 Rwy'n ffordd i chi gweithio i gyrdd 14 o fewn i gael ei wneud o'r cysylltu i'r ystyried gweithredu a'r ffostlegyslwyrgwrthau'r Fyglwysgwrthau Cymru yn 2018. Fyll gael i chi'n gwybod i'r gael ei gael ei ffostlegysguio i gael ei wneud i'r llunio'r cyd-glywfodau ellyllwr cyd-glywyr i gael ei gael ei ffostlegysguio i gael ei gael ei wneud i'r Item 1 is decision on taking business in private. Do we agree to take items 3 and 4 in private this morning? Thank you. Item 2 is the 2016-17 audit of NHS Tayside. I'd like to welcome our witnesses today, Shona Robison, Cabinet Secretary for Health and Sport, Paul Gray, Director General, Health and Social Care and Chief Executive NHS Scotland and Christine McLaughlin, Director of Health Finance, Scottish Government. I'd like to invite the Cabinet Secretary to make a short opening statement. Thanks very much, convener. The committee will now have had the chance to read the latest report from Grant Thornton on financial governance in NHS Tayside and will no doubt share my concerns at the findings of that review. As I've said before and reiterate again, I take very seriously issues regarding financial management and governance and also ensuring that action is taken to address issues highlighted through the assurance processes that we have in place. It's essential that all parties take stock following each of the reviews of the position at NHS Tayside and that we all learn the lessons and make improvements for the future. I remain committed to immediately addressing the issues that have emerged at NHS Tayside, along with ensuring that the NHS and the wider health and social care services meet the needs of the people of Scotland effectively and at the right time. Therefore, as a starting point, I can confirm that the Scottish Government and NHS Tayside have accepted all of the recommendations from the Grant Thornton report and I have received confirmation that the appropriate response to the findings will be provided by the end of June and I'll ensure that the committee has kept informed of those responses. In relation to NHS Tayside, it underscores the need for fresh strong leadership, which Malcolm Wright and John Brown are now providing. At a wider level, there are clearly lessons to be learned by all relevant parties, including the Scottish Government, and I'm determined that those lessons will be swiftly embedded into our existing control systems. In addition to the change in leadership at NHS Tayside, which I'm obviously happy to discuss in more detail during the morning session, there is a range of other work that is already under way to strengthen existing processes to prevent such a situation arising again. The committee will already be aware of the work that is being carried out by Oscar in relation to the charitable aspects of the endowment issue. In advance of the completion of the work, Paul Gray has agreed with David Robb, the chief executive of Oscar, that consideration will be given to legislative change to ensure a clearer separation of roles between health boards and their charitable arms. The Scottish Government has also taken a number of actions to improve the controls around allocations to NHS boards. I was also pleased to note Grant Thornton's recognition of the work that has been done to date to promote an open and transparent culture within the accountable officer and director of finance groups. I will give you my assurance that that approach will be maintained, expanded and embedded as we move forward with the pursuit of transformational change in the NHS. Finally, to return to the transformation of NHS Tayside, I would like to reiterate my confidence in the new leadership that will make a real difference. I'm aware that the committee members hold Malcolm Wright in the same high regard as I do, and I take reassurance from his publicly stated view that the problems in NHS Tayside are indeed fixable with strong leadership and good governance. I believe that he and John Brown are the right people to ensure that that is put in place. Thank you very much for that statement, cabinet secretary. If I can kick off with an opening question, the Grant Thornton report lays out for us a series of, I don't know better way to describe it, errors, blunders, a very messy situation of governance at NHS Tayside that led to the constitution being suspended and then led to the issue that I know you and I were both concerned about, cabinet secretary, that transfer of charitable monies raised in Tayside to core funding. To what extent can the public expect your office and the Scottish Government to be accountable for a situation like this? First, I think that restoring public confidence in NHS Tayside generally is hugely important. As you say, people give charitable donations, they expect those donations to be used for the purposes of which they were given. I think that what the Grant Thornton report makes very clear is that those issues were never escalated and reported to the Scottish Government, so neither I or indeed my predecessor, who was in post at the time, were made aware of those issues that emerged that were decided upon, as you say, and the actions that were taken in January and February 2014. That raises questions about both internal and external audit, where, again, there are lessons to be learned. As Grant Thornton report, that should not have just been a factual statement but should have indeed been reported upon and escalated to the Scottish Government so that either my predecessor or I would have been made aware of that well before the timeframe in which we did. In order to make sure that, going forward, all of those issues are looked upon, I think that there are clearly governance issues, internal and external audit issues and, indeed, making sure that there is a culture of openness and transparency. I think that what has emerged as well—and, obviously, Oscar is looking at this—is that the behaviours and the retrospective payments in NHS Tayside is not an issue being replicated in other boards, but Oscar is obviously looking at all of those returns from other boards. Indeed, the recommendation for the separation out of the role of the trustee and the role of the board member is important, because what Grant Thornton bear is that there was a conflict of interest with people sitting with those two hats. What we will do is to take those issues forward with Oscar and make sure that those changes are made to avoid a situation like that ever being able to happen again, including, obviously, the strengthened governance processes that are already under way that Christine Thornton has been overseeing. The Grant Thornton report says that there were inquiries to the central legal office to get advice on whether the suspension of the constitution and whether the transfer was going to land them in legal difficulties. Does the minister have any contact with the central legal office, or did the central legal office—are they allowed, or did they—flag up to you that that was happening and they had been asked for advice? As I say, I was minister for the Commonwealth Games at the time, but there is absolutely no evidence that that was flagged to the previous cabinet secretary or, indeed, to the Scottish Government. The central legal office, of course, we use the central legal office for advice, but I think that Grant Thornton lays bare a number of things. It says that the request from the central legal office was requested on the same day as the meeting that the advice obtained was never shared in its entirety with the trustees or the NHS board. Certain sections were extracted by management and presented to trustees in the form of frequently asked questions, but that was only extract. To be frank, the trustees—again, Oscar is looking into that in more detail, and we have not had that report yet—were only given part of the advice. Had they been given the full advice, they may have taken a different view. The central legal office provided what they thought was a rounded advice, but what they did not know was that only part of that was given to the trustees. As you say, the behaviours around that meeting were totally unacceptable. Paul Gray asked the same question. Were you made aware that the central legal office had received such an inquiry? Are the central legal office obliged to flag something like that up with you? No, they are not. However, what the Grant Thornton report has done is to cause me to reflect on the extent to which other parts of the health service might consider escalating issues of concern either to their own accountable officer. The CLO is within NHS national services Scotland or to me. I am reflecting on that, and we will have a discussion with the current head of the CLO about points at which the CLO may consider it appropriate to raise issues of concern if they feel that advice is being either partially used or not taken. The central legal office is a part of NHS Scotland of which you are chief executive. That is correct. It was approached that day for advice from NHS Tayside asking if NHS Tayside could do something that sounds quite illegal. The central legal office clearly had misgivings about what it was being asked. At no point did it flag up to you, as chief executive, that it was being asked for this advice. No, it did not. Christine McLaughlin? I am sure that that will come out more in the Oscar review, but the client confidentiality is an important part of the legal advice to NHS boards. I would say that there is a very large difference between something that might appear to be illegal or inappropriate. The central legal office would have given advice on the legality in relation to the 1978 NHS act, rather than so much on the charities act, but it would have given legal advice. It would not have been in a position to give advice on whether something complied with, for instance, the national guidance at the time. There is something that we need to pick up and be very clear on about the difference between advice about the application of the law and something that is broader implications about fit with guidance. The central legal office act more as lawyers for each board, rather than in-house lawyers, checking that NHS Scotland is acting legally in all its actions. The point that I was trying to clarify is that what it would have been asked to give