 Good morning, and welcome to the first meeting in 2023 of the Scottish Commission for Public Audit. We've received apologies from Colin Beattie this morning, so as deputy chair, I will be chairing the meeting in his absence. The first item on our agenda is to agree to take agenda item 3 in private, are we all agreed? Our next agenda item today is to take evidence on Audit Scotland's annual report and accounts for the year to 31 March 2023, as well as the auditor's report on their accounts. I welcome to the meeting this morning Alan Alexander, chair of the board of Audit Scotland, Stephen Boyle, auditor general for Scotland, Vicky Bibby, chief operating officer, Martin Balker, director of corporate support and Stuart Dennis, corporate finance manager Audit Scotland. I would like to start by inviting Professor Alexander and then auditor general to make short introductory statements. Thank you, chair. Good morning to you and to your colleagues on the commission. As I don't have to remind you, Scotland is dealing now with a range of highly significant issues, both long-standing and recently emerging. Those include growing inequalities, demographic change, rising demand for public services, social and economic recovery from the pandemic and a cost of living crisis that has emerged and has developed with the same speed over the last year or so. Those issues have combined to exacerbate the problems facing Scotland's public services, its decision makers and its communities. The lesson that we take from our years' work is that Scotland's public services need to change. It was a recurring finding throughout Audit Scotland's work in 2022-23, and Stephen will have rather more to say about that. In this context, it was the right time for the Auditor General and the Accounts Commission and Audit Scotland to consider our purpose and how we can have a positive impact on services and on the people of Scotland. During this financial year, we consulted with our stakeholders, including ourselves, to inform and shape our shared vision and mission and the outcomes that we want to achieve for Scotland. We published the results last Tuesday in the form of our refresh statement of purpose public audit in Scotland, which is supported by Audit Scotland's new corporate plan. We were impressed by the degree to which there was a common view about what Audit Scotland should be doing across the range of stakeholders. As an organisation in Audit Scotland has also had to navigate the issues that I have been talking about, like other public bodies, the cost of living crisis and recovery from the pandemic have had an impact on us and continue to do so. We are making good progress and are performing well in 2022-23, but it hasn't been easy and we still have work to do. Over the past year, Audit Scotland has bedded in its new leadership team. Our new executive directors have been in post for about 12 months. Vicky Bibby joined us in August last year as chief operating officer. The Audit Scotland board has been impressed with the dynamism energy and quality of this leadership team. This is already bearing fruit in the innovation and focus on ensuring that Audit Scotland can continue to deliver high-quality work, meet current and future needs and lead public audit at the time of such stress on the public finances. My board has continued to discharge its duties and oversee Audit Scotland through these changes. The well-informed and positive challenge that we bring to the board has, I believe, contributed to the process by which the new leadership team has led the work of Audit Scotland. I thank my fellow members—both the statutory members and my fellow independent members—for their hard work and their collegial approach throughout the year. I would particularly like to thank Stephen, the Auditor General and Accountable Officer. He has led Audit Scotland during a period when just getting the organisation through would have constituted a strong performance, but he has gone further. He has proactively tackled future challenges and put into motion the work needed to ensure that public audit remains fit for purpose, relevant and effective now and in future years. Let me conclude by paying tribute, as I always do to Audit Scotland staff. I have remarked before on their professionalism, their can-do attitudes and their good humour. I remain struck by all of this and I thank them for all their work. I hand over to Stephen to give his introduction. Many thanks, Alan. Good morning, chair. Good morning, commission members. Chair, for some time there have been questions and warnings about the sustainability of Scotland's public services and the need for reform. Audit Scotland has been at the forefront of some of those messages. Our work in 2022-23 reinforces the need for sustainable change. Reforms are needed on how public services are delivered. We believe that they are beyond the stage where incremental changes and adjustments are enough. Decision makers and public bodies need to reconsider delivery models, how they work in partnership and, crucially, how they involve the public in this process. That needs to be matched with better transparency around public spending and the decisions being made. Over the past year, I, the Accounts Commission and Audit Scotland have taken a close look at what we are contributing. How are we driving, advocating for and supporting change? How can we promote and uphold more clarity around public finances? What is the positive impact that we can have on the lives and outcomes of Scotland's people? The themes of delivery, change and transparency are also at the heart of public audit in Scotland and our core plan. They provide salient reference points for discussing our performance in 2022-23. The bedrock of our work is delivering timely, impactful and high-quality audits. Last year, we delivered 51 per cent of annual audits to the deadline. Auditors continue to work towards bringing back audits to pre-pandemic timelines, but that is challenging. Based on current tracking, our recovery plan is on course to return over the next two to three years to 2019 levels. We have made good progress with audit quality. This year, independent external review found that all of the reviewed performance audits and 80 per cent of the reviewed financial audits met the expected standards. Over the past two years, we have implemented a quality improvement programme alongside existing assurance processes. During 2022-23, we embedded our innovation and quality group to support high-quality work across the organisation. That was one part of the organisational change that we have undergone. The SCPA has supported our staffing and capacity requests in recent years, and we added 14.5 whole-time equivalents in the past year. However, like all other audit and accountancy organisations, we face strong competition for high-quality candidates. We continue to ensure that we provide a unique and compelling blend of rewarding work, career development, supportive culture, flexibility and the opportunity to do work that makes a positive impact to people's lives. Lastly, I will turn to the transparency of our financial position. We met our financial targets in challenging circumstances. As with all other organisations, both public and private, we face the impact of inflationary pressures on our costs. In conjunction with our trade union partners, we agreed a fair pay deal for staff, but one that was higher than budgeted. Through prudent management and efficiencies, we have absorbed this additional expenditure in the year. At the heart of everything that we have done over the past year has been the resilience, professionalism and empathy of my Audit Scotland colleagues. As Alan has said, they continue to support each other through delivering high-quality audit work, and I cannot thank them enough. All five of us look forward to answering the commission's questions this morning. Professor Alexander set out the context that everyone is operating in very well. The cost of living crisis is still with us. Inflation remains stubborn at 10 per cent, much to the surprise of various forecasters. However, in terms of your total resource requirement, that was £1 million under what was forecast. That, in and of itself, is somewhat surprising. I was just wondering if, Stephen, you could set out why that is. My understanding is that the majority of that is about staff underspend. Given the pay pressures, I think that we may find that surprising. Are there thresholds that you apply to the forecast in terms of underspend? If you could just talk us through both why and how you go about the forecast and whether they are correct. Mr Johnson, thank you for that question. All the context that you have said that we recognise has been a feature of our financial management over the course of the year. I am going to bring in a couple of colleagues to set out for the commission the breakdown of our underspend. Some of the intricacies of that