 G having, I welcome members of the press in public to the 13th meeting of the Public Audit Committee in 2015. Can I first of all ask all those present to ensure that the electronic items are switched to flight mode so that they don't affect the work of the committee? I at this time move in the absence of Dr Simpson, move to agenda item number 2 which is the decision to take business in private. The question is that we take agenda item 7 yn arddangosio cymdeithasol i ddylch i'w newid. Iw i agendaedur number 3, y ddi unlesswyddiad i wirth bob ni, y dyfodolbeddd 2013-14 rhaad otingi panigeld Corkbridgeiovanni Fel modifier, gan geonlik mai presents i ei guyd準au. Mae gennym ni i agenda名g aethon, ac mae gennym ayw oes ei gweld yn geonlik i llewdd Corkbridgexeithio cymryd a'r Gunneddaeth Gun détil ac fe.德w surprising fro fel y gall hyn i llawer i dali wychlais am chiliwll Carlin Gardner, fryzy Overgen for Scotland, joyr Ysgrifinci,' delivering performance Angela Cunning, who is the Assistant Director of Florida Scotland, understand that the Auditor General has a brief opening statement, which will be followed by questions. My report to the committee this morning is about severance arrangements in Coatbridge College. I prepared the report under section 22 of the Public Finance and Accountability Act 2000, which allows me to bring issues arising from the audit of public bodies to the attention of Parliament. The external auditory of the college gave an unqualified opinion on the 2013-14 accounts of the college. That means that she has satisfied that the accounts provide a true and fair view and contain no significant errors. However, she did include an emphasis of matter paragraph in her audit report, in which she drew attention to serious governance weaknesses in the voluntary severance arrangements for the college principal, five members of the senior management team and a member of staff in the principal's office. She also highlighted problems in accessing the information that she needed to conclude the audit. This delayed the audit and the annual audit report, so that the accounts missed the statutory deadline for laying before Parliament of 31 December 2014. I have prepared this report because I believe serious failures in the way that those charged with governance at Coatbridge College dealt with the severance arrangements should be drawn to the attention of Parliament through this committee. Coatbridge College was one of three colleges that merged to form new college Lanarkshire as part of the wider college reform programme. 33 staff left Coatbridge College before the merger took place on 1 April 2014, at a total cost of £1.7 million. It included the college principal, five members of the senior management team and a member of staff in the principal's office. The total severance cost for these seven people amounted to £849,842, about half of the total amount paid out in severance in 2014. My 2013 report on managing early departures was clear that, before approving any severance payments, those charged with governance must ensure that the payments represent a good use of public money and that a clear audit trail is kept. That did not happen at Coatbridge College in the case of these seven individuals, and my report highlights serious failings in governance. In particular, I would like to draw to your attention, convener. Those charged with governance fail to meet the standards that are expected of public bodies. There was a lack of transparency in the decision making process and no audit trail was kept. Payments made were greater than the colleges severance scheme allowed for. The severance scheme for senior staff offered terms that were significantly higher than the funding council's guidance and higher than the schemes of the other colleges that became part of new college Lanarkshire. There is no evidence that the colleges remuneration committee had access to the information and advice that it needed to fulfil its responsibilities, and the college principal failed to take the steps needed to demonstrate that his conflicts of interest were properly handled. Those governance failures have resulted in excess costs being incurred by the college and the public purse. They are also likely to damage confidence in the governance of the college sector, especially following previous failings that I have reported to the committee in a number of other colleges. As always, convener, we are happy to answer questions that the committee may have. Unfortunately, the appointed auditor for the college, upon whose work my report is based, is not able to be with us today, so there may be some issues that we will need to follow up with you separately, but we will do our best to answer your questions as completely as we can. I thank the auditor general for a brief opening statement, and obviously we will fall into questions. I have just a number of questions that I would like to ask the auditor general. Firstly, in connection with the severance arrangements, you confirmed that the latest sum is just over £850,000 for this particular tranche of severance payments. The payments were made in 2013-14, which was a year that the auditor was reporting on. The total for the members of staff was £849,000. It was about £1.7 million for the staff who left the college as a whole during that year. Can you clarify the arrangements that have been placed for drawing down those funds? I take it that funds are allocated to the college to allow them to put those arrangements for severance in place. Who would they apply to for such funding? Our understanding is that the funding council made available about £1.3 million to the college to cover severance costs in general arising from the reform process, and that those funds were made as part of the grant payments made to the college throughout the financial year. The funding council capped its contribution at £1.3 million, and the additional costs were picked up by the college, the cost over and above that. Obviously, the report refers to some of the issues that you have raised concerns in connection with the actual arrangements that are in place for ensuring that those payments were made, but would you not have expected that an audit process to have been available for the Scotch funding councils process? Should they not have confirmed before they signed the cheque that such funds should be paid in the first place? At the time that the payments were made, individual colleges were not required to obtain approval from the funding council for the individual severance packages that they had agreed. It is clear, and I state in my report that the funding council had concerns about the severance packages that were being discussed. There is no evidence to show that those concerns were passed on to members of the remuneration committee. As I say in my report, I believe that the remuneration committee did not have access to the information and advice that it needed to make the decisions that it took. I want to take you back to the point that we have the Scotch funding council that is concerned. They have passed information on to the chair or to the principal or whoever it is. Is it the principal that has passed that on to them? The standing is that they raise concerns with the chair and the principal. The principal has an interest