 Welcome to the 17th meeting of 2014 of the Public Audit Committee. I have apologies from Tavish Scott and Liam McArthur who will attend at some point. Also apologies from Bruce Crawford and David Torrance this year in place of Bruce Crawford. Can I ask that everyone has electronic devices switched to in-flight mode so that they don't interfere with the electronic equipment? Thank you. Item 1, can we agree to take items 5, 6 and 7 in private? Thank you. Item 2, section 23, report NHS in Scotland 2013. We have a report from the auditor general and I invite the auditor general Tricia Meldrum and Gillian Matthews to give evidence to the committee. The NHS in Scotland plays a significant role in the lives and work of millions of people every day and it's essential that the service is able to meet the needs of the population and deliver good quality healthcare. Spending on the NHS accounts for about a third of the Scottish Government's total budget and my report today comments on the performance of the NHS in 2013-14 and on its future plans. The overall message is that the NHS in Scotland is facing significant pressures at the same time as needing to make major changes to services to meet future needs. We know that NHS boards are finding it increasingly difficult to cope with these pressures in a tightening financial situation. The report also comments on the increasing evidence of pinch points in the complex health and social care system, which can lead to delays in patients getting the care they need in hospital or the community. Some of those pinch points are shown in Exhibit 13 on page 40 of the report. We found that NHS boards in Scotland delivered a small surplus of £23.4 million against an overall budget of £11.1 billion in 2013-14. All NHS boards did meet their financial targets, but several boards required additional funding from the Scottish Government or relied on non-recurring savings to break even. Despite significant efforts, the NHS did not meet some key waiting times targets in 2013-14. We consider that the current level of focus on meeting waiting time targets may not be sustainable when combined with the additional pressures of increasing demand, such as the growing older population and tightening budgets. We also highlight in the report that increasing numbers of people being admitted to hospital from accident and emergency departments, rising numbers of delayed discharges and more demand for outpatient appointments are creating blockages in the system, which add further pressure on services. NHS boards need a more detailed understanding of current and future patient demand, how they are using their capacity and how patients move through the system. This will help them assess how they can deliver services differently in the future to better match needs. The NHS has made good progress in improving outcomes for people with cancer or heart disease and reducing healthcare-associated infections. Progress has been slow in moving more services into the community and further significant changes needed to meet the Scottish Government's ambitious 2020 vision for health and social care. It is clear that the NHS will not be able to continue to provide services in the way it currently does. We recognise that it will be challenging for the NHS to make the scale of changes required over the next few years, but critical if it is to meet the vision and the future needs of the population. We make a number of recommendations in the report. These focus on NHS boards working with their partners to develop clear plans about how they will deliver sustainable and affordable services in future, including how they will release and move funding to provide more services in the community. We also recommend that NHS boards and their partners use information to better understand where the blockages in the system are that lead to problems like people having to wait in hospital longer than they need to. Looking at the bigger picture, the NHS needs to take a step back and look at what it is trying to achieve and develop long-term clear plans for delivering sustainable and affordable services for the future. As part of this, we have recommended that the Government reviews its performance framework to ensure that targets and measures for the NHS are consistent with and support its 2020 vision. As always, my colleagues and I are happy to answer questions. Thank you for that. You mentioned that waiting times targets may not be sustainable. Yet we know that the setting of targets has had a remarkable impact on service delivery. We only need to think back some years ago to the waiting times that people used to have for treatments that are now seen as relatively routine and treatments that can be done quickly. If you think that the targets may not be sustainable and if it is accepted that targets have made a contribution in improving the service that patients have, what would be the solution? It is important for us to be clear that we are not saying that targets are not important and may not be useful. We know, for example, that waiting times matter to all of us and our family and friends in terms of knowing how quickly we will be treated and making sure that we are treated as quickly as possible. What we are seeing is that, after a long period, when, as you say, waiting times across the system have been coming down, that trend is starting to be reversed. We have particular concerns about increasing waits for outpatient appointments when people enter acute hospital care and delayed discharges when they are waiting to go home. Our concern is that the focus that people in the health service are putting on meeting those targets is making it harder to step back and look at how the acute system as a whole is working and how it fits into the wider system of health and social care. Our concern is that, with the type budgets that we know are likely to be in place for the foreseeable future and the growing needs of older people, that balance may not be sustainable. So we are not saying to do without the targets, we are saying to make sure that they are achievable and moving the health service in the right direction. What is the most critical factor? Increased demand for services or squeezed budgets? I think that it is a combination of all of them and it is not possible to pin down the contribution that each of them makes. We know that the Scottish Government has protected the NHS revenue budget with slightly above inflation increases year on year. We also know that healthcare costs tend to go up faster than general inflation, so that money is not going as far as it would do in other services. We know that the population is getting older and older people tend to have more complex needs for healthcare. We have more challenging waiting times targets now. We have outlined in the report how some of the targets have got tighter over the past few years. All of that together is contributing to this picture of increased pressure that we are painting today. When we look at Exhibit 5 on page 23, we see particular issues in some health boards compared with others. For example, in Grampian and in Greater Glasgow, there are a whole number of areas where we see a deterioration or no improvement or just failing to meet the targets. Fourth Valley also has significant areas of concern. Are there specific reasons in those health board areas? Is it a management issue? Is it a budget issue? Why them and not others? Specific boards right across Scotland and that will always be the case. What I would like to draw out today is the sense that we believe that the evidence is showing pressure on the health service right across Scotland. You will be looking later this morning at section 22 reports on NHS Highland and NHS Orkney, which suggest that the pressures came out there particularly strongly in terms of the financial pressures for the boards that you have highlighted on Exhibit 5. The pressures are coming out particularly in terms of their clinical performance and especially waiting times targets. We highlight some other boards that have had an increasing focus on non-recurring savings or support from the Scottish Government to balance their budgets. One of the lessons that we have learnt over recent years is that it is risky to look at financial performance or service performance in isolation. You have to look at the picture in the round and all of that evidence suggests to us that there is increasing pressure in the system. You mentioned at paragraph 48 that the NHS spent £128 million on bank and agency nursing and midwifery staff in 2013-14, which was an increase of 15%. That is a staggering figure. Yet, at the same time, on page 28 at Exhibit 7, you show that the number of nursing and midwifery vacancies are rising. There is an increase in vacancies. We are using more private staff. Why cannot we simply use some of those private staff to recruit them and fill the vacancies? I will ask Trisha to come in in a moment. In general terms, there will often be occasions when using temporary staff is a good thing because there are particular peaks in workload, long-term sickness absence needs to be covered. In those circumstances, in our view, using bank staff is the preferred option. They tend to cost less than staff from private agencies and because they are on the hospital's own bank, they tend to know the hospital and its safety and quality procedures better. The question is why there is that overall pressure on nursing staffing and how it can best be managed. I understand that, but in paragraph 48 you also say that spending in agency staff increased by 46 per cent and that followed the rise of 62 per cent in the previous year. We are not talking about marginal and trivial changes here, we are talking about very substantial changes. That is why we have drawn attention to it in the report. It is a pressure on the finances of the NHS to be spending more on agency staff in that way and it brings additional risks to patient safety because they are less familiar. I will ask Trisha to talk you through the background to it. The general direction prior to the past two years has been that we recognise that there is a need for some flexibility around nursing and midwifery staffing and that has largely come through the bank staffing. Those are people who are already employed by boards who are already working there who can do some additional hours. That has seen us being the more efficient, the more effective, the safer option. Obviously, the bank has not been able to fully meet the needs going forward, so that is why we are seeing an increase in the use of agency staffing. That can sometimes be in very specialist services, where you would not expect there to be bank staff available. That can be an issue, but it is an indicator of some increasing demands and increasing pressures. It is still a very small percentage of the overall spend, but we have highlighted it because of this change in the trend that reverses what has been happening in recent years. I wonder if I could return to IT. We have talked about the huge amount of IT on this committee, and it seems that lessons are never learned, but we are always told that the next time around, it is all going to be fine. I refer to page 15, case study 3, NHS 24's future programme. NHS 24 is delayed implementation. As it considers, a new application developed does not make patient safety. The original business case was £29.6 million. Total cost to date is £38 million. You go on to say that there is a brokerage of £16.9 million, a further £0.8 million in revenue, and a further £2.2 million. First of all, the original business case was £29.6 million. How much is that costing at the moment? When is it likely to be finished? Have lessons been learned, and what is the final cost, and why has it gone so badly wrong? There is a limit to what I can say about that particular case at the moment, Mrs Scanlon. There is a court case, and some of that may be sub-duracy. I think that we might need to bear with the auditor general in any careful comments that she may make. Oh well, it is on the record, but can we just flick over carefully from that one? I apologise, convener. I was not aware of that. We will be reporting more in due course when we are able to do that. I think that it is certainly worthy of further investigations, so I will watch that carefully. I appreciate that we are coming to NHS Highland next, convener, but it was just a point on non-recurring savings. 