are cash, some of it is non-cash. Parts of it are del and other bits are amy, so there is a combination of factors. Similarly, I might invite Vicky to speak a bit further about the management of the staffing budget. Before passing on to Colleen, one thing that I would add is that, as the commission knows, Audit Scotland, our key financial target, is fundamentally to break even each year. Unlike some other public bodies, we are not able to carry reserves to smooth our financial position from one year to the next, just a feature of how we operate as an organisation. That means that we have to plan really quite carefully to break even. There are a number of variables—quite rightly you mentioned—our staffing costs. One of the others that is worth highlighting for the commission is our revenue recognition or our work in progress. Audit Scotland, we account for income really as our audits progress. The audit year to add complexity to that does not coincide exactly with the financial year either, so audits tend to run from October to September. When we strike the accounts at the end of March, there is an in-year position. That is a real risk that we might have to manage really carefully the work in progress. Stewart and Vicky monitor that closely through weekly reporting as we move towards the end of the year. That is fundamentally context, Mr Johnson. It would be helpful, through Vicky first of all, to see the staffing position and then perhaps pass to Stewart to set out the detail of the underspend. In context to that, the actual operating underspend is nearer £200,000. Stewart will go into the detail. This year there has been significant adjustments because of the pension and the rest of the position. We have a funded scheme—we are part of the local government pension scheme. The impact of that underspend largely relates to pension adjustments. Half of it is amy and £300,000 is dell. Stewart will go into more detail. Our actual operating underspend is nearer £200,000, which is 1.2 per cent of our budget. Given our target to break even and the challenges that we have of matching income into our budget, the board, when we discussed it, was quite satisfied that that is a reasonable variable. Staff turnover this year is higher for a number of—the vacancy factor is a bit higher for a number of reasons. We have had some retirements as a result of the year end. There has been a number, including the senior executive team, of taking time on the budget to have the full year costs. That has resulted in an underspend on some of the staff costs, which we expect to not be replicated going into 2023-24. I will pass over to Stewart for the detail, but our actual operating underspend is nearer the £200,000 rather than the £1 million. You will probably see from page 32 of the report that there is a detail of the actual variance analysis. When it comes to people costs, we show a £1.3 million underspend, but what that relates to is that half a million of that is actual controllable costs, so that staff costs, and that is due to turnover, as Vicki was saying. Half a million relates to AME funding in respect of the funded pension scheme, so that is an actual calculation that we have to account for on that basis, and £0.3 million relates to, is also an actual report that relates to the unfunded pension scheme. Out of the controllable spend, we were at half a million underspent in people costs, but other operating expenditure, we were also below budget by £0.1 million, but included in there is our management contingency budget, so that is used to offset, and in year of which we have half a million, so we had 0.3 million of an underspend there, so we were under pressures in respect of other budget headings in respect of IT training and recruitment, and property costs were higher than budgeted, so overall we ended up within other operating expenditure, £0.1 million below budget, and on top of that we then have fees and expenses paid to firms that are included in there, so that was £0.2 million more than planned, but a lot of that will be offset by additional income that we would get charged out, so that would be, and the firms would probably charge more for the audit due to the complexity and various things, and we would then recharge that out to the audited body and recover that, so as the auditor general said, and Ricky, the work in progress is a risk area that we look to manage, and that's part of the reason why the income side of things were £0.2 million below our budget there. Obviously we managed to come out overall, and the bottom line was £0.2 million in operating costs, but the income side of things, we can only recognise the income for the amount of work we've actually done on start in the new audits, and I think there's two factors there. There's a factor that this is the first year of the new audit appointments, so that on boarding of that can take a while, so this is where we rotate the auditors around, and that will be some that we would have done in-house, would now be done by the firms and the other way around, so there can be an element of delay in that, and also, as the auditor general said, it's a difficult challenge at the minute to try and catch up, so we did in the budget look to catch up an element, and that is a reason as well that we hadn't recovered sufficient income that we were planning to budget, but overall this is very closely managed with all the challenges throughout the year, I would say, with particular focus coming in the final quarter just to make sure that we can come in with a break-even position. So, can I just follow up? So, Vicky, you said that the vacancy rate is higher than the long term or your target. What is it, or has it been over the last year? So, the vacancy factor, sorry it's right, I'll get the page here, our people, it is a bit, we're about 80, I'll just issue to have that, it's in our... Tell you what, I'll come back to that. I just wonder if there is a recruitment retention issue that you have, and that's under spend, because I mean I also note that your recruitment figures, recruitment spend was over budget, and then when I also look at the median salary, it's only 2% higher in the year just gone compared to the previous year. Now, if I layer all the different things that we've alighted on, there's cost of living, we've got a very tight labour market, you've only increased salaries by 2%, and you're also having to, you know, have you got an issue there in terms of your recruitment retention, does that ultimately boil down to how much you're paying your people? I recognise all you say, that this is, I think I've conveyed briefly in my opening remarks, that we are operating in a challenging market to recruit and retain the necessary skills to deliver our services. So, you'll see from the annual report that our turnover is about 9%, and that's higher than we would have known before the pandemic, and there are a range of factors behind that we're seeing across society about, you know, I think it has been referred to us, the great retiral. So, you know, we have lost some colleagues who have been with us for many years. We have replaced them, you know, with recruitment externally or internal promotions. One of the factors that we're not quite at, we haven't recruited entirely up to establishment yet either, so, and we have done a lot of recruitment over the course of the past year as well. Part of that is the aspects of growth that the commission has supported us with, but there is also an increased turnover. Vicki, you can say a wee bit more, Mr Johnson, but the one point just for us to clarify is that our pay award was 5% in the year, rather than 2%. I'm literally just going by your median remuneration quoted on page 51 of the—sorry, there's various reports you've got, but isn't the remuneration staff report, basically? So, I just don't—I mean, I understand what you're saying about the pay award, but if your median pay is only increased by 2%. So, there's a combination of reasons behind that. So, we operate incremental pay scales, and there is a presumption that when people are promoted, they start on the lower end of the pay scales. So, there's something of an element— You take my point, is that I would now understand that these things all wash through, and sometimes the aggregate position can be different, and that can feed into your overall recruitment and retention. Yes, it can, and Vicki will want to say a bit more, but even looking to the year ahead, so we're absolutely conscious that the context that we're in—you know, you describe it yourself—that we're in almost double figures or slightly below in terms of pay overall inflation rates, there are circumstances of inflation as they apply to how people live that will be higher than that in terms of food inflation, and yet, referencing back to the meeting that we had with the SCPA on our budget for 2023-24, we have assumed a 3 per cent pay award for the year ahead. We're not