because it relates to the particular package that relates to the principal, so there is a conflict of interest immediately. The issue for me is that the Scotch funding council, because there is a separate issue, has a report that we can go into further detail on with the arrangements that the college has put in place. The Scotch funding council signed the check at the end of the day, so surely being concerned but not falling through those concerns is equally a concern. Why was that not covered in the report? My report focuses on the audit of Cochbridge College and sets out the circumstances that we found in investigating the circumstances here. I share your frustration that payments were made in spite of concerns being raised by the funding council with the chair and the principal. I think that your question is about the sanctions available to them and the action that they took are better directed to the funding council convener. But could they have decided not to make the payment with that equal? Would that have been available to them? What was the urgency in that? These people are not going to go away in the sense that they are entitled to a package. It is not as if they are going to disappear until the package is concluded. What is the urgency in concluding these arrangements? Shouldn't the funding council not have said, well, let's review the position that we find ourselves in. If we have concerns, it is sure that all those concerns are audited properly and that the proper decisions have been taken at the appropriate channels at the college and not for the principal to have been involved in those decisions in the first place. You are absolutely right about the conflicts of interest inherent in this. At the time that the decisions were made and the payments were made, colleges were not required to obtain approval from the funding council. That changed from, I think, December 2014 and they would now be able to veto severance packages like this. At the time they weren't able to do that, the funding council could have decided to reduce the grant paid to the college in general terms by the amount which they felt had been overpaid. However, as they have said to you in previous evidence sessions to this committee, they feel that that would have punished other staff and students at the college. As I say, that is an issue that you may want to explore with the funding council. It is clear that they did raise concerns but those concerns were not acted on within the college. Before I pass you on to Mary Scanlon, one of the issues that the committee may want to clarify is if there has been any issues of criminality that has been reported to the police. The auditor did not find evidence of criminal liability. The auditor specifically says that she believes that the college had the legal power to make those payments under the arrangements in place at the time. It is very clear that there has been a serious failure of governance here and that payments have been made that need not to have been made to individuals under the process of reform here. Mary Scanlon? I am not a lawyer but if there are no issues of criminality or the issues of fraud or corruption. The auditor, having looked at the circumstances and I understand you college Lanarkshire having taken legal advice, the view is that that is not the case. This is a governance failure and one about the accountability arrangement between the colleges as it was then constituted and the funding council. I have been absolutely shocked reading this report. I think that it is probably one of the worst that I have seen where people take full advantage of a situation to line their own pockets. Before I ask my question, are the people, no one is named here, the people who enjoyed the severance payments, still working in the college sector? Colleagues, you will keep me straight. The principle of the college certainly is not employed within new college Lanarkshire. I am not aware where else he may be employed now. The other people that were given quite excessive payments, are they still working in the public sector? We know that they are not working in new college Lanarkshire, Mrs Scanlon. We do not know whether they are still working in the college sector or more widely. The reason that I am asking was that our previous experience with Glasgow College, we were told that we could not pursue and ask for evidence because those who were culpable had left the sector, they had gone off and that was it. I think that it would be helpful to know if that is the case here. If I could be very brief, because I think that for the record it is worth putting down the reason that I, and I cannot speak for other committees, members are so shocked today. If I can just say that you are unclear about who developed the terms that senior management received, a lump sum of 21-month salary. In addition to 21-month lump sum, there was an additional three-month severance for taking a college through the merger, principle given a 3 per cent rise, additional 3 per cent, at a time of a government pay freeze in the whole public sector, which I agree with, in January 2013. Principle left in October and was also granted six months' pay in lieu of notice. Then we go on to final payments for the senior management team of exceeded the terms. A member in the principal's office, salary enhancements of around 10 per cent, again at a time of a pay freeze. Those enhancements included severance calculations, which was probably a smart thing for them to do, and then three of the five other members in the senior management team were coincidentally on sick leave for several months up to their departure. Finally, no documentation about revaluation of a post led to a 19 per cent pay increase. Anyone in the public sector, and quite a lot of them sitting out there that have had to endure the pay freeze for three years, will be pretty angry to see how these people were allowed to get away with it. My questions are, the last time the fault was really put at the door of the Scottish Funding Council, if you remember for Glasgow, the Glasgow College, because they hadn't given advice and they hadn't been working together. My concern here, as far as I can read, is that the Scottish Funding Council has been working hand in hand with this college every inch of the way. It's all very well to say that their advice wasn't taken, but surely the Scottish Funding Council has to take some responsibility here. We're all aware of the cuts in the college sector. This is money that could have gone to the chalk face to help more students get a career. Where's the fault of the Scottish Funding Council here, as well as the college? I share your frustration, Mrs Gavin. It's why I've brought this report to the committee so that you can see the serious failings in governance that have taken place in this college. It's clear that the primary responsibility sits with the board of the college and the principal as accountable officer, who was accountable to the Funding Council for the use of public funds. It's also clear that the funding council was aware of the problems that were emerging during the agreement of these packages and raised their concerns with the chair and the principal. As far as we can tell from the very limited evidence that's available, those concerns