is legal advice, rather than broader advice about fit with the national guidance that we had published. Oscar will look at all of that in the round, along with the application of the national guidance. The important other bit about that is that there was an intimation that Oscar had also been asked for advice around that, which it had not been. There was no evidence of Oscar ever having been asked for advice, but there was an intimation, again, to the trustees that that had been. The other side of that equation is Oscar, and they were not on that side. It turns me that you are responsible for NHS Scotland, and this conversation about potentially illegal action was taking place amongst officers of NHS Scotland, but it was never flagged up to the person in charge, Mr Gray. I am going to ask Liam Kerr to continue with questioning. I would like to continue on that point, because the Grant Thornton report seems to very squarely point the finger at the management of NHS Tayside, as it existed at various times over the last few years. In particular, the former finance director suggests that some of his practices and the culture were particularly challenging. The first question is, do you accept the analysis that this is isolated to the former NHS Tayside management? The retrospective use of endowment funds, if we are talking about that specifically, the reason that we asked boards to give returns to Paul Gray, was to make sure that there was no practice like that. The returns that we have had do not indicate that what happened in Tayside has happened in any other board, but Oscar will obviously be reporting on all that in detail and we will need to wait for his report. However, I think that what it does flag up is that, fundamentally, there was a conflict of interest of the trustees sitting making decisions around the use of those endowment funds, while at the same time being put under pressure around the board finances and therefore being asked to wear those two hats simultaneously and make decisions based on the information that was given to them, the partial information that was given to them. I do not believe that those behaviours and actions are widespread in the NHS at all. I think that there was a particular issue of a lack of openness and transparency. There was a culture around decision making in NHS Tayside, which Grant Thornton lays out quite clearly. Some of the pressures, for example, brought on the internal auditor to change the report from the draft to the final. I do not think that those are behaviours that are widespread across the NHS. The finance director, as was, features fairly prominently in the Grant Thornton report. The finance director has now departed with no process examining his role at various times. How is his side going to be heard? Grant Thornton, I think that I am right in saying, has not listened to what he has to say about this. Is anyone going to listen to his version? Clearly, he has retired. Christine Can may lay out a little bit about some of the further action that has been taken. I guess that there would have been no obligation for him to speak to Grant Thornton. I do not know whether Grant Thornton asked to speak to him. You are correct. The Grant Thornton review did not involve any interviews with anyone who was no longer an employee of the board. Oscar, in his review on the issues in relation to the use of charitable funds, has the ability to interview any of the trustees at the time of anyone involved. I can follow up with Oscar, but it would be perfectly within the remit to speak to any of the trustees at the time of the transaction, and the director of finance would have been one of those trustees. It would be worth finding out if the director of finance, in particular, will be listened to. Of course, there are some aspersions cast upon what went on, and it would be worth hearing what he has to say. The Grant Thornton report also talks about issues, various of the issues that we are examining, being reported up to the board in 2013-14. Why did the Scottish Government not know about that, if the board were having those issues reported to them? I think that Grant Thornton makes clear, and they say this a number of times, that they were unable to identify any evidence that demonstrates that the use of endowments was raised and discussed with the Scottish Government. What they say is that there was factual comment and that, both in terms of internal and external audit, there were factual statements. However, with something like that, you would expect that that would have been escalated and reported up to the Scottish Government. As a minister, I would rely on that being the case. Otherwise, we would be left in a situation of all trying to go through every set of accounts and trying to see whether there is anything in between the lines. That is not really how internal and external auditing processes should work. When something like that occurs, you would expect it to be red flagged, escalated and reported upon. Grant Thornton is very clear that that did not happen. That is why it has only emerged four years later as a substantial issue. Again, in terms of lessons learned, there are lessons for all of us. There are clearly lessons around the governance and auditing processes within boards. A lot of that has already happened, but there are also issues for external audit. We rely on that in terms of being able to pick up on issues. A lot of things have improved since then, but what we see in 2013-14 is that there were things like verbal updates rather than written. The Finance and Resources Committee is a place for the real scrutiny that should have happened on that. At the time, there were discussions with Endowment Fund trustees about a level of deficit—that same level of deficit wasn't formally discussed in written documentation at the Finance and Resources Committee, or at the board, or in the monthly financial returns to the Scottish Government. That same level of financial exposure was not part of the formal reporting, either within the board or to the Scottish Government. The tie-up with what was reported to Endowments is when you would have identified it. That was a key financial governance weakness to me at that point in time. There have been a lot of changes and improvements to the financial transparency in Tayside, and the director of finance at the moment is making more improvements to that reporting, so that those types of situations will not occur now. 2013-14 is really the year when there is evidence of that lack of transparency within the board and in reporting to the Scottish Government. Thanks for that. The concern I have—or I just need some clarity on something, particularly Cabinet Secretary, if I may, from yourself—because you made a statement about this to Parliament in April 2018, and you said, just as you've done here, no health minister could have picked up on something that internal and external auditors did not flag up. What I'm hearing is that that's the similar point you're making. The auditors we rely on their processes so that we can do something about such issues. I might be reading this wrong, but I have downloaded the annual report to members in the Auditor General for Scotland for NHS Tayside for the year-ended 31st of March 2014, dated June 2014. If I turn to page 5, NHS Scotland directors of finance were informed on 1 August 2013 that NHS endowments required to be consolidated into host board accounts with effect from 2013-14. At page 8, NHS Tayside has consolidated the Tayside health board endowment fund into its 2013-14 accounts using a template provided. What am I missing here, Cabinet Secretary? Grant Thornton is very clear about that in the report. He's looked at all of that, and what he's said is that NHS Tayside's board's external auditors identifies the use of endowment money to support the achievement of financial break-even in 2013-14. Within the executive summary of their annual report, this is a factual statement extracted from the wording in the NHS Tayside's corporate governance statement. There is no further commentary on this and no associated action identified. They talk a number of times about the fact that, really, you would have expected that issue to have been specifically escalated to the Scottish Government. Grant Thornton is very clear that that did not happen— Forgive me, it does mean that you knew about it. The Scottish Government knew about this. Did they not? Because PWC in 2014 clearly said that NHS Tayside has rolled the endowment fund into its other budgets. The Scottish Government received a final signed copy of the financial statements at the end of June 2014, but Grant Thornton has been unable to identify any evidence that demonstrates the use of endowments that was raised and discussed with the Scottish Government. That is an independent report, not my report. If you don't mind, could I clarify something just for awareness? 