Btaig earsgedd. Welcome to the eighth meeting of the Public Audit and Post-legislative Scrot innate committee in 2018 Can I ask everyone in the public gallery to please switch off or in silent your electronic devices so they don't effect the committee's work this morning? We have apologies today fromlexneal MSP Item one is decision to take business in private Can we agree to take items three and four in private this morning? Eitem 2 yw'r 2016-17 audit o NHS Tayside. I'd like to welcome our first panel of witnesses today, Professor Sir Lewis Ritchie, chair of NHS Tayside Assurance and Advisory Group, Caroline Lamb, chief executive NHS education for Scotland and chair of the NHS Tayside transformation support team, and Alan Gray, director of finance, NHS Grampian, who I understand is served on both the assurance and advisory group and the transformation support team. I will open with the first question this morning. When we invited you to give evidence, it was to explore the detail of the second report of the assurance and advisory group, and your covering letter, Sir Lewis, states that the rating assigned by the TST to the financial current position has moved from red to amber, reflecting the progress made in reducing the actual and projected level of NHS Tayside's financial shortfall. You also said that, at senior executive team level, we are encouraged by indications of improved organisational grip of the financial situation. Now, since then, we have had revelations that £5.3 million of eHealth funds has been misrecorded in NHS Tayside accounts and that the £17.18 financial outturn is likely to deteriorate further. Can you please tell the committee this morning why we should have confidence in the rest of your report under these circumstances? Thank you for your invitation to attend here today on behalf of my colleagues and myself. We were not made aware of this financial misreporting of the position during the organisation and conduct of our review and subsequent assessment of progress. This is a matter that came to light when your own committee was informed about it, as far as I was concerned. This is the first time that I saw this. Our assessment of progress was based on what was reported to the board up until the end of January and as we saw it. In our report, we talked about improved grip. We talked about evidence of better team working, leadership and that is detailed in the Transformation Support Team report, the second report that Caroline Lamb led on. That is why we felt that the tide was turning, but there was much further to go in this matter. You said that you were not made aware. I think that there were other people in that situation as well on those funds. Are you confident that you were made aware of enough of what is going on to complete your reports? My view is that this is a work in progress. Transformation takes quite some time. When I decided to accept the commission, I felt that, while it was important to address immediate financial concerns around grip, around the gap between budgeting and control and operational performance, I felt that it was important that we took a sort of route and branch look at how services were being delivered in Tayside. Transformation takes time, ownership and leadership. To correct the financial position of NHS Tayside, which has been in progress for some years, will require massive transformation. To set that process in place, it was important for us to know what was happening in terms of service delivery, what was being done in terms of the transformation programme. Our report pointed out that insufficient grip and insufficient clarity around the details of the transformation programme as it stood, that further external assistance was required, both in terms of financial support, which has been provided by Mr Allan Gray and others, and also in terms of a gap in strategic planning. In other words, unless those deficits were corrected, any financial movement in the short term would be rather about transactional change rather than transformational change. That is what is required and will be required on an on-going basis to deliver a sustainable budgetary financial control in Tayside. Can I ask you, Sir Lewis, how far into the organisation of NHS Tayside you went? Any transformational change in any organisation requires team leaders on the ground to be bought into the transformational programme and to deliver it in their areas. How far did your team go into the organisation to speak to lead clinicians on their specific projects about how transformation was happening? He will see from the annex to my first staging report the number of visits that I made. I set aside all my personal work for the three-month period that we conducted the initial work for the staging report. I and my colleagues undertook many site visits. We met with many groups, we met with individuals at the coalface, we met with committees, we met with the board both collectively and individually. I myself met with each executive team member of NHS Tayside as part of our initial fact-finding exercise. On the ground, doctors, nurses and health professionals, what was the sense of how transformational change could happen if it was happening, if they were being enabled to make it happen, if it was worthwhile, if it was going to yield results? What was the morale among them? My feeling was, as we stated in our report, that there was a sense of a lack of buy-in by front-line staff in particular to the transformation programme. The transformation programme board, which we visited and witnessed, clearly held much of its business in camera at the outset. Basically, there was a feeling that engagement was not as early as it should be, was not as thorough as it should be. Equally, I spent many hours discussing, along with my colleagues, the need for transformation in particular with clinical colleagues, because clinical leadership with support staff behind them is essential for transformation. Transformation is a common endeavour. It is not something that you do, and you do it once. You have to keep on doing it, and that requires a high degree of ownership across the system. You got a sense that, from some front-line staff, there was not complete buy-in, but did you get any sense of why that was? I think that there is a misperception that transformation is something that can be done in a short space of time. There is a misperception that what is planned in a boardroom is actually made clear at ground level and shared at ground level. There is also the issue about when engagement occurs, when should that occur? We were saying that it did not occur early enough, and that had to change. Do you think that it is changing now? I understand from my observations and from the observations of others that that tide is turning. With the revelation about the £5.3 million that has since—I read your report before that came to light—how do you think that something like that affects those team leaders on the ground, where there is such a glaring omission, such a glaring mistake at management level? How do you think that affects the confidence of people who have to deliver this transformational change? My view, when I heard on the day that your committee heard about this, was one of disappointment, because I was disappointed clearly not only in the financial hole that it opened up, but actually your point that I support it will affect morale. Having a high morale workforce is key for effective transformation, so my reaction, quite simply, when I heard about it, was disappointment. Good morning, everyone. I wonder if I could continue to tease out the issues that the convener has introduced to Professor Ritchie. Why do you think that it has taken so long? You said that this has been an issue for some years in NHS Tayside, the overall financial position. Why is it taking so long for it to dawn on the organisation that transformational change may, in fact, be required here? That is a good question. My answer to this is that if the tide is coming in in terms of resource development resources, as happened for many years in the NHS, it is easier to carry on doing incremental change. In other words, moving a service here, a little bit there, but when the tide of resource begins to go out, you begin to say that that is not sufficient. You cannot just improve your financial position by improving your financial processes. You have to actually look at service redesign. That, I believe, because of the fact that, as it were, the tide has not been so generous, it has not been flowing in so much in terms of development monies, means that the financial position is more exposed and the service is more exposed. You will know, of course, that NHS Tayside has more sites, more personnel in most categories, greater energy expenditure, and that has been going on for some time. Indeed, it was the subject of a previous task force and Audit Scotland review in 2001. Clearly, in the intervening years, insufficient attention has been made to what we really need to do to redesign our services in Tayside to make these services sustainable and continue to be high-quality and safe. Those two latter characteristics are absolutely essential. In these kinds of questions, have never really been considered or posed within the organisation to date, would you say? I fully believe, as we found out during our fact-finding stage between April and June last year, that the board is fully cited now on the need for transformation. What happened last time was that recommendations were made on the moment, on the year, and as business went back to usual, I think that sight was lost in this. Now there is a concerted effort, and I do not believe that NHS Tayside and indeed its partners will be important for effective transformation are other than cited and committed to making that change, but transformation will be neither quick nor easy. Difficult decisions lie ahead, and that includes not only taking the public of Tayside with the board and its partners, but clearly the political representatives in Tayside as well. Leadership of a very high order will be needed for this, and it will need to be concepted and continuous for some time. This is not the work of a year, let alone six months, which is what we were given to report progress to you at this point. In my view and in the view of my colleagues on the assurance advisory group, we made the comment and recommendation that external scrutiny by the Government of the activities of NHS Tayside should continue at a higher level accordingly and progress further out from the recommendations having been published in the first place should be reassessed. The reason for dwelling on this convener is that we hear these sorts of messages fairly regularly at this committee and have done over the years. Are we pointing at issues about capacity and skills and governance issues and guidance and regulation? What kind of set and sweet of skills are we talking about here to try to introduce or bring to bear in an organisation that would prevent something like that happening in a year or so down the line? I would make several points. I might want to bring in Caroline Lamb in relation to her assessment and support in relation to the workings of the transformation support team, but I preface that by saying that all of the aspects and items that you mentioned will be important. This is the knob over the matter that transformation depends on many things coming together, not just one. In the past, there would be a focus on this and a focus on that, and that is not peculiar to NHS Tayside, but transformation depends on a global perspective. It depends on many people doing things together that they might not have been doing before. A mutual understanding, effective leadership and adequate support. I now come to one of our recommendations to the Government. We had 14 recommendations, as you are aware, 10 for Tayside and 4 for the Government, and we recognised almost from the get-go of our assessment that external support would be required. NHS Tayside could not go it alone, and that is the difference between our assessment and previous assessments, where financial adjustments were made, some local leadership was changed. We needed external support, although Mr Gray on my left and Islam on my right and colleagues have tried to do that since the staging report was published. Caroline, can I write you a comment? Absolutely. The Assurance and Advisory group, as Sir Lewis's reference, issued 10 recommendations in relation to NHS Tayside and the other four for the Scottish Government. The role of the Tayside support team has been very much to provide support and constructive challenge to Tayside in implementing those recommendations, so it has not been about going in and doing it for them. It has been about very much supporting a team in situ to deliver on those recommendations. If I were to characterise those recommendations, I think that they cover the different elements that need to be in place for transformation. It is a very immediate recommendation, recommendation number one, about the in-year financial position and needing to absolutely get an urgent grip on what that was looking like and then be able to manage that going forward. I think then a longer-term recommendation around the importance and the absolute centrality of the integrated clinical strategy and the work on that towards being able to deliver medium and longer-term financial sustainability and quality services across Tayside and then link to that very much the recommendations that are about addressing some of the key areas of financial pressure identified by the insurance and advisory group around workforce and around prescribing costs and then you might categorise the second half of the recommendation and sorry an improved business planning. You might characterise the second half of the recommendations around delegation, around engagement, around corporate structures, around scrutiny and particularly around leadership development as being fundamental to creating the conditions that are required to support transformation, which is not an overnight activity. It is not something that you set off to do today and it is done by the end of the week or the end of the month. It is a long-term activity that needs absolutely to build relationships, to build confidence, to build trust and it does take some time. I mean, thank you so much for that, but it would still worry me, I would say, that we've waited perhaps six years or so to start to begin the journey towards real transformational change in NHS Tayside and that. So I'm not quite sure how to take what you're saying with some degree of comfort, but I'm certainly assured that we are now thinking along those lines and that is our intent and purpose now to bring that to bear within the