15 years ago, NHS Highland was being told that they should not depend on non-recurring savings. That was 99 in 2000. We are in 2014, and they are not the only one. I mention it because page 17 is about three. So many are dependent on non-recurring savings, obviously, apart from NHS Greater Glasgow and an extent 4s valley. Why is that still happening? It was a problem 15 years ago, and nothing seems to change. It is a concern for us across Scotland. You are referring to Exhibit 3, and it shows that NHS boards across Scotland to varying extents are relying on non-recurring savings. They can be a useful way of balancing the budget in year, but they add the pressures on health boards in the longer term because those savings have to be found again in future years. It is why we have been making the recommendations we have been about improving longer-term financial planning as well as in-year planning. Not only does it take the pressure off in future years, but it also makes it more likely that the savings that are being made are helping to reshape the services for the medium term rather than running the risk of making that more difficult by making cuts that are easy, but it may well be making it harder to develop community-based services and new types of services for the future. I would explain why NHS Highland is facing the pressures that they have, and I appreciate that in the next session. I would like to return to Exhibit 5, page 23. I noticed that Grampian has not achieved any of the targets for this year in 2014, and Highland has only achieved two. However, if we look at the outpatients within 12 weeks, no health board has achieved that, five out of 14, the day-case treatment time guarantee, five out of 14, A and E, and cancer urgent referral to first treatment, five out of 14, almost a third, delayed discharge. Having watched those reports annually, and you say yourself that performance against some waiting targets deteriorated, are the waiting targets too stringent? Is the money simply not there? Why is it that things are getting worse rather than better? Is it a management problem? Is it a financial problem? Is it the way that we do things? Every time we come to this, there are always a whole myriad of problems, and they are all going to be sorted by next year. Next year, we come along full of optimism and things have deteriorated again. Can you give us an idea of the reasons why most health boards have not achieved their targets? I appreciate that there are difficulties with Grampian and Highland because they do not receive their full national resource allocation. It is a combination of factors that apply across the health service but will apply in different degrees in individual boards. First of all, we know that finances are tight. The Government has protected NHS revenue budgets for the front-line delivering boards with increases that are slightly above inflation, but healthcare inflation tends to be higher than that. We know that the population is getting older, so there are more older people who tend to have more complex needs and who need more support to be discharged from hospital once they have been admitted. We have particular financial pressures in some boards such as those that are below their national resource allocation, the funding target for them, which adds to the challenges in those boards. You can see, by looking across the table, that some boards are managing better than others. We have talked before about examples of the way services are being delivered and redesigned that can help to manage those pressures at a local level. The NHS, as a whole, is doing some work to improve its understanding of patient flows and what the pinch points are. We also know that some of the targets have got more stringent over the past few years. It is why we are suggesting that it is time to take a step back and make sure that the balance of the targets, the funding available and the longer term vision to reshape the healthcare, is all in the right place to be able to work effectively rather than running the risk of inefficiency by focusing on an individual target at the expense of the bigger picture. I am certainly looking at Dave's report. It does not seem to be progressing, but let us hope the longer term. My final point is that Exhibit 13, page 40, was quite interesting. It is really about digging below the figures and quite a few figures stepped out, but I am sure that my other colleagues will raise issues there. Probably, at the bottom right of one of the red boxes, there is a 4,200 per cent increase in the number waiting for more than 12 weeks. We would always like to think that the focus is on clinical need rather than meeting targets. To me, more and more people are having to wait more than 12 weeks and perhaps just being treated below the day of the target in order to come in under the target. That is a huge increase. Does that mean that regardless of clinical need, more and more people are having to wait for the target to kick in rather than being treated on the basis of their need? 4,200 per cent within a year is one of the highest figures that I have ever seen, as far as a change within one year is concerned. Am I misunderstanding this or could you explain it and clarify it? We can do it and I will ask Gillian to come in a minute on that specific point on the exhibit. More generally, what we are trying to do is to make sure that we understand the way that complex system works in practice. We know that some targets are being met by most boards, not all of them, but we are seeing warning signs of pressure building up for outpatients waiting for their first appointment and delayed discharges of people waiting to leave hospital safely at the end of it. The convener asked earlier whether the targets were a good thing or a bad thing. The answer of course is that they are both. It matters to all of us that we are seeing as quickly as possible and that we have some certainty about it, but equally having a target that is unachievable so that people's efforts are simply on meeting the target rather than on making sure that the whole system can work smoothly is not helpful. What we have tried to do here is to identify where those pinch points are, where there appears to be real pressure in the system and where the risks of that sort of managing to the target may be higher than they would be elsewhere, where a system is running in steady state. I will ask Gillian to pick up the specifics of what is happening with that particular part of it next. The figure that you are referring to there is specifically around outpatient waiting times for the 12 weeks. On page 24, we have laid out some of the figures around what is happening there. The number of people waiting is increasing at much higher rates than the number of people that are being seen, but that is going back to the overall increasing demand from various issues around ageing population and more people with long-term conditions. The Exhibit 13, as the Auditor General was saying, shows where some of the main pressures are for the NHS. Outpatients was one of those along with delayed discharges and increasing numbers being admitted from A&E, especially around older people. Outpatients is one of the areas where we are seeing the pressures, but what boards are doing are trying to look at the past. We would have looked at separate areas, looked at A&E, looked at what was happening outpatients, but now they are starting to look at the whole system, if you like. There is work going around with the Government supporting some boards. They are piloting a new approach to look at the whole system, look at how the patient flows, look at what is happening in A&E, what impact that has on inpatients, what impact that has on outpatients, and then also on community care, and how that is all joined up. That is quite early work, but there is quite a lot going on around trying to understand that better. That was my previous question, convener. The fact was that I did say that no board met its outpatient target. I am right in saying that in March 2010 we are comparing that to March 2014. In March 2010 I am right in saying that 157 patients waited more than 12 weeks, and in March 2014 6,754 patients waited more than 12 weeks. Everyone going for a hip operation has all got different levels of pain and different levels of need. Does it appear that clinical need is being surpassed for targets because more people are waiting more than 12 weeks? Significantly more, 4,200 per cent more. Is there a distortion? We all agree that targets, and nobody wants to go back to waiting two years for orthopedic surgery, that no one at all. At the same time, we do not want the urgent cases all being lumped in with the 18-week target. That seems to me to be the first indication that I have seen that everyone, regardless of need, has to wait more than 12 weeks. Am I interpreting that wrongly? No, but we have not found evidence that people are being managed to the target. For example, people with less need are being seen sooner than people with greater need just because of the target. What we are seeing, though, is that increase in the number of people waiting more than 12 weeks—still relatively small numbers if you compare it to the 350,000 or so people being seen in outpatients each year, but going up markedly. As Gillian said, within that, we are seeing more people being added to the outpatient waiting list than we are people being taken off it. At the moment, the trend is for that to keep on increasing. That is the pinch point that we want to identify in the report as being one of the signs of the system being under pressure. It may be that the 12-week waiting time itself is not quite right. It may be that the targets for treatment after that could be adjusted. What we think that the Government needs to do is to take that step back and say, how do we get the system in balance and how do we make sure that the targets that we are setting are helping us to reshape the service for the 2020 vision rather than making it harder, as we think is the risk at the moment? Degree that it is a significant increase. It certainly is. Okay, if you are calling for care. Thanks, convener. Just actually on that, in terms of getting the percentages and the amounts, what is the total through number in terms of the service and the lengths of outpatients that we can get an idea of exactly how many people out of the total are actually failing on their target? Sure. The number of new outpatients seen during 2013-14 was 367,259. As I say, the number of people waiting more than 12 weeks is a relatively small number at 6,754, but it is increasing and the current trend is that it will continue to increase. Try and get a perspective in terms of the number. Although the percentage rises and there may well be a trend that you may have identified, I am trying to just explain that in terms of the total amount going into the system, it is still a relatively small number at this point. Absolutely. As I say, it is about 6,750 people out of 367,000 new appointments, but the trend is upwards. It actually takes me back to the use of bank staff that was asked by the convener earlier on about the issue of bank staff and private staff. In terms of the total numbers that are taken in, I am assuming that this is a very low number in terms of the total staffing of the health service, but the showing that it is not, shall we say for the sake of argument, a privatisation menu, if you like, simply because of the fact that it is more looking after the pressures that are being faced at this minute in time. It is not a policy decision to move away to the using private or bank staff on a permanent basis for a service. No, I think, as Trisha said, the amount spent on bank and agency nurse of £128 million last year is relatively small in the overall spend on the NHS and in the evidence available to us suggests that it is meeting short-term needs for staffing in different health services. Can I just go to my question that I actually had and it was something that has come up over the past couple of weeks in various places, certainly in the report that claims that the, in terms of the reducing Westminster budgets that have seen a 10 per cent reduction in Scotland's overall fiscal budget, the cash revenue capital combined between 2010 and 11 in 2015, and it has meant a capital cut well in excess of 20 per cent. As the Scottish Government is using NPD in the programs to ensure the investment in the NHS infrastructure is carried on, would you consider the equivalent capital value in future NHS budget assessments? What this report is looking at is the amount that is the information that comes out of the audits of all of the NHS boards for last year. You might recall that we reported last year on a wider basis across the Scottish budget about the importance of improving and increasing the transparency, particularly about that revenue-financed investment, that we know that the capital budget is decreasing and for the known planning period will be reduced. The Government is for understandable reasons investing financing in other ways through the NPD and other models, and it is using the new borrowing powers or is planning to use the new borrowing powers that it has under the Scotland Act. All of that are entirely appropriate policy choices for any Government to make, but in my view the transparency of that spending, what we are getting for it and what the long-term revenue commitment is, is important to enable the Parliament to understand the context of the financial decision-making that they are doing and the choices that that involves for the longer term. It is just in terms of keeping a broad perspective in the way that the Government is trying to deal with the problems of diminishing capital investment. We have tried to give as much information as we can about both the revenue and capital budgets and out turns here. I think that we saw a further announcement just in the last few days about new health service investment coming from the NPD model. Clearly that is not included here, but as it comes through the NHS accounts it will be in future. That would be something that you would put into this sort of report in the future. Yes, as it comes through the NHS accounts it is always included. I am looking at page 16 paragraph 13 at the top of the page there. We are talking about the allocation of funding. The Scottish Government is aiming for all NHS boards to be within 1 per cent of their allocations by 2016-17, which is not very far away. I am looking at where we are at the moment with the four bodies that are currently below the target allocations. Obviously, two of them are featuring today as an issue on funding. Is it a realistic target? I am looking here at NHS Highland and NHS