Finance Committee

So, we'll go on to our first substantive item this morning, which is item 3. This is the scrutiny of the Senedd Commission’s draft budget, an evidence session with our witnesses. Can I just ask you all to introduce yourselves for the record, please?

My name's Hefin David MS, I'm the Senedd Commissioner for budget and governance, and it's a pleasure to be here.

Thank you very much.

Bore da. Manon Antoniazzi ydw i, Prif Weithredwr a Chlerc y Senedd.

Croeso.

Bore da. Simon Hart, I'm the interim chief finance officer.

Ed Williams, director of resources.

Croeso cynnes, a warm welcome to you, and thank you for the documentation that we’ve had beforehand. So, we’ve got quite a lot of ground to cover and quite a lot of documentation to get our heads around and quite a few questions to ask. I’d like to start by looking at the impact of the 2023-24 cost-saving exercise and the delay to the supplementary budget for 2024-25’s approval. Your 2024-25 supplementary budget request has not yet been approved due to the delay in laying the Welsh Government's supplementary budget. What impact has that had on managing the organisation?

Okay, so we gave evidence, didn’t we, in, was it May, on the supplementary budget. We were very pleased to have your approval of that and support, with some very clear recommendations for engaging with Members in the future. The Welsh Government's supplementary budget will be debated on 22 October, so we should see the supplementary budget cleared by then. I would hope that Members would follow the recommendation of the Finance Committee and support the supplementary budget, if it was a recommendation—I assume it was a supporting note, anyway. That would take out £456,000 from the draft budget, because that would go in as back pay and would represent that saving then to the 2025-26 budget.

Okay, thanks. You provided information about the impact of the two cost-saving exercises for 2023-24. What impact did those exercises have on the 2024-25 budget and your original target of the £315,000 saving?

This is what we discussed in committee last time, the cost. So, what are you looking for?

Basically, because of the delay, and it's coming down the line next week—. Has there been any impact of that delay? Have you thought, 'Well, actually, this is not going to through, so therefore we'll stop doing something in the meantime'? Has it had any impact?

The impact it's had has been more on engagement with trade unions and the development of the framework for a three-year pay deal. Because of that, because we've been delayed with that, it's been very difficult to progress properly trade union negotiations. And that's totally understandable from a trade unions' point of view, because if they haven't got certainty—. They're not going to base their discussions on what might or might not happen. It has to be what is going to happen. So, that's where the difficulty has been. But we've been able to manage into the draft budget the amount of money we need, which I think was £456,000, to cover those costs. So, it's not been an insurmountable problem, and the benefit it will have is if, after 22 October, the supplementary budget is passed, then we could take that out, run the back pay, and carry on then with the deal with the trade unions, which should be moveable then and possible to continue.

And that figure then will come out of this budget, because you've already used it in the supplementary budget.

Yes.

That's fine—just making that clear.

There's some costing to be done around, but it won't be anything near £456,000.

Okay, fine. Okey-dokes. So, your overall prioritisations and decision making in reaching the resources set out in this estimate now for 2025-26, can you describe the process that you've gone through this year? How does that align with this committee's statement of principles, and are the Commission's priorities, targets and intended outcomes reflected in that? So, if you could talk us through what you've been doing, really, to get to the set of documentations that we've got.

Yes, sure. So, fundamentally, one of the first things that I, when I became a commissioner, was briefed on and became aware of and worked into my everyday life was the Finance Committee's five statements of principles. Everything we do is geared towards that for directly funded bodies, and I think it's really important, particularly that last one:

'Where any increases in funding are requested, these should be backed by evidence both of the need, benefit and attempts that have been made to reduce such costs.'

So, this Senedd Commission budget is different to previous years in that it is asking for that increase in funding that is beyond just a gross domestic product deflator figure. It is a step change—we've described it as a step change. The reason for that step change is because we've been tasked by two thirds of the Parliament—a two-thirds majority of the Parliament—to engage in Senedd reform, and that was carried through a democratic vote of the Parliament. It's now up to the Parliament to decide whether they wish to fund, and the committee themselves to decide, whether this should be funded in the way that we propose. My argument today is that there isn't really any other way of doing it.

So, there are four elements to the budget that we are bringing forward today, and four elements that have been applied to the principles of the Finance Committee. I'll come back to the medium-term resourcing framework in a second, but that is designed to sit with the principles in order to find savings, wherever possible. But the four areas we've got to find money for are, fundamentally, Senedd reform, which is an about £6.4 million increase this year; ways of working, which is the Bay 32 project—Tŷ Hywel is coming to the end of its working life; you will already notice problems with the building, but the lease will be up as well, so we need to think about that—that's about £2.4 million; and critical infrastructure projects. Now, the savings we brought to you in the past were as a result of critical infrastructure projects that we had delayed. You will see around the building—I'm happy to go into more detail on these things, but you will see around the building—things that are not working as they should. I was just talking to security this morning; sometimes the security gate fails and they've got to push it across themselves. It's supposed to be automatic. That's a dangerous thing. That's not secure. That's not secure. So, they have to then bring in someone to repair it. Well, the cost of that gate is about £60,000 to replace. The cumulative cost of delaying that will be more over time, because you're bringing someone in to repair it all the time. So, the critical infrastructure's important, and I can go into more detail in examples later, if you want me to. And finally, the pay award for staff. Originally, I think, in the supplementary budget, we discussed 3.1 per cent. Since then we've had a Government in Westminster that has offered, across the board, 5 per cent to Government workers, and so has the Welsh Government offered the same pay award. Now, our trade unions are saying to us that it is not unreasonable, then, for them to ask for the same award, and, in the Government of Wales Act 2006, it also says that the Senedd Commission should be broadly comparable pay to Welsh Government staff. So, we couldn't justify not negotiating that 5 per cent as well.

Mike.

Talking about the lease, is it full repairing lease, or a partial repairing lease?

That's a very technical question. Perhaps I could ask Simon to come in.

Yes, I will try to help on that. Ed may know as well. Is your question around dilapidations, and the impact of dilapidations?

Generally, let's take windows as an example. If the windows need replacing, are you and ultimately we responsible for replacing them, or is it a landlord's responsibility? I'm trying to get to, not very well, but I'm trying to get to the split between landlord responsibilities and tenant responsibilities.

I think I might do the dangerous thing of deferring upwards and asking Ed, because I think Ed might have the answer on that.

As the anchor tenant, it's our responsibility while we're here, and we undertake reactive maintenance all of the time across the estate. But obviously, if we were to decide not to renew the lease, then we would be into a negotiation around dilapidations. But as I say, that is a negotiation.

So, it isn't 100 per cent full repair lease—

The landlord has responsibilities as well.

If the windows all had to be replaced and we walked away—. If the windows had to be replaced, it wouldn't fall on us—you would be negotiating with them how much of that fell to us.

Yes.

But the Bay 32 project will absorb a lot of this in that the ongoing needs for a sustainable and modern building will be addressed through that. But I was in another office, a Senedd Member's office, yesterday, and they were pointing out that their window was leaking and letting in air. I was in another Senedd Member's office and they were showing me cracks in the wall. These things can be addressed through reactive maintenance and there's a budget for that. But what we really need to do is look at a Parliament that's fit for the 2030s.

You don't have to convince me of the importance of buying the building. I've said that for the last 11 years, 12 years, without getting very far. I'll just say it again for the record that it's always better to own than to lease.

So, I suspect we might come on to that if we want to discuss Bay 32, because there are a number of options—perhaps this is breaking news—that go beyond just Tŷ Hywel.

So, you outlined the four main areas of expenditure there, and part of that is Senedd reform, ways of working—they're ring-fenced budgets. So, the total increase of operational resources is over 11 per cent. Can you explain the reasons for that and what actions you've taken?

So, you want to talk about the operational budget?

Yes.

So, don't forget, Senedd reform, ways of working, Bay 32 are outside of the operational budget. So, the operational budget has gone up by—let me just get the figure—11.09 per cent.

So, you've got the operational budget and you’ve got the ways of working. So, we're aware that you've got specific amounts laid out against ways of working, and we'll go into those in more detail. But the operational budget has gone up by 11 per cent. Could you talk us through what that means?

Yes. That's a really good and important point to make, making the distinction between the total and the operational budget, and the fact that the operational budget is about those things that are happening that would happen regardless of Senedd reform. So, I think you make a key point: why has it gone up by 11 per cent when the GDP deflator was something like 6.4 per cent last year?

So, it's nearly twice as much.

It doesn't quite link across, because the GDP deflator was about the whole budget, whereas we're talking about the operational budget.

The issue is that, first of all, we've got the pay deal that I mentioned, and the pay deal is very much part of the operational budget. And that 5 per cent is higher than we bargained for, and that is because of factors beyond our control. So, if a deal is being offered at 5 per cent to Welsh Government staff, we can't stick at 3.1 per cent within the Senedd Commission, because it would go against the principles of the Government of Wales Act, and you would see, as we said in the supplementary budget, that our mission is to bring parity to the lowest paid staff in the Commission with the lowest paid staff in the Welsh Government—it would end us being able to achieve that. And I think that that wouldn't be either within the principles of the law nor would it be acceptable to trade unions or staff.

There are other issues, of course, within that, which are pensions and also the increments between staff levels, because we've needed people to be able to progress up their pay scales, so increments add a little bit of money onto that as well. So, the overall staff budget increase comes in at 9.06 per cent, not just the 5 per cent. So, there’s an additional amount on that, but that is an amount that would be in there anyway, but it would be slightly lower if we went for a lower pay deal, which we can't, really, I would argue to you.

And the other issue is the fact that we are required to do more this year. So, there are additional committees that will be running. There'll be an additional committee next year, chaired by the Dirprwy Lywydd, and there is another committee that is running at the request of the Government. So, they require staffing, and that has required four temporary staff to come in to clerk those committees. So, that has also added to the operational budget. So, it's nothing that we have wanted to do. It's circumstances beyond the Commission that have led to these things happening.

Peter.

Thank you for that. I think I've got it. So, the operational budget we know is going up by 11 per cent. We recognise the pay deal, which is 5 per cent over what you were budgeting for—3 per cent.

No, it's 2 per cent. Oh yes, it is 5 per cent.

So, you've got staff-related increases of 9 per cent. When we talk of that, do we say, 'Well, 9 per cent of that 11 per cent is staffing', or what is it in money terms?

No, that's right.

Nine per cent of the 11 per cent total operational cost is staff related.

Yes.

And that's obviously new staff and pay deals, and the pay deal is £456,000.

That was for last year.

That was for last year, right, yes.

Sorry, for this year. Yes, this year, because we're talking about the budget for next year as current year, which we can take out of the budget if the—. So, the budget will drop by £456,000, if we get the supplementary budget through.

Yes. So, what does a 5 per cent staff pay budget increase actually mean in cash increase?

