3. Pre-appointment hearing for Chair of the Welsh Revenue Authority

So, we'll move on to item 3. We've got Ruth Glazzard with us. Would you like to just state your name for the record, please? 

Yes. Bore da. Good morning. I'm Ruth Glazzard. 

Lovely. Thank you. I had mentioned that anyway, but there we are. And we've got the pre-appointment hearing for the chair of the Welsh Revenue Authority, and Ruth is the preferred candidate for the chair of the Welsh Revenue Authority. Croeso cynnes i chi. A warm welcome to you. We're going to ask a few questions, and then, after the session, a transcript will be available for you to check for accuracy. 

Firstly, I'd like to just understand some of your reasoning for applying, looking at some of your skills and your relevant experience and that sort of thing. So, can you tell us, firstly, your reasons for applying for the chair of the Welsh Revenue Authority? 

Yes. I think, probably like most people, I wasn't really very aware of the devolved tax-raising powers in Wales, but I was aware of the work of the WRA through my role with the Centre for Digital Public Services in Wales. And there's a clear desire at the WRA to innovate in order to raise revenue to support public services, and you can probably see from my current portfolio of roles that those are the types of roles I'm interested in. I'm interested in using my skills to help improve public services in Wales. WRA clearly has a very strong culture, and that was something that also attracted me to the role. 

In terms of, then, what I bring, I bring my experience in my current portfolio. I'm vice-chair of Digital Health and Care Wales. I have got experience in financial services following a career at the financial services regulator, and prior to that in operational management roles in financial services. So, all of that came together nicely, I think, for the WRA role. I was able to use some of my experience—current experience and past experience—for the chair role. 

Great. As somebody who comes from a building society and banking background myself, could you provide a brief overview of those previous roles that you were talking about, and what specifically do those roles bring to the chair? What can you pull together from that career that you've had so far, and where do you think that will make a difference? 

Yes. So, I think my experience in financial services gives me experience across complex organisations, lots of change—the ability to work through those large organisations whilst they're going through various changes. I worked at the regulator during the financial crisis of 2008, 2009. As a result of that, the regulator was separated, and I worked on large projects to create new organisations. I also then focused on governance and was head of governance for Standard Chartered bank, which was technically an incredibly interesting and challenging role. Alongside my professional career, I started my board career. I was the independent chair of the standards committee for the London borough of Newham, and then, subsequently, the independent chair of their audit board. And that was during a period when Newham was hosting the 2012 Olympics, going through massive regeneration. So, in terms of the complex financial matters and challenge in an organisation's governance, that's where I started my board career. That then has just continued in the roles I've subsequently taken in my non-executive career, as vice-chair of Digital Health and Care Wales. In all of the organisations that I currently work with, I'm either chair or I'm on the audit board, so I've retained that interest in the financial governance of organisations, as well as the wider operational aspects of organisations.

09:35

You talk a lot about, obviously, that audit side of things. What are your views regarding the fiscal devolution of Wales and the future of the devolution of taxes?

So, it's really interesting, isn't it? Because we currently have two devolved taxes at the WRA and there's obviously the potential for more there further down the line. So, my views are the same as they would be anywhere—taxation is the mechanism by which Government raises revenue for public services, and that's why it's important to get it right. If there are future taxes that come down the line, that's a matter for Government as opposed to me.

Okay. Thank you very much. Mike, you have got some questions.

Yes. I've read through the number of different roles you've had and the ones you currently have, and it's very impressive, if I can say that for the record.

Do you have any concerns of any conflicts of interest with any roles you've had recently or any roles you currently have?

I've declared everything that I currently do and discussed at interview whether there would be a conflict or a perceived conflict. Currently, I don't think there is, but if a conflict or a perceived conflict arose in the future, then I would seek to manage that.

Okay. Thank you. The WRA has worked incredibly well in its initial few years, and I think most people have been very impressed by the work it has done, and that owes a lot to your predecessor, as well as to Dyfed, who's done a phenomenally good job at running it. What are your aspirations for the WRA, and what are your priorities as chair?

Well, I think you've captured my aspirations there; it's really exciting to work with a successful organisation, and my wish is to work with an exceptional board that supports the WRA to be a success and to continue to do that. So, in terms of how I operate and my priorities around that, it would be around continuing transparency, openness, value on relationships and value on the people who work at the WRA. Obviously, my first priorities are going to be to get to know the board and get to know the organisation and get across the current operational challenges, of which I'm sure you're aware: accommodation is one of the key ones, the cost-of-living crisis, all of those good things.

Thanks, Mike. Peter. Oh, hang on, Peter, we can't hear you. Bear with me. There we are. Yes, we can hear you now.

Good morning, Ruth, and it's good to see you. Well, actually, I can't actually see you, because I can only hear you on the screen, but thanks for coming along and well done for getting this far. And I just wanted to pick up on what do you think the challenges might be for the WRA in the future. What sort of things are you going to be having to manage?

Well, I think I just noted a few of them there: there are current operational challenges, there are potential new taxes coming down the route, and all of that will require investment, redesign of services. So, there are some big operational challenges, I think, facing us. But over the top of all of those challenges is retaining the ability of the WRA to continue to be a relational organisation that does things in the right way. I think Mike noted it's been successful so far and that’s because of the way the organisation does things. And, as you potentially expand, change and grow, retaining that ethos is going to be the biggest challenge that cuts across all of the operational work.

09:40

Yes. Well, thanks for that. Obviously, you’re going to be reliant on your board and going to be working closely with your board. How are you going to engage them, and how are you going to lead that board and shape the culture of the WRA?

I think it’s about opportunities to get to know people, first of all—I’m already starting to plan some of that in—decide on any formal mechanisms that I will be using to meet with people, to review people; mapping out external stakeholders as well, because I think that part of the—. The relationships are incredibly important at the WRA. I’d want to continue the good work that they’ve already done; I wouldn’t seek to go in and turn anything on its head, I think.

Thanks. You’re going to be working, hopefully, closely with the chief executive and the senior managers to ensure that the WRA carries out its duties effectively. How are you going to approach that? You’ve talked a little bit about getting to know them. What’s your thought process of how do you do that?

It’s interesting, isn’t it, because obviously the non-executive members, as it’s a non-ministerial department, work alongside the executive. So, it’s that supportive challenge as opposed to, necessarily, direction, which you might find in a traditional chair/chief executive relationship. So, for me, it’s about that; it’s about understanding and being very clear with the board about our role as non-execs in terms of that constructive challenge, and it’s enabling those relationships to work well so that we as a board get the information we need to be able to do our job, because, if those relationships don’t work, then we can’t be guaranteed of the flow of information that’s coming to us in terms of making our decisions.

What's the current—? In your mind, going into the role, what’s your current top challenge, if you like, for the WRA as an organisation?

I think it’s retaining that ethos, it’s retaining that culture as things change. I think there are lots of external pressures, as we well know in terms of the cost of living currently. So, there will be lots of external pressures on our staff, and, as we grow and develop, it’s retaining that ethos and being able to still do things in the right way that I think is definitely the biggest challenge, especially for a successful organisation.

Obviously, you’ve touched on this, that it’s a non-ministerial department. How do you ensure that the WRA then is operationally independent from Welsh Government and accountable to us here in the Senedd?

Yes. It’s a conundrum, isn’t it? It depends what you mean by 'operationally independent'. I think the WRA already has built in that separation in terms of keeping data separate and operating in a way that doesn’t allow Ministers access to any of that data in terms of influence to individual taxpayer decisions. So, I think there’s that operational independence in that regard, but, ultimately, particularly as a board of non-execs, we’re appointed by Ministers and answerable to Ministers in the Senedd. So, I think we can provide that independent challenge, but, ultimately, we’re all here to serve—to serve under the Ministers.

Great. And just the WRA’s relationship with us as a Finance Committee—how do you see that shaping up, and how would you like that engagement to go on, and what sort of challenge would you like from us and what sort of information could you help us with in understanding the challenges of Government?

I think I—. It strikes me that the relationship is good so far, so I would obviously want that to continue, and it’s helpful being able to bring things into the open and work openly in terms of presenting to committees. I know the WRA provides opportunities for the committee and for other Senedd Members to learn about the work of the WRA as well, so I would hope that that regular engagement would continue. I would expect you to be interested in some of the bigger projects that we do; as and when we take on new devolved taxes, I would expect you to be interested in that, and about how we’re going about doing that, and I’d expect you to be interested in the discharge of our functions around that. 

Yes. You've talked about new devolved taxes. We’ve got other taxes that are devolved that aren't dealt with by the WRA—the partial devolution of income tax is one, but also non-domestic rates is the second. Both are very large earners for the Welsh Government. Do you see yourself becoming more involved in those, or do you see that that split is correct?

09:45

I think we would be able to provide advice as the WRA on whether we could be involved in that. I'm sure there's a lot that the WRA could do, but it would be a matter for Treasury to set the policy on whether we took that on or not. 

Thank you very much. Well, that's the end of the questions that I had. Peter, did you have any further questions at all? No. And Mike?

Lovely. Thank you very much. Well, thank you so much for coming in. Diolch yn fawr iawn. And we'll now be reporting back to the Minister, and fairly quickly actually; I think the report needs to be in by tomorrow, so we'll be doing that very quickly. But thank you so much for your time. 