Lanarkshire, that seems to be going the wrong way. Is there a plan? Have you seen the plan? The plan, as we understand it, is for each board to be within 1 per cent of its allocation by 2016-17. As background, the formula has been in place since 2009-10, and it takes account of the make-up of the population, levels of deprivation and other health needs and the costs of providing services in remote and rural areas. The intention is that each board should be funded on that basis by 2016-17. At the same time, we know that the Government has made an explicit declaration of policy that, in moving towards it, it does not want to destabilise individual health boards, particularly those who would lose by having money moved away from them. It is a way of allocating the overall NHS part, not of providing more money to the boards that are currently below their formula. Our understanding is that the policy intention is in place. We have seen some additional funding to Grampian in recent months to help them to move forward more quickly, recognising the particular clinical challenges that they have been facing. In broad terms, it is a policy decision for Government about how quickly they move towards it and what exceptions they might make in either direction for particular boards. So, just to be clear, there is quite a bit of money there. It has to move from other parents in the national health service in order to achieve that. Yes, it is a way of allocating the overall NHS budget, not of adding new money into the system. Turning to page 29, there has been some talk about the bank nurses and so on. On page 48, the very last sentence there, agency staff are likely to be more expensive than bank nurses and also pose a greater potential risk to patient safety and the quality of care. Why? It is because bank nurses are employed by the local NHS hospital or system. They are on the bank on a permanent basis so that you have the chance for proper induction for continuing training and development and for them to build up their awareness of things like the crash procedure if somebody has a heart attack on a ward or the way things are done to maintain drug safety on ward rounds. Agency staff are employed by a private agency. They tend to be used for shorter periods of time and in different areas of the health service, so they do not have the opportunity either to be trained and inducted in the same way or to build up their own experience of the way the system works. It is a broad professional consensus that, where possible, bank staff are both cheaper and can provide a better quality of care. There may be occasions when agency staff are needed but they should be a last resort when you cannot fill your needs from bank staff. Obviously, agency staff are being increasingly used. You are saying here that 46 per cent increase. Surely they are trained up to the same standards as NHS staff. Surely it is in the interests of the agencies to ensure that they are trained in NHS procedures. I am just concerned about this thing about patient risk. You are absolutely right. The staff would be trained to the same standards as nursing staff right across Scotland and a good agency has every incentive to make sure that it invests in professional development for its own staff. It really is that familiarity with the way things work around here, with this hospital, this specialty and this ward, and the ability to build up that experience of simply knowing where the drug cart is, what the processes are, the other members of the team, which we also know are important elements of the quality of care for patients. It is that familiarity more than anything that makes a difference. With the skills of the agency nurses that are being employed, it is to do with the short termism of their attachment and the potential unfamiliarity with the particular area that they are physically working in. That is right. Before you move on from that, can I clarify your reference to the evidence for that? Is that the report from 2010 using local doctors and hospitals? Yes, it is. We have done previous work on bank and agency nurses further back from that. We have been building our expertise in that area over a long period of time. So there is some evidence in relation to nursing staff, as well as doctors. Turning to page 33, paragraph 59, pensions that have obviously come up before and public sector pensions, of course, are quite a big issue, because almost every area is running a deficit. You have not quantified any deficit in the NHS. Do you intend to do any work in relation to public sector pensions at some point in the future? Yes. We have not quantified the deficit in this report because we have been focusing on changes and future pressures. We have reported a couple of times on NHS and public sector pension schemes more widely. One of the challenges for the NHS scheme is that it is not a funded scheme. There is a large liability, but there is not an asset against which to match it. The challenge is making sure that that liability is understood and that the long-term cost implications of it are also being factored into long-term financial planning. There are moves across the UK to be making changes to pension schemes, both to the way that the costs and benefits are shared and to the way that they are funded to make them more sustainable in the long term, but it is currently an unfunded scheme and those are the things that are changing the pressures that health boards face. An unfunded scheme, that is. Would that mean that there is no pension port? Quite simply. Pensions are paid out of revenue. That is quite a big liability. It is. It is the case for most of the public sector schemes, apart from the local government one. The local government superannuation scheme is the only one where there is a pension port to match the liabilities. All of the others are paid from revenue, and it is why we have reported in the past about the way that the overall liability is being managed and why we have focused here on the way in which the costs of meeting that liability are increasing because of known changes coming through. Realise this is a UK-wide issue. Did you say when you were thinking of doing the next review of public sector pension liabilities? It is something that we keep under review all the time because it is so significant. We are likely to include some information on it in our next report on developing financial reporting that is due in the new year. I have not made a decision on doing another in-depth look at pensions, but it may well come up in the programme in the next couple of years. There is a number of worrying comments in your report. Has there been a reduction of about 2,000 fewer beds over the past four years in our health service? I think that that number sounds right, and I will ask colleagues to keep me right on the detail. We have reported to you before that a large part of that decrease is because of the move from very much surgery being provided on an in-patient basis to day surgery. There has been a decrease, but it is not the same impact as it might appear on first impressions. You say that people are moving away from in-patient, but you also point out to quite a huge increase in out-patient. No-one is meeting their out-patient targets, and the out-patient waiting lists have increased from £187,000 to more than £250,000. As I said earlier in evidence, it is clear that one of the pinch points in the system is the time that people are waiting for out-patient appointments. Part of that is to do with the fact that, as a population, we are ageing and older people tend to have more complex health needs and make more call on the health service. That is one of the pressures that we think underlies the challenges that health boards are facing in balancing their budgets, meeting targets and reshaping services for the future. The fewer beds and out-patient waiting lists are getting along at the same time. The Government is addressing those issues. Do you detect that there are initiatives in place to address those particular problems? We say in part 2 of the report quite a lot about what the Government and individual health boards are doing to try to manage them. We mentioned the quest work that is being done with Forth Valley and some other boards to really understand the flows of patients where their pinch points are and how they can manage them. There is work going on. My concern in this report is to say that, even with that work, it feels to us at the combination of the tight budgets that we know we face, higher healthcare inflation and ageing population and tight waiting times targets and making it harder to reshape services in the way that they need to be developed for the future. There is work going on. It is the question about whether the big picture is sustainable as it currently stands. I will return to that in a minute. Are the Government aware or are they doing anything about the fact that out-patient waiting times are arising? We say in the report that there are considerable efforts going on right across the NHS to manage individual waiting times targets, the broader heat targets, which do not focus just on waiting times, and to meet the financial targets. A huge amount of effort is going into that at health board level and at the Government. The challenge is whether that is possible and particularly whether it is possible to do that while making quite significant changes to move more services into the community to help us all live longer healthier lives at home. Our concern is that the focus on short-term targets is making that harder. Pardon me if I get this wrong, but I would have thought that out-patient activity would increase if we are moving to a different model, away from in-patient care. We have pointed out that 2,000 fewer in-patient beds are moving to more out-patient care, yet the Government is supposed to be addressing this, and yet every single board is missing its target here. Why is it getting it so wrong here? The answer is that it is very complex. There are more new out-patients being seen. The number of out-patients rose from about 324,000 in the previous year to 367,000 over three years, so they have gone up quite markedly over that three-year period. However, the number of people looking for out-patient appointments has gone up faster, and that is why we are seeing the increase in the number of people waiting and waiting for more than 12 weeks. The number waiting more than 12 weeks is still quite small, but the trend is in the wrong direction. The challenge is not just to meet the out-patient target but to develop the whole system so that people can be seen in out-patient, can receive the treatment that they need, whether that is in-patient or day case, can be discharged safely home and at the same time reshaping services across the piece. It is a complicated thing. It would be hard to do in any circumstances, but when budgets are tight, it is that much harder. Just to add the question team that we talked about, they also have quite significant programmes of work around supporting changes in redesigning out-patient services. The case study that is on page 25 around fracture clinics is one of the examples of how they are trying to avoid people having to go to out-patient clinics to release some of that capacity. We also know that there is quite a big drive towards increasing use of telehealth, telecare and things like that, that again avoid people having to come into hospital in the first place. Therefore, there are quite a number of programmes of work that are aimed at trying to reduce some of that pressure. One of those pressures that we also identified is delay discharge or bed blocking, as it has been called in the past. Bed blocking has been around for a long time now, and yet you are saying in the report that it has increased over the last five years. Despite the supposed political and government attention, it has increased. Delayed discharges came down for a period of time, and now that trend is going in the wrong direction again. Once more, we think that it is one of those signs of the pressure on the system. For people to be discharged quickly from hospital, that needs to be done in a safe way. They need to be able to get the things in hospital right. There also needs to be an assessment of what services they need in the community and their services to be available. That report focuses on the NHS, but we know from previous work that local government social care budgets are also under pressure at the same time again that the population of older people is increasing. The system as a whole is under pressure, and it is that the outpatients waiting times for people coming in delay discharges of people leaving the health service both show the same picture of increasing pressure. I think that it is important to say that there are no easy answers to this. It is why we think that step back to say how do you best balance what matters to people about waiting times and access to services, the money that is available for spending on the NHS against the other services that we all rely on, and the bigger picture of an ageing population that needs different services. That is a difficult set of choices for us to make as a society, and there is not a magic one that will make it right. I think you point out that the lead discharge actually costs £78 million. Is that right? I do not have the figure to hand colleagues will do. Yes, that is a figure in the report. It is one of those classic examples where things going wrong in the system now not only make things harder for patients but also tend to cost more money. The