 I'm the Collies, and can I welcome members of the press in public to the ninth meeting of the public audit committee in 2015. Can I first of all ask all those present to ensure that their electronic items are switched to flight mode so that they do not affect the work of the committee? I have apologies from Bruce Smith. Collies, can I take us to agenda item number one? The question is that we should take agenda items number three, four and five in private. I will agree to agenda item number two, which is the section 22 report of the 2013-14 audit of NHS Highland financial management. I would like to welcome Elaine Mead, the chief executive of NHS Highland, Gary Coots, the chair of NHS Highland, and Nick Kent, the director of finance of NHS Highland. Coots could just advise us that this is our second evidence session with NHS Highland on this report falling on from our meeting in Inverness on the 2 February. I will therefore propose that we move straight to questions that can ask members and witnesses to keep their questions brief, both the questions and those answers at the same time. I would also be grateful for colleagues who could direct their questions to the specific witnesses that are before us this morning. First of all, welcome. I must meet, firstly, on the issue of brokerage, which we have had some previous discussions and in respect of quite detailed discussions in respect to that, but I think that it would be helpful for the official report today and falling on from our meeting in February in Inverness just for you to give us some background to what exactly brokerage is once again. Brokerage is an ability, if we agree with the Scottish Government, to take some additional resources to allow the organisation to break even at the year end. That was the situation for us. We required at the year end £2.5 million of brokerage, which amounted to 0.3 per cent in order to ensure that NHS Hyland broke even financially. Can I clarify, then, that brokerage is an effective and additional lending facilities provided by the Scottish Government? It is, and we are required to pay that back in subsequent years. It is a significant decision that has to be taken by your organisation, which you are the accountable officer for? It absolutely is. It is not something that we would wish to do or would do lightly, but it is something that is available to us in agreement only with the Scottish Government. Can I give you an analogy, then? People go through the process of additional lending probably almost every day, and, as we speak, there will be additional lending taking place throughout the world for that matter. It is a significant decision that people have to take, so the autonomy of those decisions that are taken and those whom they take them in partnership with have to be kept informed of those decisions. In clear terms, can you lay out what the process is for your organisation because, effectively, you are accountable to your quasi-judicial board, the Quango health board that you are responsible to? Is that correct? Absolutely. We would be monitoring the financial position throughout the year in NHS Hyland, and we report that formally to a number of committees, but the most important one, of course, would be to the board. The board, then, would be very aware of our financial position and the decisions that we were making as an executive management team throughout the year, and the board would be giving me guidance, as accountable officer, on the actions that they wished me to pursue. When it came to the end of the year and it became apparent— What I want to clarify is that, firstly, processing would follow for that and who is responsible for it. Can you confirm how many board members you have? I'm sorry, I can't, 13. There's a board of about 22 of which there's a mixture of executive and non-executive, as they called it. All those individuals have a responsibility for the decisions that are taken by the board, am I correct? Indeed. Does the accountable officer help that ultimate responsibility to Parliament for the decisions that are made around finance? Yes, but they have to be informed of the decisions that are taken in respect of financial decisions, don't they? They do. Yes. So, in respect of this additional lending facility, which is effectively brokerage, then they would expect to be informed of that, wouldn't they? So, in a formal manner, they would expect to be absolutely clear that they have taken on the responsibility of additional lending to the Scottish Government, because they have significant responsibilities as board members, don't they? They do. So, they can't be kept in the dark. They've got to know that, when a decision is taken that they are ultimately responsible for, then you have a responsibility to report that to them, don't you? So, as the accountable officer, I have the responsibility, but absolutely I have the responsibility of reporting that to the board, and we reported to the board. No, I understand you have your responsibility to report it to them, but they then have the responsibility to take the decision to apply for that additional lending, don't they? The standing financial instructions are silent on that, so it is not clear that it is the board in total. The accountable officer, having been guided by the board to take all action required to break even, was my responsibility and my decision to secure the brokerage. So, just to clarify, so you're saying now, and we didn't, I don't think we quite got to this stage previously, that position is silent on that, but you accepted also in the last session in Inverness that you accepted the section 22 report, which the Auditor General submitted to us, where he advised us that the reason for you applying for additional brokerage was because of issues relating to the financial management and the financial reporting to the board. Indeed. Is that correct? That is correct. And you accepted that in the previous evidence. We absolutely accepted that. I absolutely accepted that. So, while