organisation. Very lastly, convener, could you just give a brief practical example of some of the transformational change that you see so that people perhaps watching this can understand that we're just speaking in general terms at the moment? Could you give a practical example of what you see as a change that's required in NHS Tayside to bring these changes around? I think that it's important to recognise that there has been progress made and I think it's important to recognise that although... Absolutely, so if I just look at the improved information and data that the board now have available to them on their workforce, on where their workforce is deployed, that is enabling them on the improved partnership working around the vacancy management group, that means that both staff side and management are sitting down and actually talking about how to manage the staffing establishment and that did start to show some evidence of reductions in the requirement for expend on nursing agency staff particularly, which we know is not just expensive but also not the best way of providing services to patients. Now clearly that's been difficult to sustain during the winter period but the foundations have been set to continue to deliver that. Thank you. Colin Beattie. Clearly a key element of this whole transformation is really the bottom line, isn't it? I mean it's all about bringing Tayside back into some sort of balance. What extent are you satisfied that the information coming from the finance area, particularly given this revelation, is actually accurate? In terms of what we have been given, we have looked at it with the support of EY initially, we decided to take a public centre. It used to be known as Ernst and Young, it's now called EY. So basically we decided that in order to do the work initially, we had to do this in a parallel way and so EY, Ernst and Young former, they were commissioned to do a deep dive on the financial situation in Tayside in relation to the budgets and so on. So we had the benefit when we came to our view in June, not only of our own views but an audit undertaken by EY on our behalf. How much did that cost? I am not aware of that, I wasn't informed about it but I didn't commission it. It was commissioned at the outset by Scottish Government. Alan, can you do that? It was commissioned by Scottish Government and we used it to rely on that as part of our findings for the first report in June, so we didn't commission it. I am always sceptical about what people tell me about finances because I have served in boards for a number of years and it's always good to be sceptical in relation to any response, and in particular in relation to money. Therefore, it was important that NHS Tayside received external financial support rapidly. That support has largely come in the form of input from Alan Gray on my left and colleagues. Alan, of course, is the lead financial director for the north of Scotland and has been helping Tayside directly. Alan Gray, you may wish to comment on that. That is the point that you are making about the clarity of the financial information that is presented to the board and to other users within the organisation in terms of managing the budget. Some revisions have been made to that in terms of the financial reporting, so it is clearer in terms of what the underlying financial position is and how the overall financial position has been managed. Some steps have been made to change the quality of the financial reporting that is going to the board. My colleagues managed to stay side, and the second session may wish to talk about what they have done in recent weeks to improve that clarity. We presented that format, revised format back to the board on Monday of this week, and I think that we received very positive feedback. Part of it is making sure that the users of the information understand the financial position. Previously, if you look at some information, it could have been presented in a different way. It made it easier for a non-financial person to understand the financial position and to be able to ask questions, because part of the role of the non-executive is to be able to scrutinise and challenge. If you are not provided with information and a format allows you to do that, then that makes that job a bit more difficult. The format of reporting now should make it much easier for non-executive members with no financial background to be able to ask and challenge questions on the financial position of the board. By scepticism, I meant an important scrutiny role and challenge role, not an unhealthy scepticism about what people are telling me, but actually the fact that you need to look very carefully at the evidence, listen very carefully to what people say and challenge them accordingly. That is a process. Clearly, you are very reliant on the reliability of the information coming to you. Clearly, from the review that has been done here, there was a lack of control over part of the process here. If EY did a deep audit or a deep look at the financial situation and how it was being managed and so on, are you surprised that that came to light now and not as part of that audit process? No, I am not, because the forensic analysis of the financial systems within NHS Tayside was not part of their remit. They were there to look at how Tayside was financing its transformation programme and they reported accordingly. In other words, they did what they were asked to do. Reporting on systems and approvals and all the rest of it? No, that would be the role of your external auditors. Audit Scotland, the role of the external auditors would be looking at the systems and processes through which the financial information is produced. The young remit was to look at the overall financial position, the underlying deficit and the factors contributing towards that, so it was not a financial audit. I think that it was in the term in-depth. It was in-depth in terms of looking at and analysing the drivers for why the financial position was where it was and what the factors contributing towards that. That was their role. The external auditors role would be to look at and examine the systems of control and process and governance within the organisation and report that back to the board. Coming back to the core element in this, how satisfied are you now that the reporting that you are receiving, the information that you are relying on, is accurate? A few weeks ago, it was not. I think that there is still some further work on going to clarify the financial position. There is a whole series of questions to be asked around reviewing and challenging to make sure that we do understand all aspects of the financial position and what is contributing towards that. That work is on-going. The part of the position that has been re-forecast now is the year-end position for NHS Tayside to reflect some of that review. That work will take a few more weeks to conclude. Just to make sure that I am not misinterpreting what you are saying, you are saying that, at this moment, we do not actually know what the financial position will be. There are still elements being worked out. There is still uncertainties. It was to be reported to the board meeting on Monday that the revised projected deficit is that correct? Those minutes are not yet public. Can you tell us, Mr Gray, what that figure was? The deficit position at 1 to 11 was £11 million, just over £11 million. The re-forecast position, based on information we know to date, was forecasting a newton of £12.1 million for the end of the year. It was reported to the board on Monday, was it? Yes, it was. It was also reported in its part of the return to Scottish Government, so it was part of our financial reporting. We were asked to do an in-month position, but also an end-of-year position. Clearly, we are getting close to the end of the year, so we should be able to clarify that position. Has this issue that has arisen created any doubt in your minds about the accuracy of the information that you are getting? I am a little bit worried that we are in a situation here in which we have had problems continuously for some years. We think that we have got our hands round it and suddenly this pops up. Of course, it creates that doubt as to whether there is something else there. I guess that is why we are asking lots of questions. We are not going to throw out every line of areas in terms of the financial position to make sure that we understand all the component parts that are adding to the financial position. We will see what we get to over the next few weeks in terms of confirming that. I can only know what I know just now. I am asking as many questions as I can with the finance team and colleagues around that. We will get an external audit. Clearly, it will come up in the next few weeks. Again, I am hoping that that will also contribute to improving the understanding of the financial position. What is the role of internal audit in that? Are you making use of… Internal audit has been very helpful in terms of identifying control weaknesses and improvements. Again, we are working through with it in terms of understanding how many of those control actions have been taken forward and implemented. Again, there is on-going discussion of the internal audit in terms of the role that they can play. The audit did not pick this one up. To be fair to internal audit, it flagged the use of the deferred expenditure as a means for managing the financial position. To be fair to internal audit, it highlighted that there was an area of weakness within the financial controls in the organisation. Flagged that too, Mr Pryd? It flagged up. If you look at it in our Assurance and Advisory Committee, we highlight a number of instances where it highlighted to the audit committee and the board the use of the deferred expenditure. We referenced it also in our report. Sorry, Colin. Are you telling us that the internal audit had flagged the use of e-health funds to the board previous? No, no. I will clarify that. Within that category of funds, which we call deferred expenditure, e-health money was one component part, it did not identify that. It would have been difficult for them to flag it up. What had they identified? What they had identified was that, if I could explain how the board's financial position is mine, we are asked to work within a single revenue resource limit for any financial year. That comprises your board, your core board allocation, the underlying right formula, your money for general medical services and also covers what we call earmark funding. Earmark funding is allocated to boards all the way through the year, and often that earmark funding is required to be spent over more than one financial year. In terms of what has happened on the Tayside, the level of earmark funding that has been allocated to the board had not been spent as quickly as it should have been, and it was building up within the financial position. At the end of last year, it was £23 million of earmark funding that had not been committed in the year that would be carried forward into future years. Within that £23 million on allocations, there was the £5.3 million of e-health allocations. I would have been easy for them to pick out what those allocations were. I suspect, in a way, that that was reported. It would not be difficult for them to pick out specifically what the nature of those funds were and what the source of those funds were. It would have been difficult for an internal audit to pick out. Colin, do you want to continue with us? I am curious why it would be difficult for an internal audit. They have the right to look into anything that they have a concern about. It is not a small sum. You might say that it is a small sum in relation to the overall budget of the board, but still £5 million to me buys an awful lot of goods for the hospital. I am just thinking about what the board has received. Is there anything there? If something has been highlighted by internal audit, do you think that the board would have been concerned about it? Would they have investigated it? Yes, the board were concerned. The board had taken steps to reduce their dependence on that level of deferred expenditure. Last year, it was 23. The board was taking steps to reduce that. The board was taking all the steps that they felt were the right steps to improve that position and reduce reliance on this type of money and make sure that earmark funding was getting used much more quickly to support the profession of services. The board had taken on board the findings from internal audit and were taking them forward in implementing the actions. Coming back to the money, from your perspective, do you have a timescale in which you believe that you will have satisfied yourself that the finance side is 100 per cent in order and that we can rely on the figures coming out? Coming back to this particular issue, of course, that creates a doubt, doesn't it? I agree, and there is a bit building trust and confidence in the terms of the financial information and the quality of that information that we present to the board, so I have no doubt about that. I think that it is going to take a bit of time to do that. We have reassigned responsibility in the finance function and there are a number of reviews on going to try and identify what further actions need to be taken. We are going to get internal audit in to help us. The board reminded to commission an independent review and that was highlighted in the letter to Paul Gray. Always factors should help us to be able to then come up with a clear action plan about how we improve the controls within the finance function and the quality of financial reporting. I cannot give you a final timeline for that. My aim would be to get as much of that done by the end of June, so that you can have confidence in the next financial year that the information that is being produced is reliable and the board can make huge decisions on the basis of that information. That is another reason why we continue to recommend regular scrutiny by the Government of the Financial Affairs of Tayside and, indeed, undertake a further review in the next financial year at a suitable point. The answer is that this requires continued scrutiny. Is it a work in progress? Have you taken any steps to have discussions with internal audit in particular about the scope of their audit and whether it needs to be beefed up or whether it is adequate as it is, at least for the interim period, until you are satisfied? Yes, I am just having a meeting next week with a chief internal auditor to understand what is currently in the programme of work for the remainder of this year and for next year to see what we can do to try to re-prolitiate some of that work to help us to address some of the issues that have been highlighted in the