weren't passed on to the remuneration committee. The funding council felt that it had no sanctions to apply. If you want to explore that further, the funding council are the appropriate people to take it up with. I appreciate that and I appreciate that you can speak for the funding council. From my point of view, following the Glasgow College and what happened there, I was assured through the evidence and information given to this committee from the funding council that measures were put in place that if the funding council worked with colleges that this couldn't happen. I'm not sure that we have a system that's fit for purpose here, given that the funding council cannot take any sanctions over this college. It's worth being clear that the changes that came into effect took effect from December 2014, so after the decisions were taken and the payments were made, is one of the reasons for the changes. At the time, it would have been possible for the funding council to have withheld some or all of the colleges grant, but it chose not to do that because of the wider concern that it has expressed to the committee. The committee chose not to do that. Our recommendation was that the funding council should work with colleges. My point is that they have worked with this college and we have dreadful allegations of corruption and fraud. In the time that I've been here, I've seen colleagues named and shamed on the front page of the sun for claiming for a £48 pint of milk, and another SNP colleague on the same front page for claiming for a £199 umbrella for the constituency office. We're looking at hundreds of thousands of pounds being taken out of the public system. Why are no names given? Why are these people not named and shamed? If no sanctions can be taken, surely we can name and shame them at the very least? I share your frustration about the failings in governance here and the extent to which public funds have been spent unnecessarily for the benefit of individuals. The names of the individuals involved are in the public domain through the college's annual report. They're not withheld for any reasons other than focusing on the facts of the matter as the decisions were taken and unfolded. The names are general. I think I'm right in saying they're not in the report that we have in front of us today. No, but you're absolutely right. They're available in the college's annual report and accounts. They are in the public domain. Can I just ask why you didn't put the names in this report that we have in front of us today? My focus was on the decision making process that had been taken and the consequences of that. There was no other intention behind it. I was aware that the names are in the public domain and that was behind the decision making. My final question, convener. Given that those are very serious factual information that you've brought forward today, and I have to be careful with my words, with allegations of fraudulent or corrupt practice, is there anything at all that can be done to hold those individuals to account that you are aware of? I think that this committee has an important role in holding individuals to account, in this case and more generally. I've brought the circumstances to your attention. You can require the accountable officer of the organisations involved to give evidence to you, and I understand that you can invite other individuals to do so. Clearly, the committee will want to make its own decisions about what action to take next, but I think that calling witnesses to explain to you the circumstances that unfolded during 2013 in this college would send a powerful signal. Can I just make a brief intervention before I bring in Sandra White? Can I welcome Dr Simpson to the committee today? I understand that he's been delayed. Can I ask him at this point if he can declare any relevant interests that may be subject to the committee's procedure? I should draw attention of the committee to my interests and health as a membership of the British Medical Association, my fellowship of the Royal College of General Practitioners, my fellowship of the Royal College of Psychiatry and my membership of a number of organisations that I'll provide the clock with a list of, or I can repeat, but it would take up too much time. I'm sure that we'll be able to participate in the committee. My apologies again to the committee and to our witnesses today. After 10 and a half years on the health committee, I was only delayed once, so it's a bad start when we're joining this committee. Thank you very much, convener, and good morning. Thank you very much for the report. I won't repeat everything that's been said by the convener and Mary Scanlon, but I'll share their absolute concerns for seven people to take over half of Severance's budget. It is absolutely disgraceful. There's a couple of points that I want to pick up on, and it's to do with the fact that we don't know if there's criminal proceedings going ahead or if any charges had been made, but what I find absolutely astounding is the fact that, apart from the Severance amount of, the senior staff left before the audit was complete. That's very concerning, and it wasn't laid before the Parliament enough time. Are there any checks and balances or guidance? If we, as parliamentarians or a Scottish Government, didn't put a report at the time, then obviously sanctions would be taken against us. Any sanctions taken against anyone in this college for not meeting the deadline? I think there are two things to say in response to that question, Ms White. The first is that clearly reorganisation was a particular set of circumstances right across the college sector. By its nature senior people left colleges across Scotland, and I've reported on other circumstances, not as serious as this, where that caused problems or where Severance wasn't managed as well as it should be. That did have a knock-on effect on the preparation of financial accounts, auditors' ability to audit them and reports being laid here. As of the incorporation of colleges into the public sector and the changes to their accountability arrangements, colleges are now required to comply with a number of conditions, including complying with the Scottish Public Financial Management. That is the specification of the date by which their accounts must be available for audit, and the accounts and auditors report must be laid by the Government in the Parliament. If they fail to meet that condition among others, the funding council is able to take sanctions against them, including withdrawing their grant. At the time when that happened, and because the college was not part of the public sector in the sense that it now would be, those sanctions were not available. There have been changes made, perhaps, since the Glasgow College investigation, which you might say in regards to that. Picking up on the fact of the Scottish Funding Council, I noted in the report that the funding council contacted the college on 10th October, 16th October, 22nd October, 23rd October. At the end, they told the board that they would not fund the principal's package bond for 13 months, and yet it still went ahead. I also noted in the report that, when it was reported at the Renumeration Committee, they mentioned the fact that they did not even mention the Scottish