she advises that the rules on this appeared to be silent, the reason why we're in this position is because the board weren't made aware of this, so they could have been taking decisions across the board, not knowing that they had already submitted themselves to a lending facility that you hadn't informed them of. I informed the chairman immediately. I'm not talking about it, I'm not interested in the chairman, what I'm interested in, I put myself in position, I am a board member on your board, and I'm taking decisions every single day relating to the financial management of your organisation. For me to do that, you need to make sure that I'm constantly informed of the position on a daily and at least the cycle of the meeting papers that I put before me. That didn't happen, so that had consequences then, didn't it? We did keep the board informed, and the board gave me clear instruction to take whatever action was necessary in order to break even. It was on that mandate that I made the decision to request brokerage and secure brokerage from the Scottish Government. I understand that you've done that, and that's the position you follow, but you do appreciate the impact that this could have had in the decision making process of your board members. For them to be in a position to be able to take decisions at the board, surely they have to be informed properly through the board paper processes, is that not correct? It is, but it's my belief and understanding from board members that they were fully informed and quite clear about the action that I would be required to take. So the board members felt fully informed, so they were quite happy that you had decided to take on the brokerage responsibility, despite the fact that they weren't informed. Despite the fact that you've effectively signed up a lending facility, I don't know what you obviously would put a corporate experience elsewhere. There's not many businesses across whatever sector it is who would really think that it's acceptable for somebody to take a significant decision like that, without them having the sign-off process to do that. It's pretty unacceptable and it's very unusual and not. These were unusual circumstances for NHS Highland that we had never required to secure brokerage before. On reflection, I would accept the point that you're making, Mr Martin, but it may have been better for us to have an additional board discussion, but my feeling at the time and still today is that we had had a number of discussions with the board and the board were quite clear in their mandate to me, which was a requirement to breakeven. In fact, we were on track to deliver breakeven without brokerage up until month 10. I've looked at your board papers for other issues that you've taken decisions on. I mean, you know, some of them relate to a wide range of issues relating to the management of your board on a daily basis. I mean, I'm sure we could probably find something in here that tells us on many paperclubs you've bought and on many other procurement processes that you've went through. So there's other elements of your business strategy or your business decisions that are taken every day that you have reported to the board that to me are important, but nowhere near as important as somebody in the board being advised, yes, we've now taken on an additional lending facility unless you're responsible for that. We did report that to the board. After the decision was taken. I'm absolutely accepting that, but we had had a mandate from the board in order to secure financial breakeven. At that point there was a need for that. What do you mean by mandate? The board had requested that I did everything that was necessary in order to break even. So you've got a blank check. So they just said go and do whatever you need to do, go and get whatever loan you want to get. So did they really just say then if the loan was for £12 million and it doesn't matter, just do whatever you have to do to break even, is that what they said? No, they didn't. They were quite clear on the scale and they were quite clear on the actions that we were taking and the alternative actions that would be necessary should we not secure brokerage. But it was quite, I mean, we're not surprised still when the board said that to you, just go and do whatever you want to do. You're the chief executive, go and do whatever you want. Did you not say to them, Bill, you've got some governance responsibilities here? My view was that they were executing that governance responsibility by keeping very clear to the position and discussing with us the action that they wish me to take. It's just on that very point, I mean the one thing that Audit Scotland and in particular this committee are absolutely 100 per cent about is an audit trail and we've looked at that in colleges and various other sectors and it's a very serious cause of concern. So the third of March paper, you're talking about breaking even, that's what the board members got. On the sixth of March, you confirm agreement with the Scottish Government and then on the 1st of April, you don't, according to your audit and these are papers we didn't have in Inverness, you do not ask the board to agree to a loan of two and a half million from the Scottish Government, you ask them to note the loan. So talking about members being kept in the dark, whatever informal arrangements or discussions you had, the audit trail says that your board members, non-executive directors, were kept in the dark and that's a serious concern in terms of audit. So again, I say the proof we have here. Third of March, no mention of brokerage, talking about reducing costs for depreciation and asset lives etc. The sixth of March agreement with the Scottish Government, so obviously we're doing all this behind the board members back, telling them they would break even, but behind their back negotiating alone and on the 1st of April noting, I find that a matter of serious concern given the amount of audit reports that we look at at