4. Cynnig o dan Reol Sefydlog 17.42(ix) i benderfynu gwahardd y cyhoedd o eitemau 5, 6, 9, 10, 11 a 12 ac o ddechrau'r cyfarfod ar 29 Medi 2022
4. Motion under Standing Order 17.42(ix) to resolve to exclude the public from items 5, 6, 9, 10, 11 and 12 and the start of the meeting on 29 September 2022

Cynnig:

bod y pwyllgor yn penderfynu gwahardd y cyhoedd o eitemau 5, 6, 9, 10, 11 a 12 y cyfarfod, ac o ddechrau'r cyfarfod ar 29 Medi 2022, yn unol â Rheol Sefydlog 17.42(ix).

Motion:

that the committee resolves to exclude the public from items 5, 6, 9, 10, 11 and 12 of the meeting, and from the start of the meeting on 29 September 2022, in accordance with Standing Order 17.42(ix).

Cynigiwyd y cynnig.

Motion moved.

Under Standing Order 17.42, I resolve to exclude the public from items 5, 6, 9, 10, 11 and 12, and the start of the meeting on 29 September. Is everybody happy with that? Thank you very much. Okay, we'll go into private. 

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 09:46.

Motion agreed.

The public part of the meeting ended at 09:46.

11:00

Ailymgynullodd y pwyllgor yn gyhoeddus am 11:00.

The committee reconvened in public at 11:00.

7. Archwilio Cymru—Craffu ar Adroddiad Blynyddol a Chyfrifon 2021-22 a Chynllun Blynyddol 2022-23: Sesiwn dystiolaeth
7. Audit Wales—Scrutiny of the Annual Report and Accounts 2021-22 and the Annual Plan 2022-23: Evidence session

Croeso nôl a chroeso i bawb gartref. Rydyn ni yn ôl mewn sesiwn rŵan.

Welcome back and welcome to everyone who is at home. We're back in public session now.

It's good to be back. I'll go into English, so you can all take your earphones off. It's nice to see you all. Thank you very much. We're going to have two sessions now with Audit Wales, one on the scrutiny of the annual report and accounts and the annual plan, then followed by the supplementary estimate. We'll probably keep them as two separate entities, and we'll have a little bit of a break. I think we've got a little bit of a change of personnel at one point. But if you could, Adrian, give your names for the record and your roles. Maybe you want to introduce everybody, or everybody can introduce themselves.

Of course. I'm Adrian Crompton. I'm the chief executive and Auditor General for Wales.

I'm Lindsay Foyster, and I'm the chair of the Wales Audit Office board.

I'm Kevin Thomas. I'm executive director of corporate services and a board member.

I'm Ann-Marie Harkin, the executive director of audit services.

Wonderful. Croeso cynnes. Welcome. We've got quite a bit to get through, so we'll crack on. Thank you very much for the documentation that we have had from you. It's always good to have a read of what you've been doing and how you've been serving Wales.

I'd like to start by looking at how the organisation has worked in 2021-22. Your annual report notes that the exercise of your functions has been broadly consistent with your annual plan, and you've substantively achieved your associated priorities. It also suggests that some deadlines were extended and 98 per cent of audit products were delivered by the statutory deadline. What deadlines were missed, and what were the impacts of that?

Just briefly by way of introduction, I'd echo your comments, and it's reflected in the report. I think 2021-22 for us, like all organisations, was an extraordinary year—the second of the pandemic, really. There were huge pressures on staff as a result of that, some of which is reflected in aspects of our organisational performance, which I'm sure we'll come on to. But against that backdrop, one of the most positive things for me is the performance reflected in our KPIs against the audit delivery indicators in particular—a continued high level of performance in that area.

You mentioned the 98 per cent of audits delivered to statutory deadlines. We have a target of 100 per cent. I'll ask Ann-Marie to flesh it out in a little detail, but in a nutshell that's down to two major audits that were delayed—the Welsh Government's audit of accounts, which you're probably familiar with, and also Pembrokeshire local authority. I produced a public interest report into an exit payment to the former chief executive there, and the accounts couldn't be signed off until that PIR had been published and handled by the council. But Ann-Marie, do you want to say a little about how that compares with elsewhere?

Absolutely. The deadlines were extended. That was in agreement with the Welsh Government and in recognition, I think, of the extraordinary circumstances we all found ourselves in. If you look at local government, for example, the accounts prep was moved from the 31 May deadline to 31 August, and in the case of audit completion, it moved from 31 July to 30 November. So, those deadlines were moved in order to give the accounts preparers and the auditors longer. 

In terms of performance, as Adrian said, we did exceptionally well. It's only the one unitary authority in local government, the Pembrokeshire example that Adrian has given, that wasn't signed off. I think that was really good. In England, by way of comparison, by 30 September—that wasn't a deadline in Wales, but was in England—only 9 per cent of audits had been signed off, whereas we would have been able to sign off 41 per cent even at that stage, and that was two months earlier than our deadline here. So, I think our staff did an amazing job, actually. 

11:05

Thank you very much. The annual report highlights declining performance in three specific areas of your people survey. As you know, this committee takes a lot of interest in how your people are and how they're feeling as well. The results also show less than a quarter of the staff agree you manage change well and that the changes you make are usually for the better. How concerned should the committee be about these results?

If I may, I'll ask Lindsay to respond to that, because those are questions that the board has been asking as well. 

I'd echo that the board also holds a really clear interest in the needs of the staff and what's happening to staff in the organisation. So, absolutely, I think it's only natural that the board and the executive leadership team, our ELT, are concerned when they see results like this. Having said that, it's clear that the board also holds ELT to account for its performance, and the staff survey is one of the ways in which we understand and evidence performance. So, we've had very thorough discussions with ELT and provided challenge to make sure that we have the assurance at board that we understand the issues that are at play here.

We feel that it has been important to make sure that we understand what lies behind the results—not just that we have a reaction to the results, but actually know that any actions we're going to take in the future or have been taking are the rights ones. Because it's really important that we focus on understanding how to improve that staff experience. One of the things that we've also wanted to make sure is that we don't just wait for the next staff survey to know how things are progressing. So, we also, this year, have implemented a mid-year review so that we get a sense, a touchpoint, through the year to see how the actions that we have identified and management have identified are then making a difference. I think in giving some context to that, it's really about how we understand where that decline in staff experience comes from. We think there are many aspects to that. Clearly the pandemic and the impact of the pandemic is still at play in relation to these results—the impact on people's individual well-being and the way in which remote working has impacted on morale across all sectors, to be quite honest. 

We feel that there have been a couple of things that have been really important: thinking about how our trainees have had that access to that more immediate coaching and development as part of their experience when they've been having to work remotely; and then also thinking about how, both for our audited bodies and Audit Wales, working in a remote way has led to some inefficiencies and limited productivity at times, resulting in a backlog of work. What we've identified as one of our key areas of concern is workload pressures, and we believe that, for all those reasons that that's come about, that is one of the things that is at play here. And that, of course, has been impacted, as committee is aware, by the travel and subsistence review in terms of staff morale as well. 

We've been assured as a board by the further deep dives that ELT have taken in trying to understand what's behind the results, and one example is, as you've mentioned, around how we manage change. So, additional work has been done to find out what it is that is difficult for staff in terms of appreciating, understanding or believing that we do manage change well. And as a result of that, we've put into place a lot more around communicating and engaging staff with change and enabling staff to understand the need for change and the impact that that change is having in a positive way. We've also invested time and energy in addressing broader issues that have come through. An example of that would be that there was concern around understanding the direction of travel for the organisation. That was something that came out strongly in the survey. So, we now have in place our five-year strategy and a very clear business planning process within the organisation that enables staff to connect to that and understand that a lot better.

11:10

Is some of the concern based upon the fact that you actually threatened to use 'fire and rehire' during the last year and you can't go back on that now? Would you commit to not using that in the future?

I think some of the decline in scores, as Lindsay said, was affected by the changes that we were making to the travel and subsistence scheme. In terms of fire and rehire—dismissal and re-engagement—the first thing I'd say is that the kind of practice and use of that approach that some parts of the private sector have adopted, to me, is abhorrent. It is nothing that I would be associated with and I'm sure I speak on behalf of the board in saying that as well. It is a polar opposite to the approach that we took in Audit Wales to negotiate a fundamental change in people's contractual terms.

The committee will be aware of the background. We were looking to negotiate away a £3,350 annual allowance paid to the majority of our staff, which could not be justified on value-for-money grounds. But it was a contractual entitlement. We never threatened people with dismissal. We went through an extensive period of communication and engagement with staff. We empowered a group of staff to design alternative proposals that we now have in place. We consulted the entire organisation over the summer and made changes to our proposals on the back of that. We went through several months of formal negotiations with our trade unions and made further concessions and changes on the back of that. Our unions then balloted their members and a majority of members voted in favour of acceptance of the new contractual terms.

