 Good morning, and welcome to the 19th meeting of the Public Order and Post Legislative Scrutiny Committee in 2017. It feels like we've never been away. Can I ask everybody in the public gallery to switch off any electronic devices so that they don't affect the sound system? Item 1 is declaration of interest, and I welcome our new member Bill Bowman to the committee and invite him to make any relevant declarations of interest. Bill. Thank you, convener. I would refer to my register of interest in particular. I'm a member of the Institute of Chartered Accountants of Scotland and a former partner in KPMG. Thank you very much, Bill. Item 2 is decision on taking business in private. Do members agree that we should take item 4 in private? Yes. We're also asked to consider our work programme in private at a future meeting. Members will recall that we had an informal session over the summer, and we want to consider the various suggestions that arise from that, as well as the suggestions for post-legislative scrutiny, for which I thank all those people who made a submission to the committee. Do members agree to take this area of work in private at a future meeting? Great. Thank you very much. Item 3 is common agricultural policy futures programme. We'll take evidence on the Auditor General's report. I welcome to the committee Liz Ditchburn, who is the director general of economy and Eleanor Mitchell, director of agriculture and rural economy, both from the Scottish Government. Could I invite an opening statement from Liz Ditchburn? Thank you very much, convener. Good morning, everyone. Eleanor and I welcome the opportunity to talk to you again today, some nine months since we last gave evidence to this committee. You will, I'm sure, have questions about what's happened since then and in response to the Auditor General's update report, and I look forward to answering them. I'll try to capture some summary headlines in this opening statement. The committee has, as members will know, been receiving detailed monthly reports on progress since January. I would like to start, however, by again putting on record my thanks to two groups of people. Firstly, to Scotland's farmers, crofters and other rural businesses for their continued patience during this challenging period, and secondly to all staff for their dedication, determination and tenacity in seeking to put the cap payment system onto a more stable footing and to make this system work as we would want it to work. When I gave evidence before you this time last year, we had just come through the intensity of the June payment deadline and were still within the penalty-free period offered by the European Commission. We were seeking to maximise payments before the 15th of October deadline. I had started to make changes in the senior leadership team and we had made the first changes in governance and processes. But when Eleanor and I returned in December, together with the permanent secretary, the full depth of the challenge and the cumulative impact of the difficulties experienced in previous years were becoming ever more apparent. There have been some positive and important developments since then, as I think the Audit Scotland report acknowledges. However, despite this, 2016 payments started later than we had originally intended, squeezing the period in which the bulk of the payments needed to be made. We reached 90% of payments by value at end June, falling short of the target. You will rightly want us to hold us to account for our approach and our actions over this period. You may be asking why, if we had been doing the right things, there was not more improvement in the headline payment performance number. Let me try and answer that in summarising what has changed over the last year. First, some positives. Elements of performance have improved. The application window performed well, closed on time and the percentage of online applications increased to 78%. Payment performance after June, in effect on the hardest 10% of cases, has been significantly better. The latest data shows that we have now made over 99% of our payments by value. Payment letters now go out at the time of payment. We offered loans to farmers earlier, making loan payments from November and giving cash flow certainty. Critically, the way we are operating has improved too. Our new governance arrangements are working well. We have made significant changes in the leadership team. Effective operational working processes such as regular control room meetings are now the norm, enabling us to track progress and take corrective action quickly. We have more and better data, management information and reporting to inform our decisions. We have more focused disciplines around software releases and IT delivery and qualities improving with reducing numbers of defects. Communication engagement with staff has improved, including through daily meetings and visits by a range of staff to area offices and Eleanor, for example, has now visited all area offices. Finally, with the technical assurance review, we have now bottomed out the underlying challenges in the system. However, there were other factors that meant that we did not make the progress that we hoped for. We will be happy to talk in more detail, but in summary, the whole 2016 processing year started later due to the, I must say, very welcome extension of the penalty-free period and the earlier extension to the application window, but this pushed the whole timeframe forward. Land changes. While the 2015 payments were being processed, the day-to-day updating of land changes was minimised. To make 2016 payments, we then had to process and validate significantly more land changes than expected. Next, the dynamic nature of the system. Because 2015 is the base year for entitlements, the 2015 application has to be, in technical terms, what's called at ready to pay status before the 2016 payment can be made. Even small changes can knock this out, and this added complexity was new to area office staff who had to deal with clearing the anomalies. Finally, we continue to suffer from some delays in IT delivery with slippage in critical elements of functionality impacting on our ability to make payments. Some of these issues were known to us last year, but the scale and impact of them was perhaps less understood. Again, you may ask what are we doing to avoid a repetition of this experience. We continue to make improvements in the way that we work, and Eleanor will want to tell you much more about this. We are responding to the recommendations in the technical assurance review. We are responding to the Audit Scotland recommendations. Critically, we are looking to get ahead with 2017 requirements through, for example, parallel working on different elements, and we are starting to tackle the longer-term strategic issues, as well as the short-term demands. However, we are not complacent and none of this is easy. Thank you for your time in listening, and I look forward to your questions. Thank you very much. Perhaps I might kick this session off by asking you about financial penalties, because I note from the papers that we have received that you had made something like 90 per cent of payments by 1 July, but the requirement from the European Union is that the UK as a whole make 95.24 per cent of payments. Given that those figures one would assume are accurate, what financial penalties have you been notified of, the scale of them and whether you accounted for that within your thinking? Thank you very much. The process is still on-going. In terms of the European Commission formally confirming final numbers to the UK, there is a process by which the UK has to decide whether any penalties that are applied are distributed across the UK and the different nations. Our understanding of the current situation is that there may well have been sufficiently good performance across the UK as a whole to mean that, for the main schemes, there are no penalties. Obviously, that is not yet confirmed and we should always be cautious until we have final numbers. There are some of the smaller scheme elements where there may be some small level of penalty. I do not know whether you wish to say anything more about that. If I can add to some of the details, at a UK level, we believe that, for the BPS in greening scheme, the 95.24 target was reached, so we are fairly confident that there will not be penalties in relation to that. Indeed, the BPS in greening payments make up 98 per cent of the pillar 1 payments, so that is the vast majority of the payments. We anticipate some modest penalties for the VCS schemes, because they are Scotland-only schemes. We did not make the 95.24 per cent and for young farmer. Young farmer is a cross-UK scheme, so we anticipate modest penalties for that. As Liz Smith said, we have not been notified of any penalties yet by the European Commission. When you are anticipating modest penalties, what kind of scale are we talking about? For example, across both schemes we are anticipating penalties of around half a million pounds, between half a million and 700,000 pounds. Let me tease out our performance relative to the rest of the UK, because it sounds as if what you are telling me is that this is one of the benefits of being part of the United Kingdom, that other areas outperform Scotland and, consequently, we all avoid penalties. Would that be correct? It is correct that Scotland did—we achieved—payment performance of about 90 per cent, and the other paying agencies achieved much higher, higher in the 90s, which evened out across the country, yes. Would you have information on that that you could perhaps send into the committee? The numbers, because of all—as we have explained at committees before, before you get to the very end of the payment period, the numbers are not confirmed. It could take some years—for example, we have not finished the 2015 payment period yet—across the UK, we have not finished the 2015 payment period because of things