Funding Council's letter to them. I cannot say the word criminal, but if those are recorded minutes, they deliberately misled the people in the Renumeration Committee. Obviously, when the new chair took over on 25 October, which is only a day after, they said that they apologised because the advice had not been put forward. Surely there are some form of sanctions that could be put forward there. I do not like to use the word criminal, but there are certainly actions that have been taken there that deliberately misled the Renumeration Committee. There is absolutely no doubt that those are very serious failures of governance that are among the most serious that I have seen in my time in this role. One of the challenges that we and the auditor of the college had is that there is very little evidence available of what did happen. There are minutes, but they are incomplete. There was disagreement about them at the following Renumeration Committee minute. There were no business cases or papers available to the auditor setting out the basis on which the committee members made their decision. It does appear to me, as I say in my report, that the full information available to the board chair and the principal was not passed on to members of the Renumeration Committee. As you say, the new chair of the board apologised for that after the event. If the committee wants to explore the decision making process that the funding council went through in what sanctions it may have been able to apply, that would be best taken up with the accountable officer of the funding council. I will leave it there at the moment. From start to finish in this report, it really is just a disaster that took place at that college. I will be careful with my language. I have suggested that it is probably going to be a whole series of moral corruption that is compared to anything else that has actually went on at that particular facility. Paragraph 20 highlighted the dates when the SFC was in contact with various people at the college. The whole host of dates is there. In Paragraph 21, it is not clear from the available evidence that came back to what you mentioned a few moments ago, in terms of the lack of information that has appeared to be passed on. In Paragraph 22, it is clear that the terms that were discussed by the Renumeration Committee were not in line with the advice of the SFC. The SFC provided advice, but the chair did not provide the Renumeration Committee with complete or accurate information about the advice provided by the SFC. It is just absolutely appalling. One of the things that struck me about this is that, as you highlighted earlier, we have a decision to take later on as committee members. From 2014, the changes have taken place. I would like to know, and I am sure that all committee members and everyone else in this room and others would like to know that this type of thing, because of the changes that have happened, cannot happen again. I would like to be able to give the committee that assurance, and I do not feel that I can. There have been improvements clarifications to the accountability between the principal and the board of a college and the funding council, which come with their move into the public sector and the new conditions that are applied to them in terms of things like compliance with the Scottish Public Finance Manual. There is no question about that. Equally, when the committee heard evidence from the funding council earlier this year, you heard the dilemma that the funding council feel they face in considering sanctions against a college, in that the main sanction that is available to them is withdrawing grant from the college, and although that is a sanction to the college, the impact it has is very often on the students and the other staff at the college. I think they told you at that stage that they were considering what further sanctions may be possible. Colleagues will keep me straight here, and you may want to explore with them where that consideration has reached and what they think may be possible in future. I also think that, as I said earlier, that committee's consideration will have a serious effect on those charged with governance within colleges, where they are taking this sort of decision in future, so it is clear that there is proper scrutiny of the decisions that are taken. I share the committee's frustration that it is not possible to undo the decisions that were taken and the payments that were made, and I think that that may be an issue that you would like to explore further with the funding council. In terms of what you just said, I still have some concerns that this type of activity potentially could still take place. Maybe not on this level, but even though we have had changes that have been brought in. What would your recommendation be to tighten up the new recommendations that are there? I think that what I would say is that it would certainly be much more difficult to do this now, because, as the Auditor General mentioned earlier, with reclassification and all that comes with it, the funding council does now effectively have a power of veto that they did not have when this happened. They could actually turn around and say, no, you are not doing it. Having said that, and to come back to one of the points that you have raised in paragraph 20, I think that one of the reasons that this feels like it is in a whole different league in terms of its seriousness is because of the fact that they had all that information and traffic from the funding council saying, we have serious concerns about this and this would not be in line with good practice and yet they still went ahead with it. At that point, when you have some people intent on doing a particular thing, then every internal control in the world makes that quite difficult to do. We would never sit in front of you and say that this can never happen again. We are just not in a position to give you that assurance. What we can say is that the arrangements that are in place would make it much more difficult. With the new arrangements, is there a legal element to that as well in terms of if somebody were to breach them and undertake some type of activity akin to this? Would there then be some type of legal recourse? I don't think there would be a legal recourse. I think there would be clearer accountability to the funding council at the time because, as Fraser said, they would have power to veto packages and the accountability through to this committee is an important mechanism. We didn't find evidence that as far as we can tell, the college had the legal power to do this. It was clearly a significant failure of governance and a very poor use of public money to have done so. Mr Kelly, can you go back to the point where you mentioned veto, so that they now have the power of veto to prevent? I'm not clear where they were. If the funding council said that we're not going to pay you this, so the checkbook's not coming out and we're not paying this money to this, are we honestly saying that they weren't in that position at the time? I think that there are two bits to it. The funding council paid out what would have been paid under the normal terms of the scheme for the severance payments and then it was entirely within the gift of the college at that time to