Only at that point were we asked by the union, 'Well, what will happen if any individuals refuse to sign the new contract?' We explained that, like any organisations that had been through that process, there would be two fundamental options available to us as an employer: either to impose the new contract unilaterally or to dismiss and re-engage immediately with no loss of employment rights. Those would be the options available to us as an employer. We would, if we were in that position, choose which one to go with on the basis of the individual circumstances at play, and taking account of advice from our employment legal advisers as well on the risk that it would open up to the organisation. I'm pleased to say that it never came to that because 100 per cent of our staff signed up to the new terms and conditions voluntarily. So, yes, right at the end, we explained that it had to be one of the possibilities open to us to get that over the line, but it came at the end of a very, very extensive period of negotiation, which I would say is in line with best practice if you're looking to make that sort of contractual change.

Okay. Thank you. We'll discuss it in private later, I hope, Chair.

Certainly. Obviously, you've talked about self, family and work, in that order—that's the maxim that you've been working to throughout the pandemic. How has the practical implementation of that maxim changed in response to the worsening performance around staff experience?

Shall I take that? We've maintained that maxim, and I think in my previous answer I explained the cumulative effect of the aspects that impacted on staff well-being. We believe that that's resulted in the decline that we've seen in the people survey. So, we wanted to respond positively to that whilst keeping that maxim in place. As a result, the board and ELT have maintained that focus on redressing the workload pressures that I mentioned earlier. We've also launched a well-being strategy that contains within it a theme around living well and a theme around working well. We've developed a coherent learning and development programme, and that's about supporting changes in audit methodology. We've also encouraged people to come back together in their teams, and we've wanted to empower and enable teams to work out the best way in which they can facilitate work and manage to deliver against the objectives, while at the same time looking after their own well-being, which inevitably is different for everybody individually, so it's been for teams to work out what is the best arrangement for them.

11:15

Thank you very much. The annual plan for 2022-23 suggests you've been making changes to the staff experience and engagement indicators. Why have you made those changes and how will they drive the improvement? And how will you ensure that you're going to be able to track it through? So, it's not as if you're just changing the goalposts to make it easier; it's more—. Well, why are you making the changes and how are you making sure that you're keeping an eye on what—? That you're comparing apples with apples, basically.

Okay. Again, if I start on this one. In fact, it was following a very extremely helpful challenge from Finance Committee last year, in relation to whether the target for our civil service people survey key performance indicators was too ambitious, that got us—as board and ELT—to go and review the KPIs in that area. To achieve that top percentile comparison is still our ambition, but we want our targets to be meaningful and achievable, and particularly—as you were saying there—to drive improvement. So, we need to have targets in place that enable us not only to make useful comparisons, but as you say, to be able to track over time. I mean, a percentage score is something that we can look back on and look back at trends over time anyway; we don't lose that in terms of moving to the median score.

But also, our view is that this is about driving improvement and about learning as an organisation. So, again, it goes back to wanting to understand what's beneath the scores, so that we can understand the areas that we can improve on, rather than simply benchmarking across. It's useful to have that comparison, but it's not the only element that we feel is important in considering the results from the staff survey. It might be helpful just to say that, in terms of benchmark, around staff engagement, the median for the civil service score is 65 per cent and Audit Wales was 64 per cent in the staff survey results.

Chair, could I just say something? So, as Lindsay said, this reflects a degree of humility on my part—our part—I think, that as Lindsay said, last year I think you challenged us on the achievability of such a high target. To have taken a step back from that in the following year, I think you would have challenged us even harder, rightly, this year. So, we felt it was a more realistic ambition, given where we are now.

In terms of comparability over time, we're just about to start this year's people survey, which will be on the same basis as the last, but this is the last year of the contract that we have to run the civil service people survey. So, we will be thinking over the next few months about what we put in place after that. The civil service survey is a very, very big one, and it's once a year. Personally, I think we would benefit from having something a little smaller and more flexible, and maybe something we could use through the year to gauge staff experience more in real time. So, this time next year, we'll be looking at equivalent data, but after that, it may be that there is a slight break in comparability if we make that sort of change.

Okay. You've not achieved your audit quality target this year for audits assessed as 'good or above'. What issues were identified? And since its establishment in 2020, what has your audit quality committee done to improve the quality of audits?

Can I ask Ann-Marie to answer?

Thanks, Adrian. And thanks for the question. So, this relates, then, to our financial accounts work, where we have external quality assurance in 2021-22 of the previous year's audits that were completed in that period. And it's a fairly small sample, so one of the four didn't meet the KPI target.

In terms of the issues that were identified, it wasn't that there was an unsafe opinion, the opinion was fine, which is what we're really concerned about, but I think what the external quality assurance department of the Institute of Chartered Accountants in England and Wales identified was that there was a lack of evidence in some cases of sufficient engagement lead review of the work. So, there were e-mail trails, but as far as the audit is concerned, it needs to be on the audit file. Having it in e-mails is not really acceptable, so they identified that.

They also identified a lack of clarity, maybe, with regard to complex asset valuations and pension source data—so, pretty techy. What we did on the back of it though was we did a root-cause analysis, which would be our standard practice in these instances, to identify learning points, and learning points not just for the team, but that are then disseminated. I think that's really important as well, because some of these issues can arise elsewhere, so the important thing is that you learn. So, it wasn't an unsafe opinion, but there were learning points and we've disseminated those, and an action plan was put in place and that has been monitored and addressed.

What I would say is that, as an organisation, we're placing huge emphasis on quality. I think we've got a really good story to tell. It's undoubtedly after some pretty significant corporate collapses in England, where there were questions asked about the auditors—where were the auditors? I think it is an area of focus for the profession anyway, and we're playing a massive part in that. So, in the last year alone, we've doubled the amount of external quality assurance of our accounts work and we've introduced external quality assurance of our performance audit work as well, where previously we had had internal reviews and peer reviews with the other audit bodies. So, for us, it's at the heart of everything that we do, our quality has absolutely got to be spot on, so a lot of investment in that area.

In terms of the quality committee, do you want me to pass? Yes, sorry.

11:20

You asked about the quality committee contribution.

Thank you. So, I chair the audit quality committee. As you say, we were established in 2020, we meet several times each year and we essentially look at the initiatives that we've got in place to drive up audit quality. One of our other roles is to provide Adrian, as auditor general, with assurance that we've got the right level of investment in our audit quality arrangements.

So, in terms of the differences that we've made as a committee, certainly, we've helped to secure additional investment in the central function that supports our audit quality arrangements. Ann-Marie's talked about the QAD reviews carried out by the ICAEW, so we've overseen the extension of those reviews and also the piloting of work beyond financial audit into performance audit, and we've also looked to enhance our support functions in particular specialist areas, like pension valuations and asset valuations, which, overall, help to strengthen our arrangements. We're also looking at having a new quality management system in place by the end of the current calendar year.

I think it's fair to say, as well, that the board has been particularly interested in our work on audit quality. We've provided regular briefings to the board on our work, and the board has links or sponsors in four or five key areas, and for audit quality, it's actually Lindsay as chair who sits as our board link.

Something else worth flagging is that we, as a committee, oversee the production of our annual quality report. That's something that we're actually going to be publishing next month, and that'll give more detail about the work we've done to drive up audit quality and the impact and the outcomes of that work. It's something that we do on a voluntary basis. We think it's really important to do that in the interests of transparency and to help drive up that continuous improvement in audit quality.

Yes, thank you, and I think you partially answered some of this. So, in regard to your statement that none of the audit opinion or conclusion was incorrect and it was around presentation and clarity in the report and the pension information they talked about, I just wanted to be reassured of what you've said in terms of that this was one case file, but—

Yes, it was one of the four that we reviewed. So, every year, every director—

Okay, so the question would be: is four enough in terms of your future committee, because that is a very big drop, isn't it, 100 per cent down to 75 per cent? I understand what you're saying. So, the mitigations that you've put in place then, my question is then, on that basis: how do you know, currently as you sit, bearing in mind that you've got mitigations that are coming forth, that these practices are not far wider spread?

11:25

In terms of the one file, by, I suppose, looking at that, looking at what the problem was, then maybe undertaking a focused review of other files. So, engagement leads have a role to play in that. The engagement lead would do that. As I said, I've doubled the amount of quality assurance, though. So, we are due, and we're planning it at the minute, another tranche of quality assurance, double the amount that we've had in previous years. So, I will be waiting to see what the results of that are.

But, I think it's important to make it clear that the opinion itself was safe. What you have to do, though, is to comply with auditing standards, and auditing standards would require that everything that you do is on that file. But, we do disseminate, and then the engagement lead has got a role to play in ensuring that those points are addressed specifically, and other points are addressed as well, and then we're doubling the amount of quality assurance, external quality assurance, and looking at that carefully and considering it at quality committee.

It's a big deal, Rhianon, as you can imagine. Within the organisation, people say, 'What's that about?' It's not as though this is something that people within the organisation are not taking notice of. Ann-Marie, through her directorate, and all of the teams, have been taking this extremely seriously and focusing on the root cause that she identified.

Lindsey and I, a couple of weeks ago, met with QAD, the people who undertake these external reviews for us. I was really assured by what they reported. They've been doing this now with us for several years. They say, as an organisation, they see consistently high-quality work. They are picky, as I think Ann-Marie's description of the issue here illustrates, but they were very complimentary about the culture within the organisation, that people aren't defensive about this kind of thing, they want to learn, they want to be better.