this committee as a local member, I'm concerned, but if I take it in the grand scale of all the audit reports we get, this is a matter of very serious concern that you are not including the non-executive board members in the decisions and I am concerned about your response to the convener that this was all your decision. So perhaps you would like to explain third of March why you told board members you were likely to break even, three days later the loan was confirmed and on the 1st of April you asked them to note. To me that's rather disrespectful to your board members. Can you comment on that? I can, Ms Gannon. Agree on reflection was remiss of me to ask the board to note that was unacceptable. We should have asked them for their clear understanding and agreement for the brokerage. Should you have not asked them for their agreement before you sought the brokerage, the loan, which was agreed in the sixth of March? Rather than asking them to agree to a loan that you already had in your pocket by the 1st of April? I understood I had that permission from the board. There's nothing in audit. We have nothing to say that you had permission. Indeed. Because of that I would agree with you that it would have been better on reflection for us to have asked for that absolute agreement from the board. Sorry to interrupt. My previous question still stands. Where is the audit trail of the agreement that you sought, the formal agreement, with your 22 non-executive board directors of NHS Highland? Where is the audit trail of their agreement to the loan from the Government due to poor financial management? The poor financial management that you referred to, Ms Gannon, only became apparent to us on 18 February. That was when the month 10 position was published. We saw that the plan was off track. Up until that point, we had been rightly pointing out to the board that although things would be difficult to deliver a break-even, we were confident that we were able to do that. It was only on 18 February where we saw that there was some deterioration of the expected improvement position in Raidmore hospital, plus, as you've already mentioned, an issue around some additional funding for asset lives that meant that the likelihood of us being able to break-even, in my view, was diminishing. At that point, we were discussing that both informally with board members and formally at the formal board meeting. At every formal board meeting, we've had a report that's described our position and the risks attached to it. Although you're quite right to point out, our report said that our expectation was that we would break-even. On 18 February, you knew that you were going to have to seek a loan from the Government, but on 3 March, the board members agreed to this paper that we have in front of us that they're going to break-even. On 6 March, you confirmed brokerage. To me, that is not about keeping board members informed. The audit trail does not show that those board members were kept informed. Why is there no audit trail that would help you enormously in those circumstances? We've reflected on that from the section 22 report. We've now made the informal discussions that we're having with the board now noted and minited. In the future, there will be an audit trail of those discussions. I completely accept the point that's been made that, while we were having informal discussions and I was taking guidance from the board in those informal discussions, we did not have an audit trail of those. We've now moved to put that audit trail in place. Basically, what we have, the board members and the general public in Highland think that NHS Highland is breaking-even. That's the public face of NHS Highland. The private face, which we don't know if board members are aware of, is that you're doing backroom deals or seeking loans from the Scottish Government, and then asking them to note, which is really the final insult to your board members. The public face was in line with our expectations that we would break-even? No, I'm sorry. You said on 18 February that you had serious concerns. So you go and talk to the Scottish Government, but you don't tell your board members that you're negotiating deals. You're telling us here that you're expecting to break-even, whilst at the same time asking for brokerage behind your non-executive board members back. That's our concern. It's the whole governance issue. I understand your concern and understand that that may be how it is perceived. It's a fact. Bring us the audit trail that shows the discussion. It's not here. It's not my perception. This is a fact. Convener, can I just clarify a point here? Is that possible? Just regarding the third of March that I think the paper you were referring to went to the improvement committee. From memory, it did say at the end of the paper that there was still £2.9 million to identify, and it said we were in discussion with colleagues at the Scottish Government about how to manage that. At the time, those discussions weren't concluded, and we set out in that paper that we were in discussion with the Scottish Government, but I think we'd accept that it could have been clearer. You're talking about improvements to be made to break-even in that paper. If the ability to obtain a loan was part of the options presented to board members as a matter of course? Not as a matter of course, Mr Scott. As I said already, it's not something we would do likely and it's not something that we wish to do in that financial year, but board members would be aware because a number of other boards had secured brokerage in the past that that may be an option available to us. As Mr Kent has just said, they were told that you were in discussions with the Government, but they weren't told what mechanisms those discussions would potentially use to fill the deficit. No, and at that point, we weren't clear what options might be available to us. There were a number. But board members presumably, as you said earlier on, never having used brokerage in