Two point six—. Sorry, it's £1.5 million. The provision for 2025-26 pay award is £1.5 million, which is a 5 per cent increase. So, this is subject to negotiation as well; don't forget that the trade unions still have a mandate for strike action within the Commission—not within the Welsh Government, but within the Commission—and those negotiations are ongoing. What we want to do is to get to a three-year cyclical stable pay deal. It's been slightly delayed getting there because of the issues with the supplementary budget, but we would hope to get there, and that would give much more stability and predictability to the budget. We won't need then future supplementary budgets to deal with these things, and we won't get these surprises.

Thanks for that. Thank you.

How's the—? I know you've been engaging with Senedd groups, parliamentary groups. You've been dealing with—. Obviously, you've been speaking to the unions; you've been doing some of that engagement work. What's been the feedback and how has that been reflected in the budget and your thinking behind laying this budget?

Yes, okay. So, consultation has been really important, and engagement with Members. There are a couple of things: there's the statutory engagement we have to do, which is this; the Public Accounts and Public Administration Committee yesterday; and the Plenary debate on the budget. That's natural parliamentary procedure that enables Members to have a real structured say in how the Commission budget proceeds. We've been looking forward to today because I think we've got a very compelling story to tell about what we need to do to create a Parliament fit for the future. But, at the same time, we want Members to be on board with that at an early stage.

So, one of the things we've done is set up a Members reference group, which is partly about the works in Tŷ Hywel, but we've also got a Siambr group as well to talk about adaptations to the Chamber and discuss those things in order for Members outside of the Commission to have a direct say. I think some of them have been nominated by their groups, and that is happening and that has directly fed into the shape of the Chamber for Senedd reform. So, the shape of the Chamber has been driven by, not the Commission, but by Members who are not part of the Commission and not part of the Government even, to drive some of this stuff. And the same with the adaptations to Tŷ Hywel—that discussion has happened, and there have been detailed papers released to groups on these things too.

One other thing I'd say is that I wasn't entirely happy about taking forward a big increased budget. An annual budget, which is 3 per cent, fine, but this budget is a step-change budget, and I wanted to see better engagement than previously. So, we decided to—. I think the four of us—of course, there was Kate Innes at that point rather than Simon Hart—went to groups to discuss—well, Kate and I went to the Labour group and other Senedd Commissioners ran them in the other groups—this budget that's before you today. And a detailed briefing paper was presented to groups, and to everyone's credit, it wasn't leaked to the media, at least not the day after, and it was a really helpful discussion in groups. And some of the questions that were asked—I know Rhianon, for example, asked some really good questions, and Mike as well, in our group—really did help us inform some of the things we wanted to do. It also enabled me to identify those Members who had concerns and I had further conversations with them.

What I'd like to do in future is perhaps have a formalised, codified process for consultation on the budget and, rather than doing it in September, perhaps do it in July, before Members go away for the summer so that they can think about it. And I think that having that process would enable Members to buy more closely into some of the decisions we've got. So, engagement is massively important.

So, after that engagement, did anything change?

Not strictly change, but, certainly, the focus of my arguments that I'm going to present today were honed and were as a result of that discussion. Members—

So, where was the main push-back? What was the feeling, and what have you had to change in sharpening up maybe some of those arguments, and maybe putting more detail behind it? What sorts of things have you been doing?

Well, I hope I'll 'show, don't tell' through the course of the discussion. But, certainly, the size of the increase in the budget did make Members sit up and take note. You would have noticed that the BBC ran a number of stories across their platforms last Friday. I was interviewed by Radio Wales, there was a piece online, and it was on Wales Today and Newyddion, and I managed to do some Welsh on Newyddion as well.

Da iawn.

And that was driven by the fact that we'd had those early discussions, because I don't think the BBC would have picked up on it so quickly if we hadn't had those discussions. So, the benefit was that it was out in the public domain as well. Now, I don't see any bad thing about that, because the political arguments can be put, I can put a public defence, and we can have this discussion, and perhaps it will encourage people to take an interest in these proceedings today. So, that was the benefit of doing that.

Okay. Thank you very much. At that point, I'll bring Rhianon Passmore in for some questions, please.

Thank you very much, Chair, and bore da, everyone. Just for clarity, very simply, in terms of the operational budget that we've just been talking about, and the 11 per cent uplift in there—and we've talked about the clerking costs and the uplift in pay yet to be agreed—was there anything else within that 11 per cent that we haven't touched upon?

Yes. We did touch on additional support for committees, which was the other thing, and also the triannual employer pension and contribution rate change, which was necessary. Simon, do you want to come in on that one? Were you indicating?

Okay. Thank you. So, I'm going to move on now—

I think Simon just wants to add to that, Rhianon.

Apologies, I was indicating rather clumsily. Just to add to that very full update, as well as the pay element of the operational budget, the operational budget does include other elements. So, it includes non-pay items, like accommodation and ICT costs, and those are under a bit of pressure as well. So, ICT in particular has gone up by 7 per cent—it's a worldwide phenomenon, isn't it, that, post COVID, ICT is costing more. But critically, that operational budget line includes the project fund, where we're asking for an increase in the project fund. So, in addition to the very fulsome update around the 9 per cent, there are other elements that make it 11.01 per cent overall.

And what makes up that project fund? What's pushing that increase?

We've got a fuller answer on that to come, but I think we're happy to address that now, if you—

Okay. That's coming, yes. Peter, did you want to come in on that, or was it something else?

No, it's just on infrastructure. Just looking through the high-level budget stuff, it says that Member salaries and related costs have increased by £1.3 million, but there's no increase in actual salary costs for Members. It says in our budget group brief here that there's exactly zero increase for Members. So, I don't know if that's correct.

Yes, that would be incorporated in the Senedd reform part of things, because the remuneration determination has been set already.

Right, okay. So, I was just trying to work through what those additional—. Because it comes under Member salaries and related costs, £1.3 million; so, it must be around accommodation, and things like that, for Members—ongoing accommodation changes and needs that have inflated the £1.3 million.

Yes.

Again, I can add a little bit of detail on that.

Do you want me to go into the critical infrastructure and tell you some of the things that we're talking about there?

I was just trying to—

Let me go into the critical infrastructure projects then. So, in the last few years, we've been delaying critical infrastructure projects. So, if you were in the building today, you would see that the third lift in Tŷ Hywel isn't functioning. Now, that's partly because those lifts are coming to the end of their life, and they need ongoing continual maintenance. I mentioned the gate. But the lifts are the big thing. They really did draw my attention. The Senedd lift upgrades 1 and 2 in the Senedd building are £300,000. That's to upgrade those lifts, because they've come to the end of their life. Senedd lift upgrades to lift 3 in the Neuadd is £150,000. So, that's £450,000. That's the—

I was surprised that that would be coded under 'Members' salaries and accommodation costs' not more infrastructural maintenance.

But infrastructure comes into the project fund, which is in the operational budget. That's correct, isn't it, Simon? Yes.

Right, okay.

So, the operational budget would cover project costs. So, the point of the operational budget—it doesn't cover Senedd reform or Bay 32.

Okay.

Okay. Thank you. We'll go back to Rhianon, then. Thank you.

Sorry, Rhianon.

Thank you, Chair. I just wanted a bit more clarity on that.

Moving, then, to targets for in-year savings. Obviously, we're all working within a very constricted public purse. And, obviously, in terms of the Government's efficiency framework guidance et cetera, is there a target for in-year savings for this coming financial year, as we've always had previously?

So, we've had in-year savings in the last couple of years, and I think that sponge has been squeezed probably as dry as you are going to be able to squeeze it without having a direct impact on what Members and members of the public see. So, I've asked for a list of things we could cut from the £2 million that is there that isn't compulsory for us to spend, but it would have an impact on Members. I can go into them: things like Members' training and development—£115,000. We could end your training, but that would mean no dignity and respect training, it would mean Commission staff and Members' staff would have no training and development. And there's obviously the question, 'What happens if you don't train your staff?' It's a real issue, isn't it? Members’ international engagement. So, Members like to travel internationally. We could stop that. That would save £55,000. Staff training across the Senedd Commission. We could end staff training completely. Reactive maintenance. Well, if we stopped fixing the gate, it would save money, but it would impact on security. Members' travel. One of the things I'd be interested to explore, actually, is committee visits. Do committees really need to go on visits anymore when we've got Teams? The Economy, Trade and Rural Affairs Committee were in Lake Vyrnwy yesterday. Was it necessary to go there? Couldn't they have done that virtually? It's a question for Members. Personally, I think it would diminish our standing as a Parliament, because Parliaments across the world do those kinds of engagements with communities. But it is something that could be cut. And events, engagement and education—our outreach to schools, bringing schools in. We could end that. We'd save £100,000.

All of those things, we could do. We could close the Senedd out of term time as well, out of sitting hours. We could prevent the building from being open during protests. There's a whole load of things that we could do that could bring in money, but every single one of them would diminish our ability to link with the public as a Parliament, and it would diminish, you as Members, your abilities to act as Members comparable to Parliaments such as the House of Commons or Holyrood, and I think that would be a step that we would see as a backward step. Having said that, if it is the will of the Finance Committee, and it is the will of the Senedd, then that is what we would have to do.

Thank you—

I know that Mike has a supplementary on this, but do you want to come in first, Rhianon?

No problem, you go on.

Okay, Mike.

I think that it's not all or nothing, is it? You can reduce the training budget rather than slash the training budget. I think we do need this discussion amongst Members of virtual versus visits. I know there are friends of ours who are very keen on travelling round Europe. There are others, like me, who’d never go anywhere unless I had to.

Solidarity, comrade. [Laughter.]

We've got those. Have you looked at the structure?

Yes.

I nag you about this every year, and I hope to nag you about it next year, but flattening the structure is what Caerphilly council will be doing now in order to deal with their budget deficit. Are you thinking of doing something similar?

So, you've got two questions there. First of all, let me come to, 'You could reduce budgets'—I better write down the other one as well.—'you could reduce budgets in certain areas rather than cutting them completely.' That's what's happened. So, a management training programme was due to happen last year with Senedd Commission staff. It didn’t happen. Manon, do you want to just explain that one?

Yes, that’s—

That's true, isn't it?

Yes, it is. We have some professional development coming out of internal audits, and we have put it on hold until this year, until—[Inaudible.]

So, that’s exactly what you’re saying, Mike. The amount of international travel was reduced last year, and it was temporarily suspended, I think. So, those things are happening, but we’re at the point now where you can’t really slice at it any more without cutting it; you wouldn’t be providing. And Senedd committee visits have already been limited. Committees can only do so many visits now rather than the unlimited they used to have. Well, the next step, then, the logical step, is to say, ‘Well, maybe we should stop them completely.’ So, there’s a whole load of—. And I agree with you, I’m not a fan of travel, to be honest with you; I’m a home bird myself. But the whole, ‘Can we cut it further?’ Probably we’ve reached a point, now, where that sponge, as I said, is dry. The next thing is just to get rid of the sponge completely.