So, it does look like a dramatic drop, 100 per cent to 75 per cent, but that is one out of four, as you say. A few years ago, we weren't publishing this data at all—this was all held internally. I and the board were very keen that we put it out for this kind of scrutiny and challenge, and also that we ramp up the scale of that external review, as we're doing.

Just quickly from me, before we move on to Peter—I know that Peter's got some questions—the Welsh Government's 2020-21 accounts were delayed significantly. You have a statutory responsibility or requirement to lay the accounts before the Senedd within four months of receipt. How have you kept the Senedd and the Finance Committee informed that you'd missed the statutory deadline, and what have been the implications on your resources and the cost of audit?

Sure, thanks. Yes, this has been a massive thing for us, as you can imagine, this year. So, two statutory requirements that are relevant: one on the Welsh Government to deliver an auditable set of accounts to me by the end of November; and then, as you say, for me to complete the audit within four months. The legislation is silent on what should happen if either of those parties fail to deliver on those. That's unusual as far as the Welsh Government is concerned. For other bodies, if I were in that situation, there would be explicit requirements on me to lay a statement before the Senedd. That is something I would welcome.

In the absence of anything like that, I felt the most appropriate thing to do was to keep the Public Accounts and Public Administration Committee informed. Mike and Rhianon will know. In fact, Mike told me, quite early in the process, 'I'm going to ask you this question every single time we meet.' And you did do. [Laughter.] So, I felt that was the most appropriate way to keep the committee and, through the committee, the wider Senedd appraised of the situation. On occasion, I followed that up more formally in writing to the Chair at key points and, as you're probably aware, the Chair of that committee gave a statement to Plenary shortly before the recess. 

I must admit, my focus was on the PAPAC rather than this committee, because not only do I have far more regular contact with that committee than I do with this one, fundamentally, it has the retrospective view of the accounts, and you are rather more forward looking. So, that felt more appropriate to me. But, as I said, I would welcome, after the events of the last year, clarification of the expectations on me, and perhaps the Welsh Government, in the event that this should ever happen again. Legislative change, I suspect, is too much to ask for, but if there's a way to develop some kind of memorandum of understanding that would put some arrangements in place, I would welcome that.

11:30

The costs have been significant. Ann-Marie might have a handle on precise figures. Over the last year, it has eaten up a huge amount of time for some of my most senior staff, and continues to do so. As you're aware, I'm required to pass on the cost of the audit to client bodies, and so we have done that to the Welsh Government. I'm also required to not pass on more than the actual cost of the audit. Before I ask Ann-Marie to say a little more, part of the cost that is relevant is—. This committee may recall that, a few years ago, you approved a proportion of the WCF funding we received in part to enable us to produce a commentary on the Welsh Government's accounts to aid wider scrutiny. We've not done that this year, but all of that resource, and more, has been devoted to the production of two memoranda that are going to the PAPAC this week to explain the fundamental issues behind the various qualifications. But, Ann-Marie, I don't know whether you have a handle the actual cost involved. 

It's certainly been a considerable amount of money, mainly because there have been significant additional hours, but also at senior grade as well. An element of that we can fund from the WCF element, as Adrian has just explained already. The precise breakdown as yet we haven't worked out, but certainly the costs have been quite high. So, in total, we would be looking at over £100,000 additional cost, but it's the extent to which part of that can be met by the WCF funding, if you like. And then, the part that needs to be charged in fees in accordance with the legislation, we would be discussing that with the Welsh Government. 

I'm sure we'd be interested in those numbers when you've—

Certainly, once they're available, if you'd like me or Adrian to write to you, we can do that. 

Lovely. I'll bring Peter in at this point. I think part of one of the questions has been answered already, but maybe you want to delve into it a bit deeper. Peter.

Thank you, Peredur, and good morning, all. Mike's already asked a part of the question where I was going to be just trying to follow up on the travel and subsistence scheme changes that you, Adrian, explained—you explained that away. So, thank you for that. I suppose, really, just to finish on that point, how satisfied are you with the process of implementing the travel and subsistence change, and what lessons have you learnt in terms of change management? 

Thanks, Peter. In terms of the process, I'm very satisfied. I'm very proud of the process that we went through. I'm certain that a good number of my staff would disagree, but I think there's a distinction between the process we followed and the popularity of the change we were making. Self-evidently, this is one of the most unpopular things that I will ever do internally within the organisation. I sympathise and empathise with staff because it was a very real reduction in remuneration for many people. But in terms of the processes, as I described earlier to Mike, it was extensive, it was sincere, it was open from the outset, it engaged staff genuinely in a way that I think would be best practice for many organisations taking through such a difficult change.

After completion of the change, we undertook what we call a PPL, a post-project learning exercise, with a cross-section of staff, members of our board, our trade union partners, on the lessons that could be learnt. I guess the main one was probably, in essence, a positive one. I think our trade unions, with the benefit of hindsight, wish that they had been more heavily involved earlier in the process, rather than at the end point. For us, more generally as an organisation, the lesson learned was around communication and engagement, but that was essentially a positive one. It had worked well. We could have done some things slightly better, I'm sure, but we reflected on the value of doing that in the way that we did, and we are now applying that to other pieces of change within the organisation that are hopefully less controversial and more positive, such as the office move, where we are looking to engage staff early and fully.

11:35

Thanks, Adrian, for that. That was helpful. I would like to move and just explore how your governance arrangements have operated throughout the last year. I know that, last year, the committee explored issues identified by your external auditors regarding the quorum of the board meetings. In 2021—well, in that period—RSM report two similar instances. Why have these issues occurred again this year, and how are you implementing the recommendations from the external auditors in this area? 

I'm happy to take that one. The board recognises that the Public Audit (Wales) Act 2013 sets out our quorum requirement, which is for there to be a majority of non-executive members present at a meeting, and that's for formal business and for any decisions that are going to be taken. However, I think that it is well understood now—it has been recognised in the past—that the Act has not been particularly well thought through in terms of how it doesn't provide for an effective mechanism to accommodate non-executive member absence. So, if we have one non-executive member absent, that makes us inquorate on that basis.

It's also recognising that the Act is trying to ensure that there is a strong staff perspective brought into board through the unique roles of the elected employee members. Also, we have the nominated employee member as a board member as well. So, we at the board are trying to balance those two aspects of the Act, which aren't always able to work well together. I think it's evident that, on occasion, if a non-executive member cannot make a board meeting—and, believe me, they always try, because of these issues—then it's likely that these issues are going to occur from time to time.

On the two instances that are reported from last year, one was for a board meeting that we called at fairly short notice in relation to the T&S review. One of the non-executive members was on a pre-planned holiday at that point, and simply couldn't make that. So, we dealt with that by making sure that the elected employee members—and, in fact, the nominated employee member—weren't party to any of the decisions made, and were not in the meeting at that point. We tried to balance that, though, with hearing the staff perspective through those discussions, because that's the basis of having those members at the board.

The other instance was when a different non-executive member had a clash of work commitments, which happens very rarely but does happen from time to time. We do plan our regular board meetings a year in advance. So, wherever possible, non-executive board members are arranging their other commitments around that. We have busy non-executive members. They bring their wealth of experience from a lot of different roles into the board. So, occasionally that does happen. And again, on that occasion, that was the first day of a two-day meeting, and we had an informal discussion around the topic, which was the five-year strategy, that day, and then we actually took decisions around that the following day, when we were fully quorate.

So, I think that, given the challenges of the Act, we take a pragmatic approach. We have a terms of reference for the board, which sets out the options that there are for us. We can ask an employee member to leave the meeting, or we can defer decision making to a meeting that will be quorate. So, that's the approach that we take. We understand the guidance provided and what the statute lays out that we should do, which is that people should leave the room. But, we have reviewed that on an annual basis in response to the auditor's report, and we've concluded that we are content with the approach that we're taking on that. 

11:40

Thanks for that explanation. If I can move on, I know that there has been a review of the effectiveness of the board by external sources. I just wondered what improvements have been identified through that review, and what are the details and timescales associated with the action plan as a result. 

I'll start off by saying that I was delighted that the external review of board effectiveness found us to be an effective board, with many areas of strength. That was obviously very welcome. We engaged with the review from the outset from a position of wanting to seek opportunities for continuous improvement, so we wanted the consultants to highlight any areas where we could further build on, and develop and improve that effectiveness even further. They highlighted four areas.

One of those was around board effectiveness as a team, and that was about working together as a team. They identified they believed that we'd operated very effectively in the virtual space through the pandemic, but it was about the opportunity then to come together and meet in person to develop the team even further, particularly on the basis that some of the non-executives and the new executive directors hadn't actually met each other in person at that point. We've held that development day. We had a facilitated session that was held in May, and we're following that up through discussion at strategic meetings that we have as a board. Then we've got a further session in December where we'll consider not only further actions from that, but also we are in the process now of our board self-assessment for 2022, and that's currently under way. 

The second area was around staff engagement, and that was really, again, about how we can do more of what we were doing and make more effective use of what we have available to us at board. As a result of that, you heard Kevin mention earlier about our board link roles, and they came through the review as being very valued in the organisation. So, we've reviewed that, made sure that they are linked into the key areas of concern in the organisation, or where they can add the most value. And we've extended that to include board champion roles, for example in relation to the new well-being strategy, where that's appropriate.