yet in formal negotiations with our trade union representatives, but you can see that there is an element to bridge where we get to, and how we reconcile all that, plus the challenges of the wider auditing profession that it has in recruiting and retaining staff to deliver our work. Those are all factors that we're closely managing, and I think that Alan might want to say a bit more about the board's key interests in all this. If you can tell, I'm going to pause for a second. I think that Vicki might want to add, and I'm sure that Alan can say a word or two more. Apologies. I wanted to get the exact figure for you. Our people in post is 95 per cent for this year, and that's the average over the year because we have been on that capacity building. There has been some retirals and getting people in post the executive team and building that capacity. We are down, but it's something that we're monitoring in terms of people in post percentage, and we think that that will recover for 2023-24. The pay award was 5 per cent, and the figure may be for 2022-23. The average change was 5.5 per cent, and that reflects the pay increments that staff would have got as well, but we agreed a 5 per cent pay award with bottom loading for the most junior pay band. As Stephen said, we're in negotiations with our union colleagues about the pay award for 2023-24, so that pressure is not going away, but the average pay is 5.5 per cent on that page 51. Just to be very clear, median remuneration went from £45,197 to £46,226. That £1,000 give or take delta is 2 per cent. I understand that these all are different cuts of the pie, but I don't dispute, but that doesn't contradict the fact that I was just putting that there. In the interest of time, I think that we need to move on, and I understand all that. Can I just ask one last question about pension contributions? I note—without wishing to look to anyone around the table in particular—that £198,000 pension contribution was made for Vicky, Bibi and, likewise, in the previous year, £144,000 pension contribution to Antony Clark. Those are very high, certainly in comparison to annual salaries. I will understand that there will possibly be technical reasons in terms of trends, but I would just be keen to get that on the record so that we understand what those are and what's going on there. Thank you. There are technical reasons in respect of people who newly join an executive team or leadership group that requires their disclosure in the remuneration port as individual remuneration, benefits and kind or pension contributions. Stuart can say a bit more, but I absolutely correct me if I don't give a clear enough description of this, Mr Johnson. However, we are in a defined benefit scheme that, to capture the totality of the value of it, there is a multiplier of around £20 to say what is the benefit that people get from being in that scheme. That is reflected in the very first year that they join. It is compliant with the financial reporting manual that public bodies follow, but it perhaps does not convey necessarily the most accurate description of what the individual benefit that a colleague receives. Those are notional, nonetheless, because they are a defined benefit. That is if the person knows where to receive that benefit and it is tied to this year, which of course they do not. That accrues over the lifetime of their membership of the scheme. That is why, in both for Vicky's disclosure this year and Anthony Clark's last year, there is something of a skewing effect that is shown in the presentation. Stuart, have I captured that correctly? That is correct. That is the methodology that we need to use as part of the accounts. The multiplier of £20 is to do with the real increase and the information that we get from the pension fund is to say that this is the real increase in the year. Then we need to use a multiplier of £20, and that drives that up to quite a high figure. When it comes to next year, that evens itself out and will be more reflective of some of the other numbers that you will see in here, it will be quite consistent. It is just that initial spike is the first joining from the pension fund disclosure that we have to make for the accounts. You mentioned earlier just about the great retiral trend across society and a number of retirals within your own organisation. I suppose that, to counter that, I notice that you have 48 trainees coming in. I am just interested briefly about the impact that you think that that is going to make to the organisation. How do you retain those trainees? You could come into or at Scotland and say, this is great, I can learn on the job here, and I can take those skills and go anywhere within the sector. Good morning, Mr Ruskell. We have 48 trainees who are working their way through primarily the Institute of Chartered Accountants of Scotland's training scheme to become a CA, hopefully upon completion of their training and exams. We also have some other colleagues who are working towards other accountancy exams. Just before I can develop my answer, we also have three modern apprentices in the organisation that are being supported through relevant training programmes. Our scheme is really twofold. One is that people who are working with us as trainees make an incredibly valuable contribution. They are doing audit work alongside their exams and study leave. They are part of both our annual financial audit teams and our performance audit teams, and they spend time in both sides of the business to deliver public audit. Upon completion, and I will bring colleagues in just to say about the most up-to-date numbers that we have about retention of people. Not everybody stays, and we do not assume that people will, but when we review the programme regularly—you might want to say a bit more about the kind of boards perspective on that, too—we understand that people will leave. We hope that they do not. We hope that they stay at Audit Scotland, but we hope that if they decide to leave, they can make a contribution in broad and develop their career in the public sector in Scotland. We are seeing that many of our alumni are operating and working elsewhere in the Scottish public sector delivering financial management, public audit and internal audit arrangements. We think that that is a largely sustainable model. The impact is there, the contribution and also to an extent the retention rates, but I will check if anybody has that. In terms of the retention rate in the scheme, in 2022-23, we were just short of 93 per cent of people who stayed with us who had been on the scheme, which we are pleased about. Having said that, we also recognise that for those people who are on the scheme that qualify but choose not to stay with Audit Scotland and perhaps move elsewhere, ideally within the public sector, it is still a contribution, if you like. It is a good financial management within public service, even if it is not within Audit Scotland. We have a very high retention rate for the people who are going through that scheme. It is worth underlining the contribution that our training scheme makes to the audit profession generally in Scotland. It is a big cohort, and the cohort that we are going through at the moment has had quite tough learning done remotely for the better part of three years. It might be of interest to the commission if I comment on the fact that we held our staff conference in March for the first time in four years for the obvious reason. One of the most impressive things was to see the trainees interacting with each other—well, not quite for the first time, because Stephen Rathbone and Vicky had a session with them a month before, but they are very committed to us, but I underline the point that Martin makes. That is a contribution to the phrase public audit in Scotland, not simply to Audit Scotland. Key message number one in the report says that we are making progress in returning the timeliness of our financial audit to pre-pandemic timescales but have more work to do. The figures, as I read them in the report, are that, two years ago, the delivery to schedule number was 82 per cent. A year ago, it was 75 per cent. In this report, it says that it is 51 per cent, so that does not sound to me like progress, but perhaps you could explain those figures. You are quite right. As I alluded to in my opening remarks, that is challenging. By way of some optimism for the commission's awareness, we are forecasting for the year that we are currently in that we will be operating about 73 per cent of the annual financial audits that will be delivered to timescales. Other context that is of interest to the commission is that 51 per cent did not operate to the same deadlines, so those were more challenging timescales. There was a relaxation of the target timescales during the course of the pandemic, so the local government audits, central government and NHS all operated to extended timescales. That reflected the circumstances