like transfer of entitlement, because of probate cases. It takes a long time for the numbers to be finalised, so we tend not to publish final figures until everything is cleared, because the numbers go up and down, the denominator changes, the amount of value. I will check with the co-ordinating body about what information we are allowed to share at this point in the year, but we will of course share everything that we can. We recognise that these are estimates and it will take years to complete, but it would give us an order of magnitude as to what areas in the rest of the UK are performing better than we are and what we can learn from them. I could ask one question before I move on to other members. It has been suggested that staff are involved in the recovery of loans, and that is actually diverting their attention from processing the new payments. Is that accurate? There are separate teams involved, so this is about identifying the resources that we need to do the various tasks in hand. That is part of the new workforce planning strategy that we have in place. We identify the work that needs to be done at different times, and we make sure that we have the people involved during the weeks and months that we need them to do the different jobs. Colin Beattie As with so many public sector IT projects, a big part of the problem seems to have been originally on the management side. Reference is made to the substantial changes in personnel in the senior management team. Could you give us a little more information about that? How have you ensured that there is continuity between the previous management team? What is the mix of skills in the current management team? How is that going to work going forward? You have been involved in more detail of the changes all the way down through the structures. So continuity has been a really important factor for us. I have been in post now for a year, and since I have taken up post, I appointed a new chief operating officer a number of weeks after I started. We split up what was previously called the rural payments and inspections division into two to increase the management bandwidth, and we had a second deputy director take up post at the beginning of the year. Across the ARPID division, there are two senior managers looking after that. At the level below the senior management level, the senior C-band management to civil service grades, there is an enormous depth and understanding of the systems and processing, and we rely on those staff extremely heavily. A couple of weeks ago, for example, we had a C-band conference that brought all the senior staff together in one place to talk about the year that passed, the year that is coming. We have worked very hard to make sure that we draw on the knowledge and understanding within the organisation of the staff who have been around a long time, even though the senior people involved in this are very new. Is not there a core senior team that oversees the whole thing that has expertise reposing within that team and with oversight over everything? Yes, there are senior management teams at all sorts of levels, but the core senior management team of what I would call the ARPID, who looks after this, is cleaning myself, Annabelle Torpy, the chief operating officer, Andrew Watson, who is the director of the Scottish Paying Agency, and Eddie Turnbull, who heads up the information services division. We are all new, we have all been in post within the year, but each of us also has a wide range of people who have been in there a long time, and we draw on the knowledge and understanding. One of the things that we have done over the course of the year is draw much more heavily on the knowledge, wisdom and understanding of the day-to-day running of the operations, and that is by the principal agriculture officers and their teams who run the area officers around the country. We draw very heavily on them now, they are involved in the PDCR conversations, the control room meetings, they are involved in the governance arrangements to make sure that we truly understand how issues and decisions that we take are going to be impacted locally. What I am concerned about is, is this really a project team? Is this the senior members of the project team who have the skills and experience to implement an IT project? I would stress that this is much more than an IT project. There is an IT project within it, but success for farmers depends on an awful lot more than the IT. The IT is one element to it, and we are using very clear and standard protocols for managing that IT contract and our relationship with the contractor, and with the business as usual capability that we have within our own IT support systems. However, the policies that set in terms of how the schemes operate, the knowledge of the European Commission, the farmer facing people within the area offices, the way in which we manage operational processes, all matter as much as the IT delivery in terms of the overall impact and outcomes for farmers. We have transitioned, since we last were here in front of this committee, from a programme structure to more of a business as usual structure. This is now very much about an operational unit that is underpinned by IT and relates very much to the policy. All of that has to sit together, and that is the responsibility that Ellen and the senior team carry across that whole piece. I am sure that all the problems with this relate back to the IT services. Well, I think that the Auditor General, and I think that we would share this view, sort of has said on record that many of the problems, if not all of them, really date back to 2012 and some of the decisions that were taken in 2012. So, some of the design choices and some of the things that happened in those early days, the kind of complexity of the system that we designed, that has had a really significant impact on the way in which we have been able to take this forward. IT is just one element to it, a very important element, but just one element. The key thing that I am trying to establish here is that this is a project. A huge chunk of it is IT. There is £178 million in this project. I am trying to establish what is the capacity of that senior team in terms of being able to implement this. I agree that there are other elements, but the whole failure has been on the IT side, primarily. Now, the new leadership team, does it have the experience and the capacity to oversee this project? My answer to that would be that, as Liz said, the IT programme, the cap futures programme, came to an end at the 31st of March and it was brought into what business is usual, if you like, and it is now the responsibility of all of us. It is a Government system, own and run Government system, and we are responsible with our delivery partners, largely CGI, for making sure that it continues to run and develop as we need it to do. I think that for me, the appointment of Eddie Turnbull in post was absolutely critical in that. Eddie has experienced a number of programmes, a number of IT solutions over a number of years in the Scottish Government and elsewhere. He has developed, since his appointment, a transition plan for knowledge transfer from the contractors into ISD staff. He has also introduced a number of industry standards and methodologies for looking at how we do system testing and how we make sure that the project running is effective. There have been many, many changes that he has brought about as a way that we actually run the project now that it is part of our day-in-day working. The other two elements that I would also emphasise is that in putting together the management team that we now have in place, not only have we done the things through the appointment of Eddie that Ellen has described, but we have also sought to increase the capability around audit and assurance, which is really important because so much of this is about what are the financial impacts in terms of penalties, so increasing that knowledge and skill within the senior team and through the appointment of the chief operating officer increasing the operational capacity as well to run our business processes effectively, because it is the combination of all those things that determine success. We have felt that it is very important to build a leadership team that combines all those skills, and that is the team that we need going forward. I recognise what you are saying about the different layers of management here, but how many people are in the senior management team? The decision making in that is that now working well? Is it efficient? Is it able to make the decisions based on good information? I am hesitant with all this because I am not seeing a structure that you are describing to me, which would be a typical project team in terms of an IT project of this magnitude. I keep coming back to the IT side because that is the major part of this, and I realise that there are other delivery parts as well, but I am not seeing any familiarity as to the structure. There are maybe two things that we could pick up on that. One is that we should come back to governance, because you are also asking about the governance arrangements and we can come back to that, and they perhaps would look very familiar to you in terms of project structures. Do you want to talk about the management structure? We could of course send you more information about the organisational structure that Alan has put in place. I am struggling slightly with the concept of senior management team, because the senior management team operates at all sorts of different levels for different things. We have a clear governance model and we can share that around. Would it help to set that out? At the top level is what is called the CAP Steering Executive Steering Committee, which Liz Ditchburn chairs, and there are a range of people on that from within the Government, non-executive directors, expertise from external from the NHS, for example. Below that, we have the CAP Strategy