We've also looked at how we can maximise the role of the elected employee members who are there to bring the staff perspective in, but we also have understood that they can do more and have subsequently done more in taking the board view out to staff. They've done that around the travel and subsistence review and engagement on the five-year strategy development. We also really encourage employee observers to come to board. Again, in the virtual space, we can have more people observing, so we've been able to do that more, and we're encouraging those observers to reflect their experience to us at the end of meetings, and then also go out and encourage others to come. 

The third area is around board processes, so how can we make the board more effective through reviewing the processes. I won't give you the whole list of them, but some examples, for instance, are about making sure that information coming to board is appropriate—and we're giving guidance around that—and using that to enable us to keep focused at a strategic level at board meetings. That's as a result of planning the meetings but also the quality of the papers coming to us. We're thinking about how we manage time at board meetings so that we're giving due attention to items that come towards the end of agendas as much as we do at the beginning. I'm sure that's something that we all have to work through. And we're revising the format and timing of board meetings so that we better meet business need, so that we don't try and wrap business need around when the board meets, but we have the board meeting at an appropriate time in the business cycle, and using a hybrid way of working. 

Then, the final area, very briefly, was around the board's role in external stakeholder engagement, and that is a piece of work where we're developing an external stakeholder engagement strategy. We've had some initial focus for the chair and the senior independent director, looking at external engagement in relation to stakeholder feedback, but we know there's more that we can look at in that regard. 

Peter, I think Rhianon wants to just—. Sorry, Peter, I think Rhianon wants to come in with just a very quick question. 

A very, very quick question and a very, very brief response. Sorry to juxtapose a little. I'm just trying to process what you said earlier—that there were two incidents in terms of the quorum. It's not making any sense to me, but you were content with that. So, why were you content with that, bearing in mind that it's expressly the opposite position to what we were expecting this year?

11:45

Right. Okay.

I'll try and make it brief. So, the legislation requires there to be a majority of non-executive members present, so if one non-executive member can't make it, whether that's from illness, or for whatever reason they can't be there, then we become inquorate, so we have to remove one of the nominated employee members from the board meeting as a board member. However, that then removes their input in terms of staff perspective, which the legislation is also—

Okay, yes, thanks. And I'm pleased to note that staff members are sitting on the board, but I was quite surprised, or we were quite surprised, to see that staff members no longer play a part in the executive leadership team, and recognising some of the survey scores on employee engagement and some of the issues you had with the terms and conditions, I just wondered why you've done that. Now, I know they've joined a staff panel, so I wouldn't mind understanding why did you do it, and how are you going to engage with them? Because, you know, creating a them-and-us culture is not helpful when you've got some work to do to build relationships.

Well, absolutely, Peter. Maybe if I just try to clarify the change. So, back in 2019, I brought members of staff from lower grades in the organisation on to the executive leadership team as full members. My motivation for doing that was to try to refresh and reinvigorate that team at that time. In 2020, I undertook a fundamental restructuring of the senior team in the organisation. That came to fruition in the spring of last year when Ann-Marie and Kev and Anne-Louise Clark were appointed as three new executive directors for the organisation. Once that restructuring was completed, I changed the make-up of my leadership team, ELT. I wanted the four of us to be very clearly accountable and responsible for the executive leadership of the organisation, but I didn't want to lose that staff perspective and voice for exactly the reasons that you outline. So, I put in place what we call our staff panel. It currently has five members of staff on it from across the organisation. They receive every paper that the ELT receives, they meet as a group in advance to discuss, and then, one of their number, on a rotation basis, typically, will join us in the ELT discussions. If you dropped in and observed us, you would assume they were members of the ELT. They participate fully, there are no restrictions whatsoever, and I hugely value the input they bring. We meet collectively every quarter as well to review how that's going; we did that just a couple of weeks ago. The feedback from the panel members is universally positive as well about the experience, about the environment that we've created, and their ability to contribute fully.

We've also started to use the panel members in other ways to engage and communicate with other parts of the organisation. So, for example, in the development of our new five-year strategy, our panel members and the elected members on the board took the lead in engaging the rest of the organisation on various streams of work that led to the finalisation of the strategy. So, I absolutely understand what you're saying in the question, but I hope you're reassured that what we have in place is anything but a them-and-us approach; far from it, I would suggest. It's probably quite an unusual approach for the senior executive team in the organisation to have this degree of input from staff more generally.

Thanks. I know we had about an hour for this part of our meeting and we're going to go over, but if we could keep it to about 10 minutes each for your two question sessions. I will go over to—and, obviously, brevity would be appreciated in answers as well—Rhianon.

11:50

Yes. Thank you, Chair, so I'll crack on. So, you've expressed already that, in different formats, you've changed your KPIs again this year, despite this committee stating that we needed an ability to have comparative data. And we've gone into the decline in performance in the three areas of the people survey, so a quick question from me is—and it's a comment that was made at the beginning—why is your response to the people survey to change the surveyors? You said you were going to get rid of the civil service surveyors. I'm just interested in that, because we need that comparative data, obviously. It just seems a quick and easy fix; you don't like that, so, 'We'll go somewhere else'.

No. No, it's absolutely not that. Absolutely not that. We have a contract with providers to run the civil service people survey for us, and that contract comes to an end after we've run this year's survey—

We could renew it, but we will weigh up whether the survey that we have at the moment (a) gives us good value for money and (b) is giving us the tools we need to help drive improvement in the organisation. So, it's absolutely nothing to do with taking an easy way out. There are lots of surveys in this kind of space. They're are all focused on the same things fundamentally, which is staff engagement and staff experience, but they're designed in slightly different ways. And, like I said earlier, the civil service people survey is a particularly massive one. Some elements are more relevant than others.

Okay. That was a quick one that I've inserted in there because of what you said earlier. I mean, obviously, to me, it would seem the most appropriate. So, I'm going to go forth on to my questioning.

So, internal audit noted—and we've all discussed this morning the cultural challenges and resistance, which seems to be inhibiting the ability of the change management team to operate effectively. So, what does that mean in practice and how will the new change management team improve things?

Well, we don't have a new change management team.

We've had a small change team of four people now for three or four years. I think one of the main cultural shifts that we're looking to drive in the organisation is to break down some of the barriers and silos that exist within it. You know, that would be a familiar story, I suspect, for many organisations. The change team are integral to helping us do that, but it's not on their shoulders solely at all.

One of the major shifts to take us in that direction that we've focused on, especially in the last 12 months, has been to try to make sure that the energies of our change programme are focused on our core work as Audit Wales. So, focused on things that matter to auditors and the delivery of their work. For instance, the implementation of new auditing standards, new auditing software, learning and development for our professional staff and so forth. And I think the more we can do that, the more the organisation as a whole will feel that all our efforts are focused on the things that matter to the organisation most, and in the past, there's been a sense that that hasn't been the case.

Okay, thank you for that response. Very quickly, the cyber security review was classed as high risk, and we all know the importance of the data that you hold. How is that being mitigated? And if you could be brief.

Very briefly, Kev.

Sure. Yes. So, the review was basically what we call an 'ethical hacking exercise', so we gave our internal auditors a laptop to try and break into. What we're looking for is multiple levels of protection, so, defence in depth, so if one control fails, another one will be there to take its place. And so, we deliberately disabled a number of the controls that we've got in place to see what internal audit could do, to see if there were any residual vulnerabilities. So, we took away things like antivirus software, multifactor authentication to see what they could do. They found one issue, which led to the high-risk rating, which was where a system, username and password—so, not a personal one, but a system one—

11:55

I'm conscious that we are broadcasting this, so I hope you have mitigations in place. 

Yes, we do.

—was found, or could have been found by a user—they'd certainly have to go looking for it. During the course of the field work, we addressed that problem. We didn't wait for it to be—

It's addressed, and we've changed our complete laptop build now, so that issue has been eliminated so that we now have much greater control. 

Obviously, it's a very important issue. I'm going to move on. So, no voluntary severance packages were agreed in this year. Was this a deliberate policy, and why have you taken that approach please?

This year, yes it was a conscious decision. We've used voluntary exit schemes in the past when we've been looking to make changes in the structure of the organisation. In 2021-22, we weren't in that space; we also had a fair degree of staff turnover and vacancies, which gave us flexibility. So, we took a decision pretty early in the year that we wouldn't be running a major VES scheme in 2021-22. An additional factor in my mind was also, going back to the T&S review, as you know, we asked for a supplementary budget to help fund a pay-out, an upfront payment for that, and so, it seemed also a greater priority for me to squeeze any efficiencies we could find in the organisation to help fund that. 

Thank you. So, we've noted that you've got staff costs in-year saved, of £1.2 million, relating to higher than expected staff vacancies. And it states that you've got a fee income of £1.5 million less than the estimate. So, could you just elaborate a little on why that is the case please?