grant launch report and will widely be internal audit in previous years. Liam Kerr Thank you, convener. Good morning. We have heard quite a bit about clarifying the financial position, about re-forecasting, the requirement for scrutiny into NHS Tayside's financial affairs. In late February, the director of finance decided to retire after some 35 years, and this was confirmed, I think, that there was a letter from Leslie McLey to Paul Gray in which this was referenced in one line. Are you able to tell us why the director of finance suddenly disappeared and in what circumstances? The answer to that is no. I only became aware of the findings of financial misreporting at the same time that your committee was. I have certainly had no part whatsoever to play in the circumstances and, indeed, any corrective actions following our report, which was submitted a month ahead of this particular item coming to the attention of the Government and NHS Tayside. Does that not concern you? It does, but that is not within my remit. You are asking me, does it concern me? Yes. Is it within our remit or was it within our remit? The answer to that is no. I suspect you may wish to tease this out further in the next session. Forgive me, I have just been blindsided a bit there. You are in there to look after the transformation. The director of finance, who apparently has presided over a situation that we have explored in some detail, has just disappeared. I think that, if I am hearing your rights, you are not asking questions around that. Is that correct? My role at the moment has been completed by the presentation of a second report. I have, however, since been asked to go in to do a further assessment of progress in September with Caroline Lamb. That may change in the light of the circumstances that I am not fully aware of. Mr Gray, do you have any view on that? I cannot comment on all that I have been asked. All I can say is that I have been asked and offered to provide some interim financial support to the board and I am doing that in my current capacity, but I cannot, I was not involved in any discussions around the return of the previous director of finance. All I can confirm to you as a committee that I have been tasked with giving some support to the finance team and to the board at this particular point in time. That remains my focus for the next few weeks until I can be happy that we can move this situation forward and look at a paper coming to the board today to look at an appointment of an interim or a permanent director of finance going forward to take that responsibility on for the future. On that note, is there any cost incurred as a result of this resignation either for your own services or for our understanding that there has been a realignment among the finance team? I confirm that there is no payment for my time. I am part of a regional structure now in the north of Scotland region. I have agreed with my board that I can be released from my current duties, first part of my current duties, to support the board. I have been doing that for a period of weeks now and that goes with the blessing of my board that I can do that, so there is no cost incurred and there is no additional capacity. We are not bringing in any additional capacity to the finance team at this important time. I am looking at what is in the finance team in terms of capacity capability. If we determine that there is a need to improve the capacity in that team, I would take that forward to the board as a recommendation. At this stage, there is no additional investment of resource in the finance team, a cost being incurred by Tayside as a result of the retirement of the director of finance. Is it your view that there is appropriate financial leadership in place at NHS Tayside? Perhaps more importantly, do you take a view that there has been appropriate financial leadership in the past and will there be in the future? During my initial review, I met all of the executive team. I mentioned that earlier. I asked the question, are you confident that you have the necessary skills, leadership, in all the areas that are required for the effect of transformation going forward? Primarily, that is a matter for the board to satisfy itself, that that is the case. However, we did immediately, as you were aware, suggest to the Government that additional external support was required, particularly in relation to finance and particularly in relation to strategic planning and, indeed, to make that more granular, to see what detail was required, and that the transformation support team was established to do that. Can I just mention first of all that, in the papers that we look at today, there is reference to a report by KPMG. I just remind members that my register of interests says that I was a partner in KPMG, but of course I had no part to play in any of this work. Can I just ask Professor Ritchie just one question? You have spoken quite a lot about leadership and the importance of it in the future and this transformation that is at the head of NHS Tayside. Who is the leader on whose shoulders that burden now falls? Leadership is something that is required at all levels in NHS Tayside, not just at board level. Transformation has to be led not by the board only but primarily by the board. With clinical leadership, for example, it will be very important going forward in relation to transformation. Transformation will not happen without buy-in and without the clinical leaders in Tayside continuing to rise to the occasion. So what you are saying is that there are a group of leaders. Who is the leader of that group of leaders? The chairman of the board leads the activities of the board supported by the accountable officer who is the chief executive. That is where it starts. Leadership has to be evident among non-executives. It needs to be evident throughout the organisation. Mr Gray, you said on the question that Colin Beattie asked you about internal audit. You said that the board was aware of the deferred expenditure, including the £5.3 million. I do not see the fact—no, I clarify. If it expended generally, they were not aware of the £5.3 million normal internal audit. None of us were aware of that situation. That was only known about in the last few weeks and none of us were aware of that situation. But that deferred expenditure did include the £5.3 million. It did indeed. That is correct. Okay. When you said that the board was aware of the deferred expenditure, in what way were they aware? Was it reported to a board meeting? Can you clarify that for us? Certainly through audit committee meetings, I guess the reports of internal audit would go to audit committee. I cannot clarify in terms of the need for it to go to a board meeting. Sorry, can you speak a little bit slowly? Went to a number of audit committee meetings, the internal audit reports would go to a number of audit committee meetings in which the references were made to the use of deferred expenditures as part of the financial position. Whether that went to a forward board meeting, I cannot comment, but it certainly went to an audit committee meeting and were considered there. There is also a reference now or assurance and advisory report, which did go to the board meeting and we make references to the use of deferred expenditure in that report, the report in June of 2017. Iain Gray I mean this is quite puzzling, so there was a sum of deferred expenditure of £23 million. The audit committee and the board were aware of that. I think that Sir Lewis said that some grip had to be taken of that situation, in other words, the failure to spend money and time in there for the need to defer it had to be improved. Surely in that process, the audit committee and or the board must have asked what is the deferred expenditure and what is the activity for which we have allocated funds that are not being spent in the year. If they did that, how can it possibly be that they were not told that £5.3 million, a quarter of it almost, was the e-health money? I cannot see how that is possible. I cannot comment on what the audit committee and the board may or may not have asked. There was not any audit committee meetings. I think that that is a fair question. That is a reasonable question to ask, yes. Sir Lewis, I would like to drill down into one of the specific areas that I am particularly concerned about in the Auditor General and that is prescribing in NHS Tayside. It has been identified as one of the key things that the board needs to get a grip of. I spend all my time in the locality of NHS Tayside and in Dundee, and I continually hear stories about people's repeat prescriptions not being checked for years and years and stockpiling medicines and all of that. I have read the parts of your report on prescribing. To what extent is that going to be solved? When are GPs in control of that and also secondary prescribing in hospitals? Do you think that sufficient progress is being made? It was identified as recommendation number five. We said that efforts should continue unabated, because we recognised that there were discrepancies in prescribing across the peace in Tayside and in Caroline. Perhaps it might bring you in relation to that specific. Absolutely. It was clearly identified as a recommendation. As a support team, we also recognised that, within our core membership, we did not have particularly any expertise in prescribing. Therefore, we engaged with the effective prescribing division that the Scottish Government, so Outlaw Mayor and Simon Herding effectively provided us with advice on that, and they engage very closely with the Tayside team. In our second report, we identified that there were some improvements that had been made. Again, it was down to putting in place processes that would enable improved prescribing practice. One of the things that progress had been made on was the number of polypharmacy reviews that had been undertaken, so actually reviewing what medications were being prescribed for people. That is an ongoing process. In September, we had a rating on that. We moved that to AMBA based on the advice that we could start to see some developments. I think that it will still be some time before that starts to come through in terms of financial savings. Developments that allowed you to move it from red to amber are polypharmacy reviews? Improvements in polypharmacy reviews, improved clinical ingots. For the layman, exactly what that is, just briefly. Yeah, I'll try, because I'm not an expert in this area anyway. Sorry, that concerns me as well. The Auditor General has identified prescribing as a problem in NHS Tayside for years now, but there was nobody on the review group with specific expertise in this area. You had to refer back to the Scottish Government on it, is that right? That's exactly what we recognised early on, was that we needed, from the first week, that we needed expertise in that, and we were able to access that within the Scottish Government. Sir Lewis, should you not have had somebody on your team who was able to drill down into this? I'll nightmare and Simon Herding effectively became members of the team and they were part of the team. Prescribing is a long-standing interest of my own, Chairman, in relation to my clinical practice. You will see in the first staging report that we extracted a bit of a bored minute in relation to prescribing. I had also attended during the subsequent period between September and December a prescribing management board meeting to look at myself and witness the progress. Am I satisfied with the progress? The answer to that is no. It has moved to Amber in your staging report. It has moved to Amber on account of processes in particular reviewing, repeat prescribing. So prescribing happens in two ways. Is there any evidence that prescribing has reduced? The rate of increase in Tayside prescribing has been less than the Scottish—over the last year—has been less than Scotland. The rate of increase has been less, but there is no evidence that it has reduced. I think that what Sir Lewis is explaining is that, in general, prescribing has increased over the whole of Scotland over the last years. The fact that Tayside has increased by less than that does indicate that it has made some progress in reducing. Indeed, can I clarify that? In terms of the medicines volume, there was a 0.7 per cent reduction year on year versus a 0.3 per cent increase for Scotland last year. These are figures provided to us by NHS Tayside. The movement on your warning—the evidence for moving it from red to amber—is not all that convincing. There are more polypharmacy reviews. I think that Caroline Lam is just about to explain briefly exactly what that is. That is effectively looking at reviews of patients who are on medication and looking to see that they are being prescribed the right things. There is a process of rolling through, working through, delivering those. Okay. Did you speak to any GPs about prescribing during your review process? There was engagement through the prescribing management group, so Altner and Simon were both engaged in that group that involves pharmacists and clinicians, including general practitioners. It seems to me that the movement from red to amber is not a lot of evidence to support that, because the rate of increase of prescribing might be slightly less than the rest of Scotland. However, there is not a real weight of evidence that big improvements are being made. Would you agree with that, Caroline Lam? That is why we would not go any further than amber, because when we were rating it as amber, we were recognising that processes had been put in place, but they were left yet to deliver impact. I would also say, Chairman, that we particularly tested that. When the AGMate with the TST, that was the particular rating that I myself had concerns that we perhaps have been over generous. So, I share where you are coming from in this matter. So, you were inclined to keep the rating at red, Sir Lewis? I would have said that. We accepted the rating and the rationale for that, but in terms of tangible progress, in terms of change in the ground, that is yet to emerge substantively. That is behind your point. I would support your view. So, the people who are telling me that their prescriptions have not yet been reviewed, and in your view that is probably the case that that is not yet happening? I cannot comment on that. What I do know is that there is a great deal of commitment within NHS Tayside to get this right. They recognise that they have much more to do, and I clearly want them, from my perspective and the perspective of the AGMate and the transformation support team, to continue in that regard. So, Lewis, let me ask you about the transformational change on this level. I believe that public services must constantly be reformed