and Assurance Board, which I chair, and that is at the high level governance within the actual programme. Sitting beneath that, we now have the Paying Agency Strategy Board and the Delivery Board. The Paying Agency Strategy Board is chaired by Andrew Watson, the director of the Scottish Paying Agency. The Delivery Board is chaired by Annabelle Terpy, chief operating officer of ARVARPID. Underneath those, we have the Creditation Committee on Audit. We have the Business Design Authority, which is very much looking at the keeping very tight grip on the change processes, which was one of the problems that we had last year. Sitting below that, there is a range of other working-level projects, project boards, so there is a very recognisable portfolio management term that is a very clear structure of working. Sitting alongside that is what is the senior management team arrangements for the whole directorate, of which the various bits of ARVARPID are involved. I am confident that we have a robust governance system that is taking the right decisions at the right time, and we are making a difference. It might be helpful for us to understand a little bit more about this, because I am still a little bit concerned about this structure. If we see it on paper, we can understand it a bit better. I would like to stay in the same sort of area, but to look more retrospectively. There have been significant changes to the leadership team, and the Auditor General's report and some of the answer that you give him suggests that the tank is starting to turn, perhaps, but is not that a tacit admission that the old leadership team failed? The old leadership team got us into this mess, so is that an admission? In any event, who has been held accountable for this situation? I think that we have been round this ground before in the committee, and I do not think that our retrospective view has changed. As the Auditor General said, again, the routes of these challenges go right back to some of the choices that were made very early doors. By whom? As we have said in this committee, some by ministers and some by officials, some by the European Commission. As we have described in this committee before, there was a whole set of things. We had to try and design a system before the European Commission had finalised its regulations. We made some decisions that gave a higher level of complexity to the schemes that were running in Scotland for good policy reasons, to achieve clear policy aims, but we arrived at a system with more complexity than some of the other parts of the UK. Those decisions were taken, as is known, by ministers at the time. They were taken in consultation and discussion with stakeholders, including the NFUS. The Europe situation in terms of the difficulty of trying to design a system while the regulations themselves were not yet formalised is also well known. All of those factors contributed to a very challenging situation for the management team that was in place at the time. As we have also described in this committee, the history of this project is a series of cumulative problems that add on to each other. Every time you are trying to deal with live payments because we do not have the luxury of saying, let us just pause everything for a year and try and get this system back and running because we have to try and provide farmers payments. We are all the time trying to manage a live system and manage getting payments to farmers, as indeed we need to, as quickly as we can, with trying to stabilise and improve the system at the same time. That is the challenge that the management team had. That tells me why it does not tell me who. Who has been held accountable for this? As we have described before, there is no single point of failure that you can describe to in this. So nobody has been held accountable? I think that you have asked this question to the Auditor General as well, who I think has really considered these points. The roots of this problem lie all the way back. We are all being held accountable all the time. Well, let us look at, you would presumably accept that the contractors are at least in some way liable. We looked, or in the Auditor General's report, the CGI contract that Ms Mitchell referred to has been extended for two years at a cost of £29 million. There is a contract with another supplier, which has been extended at a cost of, I think, about £3.5 million. Do you have any comment on why we are extending contracts of companies that apparently have failed to deliver what they were asked to do and whether that represents an appropriate spend of public money? As the Audit report tried to describe, we are one of the challenges of managing a contractor in this situation. I think that the evidence has been given to this committee in the past. This whole project has gone through different phases of being led by Scottish Government, with the contractor only operating as a supplier of personnel, directed and fully with Scottish Government accountable for what they do and how they do it, to periods where the contractor was under much more normal circumstances of a normal contractor and held to account for that. We have had different payment approaches in place. You might want to say a bit more about this, because I may not have all the detail at different phases. There is no single thread. The business model that we have used has changed, and that has changed the accountabilities on the contractor. What we can talk about now is how we have increased the commercial accountability within that contract, the kind of penalty systems that we have had in place. We have had those systems in place from the beginning. As I said, we then changed the business model so that the contractor was only supplying personnel. We have then gone back to a system where we are able to apply penalties and have that sort of normal disciplines in place. One of the challenges has always been that unless we, as Government, can specify very clearly the requirement that we are asking the contractor to deliver, we need to work with things such as time and materials contracts and systems, rather than a payment by output. That is why we have not been able to do that, why we have had to maintain time and materials systems for longer than we might have wanted, is because of the very nature of the challenge that I have outlined to you, the fact that we did not have regulations clear before we had to design the scheme. We have always been almost trying to play catch-up with getting to a situation where you have a very clearly defined requirement that you hand on to the contractor and they can be held fully to account for that. That is the situation that we are trying to move into, and indeed have made significant progress in moving into it, but it is still made more complex by the interdependencies of what we need to do as Scottish Government in the business processes and what the contractor needs to do in terms of IT delivery. That comes all the way back to the original point that this is not just about IT delivery, it is much more complex than that. Do you want to say anything more about the commercial? Yes. I was just going to add to that that we commissioned an independent technical assessment review, which was commissioned from Fujitsu. We worked with Fujitsu over a number of weeks to look at whether or not the system is working. I guess that the baseline question was, is this a system that we can never develop and build on, or is it something that we will have to write off and start again? That would be the catastrophic solution. What the Fujitsu report said was that there was a basic fundamental sound architecture there, although it did acknowledge a number of defects in the system that needed to be fixed. As we were going through that process, and I was very early into the jobs, one of the first questions that I was faced with was whether we should continue working with this contractor, who we had worked with in partnership for a number of years, who had a real, deep and depth of knowledge and understanding. We all recognise things that need to change. CGI recognised that as well. They have invested heavily in new management structures in the same way that we have in the Government level to try to move things on to a different footing. We have moved on to a different footing, and I can give you some stats on how things are improving in terms of the quality of the releases that we get and the timeliness of the releases now. That is a new way of working with them to understand on both sides the business requirements and the IT requirements and the acceptance that we are absolutely looking for a high-quality product that we can implement and that will work first time. Does not that suggest that something went wrong before at the contractor level? If that is the suggestion, what steps have been taken to recover the public money that was paid to the contractor? I am not sure that you can categorise it as something going wrong. I think that the history and the catalogue of the decisions around the CAT project all the way through would mean that it is so difficult to identify. At any given decision or at any given point, it would be so difficult to understand at what point was a wrong or a bad decision taken, because decisions are taken with the best information done at the time. We launched a project without knowing whether it was going to work or not at a cost of what is now £178 million, did not we? The system worked last year. It got 90 per cent of payments out by June and 99.7 per cent of payments out by 15 October. The system works. It does not work as we would want it to work, but it works. It is rather difficult to suggest that this is a working model. Just looking at last year, there is obviously the loan scheme. Obviously I am pleased with the loan scheme because at the end of the day this is people's livelihoods. However, I am interested. The Government has a finite budget. The loan money must have come from somewhere. If