2013-14 was the first year that the endowment funds were consolidated into board accounts. That statement is found in every single board's accounts in that year. I realise that it has another dimension to it, but there is a factual consolidation of endowment funds for the first time in 2013-14 in line with accounting standards, and every board had a factual statement to say how much was consolidated into the accounts. That is entirely separate from the retrospective use of endowment funds, which is later in the Government's statement in the accounts. However, if you look at all boards' accounts, it was a statement that we asked everyone to insert into their accounts to be clear that the endowment funds were consolidated into the accounts of the boards. Is that particular paragraph that you are reading out not related to the issue about the retrospective use of endowment funds? I would be assured that if it had been escalated to the Scottish Government, and indeed to either my predecessor or me, action would have been taken, but it was not, and Grant Thornton confirms that in their independent report. Forgive me, Liam Kerr and I are both looking at each other. We are not accountants. Perhaps you can explain in more understandable terms what that means. NHS endowment funds did not, until 2013-14, were entirely separate in their accounts, and they did not sit within the accounts of the NHS boards. When you look at the annual statements, you would not have seen reference to endowment funds in previous years. Endowment funds were, for the first time, consolidated into NHS boards, so when you look at NHS board accounts now, you will see an inclusion of the income and expenditure related to endowment funds within the NHS boards' Exchequer accounts. That was a change, just an accounting practice that brings them into the accounts for the first time in 2013-14. There is factual reference in all of the board accounts to say that, for the first time, charitable funds are included within the accounts of the board. I understand that. I am sorry, but it is not entirely, but you are absolutely right that the accounts do later on make reference to the retrospective use of endowment funds. That particular point that you are making is not related to the retrospective use, but it is in the accounts later on. I now understand that, but this report from PWC goes on to say that, as with any new reporting requirements, the change, which you have just outlined, increases the risk or error of misstatement in the financial procedures. Does that statement not require you to then check if something had been transferred from endowment funds to core funders? I am sure that the Auditor General can give you a better explanation of this than he, but what that means is that, as part of the annual accounts of the board, there is a requirement to check the factual accuracy of the income and expenditure related to endowment funds. In doing so, the external auditor relies on the external audit of the endowment funds to verify those amounts. It increases the risk of misstatement because you are relying on the external audit of the endowment fund to make sure that those numbers are accurate. The point in the accounts is that there is a separate statement about the retrospective use of endowment funds, which is in the accounts, and that is the point at which there is reference to this transaction. I am happy to follow up and clarify that. I think that I would differentiate between a technical accounting consolidation, which is in all board accounts versus the retrospective use of endowment funds, which just relates to Tayside. Liz Smith, given that change, would that have been flagged up to Oscar in its audit of charitable funds? Would it have? It would obviously know about that change. Therefore, can we expect in the Oscar report some further information about who knew what when? The endowment funds are audited every year. Endowment funds, as I said in the accounts, are submitted to Oscar and are on Oscar's website, so that process did not change at all. What was new in that year was that the accounts were then also consolidated into board accounts. I would see that as beyond Oscar's remit. I can certainly clarify that for you. That would be very helpful, convener, because what we are trying to establish is who did know what when. Particularly as it seems that it was a four-year period before the issue was properly flagged up. The cabinet secretary has rightly said in Parliament that there are issues about the audit trail. It would be helpful if we could uncover exactly who knew what when. The Oscar report is going to focus particularly on the role of trustees and the endowments. We will wait and see what they produce. That is really concerning, because you have a situation where NHS Scotland directors of finance, Audit Scotland and the Scottish Government all knew that there was this change in accounting practices that endowment funds would suddenly be within board accounts for that year, but nobody thought to check across the health boards that any health board was taking advantage of this by transferring funds from endowment to core funding. It looks like that is exactly what NHS Tayside did. They took advantage of the new accounting mechanism that you had put in place, but nobody thought to check that. I do not think that that is an accurate reflection. What is an accurate reflection? The ability to use endowment funds for the advancement of health is what the 1978 act allows you to do. The consolidation of accounts is to see that as something that you can take advantage of, because it is incorrect. It was merely about including the accounts in the board accounts at the end. You might disagree with my wording and take advantage, but you have changed the accounting standards for NHS boards. Endowments suddenly become part in 2013-14. We find that in 2013-14 financial year NHS Tayside has transferred charitable funds over into core funding. Is that not a huge coincidence? Did nobody think that there are new accounting standards, so somebody must check that charitable funds are not ending up where they should not be? That is exactly what happened in NHS Tayside. I would make that that could have happened in any year. It was not related. I understand that. Did nobody think to check that because of the new accounting standards? I think that we have talked about two different things. No, I do not think that we can ask Christine McLaughlin that question. Did your office think to check that those funds were not being transferred because of those new arrangements? What we did was put guidance to boards about the ways in which the consolidation would happen and what they would show in their accounts. The use of endowment funds is something that is not related to the way in which the consolidation of accounts is done. Whether endowment funds were used for those particular projects in 2013-14 or the year before would have happened in exactly the same way. That is merely about including the values in the accounts at the year end. It did not allow, if I am giving you an impression, that the board suddenly had a mechanism to use that was not there before. That is not the case. The mechanism by which you can use endowment funds was exactly the same in that year as it was the year before. The same, Mr McLaughlin, was that there was a change in accounting practice that brought those two things together. It says in the PwC report that increases the risk of error or misstatement in financial procedures. Did you not recognise that risk and think to check it? We did recognise the risk by issue guidance to the boards on how to undertake the consolidation. The role of the auditors is to take assurance on the external audit of the endowment funds to ensure that it has the correct values, including in the accounts. Dealing with that risk was to issue guidelines, but it was not to check the accounts. It was to issue guidelines to ensure that the accounts were consolidated accurately and that the annual accounts process would include that within part of it. I am going to move on to Ian Gray's next and audits job. Cabinet Secretary, I want to track back a little bit to one of the answers that you gave. I think it was Liam Kerr, where you talked about the behaviours and actions which had taken place in NHS Tayside and you said that you believed those behaviours and actions were not widespread in other boards, but the question I wanted to ask you just for the avoidance of doubt, you do believe though that those behaviours and actions were unacceptable. We have spent quite a lot of time prior to today and today trying to find out what happened in NHS Tayside and who did what. I am also quite interested and I hope that you will have reflected on why those things happened. A number of senior managers in NHS Tayside undertook behaviours and actions in which we have agreed were inappropriate and unacceptable. I am keen to know why you think they felt constrained to do that. There does not seem to have been any personal gain to any of them. In fact, a number of them have lost their positions as a result. Why do you think they felt constrained to behave in this way? I think that, first of all, in Grant Sorton confirms this again, that there was a culture that was a lack of openness and transparency. As Christine was talking about earlier, the verbal reports instead of written reports. At the time, Grant Sorton talks about this, that there was a desire particularly on the part of the chair at the time to produce a break-even position. If you look at what flowed from that and the pressure that seems to have been applied to trustees in making those retrospective payments, it talks about the consequences of not doing that for patient care. I think that there is a language about what would have to be cuts and so on. Yet, what would have been open to the board at that point, if necessary, would have been a brokerage arrangement that they ended up with anyway. I think that Grant Sorton, ladies bear, is that there appears to have been a determination to go down this particular route to the extent that the normal procedures and processes were set aside to enable that to happen. The information that was given to trustees to get that outcome was only partial information that was provided. All of that, to me, says that there was a process that lacked openness and transparency and that that was able to lead to the actions that are laid out in the report. Surely what you are saying is that the chair was trying to pursue a balanced budget, which it was impossible to achieve. What was driving those actions, which may have been covered by the cloak of a lack of transparency, was the attempt to balance a budget that simply was not possible to balance. Were there other options available to the board, such as brokerage arrangements? Surely brokerage arrangements are not... NHS Tayside had drawn down brokerage on a number of occasions, but that was the case. Surely brokerage is a way of dealing with a particular year where there is a difficulty in balancing the budget. Are you suggesting that brokerage year after year after year after year is effective financing of the NHS? No, I do not, but NHS Tayside was requiring to get its financial position into a better place, and it had to live within its means. There is obviously a history within NHS Tayside of perhaps not doing that in the way that it should. There were outliers in a number of areas. Is that the pressure? The choices that were in front of them did not require them to go down the use of retrospective use of endowment funds. They could have had brokerage arrangements in place if that had been required. Certain parts of