and refreshed to meet the demands of our population and our citizens. Have you seen transformational change on the scale that is required by NHS Tayside? Have you seen it happen anywhere else before? I do not just mean in Scotland, but anywhere. I have not been a world traveller in relation to observing transformational change, but transformational change can happen and does happen in other health systems. In Scotland or... Worldwide, in terms of the literature. But transformational change in Scotland is something that I became particularly interested in in relation to the out-of-hours review that I led three years ago. And I quickly recognised that to do that would require a whole system approach, which never had been attempted before. So, the answer to your question is, are there massive evidence of transformational change in Scotland not yet? But there's a clear recognition that it needs to happen. Do you think that NHS Tayside management has the requisite skills to deliver this or experience to deliver this on the scale that is required? At our assessment in March to June, a staging report assessment, we took the view that NHS Tayside required urgent and additional skills to help them expedite that journey. When is your next report, Sir Lewis? I've been commissioned by Mr Gray along with Caroline Lamb to look at the situation again in September this year. Now, in the light of recent circumstances, which we've been discussing earlier today, that may change in terms of tempo, in terms of intensity. That's something that I'm sure will be discussed following your committee hearing today. And I am open, personally, as my colleagues, to continue to support NHS Tayside through this journey. So, we should expect the next report at the latest September, is that correct? I think that Mr Gray will need to agree with you the timing on that. That is an indicative timing at the moment. As I say, in the light of recent events, I would need to look very carefully at how that might be conducted in terms of change methodology and so on. Just very quickly to follow up on something that Covenience just said. It was recommendation 11. You talked about the Scottish Government ensuring the necessary skills, expertise and support are made available. At the point when that recommendation was made, did you or do you have a clear idea of what skills were missing and from which positions, from either the people that got into this situation or were lacking in an ability to get out of the situation? Two particular areas were identified and that was financial skills, which is, again, the reason that Mr Gray became involved. Secondly, a gap in omission was strategic planning. That has been made good in the form of an interim director of strategic planning. As we say in our report that was submitted at the end of December, we believe that that needs to be looked at permanence. In other words, there should be a substantive director of strategic planning in Tayside. That was a notable finding and an early finding in relation to our staging report work. I thank you all very much indeed for your evidence this morning. I am going to suspend the committee for a comfort break until 9.57. I welcome our second panel of witnesses this morning, Paul Gray, director general health and social care's Scottish Government and chief executive of the NHS in Scotland. Gordon Whales, chief financial officer, Scottish Government, Professor John Connell, chair of the board of NHS Tayside and Leslie McClay, chief executive of NHS Tayside. I am going to open questioning this morning. Mr McClay, how often do you go through the accounts of NHS Tayside? I will be part of a number of activities. Clearly part is the board, core member of the board. I am a member of the Finance and Resource Committee, which meets monthly, where there is a detailed review of our financial plans. Then I am involved in the financial planning process from leading the director team. How often is it that you sit down and go through the accounts of the board? It is less about going through the accounts of the board. It is part of the role in building the financial plans and then reviewing the progress against those plans. I would comment that it is a regular feature of my role in the governance point review at the board and also review process at our monthly Finance and Resource Committee. You are very familiar with the accounts of NHS Tayside? I am very clear about the progress of the budgets and the overall make-up of the budget. Clearly, as chief executive, I have a director of finance, just like I have a medical director, a nursing director, and that accountability and professional role is undertaken and delegated to them. How often do you sit down with the director of finance and ask him about what is in the accounts? In any board, and certainly in my board, I have weekly director meetings, which we will look at a range of aspects in terms of the performance governance of the board. Financial reviews are a feature of that, but the formal review would be happening at our Finance and Resource Committee, which is a subcommittee of our board. We have a finance report that goes to the board at every single board meeting. We heard from Alan Gray that the board knew about the deferred expenditure. We know from the Grant Thornton report that your director of finance, who has since retired, knew about the e-health funds. Did you know? In terms of the issue that we are discussing today, I was not aware. You were not aware? No, I was not. But if the board were aware and your director of finance were aware, why were you not aware? I think that the independent review of Grant Thornton indicated that the board, the director and executive team, were not aware of the e-health allocations that had come in. What Mr Gray, I believe, was referring to in terms of the board knowledge, and my knowledge was the size of the deferred expenditure budget that we had. He made reference to the fact that it was bigger than we would like it to be. I was aware of the size of the budget. I was also part of the board meeting where we instructed that we wanted a reduction in the size of the deferred budget and that we agreed through our audit committee into the board that we would have a five-year plan to reduce the size of the budget. So you were aware of the size of the deferred expenditure, the £23 million? Yes, I was. And did you ask what that was made up of? I refer you to Ian Gray's question to Alan Gray. Yes, so the finance director produces reports, which he will provide to the executive team, to the finance and resource committee and to the board, and the deferred expenditure total was in there, but it was in grouping. So the size of this budget at £22.3 million, there was not a line by line detail of every single item. And did you ask for that? No, I didn't ask for that. Why not? Because my finance, in terms of the size and scale of the reports that he would bring, it wouldn't be appropriate for me to ask for a single line. I mean, our budget for our board is clearly about £800 million and I don't have a line by line account, I wouldn't expect to have that. But you're the chief accountable officer for NHS Tayside. You sign off the accounts. Yes, I do. So why would you not ask what this sizeable sum includes? Because as the accountable officer, I also have a director of finance that I am relying on in terms of providing the financial information that comes through me and into the board. So you just trust your legal advice, your financial advice, your clinical advice and don't ask further questions? Of course not. Of course there is a level of governance and scrutiny that happens within the board and I would conduct as chief executive, but there is also a level of accountability on those individuals to bring the relevant information to identify the risks and raise those through myself and into the committees and into the board. I think that most people would expect that level of accountability to rest with you. It strikes me that if you did not ask what that deferred expenditure includes, then you weren't asking the right questions. So, as I said, from the Grant Thornton report, you will see that there were small sums of money. There was a review clearly undertaking— Sorry, what were small sums of money? The allocations as they came into NHS Tayside did not come in in one figure of £2.53 million or £2.63 million. It didn't come in like that. When reading the review, it was clear that those e-health allocations that came into NHS Tayside came in in small amounts. But that has been on-going for six years. Yes, and that's clearly—so the first time I was made aware of it was on reading, obviously, I was made aware of it and then the detail of that, my first awareness and indeed of the board's awareness was on receiving of the Grant Thornton independent review, where clearly it says that it has been practised since 2012. So, what questions do you ask if you don't ask what the deferred expenditure includes? If that's not a question that you ask of your director of finance, what questions do you ask of him? Clearly, I think that your question was, do I ask on a line by line? I don't ask for a line by line. I didn't use the phrase line by line. I think that you used that phrase. My contention is here that you are the accountable officer for NHS Tayside. £5.3 million has been mis-accounted. There was a clear knowledge from the Grant Thornton report that your director of finance knew about this. We now discover that the board knew about this, but you're telling us today that you didn't know about this and you didn't see fit to ask about it either. I think that my understanding from the independent review is that there's a statement that says that the board was not aware, neither were, the executive team or the leadership team. What we were aware of was the size of the deferred budget that we had and that the board was taking steps to reduce it. Mrs McLeod, is your job to ask these questions? Is it not? I think that I've described in terms of the process of review that we have, but not that single level of detail. It's not your job to ask what the deferred expenditure includes. It's not your job to be across the accounts to that level. Is that what you're saying? The director of finance produced a level of detail in what was included in the deferred expenditure, and that was in groups under titles of things such as ear, mart, reserves, and there would be a figure there. What was not provided was a single level of detail. However, Mr Gray has already indicated that, since being aware of this, I have taken immediate action and we have now changed the level of reporting that will come to the finance and resource committee and will come to the board, and that's now within media effect. The picture that you're giving me is that the director of finance presents you with the information that he wants you to see and you blithly accept that. I might be wrong about this, Paul Gray might be able to clarify, but I think that chief executives of organisations are expected to have sufficient training so that they can ask the requisite questions of the people who are presenting them with that information. I think that that is your job and that is the job of the board of NHS Tayside. Why weren't you asking him those questions? There were a number of questions and reviews that would be done around the financial performance, and that also is the remit of the finance and resource committee of which I am a member of, and that committee every four weeks in Tayside undertakes a review of the performance. We are also reliant, as the committee has already discussed, on findings and information coming through audit committee, both from internal auditor and clearly external auditors as well, but I would certainly reinforce the level of review that is undertaken by the finance and resource committee, and then there are always detailed finance reports that go to every single board meeting. Pick this up. I think that the report clearly indicates that it was unlikely that this would be picked up, and I think that that has been reinforced by Mr Gray in terms of his earlier submission. I am sorry, but I am confused. The director of finance knew about this. That is clear. Would you agree with that from the Grant Thornton report? That the director of finance knew about the £5.3 million? Yes, that is what the report says. Alan Gray told us that the board knew as well. No, I think that Mr Gray said that the board knew the size of the deferred expenditure. So why didn't the board ask what that deferred expenditure included? Would you not expect that level of scrutiny on your board? Clearly, with the information that we have now, I would agree with that, but it was the level of reporting on how that deferred expenditure was made up. Clearly, it did not give sufficient detail for those questions to be asked. Why didn't you ask? Because there was never any risk identified to me or to the board in relation—there was a risk in terms of the size of it, but not in terms of what it was made up. You are relying on internal audit to review your allocations that are coming in, and there was never any risk identified that there were inappropriate allocations coming into our board. That was never a risk that was identified. Ian Gray The thing that we cannot understand here is that the board knew of the £23 million deferred expenditure. I think that he said that the board agreed measures to reduce that. How could they agree measures to reduce that without knowing what activity it was that led to the deferred expenditure? That is the question that you saw me put to Mr Gray. I cannot understand so how can the board have satisfied themselves that measures were being taken to reduce the level of deferred expenditure without knowing what the activity was that led to the deferred expenditure? I think that neither myself nor the convener can see how that is possible. You would have to know what is going to be done differently and to do that you would have to know what the activity was that had not taken place in the year that led to the deferred expenditure, and therefore you would need to know a breakdown line by line or whatever of what that deferred expenditure was. I agree with the level of information that we have, but all I can see to you is that there was never any risk identified in terms of what those allocations were. The size was there? The risk was identified in terms of the size of deferred expenditure. Yes, it was. An action was agreed, except that the board then did not know what that action actually was. They could not have. The internal audit recommendation was to reduce it. That was what their recommendation was, and the board then instructed, through the director of finance, to start to reduce the level of