that is correct, what has not been procured, what has not been funded as a result of having to cross fund the loan scheme? As I think is clear in the report, the budget from which this comes is a budget that funds a number of programmes across Government. It is the financial transactions budget. That financial transactions budget is utilised by a different range of programmes. Some of them are demand driven. Across the year they are always very difficult to predict. For example, some of the ones that involve housing depend on conditions of housing market and how much demand there is to take up some of those schemes. At the beginning of the year, our finance colleagues will be projecting what they imagine the demand may be and how the forecast will play out over that year. However, it is not a situation where you have a very, very clear set of projects that are absolutely on particular pass. It is a much more fluid budget line in the sense of the demand can change over the year. What we do with our finance colleagues when we were able to express the demands that a cap loan system would place on that budget, they were able to look at their latest forecasts, they were able to look at their projections forward, the kind of flexibility they have at the end of the year, because this is money of course which does come back to Government, so it is not expenditure. It is only about the profiling of the money going out and the receipts coming back in. The needs of the loan scheme fitted within the updated forecasts and the kind of projections that we have for the second half of the year, for example. As a result of the cap loans, we did not require any other programmes to be curtailed, so there was basically a situation where the normal in-year fluctuations within the demands on that budget allowed there to be sufficient room for the cap loan to happen. Can I add to that? When we did the loan recovery for the BPS 16 schemes issue, we worked very, very closely with finance for the 31st of March deadline, and they gave us a number—I cannot remember off the top of my head—something like £115 million. They said, that is what we need you to recover. We worked with them on a daily basis, making sure that the payments went through and to hit the right number that they needed for the loan recovery. The money does come back. Obviously, the money comes back into system, it is a loan. My understanding is as Liz is that there was nothing that was not done because we required cap loan schemes. I wonder if I could ask a question or two on the IT side of it, just to come back to the disallowance issue that was mentioned earlier. The information that I have read, although you cannot find much information about the system down south, was that DEFRA were themselves preparing for substantial disallowances and fines of potentially up to £180 million on the system, in that their system had overrun as well substantially in terms of budget. Liz, you mentioned that our system in Scotland is much more complex than the one that has been adopted elsewhere. I am pleased to hear that, if both systems have made substantial progress to potentially avoid those substantial fines that were mentioned, is that the cases that have been a late run of performance in a sense by both systems to try and avoid any fines from the European Union in this? As I understand it, much of the challenges that the English Paying Agency has had are dates slightly back. I am not sure of the reports that you are seeing, but the English Paying Agency had very significant and very well known in the media challenges around their own system and the cost overruns within that system. That was some time ago now. In fact, in England, one of the biggest shifts that we have had to make in implementing this cap programme has been moving to area-based payments. As I understand it, England moved to an area-based system slightly earlier, so they in a sense went through the pain of that in an earlier cap period. Their current performance has been more stable and has been better. They did have more challenges in 2015, but, as we understand it, everything that we are hearing is that 2016 has been a good year for the English Paying Agency. Of course, it is by far the most significant one in numeric terms, so it is the one that shifts the overall balance on the UK performance. If the English Agency does well, then the overall UK performance is likely to be high. Equally, if the English system does badly, then the overall performance for the UK will be brought down. It is by far the largest component. The figure that you mentioned, and maybe it was Eleanor that mentioned earlier, is potentially £500,000, which is a Scottish component. Previous figures that we heard at this committee were as high as £60 million. How come there is such a huge gulf in that additional risk? There are two figures. There are late payment penalties, which are the penalties that are encouraged when you are late making payments, as the name suggests, and then there is disallowance. Disallowance is where the £60 million estimate from the Auditor General came from. That is on the basis of an assessment that is made as to when auditors come in and review your systems and processes, your inspection regime, and the controls that you have in place. They make an assessment as to whether or not you might be disallowed on certain factors. There are two different numbers. So, is that other number still potentially in the system that we make? The Auditor General has made an assessment of up to £60 million. That is the figure that he put in his report. We do not make any assessment of disallowance. We believe that we make. We carry out the regulations to the letter. We believe that we do them appropriately and to the letter of the law, so we do not consider that we will face any disallowance. Of course, every year we do face disallowance, but it is a long drawn-out process of negotiation with the European Commission on the level of that. We do not know yet, as the answer. Can I just come back to the late penalties? I think just to make sure, for full disclosure, that there is no confusion about the years. The year that Alan is talking about is the current year in terms of this most recent payment performance, whereas we say that we hope and believe that the UK has done well enough. We still have outstanding the 2015, any late penalties arising from 2015, and this committee will remember that we gave a previous estimate of £5 million for potential penalties for 2015. That still remains an estimate. We still do not have the final information on that, but I want to make sure that you are aware of that as well as the information for the 2016 year. Before you move on to IT, if you have finished with it, I want to pursue that a little bit further. My understanding for the 2015 figure of £5 million is that that is an assessment of financial penalties for late payments. Have you made an assessment of the financial penalties for disallowance because of weaknesses and controls? No. Can I ask why? One of the clear committee recommendations was that you conducted a full assessment of financial risk. We have done a full assessment of financial risk and we take risk into account and decision making much more fully. However, in terms of disallowance, when audits are done by the European Union by the auditors, they write a letter to us and they would give us some assessment of what they think. It is a negotiation. Auditors would say that they interpret the rules in a particular way. We have perhaps interpreted them in a different way, and there is a point of discussion and a negotiation between them. My assessment would be inappropriate for us, as a paying agency, to say that we do not believe that we have implemented rules incorrectly, so we would not assess that we would be liable for any disallowance until we are told otherwise. Was the Auditor General's report wrong? No, they have a methodology that they work out. They look at the previous audits that have been done and they take an assessment of the issues that the auditors have raised and say that that might attract a particular level of penalty, and it is a perfectly reasonable thing for them to do. However, as a paying agency, it would be inappropriate for us to say up front that we believe that we will be disallowed on the methodologies that we have put in place. I absolutely let you come in. $60 million is a reasonable assessment, but what you are saying is that, because you are still in negotiation, you are not going to confirm or deny whether there is going to be a disallowance. I would say that $60 million is an assessment that the Auditor General has made on that. Whether it is reasonable or not, I would not comment on that. Undoubtedly, the Scottish paying agency will suffer some form of disallowance at what level that will be. I think that $60 million is on the very high end of what it will be. We have never been disallowed on anything like that before, but I guess that time will tell. This is the first time that you have done it. Cap future payments, this is the first time that you have operated as a system. That is true. So, there is no history. There is no history. There is no history. Okay. Well, there is no history. Well, there is no history. Well, there is no history. Well, there is no history. My time, just let me finish this point and you can come in and address them all. Well, on that point, it is important, as Eleanor says, a lot of this is about, do we understand the rules and do we apply them appropriately? And there's no history. You're right. There's no history on this particular cap system. However, there is a history of many years of Scotland applying cap rules of whatever the cap system is at that time and suffering, in fact, lower levels of disallowance than some other parts of the UK historically. So, what we have is a track record of understanding whatever the European scheme is at the time, understanding it sufficiently well