the leadership of NHS Tayside chose to go down a route that required them to set aside the normal rules. That is not something that other boards were doing, so it was a particular course of action that certain members of the senior leadership team within NHS Tayside clearly chose to do at that point. That was not the only option open to them, and they were wrong for choosing that route. I think that we can agree that they were wrong for choosing that route, and you have made very clear that they were, especially given the action that you have taken. I come back to what you just said, that they were required to get their finances into a better state. Do you reflect at all that that might have been a pressure that led them to take what we agree were bad choices? Have you reflected at all on the kind of responsibility of the financial pressures that were being put on the forward course of action? I do not think that there is any excuse for the action that was taken. There were other options open to NHS Tayside that they were well aware of, and those discussions could have taken place with the Scottish Government finance officials to get to that option. That is what other boards have done and will continue to do as a way of helping them to get to financial balance. It was an unusual and, thankfully, it appears so far anyway—Oscar has still to confirm this—but it appears to have been an isolated case. I think that that tells us that what happened was unusual and not the actions that a board would normally take, given that it appears to have only happened in Tayside. Liam Kerr, I am just looking back at the PwC report that I referred to. I am just looking in the executive summary where it talks about financial performance. Christine McLaughlin, I guess I am putting this to you in the first instance. It has been quite clear that there was no flag put up to say that there has been an issue with the endowment funds. I am just looking at the executive summary. Halfway down the page, in January 2014, the board of trustees of Tayside NHS Board Endowment Fund approved a number of submissions for funding totaling £3.64 million, £2.71 million was retrospective spend. In total, the board has received £7.6 million of endowment funds to fund projects outside of the core activities within its 2014 financial plan. Again, what am I missing? Why is that not a flag that says that there was a misuse of endowment funds? That is the factual statement that I said is in the account. I do not think that we have ever said that there was not factual inclusion in the accounts of the transaction. It did not suggest— It was there to be seen by the Scottish Government, by the Scottish NHS. They knew. That was included in the accounts as a transaction. That does not suggest that it was an inappropriate transaction. If you go on to read that statement later on, it does say that there is not anything that was inappropriate in the accounts. The board is part of its annual assurance process, right to the Scottish Government, and that is the point at which the audit committees of any board should flag anything that the field needs to be raised from the accounts. The letter from the board said that there was nothing to make the Scottish Government aware of. So, because PWC did not write down Scottish Government, there is something not right here that exonerates the Scottish Government from any— Auditors would normally escalate matters of concern to the Scottish Government. That is what part of their role is, and that did not happen on this occasion. If it had happened, Alex Neil at the time or me later would have taken action. In fact, it was not escalated to the Scottish Government and never came to the attention of ministers. Is proof in itself that that was not now? There are questions about internal and external audit that are really something as serious as this. We would expect to be escalated. I think that, in terms of lessons learned, there are issues for us all to reflect. Cabinet Secretary, forgive me, but the report that Liam Kerr has was given to your office? Well, I have never received a report that says that this is a matter of concern that a minister should be looking at. As Grant Thornton says— Let me finish. The report from PWC dated 10 June 2014 was submitted to the Scottish Government. Is that correct, Paul Gray? It is the annual report to members and the Auditor General for Scotland for NHS Tayside. Your office would have received a copy of this. There is a factual statement in that, as we have just said. The statement says that the retrospective funds were used, the endowment funds were used to fund core spending. Is what you are telling me, Cabinet Secretary, that, for something to come to the Cabinet Secretary's attention, it must have matters of concern or red flag written at the top? That was included in the report that was submitted to your office. As Grant Thornton has said in the report, if I am sure that you have read it, that they have been unable to identify any evidence that demonstrates the use of endowments was raised and discussed with the Scottish Government. A factual statement is not the same as a matter being escalated, so a matter coming to ministers would have to be escalated to ministers. That did not happen in the case of when Alan Neal was Cabinet Secretary. There is a report that has been submitted to the Scottish Government saying that this happened, that the Board of Trustees of NHS Tayside Board Endowment Fund approved a number of submissions for funding totaling £3.64 million, of which £2.71 million was retrospective spend. It is in a report that was submitted to your office, so why wasn't that acted upon? I have never had a matter of the endowment funds. The retrospective use of endowment funds in Tayside escalated to me as a minister, and the Cabinet Secretary said that this report came to your office. Paul Gray, is that not the case? A factual statement is not the same as a matter being escalated by auditors. There is a factual statement. It is on the piece of paper in the report, but it came to your office. That is what Grant Thornton says. It is a factual statement, but it was never escalated to the Scottish Government as a matter of concern. What constitutes escalation, not a report, that has the words written? In auditing terms, there are clear processes for escalation that auditors would take if they have a matter of concern. They do that either through qualified accounts or a matter that is put to the Scottish Government. That did not happen on those occasions. So, in auditing terms, that would be the process that happens in other cases. So, Cabinet Secretary, it is what you are saying that there is no point in PWC submitting such a report to your Government because it will not be read. What will be acted upon is something that says matters of concern at the top of it. Well, what we would expect and what in terms of auditing process we would expect is that if the auditors have a concern that they escalate that concern, not a factual statement as part of an audit report, but an escalation of a matter of concern, that is the role of auditors to escalate matters of concern. So, does that support read? Does that support read? I cannot recall if I read it in 2014. I am not going to pretend that I know, because I cannot recall what I specifically read in 2014. Christiana, do you want to advise the route that that report would have taken? If I can clarify, the board accounts go through, as you would be aware, a level of scrutiny within the board, including the audit committee, and then submission to the board for final sign-off. There is an extent to which there is reliance on that assurance process, as we have talked about before, between the international audit process and the external audit process. The ways in which things are escalated to Scottish Government would be if there was something raised that was a material misstatement, a suggestion of a section 22 report, but I would go back to every audit committee rights to Scottish Government, and that is a clear method of escalation as to whether there are any issues that I want to bring to your attention. The letter from the board says to us that there is a nil response, but there are no significant issues to bring to your attention. That is the route by which we would take something as escalation. Okay. I think, though, that it is disingenuous for the Scottish Government to say that they did not know when this report with this information landed on your desk. Alex Neil Can I just begin with a wee housekeeping thing referring back to what Liam Kerr asked about the director of finance? I know that you might not be able to answer this just now, but can you let us know if Grant Thornton gave him the opportunity to talk to Grant Thornton as part of his review? I fully appreciate that he could not be compelled to talk to Grant Thornton because he is retired. However, in the interests of fairness and justice, I would have thought that it would be fair to give him the opportunity for him to present his side of the story, whether he is accepted or not. It is a different thing, but it is an interest of fairness and justice. I know that you cannot answer this just now, but it would be useful to know if he was given that opportunity. If he was not given that opportunity, maybe you should reflect on whether he should be given the opportunity, it is up to him to decide whether he takes it or not. Can I just correct the convener that there is a big difference between documents being submitted to the Scottish Government and to the cabinet secretary's box? If every document that is submitted to the Scottish Government in any department ended up in the cabinet secretary's box, then, quite frankly, the cabinet secretary's job would be impossible. No, that is a fair thing. It went to NHS Scotland. No, but you were interspersing the two. If it goes to the Scottish Government—this is important because of the point that I am about to make—there are many documents that go to the Scottish Government that do not end up in Paul Gray's box—never mind in the cabinet secretary's box. However, having said that, as the cabinet secretary said right at the beginning, what has happened here should have been flagged up. I think that we are all agreed in that. That should have been