reliance. The board was in a position where the internal auditor had recommended a reduction. The board agreed that, but I had no idea then how that reduction would be achieved. The reduction could have been achieved by taking the money out in notes and setting fire to it, and that would have been fine. The board would have met what the board had agreed. Is that right? No, clearly that would not have been acceptable. Well, they would not have known. That is the point. If they did not look at what was in the deferred expenditure, they could not have known what the measures would be. If they knew what the measures would be, they must have known that the e-health money was in that somewhere. I am not going to disagree in terms of your statement there. The description of what was in the deferred expenditure was in a level of grouping, and it was not in a level of single detail of what every allocation that had come in had been used in the deferred expenditure. That level of detail was not there. All that I can say now is that that level of detail is now going to be reported to the board. Ms McLeary, if you are leading this level of transformational change, you just clarified that the board did not ask those questions. You must be across all the change that is happening in NHS Tayside. If the board is agreeing to change to happen under those groupings, you must have known what that change was. As chief executive, you are absolutely correct. My responsibility is to lead and oversee the transformational change within NHS Tayside. I have a group of executive directors who I delegate a level of accountability, and I have governance and assurance processes in ensuring that that has done that. That is the role that I have endeavouring to do through the delivery of the transformation programme, which I think that the advisory group recognises some of the progress that the board has made over the past 12 months. With hindsight, do you think that you have delegated too much on the level of detail in the account? In the finance space, there is not anybody more disappointed to be here in front of the committee on this issue. There is a level of accountability. Clearly, I am the chief accountable officer, but I also delegate. There is a level that you have to trust. If there is nothing coming through an assurance process of risk, you have to trust that accountability to be delegated effectively and that you are reliant on individuals and their professional accountability as well. Do you feel that, with hindsight, you did ask the appropriate questions of the director of finance? I think that we have taken further action, but I have to go back to what the Grant Thornton report said. Clearly, there were failings on governance across three parties, but I think that what is important is that the independent review said that they believed that there was no awareness by the board, by the executive team and that it was unlikely, due to the nature of the transactions that we would have been aware of. Do you feel that you have sufficient experience on the board? If you were not asking those questions and the board were not asking those questions, is there sufficient financial experience on the board of NHS Tayside to take that transformational programme forward? Yes, I believe that there is. There is clearly more detailed reporting that we have to do, but I think that there is the skill and capability in terms of board members. Are there any accountants on the board? Perhaps I could contribute here, Ms Marra. First, I confirm that, as Lesley McLey has done, extreme disappointment and a sense that we would feel that we have been let down and we have let down the committee by this occurrence with the Grant Thornton findings. The board does have financial expertise. The chair of our Finance and Resources Committee, which is now a performance and resources committee, is Mr Douglas Cross, qualified accountant. He is in a long-term and distinguished career with Police Scotland, as an accountant. We also, as chair of our Audit Committee, have Mr Stephen Hay, who is an investment banker. Between the two of them, we have a significant input into our financial management and audit. I believe that the board does have that level of expertise. If I can maybe just clarify what you were alluding to, the board, as Ms McLey has said, did not have awareness of the £5.3 million in the deferred expenditure. What the board was aware of, as you have been told by Mr Gray, was that the level of deferred expenditure was higher than it should be. All NHS boards have a level of deferred expenditure. It is the nature of the way NHS finances work year on year, so deferred expenditure in itself is not unusual or necessarily inappropriate. What was unusual was the reliance that NHS Tayside had on deferred expenditure within its accounting system. Within the detail of the deferred expenditure, the e-health monies, which were totally inappropriately within the NHS accounting system, were broken down into smaller items. They were not bundled up as a £5.3 million chunk. They were bundled up into smaller levels, which were probably below the value at which one would normally expect a board to be told about transactions, all under £1 million. Whether that was done deliberately or not, I cannot speculate, but the Grant Thornton report has made it clear that there was no visibility of the £5.3 million in the deferred expenditure. I would point out, as Mr Gray previously did, that NHS Tayside had been subject to external audit by Audit Scotland in previous Grant Thornton—no, KPNG? PWC. I am sorry, there are so many initials. PWC, Ernst and Young, the Assurance Advisory Group, external audit and internal audit all have gone over our accounts. None picked up the fact that there was an inappropriate level of money within our deferred expenditure level. That level of scrutiny does give me some concern, because none of that picked up this does mean that I suspect that it would have been impossible without someone owning up to the fact that it was there. Professor Collin, scrutiny is independent eyes to check that public money is being spent properly. I would argue that you sign off the accounts of NHS Tayside also, and I would expect that, with a programme—I think that the whole committee expects—and with the programme of transformational change, that you would be aware of that level of detail, especially in deferred expenditure, especially when the board has agreed to reduce it. Those questions seem to have not been asked. You chair the board. Did the board think to ask about how those savings were going to be made, or did you ask? Yes, indeed. As Mr Clare said, the deferred expenditure covers a very wide range of activities. It is money that comes in all throughout the year to cover a number of Scottish Government determined priorities for NHS spend, including other activities such as eHealth as just one small part of that. We asked the director of finance to reduce the level of deferred expenditure, but we were asking him to ensure that money that came in was spent in year and not carried forward into following years. If we had an allocation of money for the sake of argument for an IT system, we wanted to be assured that it would be spent in that financial year. Sometimes the allocation of deferred expenditure monies comes in in the final quarter of the financial year, and it is physically often quite difficult for NHS boards to get that money spent in time, which is why it becomes deferred expenditure. The item is carried forward into the following year. We were asking the director of finance to carry forward as few activities as possible, but we did not ask to be given line-by-line itemisation of what items he would be spending money on and not on. In hindsight, we might have asked him to give us headline notification of the larger items so that there was some awareness of which activities we were going to be spending on if we weren't. It is very easy to do that in hindsight. The fact that all the external scrutinies did not note that does not give me comfort, but it is what I rely on when I sign off the accounts to be given an assurance that our accounts have been audited and are acceptable. The previous panel made reference to a deep audit by the strangely named EY. Who commissioned that? I am Sir Ernst and Young. That is what they would be referring to. That was commissioned by us as part of the run-in to the Assurance Advisory Group work. How much did it cost? As far as I am aware, Mr Beattie, I am happy to provide the committee with more detail. The sum involved was £211,000. Really? £211,000? Do you have value for money? Yes. Really? Why is that? Because the Ernst and Young report provided a basis on which Sir Lewis Ritchie and others could take forward the work that they did. Had Ernst and Young not done the work that somebody else would have had to do it? I do boggle about it £211,000. It seems an awful lot of money. It is the going rate. We did not pay over the odds for that kind of advice from that sector. You believe that you have a good result out of it, but they did not pick this up. If it is a deep audit, surely they would look at all the processes and every element of it. If it is £211,000, they would expect it to be forensic. Well, a forensic audit would be a different thing, and we did not commission a forensic audit. I suppose, Mr Beattie, I do not wish to present to the committee some analysis that says that this is a good situation. It is not. It is something about which, to call it disappointed, we would be putting it mildly. What Grant Thornton said was that the process by which this money was being transferred had been embedded in the board's financial planning and financial reporting processes for a number of years, and therefore has masked the underlying operating position of the board. He then referred to the lack of challenge by the board that we have just spoken about. We think that that is due to the lack of reporting of the transactions, as the knowledge of those transactions seems to be contained to the NHS Tayside director of finance, NHS EHealth and EHealth Leads Group. They have been, in effect, off-budget reporting transactions. As colleagues have said, we have to rely on the assurances that we receive, otherwise there is no point in having those assurances. Those assurances have come via a range of routes that have already been described. Those transactions were, in my view, carried out in a way that was intended to obscure them from the board of NHS Tayside, and that is what happened. Grant Thornton's report also says that there was lack of controls in place in the NHS Tayside around those transactions. That is accepted, and they have changed the controls. There were equally the controls that have been different around EHealth and the NHS. I have removed financial responsibility for making those transactions from the EHealth Leads in response to that. In my experience, orators focus a great deal on all the different forms of suspense accounts, deferred payment accounts and all those things, because that is where you hide things. Orators focus on those. We are told that we have had PWC, Ernestyn Young and goodness knows who all involved in this at whatever cost, yet they still do not pick up this basic element. Mr Meaty, all of us in our jobs rely, to some extent, on the fact that people are transparent and tell us the truth. Otherwise, it would be impossible for any of us to proceed. The committee quite rightly relies on me to tell you the truth and to be transparent, and I do that, as you know. If someone does not, yes, checks and balances will deal with it up to a point, but we are reliant on Ernestyn integrity. You are saying that Ernestyn integrity was not there? I have said what the Grand Thornton report says. The knowledge was contained in a particular way and was not passed on. The board, effectively, was misled. I would say so. Coming back to what Leslie McLey said, she said that she relied on internal audit. Do you think that internal audit should have picked this up? I think that Mr Gray has already said that. What I said was that clearly we rely on our internal audit and our governance processes, but with the detail that we have around this, I can understand why it was not picked up. On the overall figure for the deferred payments, you also said that the internal audit had recommended reduction. The headroom recommended reduction in this size, so their focus was around that we were relying too heavily on deferred expenditure. Would internal audit have known the content of the deferred expenditure? I am probably not in a position to answer that question today. Looking at this, we had issues that we raised previously about internal audit in connection with NHS Tayside. That is when the problems first surfaced. We could not understand why the situation developed as it did without that being properly out-reported. Here again, I have some doubts as to what internal audit is doing if it does not pick this up. It is a classic situation where a business or operation puts funds through the books of the year-end or whatever of the reporting period in order to make the situation look better. That is the sort of thing that I would hope would be picked up. Is there one moment on the general internal audit point to bring in Ian Gray? It is a slight fill-up, Mr Gray. The point that you were making is that your view in the Grant Thornton report indicates that the sum was accounted for in a way to hide what was happening from the board. In the Grant Thornton report, it says, the email trail appears to indicate that the director of finance at NHS Tayside was planning on using the eHealth money as part of their overall income that year and that the director of finance at NSS was aware of the situation. Is it the case then that the director of finance at NSS was part of that knowledge that was hidden as well? It is possible that NSS is conducting an internal investigation. Colin. Again, that brings a question in about NSS internal audit. Did they feel to pick this up at their end? So, Mr Beattie, we are straying into areas that are at the very limits of my technical competence but I will try to answer your question as best I can and it may be that Mr Wales can assist. The distinction that I make between NSS and NHS Tayside is this, NHS Tayside's end-year accounts, if I am, and forgive me if I do not use exactly the right technical words here, would have represented them as having £5.3 million available to spend, which in fact they did not because they were going to have to give it back. So, in other words, the position that looked £5.3 million better, or would have had we not intervened, would have looked £5.3 million better than it should have done. So, that is Tayside. NSS were not going to spend the