challenge is how you break out of that system. We think that the answer is to step back a bit and look at whether the individual short-term targets are right and whether they are really helping us to make the moves that we need to make towards the 2020 vision. I think that you are painting a very vivid picture of hard-crest staff working their utmost to address short-term problems or immediate urgent problems, but actually the whole health service and care generally creaking under the strain of demand and other resources. We know that the short-term targets are there for good reasons and waiting times targets matter to all of us. The question that we are asking is about whether all of those are in balance and whether, with the funding that is available, the milestones that the Government has set towards 2020 are likely to get us there. At the moment, there are clearly signs of pressure in the system both financially and in terms of waiting times. It is that step back and looking at what will help us to ease the immediate pressure so that we can invest in change on the scale that is needed is the question that I am asking in this report. A couple of other milestones. I think that you have pointed out that the high-risk backlog of capital maintenance, the Government was supposed to get rid of all high-risk maintenance by this year and it has failed to do so. I think that it was supposed to reduce its significant risk maintenance backlog by 2016 and, again, you are suggesting that it is going to fail to do so quite dramatically. The figures, as you say, show that the backlog maintenance estimated cost has increased and it will take longer than expected to clear the high-risk backlog. I do not think that that is surprising in the context of the financial pressures that we are talking about, but it is another pressure that has to be taken into account in setting the financial and performance targets for the health service and thinking about what investment is needed for the longer term. It may be that some of the models of hospital care that we have in some parts of Scotland are not right for the future and that all needs to be played into that estimate of what the cost is and what the priority should be for spending. I thought that, on a slightly cheeryer note, the graph that gave me greatest hope in this whole book was page 34. As far as I can see, we are all going to live forever, according to your... Is that right? The changes in life expectancy are really quite startling at the moment. The life expectancy for a baby born today is decades longer than it was when we were born, making assumptions about our relative ages. It is changing year on year. If you look at the register of Scotland estimates, the general register of his estimates, they are changing very fast. That is a huge success story. We should all be proud of it and individually pleased by it, but it does bring with it costs. We know that older people tend to have... We become frail whatever happens. We have more complex health needs and we need different health services from 20-year-olds who are at risk of breaking a leg or being injured in some other sort of accident. That is why this is so important. It really is at the heart of it. I encourage you. The previous page, unfortunately, points out that the health budget is going to fall by 1 per cent over the next two years. We know right across Scotland and right across the United Kingdom that the finances will stay tight for the foreseeable future. That is the case in whatever scenario you might look at over the next period. The challenge is to think through how we can manage those competing pressures. We have the ageing population, we have tight public finances, healthcare inflation will continue to be higher. All of those things mean that these questions are not going to go away and there is no quick fix for them. It is something that, as a society, we need to be able to debate and make choices about. The key thing is not to be short-term but to look at the bigger picture. That is a key message. We have been talking about long-term financial planning for a while and I think that is part of the key. The second is to make sure that we understand the impact that the short-term financial and performance targets that are in place for good reason are helping with that long-term picture rather than making it harder. I would like to go back to the point that was raised by Mary Scanlon. I think that says in a nutshell a lot of the pressures that we are already talking about. Mary quite rightly points out that there has been an increase in people waiting to be seen. However, at the same time, there is a 13 per cent increase of those who have went through the system in that period. We suggest that the Scottish Government or the health service are taking us very seriously, are dealing with more and more people every day. The other side of it, the increase in those waiting, showed that the pressures are continuing pressures that we are under over an ageing population and, of course, the on-going financial situation. Targets are coming up time and time again. Almost every questioner has asked you about targets. This is probably more a question for the committee as a whole, but do you think there is a case for the Scottish Government to come and explain to us the rationale behind their targets, why they select certain targets and what the judgment is for them to put those targets forward? I think that that would be a really helpful conversation to have. I recall the evidence session that you had with Scottish Government colleagues a few weeks ago about A&E waiting times, where they were very clear that the four-hour target for A&E is a good target because seeing people more quickly keeps the system moving and leads to better outcomes for those patients. There is always a judgment to be made, but we know that a number of targets elsewhere in the system have got tighter over recent years. I do not know if that debate has been had about whether the 18-week referral to treatment time is the right period and how it fits with outpatient targets and delayed discharges, but that sense of the whole system and the way in which targets play into that is a really important discussion for the committee to have. Thank you for that. Ken Macintosh talked about the no short-termism. Surely that is what 2020 vision is all about. It is about looking at things in the round and trying to make sure that we get there. At the same time as we are dealing with it, we have to deal with short-term issues because every short-term issue is a person with a problem. Again, I would say that we have a responsibility to make sure that along with health professionals that this is not easy for any of us, but that sometimes we put away our political hats and look at the picture in the round. Is there anything that, in order to general, that you have picked up while you are doing this report that you would suggest would be crucial or helpful to put in the mix for the discussions that we should be having? I think that you have already put your finger on it, Mr Dill. For us, there are good reasons for having annual or short-term targets for the finances and for performance. Making sure that all of those fit together in the system in the year is one important question, and then making sure that all of them are moving towards the 2020 vision rather than making it harder is the second question. My concern is that both of those look to me that they are getting more difficult for health boards than the Government to achieve because of external pressures like the rate at which we are all getting older and living longer. I think that just taking that step back and saying that this is moving us in the right direction towards the 2020 vision that Garner has really widespread support right across the piece would be a very important contribution for the committee to make. Okay, thank you for that. The only thing I would say is that, as the older I get, the happier I am with that graph that Ken pointed out. Thank you. Me, too. Convener, hello, Auditor General. You have mentioned several times that the Scottish Government has protected in real terms of revenue budget and there is evidence to support that. There are good messages in your report, too. There are plenty of good messages and the outcomes are improving and cancer, heart disease, health associated infections and patient satisfaction is increasing, too. You do say in page 32 that the forecast for spending from the UK to Scotland is going to reduce by 0.7 per cent in 2016 and 2017-18. Is there a quantifiable amount of money associated with those reductions and are those compounded reductions at 0.7 on top of another 0.7 in the second of those years? We show the cumulative percentage reduction on the right-hand part of that chart. I think that is the 0.93 per cent reduction overall that is shown on the exhibit. We certainly can put a figure on it. I am not sure that we have got it with us just now to be able to give it to you, but we can provide that information. The point of this really is just to give that sense that the financial pressures are going to increase whatever decisions Government and the Parliament make about funding for the health service within Scotland. In terms of the discussion about targets, is there any evidence that you can find that failure to make a particular target in a particular health board is having any consequential impact at all on health outcomes or patient satisfaction? Is there any evidence to support that at the moment? We do not have evidence of it, but I think that it would be a useful area to explore with Government. First of all, we know that for any of us, not being seen within the time we expect to be seen is a disappointment. We want to be treated as quickly as we can and we want to have some certainty about that because it helps us to make plans for the rest of our lives, so people missing targets have an impact there. We know that there are some conditions where it does have an impact, either because a condition gets worse or for things like hip replacement or knee replacement, because people are living with discomfort for longer than they otherwise should. There are some areas where it may not make very much difference other than the inconvenience around it. The bigger question is the way that individual targets fit together, so having a very short target for outpatients followed by a longer period for treatment may make less sense than having a longer period for outpatients and then a quick follow-up. That is really a policy decision and a clinical decision rather than one for us, but the targets need to fit together through the system because a lot of this is about patient flow. I think that it goes back to Mr Dawland's question about time to have that debate. My sense is that people right across Scotland know that there are some difficult choices to make here because of all the pressures on the health service and people do not expect everything to happen instantly. Having a public discussion about what matters most and how we balance the different priorities that we have seems to be a very timely move to make from this committee. We know from other data that patient satisfaction is higher than it has been for a number of years and that overall waiting times are lower. Where are the opportunities for us as an audit committee again for the greatest gains to be made given that we are listening to your message about the significant pressures on the health service? Where are the chances and opportunities for greater gains? Is it to look at those targets? If there is no evidence to support at the moment that failure to meet a particular target is having any consequential impact on health outcomes, should we be looking at the targets in a bit more detail? Is that where we might gain most? I think that looking at the individual targets and the way they fit together, looking at the clinical evidence, looking at the evidence about what matters to people and asking people are all things that could really help move that debate along. My sense is that people might well be prepared to wait a bit longer if they were sure that they would be seen within the time that was being set and that might help the whole system to run more smoothly that would let people divert their attention to thinking about the longer term changes that are needed rather than firefighting. Tricia, I think that I want to add to that. Just to add thinking about some of the pressures, some of them are manifest in areas that are not particularly covered by targets as well. If we think about in-patients, one of the issues that we have raised in the report is around boarding, so about patients being managed in not necessarily the correct word, so a word of a different specialty, and we know that that can have a detrimental effect on the patient experience, patient outcomes, length of stay. Some of the pressures are not necessarily come through in the targets but they do come through in other indicators. My last point, convener, in order to general, you mentioned in your opening remarks about the slow progress and delivering help in the community setting and so on, and I have said it several times at previous committees. Are you getting a sense that we are making progress here, or is there much more work to be done to affect some real gains in this area that would influence a future report like this coming to this committee? Reported on that issue on reshaping care for older people back in June of this year, I think, and our finding then was that it was slow efforts being made, but I