that we have discussed in previous sessions with the commission about the availability of audit evidence. Some real emerging technical challenges, particularly in local government, around the valuation of assets that has taken longer requires more evidence. There are also other factors that we comment as well, but the sequencing of availability of our audit work, with the exception of further education colleges that operate to 31 July financial year end, all other public bodies in Scotland have a 31 March year end. If for whatever reason the auditor or public body is not available to support a particular slot that has been allocated, often what happens is that it is not just deferred by a couple of weeks, it can drop to the end of a queue. There is a variety of factors, but the results for 22 to 23 financial year, as I said, are a combination of audit years therein. Probably I think that we think represents the bottom of that delta of the delivery timescales and something of a legacy of the pandemic, much more confident around the 73 per cent that we are tracking for this year and also a continuation of progress to recover to 2019 timescales. The last thing that I would say about Mr Leonard is that we are pleased with the progress that we have made on audit quality this year, but we also recognise that the timeliness of delivery is a component of audit quality as well. Both ourselves as parliamentarians and the public bodies want their audit signed off as quickly as possible, and we are working to make that progress this year and beyond. Professor Alexander, in his opening remarks, talked about the organisation considering our purpose. I think that for most of us we would consider the primary purpose is to carry out audits of public bodies. From those figures it appears to be not making the kind of progress that we would want to see, but can I just understand from you Stephen the extent to which this is timeliness issues among the bodies that you are auditing versus timeliness issues in your own organisation? I think that it is a combination of both of those things. Certainly there are more complex accounting and evidence factors. As I have mentioned, the evaluation of local government property, plant and equipment has been a feature across UK local government bodies. That has required more consideration. This year, in terms of my auditor's perspective, we have new auditing standards that have also required more detailed analysis consideration. Always a feature, Mr Leonard, of new auditing. It takes some time to bed in, regardless of how much preparation and training that we do with our colleagues. That has been one of the features. There is also an element of public bodies' ability to support the audit. So, while we have had higher turnover, so have public bodies and their staffing arrangements to support the audit. Those factors, together with the scheduling arrangements that we make for the delivery of audits—as I mentioned, if a public body is not available to deliver on time or that there are factors causing the delay of the audit—that can knock out the timescales. All of those factors are playing into what we anticipate will be the bottom of that curve in terms of annual audit completion deadlines and already projecting a stronger performance when we speak to you next year. Do you know when you will get back to those pre-pandemic levels of completion? We are anticipating that, over the next couple of years, we will return to the 2019 levels. As I say, the circumstances in 2019 will not be the factors that are relevant in 2025. There will be new technology that we are adopting. Methodology is changing as is accounting and auditing standards that are all relevant. I have omitted to mention some really complex accounting standards that have come in that are featured in our own accounts about disclosure of leases, for example. I have taken a lot of working through not to mention our pension disclosure. Having said all that, we anticipate that careful management will be on course for that over the next couple of years. Can I ask you about best value auditing? In page 15 Audit Scotland reports that it has developed a new model of integrating best value into councils annual audits. Is the best value audits were performed as separate audit projects until this year? To what extent will the new model contribute to effectiveness and efficiency, not just for the audit teams but also for the audited bodies? We think very much that that will be the extent. I want to comment a bit more about the application of the new code of audit practice that the Accounts Commission and I have agreed that it has evolved the statutory duty of best value and the associated audit arrangements in the new code chair. You will recall from previous conversations that, as you mentioned, the best value was a statutory audit arrangement that applied on a cyclical basis. All councils would be subject to a best value audit at one point over a five-year appointment cycle. We have moved in for this new year into the first year of the next five-year appointment round. However, as best value has evolved, rather than being that standalone arrangement, which had real merit and real depth and evidence of scrutiny, to strike the right balance between impact and evaluation, is fundamentally building on the knowledge that auditors have in the public sector in Scotland. They do not just audit the accounts, they also apply the wider code, so they will be routinely examining financial management, financial sustainability, governance, leadership arrangements and value for money. The Accounts Commission decided that it would evolve the best value audit model into the annual audit arrangements, but it will still take the opportunity to have a more in-depth analysis on a rolling basis of a number of councils each year. We are not anticipating any loss of impact through those arrangements, but rather harnessing the expertise that the annual auditors will have and building on the wider code that we use to audit councils in Scotland to demonstrate the scrutiny effectiveness that will come from that process. A lot of it has been covered there. The final round of the three remaining best value reviews completed for that year, but as part of the new code, which we are now in for the moment, is part of the wider scope audit. That is new for councils, so there has been a lot of work that the commission has worked through with COSLA and SOLIS about people understanding the impact of that wider scope. However, there is consensus that integrating the best value into that wider scope will really pay dividends, but not diluted. However, there will be additional best value reports, and I do not want to speak for the commission. It is not my role, but we will be monitoring the effect of that, but we are quite pleased with how that is progressing. However, the council commission gets regular updates each meeting on that. One of the striking outputs from the consultation that I referred to earlier, which led to the publication of Public Audit in Scotland, was the degree to which Audit's bodies appreciate what they get from the wider scope audit. Clearly, they want a clean, clear audit in terms of propriety, but they also want us to use that as a platform from which we can help to improve the overall performance of the public sector. I was struck by just how strong that view was. When I joined the Board of Audits Scotland four years ago, there was a lot of talk about wider scope audit, and what has happened over those four years is exactly what Stephen and Vicki have mentioned—a clearer integration of the propriety audit and the wider scope audit. I think that there is a lot of added value for the public sector, Scottish Public sector, in the fact that we do both of those. I am absolutely convinced that having the best value audit almost in a separate box diminished the effect that we could have. Moving on to the property portfolio, on page 34, Audit Scotland reports that began a review of premises to consider its future needs. Can you provide an update on the review of its use of premises in the likely timescale for completion of the review? Can you also explain why actual rent and rate costs were less than budgeted and show a fall from the costs reported in the previous year? I am sure that, like many organisations, the make-up of how our staff work has changed as a result of Covid. As an organisation, we wanted to capitalise on the fact that our leases were coming to a point in Edinburgh and Glasgow. The Board was clear with us that we needed to maximise on opportunities, such as the lease break, but we also needed to be cautious, because, like many, we are not exactly sure what our future hybrid working will be. I will bring in Stuart for the detail, but looking at our staff make-up, we know that staff in the west of Glasgow offices do not have enough capacity for the way in which staff want to work. Work tends to