money in the year in which it was allocated and did return it, which so far is the right thing to do, so their books are not misrepresented. But they returned it through a budget exchange mechanism, which had originally been designed as a strategic reinvestment fund, as we are going back now to 2011-12, which was a legitimate process which had, over time, been changed into one that was now effectively recycling money. So, something that started as a process whereby, if you had not spent all the expenditure that you had intended to, you then made that available for reinvestment. That is entirely legitimate. Where it strayed from legitimate was when that money began to be used as a recycling mechanism, which should not have happened, and that is what we have put a stop to. There are still questions, both with NHS Tayside and with NSS. Grant Thornton's report talks about inconsistencies and quality issues in connection with NSS, challenges that were out of the normal and should have been challenged and raised at NSS. There are a lot of questions there as well. It is not just NHS Tayside. There are two sides to this. Indeed, Mr Beattie, and that is why I have ensured that NSS is carrying out proper investigation of that through the governance processes and when that investigation reports, which I expect to be within the calendar month of April, then a decision will have to be made on what further action is required. I do not want to pre-empt the outcome of that. Just one last question on this. You rely on internal audit and you have stated that. Are you satisfied that the scope of internal audit, as it stands, gives you the reassurance that you require on the financial situation of Tayside? So in light of the situation that we now have, and I think that Mr Allan Gray made reference to that, we are revisiting that with the information and evidence that we now have to make sure that if there is any risk there, then it will be covered in our 18-19 audit plan. So that has been part of the immediate action that I have taken. Would you expect board members to ask questions around deferred expenditure? In general, yes. And why do you think that that has not happened at NHS Tayside? Well, I think that it has, but I think that the detail was obscured from the board, and I think that the board has acted reasonably once the detail became available to it. You said that you think that it has, but I think that we have already heard this morning that the board was not asking these questions, although they had the information presented. It was presented in quite general terms and the questions were not asked. Would you not expect your health boards around Scotland to be asking these questions? I expect health boards to act reasonably. What I mean by that, because your question is a fair one, is that they have to scrutinise what they have before them in a way that probes the detail. However, if some of that detail is obscured, then I think that it is asking a lot. It is asking people to notice something that they cannot see. Is it a reasonable expectation that the chief executive would ask for that level of detail? Well, I am running this through the lens of what I would do, and I genuinely find it difficult to know how I would have done something different if it was presented to me that there is a packet of deferred expenditure of £23 million. If the components appear reasonable and there has been a process by which it has been allocated, it is entirely possible to speculate about what one might have done with different knowledge, but I think that what NHS Tayside did with the knowledge that it had, and I am speaking about the board, was reasonable. Whether the internal controls were strong enough, it has already been accepted that there will have to be a review of internal audit. How could you agree to take action to reduce deferred expenditure when you did not know what it was? That is effectively what we have been told that the chief executive, the chair and the board did. Yes, and you can take action and the action can be reasonable and proportionate, and if the components look reasonable, then the action that you take will look reasonable. So you are satisfied that one of your health boards in Scotland, the management team and the board are not asking those questions to the extent that we now have £5.3 million just mis-accounted for? You are happy with that situation? No, Ms Marra, I did not say that I was happy. I think that we have all said that we are very unhappy, but what I am saying is— But you are satisfied that that situation can be allowed to continue? No, we have stopped it. But it has been going on for six years. Through a process that was, as I have explained to Mr Beattie, originally designed for something else and was changed over time, which should not have happened, we have taken away the response to the authority from the eHealth lead so that it cannot happen again. But in genuine difficulty to see what a person can do when they are presented with information that is designed to give them one impression when, in fact, the facts are different. Mr Gray, we are not just talking about politicians or the man in the street. We are talking about chief executives who are highly trained, highly effective leaders, strategic leaders with forensic abilities, but you would not expect the board members or the management to ask those questions. I would expect them to seek their relevant assurances. That is how any chief executive works. They have to work on the basis of the assurances that they have, and they have to make sure that those assurances are sound. That case shows exactly that that did not happen, but it did not happen because there was deliberate obscuring of the information. On that note, after 35 years, you have a director of finance who is working for NHS Tayside for around 35 years, one way or the other. He is deliberately obscuring information, walks in and retires without notice and any forewarning. Is that really the situation? That was not exactly how it happened. I will briefly tell you about the process. When I was alerted that there was a situation regarding our year end, and that is how it was presented to me on my assessment of that, my immediate action was that I needed to undertake an internal review and investigation into the governance. I also wanted to quickly understand what that was going to mean for the 1718 position in terms of the board, and, obviously, going forward the 1819. I took the view that, in order to carry out an open and transparent investigation, I would take management action with the director of finance, and that is what I did. At what point does that management action, which I assumed is management speak for disciplinary action? No, it was not. I took the action to suspend the director of finance, and that suspension was done, which is available for me to do that in such circumstances. That was taken as a neutral act, and it was to allow me to ensure that I had an open and transparent investigation. It was to protect the board, and it also was to protect the individual. My immediate action—you can only get into a disciplinary situation once you have got evidence and facts that there has been some misdoings or wrongs, and clearly you would take action thereafter. However, my immediate action was to investigate the issue, and so I carried out a suspension of the individual. At that point, the individual turns around and says— No, he didn't. No, he didn't. How did that turn into a retirement? Anyone who is part of the NHS pension scheme can make the decision to retire before the age of 60, and that is open to individuals. The suspension was enacted on the individual, and it is also probably important to say that I took senior HR advice in relation to the situation that had presented to me, made that decision and then started the internal investigation. That was on Monday 26 February that occurred, and through the trade union representative there was an indication to the HR person who was leading the investigation for me in terms of that part of it. We were given intention that he wanted to retire. You don't accept it, but he just retires. I'm not in a position to—I don't have a remit to be able to approve that. If somebody makes the decision to retire with immediate effect, then that isn't a decision that I can either prevent happening. I understand. What payments would have been made at the point of retirement? The individual and any individual who took that decision would just be what their entitlement was. Their entitlement is a payment in terms of their notice period and any annual leave that they were due. Anyone who takes early retirement, I think that committee members will be aware, has a reduction on their pension and their lump sum, so that is adjusted if they are taking early retirement. Just to be clear, there was a lump sum payment made—a payment in lieu of notice? No. Sorry, what I'm saying is that it was the normal entitlement of any individual in the NHS that was provided for this individual that we're talking about. Yes. I appreciate that, but just to be clear, there would have been a payment in lieu of notice, which, after 35 years, would be three months. Right. Was the director of finance professionally qualified and regulated by anybody? Do you know? Yes, he was, and apologies, I've probably forgotten the name of that body, but I have. I can tell you. CIME. No, we've talked, we've heard there about, I think you said, honesty and integrity was not there, we've heard of misreporting. I think I may be paraphrasing Mr Gray, but the information was willfully excluded from the board. Has a notification been made to the regulatory body, Mr Gray? The answer to the question is no, but that is because we contacted the regulatory body to establish that they were already in possession of the facts or they were, so reporting it twice would have served no purpose. I understand, but something is being done by the regulatory body to the best of your knowledge, not just committee. Lizzie McLeay talked earlier about a level of accountability. In what way are you aware that the former director of finance is being held accountable? Are you aware of the director of finance being held accountable in any way? I'm certainly in discussion with Scottish Government colleagues, I was aware that there was an engagement with his professional body. Mr Gray, just moving away from that slightly, if I may, was the Scottish Government wise to entrust millions of pounds a year to a group that Grant Thornton concludes were not financially aware? This is the e-health leads. In retrospect, no. So what's the Government going to do with that knowledge going forward? Well, we've removed delegated authority to commit expenditure. Why did the transfer request made by NSS not raise any concerns within the Scottish Government health and social care directorate? Because it was seen to be part of a process that existed since 2011 and there was a failure to detect the fact that its purpose was changing. But leading on from that, the Cabinet Secretary for Health leads the health directorate, which in turn is responsible for the e-health strategy board, and yet no one from the cabinet secretary downwards at any point said, this looks amiss or raised any red flag. Does that concern you at all? I have thought quite hard about that, Mr Kerr. If you think of the situation where you have a group of e-health leads whose responsibility is in relation to digital and in relation to project and programme management, there is a process for a strategic reinvestment fund and they are using it in a way that appears to them to be reasonable. At the bookends of that process, there are two finance directors, one in Treyside and one in NSS. I think that I would be speculating to answer your question, should someone have picked it up. If I was given clinical advice by two doctors, I think that I would generally be inclined to accept it. That is a fair point, because the e-health leads are not finance people, I think that is the point that you are making, is it not? They are IT, they are operational. The final question, if I may convene it, from Grant Thornton's report, there are a significant number of people in e-health in NHS Tayside in NSS who knew what was going on. So, who is going to take responsibility? Who will be punished for this, Mr Kerr? I will not tell you what you may think, I will tell you what I think. I think that the finance director of NHS Tayside has left work earlier, as in some years earlier, than he meant to. He has, as Mr McClay has made clear, therefore had an actuarial reduction in what he would otherwise have received by way of pension and lump sum, and his professional body is considering his position. That seems to me to be a fairly significant weight on a person. I have reviewed the situation in relation to the e-health leeds and have removed delegated financial authority from them. I do not regard that as a punishment, but I regard it as an appropriate action nonetheless. I will await the report from NSS before making any decisions about what to do about it. Professor Connell, one of the last times that you came to committee, we talked about the bonus payments that management NHS Tayside had received. Can you tell us when the last round of those payments were considered? First, I suspect that it would be for the sake of accuracy and best not to call those bonus payments, because I think that Mr Gray has also clarified at an appearance before this committee that those are pay increments that are made for senior staff within NHS Tayside, so I think that bonus is a misleading word in that circumstance. But they are judged on a criteria of satisfactory performance. So, in terms of the annual cycle, it runs essentially a year behind, so the payments to recognise performance for the financial year 2016-17 would be enacted during 2018-19. Yes. The last time that was considered was for the previous year, 2016-17. If you are getting to the point of asking about the payment that was made to the finance director, it would be based on his performance in the year 2015-16 that would determine his level of pay in 2016-17. His pay in 2016-17 would be determined by the assessment of his performance in 2015-16. In the last round of those performance awards, was he awarded an increment? To my understanding, he was. That would indicate that the judgment on him that was satisfactory performance to receive that increment is correct, that bonus payment. The triggering of an increment is based on a performance that would be deemed either satisfactory or higher than that. Without having the facts in front of me, my recollection is that he was deemed satisfactory in the year 2015-16. Okay. So, he received his increment in that year? In that year, yes. How about the rest