to apply those rules effectively in ways that we're able to defend to the European Commission and argue sometimes that they may have one interpretation. We may have another. They allow us to put evidence forward, et cetera. So, we have a track record of being able to demonstrate that we can apply rules appropriately. Now, the rules may be different this time round, but I think the capability to understand those rules, apply them effectively through our systems, is still pertinent. Okay. So, the failure in 2016, given that you have all this ability to apply the rules effectively, the failure in 2016 was down to... But do you mean failure when you say in terms of late payment penalties? Well, late payment penalties and did you learn from the control weaknesses? So, there are very, very many different things going on within this. There is a very clear system around late payment penalties. That's a simple test. Did you make the payment on date X or did you not? Okay. And that sort of sits within a very clear bound as the committee may well remember. There are then these questions of you have a 5% allowance that you can use post a certain date, a 2% allowance post another date. But it's very, very clear and it's black or white. The payment is either made or it's not. Disallowance is... And the broader categories of disallowance are very often... Are very broad and varied in terms of the nature of the questions that the European Commission can ask. So, it includes lots more things which are far more qualitative. They're not black and white. Did we make a payment on day X or not? They include things like have the scheme rules been applied appropriately. Some of those things are points of interpretation, which we will debate with the commission. They may also include control weaknesses, were the inspections carried out effectively enough, etc. Things like that. But there are very different set of categories of types of issues that it's not as simple as saying we were late in payments, therefore we'll have disallowance. That's two quite different things going on. Okay. Can I come in just to clarify that point? So, I think my interpretation of the question you're asking was, did we learn from the past? So, the certifying audit 2016, which looked at the cap payment year, the overall conclusion of the report was that there were no major findings of weakness in the Scottish Government's administration of cap funds for the 2015 scheme. However, a number of intermediate findings are being addressed, and I should say that we are absolutely not complacent about that at all. We have a number of, within the governance structure, we have a number of working groups in place, which is taking each of the main areas where we weren't found to be and we've got a group that is focused on making sure that our performance this year is better than it was last year. In fact, I think that my understanding is that the 2017 certifying audit is now under way, so I would hope that it would recognise that, actually, we have made some significant improvements in the areas where, both internal audit and audit Scotland found that there was improvements to be made, and we are absolutely not complacent on that. I refer you to paragraph 60 of the Auditor General's update report, which mentions some of the weaknesses in the controls, and, of course, that was published in June 2017, so it's very current. Do you accept all the failing set out in paragraph 60, given what you've just said? For the benefit of the official report, shall I maybe read some of them out? Incremental nature of developing and implementing the rural payment system has affected the quality of the audit trail during 2016. Paying agencies focus on delivering core compliance functionality has meant that the audit trail is not always easy to see or access. Delays in delivering the new system impacted significantly on the paying agencies plan programme to make BPS payments to farmers, crofters and rural businesses. I can go on, but there are serious control weaknesses identified by the Auditor General in paragraph 60 of her most recent report. I recognise all of those. Yes, of course I do. I should say that we are working hard. We are not complacent. We are working hard on all those issues. I should confirm that the European Commission confirmed that there were no financial corrections required as a result of the certification audit. The bottom line is can the Scottish Paying Agency continue to make payments to Scottish farmers? Yes, we can. The certification audit identified that there were no major findings or weaknesses. Clearly, some issues are raised, some serious issues are raised and we are working on them. On a daily basis, we are working to improve our position. I will let you back in. I just want to pursue this, because you talk about the assessment of risk from financial penalties is now an embedded feature of our governance arrangements. What does that mean? When will we be publicly able to see this? For example, we have introduced a new commissioning process. For new pieces or change requests, or new pieces of functionality that are required, there is a new commissioning process in place, which goes through a number of governance board that eventually comes to the cap strategy and delivery board. A key piece of information that is sought is how does this impact on our does this improve our audit or assurance processes or does it bring it in? Is there a risk attached to it? It is a key part of our decision-making process. Will they be publicly available? The commissioning process—I happily share the commissioning process for them. I think that it is the risk assessment in particular that we are interested in. Clearly, while you may have internally made an assessment of the financial penalties for disallowance, you are not sharing that with us because it is part of the negotiation. What have you budgeted for in terms of disallowance in 2015? What are you budgeting for in the future? Surely, the risk assessment would lead into that. Can I start on this? I want to come back to your question of whether we disagree with the Auditor General. It is really important to say that we absolutely agree with the Auditor General and the Audit Scotland report about the importance of risk assessment and the need to maintain and mitigate the risk of financial penalties. We have absolutely embedded in our governance processes, as the Audit Scotland report recognises. If there is a difference of approach, it is that we are trying to do a set of things that enable us to form that risk assessment, but we are not seeking to quantify it into a single number or a range of numbers, particularly with respect to the disallowance rather than the late penalties, for the reasons that Eleanor has outlined. We are not going to be able to provide you with a single number, but what you rightly are challenging us on is whether we are clear that those risk assessments are informing the decisions that we are taking, which we believe they are, whether we are aware of the potential implications of those that we are and whether we are budgeting for them appropriately. The budget does not work in that sense in that until we know that it is a very long-drawn out process, the final liabilities for, for example, the 2015 scheme are not even, you know, we are nowhere near to the conclusion of that yet. There is further audit work to be done and then subsequent negotiation. I understand from my finance colleagues the point at which that risk would crystallise into an absolute number and a request from Europe, and we have exhausted the opportunities to reduce that through further evidence. That is the point at which we would need to bring that into our budgeting, but it would come into a future year, not into the current year, as it were. Do you want to say anything more about the financial aspects of that? The only thing that I would add, and I was just looking for absolute clarity on the number, my understanding is that the accounts that are published this year, there is an allowance of a million pounds for the cap 15 year, and that will be because of the actual late payments that we made. Sorry, I am now confused. You had a risk assessment that said five million, but what you are saying is that there will be something in. It is because of what it is when the issue, so that, as Liz said, it is the issue between the status of it, it is the issue of when our risk materialises. Okay, so there is a million in the current accounts? Accounts are currently draft. In the draft accounts. In the draft accounts. So, there is a million in the draft accounts, but more to come. Possibly? In future accounts. Yes. And we do not know the number. Yes. Wow. Willie Coffey. I almost forgot what I was going to ask you. Sorry, sorry. It was so long ago. I was wanting to ask you about looking ahead from this point on. Eleanor, you mentioned that we are at 99.7 per cent. And Liz, you did mention some critical IT functionality. I just wanted to explore that a wee bit more and to try to understand what are the critical factors that will manage this process in the years to come. Is it IT, is it components of IT that we need to be in place, correct and working to ensure that we do not face these particular issues in the next few years? I think that it is IT in business processing. It is the annual business cycle. One of the things that we have been working on very hard this year is to match the agricultural cycle with the SAP, the application processing cycle and the broader business cycle around the requirements of things like inspections and the like. It is a mix of all three. It is making sure that we have the right staff in place, with the right skills to do the jobs that we need them to do. It is making sure that the IT system is working to its optimal level. It is finalising getting the additional functionality that we need in the system at the time that we need it. So it is a combination of all three. Where are