be more the financial audit staff who are more in the office and out at clients. We are looking very closely at expanding our Glasgow office, offsetting it by potentially looking at reductions in the Edinburgh office. It is not all signed off yet, but there is quite a significant saving in that as well, just with the property prices from the west compared to the east. We wanted to have a saving as a result of that, but we also met the needs of what our staff are looking for. It has been a careful balance in maximising opportunities to drive down our costs, but we also met the needs of staff. The costings of rent are a lot to do with the change in IFRS 16, but Stuart has been leading on the property review and the accounting for rent, so I will pass over to Stuart. In respect of the reduced cost, that is absolutely right. It is a new accounting standard IFRS 16, it is called Felices. Originally, it was supposed to be adopted on April 2020, but due to the pandemic, it was delayed, so it was adopted for the first time April 2022, so we needed to account for it on that basis then. Effectively, you will see in the analysis there that there is a new disclosure called depreciation right-of-use asset. Effectively, that is where an element or the bulk of the element of the rental for accommodation is going in. We have to depreciate that as a right-of-use asset now under the new or under this accounting standard that was taken on board for the first time. Also included in there is the, we also have car leases as well that are classified as a right-of-use asset, so you'll see as well that the travel and subsistence has reduced down as well as the rent and rates and that is due to the accounting treatment with the cost now appearing under this new line depreciation right-of-use asset. From what Vicki was saying as well about the accommodation, yes, I would think that we would be in a good position when it comes to the commission's meeting for our budget proposal that we would be clearer what our accommodation requirements will be, subject to that we'll be going to the board and as part of the budget proposal so you will get a good idea of what our future plans will be in that respect. As Vicki said, the demand in Glasgow is a lot higher than in our Edinburgh office and that is an element of the actual increase in numbers that we've had and the new staff that are joining. Actually there are more now than pre-pandemic that have a Glasgow base so in effect we've gone from around about 100 that had a Glasgow base and now we're at about 130 have a Glasgow base, so that is whether the demand as well is increasing. The way the board has approached this. Let me start by just referring back to our very long time ago when I studied Latin at school and I learned that wonderful tag 15 alente, you know, to hasten slowly. There was a tendency around and I don't mean within Ordet Scotland, I mean generally around to grab this great benefit that hybrid working was going to produce for organisations. My view and I expressed this quite forcibly from the chair was look, we need to be sure before we make any changes because we're going to look daft if we make changes and then have to pull them back 18 months from now. So we've now on the board had, I think I'm right in saying three goes at it and we'll have a final go and come to a conclusion in September. Just by way of broader comment, I was reading a piece yesterday in the papers about the decision of HSBC to abandon their signature building at Canary Wharf and move in to a smaller refurbished BT office in the city and the first thing I thought when I read that was, I hope they don't live to regret that because it just seemed to me to be a very big change and I think any organisation has got to be careful, but there is absolutely no doubt that anybody who has ever visited the Glasgow office, there was always going to be a need to increase capacity there and we're now in the position where we may be able to balance the various parts of our rental estate in a way that will be medium to long-term rather than grabbing a short-term benefit. Thank you. I'll now bring in Mark Ruskell for his set of questions. I was actually interested in the answer about what your staff think, because there are questions that organisations are having to consider now about whether in the long or medium term they move towards that and make a final decision on a lease, but I am really interested in what your staff and what your staff and what your trainees think as well, what kind of workplace do they want to live in and work in going forward? We take the temperature of the staff on this quite often. I'll leave it to Vicky and Stephen to give you the detail, but there's no doubt that there is support for hybrid working. The problem is that each individual has a different definition of what the best hybrid for them is, so we have to navigate that and make it possible for people to work in a way that is acceptable to them and productive for the organisation. That's why we've taken our time about this. I touch with what I say, and I hope that the decisions that we'll make in September and which we'll talk to you about a year from now will turn out to be the right ones in the medium or long term. Stephen. I'm going to turn to Martin, Mr Ruskell, because he has led much of the staff engagement that we have done with our colleagues on such an important issue. Given the upheaval that we've all been through, and particularly thinking about it from my colleague's perspective, but how we have audited over the past three years in a rapidly different environment than we were used to, we've conducted our traditional surveys, so we still do our annual best company survey. We have a stress survey with our colleagues alongside that. We've done a range of pulse surveys in between times, just as part of our wider staff engagement, but we've specifically engaged with people on hybrid working arrangements. You'll perhaps not be surprised to hear that there are mixed views. Some people are very enthusiastic about hybrid working, others equally so about almost remote working, and there's an equally sizable group of colleagues who want to be back in the office almost entirely. We have to do our best to accommodate individuals' preferences but also find the right model to deliver high-quality, effective, timely public audit arrangements. Those results are very relevant, and they are nudging as to where colleagues have suggested that we're getting to with our state's strategy that we'll engage with the commission further on, of retaining high-profile, appropriate premises in Edinburgh, Glasgow, alongside the premises that we have in Inverness and Aberdeen, but on a slightly different ratio of footprint in Glasgow and Edinburgh. Your question was very much about staff engagement. What do people think? What are they saying about that? As Stephen said, we've got a range of surveys and other engagement tools that we use to keep typing the temperature, because we're also conscious that opinions change what people felt about hybrid working and what that might look like at a particular point in the pandemic has changed over time, as people experience both home working but increasingly as people experience and reminding themselves almost what it's like to be in the office, to be working with face-to-face with colleagues and some of the buzz that you get about that when people are actually together. We've got a developing hybrid working project, and there's a couple of key work streams in that. The estate strategy is one of those, which we've spoken about because that and working patterns are obviously inextricably linked. We've also got a work stream in there, which is about the policies and procedures and so on, just to make sure that everybody's as clear as they can be around what the expectations are around hybrid working. That project group very helpfully includes representation from across the business groups, but also from our PCS branch as well. We were members of that group, so we keen to get that wide range of views in there. In terms of working practices, Stephen said it's a roundabout between 70% and 80% of folks that operate where they're in the office maybe a couple of days a week, and then we've got much smaller numbers of people at the extremes with those who are very rarely in and for those that are in the office all of the time. That's not shifted hugely. It's something that we've been tracking, but it's not changed fundamentally, although we are seeing slightly higher uptake in terms of office usage in recent times. Lots of processes have gone away to really keep taping the temperature and see what people are feeling, and that includes the contributions of the meetings of the working group itself, because there's lots of representatives from different areas of the business in there. Stephen said it does, there are some patterns in there whereby financial audit in the west