Ann-Marie is probably best placed to— 

I will keep it brief. So, there has been a reduction in the level of grant audit that we have to do, following a change in Welsh Government policy. But if we don't have the staff in place, i.e. we had higher than expected levels of staff vacancies, we can't do the work and generate the income. And that, I suppose, is the sort of challenge we've faced. There was also an element, I would say, of work taking longer to do because of the way in which we were having to work. And, obviously, that is where the fee costs more because the work takes longer. That was a cost we were absorbing; we weren't passing that on to audited bodies. So, it would be a combination of all three of those really, Rhianon. 

Okay, thank you. And in the same vein, the financial audit work for local government has been declining for quite some time. Is there a simple explanation for that?

In terms of the amount of income that came in from local government in the two years—I suppose you could say 2020-21 and 2021-22—the reason for the decrease would simply have been that, as there was a build-up of work taking longer, we were less far advanced through the following year's audit work. So, one year would take longer; you would get income from that, but you would be unable to recognise as much of the following year's income, if that makes sense, because you wouldn't have started that work. So, by way of example, I think we were only about 17 per cent through our 2021-22 audits at 31 March 2022, whereas we were 25 per cent through in the previous year. So, we can only recognise the money when we do the work. So, although we are invoicing, we can only recognise it at the point that the auditor turns up and does a day's work. So, you have to be far enough through your audit work for the following year as well. 

Well, we are trying very, very hard to get back on track. So, we're hopeful that, where we've had audited accounts in, or we've had accounts in, we will meet this year's statutory deadline, as we have done in previous years. But, we do face challenges next year and I'd be lying if I said that we didn't. Not only have we got this backlog of work, where we're having to constantly prioritise and reprioritise, we've got a completely new audit approach coming in. So, we've got a new audit approach, brought about by new international auditing standards that we have to comply with, and that is going to present us with problems. So, I wouldn't say I'm losing sleep exactly, but it's certainly a challenge for us. 

Sorry, Rhianon, just to pop in on that. So, if you're behind on audits, and you only realise the funds for doing those audits when you've carried them out, does that mean that, at some point, the money will eventually come through, and it's just more of a timing issue, rather than that you're not going to get paid for it, or you're doing less work?

12:00

It's the timing. So, essentially, you finish off one year's audit in the year, and you start the next year's. What happened in this case was that because the first year was taking longer to complete, you hadn't done as much of the second year's. Does that make sense? I'm not sure if I'm explaining it, but it's just a timing issue. We're not drastically reducing the amount of audit work we do—for now, anyway.

Thank you. That's more clear. Your accounts note an underspend on capital of £138,000, which is almost 40 per cent of the budget. Will you outline to us, please, what the implications of underspends are for Audit Wales, and what it means in the future?

I think much of the underspend relates to our IT replacement programme for laptops. It's affected by this global shortage there has been in computer chips, which has caused all sorts of delays in the production of laptops, cars, et cetera. So, we couldn't buy the laptops that we intended to. What that means is that we've got a small backlog in our replacement programme, which we're addressing this year through much earlier ordering times; lead times have probably pretty much doubled. So, that's what we're looking to do to bring ourselves up to speed. The remainder of the capital budget for this year we're looking to focus on the office move, which of course we'll talk about later, and in future years in taking forward our digital strategy.

The underspend on the computer chips and laptops will obviously still have to happen if you've ordered them and are just waiting for them. So, in the interim, is that money being reallocated for the office move?

It was an underspend that we've returned. Yes.

That's fine. I Just wanted to know. Your annual estimate draws on the previous estimate when making year-on-year comparisons. Your 2022-23 estimate of £22.3 million was used as the baseline for your gross revenue expenditure, but your accounts show that the outturn for the year was almost £1 million lower. How do you account for that when you're preparing next year's estimate? That's a lot of money.

It is. As Ann-Marie has mentioned, the 2021-22 financial year was pretty unprecedented in terms of staff vacancies. We've been successful in recruitment since then, but we've got a lot of catching up to do. So, we think now that the 2022-23 estimate is a realistic baseline for 2023-24. Of course, we need to look at other factors in that. One of the things in particular we'll be looking at is the impact of reduced travel for our staff, and of course that will influence and reduce the estimate for 2023-24.

I don't know if the answer is 'timing' to these next two questions—you've answered that to questions Rhianon has asked similarly. We know that receivables were £1.7 million higher at 31 March compared to a year earlier. We know deferred income was £1.3 million higher compared to a year earlier. Are there underlying reasons for that, or is it just timing?

If I start with the trade receivables, Mike, it's timing, mainly down to staffing pressures. We're talking of a couple of weeks or so, with payments subsequently made in April—just slightly later issuing than we'd planned.

Thank you. And on deferred income, is it the same?

It was to do with the timing issues that we discussed earlier.

I just wanted to get that on the record. You've got £60,000 of travel buyout for 2022-23 and £88,000 for future years. Is that again a timing issue?

The £88,000 includes the £60,000. It represents what we agreed with staff during the negotiations around the travel allowance withdrawal, so that in the event that we either extend a fixed-term contract or change their working pattern, we honour the original terms of the agreement. So, for example, if you had 18 months to go on your contract, you'd have got three quarters of the buyout, but we agreed in negotiations that it was fair that if we extended that contract then you'd get proportionately more of the buyout. It was something that emerged quite late on in our negotiations, which is why it didn't feature in the supplementary, but it was something that we talked through with the unions as being a fair approach.

I think we'd agree with it being a fair approach. Your five-year strategy focuses on three areas: assure, explain and inspire. Can you outline the spread of your resources across these headings, how your annual plan for 2022-23 supports delivery of that strategy, and whether you have started to implement the associated objectives?

12:05

Assure, explain and inspire has been our headline for four years now. It's not possible to put precise numbers on it, because they all obviously interconnect. But, if I had to, the guts of our work is about assurance. So, probably 60 to 70 per cent of our staff resource and effort goes into that, maybe 20 to 30 per cent on the inspire piece, which is about driving improvement in the wider public sector, and the remainder on the explain strand, which is about explaining some of the issues that the public sector faces to the wider public. The new five-year strategy for the first time gives us a framework within which the annual plans that we're required to produce by statute now sit. So, our 2022-23 annual plan is the first, and I envisage that annual plans from now on will nestle within that five-year strategy, will show what we have to do in that year in order to progress along the road to the completion of the strategy. They are, in turn, underpinned by detailed business plans that Ann-Marie, Kev and Anne-Louise hold for their business areas that have the real nitty-gritty of actions and steps that we want staff to do in order to deliver that. Progress against all of that is monitored by the executive directors, by ELT and the board at a strategic level to make sure that we're on track to deliver the plan and the five-year strategy. 

Thank you very much. We're relatively good on time. We've got a bit of a change of personnel, I believe. Ann-Marie is leaving us, so thank you very much for your answers, Ann-Marie. We're just going to swap over. Then we're going to talk about the supplementary estimate for 2022-23. Laurie, I think, is going to join us. Thank you very much. Once you're settled, if you could introduce yourself, that would be lovely. 

I'm Laurie Davies from Audit Wales. 

Thank you very much. Diolch. Great. Rhianon has just stepped out, but we'll crack on, because we're probably going to run over a little bit on time, but I hope I have your indulgence for that. Mike, do you want to continue?

You're talking about moving to the Capital Quarter—and I can see the advantages of that—and you're talking about doing it in 2022-23. What's the advantage of doing it in that year, rather than the following year?

We're talking about doing it from next year. Our lease on Cathedral Road ends next March. We had previously contemplated seeking a one-year extension of that lease to give us a bit more time to prepare. In dialogue with the landlord, however, it became clear that that was not going to be something that was straightforward to do and would be quite expensive for us to do. And so instead we decided it was better to move at the end point of the lease, hence the request for a supplementary budget to help fund the move, rather than seeing it in the estimate that you would have for next year.  

Are you sure you've got the right amount of accommodation? The movement towards more homeworking is a direction that happened well before COVID, but COVID turboboosted it. Are you sure you're not taking on more accommodation than you need over a 10-year period? Because we've seen right the way across, especially in accountancy firms, that a huge number of people are spending most of their time now working not from their offices. 

Great question, Mike, and it's one Laurie and her team have grappled with endlessly over the last couple of years. The first thing I'd say is that Cathedral Road is way too large. It was too large pre pandemic; it's way too big for us now. Capital Quarter is about 40 per cent less than that. So, it's a significant reduction. It's on two floors and we're looking to negotiate break clauses on both floors so that if we find that, in a few years' time, it's still too much, we have a way to reduce our footprint still further.

That said, the pandemic and coming out of the pandemic has thrown up some really fundamental changes to our operational model. You mentioned other accountancy firms; actually, accountancy firms and certainly our sister bodies as public audit agencies are bringing staff back into their offices because they, like us, have identified that that is necessary to ensure staff well-being, but also the quality and efficiency of our delivery. Pre pandemic, our model for a lot of our work was for our staff to be located not on our premises, but onsite at the bodies we audit. That's very difficult for us to do. Bluntly, a lot of bodies don't want us to be onsite, and even if we are, the key people who we want to engage with might not be there. So, paradoxically, if anything, we think we probably need a bit more of our own space in order to bring teams together. It is a moving feast. We're piloting a lot of return-to-office work now, which is going well. It's certainly our best estimate. We think we've got it about right, but we've also built in those flexibilities over the next few years.