The other thing you mentioned was flattening the structure. It’s a really good point. One of the things I first asked for when I became a Senedd Commissioner was an organic structure of the organisation. It isn’t that hierarchical, in that there are many layers, but you do get a lot of middle-band rather than lowest band staff, and that’s because you’ve got committee clerks, legal experts, researchers—who are key and fundamental to the work we do—that are on the higher level of the organisation. So, it’s more like a bulge in the organisation rather than a triangle. But we wouldn’t be able to do our work without that.

And I think if you start talking, when we go into Senedd reform, about reducing clerking teams and things like that, when, actually, we’re going to have an increased-size Parliament, that becomes really difficult, doesn’t it, because you’re going to have more committees. You’re only going to be rehiring staff again. So, if you went through flattening the structure, you’d be going through redundancy programmes. Redundancy programmes cost money. And you could, then, be rehiring these staff later when Senedd reform happens.

Or non-replacement, Hefin. That's what lots of people do.

Yes, so non-replacement happens already. So, the staff this year have only grown by four staff, and that’s to service one committee. It will grow by 47.9 full-time equivalent for Senedd reform, but that is an increase that is necessary to deliver a Senedd that is 60 per cent bigger. At the moment, staff aren’t growing—we’re not increasing staff, we’re not adding to that structure. But if you see a lopsided structure, it’s because we’ve got a lot of professional, middle-level staff.

It’s quite interesting this, isn’t it, because I’ve made the case, from your position, as a council leader, to my colleagues every time, because we used to have to. Every year, I made the case, for years, and I’d try to convince members that we needed to do certain things. But in the end, we would have planning assumptions where there would be a 3 per cent expectation on staff inefficiencies. So, we wouldn’t expect any drop in quality of service, but we’d expect it to be done with fewer people.

So, that’s more or less where we are. We haven’t got a redundancy or a staff reduction policy, but we have got a policy whereby the medium-term resource framework is continually analysing the effectiveness of staff. So, the medium-term resource framework—71 per cent of those costs are staff costs. It's continually, on a three-year rolling basis, reviewing where staff are deployed, and workforce planning is a fundamental part of that. The problem is, if that was a steady-state situation, great, and we could find reductions in staff numbers over a three-year process, it could happen. As I say, remember, out of 536 staff, we’ve only increased by four in the last year. But we’ve been tasked by the Senedd to increase the size of the Senedd. So, you’ve seen the local authorities—. And Caerphilly council have announced that they’re going to have to find 600 job cuts out of their 9,000 staff—9,000 staff, not 536—in the year that’s ahead. But they haven’t been asked to do any additional work on top of what they’re doing. In fact, they’re doing less, as Pred will tell you.

I think it’s always acceptable to have new burdens, and they have to be funded accordingly. That doesn’t mean to say that the lens of efficiency can’t be continued, even through expansion.

Yes. So, the medium-term resourcing framework does exactly that. So, one Senedd Member, through the engagement process that we did with the groups, came up to me and he said, ‘What you should be doing is commanding your Commission staff'—it was very strange language being used—'to engage in an efficiency-saving programme, a one-off efficiency-saving programme, which they'll present to you as a Commission board, and you will endorse savings within that. That’s your job to tell them to do that.’ Now, one thing, I don’t tell staff to do anything, because I’ve got respect for the chief executive, but, most importantly, the MTRF already does that. That’s what it is there for. It only came in in 2022, so it’s new, but it’s a rolling three-year programme, and it is designed to do exactly that. I've looked at it in detail, and I'm convinced that it will continue to deliver savings once we reach a steady state, after the step change. But I'm not convinced that we can introduce those savings when we're asked to increase our work.

I'll bring Rhianon in—. Did you want to come in on that point?

Could I add just a couple of things on that point that might be helpful? Just to amplify the detail of what the Commissioner just contributed, when we went through our service planning exercise this year, we identified the need for 16 more staff members. So, we've ended up asking for four temporary staff members in addition. The rest of that pressure was absorbed within the organisation through the efficiency judgments that you're recommending. So, there's a lot of work that is already built into the bottom line, a lot of savings built into the bottom line that we have identified, as the Commissioner said, through the operation of our medium-term resourcing framework. You'll notice the staff we're anticipating—the Commissioner mentioned the number of 47.9—to do with Senedd reform, on the other hand, is actually reduced from the regulatory impact assessment. There are other changes, but that's a positive change; we've been able to bring down the total there.

And just on your point about structure, we do wish to reassure ourselves from time to time that we are comparable with similar organisations, and we did have a look—our expert research colleagues helped us have a look at the comparison between our senior structure and other Parliaments in the UK, and that gave us some comfort that our structure is typical of parliaments and is unremarkable in that sense. And so I'd be happy to share that note, if it was useful.

Yes. And, in fact, I think that the Scottish Parliament is £195,000 more expensive per Member than the Senedd.

I think that's all—

Can I just say one more thing, just before we move on? On that figure that Manon mentioned—that the chief executive mentioned—47.9 is the FTE in the budget. In the regulatory impact assessment that accompanied the Senedd reform Act, it was 59.9. So, that came in at £2.1 million. The actual figure for Senedd reform now, in the budget, is £1.7 million. So, we've reduced that right back.

So, just to—. So, you've still got 12 vacancies currently, because you were looking for 16, you've only recruited four, so there are 12 vacancies in the Commission at the moment.

Well, we're looking forward; this is the budget for next year. We're not asking for additional money for those 12 posts, because we're going to try to repurpose and—

No, I accept that. They carried forward—the benefit is from not having them, if you like. The efficiency will carry forward into next year.

Rhianon has been very patient there on the screen. I'll bring Rhianon back in.

I like the organic nature of this. This is very good.

Thank you. Diolch. I've only got one small screen as well, so apologies if I'm jumping. I think it's the optics as well that's important, in terms of hidden savings, being able to see what they are. So, could you briefly explain the medium-term resourcing framework budget planning? How has that been different? And are there any examples that you may have just touched upon in terms of how this has increased savings? And as an aside, I'm taking that there are no quantifiable savings that you are recording and reporting from your previous comments for 2024-25.

No. The Commission has taken the decision this year that to work on the kind of minimal savings you might be able to find that would directly impact Members that I've mentioned would take away from the work that is being done to deliver a Parliament fit for 2030. And I think if we start going down the route of savings, it will mean that we'd need to engage with Members and make sure that Members are happy with some of those savings that will be unpalatable. And I think the net consequence as well of finding a small number of savings that will have a 1 per cent change on the overall budget increase—so you might be talking about 15 per cent instead of 16 per cent, if that—would have a negative impact on members of the public.

So, if we're restricting members of the public's access to the building, most importantly if we're restricting members of the public's ability to protest, because that's a huge thing—

Okay. I'm going to interrupt you, if you don't mind, Commissioner, because you've made those points previously, and it's more around the other aspects that we're looking at. Can I just ask you to address the point around the medium-term resourcing framework? Are there examples of savings that you can demonstrate in terms of the medium-term resourcing framework?

No, not this year, but once we're into a steady state following the step change into the seventh Senedd, it will deliver savings, because that's its job. At this point in time, it's telling us that if you want to deliver savings, they've got to be in those unpalatable areas. But what it does do is it gives us a clear assessment of the long-term future workforce needs, so it gives us that target. All we want in a budget, really, is predictability, and we haven't had that this year and next year, but the MTRF will deliver that predictability. It will give us the opportunity to identify where staff are lacking skills and development and may need experience and movement, and may need training. We call that our 'Grow your own' strategy, where you build staff up into new roles.

It'll give us very good succession planning, and succession planning is almost the holy grail of management—being able to bring staff into roles that they previously may not have even considered—and very few organisations are good at that. It also gives clear milestones for delivery, but they've got to be linked to the other outside pressures—like Senedd reform, like ways of working and Bay 32—that we've been tasked to deliver, and ad hoc committees that the Government and the Senedd want us to do. They've got to be fitting in with that, and that's where you put the difficulties in; that's where it gets challenging.

You've been very clear on that, so I'm going to move on to my next question. The budget states that the costs included in the budget relating to Senedd reform in 2025-26 are higher than the cost estimates in the regulatory impact assessment that we discussed last autumn. Could you explain the reasoning for such a significant increase since last year?

Yes, I can. The staff costs have gone down. From the RIA, the resource impact assessment, that was done for the Government—it was done by the Commission for the Government, I should be clear—for the Senedd reform Act, the staffing costs from that have gone down. So, we've made the case there: 59.9 full-time equivalent to 47.9 FTE, which is a £400,000 saving in that figure, roughly.

Where the costs have gone up has been in capital costs, but the net increase from the RIA to the draft budget is £400,000. That is not a huge figure for a capital project estimate. If you think about a capital project estimate that takes place two or three years before the project starts, a £400,000 variance is not much at all. Unfortunately, the fixation in the media was on the fact that the increase in the draft budget capital costs went from £1.7 million to £3.8 million, so they were talking about millions of increase in the budget. But, actually, because staffing costs were found to be reduced, it was only £400,000.

So, let's look at why the capital costs increased. The Senedd was originally designed to be able to be expanded without too much work, but it was designed to be expanded to 80 Members. So, what you would do is take out a row of door frames and change it slightly. You still could have done that with 96, but you would have needed benches, so you would have had House of Commons or Stormont-style benches in the Chamber. They were 1970s-style Parliaments and, obviously, 1800s-style Parliaments, and Members expressed a view through the consultation process that they did not want that, because it would mean that not every Member would have a place; they'd have to squash up and the information technology and speaking systems would be inferior for backbenchers compared to frontbenchers, and that's frontbenchers in all groups.

So, there was a feeling amongst Members that that would be a retrograde step, because we've got this modern Parliament moving backwards into a House of Commons-style set-up. That was discussed through the Members' reference group, and it was decided through consultation with Members that the public would be better served by Members having their own desk, their own facility, and being able to be viewed and scrutinised individually in the Chamber by people in the gallery, and Members felt that was really—

Sorry, could I interrupt you, if I may? Because I've got a further question, and I'm very clear on what you're saying there.

Can I just finish that point, just to say that that's where the costs went up? Because to do that for 96 costs a lot more.

Okay, so, on the capital costs, you would put that increase down directly to that—thank you.

And the adaptations to Tŷ Hywel as well, sorry.

Okay. Thank you so much. The budget includes funding, looking forward, to progress the business case around securement of building accommodation when Tŷ Hywel’s lease ends in 2032, and states that significant decisions on the direction of this project will be made before the end of the next financial year. Given the scrutiny role of this Finance Committee and Senedd in considering and, as you stated, authorising the budgets of the Commission, what role will we have as a committee in considering and authorising the direction of the final decision?

You're talking about Bay 32 there, aren't you?

Indeed.

You've got your statutory role, you can call us in at any time for a discussion on the budget, but I think we should be more structured and strategic than that. What I'd like to be able to do is come here and give a direct evidence session on Bay 32. There's a lot to be said on Bay 32 at the moment. We've moved from a single procurement source to three potential procurement sources, and the idea is that that will, over 50 years, reduce the cost, because you'll be able to find better procured services through a series of choices than you would if you had to go with a monopoly, although the procurement process will be a bit costly in the short run because obviously you're dealing with three instead of one. I think that's a net saving over time. That's a good thing. But there's a lot to be said in that area that probably goes beyond the scope of the budget today. Because what we're looking for now is a ring-fenced budget for Bay 32.