think increasing evidence from this report that those efforts are made harder by the need to keep the system running in the short term to meet short term financial and performance targets. We think that taking that step back and looking at the system as a whole will both make acute hospitals run more smoothly for everyone involved, health service staff, as well as patients, but also provide that bit of breathing space, the money, the time to think about how you really do reshape services for the longer term. So it seems to us that this is a really important debate to be having and to be thinking about how best to move us to where we need to be with the 2020 vision. Okay. Thank you for that. Okay, thank you. Can I thank the other four general and colleagues for— Just a brief. Oh, sorry, many scanning. Sorry, it was just a very brief question. Several colleagues have mentioned the ageing population as you have Auditor General, and it was just at page 40, Exhibit 13. Given the ageing population and the need for home care, et cetera—I have to say, I was just a little bit surprised that care homes are down by 10 per cent. There's 36,500 fewer residents in care homes, but also care at home, which we always understood there would be much more personal care delivered at home, and that's down by 11 per cent. I think I'm right in saying that this is over the past five years, but it's still a significant number, 61,950 fewer people receiving home care. I just assumed that, given everything that we know about demography, that there would be an increase in care homes in increasing care home places, and indeed a significant increase in home care. Is going in the opposite direction, I don't understand that? I think there are two things going on there in broad terms. One is that care homes are increased and recognised as not being the best place for many older people, that if we can stay at home for longer and live a good quality of life, we should be doing that. I think that that accounts for some of the fall in both the number of care homes and the people who live in them. The care at home figures seem to reflect higher thresholds from local authorities, so people who might have received an hour or two of help a week in the past increasingly won't qualify for social care at home and care is being focused on people with more complex needs who really need that help to keep them at home. But again, I think it's another sign of the pressure on the system, and we know that the 2020 vision will require a much wider range of services that can provide much more flexible and responsive support to older people and keep up with those needs as they change as people get older and frailer. Basically, the eligibility criteria for free personal care—we were both on the committee that passed that in the first session of Parliament—is saying that the eligibility criteria has increased and that, in order to get care at home, you have to have far greater needs than you did, say, 10 years ago. It's not just about free personal care but also all-home care, yes. But yes, that there's more of a focus on people with more serious and complex needs than was the case in the past. David Torrance will leave one segment. Thank you for being here. P17 and to do backlog maintenance. Fife has the largest increase, I think it's £13.5 million. Is that because, recently, over the last year, they've moved a new extension in the hospital and there's a large number of building surplus to requirements in Fife now, which have been vacant for over a year now, if not longer? I don't know if we can answer that specific question for you this morning. We do know that some of the increase is due to new backlog maintenance requirements being identified through surveys, but we can follow up on that with the committee in correspondence if that would be helpful. Thank you. Thank the auditor general and her staff for a very full contribution. This is clearly an issue of huge interest, not just to politicians but to the public right across Scotland. I don't think that any of us would underestimate the, not just the strains, but the challenges that there are in delivering services. It's not just about party politics, I think that you've outlined very well the broad demographic and financial strains that are there, so it's no doubt something we'll come back to, so thank you very much for that. Item 3 on our agenda, section 22, reports the 2013 audit of NHS Highland and the 1314 audit of NHS Orkney. Just before I go into it, I can also just remind members that there was a section 22 report entitled the 2013-14 audit of NHS 24 management of an IT contract, which was laid on Friday, October 24th, and it's not on the agenda. The reason for that is under rule 7.5 of the Standing Orders on Sub-Duracy. Consideration of this report will be deferred until such time as any investigations are resolved, and that refers back to the earlier comments. I thank the Auditor General again, and this time she's joined by Stephen Boyle, who's the Assistant Director of Audit Scotland, and Tricia Meldrum, the Senior Manager in Audit Scotland. I invite the Auditor General to speak to the two reports. As you say, I'm bringing a further two reports to you this morning which highlight concerns in NHS Highlands and NHS Orkney, which were included as case studies in the report that we've just discussed. I've prepared those reports under section 22 of the Public Finance and Accountability Act 2000. As you know, this legislation allows me to bring issues that have arisen from the audit of the accounts of public bodies to the attention of Parliament. I'd like to highlight at the outset that the external auditor Stephen Boyle gave unqualified opinions on the 2013-14 accounts of these organisations. This means that he's satisfied that the accounts do provide a true and fair view of the Board's financial position. I've prepared reports on these boards because I believe that there are issues of concern highlighted in Stephen's report that should be brought to the attention of the Parliament through this committee. I'll cover the main issues in the two reports in turn. They both relate to weaknesses in financial management. As public sector budgets continue to tighten, effective financial management has never been more important, and it's fundamental in helping those in charge of governance to make informed decisions. In relation to NHS Highland, the auditor reported that weaknesses in financial management were a major factor in the Board needing brokerage of £2.5 million from the Scottish Government in order to break even in 2013-14. That was mainly due to an overspend on the operating cost for Rhaigmoor hospital, and the auditor highlighted that weaknesses in financial management at the hospital emerged late in the year. Other factors contributing to the need for brokerage were financial pressures in the acute sector from costs associated with hiring agency staff, especially locum doctors, and meeting national waiting times targets. The auditor also highlighted the Board's continued reliance on non-recurring savings. Throughout the financial year until February 2014, NHS Highland was forecasting that it would break even at the end of the financial year. Monthly reports throughout the year to its Board of Directors forecast a break-even position at the year end, although the actual outturned position showed significant overspends against the budget each month. There were no sufficiently detailed plans to breach the gap between the Board's in-year deficit position and its forecast break-even position. In February 2014, NHS Highland approached the Scottish Government to agree brokerage of £2.5 million to enable it to break even. Brokerage can be positive and give more flexibility if the Board and the Scottish Government plan for it appropriately as part of a clear financial strategy. In this case, however, the Board had to request it late in the financial year when it would have been unable to break even without that additional funding. Officers of the Board did not formally report this brokerage agreement to the Board members until close to the end of the financial year. NHS Highland is due to repay the brokerage over the next three years. NHS Highland continues to experience financial pressures in 2014-15, and the Auditor has reported that its financial position will remain challenging for the next five years. He has also highlighted that the cost of delivering adult social care services in Highland continues to pose a financial risk to the Board. NHS Highland has put in place a new management team at Readmore hospital, and training is being organised for all budget holders. A programme Board has been set up to oversee the delivery of savings, and the Board is focusing on delivering savings to achieve financial balance. Moving on to NHS Orkney, weaknesses in financial management were again a factor in NHS Orkney requiring brokerage of £1 million from the Scottish Government to break even in 2013-14. The need for brokerage in this case was mainly due to hiring locum doctors to cover vacant medical posts. The Board continues to face difficulties in recruiting staff, and this remains a cost pressure for them. The Auditor also highlighted that the Board's continued reliance on non-recurring savings and concerns about the capacity of the finance team, given the financial pressures facing the Board. Throughout the year, NHS Orkney was reporting an overspend against its revenue budget and continued to forecast that it would break even. However, like NHS Highland, it did not have detailed plans for how it was going to bridge the gap between its on-going overspend position and the forecast break-even position at the end of the year, or provide reports to its Board of Directors about how it would achieve this. NHS Orkney approached the Scottish Government in February 2014 to request brokerage of £0.75 million, which was later revised to £1 million in March 2014. The chief executive asked the Board's internal auditor to undertake a detailed review of the 2013-14 financial position, including its approach to budget setting and in-year financial management. This report was presented to the Board's Audit Committee in late September 2014, and the Board is currently developing an action plan. NHS Orkney still faces significant challenges in making the savings that it needs to meet its financial targets. The Board has set out its plans to break even in 2014-15, but it continues to place a high reliance on non-recurring savings, which may not be sustainable in the longer term. As I said, alongside me today is Stephen Boyle, who is the appointed auditor responsible for the audits of NHS Highland and NHS Orkney, and, together with Trisha, we will do our best to answer your questions. You mentioned, with reference to both reports, weaknesses in financial management in both boards. Are those the only boards in Scotland where there are weaknesses in financial management? They are certainly the most significant weaknesses that came out of the audit last year. We were talking earlier about the financial and other pressures that face the NHS right across Scotland, and they are also a factor in those two cases. However, in my view, financial management was not good enough in those two boards, which is why we are here today. You said that they were the most significant. Does that mean that other boards have weaknesses in financial management, but they are not as significant? Financial management varies across public bodies right across Scotland, and there are often areas in which there is room for improvement. Those are the two in the health service, in which I felt that the weaknesses were significant enough to merit bringing them here to the committee. You also identified, for both boards, problems, costs associated with higher-end agency staff, particularly locum doctors, but in the case of NHS Highland, presumably other staff as well. Are there other boards in Scotland—if I refer back to our previous discussion about the costs associated with that—where it is also a significant problem, but because of their finances, it does not impact on them so badly? Are those two boards more exposed to that problem? I will ask Stephen to come in in a moment. My view is that they are more exposed to that problem because of where they are, and the challenges that that brings in providing services across very remote and rural areas. However, the weaknesses in financial management made those pressures even more difficult for the boards to manage. Thank you, Auditor General. The experience that we saw in both Orkney and Highland was twofold. It was the challenge in filling both the posts, but it was also a large increase in the early rates that they had to pay to secure the services of temporary members of staff during the year that contributed to both the significant increasing costs that both health boards found during the year. Clearly, there are a number of factors behind that. In Orkney in particular, it was noted that the organisation thought that they had secured key clinical posts only to find that the successful candidate later changed their mind, which again contributed and compounded the financial challenges that they experienced. That does not sound as though it is a problem that is likely to disappear any time soon. If there is a general shortage of staff in certain areas of specialism in the NHS across Scotland, and if those areas are seen as less attractive to work for whatever reason, possibly because of remoteness, then those who have the skills can drive the price. Is there any indication that that problem will