flagged up. We have mechanisms in place. We have non-executive board directors, whose job it is to flag those things up. We have audit committees run by the non-executive directors. We have internal auditors. We have external auditors. We have monitoring teams in St Andrew's house in various functions. Despite all that, nothing was flagged up to the Scottish Government until recently. That is about events that have taken place four or five years ago. Certainly, it was never flagged up to me. We knew that there was a financial problem, but it was never flagged up to me that there was any problem of wrongly using funds. Had it been so, then, obviously, you would take action right away. My question is clearly there is systemic failure in terms of picking up what has gone wrong to me. Despite all that paraffinial you have got and all the checks and balances that we have in place, they did not work. Obviously, the recommendations, cabinet secretary, you have rightly said that you will implement them in full, but I am not convinced that the recommendations of themselves will solve that particular problem. Therefore, my question to you is whether you are looking at other ways, whether it is early warning systems, whether it is telling the CLO to notify at least Paul's office if they have an inquiry of an unusual nature from a board or whatever. However, you are looking at how we avoid this happening again, because very clearly had this been flagged up at the appropriate time. In the same way, my predecessor, Nicola Sturgeon, had a similar problem with the waiting lists in Lothian health board. Have you looked at other ways in which we can, in the future, try to ensure that issues like this are flagged up very quickly? Yes, indeed. The recommendations are part of this, but you will appreciate that a whole load of action has already been taken, one of which is a cultural change, particularly in NHS Tayside, in that the behaviours that were only able to happen because of a culture that was less than open and transparent. We have already touched on the fact that the internal auditor had put pressure on them to change the report, so there was clearly a deliberate set of actions to obfuscate the facts here, so that is important. In terms of the action taken, clearly there is a strengthening of the audit processes that are well under way, and the new chair, John Brown NHS Tayside, has been very keen to do that, and to do that very quickly indeed. There have been other changes that Christine Can outline that have been taken forward across the NHS. There is also the work that John Brown has brought in in terms of the assessment of skills across the board to make sure that there is the right set of skills. I think that the role of non-execs is important, but it needs to have the information and the confidence to ask the right questions. Again, there has been a lot of leadership training to empower non-execs to be able to do that. Christine Can come in with some of the detail, but the separation out of the role of endowment trustees from those sitting on the board is an important step forward, because it would then remove any possibility of that conflict of interest arising. That is something that Oscar has already flagged, and the intention is something that we would want to do as well. I think that that would really ensure that you are not sitting with two hats on, as was the case in Tayside. Do you want to say a little bit more about some of the work that is under way? I think that the important point that you should say is how do you create an environment where people feel comfortable to say that something does not feel right in that whole system? Partly it is making sure that there is clarity of the financial environment in which boards are operating and that we understand the different sets of pressures in different boards. Partly what we are trying to understand is what those are, the extent to which we really understand them, and that we better understand the steps that boards are taking in order to provide that balance of performance and finance. For me, that is the way to improve on all of this. There are some things that we need to do in relation to governance, to the internal audit function, which is really important on all of this, to make sure that you are focusing on the right things and flagging risks. There was certainly some evidence in Tayside of things like internal audit action has not been followed through. For me, that is certainly something that I will be much more aware of in looking at much more closely, because it is a very good sign of pressures in a system. What types of issues are being raised by auditors? How are they being addressed? In what time frame? When we go back and look at the position over the past few years in Tayside, there has certainly been one of the areas that has been identified that there was not that follow-through of key issues, because most of those things were raised in some way. There is no effort on my part not to be absolutely honest with the committee. Things were identified at the extent to which things came to sufficient clarity. I think that there was enough understanding of the significance of issues in order to make sure that action was taken. That is why I want to focus on the whole of the system and really learn from what happened in Tayside. Can I ask two specifics? It seems to me that the role of the non-executive directors has to have a big question mark around it, because clearly they did not do their job. If they had done their job, none of this would have arisen. It is a similar problem as to the one that we had in other organisations such as the Scottish Police Authority. What are you doing to strengthen the quality and performance of non-executive directors? Not just in Tayside, but in other boards as well. Question number one. Question number two is, obviously, and Christine has referred to in her own department, but this is more generally for Paul, about strengthening the monitoring of boards at St Andrew's house, so that a lot of the recommendations relate to how Tayside itself internally should improve its checks and balances. Clearly, there is a need for a non-going check and performance monitoring in the widest sense at St Andrew's house. It seems to me that, as well as doing something about the non-executive directors, there needs to be a substantial strengthening of the monitoring of boards in St Andrew's house. Would that be a fair comment? I think that a lot of that is already under way to make sure that that is the case. There is also, I think, an attempt to recruit non-execs from a wider spectrum of society, shall we say, that brings in different skills and experiences, and I think that that is a good thing. I had a session with all of the non-execs across Scotland and it really was making the point that they have a critical role in questioning, but they need to have the information at hand, so the role of the executives in providing proper, open and transparent information is critical there. I think that expanding that where we draw non-execs from is important in enhancing and building on those skills. Three things to say. First of all, to record that I had a very useful conversation with the Auditor General about how we can learn together about what we might all do differently as a result of that, because I think that there is no doubt in my mind that this is something that we do not want to happen again, and I think that there is a joint commitment to learning what we need to learn. Secondly, there is the Grant Thornton report, there are other reports, there is the Oscar report to come on Tayside and then the broader Oscar report on other boards and the material that I have submitted to them. We want to learn from the lessons that we need to learn in terms of things that we might do differently. The chief executive of Oscar has asked for a meeting with me, which I have agreed to discuss how we might best strengthen the governance of endowment funds and bring in that separation that, as I said at my last appearance at the committee, we are all committed to. John Brown and Susan Walsh have undertaken a review of governance in NHS Highland with the clear intention that that should have broader applicability across all boards and turning to your point about monitoring from within the health directorates. Yes, you are right, but what I want to be absolutely clear about here is that we have a presenting problem here, which is an issue that arose in Tayside and was not escalated and therefore was not acted on. Can we make absolutely sure that what we do is not simply designed to fix one presenting problem, which might not happen again, but rather is designed to ensure that where we can strengthen the monitoring, we do so? We are trying to address this on a number of fronts. In terms of non-executive director development, as the cabinet secretary has said, we are already engaged in that and have already drawn out some of the lessons of Tayside for the rest of the non-executive director cohort. You will recall, Mr Neil, that we had significant issues in NHS Lanarkshire at the end of 2013, part of which arose from weak questioning by the board. We did substantial development with that board and have brought about something of a transformation layer. Again, we are ensuring that the lessons from that are being spread to other boards as well. Sir Lewis Ritchie has been retained to work with NHS Tayside and his audit advisory group function to ensure that there is strengthening and support for the non-executive directors there, too, in terms of their development. We are trying to address this in terms of board scrutiny, internal scrutiny and subject to the fact that, clearly, we do not direct audit Scotland a discussion with them about their external scrutiny as well. We are trying to tackle this on a number of fronts. Thank you, Mr Greed. You said that the skills review was taking place in NHS Highland. Do you mean NHS Tayside, just for the official report? Sorry. John Brown is doing a skills review in Tayside, but he was also prior to this commission to do work in Highland with Susan Walsh. It is the work in Highland with Susan Walsh that is designed to have broad applicability, although we will clearly learn from what comes out of Tayside as