I would suggest perhaps the committee holds a session with me and staff at a later date when the process has gone down the road a little bit further. I'd be happy to do something public on the record, but I think perhaps precede it with a technical briefing that covers the commercially confidential aspects of it. The commercially confidential aspects we would not want to discuss in public because that would damage our ability to deliver, but we could certainly then have a public session on the broader aspects and the public interest bits that demonstrate value for money. So, I'm making an offer to you now: if you want to call me in for that, I'd be happy to do it.

I think it would be very useful, so that there are adequate and appropriate opportunities for this committee to be able to scrutinise what is happening in this high-risk project. Thank you very much, Chair.

I'd hesitate to call it high risk, because we've got an audit and risk assurance committee that makes sure that things aren't high risk and that, where risk is involved, it's minimised.

We'll certainly take you up on that offer, because it is a technical area, and I can see the logic as to why you’d do some as a technical briefing. But I think we owe people out there—. If we're spending this sort of money, and we're talking about Welsh democracy, we need to be transparent about those decision-making process. I also, from the Finance Committee, but also as a Member of the Senedd, would want to make sure that we have that decision making when it comes to who makes that decision in the end of what to do.

I can't speak for the future at this point, but you would imagine that any choices that we have to make would be showcased to Members and members of the public before we make them.

May I just put on record that we really welcome what briefings we've already had, which have been really helpful, so we're not cold to this.

We've got some brilliant Commission staff.

I'll come on to Mike Hedges, and I think we're probably going to run over a little bit.

Not by much, because most of what I was going to ask has been answered in other answers. Can I ask about the Pierhead review project, which I don't think we've talked about up to now? It's funded from the 2024-25 budget. How are you ensuring the Pierhead building is sufficiently utilised and providing value for money?

The Pierhead building is one of those rare buildings that does have a lot of public interest. A lot of people assume that that’s the Parliament building as well. The Pierhead project is currently going through an options analysis. We’ve already worked on the north Wales office, the Siambr and Senedd building, Tŷ Hywel—all these are covered in the budget. So, we need to start looking now at an options analysis for the use of the Pierhead. That options analysis is going to include expanding commercial use. I think if there’s a building that really has potential for expanding commercial use, it’s the Pierhead, because of its iconic status. So, that’s what we’re looking forward to, but that’s early days. So, it's just beginning, as part of the ways of working policy. That will be concluded in the next two to three months. If you want some more detail on that, I'm sure Ed would be willing to—

I just wanted to get that out, so we've got some record of it.

Events in the Pierhead are something special—they really are.

This is the last question from me. You've talked about spending large sums of money on significant life-cycle replacements of major plant and infrastructure. Is there any way that that could be shared over a number of years? You can't share it backwards and think that, perhaps, if we were talking about it five years ago, we might have thought that we could have done it over 10 years. But is there any way that it can now be scheduled over a longer period of time?

I think the problem is we've already done that. A lot of stuff has already been put off. Some of it will be, though. Where we can, we will delay stuff into future years. Don't forget that the Commission's only got a year's budget; it doesn't get a three-year budget, and is not able to hold reserves.

No, but you have a three-year or five-year budget plan, don't you? And I think that would certainly be on capital and on development. Whether you want to share that with us or not is another matter—exactly how that three and five-year plan goes.

There's table 5 in my document here, which I want to highlight to you. I imagine it's in the budget document anyway, but I want you to be aware of it. There's a whole host of very expensive things that are coming to an end that will fall over. We've already had a problem with closed-circuit television. CCTV nearly collapsed last year. And if it had, it would have effectively meant that the Senedd couldn't sit—that's how important that one was. The other one is, as I've already mentioned, the lifts. The lift in Tŷ Hywel that we're referring to was used by the Queen on the day that the Senedd officially opened, albeit delayed due to COVID. I saw her going up in the lift. Imagine if that lift got stuck, or, even worse, if it was your mum in the lift. It's even worse then, isn't it? But that's the problem we've got—that these breakdowns could happen. Delaying, delaying and delaying increases the risk, and these things are not cheap. Those lifts were £300,000.

The building management system replacement also runs heating, lighting, cooling, air source—that's at the end of its life. Delay it another year, you've got problems. That's £500,000. I've mentioned the lift upgrade. The CCTV rolling programme—again, that's vital—that's at the end of its life, and that's already under way. So, what I'd like to do is give you this list and you can look through and you can see what we need to do. But some of the things have to happen anyway. Senedd.tv will need to be replaced for the seventh Senedd anyway, because the whole Chamber and system's going to be changing. So, there's a lot of things that are being put off into the future, but they can't be put off indefinitely. And some of them, the longer you put them off, the more they're going to cost you in the end.

I don't disagree with anything you've just said there, Hefin. But are you able to provide us with a three or five-year plan?

Yes, we can do that.

Thank you.

Perhaps I should have just said that at the beginning. [Laughter.]

Peter.

I was going to be asking you some questions around staffing, but I think we've covered an awful lot of those, so I'll skip some of that, unless there's anything—. There are no areas of staffing that you've had to disinvest in, so that you can do something else, are there?

Well, there's training. Staff training has been reduced, yes. And I think that does have a well-being impact. And of course, we mentioned in the supplementary budget session that recruitment was frozen. The refilling of posts was delayed by three to six months, and we discussed that in detail. That puts pressure on staff, and there's a well-being issue that comes up.

Just on that, something that this committee's very focused on is staff well-being. As you develop your plans for changes to the building, moving onwards with the democratic project that we've got here in Wales, and moving devolution on, when it comes to the staff that work in the Senedd, things like crèches and being a modern place to work, is that something that's been factored in—the elements around well-being, and that sort of thing?

I'm going to hand over to Manon as the chief executive, because she's in charge of staff here. But just before I do, there are two things I want to say. Crèches would be great, but they need to be run, and they will come at a big cost, because you're adding additional staff. We had a discussion, didn't we, when I wanted to bring my daughters to a recall meeting. What do I do? This time around my daughter was old enough to sit in the gallery. She's seven and she absolutely loved it, but when you've got a toddler it's very, very difficult. So, having that facility would be great, but the problem would be it would be a very limited use of that facility for a relatively high cost, so a decision needs to be made there, and when we've been asked to find savings, it's probably not something that we could get into in detail.

The other thing I want to say, and this is what I said to PAPAC yesterday, is—and I’m not thinking of anyone around this table, by the way—as an organisation, Members are one of the most visible cultural aspects. Whether you know it or not, you are recognised as you're walking around the corridors, and the way we treat staff is really important. I think dignity and respect training, which again comes at a cost, is vital, and we've all engaged in it. And above and beyond dignity and respect training, the way we talk to and treat staff at all levels, whether it's the most senior or the catering staff or whatever, whatever level of the organisation we're dealing with, staff in the Commission are doing an incredible job keeping us fed, keeping us safe, keeping us online, and I think we need to recognise that as Members. I think everyone here, and Rhianon, does, but it's not always been evident to me that that happens across the board.

That's perhaps something you need to do outside of these meetings. What I will say, of course, is that that we're all coming here to earn a living, be it as Members, be it the chief executive or be it people working at any place here. They're all doing the same thing: doing a job to earn a living.

Yes, and therefore, that dignity and respect is really important, which is why I'm so pleased we've had dignity and respect training. Now, there's probably more detail that Manon would like to talk about with regard to well-being and staff satisfaction.

Yes, absolutely, and underpinning our corporate values is a commitment by all of us to work as one team to support you as Members and this Parliament, and dignity and respect is a very important part of that. We have noticed a definite negative impact on staff well-being as a result of the recruitment pauses that we had to introduce to balance the books last year, and I talked a little bit about that in the public accounts committee yesterday. Without going too much over the same ground, the salient points were that, when we surveyed staff about the effect of this on their well-being, over a third of them said that there had been a negative effect from this measure. We also saw in the autumn of 2023—this time last year—a peak in staff reporting that they felt they had too much work to do, which was followed by a rise in sickness absence in the following months, and of course that's a graphic illustration of the importance of enabling staff to operate at peak productivity and not overburdening them. This has been raised with us formally by the unions as well, and so it's something we're very much taking forward.

We have a well-being strategy. All our senior leaders in the senior leadership team have signed up to a well-being charter, and each service area now has a well-being plan. So, we have a suite of resources available. We have an equalities network that we call Mindful, which helps staff balance work-life matters. We have seen an improvement in sickness absence rates, which is encouraging. In August of this year we were down to 7.1 days lost per full-time equivalent, which is comfortably below the industry benchmark, but it is something that we keep a close eye on, because by far the greatest element in our sickness absence is mental health, and so it comes back to these resources to promote well-being that we have to keep an eye on. We're in the middle of surveying—our big staff survey is under way at the moment, and so we'll have the results of that in a month or so, and that will give us a good snapshot of how well our well-being measures are working and whether there are gaps that we need to fill in the coming months and years.

And a big element of that as well is having facilities, and the actual working environment not having cracks in windows and cracks in walls, so it adds to that element.

I think staff training is a really important part of that as well. We can't keep cutting back on staff training.

Thanks for touching on the well-being, because I was going to ask what your main findings were so far in your interim review. But I'll move on to the last question, really, one that is quite pertinent at the moment, a topic that is taxing a lot of us at the moment. While there are major benefits of artificial intelligence and things like that, what are you doing to invest or how does the budget demonstrate where you're exploring safer software to deal with AI? It's an area we're going to have to invest in—we recognise that.

When it comes to AI, I'm not that intelligent, either artificially or otherwise. It's not something I'm really up on; I'm still waiting for this fourth industrial revolution they keep talking about. But it is having a very definite impact. You will see that the head of communications has been to groups to talk about what is happening with AI. There is an AI governance group, which is chaired by the head of legal services, that looks at the risks involved and some of the consequences for the way the Senedd Commission does its work, and who holds the information that AI might generate. We were talking earlier about an AI system that generates its own minutes of meetings and is able to tell the person who comes into a meeting late what's been discussed. Well, where's that information being held? So, the AI governance group is about that.

But there's also an AI opportunities group, which is chaired by the director of communications and engagement, that looks at what are the opportunities we can bring into this. And I know there are Members in every group that are fascinated by these things, more than I am, and therefore I think it would be helpful for Members to engage with that.

Is there a figure of spend that we've had to invest around this?

Is that £118,000 per annum?

That's on cyber security.

Right. Ed, go on.

It's a low figure. The figure in my mind is £15,000 for licensing. I'll double-check that just to confirm I've given you the right amount, but it's quite a low amount because it's within the Microsoft package that we already have as an organisation. We're just rolling out licensing now on a pilot basis, so the ask in the budget is relatively low at this point, but it's going to develop over time, I'm sure.