places more demand on the office, and indeed of course people out and about audit sites more so than they were now as well. Whereas in Edinburgh where it's more some of the performance audit and support functions where perhaps the office usage isn't as much and certainly wasn't as high as it used to be pre-pandemic, but we do want to draw that all very closely, and I think we're looking at a period now in combination where the estate strategy is by the autumn time this year, I think will be much clearer on what a more predictable future will look like in terms of hybrid working. Okay, it's useful to get that temperature check in terms of what your staff feel. I mean maybe if I could just move on to another area then, which I think has come out of staff surveys. We understand that the in-house teams have responded to surveys and have indicated that they perhaps feel that they don't have enough time and resources to complete the audits, and that's compared perhaps unfavourably with other firms that are operating in the auditing space. I'm wondering to what extent you recognise that, what you think the underlying reasons are for that difference between yourselves and others, and what action you think you should or could take on the back of that. Yeah, but we absolutely recognise it, and our colleagues have told us that they would like to have more resource to deliver the delivery of audit work. There is something of a balance between, you know, our resources are finite and we do want to make best use of those to deliver high quality audit within timescales, but it is a feature, as you say, and it's come out in both our staff survey and the quality survey results that are reflected in our quality of public audit in Scotland publication. The differences between us and the firms, we don't have a detailed analysis of that. I think that there is an aspect of comparing quite different cultures in an audit firm relative to a public body like ourselves in Audit Scotland, but we are taking it really seriously, and Vicki might want to say more about our work in this area. I guess that a couple of things I would add firstly is that we spend a lot of time thinking about where we go next in terms of our delivery models, our deployment arrangements, the innovation that we want to bring into the delivery of public audit. We used to have all of those arrangements spread across different business groups. We have instead moved to a model of an innovation and quality group, innovation means that how are we undertaking audits, the methodologies that we are using, the deployment arrangements, because I think that sometimes we more regularly talk about resourcing rather than deployment and how we are forming teams in the organisation is one part of that. Alongside, as Alan mentioned, the publication of public audit in Scotland and our corporate plan in the last couple of weeks underpinning that is the business groups, their own business plans. The real focus this year on is just cracking the resourcing arrangements that we have in Audit Scotland so that we can marry up delivering high-quality, timely audits, but also so that colleagues feel like they have enough time themselves to deliver and contribute to the overall objectives. Is that fair, Vicky? Is that what we haven't got the time to do this? Is it about how we do this in a more efficient and more productive way? How do we marshal ourselves in a way that can deliver those benefits and reduce pressure? Is that kind of... Yes, 100 per cent. That's our objective. As maybe touched on a couple of times, the auditing profession is changing quite rapidly. So new auditing standards, new accounting standards, new technology is being brought to bear. We're investing in... We've talked with the innovation and quality team. We have plans in place for new software to capture our audit work and our judgments. All of those factors will contribute, we hope, to easing some of that pressure. There is something of a bit of an internal aspect to this, is that auditors desperately want to recover the timescales. The teams want to get back to 2019 patterns, and back on track is the phrase that we tend to use for good reason. We want to deliver timely high-quality audits, so it's the compressed nature of that. Let's explain it to Mr Leonard. We think that we're in something of a two-year window here with which to recover that timescale and work through with colleagues' application of methodology, technology to ease some of that at the same time. Just to add to that, picking up on a number of aspects, we've got a number of things to balance. Getting back to a timetable, addressing or meeting the new requirements on the profession, looking at how we also modernise, as an organisation as well, of what not just in year but looking ahead, what does the auditor of five years look like, so we're on the front foot, and also managing that against staff wellbeing, which is absolutely vital. It's what is the right balance, and we're in close discussion with our unions and with our staff. That's why we place the importance on staff service, but very much linked to that is our new corporate plan, and we've got a new business planning approach about where we are focusing our time to ensure quality delivery and impact, that positive impact. Having discussions with staff around the productivity and efficiency, what mechanisms or pieces of work do we stop doing because we're trying to balance off all those challenges that maybe don't have the same impact on our work, so it's absolutely vital that all staff are involved in delivering this new corporate plan, our business planning approach, but alongside that, the people strategy and the financial strategy are absolutely key, and we're bringing all of those together, but we have to balance those aspects, and that's why Stephen was saying, taking that two-year period of recovery, managing the innovation that we want to do, the staff wellbeing that we believe is the right pace at which to do that. Okay, thanks for that, that was useful. My last question is about the 80 per cent good compliance target. What are your thoughts on that? Is that too low? I think that the first thing I would say, we're pleased with the progress that we've made in terms of audit quality. I think that going back a couple of years, we had a dip in some of our financial audit work at the start of the pandemic. We've invested in our audit quality framework and associated action plans to target specific findings recommendations that we've had from quality reviewers. This year, we've seen an upturn. All of our performance audits met the required standards and on a rolling basis, the annual financial audits have met the target. We think that it's about right 80 per cent that there will always be factors that come out of an annual audit that is subject to review that might lead to an external reviewer or an independent internal reviewer to reach a judgment that an audit has fallen below the good standard. There's a four point scale effectively that assessors use one and two, you're okay, a three or a four, not so. We're pleased over all, Mr Ruskell, with the progress. I think that it's borne fruit the focus that we've had on audit quality. Again, Alan has been at the forefront of the governance that we've had around audit quality just to make sure that this is an organisational priority. Recognising that if the quality of our work isn't there, there's a huge credibility gap that we would have as an organisation. In order to speak authoritatively to the Parliament, we have to be able to demonstrate that we are reliable in the judgments and the reporting that we are making. I think that it's worth adding to that that as part of the process of addressing issues of quality that jumped up in bitters in 2021, Stephen has mentioned both on this occasion and previous occasions. That is a recommendation to the board, which the board accepted of having a new directorate for quality and innovation. That has been a major part of addressing that. One of the things that we've also done is to rejig the way in which the board receives information about organisational performance and, indeed, financial performance. I think that we're now in a position where we get a richer suite of numbers each time we meet and both the audit committee in great detail and the board as the major governance body, and if you like the longstop, that is one of the key things that they have to examine on each occasion. I think that I go along entirely with Stephen's point that 80 per cent is good performance. We can probably do better than that, but it's very difficult to see how you get to 100 per cent on this, because it's such a varied portfolio of things that we have to do and the time that we have to do it. So you could go north of 80 but not up to 100 then? Is this quite a blind metric, or should we be looking at something a bit more detailed within that, given the nature of the