not recur in future years? The indications are that there is a continuing pressure, especially for NHS Orkney, and it is probably worth noting that the committee heard from NHS Grampian a few weeks ago that, for different reasons, they face some of the same challenges in a part of Scotland that has got high costs of living there and struggling to recruit staff to fill key vacancies. It is another financial pressure on the health service and one that affects different parts of Scotland differently. Can you give me a significant example of non-recurring savings? Stephen, do you want to talk through your experience in either or both of the boards? Thank you, Auditor General. Perhaps the best example of non-recurring savings is the vacancy management convener. Your previous question about the inability to fill a post during the period that is identified and the period that the new post holder takes up their position, that gap would be an example of a non-recurring savings. Colin Beattie. Obviously, those do not make very happy reading. There are two things that I do not see coming out in the reports. One is retribution and the other is resolution. Are the people who are responsible for this still in place? I see that there is mention of one of the heads of finance being replaced, but there must be other people who are responsible for this, who failed to give the information that the board required. It is a serious feeling. I think that the Scottish Government is working closely with both boards to understand what went wrong and to resolve it. Stephen might be able to give you more information about the specifics in each of the boards as it currently stands. Thank you, Auditor General. If I can start with NHS Orkney, it is safe to say that NHS Orkney is a small organisation and is our smallest territorial health board. The demands on that finance team are the same as any other territorial health board. The nature of the changes in that team were such that the head of finance left the organisation. It was December 2013 and the organisation thought that it had sufficient capacity to deal with the requirements that were placed on it in the intervening period. Perhaps what compounded the factor in NHS Orkney during the year was that it had to deal with the five-year revaluation of its land and buildings estate. During the course of that revaluation exercise, it was identified that it was more complicated and more difficult than it anticipated. Indeed, as a result of that experience, the board sought to review its requirements again and has now appointed a replacement for that post of head of finance. It is back to the level of finance capacity that it operated with. In respect of NHS Highland, its financial management circumstances were such that they were compounded by the situation in Rhaigmoor hospital. The extent of its financial position only became clear later on in the financial year that prevented them from delivering the forecast break-even position that they had been doing so over the course of the financial year that resulted in the requirement to seek brokerage funding from the Scottish Government. I do not get that feeling that it has been taken a grip of as yet. You may have more information on that. Are you satisfied with the steps that they are taking to bring all this under control? In terms of NHS Orkney, it is a positive step that they are back to a full complement of finance professionals in the team. I would not say that that will guarantee their financial position or alleviate the financial pressures that they face, but it is a positive development that they now have the level of skills and expertise that they require. As a by-product of their circumstances during the audit of the financial statements, NHS Orkney forged strong links with NHS Fife to allow them to deliver the conclusion of the financial accounts and the audit. That may be a mechanism to allow them to draw on expertise as and when that is required. NHS Highland has an experienced team that has also, in particular, taken steps to address some of the financial challenges in Regmore hospital through the installation, as the Auditor General mentioned, of a new management team at the hospital, complemented by a programme board chaired by its chief executives to identify recurring savings to again secure their financial position in future years. Those management affiliates are not just within the finance team, they are outside as well. There are other people responsible. The responsibility for governance of financial management is clearly an organisation-wide responsibility that rests formally with the board. We have reported as clearly as we can the circumstances within both Orkney and Highland, and the circumstances are different there, but it is the board's responsibility to make sure that it has the full picture in both the finances and the performance of the board, and that it is supplying an appropriate challenge to that. It might be appropriate for us—we cannot let this lie, I do not think—to ask the Scottish Government, maybe in writing to them, to ask them to give us more information on what steps have been taken since the Auditor General says that they are closely involved in bringing this through. We will be discussing that at item 6 on the agenda. Just before I bring Liam McArthur in, can I ask Mr Boyle? You mentioned that the Orkney had co-operated with NHS Fife to deliver some of the financial services. Is there any value in organisations like NHS Orkney pulling and sharing the delivery of certain services such as finance, personnel and IT with other boards, or is there a value in them retaining a standalone function? Thank you, convener. I think that it would be right for all boards to look at how best they deliver services, traditionally known as back office services, to make sure that they are achieving best value and securing value for public money. The example that prompted NHS Orkney this year perhaps was not in the kindness of circumstances, but it has allowed NHS Orkney to draw on expertise in the function going forward. Much like NHS Orkney does for its clinical services through the variety of arrangements it has to receive services from other health boards where it does not have that level of expertise or facilities on the islands. As the auditor general, if this is something that you identify as an issue or a concern, will you be recommending to boards that they should co-operate to share services in order to make sure that the qualified staff are available to provide the function required? I think that, as Stephen said, a fair amount of that sharing already goes on, not least through the NHS directors of finance meeting regularly and having a strong network where they can call on help where it's required. I think that the challenges where a specific issue comes up like this to be able to get the right help quickly enough and well enough plugs into what's really happening to be able to make a difference while it's still possible to recover the situation. So there's probably a recommendation about doing that in a more proactive way rather than waiting for a problem to be clearly on the table. I was interested by the point that Stephen Boyle made in relation to the clinical shared services. Obviously the relationships there are most closely with NHS Grampian and NHS Highland, but for obvious reasons that wouldn't necessarily have been the most appropriate link in relation to the issues that we're discussing here. As well as the problems within the finance department, it clearly comes through in this report, and Colin Beattie is right that it is made for alarming reading, particularly when you are a constituent of NHS Orkney as well as the elected representative. It brings out very clearly the problems in relation to recruitment and then the knock-on consequences in terms of the high costs of locums. I can understand why there are similarities perhaps in the pressures that both NHS Highland and Orkney face in relation to recruitment, but I would expect the similarities to be greater between NHS Orkney and, for example, NHS Shetland and Western Isles. I wonder whether there was anything through the audit process that you could suggest that those health boards appear to be getting right in terms of recruitment where Orkney could perhaps learn lessons. Similarly, in relation to the locum procedures, are there things that, if this is inevitable, needs to be done that could be improved in terms of bearing down on those costs? I'll ask Stephen to come in in a moment. I think that the context for this is that, particularly for the island health boards, losing one or two key people can have a really significant impact because of the scale of what we're talking about. Part of the picture is simply that Orkney has been hit with a number of vacancies this year, it could have been Shetland, it could have been Western Isles and that unpredictability is always a factor that needs to play in, whether there are wider lessons to learn and I'll ask Stephen to pick up on that. I think that the auditor general has touched on it. There are not an abundance of either non-clinical professionals or clinical professionals and the loss of one person can be very significant in the delivery of services. It is clear that, in relation to NHS Orkney, it has connections with NHS Grampian and NHS Highland in particular, but it also has forged links with its colleagues in Western Isles and Shetland, I think that it is the island care model, as a means of sharing best practice. Indeed, there is no guarantee that it will be faced with particular individual challenging circumstances again, that it would be similarly straightforward to resolve. Obviously, recruitment is borne out of an inability to retain in some respects. Are there particular examples of what is happening in the other island health authorities, where the retention rates are higher and therefore they are not being faced with the problem of having to recruit, as the convener says, in a market where skills are in certain areas, they really are at a premium and therefore the difficulties in increasing the cost has increased? There is nothing we are aware of, that is not to say that there may not be lessons to be learned, but one of the other clues came out in something that Stephen said earlier, that often it is less about the health board or the post than about the individual's personal circumstances, the things that make some people willing and indeed very happy to live and work in an island community for a long time, may be the things that make it harder for another individual because they have young children, because they have a spouse who works, whatever it may be, so factors about the individuals we know have made a difference from time to time, as well as potentially there being things about the way the board manages this that can make it easier or harder in what are always difficult circumstances. Can we take you on to the issue of the recurring and non-recurring costs? Obviously there are concerns there at the level of non-recurring savings that NHS Orkney are making, perhaps more of a concern given the earlier predictions of them being recurring savings, but I also note in paragraph 10 of the report an acknowledgement that NHS Orkney is about 12.2 per cent, i.e. 4.8 million, below its target funding allocation. There is an acknowledgement of that by the Scottish Government plans in place to increase that additionally by half a million in 2015-16 and 3.8 million in 2016-17. Those in the scheme of NHS Orkney's budgets are significant sums. Would it be reasonable to be making recurring savings where there is an acknowledgement of underfunding, where there is a plan in place to put that funding in? NHS Orkney, like all other health boards, would probably argue that it has made savings down to the bone where it can. The danger in making further savings is that you dig very deeply into pretty critical services. In terms of the profile that the convener and other community colleagues were referring to, in terms of an ageing population, the pressures that bring with it in terms of the costs are magnified in an island setting where you have a dispersed population. Is it reasonable? Should the expectation be that NHS Orkney is looking to make recurring savings, or is it a process of trying to bridge the gap until the additional funding, which is absolutely essential, has been acknowledged by the Scottish Government, is going to be put in place? It is a really good question. As well as the increased funding due over the next two or three years, we are all sitting and moved to a new hospital, which will provide new opportunities for providing services in different ways and generating longer-term savings or efficiency improvements. I think that the concern is about making sure that the planned savings are delivered in practice, whether they are recurring or non-recurring, and the challenge that non-recurring savings bring in is that you have to look for them all over again next year. Stephen will know more about the specifics in Orkney. Thank you. It is certainly that planned nature that we have sought to report is the board's performance against its own plan, the level of recurring and non-recurring savings that it has identified in its local delivery plan submissions to the Scottish Government that it expected to make. Non-recurring savings clearly is a far more sustainable way of securing its financial balance, but NHS Orkney, over a number of years, has used non-recurring savings as a means of securing its financial position. What is also the case, though, is that