we in being able to say to the committee members and to the public at large and to the farming community that the software is completed and it is ready? For next year, this will be a long time. Where are we in terms of being able to say that? Are we still finalising key components of this IT system? Yes, we are. When do we think that they will be? Well, we have a detailed delivery schedule of IT, which we are more than happy to share with the committee, which sets out when the various bits are likely to be delivered both in terms of the cap pillar 1 payments and the cap pillar 2 payments. As with any major IT system, there is an on-going range of maintenance that we need to do every single year. The SAP form is what is called the rollover, so we need to change the dates. Rules change, for example, greening rules change in Europe this year, so every single year there are changes in amendments and upgrades that we need to do. As with every IT system, it is an on-going process. In terms of the base functionality, we have talked before about the cost of cap futures of £170 million. An amount of money, around £11 million, was brought forward from last year into this year. In terms of the completion of the bits that cost us £170 million, the cost of the system will be finished in this financial year. You mentioned it, and I am pleased to see in the report that we have on the front is that there are new testing processes in place, there is quality management going on, there are less defects emerging from the software. Are you becoming, are you confident, are you becoming more confident that the system is settling down and stabilising to enable this process to be done correctly, properly and on time for the next round of applications? I am cautiously optimistic. We have, of course, the independent technical students, which identifies that there is a significant amount of technical and production debts. We have a joint team in place with members of ISD, members of the Scottish Government and CGI working on making sure that we are, first of all, we are triaging them, we are making sure that they are real, they are affecting payment performance and, if they are, we are dealing with them. In the past six months, we reduced the technical debt by something like 40 per cent, and we are not adding to it anymore because when we put new releases into the system, we are making sure that they are defect-free or we are working to make them defect-free. I am cautiously optimistic, but there is a lot of work to do. I am really proud of what the team is doing and continuing to do to make inroads and improvements in the system, but it is a journey. It is really important to highlight the technical assurance review, because this time last year, when we sat in front of this committee, some members asked us if this system would ever be fit for purpose. We said that that is a really important question, which we absolutely need to know the answer to as well. We cannot just go forward in hope and faith. We have to absolutely assess whether the system warts and all its strengths and its weaknesses, and that is what the technical assurance review was about doing. It was good to hear that the system's design and infrastructure was fundamentally sound. Many areas of improvement and problems and legacy from previous changes that we need to sort, but that the system's design was fundamentally sound. It provides a basis from which we can continue to improve and develop the system. Bill Bowman, as new to the committee, I am picking up things as we go on. So maybe just before I ask my specific question, can I just make a couple of comments on the penalties that I have been hearing about? When you talk about the disallowance one of £60 million, I can understand how your negotiating position would be that we have done everything correctly, but, in the real world, you have to make an assessment of where we stand and what may come to hit you. I am not asking you to put that out here, but I would like to think that you actually do that. When you spoke about the late payment penalty of £0.5 million to £1 million, I think that you used the word modest. I think that that seems quite a lot of money to many people. It is maybe just the wrong terminology to use when speaking about the payment that we get no value for. Moving on to the paper that you submitted on the update. The one that has a point 1 section update on progress and the last sentence, there are appropriate disaster recovery solutions. The letter that we sent to the committee on the 30th. Do you see that sentence? Yes. So there are appropriate disaster recovery solutions in place for our two separate platforms. The disaster recovery position is constantly developing and forms a feature part of infrastructure planning and application support. I just wanted to clarify for myself what that actually means. Have the disaster recovery solutions actually been fully tested? Secondly, what does constantly developing mean? That does not sound like something that is stable and working. What is a feature part? Elena May might wish to say more in detail, but let me say a couple of things by way of introduction. The first thing to say is that the new system, the future system, which is the RPS system, has a full disaster recovery system in place, which meets the standards. We expect restoration of service within four hours from that system. Your question has been fully tested. It has been partially tested. It has not yet had a full kind of almost go live, take everything out and see if it works. Full emergency, full scheduled emergency exercise type testing. That is because of challenges of time frames and fitting everything else in. But it has been tested to a significant extent and it was designed absolutely along the standards that the industry would expect for a full disaster recovery system. That is the main system, that is the new system that is working to make our payments. As the committee will know, there are a number of legacy systems that we are still using because some of the challenges in earlier years meant that we had to delay the implementation of some of those other systems. One of them is the land parcel information system, LLIPIS, and there is another system, which is the SIAC system. Those legacy systems do not have the same kind of full disaster recovery system that the new part has, but they have full data and system backup. Backups are held off-site so that we can recover and restore all of that data and systems if we need to, but the times that those legacy systems would require to be recovered are much longer. Although we have tested to make sure that those backups actually do restore from tape, what the team is doing is working through the levels of risk that we are prepared to take, so those legacy systems will be replaced. The question that we have to ask ourselves is what would it cost to put in place a full disaster recovery system for those legacy systems when some of those legacy systems will only be working for, for example, a number of months, and we have to assess that, the risk and the cost of doing it. That is what the team are working through, so they are assessing what are the mitigations that they can put in place to improve the disaster recovery of the legacy systems and where can they make decisions around that. I do not know if you want to say any more about that, but I wanted to describe the shape of the overall way in which we are approaching this. I do not want to add any more to the disaster recovery. I just want to say that you remarked on the late payment penalty. My use of the word modest was just in reflection of the fact that it was modest in relation to the hundreds of millions of pounds that we actually pay out as a paying agency, but that is not to track from the fact that we should be making payments in time. I absolutely accept that we should be making payments in time, and I regret the delays that farmers are experiencing in relation to the monies that we have not got out the door yet. Just moving back to the disaster recovery. What part is constantly developing? Is that the legacy part? Yes, the risk assessment of the legacy. We need to risk assess not just in the abstract, as it were, but risk assess against particular payment processes. The risk may depend on whether the system is exposed to particularly high volumes, for example, and my understanding of what the teams are doing is that dynamic risk assessment and assessment of the options that they have. That is an appropriate way of dealing with the risk on the legacy systems. What we absolutely need to do is to be clear that we are taking risk-based decisions. We are explicitly accepting a level of risk and deciding whether we can tolerate that or whether the cost of mitigating it is too much. Of course, it is critical to think about the length of time that we are exposed to that risk. If those legacy systems were going to be working for another 10 years, then without doubt we would probably choose to do some different things. Knowing that they are going to be replaced, we have to assess the trade-offs of carrying a level of risk currently, but when that risk exposure stops. The future system that you said has been tested to a certain degree? The future system, we still would like to be able to do a full-scheduled emergency exercise. We have not yet done that. We do need to do that at some point, but we are confident that the new system, I do not have a date, I do not know if you do. We have not got that schedule and, as Liz said, it is because... But do we mean a month, three months, a year? In terms of when we will do it. My plan of when we would do it. At the moment, it is to do with the new system. We have done desk exercises. We have done what we can do and what we can reasonably expect to do without taking the whole system down and doing full disaster recovery. The reason that we have not done it is that it may sound melodramatic, but the system is operating all