effectively top that up to pay the package that they wanted to pay, which is what happened. The funding council probably could have said that we're not handing over any of our bit of the money. It still would have been entirely within Cotebridge College's legal powers to top that up and to pay it. The difference now, as the Auditor General mentioned, is that they have to seek and receive approval specifically from the funding council. It's tracking out what he'll lose, what he'll get track of, what happened previously. It was within the gift of the Scottish funding council to say, sorry, we're not giving you this money because we're not satisfied with the current arrangements that are in place. Could they have done that? Our understanding is how it works, convener, is that at the start of the year there was a specific pot of money for each college set aside for severance payments to do with regionalisation. Sorry, I'm not asking that crap. I mean that with respect to the question that I'm asking, it's clear, though. All I'm saying is that was it within their gift, I'm not worried about arrangements, we've already been over them, was it within the gift of the Scottish funding council to say, we have this sum of money, we're not giving you this sum of money because of the exchange of emails and correspondence that's taken place, we are not going to allocate this money to, they wouldn't have been able to pay the money out, could they, yes or no? My understanding is that they could have done that and that's worth checking with the funding council. Thank you very much, convener, and good morning colleagues. I don't want to go over what colleagues have said, but I just want to go beyond it and just reflect, or as a general, that you have met, it comes with the territory. You meet this kind of thing year in, year out, possibly not with quite as big a set of numbers, quite as blatant. We've spoken about the law and you've clearly indicated that your legal advice is that nothing that was done here was criminal, as it's currently understood. Would it be fair to deduce that the law of the land is inadequate and that we should be changing it? I'm not a lawyer, Mr Donne. I think it's very clear that the committee and I share a sense of real frustration about this particular case but also about other cases that have come to your attention. I think that frustration would be shared by men and women in the streets across Scotland for reasons that we all understand. I don't know what the legal remedy is to that. I can tell you what my powers are and I can bring it to your attention so that you can use the mechanisms available to this committee. There's a separate discussion about legally what would be a better way of doing this that I don't feel qualified to advise you on. In which case that's a fair comment but I guess I was looking for your advice. You don't have to be a lawyer but I mean I think the perspective. I just come back to Mr McKinley's comment about internal controls and those fail. They often fail. That's exactly what you're looking for. The ultimate external control is the criminal law and it's simply because it's there that most people behave correctly most of the time. I guess what I'm saying to you is would you agree with me that we should be exploring whether there should be a change in the law. I've long held the view that corporate criminal law is pretty awful. In fact it's one of the reasons why it's very difficult to prosecute the banks for reasons we all well understand. It's actually a Scott's Court of Corporate Criminal Law is not in a good place but it politely. Should we be addressing all these issues and how people should behave in public, financially responsible places? I think it's fair to say that a case this egregious is unusual and I think as Fraser alluded to what appears to have allowed it to happen is the chair of the board and the principal working together to achieve a certain outcome. Members of the remuneration committee not receiving the information they needed to make their decision, not receiving information about the concerns that had been raised by the funding council. We have heard and you have heard that the new arrangements should mean that that couldn't happen with the funding council now needing to approve severance packages before they are paid. I don't know whether it would be possible for that sort of collusion to circumvent that control. I do think that there's a question that's worth exploring. First of all with the funding council how they would expect to be monitoring these sorts of decisions and the payments that go with them and if that leaves a gap then I think it would be worth exploring whether other remedies including legal remedies are needed. I hope that they wouldn't be. Most public servants don't behave in this way most of the time but occasionally a case like this comes along where the normal controls simply have failed to have the effect that they're intended to do. The generality. Again, I really am grateful that I'm able to ask you because you see the wide sweep of public service. Surely this is just a particularly bad example of the kind of misuse of funds, the deliberate withholding of information and of feathering one's own nest. Which is always likely to happen when people are in charge of quite large sums of public money and they can find ways round accountability which intelligent people generally can do. Is it not your observation that are tightening up of the criminal law which is the ultimate sanction would help across the board? I don't know what the specific remedy would be that would prevent cases like this from happening. I think that the changes that have been made in the further education sector will reduce the likelihood of them happening in future. We'll provide a stop power effectively for the funding council to have avoided this from happening under the arrangements that are now in place. I think that this committee plays an important part in holding individuals to account. Equally, I share your frustration that there is an area where those mechanisms have not been effective and we don't know how effective they would be under the current arrangements. I'd be very happy for us to go away and have a look at the wider set of circumstances in this case and in others that have come to our attention and been brought before the committee to see whether that's the case. My first reaction hasn't been that there is a legal problem here though. It's that there is a failure in the governance and accountability arrangements that have been put in place around the use of public money. Thank you, convener. Partly on what Nigel Don came out with there, and it's that information that went between the SFC to the senior officer's principle, I assume, which didn't get through to the Immunisation Committee. Is there any evidence that this was withheld intentionally or is it genuine oversight? There is very little evidence available. My professional judgment, and I hope that it's clear in the report, is that it's very unlikely that it was oversight. I think that it was a deliberate withholding of the information as far as I'm able to draw a conclusion from the evidence that's there. Given that there was a clear conflict of interest between the principal and others who had