audits? Yes, we do have the detail. We have a programme of external quality reviews that are undertaken by our external quality assessor, which is now the Institute of Chartered Accountants of England in Wales, whom we appointed last year. They've gone through the first cycle. It's something of a rotation from a previous provider, which was the Institute of Chartered Accountants of Scotland. Again, a completely detached, separate evaluation of the quality of our work covers both performance audit and financial audit. We look to cover appointed auditors both within Audit Scotland, our in-house teams and the firms that we use. You'll have seen from the quality of public audit in Scotland the scores that have been provided. Alongside that, we've got the in-house teams both from the firms and ourselves who are assessing it. To answer your question directly, Mr Ruskell, it's my hope and expectation that we'll be well clear of 80 per cent, but, as a metric, it allows for the fact that we have scores of appointed auditors within the organisation, some undertaking a large portfolio of central government bodies, NHS and local government, but we also have managers within the organisation who are appointed auditors who audit smaller bodies. We think that that's the right model that allows us to support career progression to larger portfolios in the future. However, there is an increased possibility that quality on some audits might fall below where we want them to. We are safeguarding that with the investment that we have made in audit quality and some of the training that goes alongside that. We hope to be well clear of 80 per cent, but allowing for the range of variables will fail as it's broadly the right target. Are there any final questions? Before we convene. I just wanted to ask a couple of broader questions. First of all, we've had the resignation of William Moyes from the Audit Commission. I'm just wondering if there had been some use of this point in time to reflect on the fact that we've got these parallel structures, certainly in terms of statutes, but I always reflect when I read your reports. I'm not sure that someone will come in for a fresh, dreary annual report if they necessarily see that hard distinction. Is there a discussion about how the two entities move forward in advance of a new permanent appointment, certainly from Audit Scotland's perspective, and how they interoperate? There's a range of points in there. I'm sure Alan might want to say a word or two about it as well. Dr Moyes handed his resignation or wrote to the minister in May. The Accounts Commission is a non-departmental public body and by statute Audit Scotland provides services to both the Accounts Commission and the Auditor General. As you know, Mr Johnson, the SCPA decides that the Auditor General is the Accountable Officer of Audit Scotland. In terms of interim arrangements, the Scottish Government has appointed Ronnie Hines as an acting chair and he's working closely with his Accounts Commission colleagues on future arrangements and, in due course, the Scottish Government will be re-advertising for a permanent chair. In terms of all of the arrangements that are set down in statute, there is legacy from pre-devolution. The 1973 act for local government still applies to the arrangements for the Accounts Commission. When Audit Scotland was formed and the Post of Auditor General with the 98 Scotland Act and the Public Finance and Accountability Scotland Act 2000 sets out how the model operates, I think that there's some certainty with the combined focus and attention in public audit in Scotland, our recent publication, that sets out how the model of public audit in Scotland operates, where it's relevant. We have a shared ambition, we have a shared work programme and to deliver high-quality public audit in a way that public services are changing as well. We come together where we need to and we have a distinct identity when we also think that that's most appropriate. Until there's a decision elsewhere, if that ever came, this model is how we have it and we aim to make it to operate effectively. I think that it's worth telling the commission that before Bill Moyes resigned, we were already beginning a process of how we could improve the way in which this three-legged stool of the Audit General, my board and the commission work. That will continue and Ronnie Hines has a brief to look at that in the period when he is interim chair of the commission. However, we are in this odd situation where I could revert to my previous profession and tell you what I would do in terms of how to organise public audit in Scotland, but I'm not going to do that because I don't have the power, I don't have the locus to do that. What we do have is a commitment to modernising and refreshing a document that sets out how the partnership should work, and we're working on that at the moment. We would expect that to be completed. Before our permanent chair is in place in the commission because the situation is such that we need to know with some clarity how the three bodies work together. I think that it can work. I don't know whether I would have designed it this way, but we're on the case. I find it interesting that Stephen Cymru reflect on the local government act 1973. In some of our previous deliberations, I looked into that and I was quite surprised at how distinctly different. While the work that is undertaken or under the auspices of yourself in your office and the audit commission are functionally the same, in terms of the accountability, they are very different with the Auditor General being accountable to Parliament, where the Accounts Commissioner being accountable to the Scottish ministers. While the nature of the day-to-day work, whether that accountability point is worth a collective thought and reflection, not just on your part but on ours as well? It's an interesting point. What I would use to stress is independence. The Auditor General for Scotland is independent of government. Although I report to the Public Audit Committee, I am free to set my own work programme. Again, the Accounts Commission is the best place to speak for themselves. Although they are a non-departmental public body, they operate independently from ministers, albeit that they are appointed by ministers and do engage with ministers. From Audit Scotland's perspective, it's our role to provide high-quality audit work on behalf of myself and the Accounts Commission through the annual audit process and the delivery of a performance audit programme. However, we can never take independence for granted, Mr Johnson. That's the point that we safeguard it very carefully. We have a range of checks and balances through how we are assessing colleagues' independence, our ethical standards and so on. However, it matters not just that we believe that we are independent but that the Parliament and the public also see that both Audit Scotland and the Accounts Commission are independent as well. I will ask one final question. I will do a bit of a Daniel Johnson special and ask a very left field question. We had some discussion about how different accounting treatments for leases have impacted your accounts. I think that there is a number of quite challenging things coming down the line. There has been a lot of discussion about generative AI. There are also questions around carbon accounting. I am just wondering what your thoughts are collectively about thinking about the sorts of issues that are not limited to those and how they might impact your work in the future and how you are tracking them. Do you have a radar? Is there any resource allocation to thinking about those potentially big changes? Very much. That is wise after the event perhaps, but the intention that Alan mentioned earlier is to create an innovation and quality department in the organisation so that we have the capacity to respond to the fundamental changes that are happening in society and to the auditing implications around that. We have invested in digital auditing, but that is really only one part of it. You quite rightly mentioned artificial intelligence. We do not yet know what that will mean for how we will audit as Vicky talks about the auditor of the future five years from now, but we can safely assume that it will have fundamental changes. We are keen that we are not reacting to some of those changes and developments. We hope that that will have a positive impact on both the depth of our work and the insight that we can bring to the delivery of public services. Yes, we are tracking and monitoring it. We are engaged significantly with the auditing profession and the accountancy profession, so that our reach is, again, not just a reactive one. From a public audit perspective, we also want to have our voice as part of some of the developments in the profession. Public audit in Scotland is in a relatively strong place compared to some of the challenges that we are seeing in other