One question and one declaration. I'll do the declaration first—I probably should have done it earlier on. I think it's quite well known that I chair the civil service cross-party group in the Senedd, which is run by the Public and Commercial Services Union; that might save you some money from an investigation. The question I've got is—this is a very serious one—somebody could take what's happened today, could change your words and could change your mouth for saying those words, and could get entirely different things coming out. How are you ensuring that you keep the record, and you keep not just a printed record, but you keep the record of the meeting available, so that if somebody said, 'Hefin David said that he was going to do something at this meeting today', somebody can go back and get hold of the true record? AI and the ability to change people, move people, put people into pictures they're not in, make people say things they haven't said, which is playing out in the American election, is likely to become more and more prevalent.

So, first of all, the AI governance group is looking at the risk appetite—how much would we want to risk—but, of course, we keep a written record of all proceedings, the Cofnod. So, that is kept as a written record that could be compared against anything that is said publicly. So, social media is a wild west and people could go and share and share and share, but when it comes to us putting things right and correcting the record, we would have a written transcript and also our own recordings that we could compare against anything that was said. It's very difficult, though, in this world to prevent some of the systems that are out there using us to change some of those things. I don't know what more we can do about that other than be aware of that issue, and take those safeguards that I've already mentioned.

And wait for things to happen outside, because somebody's going to have to start doing things about this. There are things happening, and some people have been put in pictures, taken out of pictures. Some people have been made to say things that they haven't said. That's playing out in the American election. Why do we think we are not just a couple of years behind?

Absolutely—I completely agree. I just hope nobody does it to today's meeting.

Well, talking about today's meeting, there will be, obviously, a Record of Proceedings. [Laughter.] But I've just got one final question. You've talked about this being a step-change budget and we're obviously on a trajectory towards 2026. So, are we on stairs, so we can—? What's the next budget going to look like, in your opinion? Are we going to have another step before we get to steady state, or what—? Just as a precursor, just so that we're getting into that mindset of, 'This is where it's going', so that there are no surprises.

Well, if you think of it logically, we've got to prepare for another additional 36 Members. You're not going to get the whole accommodation sorted in a year. We're going to decanter to the Siambr in Tŷ Hywel, so that's going to be a challenge that isn't going to happen in one budget year. Then we're going to have to move back. New Members' offices will need to be populated, and when new Members come in, there's going to be a whole load of induction and additional costs with that. So, the step change isn't a one-year step change, it's a two-year, two-and-a-half-year step change. What the aim would be though is to reach that steady state in the seventh Senedd, and—

So, is that a year into it, or two years into it, or when? What in your—?

Well, I wouldn't want to predict—

I'm not going to hold you to it, it's just so that we know roughly where we're going.

Right. I'm not going to predict beyond the election, because a new Parliament will be elected, and there will be a new Commissioner, possibly, or not, here. So, I think I can talk about the next year's budget, and the step change will continue into that. What happens after the seventh Senedd will depend on the will of the Commission, but, certainly, they will be able to move to a steady state sooner rather than later in that term, if that is their will.

Okay. And of course, we've got 2032 looming beyond that, beyond the following election as well.

Yes. But within that time, the MTRF can get back to doing its work of also finding savings. We don't intend the MTRF to be savings suspended for one year—sorry, permanently. It is intended to be a very short-term measure.

Okay. Thank you very much.

Diolch yn fawr iawn i chi am ddod i mewn y bore yma. Fe wnawn ni rŵan gymryd pause tan 10:45. Diolch yn fawr.

Croeso nôl i'r cyfarfod.

Welcome back. We've got our next session now, which is item 4, the scrutiny of the annual report and accounts and the annual plan for Audit Wales. We've got a new set of witnesses in front of us. Could I ask you to introduce yourselves for the record, please, beginning with Adrian?

Diolch, Gadeirydd. I'm Adrian Crompton, Auditor General for Wales.

Diolch yn fawr. Ian Rees ydw i, cadeirydd Audit Wales.

I'm Ian Rees, the chairman of the board of Audit Wales.

I'm Kevin Thomas, executive director of corporate services at Audit Wales.

Bore da.

And I'm Anne-Louise Clark, and I'm executive director for communications and change at Audit Wales.

Wonderful. Thank you very much, and thank you for the documentation we've had from you. The reports make for a lot of reading, because they are quite chunky documents, so it's always good to get them and always good to have you here. Obviously, this is being recorded. You will have a transcript to check for accuracy afterwards. But, to start with, croeso cynnes, Ian, to your first meeting here as chair of Audit Wales, and congratulations on—

Diolch yn fawr iawn.

—your new role. So, it's good to have you with us and we extend our congratulations as a committee.

I'd like to start by looking to understand how the annual report and accounts were prepared and the challenges you faced during the year. You laid your annual report and accounts on 9 August, slightly later than previous years. Did the process of preparing this year's report go according to plan, or were there challenges in pulling it together?

Ie. Dwi'n mynd i ateb hwnna. Diolch yn fawr, Gadeirydd, a diolch am y geiriau caredig a'r croeso a'r dymuniadau da.

Thanks so much for the kind words. With the laying of the accounts for this year, the timetable we had for the delivery of the annual report and accounts was in line with previous years. That is, the board would sign off on 13 June, following audit and risk assurance committee consideration on 11 June. Unfortunately, our external auditors were unable to complete their work in time for the ARAC on 11 June, so an additional ARAC meeting was held just to consider the annual report and accounts. Consequently, sign-off was moved to the next available board meeting then, on 31 July.

We undertook a post-project learning exercise, and we've identified some timetable changes for the external audit process, which should avoid a recurrence of that for 2024-25. Now, Adrian and the now chair of ARAC have exchanged correspondence with our external auditors, and we're optimistic that delivery next year should be smoother. We're conscious, of course, that the external auditors are appointed by yourselves as the Finance Committee, and if we have any significant concerns, we will, of course, contact you.

You were appointed on 12 June, and you're talking about 13 June there, and correct me if I'm wrong, I think you were—were you chairing ARAC at that time? So, was there an added complication of you going into the chair and appointing a new chair for ARAC and that sort of element as well?

I think we handled the timing well. It was interesting that the Finance Committee consideration of my position as Chair was held during a board meeting, so I think we managed that well, and yes, you're correct, I was chair of ARAC for nearly four years prior to going into the chair, but we managed that well, I think.

And who's now the current—?

The chair of ARAC is David Francis, who is also the senior independent director.

Okay. Thank you very much. Thanks for that. I think that sort of explains some of that delay, and yes, do keep us informed—

Indeed, we will.

—if you do have any concerns about your auditors. That's important for us to keep an eye on.

Just now looking more towards the performance indicators, and particularly those requiring improvement and the things that we've discussed with your predecessors, you've achieved 10 out of the 18 indicators this year; two fewer than comparable indicators for 2022-23. You've also changed some of the measures you're using to assess the performance. Are you satisfied with the overall results, and can you describe the changes in the measures, why you made them and what would they have shown if they were still in?

Sure. I'll try and pick up each of those points. So, am I comfortable with so much amber and red? No. Clearly, I want everything to be green. I'm sure you'll want to delve into specific indicators. I'm very happy to answer those as we move along. Underpinning all of the areas, I would say, that are not where we want them to be are two big drivers. No. 1, hangover issues related to our experience through the pandemic years. And, secondly, the very significant workforce gaps that we have discussed with the committee in previous years. They're linked to pretty much all of those areas.

In terms of the suite, I'm not sure we have changed many of the indicators themselves. We have altered the description or the presentation of a few. The top three, for instance, we've tweaked the wording and how we lay them out, but the data that underpins them, the measures themselves, are identical to previous years.

The one area where there is change is something we've discussed with the committee previously. So, a couple of years ago, we took the decision to move away from using the civil service people survey. So, we now have a different platform in place to survey our staff’s views. That means we've lost comparability with one of the indicators we used to have, but we've maintained the principal one, which is around staff engagement, and added in a new indicator related to staff turnover, because that was such a big issue for us.

Before we go on to discussing where we're not so good, I would like just to point out that, in some areas, the performance I'm delighted with. It's really exceptional. In particular, I'd point to indicator 3 on audit quality. So, we anticipated a dip in our external scores for assessment of audit quality because of the really fundamental changes that we were applying to all aspects of our audit work last year. But, as you can see, we scored exactly what we needed to do. That compares very favourably with our sister organisations elsewhere in the UK, and is a huge testament to the work of the staff. And I'm really pleased too that our indicator around trainee examination success is moving upwards again, after a dip around the pandemic. That's good for the here and now, but, obviously, is an indicator of strength for the future as well, as those people come through the system.

Okay, thank you very much. The annual—. Sorry, I've lost my place. Ah, there we are. You talk in the annual report about prioritising work, and you've slightly improved your performance around delivering to statutory deadlines. I know we were interested in some of that last year, and we've had a letter from you, I think earlier in the year, explaining a little bit of that. But there's been a decline in the delivery of other key audit products in accordance with the planned timetable. Do you feel you are getting the right balance, in terms of your resourcing? And is there anything else affecting that?

Yes, of course. So, those two indicators, the one pertaining to statutory deadlines, relates to our accounts audit work. The other one relates to performance work that we deliver locally to individual local authorities and NHS bodies. So, as I said earlier, both have been affected by staffing shortages in previous years. We're in a much better place this year than last, in large part thanks to the support this committee gave to our estimate last year. The fact that there's been a dip in the second one relating to the non-statutory work, in part reflects a conscious decision that we took to prioritise delivery of the statutory programme. So, where colleagues in the performance teams are qualified to do accounts work, we've moved them across to support our accounts work. So, I'm not surprised that we've seen a dip in that indicator.

So, it was a conscious decision.

It was a conscious decision on our part to do that, absolutely. We're in a much better place, as I said, in terms of staffing across the organisation, but in our accounts teams especially, so we're almost back up to where we need to be. So, we're no longer needing to draw on teams from corporate services or elsewhere. So, I'm confident that we will start to see improvement in that area. In addition—[Interruption.] Sorry. We've undertaken a programme of resetting all of those work programmes. Because they were late in delivery, some of what we were planning to do may no longer be relevant, so we’ve worked with both those sectors to try and reset the programme so that we’re focused on things that matter here and now.

And does that have any bearing, then, on your fee-earning potential? So, maybe you can talk about what does that mean. [Laughter.] As in, what is the tangible—? By making that conscious decision to move to that rather than this, in balancing your books there, what does it do?

Other things being equal, no difference, because both those areas of work are, in the main, funded through fees.

Okay.

When we have significant shortfalls in staffing—in fee-earning staffing—then we see a corresponding reduction both in our income and in our expenditure. And you’ll see that in our accounts, where expenditure and income are both down significantly. That’s a reflection of gaps, but that shift between those two areas of work would not be a significant contributor to that.