received that information and the doubts that the SFC had come across, and I would probably suggest that, without having been a solicitor or lawyer myself, that if that is the case of a deliberate withholding of information, and there's obviously a very, very clear conflict of interest here, surely that does bring into the realms of dispute that there is perhaps nothing that could be done in terms of a legal recourse to either recover funds or whether it be through criminal or civil or other function. I have no doubt that the principal had a serious conflict of interest and didn't take the steps that he should have done to manage that conflict of interest. That's part of the contents of my report. I understand that New College Lanarkshire, when it took responsibility for the affairs of Coatbridge College, took legal advice itself on what action was possible to them in terms of seeking to recover the funds that had been paid out or other action and were advised that that wasn't possible. That's the legal advice that is in play at the moment. Finally, is there a clear indication anywhere within the rules, guidelines, contracts, whatever you want to call it in terms of the management of the old college, which actually makes it clear that any conflict of interest must be reported? I think it's covered very clearly by the principles that should govern everybody in public life. The Nolan principles are well accepted, run through all the codes of conduct that apply to public servants. It should be clear to everybody in a senior position that the principle of integrity, for example, means that if you have a conflict of interest where your personal position and that of the institution may be in conflict, you should take all the steps necessary to manage that conflict. That didn't happen in this case. I don't think that the lack of specific guidance is a reason that could be used to explain or to excuse that. The only reason that I was asking that is simply because of the fact that, if it is known as good practice within the public service to be doing X, Y or Z, and the fact that, as far as we know, there is nothing down in paper as to the agreement to the management principles of their unification and the senior principles of the officers of the college, it would seem to me that if there is no recourse for either recovery of funds or certainly some form of investigation, I don't know where the law would stand. I don't know how you would actually fight against that type of thing happening again if the circumstances were the same, because there just does not appear to be any teeth anywhere that forces people to act to the standards that they're meant to work for. The principles of conduct in public life are clear and I think run through all of the guidance that's available in terms of codes of conduct, the Scottish Public Finance Manual, accountable officer terms of appointment, so they are there. The question is what sanctions are appropriate and available to those responsible. There have been changes made to the sanctions available to the funding council in terms of both pre-approval of voluntary severance packages before they're agreed and paid and compliance with the terms of the Scottish Public Finance Manual. Perhaps there is a gap beyond that which needs to be explored, but I think that the question for the committee today is whether the accountability mechanisms that were available at the time were applied as fully as they could have done and what the reasoning process was for the funding council in doing that. There's absolutely no doubt about it and you confirmed that payments were made that exceeded the terms of the college's severance scheme. They also exceeded the terms of the Scottish funding council guidance and when you were talking about the college chose to top up their severance payments and basically lined their own pockets etc. Is that perfectly acceptable for them to do that? Did they have the power? I know that there was no audit trail, I know that there's no trail of evidence, but did they have the power? Did they have the right? Did they have the authority? Did they have can't launch? Just to top up the severance payments above the college scheme, above the Scottish funding council guidance, to top up as much as they wanted? It really wasn't perfectly acceptable for them to do it and that's why my reports in front of you today. The auditor in investigating this concluded that there was no legal barrier to them doing it. They had the legal power to do it. There's no legal barrier to them. They could top up as much as they wanted. They could have gone beyond what's in this report today had they chosen to do so and they would be fully aware that there's no legal barrier. That's all I wanted to know. It really follows. The remuneration committee would be aware that there was a top up. As my report shows, they were making decisions about terms for the seven people involved that went beyond those available for the other staff within the college. Exactly. Did the remuneration committee require to justify to anybody that that, in fact, was something that was appropriate? Would they have known, or could they have known, the normal terms that the funding council would have applied? Should they have sought guidance independently rather than the failure of getting the information to the funding council on the exchange of emails? Should they, as a remuneration committee in fulfilling their duty, have sought the external advice from someone, yourselves or as the auditors or from the funding council as to whether this was appropriate? The lack of an audit trail makes it difficult to give you a firm answer to that. As I say in my report, it's very clear that they didn't have the information and advice available to them that they needed to make the decisions that they made. Anybody in those governance positions of responsibility should be aware of their responsibilities to seek the information and advice that they need. Failure in that remuneration committee. I'm trying to think of the future here. In terms of, I know that you said you haven't named the individuals, but the names would be available to us quite clearly in the public domain. I assume that the individuals involved in this, the principal and the chair, will now be banned from any public office and who would be responsible for that? I mean, would you recommend that the appropriate committee and government should be actually ensuring that these people never again hold public office or they are banned as they would be if it was a company? They would be banned from holding public office for a period of time depending on how egregious their offence was and it seems to have been pretty egregious. I think that you are absolutely right that the former board chair and principal hold the primary responsibility for this. I think that there were failings among the other members of the remuneration committee in pursuing the information and advice that they needed, but it also is clear that they weren't receiving information held by the principal and chair that was very relevant to their decision making. I don't know what the Scottish Government's process is for effectively identifying individuals as being unfit to hold public appointments in future and that may be an area that the