well. Okay, so they are doing a skills assessment of the board at NHS Tayside, as per your letter. That is absolutely correct, but what I am saying is that there was also another separately and unrelated commission piece of work, but it was relevant to my response to Mr Neil. I would like to raise the question of the KPMG investigation of e-health funds. We have received a heavily redacted summary of the findings and conclusions here, and there are key areas that are missing, such as governance weaknesses that are referred to in the contents but do not actually appear. Would it be possible to get the full report? Yes, yes. I think that that should absolutely be possible. The board is just going through the internal clearance with the auditors. That was a report that was largely written for internal consumption, so it was a lot of references to individual members of staff, and they just need to ensure that they have dealt with that appropriately and then we will get the full report released to the committee. Cabinet Secretary, it is possible that this question is more for Paul Gray, but I assume that NHS as a whole has some sort of risk register, which is monitored periodically. I assume that Tayside is fairly prominent on that. What is the criteria for appearing on that risk monitor? Is it if you get section 22 reports? Is it if you require brokerage? At what point did Tayside appear on that risk register? I'm happy to take that comment, so I take it, and Christine Cynad. The criteria for appearing at, if you like, health and social care management board on the risk register are not confined to two or three aspects. They would cover financial risk, they would cover governance risk, they would cover performance risk, and they would cover people, HR-type risks. If any of the relevant directors—the director of finance, the director of performance, the director of people—were to feel that there was a risk based on their monitoring that was material and sufficient to cause it to be escalated, that's how that would happen. We try not to narrow the criteria because sometimes risks can emerge in different ways, and if you have a narrow set of criteria, you end up excluding genuinely material risks because they don't quite meet some fixed criterion. At what point would Tayside have appeared on the risk register? You may not have that. I mean, why don't I write to the committee, but what I can say is that it was sufficiently high on the risk register that, by March 2017, we had agreed to put in place the audit advisory group, so it had appeared sometime prior to that. One of the things that highlighted in this report is the number of people that appear to be complicit in covering up the situation that arose. As a culture, it seems astonishing. You sometimes get one or two people, but here we are talking about the director of finance, the deputy director of finance, the internal audit. It just seems like across the board that there was this culture, and it's very difficult to get your head round how it came about. As we've touched on earlier in the session, there was certainly a culture that was less than open and transparent, and that led to a series of behaviours that were not only tolerated, but actually became dominant in some of the key decisions that were made. If you look, for example, at what the thing that jumped out at me was the pressure that was put upon the internal auditor to change your report. Thankfully, those behaviours are unusual to the extent that they become a dominant culture. I haven't seen that level of behaviour anywhere else. We have had problems elsewhere in other boards in various aspects, but the lack of openness and transparency and the culture within Tayside at that time is in a bit of a league of its own, to be honest. The behaviours that followed from that are laid bare in the Grant, Thornton report, which is why one of the things that the new leadership team has done is to focus on a change of culture, the requires to be openness and transparency, the requires and needs to be a culture where people can feel, they can raise, concerns. That has been very much the message that has imparted to the leadership team in the NHS Tayside, but also the staff that that should be the culture. Now, that might take time, but I think that it is absolutely the right thing to do. Are you satisfied that there has been a similar change of culture within internal audit? I am looking at what has been happening here with internal audit reports and so on, being presented by management, not by internal audit, poor quality recommendations, lengthy audit reports that probably people did not understand very well. It just seems like they were complicit in the whole thing. The lack of information, partial information, verbal reports, the sort of written reports, all part of the same picture of an attempt to provide best partial information to those who are then expected to make decisions about that. I am sure that there will be more that will come out in the Oscar report around the specifics, around the role of the trustees within that. Without a doubt, the changes that have taken place are important in the way, the mechanics of reporting. Those are things that are now in place about written reports and so on. That in itself is important, but so is the cultural change to go alongside that, so that there is not an attempt to provide partial information. That should not be what people are trying to do. As well as the mechanics of openness and reporting, the cultural change is also important. As far as internal audit is concerned, two things. First, are they still the internal auditors to NHS Tayside? Secondly, if they are, are we satisfied that they are now doing the job properly? I know that you asked me about last time that I was here. We have given some information following the last appearance about the internal auditors but also to say that the board of NHS Tayside has signed off on a review, which is good practice for internal audit. It is an external evaluation on the internal audit standards that any internal audit should follow. That is going to happen in June. We will look at the effectiveness of the current internal audit system of controls within Tayside and areas for improvement from that. That is a really good first step. It is good practice for any board. We will ensure that that is in place across all the NHS. The same audit group, which I believe is internal to the NHS, provides internal audit services elsewhere within NHS Tayside. Are we satisfied that they are doing their job there? There already was part of good practice reviews, external quality assessment reviews of the functions, and FTF, who provide that in-house team, are part of that review. I would like to see what comes out of that and what the areas for improvement are. However, as you have mentioned, things that remain in the report about management presenting reports, that lack of clarity and particularly lack of follow-through in actions are all things that the new leadership has already got under way to make improvements on that already. We will do that review, but you will see improvements already in starting to take place. Paul Gray wants to come in. It was on that point, Mr Witte, if I may. One of the things that I should have said to the committee in my earlier response was that the Auditor General and I have also discussed the importance that we both attached to ensuring that internal audit is robust and protected, and I have also discussed that with the director general for Scottish Exchequer within Scottish Government. We will be following that up, not just in the context of Tayside, but more generally to ensure that the internal audit function is sufficiently robust to bring information that needs to be brought and escalated to where it needs to be escalated to, that it is protected. In other words, some of the evidence within the Grant Thornton report is that the internal auditors were put under pressure about their own positions and their own future. That is completely unacceptable. I think that I made that clear at a previous committee appearance, but I wanted to give the committee assurance that we are following that up now, and we will hope to make further progress on it quickly. I will come back to the fact that the internal audit clearly failed. It did not do its job. It should have been escalating things past the management if necessary, if they were having problems and if they were having difficulties with being intimidated or anything. However, the external auditors have been signing off every year saying that internal control is appropriate. Should external audit be able to pick up that internal audit is failing? I think that there are lessons for internal and external audit. I know that the discussions that Paul has been having are important in that respect. There are lessons, I think, for all parts of the system here, whether it is the internal controls, the reporting mechanisms, the culture, the external audit. I think that all lessons have to be learned to make sure that there is a tightening up, that things are appropriately escalated when there is a matter of concern. If we get all of that right, it will ensure that something like this could never happen again. I was just going to ask a general question again about internal audit. Are we satisfied that across the NHS internal audit is doing its job and that external audit is interfacing as it should with internal audit in order to ensure that this sort of situation cannot arise again? I see this largely arising because of failures in the audit system. Can I have brief answers to that, please? I think that the comments that are being put in place will deliver that. Some of that has already happened, some of it is in the process of happening, and I am sure that it will deliver those additional assurances. I can hear good morning everybody. Can I start by asking a simple question? Has the endowment fund been returned to the endowment trust and to be effectively replaced by brokerage now? The £3.6 million will be in this financial year. The agreement has been made to make that transaction in 2018-19. The issue will be replaced by brokerage anyway. We have already offered additional brokerage to make sure that we do not want that impacting on patient services. It will