some non-recurring savings are also used to support non-recurring expenditure, as is the case with the new hospital to be coming online in a couple of years. NHS Orkney has that period between it opens the new facility to where it is now that it will have non-recurring expenditure, but fundamentally what we seek to report is NHS Orkney's performance against its own plans. You gave the example to the convener earlier on of the recruitment of a senior staff, which then fell through and had to be replaced by a local nurse at short notice. Is that the sort of thing that is given, I mean other examples, because in the sense that something of that scale in a smaller budget almost accounts for a significant percentage of either the non-recurring cost or the problems that have been identified in a single year within this report? I am trying to think of a good example, Mr MacArthur, of the vacancy management. I suspect that there will be many, albeit in a non-clinical setting, perhaps, identified savings on facilities costs on the estate. Perhaps, as has been suggested around the level of on-going upkeep around the old hospital relative to the new facility, but if I can think of a better example, I will come back and answer your question later. Can I just clarify something, Mr Barth? You mentioned vacancy management as a non-recurring saving, but if a vacancy runs beyond one year or indeed is eliminated permanently, surely that would then become a recurring saving? That can be another thing that the key to that is the point at which the vacancy, the duration of that vacancy. Is there a balance in what you see there then between the non-recurring savings due to vacancies and the recurring vacancies that are due to savings? I think that in terms of the recurring nature of savings, we would expect these to be planned, to be identified and to be a service redesign analysis coming through in a workforce plan and the connections that that would then have with a financial plan, whereas the non-recurring nature would be just the circumstances that the health board encountered as it went through the recruitment process or the time that it took to complete any recruitment cycle. I would like to start with the vacancy management and the point that the convener has just made, that if that continues over a certain period, the non-recurring does actually become recurring. Is vacancy management being used to balance the books? Is it a recruitment problem or is it a financial problem? The reason that I mentioned is that, in recent weeks, the local newspapers have been doing FOIs in NHS Highland and discovered, for example, that 104 patients had to go elsewhere in Scotland in recent months for orthopedic surgery, which I support is important to get their surgery. We are finding that it is not all about recruitment and patient waiting times are longer now. I do not think that I have ever known a time that I have heard more from patients in NHS Grampian because I have covered Murray and NHS Highland given the waits for diagnosis, the waits for scanners, the waits for treatment, the waits to see a surgeon. It appears to me that this is impacting seriously on patient care. I appreciate that you are mainly looking at the finances, but is it reasonable to say, given that 104 patients in recent months are travelling elsewhere, that this is becoming very serious indeed? I will start with a specific point that you asked about vacancies. It is clear that vacancies can be used to manage the finances by choosing not to fill a post for a period. If that post is required, it is likely that that will have an impact on service levels, whatever the job is, whether it is a consultant post or a key person in the finance team, or it may be a difficulty in recruiting somebody, which gives you an unintended saving, but it also has an impact on the service that you are able to provide. Stephen may be able to tell you more about what we know about what is happening in NHS Highland, but I think that the key is in the point that he made about workforce planning, linked to financial planning. Every board should be clear what staff it needs to provide the services that it is responsible for. Its financial plan should be very closely linked to that, and vacancy management, other than at the margins, is not a recurring or sustainable way of making the savings that may be needed to balance the budget. If what you need is to reshape your staffing, then you should do that and recruit to the new staffing structure, rather than keep posts held empty for long-term periods. Short-term flexibility may be sensible if long-term periods are not. Stephen, do you want to add? Around a 350-mile round-trip for patients before and after surgery, I think that it is worth mentioning. Absolutely. Clearly, there are particular circumstances in both of the boards that we are talking about today. No question about that. I am not sure that I have any specific examples of the nature of specialties and its impact that it is having on patients in Grampian or NHS Highland, Ms Scanlon, that would support that. You said that it was the board's responsibility for the finances, and it is really calling on the back of Colin Beatty's question. I do not think in the three years that I have been on this committee that I have ever actually seen a paper that states, and I quote, The chief executive and director of finance discussed the board's financial position with the Scottish Government, which, of course, it should do, in December 2013, but did not formally advise the board about the fact that they were not going to break even. Sorry, it is page 5 in the year section 22 report. I would have thought that that is tantamount to Grosan's conduct, because, one month before the end of the financial year, that board, NHS Highland, is made aware that it will not break even. How serious is that? We understand that the board's financial position was discussed informally with the board during board development sessions, but I agree with you that it is a sort of matter that should be formally on the board's agenda and available for the board to understand, to discuss and to challenge where appropriate. We have talked before to this committee about each board's central role in governance in being able to take that big picture of the way that finances are looking, the way that clinical and other performance is looking, and to provide the level of oversight, scrutiny, challenge and support that is required. One of the reasons why those reports are here before you is the concern about financial management and, for Highland, that particular question of transparency. It is very difficult for us as an audit committee and, to be fair, the Scottish Government to hold that board to account when they are being kept in the dark by their chief executive and their financial director, as you have stated here. The chief executive and I think the director of finance are both members of the board. The question is whether the board was able to fulfil its role and the legitimate public interest in concerns like this. We were talking earlier about the need for debate about the way financial and other targets work together in the health service. I think that it is entirely legitimate to say that these are the issues that should be discussed at the appropriate level of detail by a board. Sorry, can I just stick with that for a moment, because there is a significant issue here, both about the staff and the board. Paragraph 6 indicates that, in the top of page 5, the actual year-to-date outturn position showed significant overspend against budget seats. Monthly information prepared by the finance team for board members and the Scottish Government have reported that the deficit would be addressed from management planned actions. So, the senior staff reported to the board that the deficit would be addressed from management planned actions. But then you go on to say that the chief executive and the director of finance discussed the problem with the Scottish Government, but not the board. Now, I think Mary Scanlon is right in the dereliction of duty. Surely the senior staff are obliged to report to the board, otherwise, what is the point of having a board? If they believe—maybe clarify for me, maybe I'm wrong—maybe the chief executive and the director of finance and other senior staff should report directly to the Scottish Government rather than the board. Is that the case, that the board is irrelevant in this? No, I've said convener that, in my view, these are exactly the sorts of issues that should be on the board's agenda. The board is responsible for scrutiny and oversight of the overall performance of the board. We're told that the board discussed these issues informally as part of a board development session rather than on a formal board agenda, but, in my view, that doesn't meet best practice. Stephen may want to add more of the background of what we know in this particular case. Sorry, just before Mr Boyle does that. Are these staff still in post? There has been one departure from the NHS Highland Board hospital, otherwise, people are still in post. As the Auditor General notes, we would have expected that the forecast financial position, which states that it would break even, but to be compensated by planned management actions, would include more detail around what planned management actions would entail, and we didn't see that during the course of the year. By way of context, I suppose that the NHS Highland in previous years has also relied on non-recurring savings to secure its financial position and has achieved its break-even. The extent of brokerage or additional funding from the Scottish Government that it sought of £2.5 million is only a very small percentage of its overall allocation, but, nonetheless, we would have expected that it would have been clearer to board members the risks around its achievement or break-even. The more I hear the worse this becomes, frankly, it's a scandal that these senior officers are actually treating the board like mushrooms. They're best kept in the dark, because not only did they not advise the board at the time but they did discuss it with the Scottish Government, but the same paragraph actually says that officers did not formally report the brokerage agreed with the Scottish Government to the board until close to the end of the financial year. What is the point of having a board if you don't discuss those serious issues with them? The word formally in both sentences is important from our discussions with the board. We understand that there were informal discussions in board development sessions, and I agree with you, convener, that these are the sorts of issues that should be on a formal board agenda with proper papers and proper miniting of the action that's been taken as a key part of good governance. Actually, I think the fact that there was informal discussion makes it even worse, because informal discussion won't appear in any records anywhere that the public can examine and hold the board to account. The nod, the wink, the private conversation that there's a problem, frankly seems to be a way of getting round public scrutiny and proper public accountability, so either the board are complicit in a situation where there is no proper governance here or the board have been kept in the dark by senior management, but somewhere right along the line there is, I think, a chronic failure of this board to hold the executives to account, or else a failure of the board to properly advise the senior staff to advise the board. Either way, it's significant failure. It may well be both, but to have a board that is not formally told about discussions with the Scottish Government about brokerage, I think it's an outrage. I don't know whether this is happening in other boards or whether it's just a local practice, but I think, as Colin Beattie has suggested, we do need to have some discussions with the Scottish Government about this, because there's something badly wrong here. One of the reasons why the report is here is that the way this was handled means that there is no formal record of papers to the board and minutes of decisions taken, and that makes it hard for us to see and understand the level of board discussion and the actions taken, but those requirements are in place for good reasons, as you say, good governance and public accountability. Before I go to my final question, which is looking at the way forward, I quote on page 13, until February 2014, the board was forecasting that it would break even at the end of the financial year. Now, you've actually told us that they had informal discussions. They were aware that there would be £2.5 million brokerage. Those discussions took place between the chief executive, the financial director and the Scottish Government in December. So, were the board lying that they would break even? Were they lying? Were they unaware of the brokerage, or were they just being economical with the truth? I think that what paragraph 7 is describing is an evolving picture. Stephen will keep me right. My understanding is that the December 2013 conversation was about the financial position of the board and the challenges that were being faced, particularly at Regmore hospital. In February 2014, that discussion had moved on to being about the potential requirement for brokerage. As the report says, the board was formally advised about the need for brokerage close to the end of the financial year. Those discussions were evolving. What's clear is that they weren't happening formally on the board's agenda and that the plans for closing the gap