committee chooses to explore with government. My final question on this is going back to the remuneration committee. Clearly they failed in their duty and therefore I would hope that none of those members of the remuneration committee have remained on any remuneration committee within this college or do colleges, I know it's now an amalgamated college, but hopefully none of them have transferred to the new body. I think that that's the question that you would need to take up with new college lannuctur and the funding council. It's a question regarding the remuneration committee. Did you do any particular work in terms of looking at the membership of that committee? The auditor in carrying out the work that she needed to do to complete her audits did her best to interview members of the remuneration committee as well as to review the minutes and the other limited documentation that was available. That was the process that she had gone through and that's the source of some of the evidence that you will see referred to in my report. Any links via family or friendships between members of the remuneration committee and the individuals who are being discussed in this particular report? Not that we're aware of. There are two individuals with the same names involved in it, but they are not related as far as we're aware. Can we draw attention to paragraph 11 of the report? It refers to one committee member who indicated that she'd not had enough information at the time to allow her to make a decision. I think that we just need to be clear in terms of casting any dispersions over the entire committee. Obviously there was somebody on the committee who may have had issues with the information that has been provided to them. I think that we just need to be careful for the record on that issue. I was trying to work out if there was any other activity, but that was well about it. Collin, thank you. It was actually something that was just what Richard Simpson sort of got me thinking about it. Maybe you could explain that obviously the auditor at the time had passed a note but basically gave an unqualified note. Given the fact that I think on two occasions this morning you've referred to a lack of an audit trail somewhere online, why were these accounts unqualified? I know that there's a comment. Perhaps I'm not quite sure of the difference of the stat, how much weight you put in these things. It would appear to be if there's a lack of an audit trail somewhere that is very difficult to give an unqualified set of accounts. The opinion on the financial statements is a very particular declaration and it's a confirmation from the auditor that the financial statements give a true and fair view of the college's financial position at the point of the audit. In order to give that opinion she had to go and look at the internal controls for systems of collecting income and making payments, paying salaries and so on, as well as a range of other things. She concluded that all of that was working soundly as it had done in previous years. The mechanism she has for raising concerns, which are significant as they clearly are, but don't affect the numbers in the financial statements, is to include an emphasis of matter paragraph in her audit report. That's what she's done in those circumstances and it's that that's led me to make a report under my statutory powers to the Parliament. I'm satisfied that that's the appropriate response to have taken. I take it as part of the merger process. There would be other severance arrangements that were in place for other members of staff. I take it that catering staff, other people on lower pay grades, were any there? Was there any enhancements of arrangements for severance payments? Was that ever considered at committee? As my report says convener, from the January 2013 consideration of this matter by the remuneration committee, there was a deliberate proposal to enhance the terms for the seven members of staff that my report focuses on compared to other staff. I think a total of 33 staff left during that financial year and the other 33 staff severance packages were calculated on the standard basis assumed by the funding council and by the other colleges that were part of the merger. So clearly there was a two tier system here then for catering staff, cleaning staff and the lecturing staff. You just get what you get and then if you're higher up between and you seem to be involved in the decision making process then we'll need to look at how we can enhance that. Who makes that decision then to differentiate between those two classes of employees? We don't know who made the proposal to the remuneration committee that there should be a two tier system. We know that in January 2013 the decision was made by the remuneration committee to do that. Although, as you have said, we found that when the minute was considered by the remuneration committee at its following meeting in October 2013 a couple of members of the committee raised their concerns that it wasn't a full record. Go back to the funding council again now. So why do the funding council accept that then? So why do they say well let's look at enhancements for these management staff where those mergers take place but if it's catering staff or cleaning staff then just let them get the basic and the lecturing staff just let them get the basic package. So why is there this kind of environment that allows that kind of approach to take place? I share your unhappiness that that's what happened. My report says that in October 2013 that was one of the questions that the funding council asked the college. It asked for assurance that the arrangements that were being proposed for the senior management team and one other member of staff represented good value for money. I think it's a question for them as to what actions they took on the back of the concerns they clearly had about that aspect of the severance discussions as well as the other ones that I've referred to in my report. So you accept that there has to be some kind of, I mean there seems to be a class approach to this which is those in the lower pay grid get what they get and those higher up in the pay grid just let's look at enhancing their package. I can see no justification for having a standard two tier package. I can see there may be exceptional circumstances where an individual may incur additional responsibilities which may justify an additional payment and in any case senior people almost always have higher salaries to start with which means you lead to higher packages at the end of the process. I can't see a justification for a two tier approach, particularly for such a small number of staff as we're seeing in this situation. Thank you very much. It's a very quick question from Sandra White and I'll move on. I just wondered if we were looking at taking evidence perhaps in the committee and further evidence come up about who agreed to the difference in rumination committee, would it be advantageous for us to bring in the rumination committee to ask them? Because, as the convener has already mentioned, in the differences one was agreed with the new colleges and then only these seven got the enhanced payments. So whilst two members said, we don't recollect that, we're unhappy with it, the other members of the