be part of their brokerage arrangements. Of course, there is a new recovery plan being worked on by the new leadership team, which will be robust and will give us all renewed additional confidence in them being able to get back into financial balance over a period of time. Cabinet Secretary, you said that we would have probably ended up where we are anyway in giving the board brokerage, but Ian Gray mentioned that earlier on. That is not the first time that NHS Tayside has requested brokerage. I think that it is five or six years in a row now. What is our role at the Scottish Government NHS in intervening and repeat situations like that to try and assist the board to get their books on balance? Obviously, a lot of work has been laid out in the statement to the Parliament that all the work that had gone on to support the board in its journey to recovery, both in terms of financial recovery and making sure that it was living within its means and tackling some of the areas where there were outliers, all of that was work that was on-going and supported to a great extent by the assurance process as the external support. However, at the point at which Paul Gray had the final recovery plan was being reported upon, we then had, as you probably recollect, the issues of e-health and then endowment, issues being raised. What the new leadership team is doing is to look at where there is strength in that recovery plan, but to make sure that what comes forward from them has an additional level of robustness, has the confidence of the leadership team and the staff, because perhaps that was lacking in the previous plan, and that it is deliverable. It is deliverable against achievable targets over a clear timeframe. That is the task that they have been given. I have to say that I have more confidence now in the ability from what I am hearing from the new leadership team of them to deliver something that is robust and will actually make the substantial changes that need to be made, particularly on finance. We expect to get a revised plan for 2018-19 by the end of this month's next week. We will have the first draft of that from the new team. In the area of making sure that this kind of thing does not ever happen again, are we clear about the definition and the appropriate use of endowment funds? They seem to hang their hat on the scope of it being for the advancement of health, which could really be anything. Are we clear about what is and what is not appropriate in terms of the use of endowment funds in the future? The guidance has been referred to and was revised back in 2013. There is obviously a wide scope for the benefit of health, but what is clear is that what happened in Tayside with the retrospective use of endowment funds was totally inappropriate. I guess that there will always be debate among the trustees about whether we have had that request or that request. There are various ways that endowment funds are used. I think that the separation out of the trustees role from that of board members will give that extra level of assurance that what the endowment trustees are focusing on is what is the appropriate use of endowment funds for those additional things that are not core services. Yes, it is about the betterment of health, but it is about those additional things that can improve healthcare for the local public. Oscar wants to review the guidance further, which is a good thing, in addition to the separation out of those roles. All of that will get us to a position where we have greater assurance. Obviously, ministers have no role quite rightly in the spend of endowment funds, because they are charitable and Oscar has very clear rules, but Oscar himself has recognised that the guidance needs to be revised and that the separation out of those roles is important. On the internal audit issue that my colleague Colin Beattie was leading on, Cabinet Secretary, you have mentioned several times in the Grant Thornton report that the internal audit report on the use of endowment funds was changed from the draft report. The paragraph that I will quote here exactly says that the chief internal auditor informed us that the director of finance and an assistant director of finance put pressure on him to amend the covering paper at a meeting on 5 May to discuss the internal audit annual report. There were alleged threats made, including those of the potential removal of that internal audit function, as internal auditors or the removal of him as chief internal auditor. That is an incredibly serious commentary to be made. I know that you have not referred to it several times and so has Mr Gray. What is the Scottish Government doing to try to pin down exactly what happened here to make certain that can never happen again? You are right that they are very serious indeed. Grant Thornton does then go on to say that they have been unable to substantiate those allegations, but note that there were changes between the draft and final versions of the internal audit and endowment annual report. Grant Thornton considered that the changes' impact on the emphasis and reduced the concerns that were initially raised. Although they were not able to absolutely categorically establish allegations, I think that reading between the lines, there was obviously something happening between the draft and the final report. Christiane has laid out some of the work that has been undertaken about reporting, how to make sure that the reliance that they had at the time of verbal reports instead of written reports, and the fact that there needs to be a process of openness and transparency that internal auditors need to feel that they are able to raise those concerns if someone was being pressurised into going down a particular route. A lot of work has already gone on to make sure that that could not happen again and that further work is on-going. Liam Kerr, I think that the draft and final audit report was escalated beyond the director of finance to anybody else. I think that that is the crux of the issue. There is no evidence of further escalation beyond that reported position. What there is evidence of is that the wording in the final report was different and was not as strong as what was in the draft. It did relate to the extent to which Oscar advice could or should have been sought. Partly what is referred to in the report is that that might have been because there was a view that that would have been covered through the work of the Endowment Fund external auditor in the process. Clearly that failed to come to anything, but to be clear into other things that should happen and be in place, the internal auditor should be able to talk and report to the chair of the audit committee in any board. So there are mechanisms to go beyond that sense of management intervention in any way, both to the audit committee, but also to have good practice would also involve private sessions with non-executive board members routinely through the year, where the external audit teams can talk in a private space to the non-executives as part of that scrutiny, and I think that there wasn't sufficient evidence of that kind of thing, so there are most certainly areas in the strengthening and protection, as Paul said, of internal audit that we want to make sure are in place and operating effectively across all of the NHS. With respect and great respect there, I'm not surprised that that didn't happen. If this is true that threats were made to remove the persons as chief internal auditor, I mean a challenge anyway to see what they would have done under circumstances like that, that's quite scandalous to have that hanging over you, then I would spring to the defence of the audit process here. In my last question, convener, I joined this committee in 2007 when we looked to the Western Isles NHS and they who completely ignored internal audit recommendations at that time, and here we are again with another example of audit recommendations being honestly and fairly presented and being changed by others being ignored. I suggest to you, convener, to the members that that's not a failure of the audit process, it's a failure of people abusing the audit process and abusing their position. The real crux is how do we ensure that we follow up and verify what auditors are recommending be done? I've asked this over a number of years at this committee and I think that that's the key here, to support the audit process and make sure recommendations are carried out. How are we planning to do that? I think that the recommendations in Grant Thornton and also the additional work that's already been undertaken recognise that and that's why there were additional steps of assurance that are being put in place. You're absolutely right that there was a culture that enabled that to happen, but the processes didn't pick up on that to stop it happening and that's the bit that has largely been sorted and is continuing to be addressed. Liam Kerr, thank you, convener. Just very briefly, I think that Willie Coffey's line of questions is very interesting and I'm just looking at Grant Thornton. It would appear that the director of finance, the chairman and somebody called the assistant director of finance have been involved. Now, we know what happened to the director of finance, we know what happened to the chairman. The assistant director of finance, I think, is a chap called David Carson. Where is Mr Carson now? He's retired from the board. Right, okay, from the board of NHS Tayside. Right, and so this was all happening concurrent with Mr Bedford's retirement as well. I'm not sure of the date that he retired. I think that over a year ago, I think in the last two or three years, he retired from post. I can confirm the date. Bill Bowman, thank you, convener. Can I just refer to my register of interests when I was a partner at KPMG, whose name appears in these documents and I had, of course, nothing to do with this particular report? Can I just ask some specifics, cabinet secretary? In looking at the serious financial irregularities at NHS Tayside, both the eHealth and the endowment funds, which have been serious enough to warrant your intervention, and we've had descriptions of things like cooking the books. There seems to be one aspect missing from the discussions that we've heard about so far, and that's the possibility