Okay, thank you. And then there’s a drop in the proportion of stakeholders who said that they, through your work, had gained useful insight that they would not have acquired otherwise. You’ve also missed the target for the proportion of stakeholders who believe your work has led to improvements in the provision of public services. Can you talk a bit about that, or explain why that’s happening? And with reprioritising some of the work that you’re doing, how does that address some of that, and, maybe, what would we see as a committee going forward?

Of course. The first thing I’d say is that there is a measurement factor to keep in mind here. So, every other year, we undertake a large, externally run stakeholder survey. So, we did one in 2023, we’ll do the next in 2025. This year’s data is gathered through a much narrower exercise that we undertake ourselves internally. So, there is some limitation, I would say, on this year’s data. Nonetheless, those two areas have always been the weaker of our themes.

What I hope you see, if you look, not only at our report and accounts, but at our annual plan for the current year, is that the priorities that we’ve set for the organisation very much reflect the areas where we need to see improvement. So, relevant to these themes, you will see priorities for the organisation around how we write our reports, how we communicate our findings, specifically how we frame and word our recommendations, so that they’re tighter and more understandable. Anne-Louise’s team has done a lot of work around our website as a portal for users, so that they have much readier access to the findings and insights that flow from our work. So, we’re doing a number of things practically that I think will help.

Going back to my previous answer about the timeliness of delivery, I think the two are connected as well. If the work that we are delivering to a local authority or a health board is delayed, it’s not as relevant now as it would have been last year, I’m not surprised that some of the feedback we get will say, 'This is not telling us the kind of thing we need to know.' So, there’s a package of things that we have on the go that I think will assist. That said, these are probably two of the hardest ones for us to shift, because, of course, not all of our work is designed to provide insight or to drive improvement; a lot of it is about giving you and the public assurance that organisations are managing their finances well.

Okay. So, with that in mind, by improving the timeliness of doing this work, it will help with the relevancy of the findings. So, in theory, you should see a change in this over time. Is that the theory?

That’s the theory. [Laughter.]

Then the world gets involved.

Exactly. That's the theory. So, as I said, it’s not just the timeliness. Timeliness is important. We need to be delivering our work at a point in time when organisations can still sensibly make use of it. It's also, though, the focus and scope of our work. So, one of our priorities for the coming year is to have a much sharper focus, more of the time, on value for money issues, bluntly. And I think we drifted away from that through the pandemic period. So, bringing our work back to that kind of focus, I hope, will assist in this area. It will be telling organisations important things that they need to know at this point in time.

Thank you. I'll bring Rhianon in at that point. We'll just unmute Rhianon, hopefully. Hang on—there we are.

I'm afraid we had simultaneous unmuting. Thank you. We've spoken around some important KPIs. You've met your target, Auditor General, for employee engagement, but you've dropped the KPI for employee experience, and that was rated as needing significant improvement in 2022-23. So, the question really is this: does providing less information about employee experience run the risk that this committee in particular, and the public also, don't get the full picture of satisfaction at Audit Wales?

Thanks, Rhianon. The reason we no longer work to that KPI is not because we're not wishing to share information. It's for the point I referenced just now, namely that we no longer run the same people survey, so we don't have that measure available to us. We were determined that we keep the same questions around employee engagement that enable us to have comparability over time and with other organisations. And we've added in, as I said, a measure around staff turnover, which I think is relevant. We publish the results of our people survey in full on our website, so anybody can see the full results, and we also include in the report and accounts quite a lot of narrative detail, I think in paras through the 50s and through the 60s. There's a lot of narrative information there, drawn from the people survey, about what staff are thinking, issues around morale, and so forth. So, in the round, it feels to me and the board as though the KPIs do give a rounded, fair, transparent reflection of life at Audit Wales.

You've talked about the narrative, but are you seeing any new patterns in terms of the reasons why people are leaving, in terms of turnover? Or is it too early?

I guess the best news and the biggest news around turnover is that we're successfully bringing it down. We discussed last year that we were seeing unprecedented loss of staff in the organisation. In large part thanks to your financial support—. But also, we've worked really hard internally to try and improve morale in the organisation, and that is reflected in what we're seeing. I think, in the most recent year to date, turnover is now around 8.5 per cent, which is much healthier—

What was the peak?

I think the figure we've reported in the report and accounts is just over 12 per cent, and I think in year, at one point, it was even higher than that. You'll see our KPI target that we've set is between 5 per cent and 10 per cent. So, we don't want it to go too low. That will be an organisation that is at risk of becoming stale and not allowing people to move on and develop, but it's much more now at a level that we're comfortable with. We've had a lot of success in recruitment, and we've seen that loss of staff reduce considerably. Forgive me, Rhianon—I've waffled on and now forgotten what your question was. Oh, the reasons—

In terms of your narrative, have you seen any difference in terms of the reasons why staff were leaving?

There is a whole basket of reasons—personal circumstances changing, life moving on—but the thing that was unique in the last year or 18 months was undoubtedly that loss of staff to other parts of the public sector that, bluntly, paid better, and something that was brand new for us: a loss of staff in significant numbers to the private sector firms. We—touch wood—seem to have stemmed the flow and all those fronts, as I've described.

Rhianon, I think Mike just had a quick supplementary on that.

It's in two parts, Chair. A 5 per cent turnover every five years would mean that people would stay roughly 20 years. That would be a reasonable length of time, wouldn't it? The other question is whether these people who are moving on in employment retiring, taking early retirement or taking partial retirement. Are they in there?

Kev, the definition of our numbers—.

The definition of 'voluntary turnover' is staff leaving the organisation through their own choice. So, that would include retirement, as well as things like going elsewhere for promotion or progression. We have a very small number of people on partial retirement that we include within the figures, but they're very low numbers.

But some people may leave you to go and work part-time somewhere else in another auditing area.

They may well do, but again, because that would be through their own choice, their own decision, that would be included in the voluntary turnover rates.

Thank you.

Are you seeing anybody leaving and then coming back—so that they potentially would step up to a different role and then come back to a higher role, as happens within the public sector, maybe? Do any trends like that happen?

There are no trends. I can't say 'between these four walls' when we're being broadcast and recorded, can I, but it's great if staff want to come back and they thought the grass was greener on the other side and discover it isn't. We haven't got a flood of people in that category, I must admit. Of course, we see colleagues go out, develop, come back to the organisation. That's brilliant. We do, as best we can within the ethical rules that bind us, encourage staff to go out on secondments as well. A senior member of Anne-Louise's team has just come back from that, and we've seen colleagues develop in that way.

That's where my question was going. Is that something that you actively encourage, through secondments and things, so that they get the experience of being in a different body, to be able to bring that experience back?

Absolutely. The restriction that, unfortunately, we have to work with is that we can't do that for staff of any degree of seniority into any of the bodies that we audit. So, that clearly restricts the options considerably. But for organisations that are not within my audit remit, it's possible to do that. And at a more junior level, of course, all of our graduate trainees, as part of their development, go on a six-month secondment to another public body.

But they could go to Bristol, they could go to health boards in the south-west of England, and if they're living Monmouthshire way, it might be equally as easy for them to get there. So, it's just outside your audit control, not any audit control.

That's right.

Sorry, Rhianon, I'm cutting across. Do you offer sabbaticals as well?

I'm not aware that anyone has taken up a sabbatical. We do have career break opportunities for staff. There are two different types that people can pursue, either for perhaps personal reasons, if they want to take some time away from work, or, alternatively, where they want to try out, perhaps, a different career or a different opportunity, whereby we keep things open for them to return in x months' time or a year's time. So, it's a type 1 or type 2 secondment—that's what we describe it as.

Thank you very much. Sorry, Rhianon, I'll come back to you. Diolch.

Thank you very much. That's very interesting. Your annual report notes that you exceeded the 2023-24 savings of £1.5 million and actually delivered £1.8 million of savings. Can you outline for the committee, please, how those savings were generated, are they going to be recurrent, and also importantly where that money saved has now been spent?

Sure. Thank you, Rhianon. There are a few things to say on this point. Included within that target of £1.4 million is an assumption that we always make in setting our budget for around about a 5 per cent churn of our staff. Just through that churn and the vacancies that arise, that will generate the best part of £1 million of that sum. So, in large part, the fact that we overdelivered on that measure last year is because of all the vacancies that we had. For the remainder for the year in question here, there's a £500,000 savings target for our financial sustainability review group, which Anne-Louise chairs. That sum is much more akin to genuine savings and efficiencies. Moving forward in our annual plan, you will see that we're no longer going to incorporate that staff churn saving as part of our savings target. It will still be built into the numbers, we just won't be seeing it as savings, because they're not. But we will focus just on a smaller number that are genuine savings and efficiencies that we need to drive. Last year—

Sorry, just to be clear, when you're saying that you've overdelivered on the savings—. I've got £1.5 million here, not £1.4 million. But when you've delivered the £1.8 million in terms of vacancies or staff turnover, you're saying that that money hasn't been spent anywhere.

That's right, Rhianon. The overdelivery in large part is just because we didn't have all the staff we needed, and so we were saving costs in that way. As I mentioned, moving forward, we'll report just on the genuine savings targets that we work to. I think that will give a more honest and realistic reflection. I think, Anne-Louise, from memory—correct me if I'm wrong—in the FSR group last year, with a target of £500,000, around half of the savings that we identified were recurring for future years.

Yes, that's right, Adrian. We met the target and £238,000 of that target are recurring year on year—

Out of £500,000, did you say?

Yes, so they're banked—

It's that disaggregation that we need to be clear around, as you've already outlined. The savings are £250,000, which is half of what you've talked about. Could you just outline how you got to that money?

The committee will be familiar with the changes we've made around our estate, so that has contributed to that. We have one more move afoot next year in our west Wales office, so there are some genuine recurring savings there. We've taken advantage of some of that staff turnover to restructure teams, especially where they're not fee earning, so that we cut our costs and deliver for less in the future.

Thank you for that clarity. The annual report—I'll move on—talks about certain aspects of the staff survey not being as strong as other aspects, and that includes confidence in senior leadership and strategic vision, as well as resource allocation and management. How do these scores compare to those in the previous survey, and how are you reacting to the results?

One of the advantages of the new employee engagement platform and survey that we use now is that it gives us far more intelligence about the levers that we can pull to help guide and steer the organisation. On those three themes that you mentioned around leadership message, resourcing and performance management, it’s not that those areas were areas of particular weakness, but they are the areas where, if we focus our efforts, those will be the most effective levers to pull in order to improve overall staff engagement. So, that’s what we’ve done through the current year and we’re all in the process, for instance, of a regular round of direct staff engagement exercises. We’ve invested in a significant management development programme for everybody from me downwards who has line management responsibilities over the last year, and we’ve revamped our performance management system. Whether that’s bearing fruit, we will find out in the next few weeks. This year’s survey goes out at the start of next week. I’m optimistic they are having some positive impact, though. We ran a very short pulse survey just to take the temperature several months ago around those three areas and they all showed some quite significant improvement since the previous autumn.

Thank you. In terms of your moving away from the civil service people survey, which retained the ability to benchmark against the CSPS engagement index, are you comfortable with the information that is now generated through the survey in 2023-24? How do you intend to benchmark in future against other public sector organisations? It's about comparability, isn't it?