12:10

Just before I bring Peter in, something that you said in the first question was on the costs of staying put for another year. Is that reflected in the letter? Is that where the £360,000 comes into Cathedral Road in 2023-24, or is that something else? It's in the table. I think it says £360,000—

It's the cost of the investment that would be required should we remain in the premises.

And that would be if you remained there for a year, or if you remained there for a longer period?

Either. If we remained there for a year, there was going to be a substantial increase—for a one-year extension, a substantial rental increase. That still applies even if we were to extend longer term, but with the proviso that we contribute through capital into the space as well. So, it would be—

Yes, it would.

Okay. Thank you. Sorry for cutting across there. Peter. You're on mute. There you are.

Thank you. I note that the letter says that there's been a rigorous governance process around the relocation project. I wonder if you could outline how you have gone about making the decision to move to Capital Quarter and why. I know we've heard some of that in previous evidence. Why, given that other bodies might also find themselves considering their accommodation requirements, were alternative locations discounted? I wonder if you could flesh that out a bit more.

Shall I take that one? We have a change programme board, which is made up of members of the executive leadership team and also the head of finance. They've considered a wide range of options alongside the Audit Wales board itself. We've done, I think, three sets of different options appraisals prior to the business case, and we considered options across south Wales, particularly within a 40-mile radius of Cardiff. We looked at the private sector; we also looked at potentially sharing within the public sector and collaborating with other bodies on that. We also explored purchasing premises as part of this as well. We did consider a wide range of premises as part of this. What we found through the review was that there would be a significant impact on staff in moving quite far from the Cardiff area, and it would also have a wider environmental impact for staff.

There was limited interest in sharing initially, I would say, partly because of the pandemic and partly because of the size of space that we require. But we did really explore this quite widely. We went through Ystadau Cymru to do a trawl of the whole public estate, and we also then engaged with the GPA, the Government Property Agency, to see if there were options there. We also approached a number of public bodies directly. But, ultimately, Capital Quarter was considered the best overall in terms of quality after we had undertaken a number of different options appraisals and considered a wide range of premises. In terms of helping us to meet our environmental aims, it's very close to public transport as well, which was really a big selling factor for us and it will still enable us to achieve our target savings and cost, and also to meet our business needs as we are changing our operating model, as Adrian has outlined.

12:15

Peter, if I could just add one small point on the question of collaboration with other agencies. Obviously, one factor that we have to take into account, which is probably unique to us, is the question of independence. So, very difficult for us to enter into a kind of contractual client relationship with any of the bodies that we audit, either as landlords or as lessee.

Yes. That absolutely makes sense, Adrian—I get that. Obviously, as you've shared, you looked at several buildings and properties through your appraisals—30 or more, I would imagine. Did any of those score higher than Capital Quarter, and if they did, did you choose Capital Quarter because of that staffing inconvenience?

There were a few premises that did score higher, so we did explore, as I mentioned, within a 40-mile radius. We eventually narrowed that down through the appraisal. There were about 26 of those that were discounted for a variety of reasons—size, cost, location. There were a couple of premises that had scored higher, but it actually represented increased cost. And there were a couple of premises that initially scored higher, but then we revisited them and they ended up scoring less after we delved a bit deeper. Ultimately, we longlisted nine premises that we then got down to a shortlist of three, and Capital Quarter scored highest of those three across all of the quality areas that we had reviewed. It scored slightly higher in terms of cost, but it was only marginal over the life of the lease, but there were other reasons for discounting the other two remaining and those related to impact and environment.

Thanks for clarifying that. That was reassuring. Just a final question from me, then: you set out that the running costs of the Capital Quarter office will be £220,000 less than Cathedral Road; can you confirm whether these are cash savings that will be visible in your estimate, where the savings fall in terms of lease costs and other operating costs, such as energy? And how long will it take to deliver your savings target when all related costs are accounted for?

Okay. I'll start with the first part of that question, then. It will appear in the estimate, but we haven't broken that down in there. In terms of lease-related cost, that also includes things like depreciation and dilapidation and international financial reporting standards treatment, and then the savings are split between—there will be running costs and in addition to those, service charge costs. So, it's a different split, and we can't really at this stage tell you the exact breakdown, because we're still in negotiation on the particular premises. And the split isn't going to be exactly precise against one, because we don't currently pay a service charge; we're fully responsible for the current premises, so we can't provide that breakdown.

In terms of the second part of the question, payback, we believe, will be within a three-year period, and I think the one thing that may impact upon that would be the increasing electricity costs currently that we're aware of, and we may also consider rentalising a small proportion as well, but we expect that it would still be within a three-year period with that.

Before I move on to Rhianon, just a quick question: having visited your offices in Cathedral Road, you've got a fairly large car park—

12:20

—and Capital Quarter doesn't, from my understanding; you've got a T&S scheme for people with cars, could you talk us through your thinking?

We did reduce the number of spaces around its proximity to public transport. We're trying to encourage greater use of public transport, and we believe that the pandemic has impacted on that as well. We will be hiring some car parking spaces through a lease, and there are car parking spaces right alongside the premises as well to ensure that staff aren't too adversely impacted. We may have a number of season tickets at those.

Apart from taking away the travel allowance, probably the next most unpopular thing to do is to take away people's car parking spaces. [Laughter.] But as Laurie said, we're mindful of that. There is public car parking available very close, and we will lease plenty of spaces so that we don't really lose any capacity, certainly in the short term. But we do want to, over time, take a bit of a modal shift in the way that we all commute to the office. So, one of the big attractions of this site was that it was equidistant between the two main stations, it's on a cycle path, it's on bus routes and it's easily accessible by foot from the city centre. So, yes, over time, we will, hopefully, see that sort of change in the way that we commute to and from the office, but certainly for the foreseeable future we also know that a lot of staff have to rely on their cars to get to work, and we will make sure that they can do that.

This comes into operational management, doesn't it, because the problem you will always have with that is that you get people in for a meeting at 10 o'clock, and then you send them somewhere else at 12 o'clock, so they've got to drive in in order to get to the next place. It's operational management so that you ensure that people are not coming in for part of a day and therefore they can use public transport. But it would be no use to somebody who gets called in there in the morning for a 10 o'clock meeting and then, at 2 o'clock in the afternoon, they have to be in Caerphilly council's building. 

I mean, the only way that you're going to be able to do that effectively is by car.

Or using hybrid now, isn't it, so that you wouldn't necessarily need to be in the office for that meeting.

—it's managing people so that they're either in the office or they're not; not part in and part out, on a daily basis. Now, that won't be your decision, Adrian, but it'll be an operational manager's decision, so what advice are you going to give to operational managers?

We will have a travel plan. That will come out with this too, trying to encourage different behaviours, and we feel that some of the operational elements will need to be considered and we'll be involving staff as part of that process too.

You're spot on, Mike. Lots of this comes back to the nitty-gritty of how we deploy staff, but managers already are expected to monitor where and how staff are travelling and only to do it when it's absolutely necessary for business need. We can obviously do things through hybrid form now much more easily than we could before. So, what do I see in the future? Inevitably, that sort of situation will arise from time to time, but I'd say it's being reduced in frequency all the time and we've got a really close eye on it.

Thank you. I presume the leasing of car park spaces is part and parcel of the accounting in terms of—

Okay. So, once again, you're here asking for finance—an additional almost £1 million, isn't it—to fit out and the environmental upgrades to this building. As it's a new building, I would have presumed that those environmental upgrades would have been already there, but you obviously don't feel that they are sufficient enough in terms of your choice. Given that this is a modern development and scored highest overall—you've explained that there were others that scored higher, but then you visited and they didn't on your options appraisal—my question is a really simple one, as you can tell from the tone of my question: why is this necessary? People are downsizing. We live in a time of very, very, very  tight budgets, you are who you are—Audit Wales—you are setting an example, why do you need to do this?

Why do we need to do this? The need for us to have an office space is crystal clear to me and the board, and I think we've talked about that through the earlier session in terms of the impact of consistent remote working on the organisation. So, we need an office of some sort. We are downsizing very considerably; we are reducing our costs considerably in so doing. We're improving our environmental performance considerably as a result of the move, and we're moving to a site that will encourage much greater use of public transport. So, it ticks all the boxes in my mind that I would say are right for Audit Wales and would be good things for other organisations to be looking for as well.

In terms of why we're seeking a supplementary and the absolute size of that, I explained earlier to Mike's question why we're asking for a supplementary rather than building into the estimate for next year. The quantum involved for a move of this scale and this type is not extravagant at all, and these are costs that would be faced by any organisation transitioning between leasehold arrangements—the cost of fit-out for a new place and dilapidation costs—

12:25

But, with respect, they're not all coming to this committee and asking for a supplementary budget, are they?

And that's because of the unique position—well, not unique position, but, the position of Audit Wales alongside the ombudsman and the Senedd Commission. We're the only three public bodies in Wales that are above the line. So, if this were happening to any other public organisation, they'd be speaking to the Welsh Government or the local government and they'd be having that conversation internally and looking to use reserves or whatever. That is not open to us. Our route to funding is through this process and through this committee. So, we're not asking for anything different or special to any other organisation. What's different and special is the route that we are required to follow and the degree of public scrutiny that comes with it.