the time. We are always working on the system. We are always getting payments out. Partly, as Liz said in an introductory statement, this year's 2016 payment has been a very fraught year. That is the point to pay tribute to the tremendous dedication and work of all the staff throughout all the country who work on this day and day out. We started late. We had a number of changes to make in the system and we have been literally making payments on an almost daily basis the entire year, so it would have been inappropriate, in my view, to take it down to do a full disaster recovery. Will 17 be any better than 16? Possibly not in terms of staff workload. Partly because we are introducing a new LIPIS system to try to improve our land management information and the holding of information on land. On a land-based system, that is clearly very important. It was highlighted as one of the key controls that we have identified as not being right in all our audits. We are taking action on that. We are doing it this year, but it means that the system is constantly under pressure. I know what that means in terms of disaster recovery, but we are constantly assessing the risk of that. However, my assessment would be that we will continue working with the system as it is, and we will do disaster recovery at a time when it is not under so much pressure. I do not want to pursue that, because I do not perhaps have the technical knowledge, but you could perhaps come back to us. What is the technical guidance on a backup testing when the system is not available to be tested? What is the best practice in the situation? I think that we would like to come back to you with more data. It is a very technical subject on which I am also not qualified. My understanding, but we should confirm this to you and give you more information, is that the design of the system and the nature of the tests that we have done do meet the standard. I am afraid that I do not have the standard in my head. It is one of those numbers. I thought that I could find it on the piece of paper, but we should write to you with more information about that. If you did quote it. Do you have time to ask another question? Moving down on the paper that you presented, item 2, bullet 4. The one that begins to develop a benefit realisation plan. So develop a benefit realisation plan to record and monitor all potential benefits and value that the system can provide. Is this something that you have begun with or is this something that you have accepted to do? I am just interested to know what might be all potential benefits and value. So clearly there was a business case done at the beginning of the CAPFutures programme and as a normal practice towards the end of it, you would look at it, you would review it, you would update it, you would have your final position before we go into the gateway review process. That work is under way. It has recently started under way. Do you know any of the potential benefits and value? The work has just started. Will we hear about that at some point? Of course. A couple of short questions. First of all, I will refer to Eleanor's updated management report dated 4 September 2017. Can I just make a suggestion that it would be useful to add a column showing the percentages so that, if you take the BPS, for example, the value of payments made to date, what is that as a percentage of the total and write down? It is the same for the VCS, but that is a suggestion. Am I writing a suit in my calculation that you see in your letter that you remain on track to issue the payment schedule to all our customers by the end of September 2017? By my calculation on the BPS, there is only 3 per cent of payments outstanding between now and the end of September to achieve that target. Is that right? At the end of August, we were on 99.3 per cent of the BPS scheme, which includes VCS. We have, virtually, completed the beef scheme such as we can. There are always tail payments, and the VCS sheep scheme is the one that we cannot complete until we have completed the BPS payment scheme, so that is the one. With a subdivision in the support of the BPS from the VCS, the number of eligible applications is 17,990, and its payments have been processed to date is 17,509, which would suggest 481 outstanding payments, which would suggest roughly 97 per cent, so that we get 3 per cent to catch up on that particular one. We have 321 outstanding BPS payments. You are fairly confident that those will be met by the end of September? We will do all that we can. As in every year, there are payments because of probate, because of all sorts of issues that are extremely complicated, but we will get to just the very, very, very tail end by the end of September. I am confident of that. That is the percentage by the number of applications. In terms of the percentage of the value, is that roughly the same kind of percentage? It is roughly the same. You are fairly confident that you will get near as close as you possibly can, reasonably close to 100 per cent? Yes. Now, the VCS payments that have highlighted the bottom part of that report, the suckler beef support scheme for mainland, the one for Ireland, and the Scottish Heartland sheep support scheme are each of those at a similar kind of percentage, and I would use optimistic Eleanor about getting those completed by the end of September. So, as I said, the beef scheme is complete now. We have achieved over 99 per cent overall by the end of August. We have made good progress over the summer on these, and we remain on track to get to just down to the very, very last few tail of payments by the end of September, yes, across all schemes, pillar one schemes. My second very short question is that you say in your paper, again referring to paragraph 2, bullet point 5, that you are prioritising, that you communicate clearly with the payment timescale, the payment timescales and processes to farmers, crofters and rural businesses if we did a survey of farmers, crofters and rural businesses today, I know what the result would be up until recently, but if we did one today, do you think the majority of them would feel that that's been achieved? Visibility of when we're going to make payments? Clear communication about the payment timescales, because one of the issues clearly from the NFUS and others individually was, apart from the core issue of the payments themselves, was the communication. Yes, a few things I'd like to say on that. We still clearly intend to publish a schedule of payments for next year. The reason I have been reticent to doing it up to now is because I want to be sure that when we are setting out a payment schedule it's something that we can meet, because what I hear when I go around the country is what farmers and businesses really, really want is assurance on the dates. Clearly, they want their money and they want it as soon as they possibly can, and that's entirely appropriate, but the main thing is that they want surety of timing. We haven't been able to produce that until we have a clear delivery, IT delivery schedule, and we've only recently firmed that up. We're now in the final process of agreeing what the dates are that we can commit to delivering information, and we will publish that as soon as we possibly can. In terms of general information, one of the achievements that the team has made over the course of the year is that, in the 2015 payment scheme, payments were sent out, and at some point later in the year payment letters were sent out. People were receiving money in the bank accounts and were getting letters detached from that. In the 2016 processing year, we sent out payment information letters at the same time as people were getting their actual amount of money. I think that we have demonstrated that the information available to farmers is better. In terms of another issue that has come up in conversation with the NFUS and with individual farmers is understanding the knowledge of their entitlements. All entitlements are now shown online on the screen, so if a farmer were to log in, they would see very clearly what their entitlements show. That is another piece of information that we have worked hard to make sure that people can access more easily this year. Have you done any complaints from them about communications issues? What is the level of complaints about that specific aspect of the problem? When I was rounded about the area offices over the summer, they would say that they have had very few recent phone calls about payments. Undoubtedly, the loan schemes helped with that, because people had money and weren't waiting for the money, which is very good. The level of calls into area offices has been generally pretty low over the summer. Can I finally just come on to the loan scheme? Is the loan scheme being operated separately in the sense that the loan is given pending the award of the grant? When you then calculate the amount of grant that a farmer is entitled to, do you deduct the loan outstanding so that they get a net grant payment of the loan, or do you pay the full grant and then, in parallel, take steps to recover the loan? I am almost sure that we pay it net, but if I am wrong on that, I will come back to you. There may be cases in which the loan exceeded the grant entitlement, so is that differential recouped? Two things I would say on that. The BPS loan schemes are fixed at a certain percentage. The ELFFAS loan schemes are up to a certain amount, and that reflects the variability. Quite detailed calculations are done by the loans team in advance of offers of loan being made to try and avoid that very possibility, because no one wants to have money that they have to be recovered. However, there are occasions when recoveries do have to be made, and that is often because of penalty that has been applied on farms. However, the team does high levels of checks and calculations to make sure that people are not offered too much money as a loan. Two questions arise from that. First, would