Yes, absolutely, and that's why we insisted that we added into the survey that our providers provide the questions that generate the overall engagement index, and that is common to all organisations that use the CSPS, but also organisations that have stepped out, such as the Senedd Commission, I believe. So, that is the principal way that we maintain that sort of benchmarking capability. But within the survey that we use, we also have comparability with all other users of that survey, and it's extensively used throughout the world, so that will give us benchmarking, not only to other parts of the public sector, but also to professional private organisations that operate in a similar kind of field.

Okay. Thank you very much, Chair.

Mike.

Diolch, Cadeirydd. During the year, it came to light that the former chair had taken up a disqualifying role. This meant that from 1 January 2024, she was disqualified from the position. Due to the timing, the former chair was notified of the disqualification on 15 April. Between 1 January and 15 April, did the board take any decisions or undertake any actions affected by the disqualification?

Diolch yn fawr, thanks for that question. I'll take that then. Of course, decisions were made during that period, as you'd expect, but the Public Audit (Wales) Act 2004 contains a savings provision, which means that those decisions are not invalidated by vacancies or defective appointments, and we took legal advice on that very point and we're completely confident that there were no decisions taken by the board that were invalidated or impacted by the chair's disqualification.

Thank you very much. That makes us all feel a lot better. [Laughter.]

And me as well. [Laughter.]

Following the board’s self-assessment, you developed an action plan to address the key areas identified for improvement. Can you share with the committee what those areas were and what actions you took to address them?

Thank you. We do an annual self-assessment process as a board, and last year's was a positive process, and members considered we were generally effective and contributed positively to governance and leadership at Audit Wales. As you'd expect, there were areas for development, and we developed a plan to address these, and these areas included—I'll run through them quickly—reviewing scheduling and agenda items to ensure we were focused more on strategic input and decisions, and also on key statutory work; then also increasing our focus on the scrutiny of performance by Audit Wales, by developing an effective integrated performance report. We're also further developing board learning by holding development days every year—we have one coming up in December—and also placing expectations on members to attend and access training.

Adrian has referred already to the roadshows. We are improving board visibility and engagement with staff within the organisation in a number of ways: this afternoon, we're going to a roadshow again; we're arranging to meet staff informally and in teams, and that's an ongoing process; and also we're supporting new board members in their induction with a core information induction document that forms the basis for that.

So, progress, I think, has been good in those areas, and development of course is ongoing. We'll take stock at the next self-assessment, which is starting in the next week or so, and also we'll build on that then to the board effectiveness survey, which will be conducted some time next year.

Thank you very much—

Mike, if I may, as a new chair, even though you've been there for a little while as well, what's changing from when the previous chair was there? What sort of things would you like to see changing, or is this a trajectory that you're driving as chair, or is it something that was set in motion and—?

Okay, a few points to that. I think that the development plan that we agreed as a board roughly 12 months ago was a good one. So, 'if it ain't broke, don't fix it', so we'd build on that. Although, I have, I think, put greater emphasis on staff engagement, and I placed, if you wish, a greater expectation on board members to undertake learning. Those are the two aspects. But, of course, we'll take stock again, and then maybe with the outcomes of the self-assessment this time around, I can then put my further views in.

Rhianon, did you want to just come in on that?

Very briefly. So, you can put that emphasis on there as chair for take-up, but how are you monitoring that, because, obviously, refreshing training and being up to date with everything that you need to be up to date with in this world is absolutely crucial? So, how is that being monitored as chair?

Yes, thanks for the question. There are few things. Over the next month, I'll be appraising all board members and that is a matter we'll be discussing with them. As we come to next year, then, I'll be looking back at what they've undertaken as training, so that's an element of monitoring. But also, when it comes to some matters, they are undertaken as items for the board with all board members present, maybe in a workshop session on a strategic session on developments in audit. And so, in a way, we're assured then that it's not a matter of individuals looking for it, but that they are provided with it as part of the normal board meetings. So, I'm not sure if that responds to your question. Thank you.

Thank you. Your internal auditors issued seven internal audit reports during the year, three of which were rated 'reasonable assurance'. One was cyber security, a matter that I'm sure concerned you gravely. I would have thought that there won't be an organisation that won't have cyber security in there somewhere as a serious danger. We know what the ratings are. How are you ensuring that you keep safe, both your data being protected and that you don't allow somebody to get into the system? I know how difficult that is, and unless you pull the plug, it is always possible. So, really, what assurance can you give us that you are doing everything possible to stop that happening?

You're right, Mike, you can never say never, because the world changes so fast. So, we're never 100 per cent safe. I'll invite Kev to come in shortly—he is more expert in this field than I—but I hope to give you some assurance. The audit and risk committee—previously under Ian's chairing, but continuing under David's—has this as a frequent topic for a deep-dive, so they're continually questioning our arrangements. We ran a significant dummy trial last year to test our arrangements. It's not quite cyber security, but when the CrowdStrike incident happened earlier in the year, our team responded brilliantly to protect the organisation within a matter of hours. So, we have some high-quality arrangements in place, but, Kev, maybe you could just talk in a little more detail about how we test and keep those arrangements up to pace.

Sure. Yes, so, thanks for the question, Mike. One of the things we're keen to get is pretty much an annual review from internal audit of our cyber security arrangements. So, their conclusion around reasonable assurance was, effectively, that there is an adequate system of internal control, controls are working effectively, but there's some scope for improvements. They raised some helpful recommendations—we've addressed all bar two of those. The last two are due to be completed by the end of this calendar year, and the final one is, in fact, pursuing a new cyber security accreditation. That's something that our audit committee will be considering at their meeting in December.

The accreditation is one thing, but one thing that we really focus on is what we call 'defence in depth', so we look for multiple layers of security. So, if one fails, you've got another one to take its place. The example our head of IT always gives is: you've got a door with two locks, but you've also got a bolt on there, so, if one of those things fails, you've got a back-up in other areas. So, we have this defence in depth, and one of the things that we've done this year, with this committee's help, is to employ a cyber security consultant, called Accenture. What they do is provide consultancy services, and they also provide 24/7 support in the event of a successful cyber attack. You often talk about cyber attacks as being not 'if', but 'when', and we need to be really well prepared for that eventuality. So, already, they've been incredibly helpful, they've produced a number of helpful recommendations that, along with internal audit, are really helping us to strengthen our arrangements and to focus our resources on the things that are going to make the biggest difference in guarding against cyber attack.

But, sorry, when you get into cyber attacks, there are two levels, aren't there? They go in as you, which would be a problem, but not disastrous, or they go in as the systems manager in which they get complete control of the whole system. So, it's really about making sure that people don't do stupid things, which I'm sure you tell them not to: don't tape their password to a home computer that they're using to log on; that they don’t use their name or their wife's name as their password, or anything else guessable like that.

I'm sure you tell people these things. How you manage to make sure that people don't—. I know that I've got—I won't say hundreds, but I've probably got about 50 places now, where I log in at different times, and a number of them ask for capital letters, numbers and external characters. I mean, do you give advice to say, 'If you're going to use a capital letter, don't use it at the beginning' so that, if my password was 'Mike', don't use the 'M' as the capital letter, use the 'I' or the 'K' as the capital letter? It's just protecting them. You can't be—. If they're coming in with brute force, then it's very difficult to protect it, though, you do know—I'm going on too long now—[Laughter.] But you do know that—

Yes, this isn't a session about password security, Mike. [Laughter.] But I get your point, yes.

I used to teach it, sorry. I just—

It's a really good point, Mike. Technical security is one thing, and we've got lots of arrangements in place for that. But, of course, the individual, that is where, perhaps, the greatest risk is. So, there's a whole host of things we do to provide advice and guidance to staff. We do, for example, test phishing expeditions; we will provide guidance on password security; and also, all staff are required to review and refresh their memories on the information governance policy each year, which, again, covers a whole range of cyber security advice and tips.

And I suppose, when you come to doing the procurement for that consultant, it then becomes a balance of—. You know, you're going to spend an absolute fortune on this, but you could spend nothing, and it's highly risky not to spend anything; it's, maybe, too much to spend an absolute fortune on it when—. It's moderating that risk, compared to the—. So, obviously, your procurement processes are involved in mitigating risk and finding the best solution for that, and then, it's getting the best value for money, I'd imagine, from that and then for us as a committee, then, to understand that process to make sure that we're comfortable that you're getting the best value for the money that is in the budget. So, maybe, a short answer that that is happening and that that's something that's there.

Absolutely. And I think that's where things like the internal audit work and the consultancy support are incredibly helpful. They help us to prioritise what are the areas of spend that are going to make the biggest difference—give you the greatest protection. There are a million and one things that you could do, but what are the most important ones?

The other thing that we look at is advice from the National Cyber Security Centre and, if you like, their top tip: if you do one thing in terms of cyber security, it's introduce multifactor authentication, which we've got. So, again, things like that help us to really prioritise our resources and get the best value from our investment in cyber security.

And that then answers to the board, and the board makes those decisions and then we scrutinise the board and that's how it all works. Lovely.

The last question from me, and it's a short question now: how many red risks have you got on your risk register?

That's an exam question for you.

So, we've got one residual high risk from—. Are you talking about last year, or—?

I assume you use 'green', 'amber', 'red' on your risk register.

We do, yes.

Which is a sort of—. If you were investigating somebody who wasn't doing that, you'd probably tell them off in your report. So, how many have you got that are in the red?

So, we've got one, which was related to our financial sustainability, which is obviously a key for us, and we've already discussed that. That, we feel, is likely to be de-escalated in this current year, when we've completed our assessment of our quarter 2, looking at our accounts. So, that's the approach we've taken. You'll see in the document that we've also included something on our risk appetite, and that's what we use to really keep ourselves abreast of the risks that we're facing. But we review our risks, probably, on a monthly, if not more frequent basis than that.

So, when we're having a discussion this time next year, you'll be saying there's nothing in the red.

It depends.

Hopefully not, but it depends what risks arise. You know, earlier in the year, we raised a red risk around a situation with the chair, so we won't have that again, I know, but—[Interruption.] [Laughter.]. But, you know, we've just talked about cyber security, that's always on our register, as you'd expect. Our financial sustainability in the short and medium term and linked to that our ability to recruit and retain the staff we need—those are always top of our register. At the moment, we're in a position where they're not showing red, I'm pleased to say.

Thank you.

Peter.

Thank you, and I'd be really surprised if you had all indicators green. I would say, 'Well, actually, there's something wrong there', you know, because you should always be striving for further improvement. Anyway, that's not my point. I was just going to talk a little bit more about staffing and perhaps a couple more finance issues. Just to start, on severance, I note there was one severance payment this year, in comparison to three last year. I just wondered if there is a story around that, perhaps if there is a post gone as a result, and what are the implications to the person's work, if that was the case? How is that being picked up? And an indication, perhaps, of the criteria for severance would be useful.