of any criminal activity. Perhaps to be the benefit of public trust in the health board to rule out any criminal wrongdoing in these matters, useful if you could perhaps explain without prejudicing any legal case what discussions you've had about involving Police Scotland in the issue? Obviously, the grant sort and report will be looked at in close detail. We've already accepted recommendations of NHS Tayside. Now, if there's any evidence within that report, or indeed the Oscar report coming forward that is criminal in nature, then clearly action would be taken on that basis. Christine, do you want to say any more? I think that all I would just say is that there is nothing that I'm aware of that's been put to us so far that is criminal fraudulent or involves personal gain in anything that I've seen to date. Clearly, if anything did come to light, that would be something to be considered, but it's not something that we've considered to date. I suggest that you perhaps do. We have the misrepresentation of public funds in a set of financial statements of a significant entity, not just looking over the whole piece of things. I would ask that you might think about that. What was the evidence of criminal... Well, that's how you... I know, I'll take your point. To define that. Another thing, cabinet secretary, previously confirmed to me in the 17th of April that either the grant, Thornton review or subsequent investigation would cover your own office regarding who you thought saying that the investigations to quote you will get to the bottom of all that and make sure that there is full openness and transparency. Can you provide some detail us to that process, specifically who in your office has been involved and what investigations or information they've provided? Well, through all of this in terms of the reports on eHealth and the issues of endowment, what we've said is that we need to know, first of all, how this could have happened, what communication there was, what the relationships were and obviously in the terms of eHealth that has been fully investigated both in terms of the eHealth officials within the Scottish Government, National Services Scotland and NHS Tayside and the relationships there and how that was allowed to happen and action has subsequently been taken on the back of that. In terms of endowment, again, the reason that the independent report was important was that there was an external look at all of that. Your own office and the papers and spoken to the people within that? Well, part of Grant Thornton's review was to look at what the flow of information was, who was told what when, that was what Grant Thornton was tasked with and as they've said very clearly about the reporting mechanisms, what was provided information wise and what wasn't. We're very clear, Christine, has looked in terms of any information that was passed at the time and, Christine, you want to say a little bit more about that? Really, but I was trying to get at somebody coming and actually spoken to your people, being into your records. So, to clarify, certainly, for the eHealth review that involved Scottish Government's role in that as much as the role of the other parties, so that was fully included in there and emails were looked at and members of staff were spoken to in relation to eHealth and the outcome of that was included in the report. The report that we've got presented just now in discussing in relation to financial governance looked at reporting to Scottish Government, so there was no, as far as I'm aware, there were no interviews with members of Scottish Government. It was a look at documentation in terms of flow of information between Tayside and Scottish Government. This issue has obviously been spoken about. There's been a suggestion that you should have intervened earlier in this and you said that that wasn't possible given that neither internal nor external auditors raised significant issues with you. Following on from that, you've said that there should be an examination of why these issues weren't flagged up by the auditors. Can we just maybe cut through the wishy-washy language here and say, does this mean that you believe that the Auditor General office failed in their duty to you? I wouldn't use that language at all, but I would say that there are lessons to be learned from all parts of the system. If we're going to make improvements, we all have to take a hard look at what could have been done better. What I would contend, and I'm sure that Alex Neil would contend this as well, is that had any part of the system, whether it is internal or external audit, escalated that specific matter to Alex Neil's attention or indeed my attention when I came in to post it at the end of 2014, you can be assured that action would have been taken now. If we need to then make sure that the processes of internal external audit would do that in the future, that means that we all have lessons to learn. Do you believe that you should have done it in the past? Of course, and that's why lessons need to be learned, because if that had happened, we would have been looking at that issue in 2014 rather than in 2018. Cabinet Secretary, if we can take you back. I'm just looking for a little bit of clarity on a question that Willie Coffey asked about the repayment of the endowment funds, which I know that you're keen to see. Did you say that £3.6 million will be transferred back to the endowment fund account in NHS Tayside? Is that correct? Yes. When should we expect that to happen? It will be during the course of 2018-19, so it will be during this financial year. So would we expect to see that back in the accounts at the year end? Yes. The original report, which Helen McCardill wrote in the Herald, said that over £4 million had been approved for transfer from the endowment fund to the core funding budget. Have you done investigations to see if that amount was transferred and therefore where that different amount between it—I can't remember exactly—was at £4.2 million and £3.6 million? Was that amount transferred and therefore is there still money that needs to be paid back? Is it going to be more than £3.6 million? No, it's not. Grant Thornton specifically looked at what was transferred and it was £3.6 million. I don't know where the Herald got their figures from, but this is an independent report that has identified £3.6 million and that is an accurate reflection of what then needs to be paid back. Can I ask the Grant Thornton report, which we've been talking about today, your office received it a week before we received it here in committee? What's been happening to it during that week? Christine Grahame, I think that we've been just going through the normal process to get it to a final draft. I think that I said to you that we're expecting the first draft on Tuesday of last week. We got a final draft on the Friday, so just a routine process of making sure that it was fully complete and that there were gaps in it when it came at first, that Grant Thornton were continuing to finalise and just making sure that they had verified everything that they needed to. So final draft on Friday, and then it was ready for clearance internally on the Monday of this week. Has it been changed? It wasn't a complete draft until Friday of last week. I wouldn't say that it's been changed, it just wasn't complete. Grant Thornton, as Christine said, had additional bits of information to put into the report, which is the final report. Is there any way that the original report that you received can be made available? I can speak to Grant Thornton and see when there's a normal process at which somebody would say that this is the draft version that they would release, and I'll speak to Grant Thornton and ask them to give you that. We're due to receive, of all the six reports that are taking place on NHS Tayside, one of them is a statutory report, the one from Oscar. Given that it is a statutory report, what's your understanding of the process around that? Does that also come to you in draft form, or is it published directly from Oscar and made available to the committee and made public? It's Oscar's report, we have no locusts in that report, what's where it now? It doesn't come to Scottish Government, it's an entirely independent report from Oscar. Oscar has an approach to commission the report. Sorry, one at a time, sorry, Christine McLaughlin. Did you just say that Oscar has a protocol that is published, which explains how they undertake reviews and their process of publication of reviews? So, just for clarity, there is no draft report to Scottish Government or anything of that nature. So we'll receive the first report, the process is different from the Grant Thornton report. That's correct. Okay. And that isn't because we commissioned Grant Thornton to do the work, Oscar had decided to do their review. Yes, okay. But you can check for us if we can have the original version of the Grant Thornton report, if that's possible. Great. Are there any further questions from members? Can I just ask? Whoever put pressure on the internal auditor to change the report, that's a fairly serious disciplinary issue. Has appropriate action been taken? Well, as I said earlier on, Grant Thornton then went on to say that they've been unable to substantiate those allegations, but they do point to the changes in reports. However, the individuals involved, as we've talked about throughout the session, have retired or indeed one of us in the previous chair at the time has deceased. Do you have taken action in terms of professional organisations? As with anyone who is professionally qualified, it would be a matter for professional bodies to look at the actions of individuals and decide whether there's any action to be taken. So, I think that at the end of this process, I've already had initial discussions with some of the accountancy bodies in relation to the events, and they're taking a very close interest in the outcome, and they will determine whether there's any follow-up or any reviews that they would wish to take in relation to members of any of their accountancy bodies. It has to be a very clear message to everyone else in the public sector that that's not on. Can I thank you all very much indeed for your evidence this morning? I now close the committee's public session.