it not make more sense to give them an advance partial grant payment rather than the loan that clearly is a completely separate form of administration? That would be by very strong clear preference. Unfortunately, we are not allowed to do that because under EU regulations and under the rules, you have to have done all your inspections and processing of that before you are allowed to make an advance. We do not plan to finish our inspection processes until this year until December, which is significantly better than last year, but December, so we cannot therefore make an advance payment. That is the same EU that has not had their accounts in DOS for 30 years, by the way. The final point is that, in terms of loans, has there to date been any bad debts, and do you anticipate the provision of any of bad debts on the loans? As far as I am aware, we have had no bad debts—what you would call bad debts—to date, and no provision made for them. However, if that is in connect, I will write to the committee. We have talked a lot already about the processes and procedures. I want to touch briefly on the people who are behind the scenes or the public facing who are powering through. I think that both of you have recognised how hard staff are working. I am sure that they will be pleased to hear that acknowledged on the record. I wonder if you can give the committee some reassurance that staff welfare has been looked after. In previous sessions, we have asked about the impact on staff and their wellbeing. Over the summer period, has there been any restriction on staff taking holidays? Has that been difficult to manage? I wonder if you could talk about the capacity and the team to cover holidays and sick days. I could not be enough tribute to the staff in Sockton House and in every area around the country. The dedication to the task is something that I have never come across before in all the jobs that I have done in the Scottish Government, so I would pay absolute tribute to them. I take welfare of my staff—welfare and wellbeing—very, very seriously. As I say, I have been around all the area offices, and I am based in Sockton House. I talk to staff regularly about how they feel about things. I look at our regular stats on absence management. I look regularly at the flexi levels that people have. There is nothing in that that causes me particular concern at a global level. Our absence levels are roughly the same as the rest of the Scottish Government. Our balances on flexi are roughly the same as the rest of the Government. The ability of the carry-over of annual leave is roughly the same as the rest of the Scottish Government. I pay tribute to the principal agricultural officers in that regard. They work closely with the staff. They look at the work scheduling across the year. They have very, very clear timelines. Some members of the committee and the direct committee have visited some officers Ayr and Hamilton over the summer. They will have seen the detailed plans and offices that say that those are the tasks that we need done this week, and that those are the staffing resources that we need done this week. Everybody is encouraged to make sure that they take their holidays at the times that they want them to and plan them in. Of course, we still ask people to do overtime at some endpoints in the year. Staff do it willingly. They do it gladly because they know that it is making it, having an impact. One of the things that I would say this year that has been better than last is that we have been clearer about the peak periods of times with area officers closely in conjunction with them about when staff time might be needed to process applications. That is partly because we are much more rigorous in engaging, talking to and valuing their knowledge and understanding of area office staff as to what they can actually do. There are periods of time when there is nothing that area office staff can do in terms of processing the forms, so they can manage their other work at that time. We are clearer about the work processing, work planning, and my assessment is that that is really beginning to help. In terms of overtime, because that is something that you just mentioned, has there been an increase in overtime and how does that compare to other parts of government? Overtime levels are remaining pretty static over the year and last. It is well managed at a local level by the area office staff. When you say that everyone is working really hard, is that just meaning within the normals of a normal working week? I have got the impression that people are perhaps having to work round the clock and go beyond the call of duty. People are working very hard and people are feeling that it is a stressful environment to where people are knowing that they are having to take phone calls from farmers, for example, if payments are late or people do not understand the letters that they are getting. I recognise and understand that that can be very stressful. What I have asked the principal area office to do is to make sure that they have systems in place to make sure that the staff know that they can come and talk to people, if they are feeling stressed and anxious about the conversations that they are having, if they find it difficult. I cannot underestimate, because I have never worked in a small office, but people tell me that it can be very stressful if, for example, you are in Tyree, you are one of eight people, you live in the community, you work in the community, you are meeting people in the supermarket, you meet people when you pick up your kids from school. If you have problems in the system that you are working in, it can take over your life. I understand that we have had people who suffer from stress because of work. We take that very seriously. We offer high degrees of support as an organisation, but we do our very best to manage it. Everyone in the organisation would recognise, I hope, that I take wellbeing and welfare very seriously indeed. One of the risks that was identified previously, when we heard from the Auditor General, was the idea of burnout and what would happen, because that would probably bring in more agency staff and that would have another cost. Again, the work environment is not really a pleasant one for anyone, but you are not overly concerned that your city is a stressful environment, but are staff impacted by that stress, or are you not seeing any real evidence of that? One of the things that we have done this year is to look at the vacancies, skills and jobs where people have been on temporary promotion for a long period of time. We have a resourcing plan in place. We have taken steps to recruit a number of key posts. We have recruited new influx of agricultural officers of land management teams, and that has a positive impact on staffing numbers in the area of offices. We have also looked at, as Liz has mentioned before, the skills that we have in terms of audit and finance. We have recruited staff into those posts, business management, business skills and those posts. We have taken a very proactive approach in saying what are the skills and capabilities that we are needing across the organisation. I have been very upfront and open with all my deputy directors, all the C-band staff, asking them to be very clear about what resources they need to do the job in hand. I am not asking people to work 24 hours a day. I want people to tell me the resources they need and the skills they need to do the job, and then we would go out and try to source the resources for them. Our first port of call is always within the Scottish Government. I thank you for that. I wish all the staff well and those who have not had their holiday yet, I hope that they get one soon. I just follow that up. I would never be in the business of denying some of the holiday. Let me ask you about knowledge transfer, because that was a key recommendation picked out in the order to generals report. I am wondering in this busy work environment how we are ensuring that key contractors transfer their knowledge to Scottish Government staff and what is the end date for that? I think that the first thing to say is that it is a recommendation that we absolutely agree its importance and the risk that, if we do not do that well, the risk that would come from that. I think that one of the reports also mentions that we have already identified some of the most critical contractors in terms of the people that hold the most knowledge without which we would, and they hold that knowledge personally. There is work shadowing arrangements in place for those critical contractors so that that knowledge is starting to pass over. I understand that all contractors now have a plan in place for knowledge transfer. Those plans are at varying stages of implementation. That is partly because there needs to be someone to whom that knowledge can be passed, and that is partly about the recruitment schedule that Ellen is also talking about. It is fair to say that we absolutely are on the case on this. There has been some good progress, but there is still some way to go. The maturity and the way in which the contractor team and the Scottish Government team work together has really developed over the year. Ellen and I worked in all-staff session with all of the CGI staff contractors. The fact that it feels like one team now, it feels like there are these integrated teams with people from contractors and Scottish Government working side by side. Of course, there is very formal knowledge transfer, but the knowledge transfer through working together and working on common goals is also very significant. If you could give us an update on that as the work progresses, that would be much appreciated. In the absence of questions from any other member, I thank you both this morning for coming along and giving evidence to the committee. I suspend briefly to allow all I'm going into private session. In fact, there you go. So we'll go into private session. Thank you very much.