Sure. Thanks, Peter. You'll appreciate it's always tricky to talk too much about the individual case, but I'll say as much as I can to try and address the question. So, the business case for this particular exit was built around organisational efficiency. It was a small part-time post, 0.2 of a post. So, removing the post enabled us to restructure that team in the round and put in place a structure that's much more robust and suited to the sort of work that we need to deliver. A significant element of the payment itself was simply contractual entitlement through payment in lieu of notice and so forth.

That's fine, and puts it into context, being 0.2 of a post. If it had been a full-time equivalent, then I would have thought there might have been a—. Thanks for that. That's useful. Just around sickness absence, and I know it's one of your areas that has altered a bit, there's a slight increase in sickness absence per person. I just wondered if you'd done any analysis of that, further analysis of that, and if any of that was down to workforce stress-related issues.

Yes, there has been an increase in sickness absence in the past year. The main driver for that is long-term sickness absence, and the main driver for that is in terms of stress-related absence. So, one of the things that we did, just over a year ago, was to introduce more granularity to our reporting, so we could better understand the reasons for sickness absence. So, we now record work-related stress absence and then home or other-related stress absence. In this case, the majority of the absences are caused because of factors outside of work. But understanding that helps us to target intervention and support more effectively. I think the other point to make is that, in a relatively small organisation—300 staff—just a couple of long-term absences can have a significant impact on your overall statistics.

In terms of those people on long-term absence, there's a range of support available to them. Immediately, they are supported by their line manager. The line manager has support in turn from their human resources partner, and there are regular check-ins and welfare visits to help them. There's also a range of other support available. So, for example, they can access free confidential counselling through our employee assistance programme, there's occupational health support, we also have trained mental health first aiders and well-being champions, all of whom can provide advice and support to the individual. And when the individual actually comes back to work, they sit down with their line manager and they work on, develop and agree a well-being action plan, which helps with their phased return to work and also their reintegration into the workplace.

That's helpful. It seems like you've got a good suite of support around there, and I take the point that sometimes stress and anxiety can be caused from outside the organisation. But you're confident that any internal related stress-driven absences—you're conscious of those, and you've got things in place, interventions in place, to try to remedy that, I'm assuming.

Absolutely. So, that's something that is done on an individual basis with that line manager and HR partner, but at a more organisational level we monitor our sickness absence statistics. We do that through our director team and through our executive leadership team, and we also have a health and safety committee. So, we would look for trends and issues, so that, again, we could tailor our support and intervention to help tackle those things at source.

Thank you for that, that's helpful. Just moving on to resources, then, I noted that the total resources, gross expenditure, was £1.6 million lower than in your estimate this year. The largest area of variance, we know, is a £1.1 million underspend in staffing costs, but also the generated income was £1.3 million less. It would be interesting to know the factors at play. Is that an indication that there's a direct correlation between fewer staff and less income generation?

Absolutely, there is.

Right, I've answered my own question. [Laughter.]

That is the answer, yes—those are the guts of the answer. There are some smaller points at the margins that we can touch on, if you like.

If there's anything else you wanted to add to it, you're welcome to.

Just to give you a little bit of detail, we've talked about some of the turnover and recruitment challenges that we've had. There's a direct result then on our spend, so about a £1.5 million underspend on staff costs. That was actually offset by a one-off cost-of-living payment to staff, which I think this committee will remember discussing nine months or so ago, so that netted it down to about £1.1 million. But, absolutely, without those staff we're not in a position to generate the income, and that leads to that £1.3 million underdelivery on income. Obviously, that has that knock-on impact on our work programme and on our backlog, as we talked about earlier.

Sorry, remind me, then, as we come to the end of this financial year, coming soon, if there's any underspend, then that will be returned to the block grant. So, because this is from your earned income, and then an underspend on that, how do the mechanics of that work? You wouldn't move it across to anywhere else, so does that mean that we might be looking at some money being returned, or is it—?

No, it's all in the same pot. I'm afraid there's not a treasure chest we're sitting on, sadly. So, no, if our income is down, that's reflected in our overall balance position, and that's what you see at end of year, in terms of any return to the fund.

I just wanted to clarify that position, just for fullness, really.

So, clearly, you're short on staff, or are you running at an optimum? What would your optimum be? It looks like you could generate enough income if you invested in staff, so you could keep going on with that equation, but what's your optimum to say that you can cover the work levels?

You wouldn't believe the degree of planning that goes into this area—so, a super-precise number of roles and time allocated to deliver a fixed package of audit work, in the main. I've mentioned how we're in a much better place this year than we were a year ago, in terms of staffing. We currently have more staff than our establishment would need to deliver a typical year's work, and that is enabling us to eat into those backlogs of work that we talked about earlier. So, yes, at the moment, we have almost as many staff as we think we need to meet our targets around the backlog, so our issue this year is more likely to be some overdelivery of income, if anything.

Well, that's good. So, you've got your optimum-sized team, really, or near it, anyway.

At the moment, fingers crossed, yes.

Thank you for that. A supplementary to that, then: you've underspent capital in 2023-24 by almost 20 per cent on a cash budget of £310,000. Are you happy with that level of variance, and, given that this isn't the first time that you've underspent on capital, can we have confidence in the robustness of your estimate regarding capital when it comes forward?

Kev, are you happy to take that?

Yes, sure. Thanks Peter. So, yes, that underspend, it's about £60,000, and there are probably two key reasons for it. One of them is an underspend because of a delay in the ongoing development of our SharePoint-based audit management system, called SMART. That's something that's been rolled forward into the current financial year, so that's happening now. The other factor is the ongoing move from capital to revenue expenditure in terms of IT infrastructure. So, rather than having to spend on kit on premises, we're increasingly renting that in the cloud because that gives you better security, better value for money. So, in recognition of that trend, what we're looking to do is to reduce our capital programme from 2025-26 onwards to reflect that.

Okay. Fine, that's good.

And you'll see that in a few weeks' time.

Because you're back with us in two or three weeks, aren't you?

Just a couple of more quick ones from me. Your financial statements outlined a credit loss of £143,000 in 2023-24, up from £77,000 the previous year. The accounts note this relates to a provision for bad debt over 12 months old. So, why has the figure almost doubled, and can you outline the process for pursuing debt?

Sure. So, the provision relates to debt that almost entirely relates to town and community councils. We audit around 750 of those. What we're talking about is a very large number of very small invoices, and inevitably chasing those up is quite a time-consuming process, as each chase-up generates queries that we need to deal with. The way we chase them up is primarily through e-mail and telephone contact with individuals at those bodies, and in recognition of that higher than expected level of debt, we've appointed a temporary credit controller to help us get to grips with that. Their work has already proved to be really successful. So, over the past three or four months our debts over 90 days have reduced by about a half, and the debts over 12 months have started to reduce slightly. What we're expecting, though, over the next month or so, is a further reduction in those debts, because there is a regular cycle of council meetings for town and community councils. Those have just been held and one of the things on the agenda is to approve the payment of the Audit Wales invoice. So, we expect that figure to come down again during October.

Typically, roughly how much is 'small'? Is it hundreds?

Hundreds.

Hundreds, yes.

A couple of hundred pounds per community council, as it were.

Yes.

For an entirely straightforward, well produced, on-time delivery of accounts from a community council, our fee would be in the region of £200 or so. That's such a tiny amount, any additional work on our part can mean that that moves to several hundred, low thousands. And for a small organisation that's a lot of money.

On the work carried out. But it's still proportional to the amount of work that you're doing and that's what we agree in the fee scale beforehand.

We're not allowed to make a profit on any of our work, so it always reflects the work that we put in. But it is an extremely laborious, time-consuming system that unfortunately we have to apply.

But in England they would appoint a private company to do this.

I believe in England parish councils, if they're below a certain threshold, they don't need to have a formal external audit. It certainly wouldn't be the comptroller and auditor general doing it. So, there's a much lighter system in England. But where auditors are appointed, you're right, each council would appoint an individual or a private company to do it.

That's obviously a different—we're not going down that route now, but it's interesting to understand that.

I've been invited to give evidence I think to the local government committee in a few weeks' time, who are just kicking off a piece of work into town and community councils. So, I'm sure I'll talk more about it then.

I might watch that session.

Just a last question from me, and I'm conscious of what we talked about earlier, about sensitivity around individual issues. But the accounts include a special payment of £21,000 made to a member of staff in resolution of an employment dispute. Can you provide on the circumstances surrounding the payment? Was the Wales Audit Office found to be at fault and legally required to make that payment?

Thanks, Peter. You'll appreciate I do have to be careful about what I say, especially as this is a colleague who still works with us, but the committee will recall that we used to pay an allowance called a travel allowance in respect of travel. This issue arose due to a question about historic entitlement to that allowance. We were not found to be at fault, but we did take external legal advice and that said the safest and most appropriate way to resolve the dispute and to protect the organisation from any risk of further cost or claim would be to settle. That we've done, to mutual agreement on both sides, so the issue is now resolved satisfactorily all round. It was a pretty unique set of circumstances around this case, so I'm confident that there are no others in the organisation.

I was going to ask that question: are we likely to see anything else like that?

No.

No. Thanks for that clarity. That's all from me. Thank you.

Just finally from me, your annual plan says it will take you several years to get on an even keel post pandemic, and back to pre-pandemic timescales. What needs to happen for that to be the case? What are you doing to get yourself to that position? How will we see that being delivered? You mentioned a bit that you're probably 'overstaffed', in inverted commas, to deal with that, rather than just the business as usual, but maybe you could just talk a little bit about that, just so that we understand where you're going with that.

Yes. You'll see in our annual plan—and the organisation is probably getting sick and tired of me saying it—I have said that elimination of backlog, catching up, resetting our work, is absolutely my No. 1 priority before I cease to be auditor general in a couple of years' time. So, I want to hand over to my successor a clean slate. So, we have plans across all programmes of our work to do exactly that over the next couple of years. Given the factors that are within our control—principally, maintaining a high level of the high-quality staff that we need—I'm confident that we will achieve that. It is possible that we get hit by issues from outside that knock us off target. It requires, certainly in our accounts work, for the bodies that we audit to play their part in delivering high-quality draft accounts to us on time and so forth, and they certainly have some challenges in that space. The world of auditing standards is constantly in flux and so we always need to deal with those, and I can't control any further duties and responsibilities that the Senedd or the Government asks of me. But, putting those to one side, I'm confident that, given where we are at the moment, the progress that we're making, the arrangements that we've got in place, I will go and hand over a clean slate to my successor.

Lovely. That brings us to a close for our public sessions today. Thank you so much for your time.

Diolch yn fawr i chi am ddod i mewn.

Obviously, I mentioned there will be a transcript available for you to check for accuracy afterwards, and you've also mentioned that you'll be with us in a few weeks' time to talk about your draft budget. So, we'll see you then.

In accordance with Standing Order 17.42(ix) I propose that the committee resolves to exclude the public from the remainder of this meeting. Are Members content? Great.

Thank you very much.