of management? Again, without having the details in front of me, I am working from memory, but my recollection is that no members of the senior team were deemed less than satisfactory in that year. So, every member of the senior team in the last round of bonus payments received one? If I can again point out that these are not bonus payments, they are pay increments, which are determined by the Scottish Government. I think that it is important for the sake of accuracy to note that. If I call them incremental payments, the last round of incremental payments, every member of the management team received one. I would need to confirm that, but I think that that is correct. Is that correct, Mrs McLeod? Yes, that is correct. Thank you. Willie Coffey. Thanks very much, convener. I wonder if I could turn to the transformation agenda. Perhaps this is the bigger issue for NHS Tayside and perhaps the other NHS boards in Scotland to embrace the change agenda. What I want to ask you is why is it taking Professor Ritchie to come along at this stage and make us aware, or at least make us think, that a transformational change is required in NHS Tayside? Why haven't you done that under your own vision? I could ask that of Mr Gray and Mrs McLeod. I think that that is a fair point. I think that I would contest the fact that it was only when Professor Louis Ritchie was appointed on the insurance advisory team that NHS Tayside understood the need to transform its business. I became chair of NHS Tayside just about two and a half years ago, and it was at that time that it was very clear that Tayside's operational expenditure was greater than its incoming revenue and that there was a need to transform its activity. In the first period after that, significant effort was made to try, if you like, to carry out a fair amount of transaction activity to halt the rate of over-expenditure, but with a clear recognition that transformation of our operations was going to be required. It was very clear, as Professor Louis Ritchie pointed out, that transformation takes significant time, but the board did embark on transforming its activities in the year 1516 and 1617. It was at that stage when it was clear that the pace of transformation was insufficiently rapid and that we were still having difficulties in matching our operational spend with the available revenues that Sir Louis Ritchie's assistance was brought in. Transformation has been on the cards really for over two years, but the pace has been picked up in the last year. In terms of evidence that some things are happening, you asked Carline Lanford evidence of transformational change. I think that there are some genuine transformations happening. Perhaps the easiest one to cite is a major change to the way in which Tayside will deliver its surgical services in the future, a process called shaping surgical services whereby, in the future, acute unschedule surgery will be delivered out of only one site. In the past, that has been delivered out of two sites, so transforming the way in which we deliver surgical care will be better for patients but will be more sustainable in terms of workforce and finance. That was a process that began before Sir Louis Ritchie was in place and will continue in the future. There are other major transformations to the way we operate, which are on-going at present. It certainly gave me the impression—I do not know what the rest of the committee members feel—that that kind of pace of change or, indeed, the transformational change that he was referring to had not been evident in the NHS Tayside, but we perhaps disagree in interpretation of that. Are you confident, Mr Gray, that you have the skills, the capacity and otherwise, within the NHS Tayside, to carry forward this transformational agenda, so that we are not sitting here again, perhaps next year, in a conversation like this? Let me pick that up just to start off with. There is no doubt, in terms of the health board and NHS Tayside and probably other boards, that there is a challenge around capacity. That is just because you are reliant on individuals doing their day job in terms of managing patient care and, at the same time, being part of the redesign process and the transition process in terms of new services coming in while still managing the existing services. We were clear, as a board, that there were gaps in our capacity to do that and there were probably particular skill gaps as well. The opportunity that our board had through the AGE review and the transformation support team, in particular, provided some additional capacity and expertise for us. Even skills such as programme management skills, which are not inherent in a number of boards, and you need really good programme managers to manage. Once you have worked with your clinicians, with your staff sides, with your front-line staff and the public to agree, as Professor Cornwall is talking about, about this new model in how we deliver surgical services, you have the existing model going on and then you need skills to manage a detailed programme, manage all the risks and the things that go with it. We have been fortunate in terms of getting support through the transformation support team and there are still individuals who are working with us and I foresee the requirement for that over quite a significant period of time. I think that the skill gaps will change. We are also trying to develop our own individuals when we have expertise, so we are working from other organisations coming in that we are also doing training and development with our own people so that, when they leave, they have that additional skill. However, there is no doubt that an organisation like ours, with the scale of the transformation change that we have to deliver, will require on-going additional support and capacity beyond our current workforce. I could ask the same question of Mr Gray. Is this kind of transformational change agenda that NHS Tayside is being asked to embrace? Are we seeing that in other NHS boards in Scotland or are we going to see the same issues cropping up where external support might be required for a period of time to bring the skillset within the organisation? Could you give us a little flavour of what that looks like across the landscape? I think that most boards and most organisations benefit from some external support to assist with transformational change. I would be quite concerned if we got ourselves into the position of thinking that external support was always a bad thing, that it was always an evidence of some kind of failure or default. I think that having people who have change management and organisational development capability, qualification and experience is hugely important to driving forward change. The effect and benefit of a fresh pair of eyes cannot be underestimated. Sometimes, when organisations have got to a point where they think that they have exhausted all the possibilities, a fresh look at it can open up new avenues of consideration or make people revisit something that they had perhaps discarded as an option. I would not only expect but welcome further change management capability and transformational change capability being used in NHS Scotland, because I think that it would be entirely beneficial. Lastly, are you satisfied that what has been put in place with and for NHS Tayside is sufficient and inadequate to get us through this period of transformational change that we require? I am satisfied that NHS Tayside, rather than submitting its final plans for 2018-19 by the end of this month, which in effect would be today, to do so by the end of May, because I want them, based on what we now know and all the things that have come to light that we are aware of, to reassure themselves that their plans are sufficiently robust and that they have the capability and capacity in place to deliver them. I have also asked Sir Lewis Ritchie to maintain his oversight from the assurance advisory group perspective so that I can be provided with assurance that those plans are being developed in a robust way. We are providing additional support to Tayside and we stand ready to support them in gaining more support and assistance if that proves to be required. Liam Kerr, if I may, to follow on from that line of questioning. A degree of brokerage has been given to NHS Tayside. For anyone watching, it is an interest-free loan, if that is fair. The £33 million of brokerage has been given. I think that you can see that because of the issues that we have been looking at earlier today, there might be a little more brokerage needed. That being the case, you have deferred it for three years, the repayment. The question is, how much confidence do you have that this level of brokerage will be repaid to the public purse? It is necessarily a fixed sum. Therefore, the sum that you will get back in three, four or five years will be worth significantly less to the public purse than it is at today's date. Is there any implication for the rest of the NHS budget of having put this amount of brokerage into NHS Tayside? I will try to answer your questions in an orderly way. I had already indicated to the committee an intention to provide at least £4 million of brokerage relating to this financial year, in addition to what was already provided. The very sad fact about the £5.3 million on which we have concentrated most of the questioning is that it was in effect additional brokerage, which had we been asked for, we would have given. That is the unfortunate fact about it all. If you add four and five point three, you get nine point three. That is not difficult arithmetic. However, one of the things that I have asked NHS Tayside to do is to assure themselves that, in its estimates of expenditure, it has removed, as far as it possibly can, an optimism bias. My expectation is that, as we close off the end of this financial year, which we are now approaching, I will provide brokerage to Tayside in the range of £9 million to £12 million. They will be able to tell me more about that after their board meeting this afternoon and after some final work that Alan Gray is leading. That will take the overall brokerage into the £40 million. That is the answer to your first question. Will we get it back? Do I have confidence that I have a strong expectation that we will get it back? My confidence will increase over time. Has it been detrimental to the rest of the NHS? No, because it is not that NHS Tayside has money and it just disappeared down a hole. It was spent for legitimate purposes on patient care and other things, so there has been benefit from this expenditure. Will I be glad if I get £45 million back in three years' time that I can then recycle into other things? Yes, I will. Just to be clear, when I say that there is no detriment to the NHS, quite clearly the money has gone to NHS Tayside and it will have been used, but that money has come from somewhere. From which budget has it come? Is that somebody else's budget? Has NHS Grampian not received £33 million as a result? No, there are always in a budget of £13 billion adjustments. Is what and to whom? It is very difficult to speculate. I am not disagreeing with your question. It is fair and appropriate. What could we have spent £33 million on that we did not? The answer is that I did not know because we did not plan to, so it is not that we had some plans that we then cancelled and said that we will not do that. We simply did not devote £33 million to some other board or function or purpose that was devoted to NHS Tayside. Good morning, Mr Gray. I am sorry, but I will continue on the £5.3 million. The Grant Thornton report, which I have read and it is quite clear and I think that it is a good report, but in my mind it is what I would call a limited report because there were specific instructions given to them basically to look at certain controls and look at the accounting of these transactions. They mention in several places that their work did not constitute an audit or a forensic examination and there does not provide the same level of assurance. The conclusions are based on the documentation provided by the various bodies concerned. That gives me a slight worry because you talk about what people tell you and you have to take some trust in that. I am not really clear from this exactly who knew what and when. It does not mention, I do not think, the retirement of the finance director or anything he may have said. There is a link being made here that that person left because of something that had been done in the past and you have used terms like detailed being obscured. Do you plan to have a forensic examination so that we can really get into the detail of this? I had not at this time planned to do so because a forensic examination would imply that there was some information somewhere that you did not have. That is what a forensic audit, as I understand it, would normally do. It would go and look for things that you did not have or thought might exist but were not sure where they were. I think that we have pretty much all the information that exists. As I always say to the committee, if the committee were to wish to make a recommendation about further work that it wanted to see done, I would take that very seriously. We are taking it pretty seriously already. We have commissioned a report as quickly as we could. We have got the results pretty fast. We have taken a number of actions as a result of that. Alan Gray, who is certainly one of the best finance directors, I know, is going through now, in the level of detail, the budgets of NHS Tayside, which he is now able to do because he has access to all of that detail. I think that there is some fairly thorough looking being done. I cannot imagine that, having heard all that they have heard, they are not going to take a fairly close look at issues that are connected with this financial year and may review previous financial years. I think that the level of detail that we have gone into is pretty substantial, but if the committee had a recommendation, I would pay close attention to it. Obviously, we will come to that later. I do not think that there is a doubt that we have the figures, and we have seen the schedule of reversing entries, which is a bit of an audit trail in itself. I am still not just convinced. Sometimes, when you read those reports and it just has titles, it is a little bit harder to follow exactly who is who. We are exactly clear as to when people knew or did not know exactly what they knew, what discussions maybe took place about year-end balances, could that be improved, could that be the presentation to be improved. The board, as I understand it, is saying that we did not really know about this. Did the finance director hold his hands up and say that he did all this? I appreciate the point that you are