rumination committee agreed to this and there doesn't seem to be any minutes. So I just wondered if it would be advantageous for us to ask for them to come in also if we're asking for evidence. I think that the general team for the evidence this morning, I can just remind members that we will be discussing this matter on agenda item number seven later on in the committee's agenda. I can just spend this just briefly because I just draw your attention to the fact that we receive responses from the Scottish Government, NHS Highland and Audit Scotland report and title report on NHS Highland 2013-14 financial management. Members will be aware that the AGS intends to publish a report on the audit of the 2014-15 accounts of NHS Highland next month. Do colleagues have any comments on those responses? Can you advise me how you wish to move forward? Mary Scanlon? I think that we were brought to section 23 report highlighting poor financial management at Rakemore. I think that we've rigorously pursued this in terms of questions. I think that we should acknowledge the changes that NHS Highland has made, convener in particular, to their standing orders to address some of the matters that will include the board in terms of acceptance of any future brokerage, etc. I think that that should have been in the standing orders a long time ago. I'm pleased to see that it's there now. I also think that it's worth acknowledging that on page 2 paragraph 4 the Auditor General has been asked to report directly to this committee on the Rakemore budget and recovery plan for the next three years. That's something I've asked many questions about. It's the main acute hospital for the Highlands. It serves a huge geographic area. The overspend was £9.9 million at that hospital. It's now just over £6 million. There are serious concerns about cutbacks, etc. I am assured that the Auditor General will report directly to this committee on that budget and how it's being managed in the next three years. I have to acknowledge that we did find something that was very poor in terms of financial management. I think that we've got to be big enough and professional enough to accept that some steps have been taken. We're not at the end of the road yet. On that basis, convener, as a member for the Highlands and Islands, I would be content to note those responses and look forward to the Auditor General's report expected next month to continue our scrutiny of NHS Highland. A comment from colleagues is the agreement that we shall await the Auditor General's report. We should be later this year. Colleagues, we've come to agenda item number 5. We have written submission from the Scottish Government regarding the AGS report entitled the Scottish Fire and Rescue Service. Members may recall that we noted the AGS report as previous evidence in the session in May. That submission was in response to some follow-up to the questions that the committee had. I wonder if we have any questions from colleagues or comments on that. I highlighted the particular issue about the recruitment of retained firefighters. I appreciate that it is not a big issue in Glasgow, Edinburgh and the big cities, but the recruitment of retained firefighters is absolutely essential to having a fit for purpose fire and rescue service in the Highlands and Islands. I did read through Paul Johnson's letter from the Scottish Government. There is no mention at all or commitment about the recruitment of retained firefighters, so I just wanted to put on the record that I do hope that we will get an update from Alistair Hay or Pat Waters. I think that it was promised towards the end of the year, but I would like to think that the accountable officer is on board as far as those concerns have been made. Every rural community is dependent on volunteer firefighters and I share her concern that that is just something in the whole operation of the fire service. That is something that we need to keep an eye on. Any other comments from colleagues? Is it agreed to note the report? Subject to the comments that were made. Agenda item number six is the section 23 report headed at Scotland's colleges 2015. It just reminds you that we have received written submissions from the Scottish Government, the Scottish Funding Council and or at Scotland on the AGS report entitled Scotland's colleges 2015. The draft report that we will consider and agenda item number eight takes into account those responses. I wonder if any members have comments or questions that they would like to follow up in relation to those responses at this stage. Mary Scanlon. Sorry, it's me again. It was just a couple of figures jumped out at me. I'm very pleased to see that the colleges are increasing, although it's a slight increase, the students from deprived backgrounds. I think that we have to welcome that. I'm actually shocked at, if we look at, say, the Highlands and Islands, it's 4 per cent from students from the 10 per cent most deprived areas compared to, say, 4th valley at 27.9 per cent. Really, what I'm just wondering in terms of those figures is why some colleges can do so well in opening opportunities to students from deprived backgrounds and others do so badly. The only other question or point I wanted to make was the Britain submission from Audit Scotland. North Highland College, 23 members of staff left through compulsory redundancies and also five colleges, some compulsory redundancies. It's just, convener, that we've been constantly told that since the mergers in 2013 that there were no compulsory redundancies, so I just wanted to sort of note that point and put it on the record. Any other comments? Always Nigel Don. Again, I want to echo what Mary Scanlon has just highlighted. I'm just wondering whether it's worth trying to do some kind of work on why it is that we have such very wide differences in those numbers in annex A. I mean, I'd just like to understand it. I'm not even critical of somebody, but clearly very small numbers in very small places, one can understand. I don't want to worry about the notepoint notes that are occasionally creeping in, but Aberdeen and Aberdeenshire are only 5 per cent whereas Glasgow Kelvin at 35 per cent. I'd just like to understand that. What's hiding behind there? Is there something else that we should be teasing out in this? Any other questions? In terms of noting those issues that colleges have raised, how do they wish to take them forward? Can I ask you, do we know? Do we know is there a mechanism for looking at variation? Do the funding council, apart from reporting on the numbers, actually go in and investigate whether there's outliers? Do they do funnel plots and say, you know, here's the outliers, why is it that one, I think it's Kelvin, has 35 per cent? What are they doing right? How do they overcome the barriers? And on the other hand, the ones that have zero or 4 per cent or whatever, you know, what effort are they making? I mean, is there a mechanism or could we ask them if there's a mechanism? Can I suggest that we take on, A, the clerk takes on board the points that have been raised and we go back and seek for the clarity on that and come back to the committee on that. Is that agreed? Yes. OK. Thank you, colleagues, and as agreed previously, we now move into private session for agenda item number eight.