parts of the UK in terms of the delivery of audit. We want to retain that position, and we see our work through innovation and quality as one of the ways that we will do that. Thank you. Are there any final questions? In that case, I finish by thanking Professor Alexander, the auditor general, Vicky, Martin and Stuart for their evidence today, and we will now have our short suspension while we change witnesses. Good morning, and I welcome to the meeting David Jeffcote, partner and Gillian Sol, audit and accounts manager from Alexander Sloane. I start by asking if you would like to make an opening statement. Good morning, chair and the commission. I would like to give a summary of our work to accompany our audit opinion and our audit summary report. Alexander Sloane was appointed to carry out the external audit of the Financial Statements of Audit Scotland for the year to 31 March 2023. An audit planning commenced in February. Our audit work in early May, and I signed the audit report on 12 June 2023. Our audit was carried out in accordance with international standards on auditing. Once again, we carried out our audit remotely using a variety of methods to do this effectively, such as a secure portal to request and receive information electronically, and screen sharing and video calls to make our work as efficient as possible. I would like to thank the attentiveness and responsiveness of Audit Scotland's finance team for their support in this approach. Our audit opinion is contained within the audit report and the accounts, and it confirms that the financial statements of Audit Scotland give a true and fair view as of 31 March 2023 that they have been properly prepared in accordance with international reporting standards and the Government's financial reporting manual, and in accordance with the Public Finance and Accountability Act 2000. For the record, I can confirm that adequate accounting records have been kept by Audit Scotland and that we received all the information and explanations that we required before issuing the audit opinion. Our audit opinion also confirms that expenditure has been incurred and receipts applied in accordance with the PFA Act 2000. As part of our audit work, we are required to prepare an audit summary report to the management of Audit Scotland and a copy of this has been sent to the commission. The audit summary report summarises our response to key audit risk areas and where applicable reports on any weaknesses in the accounting systems and internal controls that may come to our retention during the audit. Our audit on management override considered the authorisation, appropriateness and accuracy of bookkeeping and accounting journals and related financial controls, and we identified no issues to bring to the attention of the commission. Our audit work on revenue recognition considered the accuracy of recording income in the appropriate accounting period and is linked to our auditing of work in progress. Our audit work in this area concluded that the work in progress debt of balance and the work in progress credit of balance or deferred income at 31 March 2023 were based on robust assumptions accurately calculated, and we are satisfied that they were accounted for appropriately in the financial statements. Our audit work on accounting estimates included consideration of provisions within the financial statements, and we are satisfied that the provisions contained within the accounts, including the provision for fee rebates to be issued to audited bodies, is appropriate and that the estimates have been accurately calculated. Sufficient disclosures have been made in the notes to the financial statements. Our audit work this year identified two adjustments to the draft financial statements, and they are noted in our audit summary report. They are related to the accounting for leases and for pensions. I would like to record that in both cases, our dialogue with Audit Scotland was constructive. We encountered no issues with our proposed amendments. Taking those in turn, our audit work this year required a consideration of the recent adoption of an accounting standard in respect of the accounting for leases. Our audit work noted that some amendments required to balances on the statement of financial position though no effect on the reported net comprehensive expenditure. Those amendments were agreed and processed, and I can confirm that we are now satisfied that the accounting for leases is appropriate and disclosures in the financial statements are sufficient. Our audit this year also required an assessment of the reported pension balance. The actuary report showed a surplus under pension schemes assets over the schemes obligations. Where that arises and following the accounting standard IAS-19 and guidance named IFRIC-14, consideration must be given whether that surplus represents a flow of economic benefit, namely a refund to Audit Scotland or a loss of reduction in future contributions. Further calculations from the schemes actuary were requested to assess whether an asset sealing applied to ensure that there is no overstatement of the asset in the statement of financial position. Following those further calculations by the actuary and our discussions with Audit Scotland's management, we are satisfied that the accounting for the pension balance as nil in the statement of financial position is appropriate and that adequate disclosure in the notes to the financial statements is present. Our audit summary report is also an opportunity to propose recommendations to the accounting systems or financial controls in operation, and I can confirm that following our audit work we did not identify any matters that we required to raise to management or to the commission. Finally, on behalf of me and my team, I would like to record our thanks to the staff at Audit Scotland for their helpful and prompt assistance during the audit. I am happy to take any questions from members of the commission. Thank you. The SCPA welcomes the positive audit report received from Alex Lander Sloan, CA, in the unmodified audit opinion placed in Audit Scotland's 2022-23 annual report and accounts. For completeness and for the official record, can you confirm that you have received all the necessary information and explanations that you require to form your opinion on the financial statements? I can confirm that, yes. Can you also confirm that you are content with the judgments made by Audit Scotland and the disclosure of those in the annual audit and accounts? I can confirm that, yes, and often they are contained within the accounting estimates section within the financial statements, but yes. One final question for me. You will have heard the evidence earlier from Audit Scotland. The delays to completion of financial audits, is that something that Alexander Sloan is also experiencing? I think that it was interesting that Stephen mentioned that there is a knock-on possibly in 2021 when there were delayed deadlines in 2020. There were delayed deadlines for 2020 audits that knocked on to 2021. Now organisations are trying to get back into the old rhythm, so it is taking a little while for us to get back. I echo what Stephen is saying about probably a year or two until we feel that we are back on track with our own audits. Thank you. Can I ask any other members of any questions? There was a fair bit of discussion about the new accounting treatments for leases and that accounting for a big decrease in things such as transport costs and so on and so forth. I would be interested to know whether you feel that those have been treated adequately and whether or not those differences are ones that you would expect, given the application of the new standards? Again, what was interesting is that there was no change to the net comprehensive expenditure. What we looked at were things like prepayments. Pre-payments are where you might pay rent in advance. That is no longer called a prepayment under rifer 16. That is actually paying down a liability. Things like that have affected the statement of financial position. Within the statement of comprehensive expenditure, it was really just moving around. I do not know if you have note 5 or note 4 available. It was moving another operating expenditure note, moving it down from rent and rate. The actual costs did not change. It was reallocated within that note. Is there an accounting change, not a cash flow? An accounting change, yes. Are you confident that that has all been applied as you would expect? Yes. Again, an initial draft of where that was in the accounts was slightly higher up in rent and rates. It was then in this final draft in the signed accounts were reallocated down to what is now called a depreciation of writing use assets. That is how it comes in to the PNL, if you like. It comes in through that line. In that case, I thank David and Gillian for their evidence this morning, and we will now move into private session.