And I'd also state that I hear very much what you're saying, but the answer to most public bodies would be, 'No'.

You spent £50,000 capital in 2022-23 on preparatory work for the office move, including work to the existing premises. So, can you just break down for the committee how that money was spent and explain why it represents value for money?

Firstly, part of the spend was at the height of the pandemic, and we were considering staff well-being, so we invested in hospital-grade air purifiers after conducting some research, because we couldn't bolt on extra ventilation. So, those are things that we can take to the new premises. That's for all of our premises, not just the Cathedral Road office. We also made improvements to LED lighting for environmental improvements where we could see immediate benefits, and it also will help reduce our dilapidation settlement. We also replaced a little bit of carpeting, and that, again, to reduce dilapidation too. And we purchased a small amount of furniture to test and trial new ways of working, and we plan on bringing all of that furniture with us to the new premises. And I'll add to that that we do plan on reusing as much of our current furniture as we can, applying a circular economy approach. We estimate that we'll probably reuse 75 per cent of that, and what we can't reuse because of the size of the premises we will be looking to reuse within the public sector or third sector as well.

Thank you. Finally, your supplementary estimate identifies an additional £100,000 of revenue costs in 2022-23, and that's articulated as £60,000 for rental costs. Can you outline what the remaining £40,000 revenue is for?

Yes. That included some preliminary work, so estate agent fees, it also had legal fees involved, we also have dilapidation work to be undertaken at the current premises and work for reducing those—

For our current premises, which can't be capitalised. So, it's additional consultancy support and legal services that we need to have. And that wasn't just for this premises, it was for all of them, because we've also renewed the Penllergaer lease too.

With the Penllergaer lease, I think that's the first I've heard of the extent—. Did you say that you've renewed it? For how long?

We are currently in the process of potentially renewing it for an additional two-year period.

12:30

Okay. And is that, then, put into estimates and next year's—? It'll be followed through, obviously, in the numbers that we'll see. Obviously, that's sensitive at the moment, but I'm sure you'll be driving a hard bargain as best you can there with that.

In the scheme of things, the Penllergaer and Abergele leases are very small compared to Cathedral Road.

Okay. Thank you. Your accounts include a provision of £650,000 for dilapidations. Can you confirm that, if the committee agrees in principle to this supplementary estimate, up to an additional £650,000 cash will be included in your estimate?

Yes. We are looking to request cash cover in the estimate for 2023-24. It's just worth stressing that the figure in the accounts covers the whole of our estate, not just Cathedral Road, and also just to stress that this isn't additional resource that we're after; it's simply cash. We've accounted for the dilapidations over previous years, building up the provision in our accounts over the years, since we've had the lease, that, of course, the committee's seen previously. It's also important to stress that dilapidations are a contractual requirement under the lease—so, the same for any organisation with a lease arrangement.

You mentioned up to £650,000 as well. Of course, we'll look to reduce the dilapidations to the lowest possible level. We'll be carrying out a very thorough review of the dilapidations provision, and the dilapidations schedule, I should say, and also looking to see what work we've already carried out at Cathedral Road that, again, could offset any of that.

We heard a little bit about that work already done, so obviously it will reduce your overall bill as you exit.

The supplementary estimate includes an international financial reporting standard 16 adjustment associated with the new lease. Can you briefly describe the implications of this on your accounts and the estimates going forward? Because I think it's quite a large number. I believe it's a technical exercise, but I'd like to understand what that actually means in practice.

It's a complex technical exercise. Essentially, the IFRS 16 requires us to record what are called right-of-use assets on our balance sheet. So, to all intents and purposes, that means our leases. So, we now have to capitalise the value of the lease and then depreciate that over the life of the lease. You will have seen in the letter the total amount that we're looking to capitalise, and then we'll depreciate it over the next 10 years. For us, the impact of existing leases was covered in our first supplementary, which you saw, I think, back in May, although it was relatively small as the current lease is nearly over and, as Adrian said, the other two leases we have are quite small. The new cost of capitalising the lease in Capital Quarter is set out in that second supplementary estimate. It's worth saying then, going forward, the impact is pretty minimal, as the depreciation and interest costs are pretty much offset by the actual lease costs for Capital Quarter. So, if we look in terms of our accounts for future years, the impact is probably around £30,000 non-cash per annum, and that relates to us establishing a new dilapidations provision for that building, and then writing that off over the period of the lease—as I say, about £30,000 a year.

That's cleared that up. [Laughter.]

Sorry, it doesn't at all clear it up for me, I'm afraid. So, the £650,000 that you talked about for dilapidations—you'll have to bear with me on this, this is new for me. You mention that the other two leases that you currently have are small, so the majority of those dilapidations, then, you've attached to Cathedral Road. Is that correct?

It's something that we're negotiating with the landlords, so it's difficult to say exactly how much it is. But, yes, the £650,000 applies to the current—

—suite of leases that we have, the three leases we have. Going forward, I'm talking about a new dilapidations provision that we would need to establish under IFRS 16—

It's quite a considerable amount of money, so would you be prepared to give us more information on that, when you know it?

On the actual cost?

12:35

On the £650,000 disaggregated, so that we know what it's about.

Yes, of course.

Obviously, you are in negotiations now, and this is potentially a commercially sensitive area. So, we don't want to press you too much at the moment, but we would appreciate an understanding when you are able to share that information. Obviously, we'd stress, from a Finance Committee point of view, make it as small as possible. And I'm sure that your landlord will listen to this committee saying, 'Yes, don't put the bill up too much because, obviously, it's public money that could be spent elsewhere, that could be helping people in a cost-of-living crisis and all the rest of it, because it all comes out of the public purse.'

Absolutely. No, we absolutely understand that, and we will negotiate as hard as we can. I would just stress once again, though, that this is the realisation of provision that we have been making through the lifetime of the leasehold, so this isn't coming as a bolt from the blue.

No. Apologies for going over slightly on time. We've talked about the lease, and we've talked about what you are trying to do. Can you outline the risks and the disbenefits if funding is not provided to undertake the office relocation activities that you have outlined in this estimate? Is there a plan B?

The plan B would be that we still move. We have to have an office. We would be able to do so. What would it mean in the short term? It would mean that we would look to utilise, essentially, all of our existing capital budget. So, everything else that we are looking to spend capital funds on, I don't think that we would be able to this year. We, I suspect, would not be able to move into a fully operational building on day one. So, that would obviously have consequences for our utilisation of that space. I suspect that we therefore would also incur some costs hiring other facilities in the short term for staff to come together. Inevitably, it would then be reflected in our future estimates, because we would want to do those capital works in the new premises as soon as possible. 

So, the money would be spent at some point. It's either going to be spent now or going to be spent in the future.

And the knock-on effect on staff well-being, on your operational efficiency, in the short term—

It would be very considerable.

Yes, of course.

Okay. Just circling back very, very quickly to something that you said in response to a question earlier about the car parking. Sorry. You mentioned that you would be leasing some car parking spaces. Is that in the estimate, or is that already—

It's included.

—put into that sort of provisioning? That's fine. I just wanted to double-check that. Okay. Can you just talk us through, quickly, the timescale of when things will happen if we agree? What's the plan?

We are finalising our lease negotiations as we speak, and starting to work with the landlord's team in hopes that you say 'yes'. Then, we will be doing procurement exercises to start some of the construction fit-out work over the coming months. There's a series of staff communications taking place, and regular engagements as well, and we have ongoing work with a number of suppliers. So, it's both about the relocation, but also what we need to do to prep to leave the current premises as well, aiming to vacate premises by the middle of March at the latest and then finish off the remainder so that we can leave the current premises on time.

In your procurement processes now, in moving, there's a fair chunk of money going to be spent on that. Could this committee have an assurance that that money will be spent in Wales?

We will try. We will ask the suppliers to put it forward, to restrict where we can, but if it is put out widely, some of the procurement, people in Wales will have an opportunity, but we can't guarantee that they would be awarded it.

12:40

But we will try.

—you weight, and a supplier in Wales, providing Welsh jobs, and that element would be something that I think we would be very keen—. Yes, Mike.

I think I've probably said it before to everybody in this room, but I'll just say it again. If you make the contracts small enough, then you will have local suppliers applying. If you make the contracts very big, then you've got all the big companies applying.

I've got one more question, and it's been partially answered, but I am seeking further than I've heard. So, you plan to move anyway. So, can you articulate briefly—assuming that there is any money to do so—the reason for you not staying where you are? Can you give me four points as to why you are not able to plough money into where you are?

It would cost a huge amount more. We'd have to invest enormously in the building to bring it up to anything like the kind of environmental standard that is necessary. It costs more to run in the first place. It's much too big for our organisation and our way of working now. Its environmental performance is very poor, and though it's a lovely avenue to be on, it's not particularly well located for accessibility, other than by car.

Thank you very much for your time, and apologies for going over time slightly. But I think we've had a very good discussion, and obviously we'll now take away what you've said and come to a decision, but thank you so much.

Therefore, I think we'll go into private. Thank you. 

Daeth rhan gyhoeddus y cyfarfod i ben am 12:42.

The public part of the meeting ended at 12:42.