between the month-by-month position and the forecast break-even position were not detailed enough to give us satisfaction that the picture was being managed well. What we have is a formal forecast of break-even by the end of the financial year and an informal knowledge that they would not break even. They required £2.5 million brokerage. The picture appears to have been that the formal discussions at the board didn't take full account of the financial position of the board and that that evolved until right up at the end of the financial year when the need for brokerage was reported. Stephen may well want to add that, if it's much closer to the picture on the ground than I am. The Auditor General's understanding is consistent with my own. Certainly, the formal reporting of the requirement for brokerage, as the paper notes, and you've said, Ms Gannon didn't take place right up until very close to the end of the financial year but based on the February in-year position. The formal position and the informal knowledge were quite different. I think that's what we'd agree with. Can I look forward to the final paragraph on page 13, case study 1? I hope that you'll forgive me, but can you please explain to me? In order to break even at the end of the financial year, this requires to achieve a £12.3 million improvement on the financial position. £9.9 million of that relates to Regmore hospital. What is a £12.3 million improvement on the financial position? Is that £12.3 million less that they have to spend in order to break even? Or is that £12.3 million of efficiency savings in one department that will be taken and reinvested in another? I just don't understand, and I'm sorry, convener. What is an improvement in the financial position of £12.3 million means? Ms Gannon, the £12.3 million that you referred to is the board's forecast year end-out turn, as at the end of the 14-15 financial year. Is that £12.3 million deficit at the end of the year? That would be what they would be projecting, that their deficit would be if they didn't take any steps to address that and meet their break-even target on their revenue position. So, if they're projecting a £12.3 million deficit—I'm sorry for being the daft lassi, but I'd rather make it understood—if they're projecting a £12.3 million deficit at this point in time, does that mean that they have to cut back their spending by £12.3 million in order to break even on the 31st of March next year? Just one point of clarity. I think that the board is actually projecting a break-even position, but it's identified that—I'm sorry that this is not clear or trying to be as clear as possible. I don't understand how they're projecting break-even, but they've got a £12.3 million deficit. So, they are projecting that they will break even, but have identified that they have a gap of £12.3 million, as a forecast gap, rather, as things currently stand at the end of period five of the financial year and, indeed, need to take steps that would address the £12.3 million gap that they currently have. So, they need to cut back on their spending by £12.3 million by the end of the financial year in order to break even. Is that accurate? Cut back on spending or identify other revenue streams or deliver services in a different way? Okay, so £9.9 million of that relates to Raigmore hospital. That's a huge financial improvement or cut back or whatever you want. That is identified at that £10 million at Raigmore hospital. Is that reasonable to expect NHS Highland to find £10 million of cut sufficiency savings or financial improvements, whatever we want to call it, in six months? I think that that would be a very challenging thing to achieve in the many months of the financial year, but it broadly mirrors the financial position of the board certainly last year. As we know in the paper, the £9.5 million of the financial challenges that are faced by the board are attributable to Raigmore, so the trend is broadly consistent. Okay, have you been given an assurance? Have you been told where the savings or how this deficit will be met? Have you been given a future plan in order to break even from NHS Highland and is that something that we could see within this committee? I think that the reference that I made in my opening remarks to the board's programme board, which is set up specifically to try to enclose this gap is that board, which is both monitoring the situation and developing the plans. I think it's not a single plan but a series of plans for closing the gap in this financial year of £12 million and making sure that the longer term challenges, which Stephen referred to in his report, are also met. Is that accurate, Stephen? Before I bring out, there are at least three other members wishing to come in. Auditor General, I'm aware that you have to attend the local government and regeneration committee meeting to give evidence. I don't know, are you content to leave at this point and leave your colleagues to to deal with further questions or do you wish to stay for the rest of the questions? I think that the local government committee is content for me to stay with the committee until you're happy on the site and then I'll move on. Thank you very much for that. James Dornan has a quick question and then Willie Coffey. It was just based on these board informal and formal board meetings. Did you get any sense when you were doing the audit that in these informal discussions that they had what they thought was a plan to fill this £2.5 million or was it really a case of they were saying one thing in public and another thing in private or was it a case of they were just sitting there hoping that something would turn up? It's difficult for me to say what is actually discussed in the informal sessions because it's been said that we're neither present at these meetings nor do we receive minutes from them. Perhaps it could be a conjecture, Mr Dornan, that the experience of NHS Highland's financial position has been such that it has delivered its financial position in previous years and I expect anticipated that it would do so again in 13, 14 but the late detail around the challenges in Rhaig Mawr compounded its financial position and prevented it doing so and as such required brokerage. Thank you, convener. You came in earlier, if the second time you're convener on a number of the points I wanted to raise but nevertheless I want to ask the auditor general a couple of questions. This story reminds me of the Western Isles case a number of years ago when I served in this committee when significant management failures were pinpointed then and we hoped that lessons were certainly learned on the Western Isles and it looks as though similar without knowing the detail of course similar management failures are occurring again. What's extremely worrying of course is that it seems to be pointing to a lack of either ability or willingness to scrutinise what's being said by whom and to whom here. You can't seriously say that you're going to out turn on balance and project a deficit shortfall of it by management actions and not even decide to inquire what these might be and who said them. That sounds like what we heard in the Western Isles some years ago. I can't think of any possible reasonable rational explanation that might explain this other than other. I'm not going to say it, I just can't understand why that would be the case but could I ask you though when was it in the stage, in the process that it became immediately obvious and clear that the brokerage was actually required? Was it right at the end of the financial year, month to go or something? When was it? Wendy Rocker? I think the picture that we've tried to paint for you is a sense of it being clear that there were real financial pressures from at least December in 2013 onwards and although there had been, as Stephen says, a history of making the savings that were required in previous years, the difficulties were compounded this year by the weaknesses in financial control at Rhaigmoor and by the very ambitious work that is happening in Highland to integrate adult health and social care under the health boards leadership. I think the question is how well understood the reasons for that financial position were and particularly how well positioned the board was to ask the right questions as you're suggesting about what the underlying reasons were, how good the plans were for moving towards break-even and what other action might be required. As Stephen says, we can't be sure about that because the meetings weren't held formally, we don't have access to papers or minutes as a result of that but that is the board's responsibility and it's the good governance requirements for good reasons as the committee is exploring just now. Just to ring in another alarm bell convener about the past experience that we had, we had examples where even internal audit recommendations were being ignored. It raises the question about how on earth do we ensure internal or external audit that what's being said and what's being reported is actually done and scrutinised. It's one thing to report and recommend but it's another to actually do it and for someone else if necessary externally to come in at a late stage and see that it's not being done but that has to be in process, that's the responsibility of the board as you've said there but it seems as though the same mistakes perhaps have been made again here with these two particular boards and I think lessons need to be learned pretty quickly. I think convener to try and stop this happening again. Colin Kear? Thanks convener. My question is similar in terms of the board meeting and we know it's been reported to the board later on but maybe I've missed something in what's being said and I apologise if I haven't but it's really trying to get an idea of what the actions of the non-executive directors of the board are saying, some sort of response to see if there is some form of dissent or comment or acceptance or whatever and I'm not maybe I don't know if I've missed this or you know it's not that's information not available as it's minutes that you've not seen but it would be interesting to know if the not just the executive members who are obviously responsible for the day-to-day running but the non-execs who are supposed to be there for a specific reason are actually up to the job of carrying this on. Thank you Mr Kear. It's maybe worth noting that the board has issued a response to the section 22 report stating that it takes the report very seriously and I tend to address the points in it. We've commented already about the timeline and the information being provided to the board in both formal and informal sessions and perhaps worth noting that the basis for the auditor general session 22 report is the annual report on the audit and I presented that to NHS Helens audit committee I think September of 2014 if memory serves me correct and that meeting is clear that there is an action plan that accompanies the report along with recommendations for improvement that I make and they are responded to positively in my mind about the next steps so they were they were discussed in full at that meeting. I would have liked to have known what the initial response was I know they're doing the action plan I know they have to agree a series of forward plans to alleviate the problem but it was actually to try and find out what the initial formal reply from the rest of the board was to find out that brokerage was required virtually the last meeting of the year even allowing for the fact that if they were accepting of an informal discussion which brings in the problem of well shouldn't the non execs be pushing for that to be formal formalised or did they know but what was the initial reaction because I'd really like to know as to how the board when confronted by this actually reacted initially because it would give us a real idea if you know there was problems with the executive function of the board. Probably the best answer I can do that was from my experience of that meeting that some non executives who serve in the audit committee which is not all the non executives of the board there was a degree of recognition that they were familiar with the board's financial position whether that then translated into an expectation or understanding that it would require brokerage from the Scottish Government to secure breakeven I'm not sure I could be give you that clarity. Thank the auditor general and her colleagues for that. Auditor general just before you leave the next item on the section 23 report we have responses both from the Scottish Government and yourself. Can I just ask you one question before you leave in your response you say that my report on the NHS in Scotland 2013-14 will comment on the number of settlement agreements that include the categories you refer to confidentiality clauses and highlight any concerns raised by local auditors I can't see any reference to it in the report. It's not in the report and we are still planning to report back to you on that issue convener we want to take the time to make sure we've got the information absolutely right before it comes to you. The next item as I said is the I've a break just after this because I think we should be able to deal with this fairly quickly consideration of the responses from Scottish Government and the auditor general. Members can either agree to note the responses or to decide whether to take any further evidence or indeed refer it to another committee. Any comments from members agree to note? Okay thank you. At that we will go into private session and we will take a break.