making, Mr Bowman. Maybe I should start by saying that the audit committee of NHS Tayside remains very concerned not about the what, because I think that the what details are actually quite clear, but about the how and the governance aspects of it. The audit committee of NHS Tayside are at the present time putting together a remit for a further externally led review of the detail of exactly what you are asking, who knew what and where the opportunities missed for this to have been picked up. While I have given you assurances today that I do not believe that there has been anything missed, the audit committee has asked for some further assurance about why this was missed for so long. In terms of the titles and your litter number of names, I would point out that this arrangement dates back to 2012. When we talk about director of finance, it actually was a different director of finance in NSS from the current one than a different director of finance in NHS Tayside. The arrangements, when they were set up, were established by a different set of people, but what has been the difficulty is that they have been continued through time, so it has become almost part of… Mr Bowman had a direct question. Did the director of finance hold up his hands for… I think that Ms McLey was dealing with that, weren't you? I think that Ms McLey was dealing with that, weren't you? What I can see is that my first awareness of this was when the director of finance advised me of it. Advising you of an issue is different from saying that I was the person who perpetrated it. He advised me of the issue on further questioning. I was aware that he clearly had knowledge, and that was when I then made the decision to do the internal investigation. Now, whether there is a forensic examination or your external review, I think that it would be interesting to know what you are actually proposing before I would push on that. Perhaps will you have some oversight of that? Absolutely, and my finance director, Tristyn McLaughlin, will expect to see that. Would it be helpful for us to write to the committee with the terms of reference of that external review? Would that be useful? Mr Bowman, do you have… I have just one final point. You have used that term detail obscured. Now, if I go back to my sort of auditing days, if something is hidden, then you would expect the checks and balances to find it. If there is conclusion, it is much harder because there is more than one person involved. Now, how sure are we that there was not actual collusion here? Because we are focusing a little bit on the NHS Tayside and the other parts of the organisation. Was there a collusion to misrepresent the Tayside accounts? I have already made clear that the NHS is doing an internal investigation and we shall see what that brings. I think… No, I am not going to say what I think, because that is the road to ruin, frankly. I expect… Will you stay here to be honest with me? The committee, Mr Gray. Oh, indeed, but… Great, great. No, sorry. All I meant, convener, is that I am not going to speculate, because that will not lead to an honest response to the committee. It will just lead to my speculation. I expect, I think that I should more fairly say, that the external review that Tayside is commissioning about which we have spoken will bring further clarity to that detailed point about who within Tayside knew what about what when. I have a… I can give you it, but I am happy to read it out if you want. I have a timeline here of what we knew when, but that may not be the line of questioning that you are pursuing. No, I think that it would be helpful if we get that proposed in terms of reference. Just one final question. Do you intend to withdraw, correct and reissue the NHS Tayside accounts for the years concerned? That would be a matter for discussion with Audit Scotland. I think that it is for you, isn't it? Yes, but… You own the accounts, in that sense. I would wish to discuss that with Audit Scotland in terms of how we might go about that. So that is on your agenda? Yes. I will need to have advice bearing in mind that what we are saying is that, for a number of years, the position has been misrepresented, I will need proper advice on how one rectifies that situation and at what point the changes become material. I think that they are probably material in the sense that we are discussing them at great length here. Yes, sorry, but all I mean is that there may be some years in which the differences were not material and there may be others in which they are. I simply do not know, but I am happy to respond to your question by saying, yes, that is something I am concerned about. Mr Greed, did you see the first panel of evidence this morning? I am afraid that I was not able to know. I asked Sir Lewis Ritchie a couple of points around his report, which was published before the subsequent issue of the £5 million came up. I was particularly interested, as I have been before, in the prescribing issue at NHS Tayside and the detail that is in his report around that. I cannot remember his exact words. The official report will tell us later, but he indicated that he was perhaps a little wary of the movement from a red warning to an amber warning on the prescribing issue. I had really wondered if you had seen the evidence and how you felt about that indication from him. No, I have not. I think that there is a response earlier in junction about being honest with the committee, which I trust that I always am. I am aware anyway of Sir Lewis' concern about that particular issue. He and I had a brief conversation earlier this week. You may recall that I had previously engaged the Deputy Chief Medical Officer to look at the issues around prescribing. I think that my intention would be to ask Gregor Smith, the Deputy Chief Medical Officer, just to come back and provide some further assurance and support on the prescribing issue. That, if I may say to the committee, is one of the areas in which I am very keen that what I earlier described as optimism bias is weeded out. I think that what Tayside are proposing to do on prescribing is spot-on. I still wonder whether the ambition that they have expressed exceeds the likely rate at which progress can be made, because it is a relatively complex issue that requires a lot of persuasion of a lot of people. I think that they are doing the right thing. I just want to be sure that it will happen as fast as they think it will. In your view, Mr Gray, what drives that rate of progress that you say is necessary? Engagement, above all, in English speaking to people is not a complicated technical process, but decisions about prescribing are multifaceted. Also, there are historical practices, and I am not suggesting that they are all bad or wrong, but if people have done things in a particular way for many years, they are asking them to do it a bit differently. I think that engagement, persuasion and ensuring that both clinicians and the public understand what we are actually aiming for, which is better prescribing, are the things that I think matter. The people who are being asked to make this change on the ground, presumably this change is not easy to make or it would have been made before, how do you think that the issue of £5.3 million is just being mis-accounted for? How do you think that that will affect their confidence to see through the change that they are being asked to make when they look at the newspapers, the Scottish Parliament and the board and think that they are not asking these basic questions around where the money is, so why should we make that change? Do you think that it will affect their confidence in any way? I genuinely hope not. I saw three things. Firstly, I never operate on the basis that if someone else has done something wrong, I will not do something right by way of some kind of response to that. I do not expect that colleagues in Tayside would take that view either. Secondly, the £5.3 million, as you yourself said, convener, and rightly, has been mis-accounted. It has not been used for something that it should not have been. As I said in response to earlier questions, it is just a great shame that it was not asked for as brokerage because it would have been given and then the situation would have been exactly the same except that it would have been properly represented. The third thing is what we are seeking to do on prescribing in Tayside is consistent with best practice and with the principles of realistic medicine. I think that all clinicians will subscribe to that and I think that it is an important task to engage with them respectfully, which I know that Tayside is doing, and to ensure that that is carried through. Mr Gray, you are effectively the mortgage broker for any health board that is running a deficit. That is right. An effectively NHS Tayside has reported a false account to you when they have come to you for brokerage. Are you in a position to be granting brokerage when the accounts are not accurate to the extent that they are not in Tayside? There has been a misrepresentation of £5.3 million that has been uncovered and fixed. My confidence in what has been done so far, particularly as led by Alan Gray, is strong and I am therefore confident in giving brokerage to NHS Tayside. The Grant Thornton report said specifically that there were a lack of controls in NHS Tayside that led to this situation. How do you feel then about senior management accepting an uplift on pay based on performance when those controls did not exist and have led to this situation? I am not a party convener to the performance discussion in health boards and it would be difficult to answer your question. You are in charge of all the health boards in Scotland and effectively in charge of all the senior management. We have a situation throughout Scotland where people can award each other performance payments, but the board has been running a deficit and has been running a mistake in their accounts for the past six years. Increments are a contractual entitlement, as far as I understand it. If I am wrong about that, I will correct it, but that is my understanding. There is a process to decide whether they should be paid. I am happy to place on record that I will expect Tayside to think very hard about this year's round. The internal and external audit teams, are they being changed, replaced or are they continuing? There has certainly been no discussion in relation to that. The external audit team are allocated, and that is my understanding to the board. How about internal audit? Do you have the confidence to continue with their services? Mr Gray indicated earlier that he is sitting down with the internal audit team to discuss what our programme for 18, 19 looks like. There has certainly been no discussion from our perspective on whether there is a change required or not at this stage. I think that when the external review that we have already spoken about has concluded, it will be an appropriate moment to consider the points about internal controls and internal audit and to decide at that stage what that report tells us. It seems to me that the internal audit—we know that everyone who has looked at this has missed it, but it seems to me worthwhile that it is considered if there should be strengths added to that team to make sure that that does not happen in the future. Lesley McLey, are you comfortable that the director of finance carried the can for this? I think that the independent report clearly recognises that there were failings in our governance procedures. We have rectified those. There are further ones that we have enhanced. I think that Mr Paul Gray has indicated that the detriment to that individual is significant. To that individual, but to nobody else. Effectively, he was suspended and then took early retirement, so, effectively, he has carried the can for this mistake. Is that right? I think that he has certainly been personally impacted by the situation. That is fair that it was entirely his responsibility and he has taken his— I think that the grant author clearly states that there were failings across three parties and that it was not just one individual. The job that all of us have to do is to make sure that we rectify and take actions as immediately as possible to safeguard the situation that is ever happening again. That is what I see as my responsibility. You do not feel that you made any mistakes in the questions that you did not ask the director of finance around that? Clearly, the conversation and the challenge that you have given today, I absolutely take that on board. I think that we have already taken actions regarding further detail in our reporting. I have also instructed changing to our standing financial instructions, which will now mean that every single allocation that comes in to LHST side, I will, along with the director of finance review, consider it and formally sign it off before it then goes through the then financial management process thereafter. As other people have indicated, we are commissioning an independent review and we will look at those findings further and we will take actions as recommended by that. You are happy that the director of finance was his responsibility and your performance continues to be satisfactory and deserves an uplift in payment? As I said, it is clear that the director of finance had a responsibility. The grant author and report determines that in relation to my performance. That is a decision that we made by the chairman and by the board and it would not be for me to make any statement on that. In terms of the transformational change that we are talking about as a whole that needs to be made, I asked Paul Gray about the people on the ground who are delivering that change. Do you feel that, given those revelations, you still carry their confidence to make that change? I think that it has already been discussed. The impact of that is felt by every single person across the organisation. We also need to recognise that we have a published assurance and advisory group report that was recently assessed and published in January of this year. That clearly documents the progress through our front-line clinical teams, managers and engagement with the public and our staff that there is progress being made within our organisation. We are clear that we have a significant journey ahead of us and that nobody underestimates that. It is important that, although we build confidence back around any concerns around the financial position to the staff of our organisation and the public, at the same time, we also publicise and commend our staff for the huge amount of work that they have undertaken over the past 12 months. I thank the panel for your evidence this morning. We will just take a minute to change witnesses. I move the committee now into private session.