the past, never having used the loan facility in the past, because brokerage is a very misleading word, and never having used the loan facility in the past, the board members might fairly assume they would just get a bung from the Government, in other words, a grant that would just buy off the deficit, because that's what's happened in other board areas, right? They may have assumed that. So, would it not have been a bit of a shock to the board members that suddenly they'd, as Mr Scanlon has just been pointing out, suddenly were asked to note a new loan, which they'd never been told about before? Were they not shocked? No, I don't believe they were shocked. They thought it was okay to have a loan as opposed to having a grant that therefore they wouldn't have to pay back. Did any of them ask whether the loan would have what the repayment characteristics of the loan would be? We made that clear to the board that there would be a requirement for repayment over a period of three years. And when you discussed it with the Government, did you discuss with them the possibility of just getting a straight grant rather than a loan? I can't recall. I don't think that option was available. From who? From which, did you ask for a grant for a straight additional amount of funding just to cover off the deficit? No, we did not, because we know that's not the way the Government would operate. The brokerage system's fairly well trodden path. Brokerage is offered, but only on the understanding we paid back and on the understanding there's a clear plan to name it to be paid back. I wonder if I could ask the chairman what the circumstances would be for calling a special board meeting. I mean, does it have to be—well? The circumstances would have to be that we would have the time to be able to do it because we have to give board members to clear weeks notice that there's going to be a special board meeting called. And so from the time that the decision to have the meeting, it would have to be a substantial time from then until our next scheduled meeting to make it worthwhile. As there was from the time of the agreement of brokerage, the time that we had our meeting and it was reported was little more than the fortnight anyway, so I would not have deemed it as appropriate or adding value to have done that. So you don't have a facility just to basically call a—like any normal board running any company I've ever been involved with, they need to get the board together, they just get them together, you don't have that facility. We can do that informally and yes, I will do a phone around of board members, but I've got members that are living in Argyll on islands and they're part-time, I've only got use of their time for maybe a day a week for a variety of stuff, so actually to get them together for a formal board meeting to make a formal decision without giving them the appropriate notice could actually have been seen as not giving them the opportunity to talk about it. I undoubtedly regularly contact board members as issues are arising so that they're aware of them, but I can't call that as a formal board meeting and you certainly won't have an audit trail for it. Are you not allowed to have a board meeting that, for example, allows people to video conferencing or use a telephone on a desk? We can do that, yes, but again, I would have to, in light of the discussion that we're having here and the importance that is being put on this, I may well have taken a different view, but I was certainly aware of, this was the first time in the 10, 11 years that I chaired NHS Highland that brokerage was an issue for us, but I had been aware of it being an issue for other boards and I was not aware of the requirement for formal board meetings to take place to allow that to happen. Boards are not allowed to run a deficit, so we know that our chief executive and others will be looking for any measure to make sure that we break even. Okay, um, just those of special board meetings, have you ever held one before? We actually held one to do with the new build proposals for a hospital to allow us to get into, but we knew that that was the requirement for that was coming up several months in advance, so we were able to schedule it and have it in. So, in terms of formal board meetings, I think that's the, so we've got the facility, we can do it, but it's something that we'll use very lightly. So, for a new build facility, you called a special board meeting for that? Yeah. So, how long did that take to call? It would have been the full fortnight. Sorry? It would have been the fortnight, notice that people would have needed. The reason that was called as a special board meeting is that it's a complex deal between private sector lenders and hubco, et cetera, and it has to be signed off at the same time as other boards, and it didn't fit in with our cycle of meetings. So, we had to call a special board meeting to do that. Okay, sorry. One final question, if I may convene out to the chairman. I think I'm fair writing saying, Mr Coots, that you said in Evanescent evidence that there was a board development session at which one member of your board asked whether it would be sensible to look at brokerage, to look at the lending facility. Can you recall what the date of that board development session was? I think that was November-December. It was the fourth of March. It was the fourth of March, sorry. Okay, that's very helpful. Thank you. Colin Keill, I want you to come in on the issue of brokerage. It was actually something that was said by Ms Mead in terms of the informal meetings that I just would like clarified and that's okay. And it was the, if somebody was looking for decisions in board meetings and you've been talking about other things through an informal basis, how can this possibly look correct when you're taking these decisions informal meetings? How could it be possibly reported for somebody checking up on the performance and anything else that they might wish to check through an informal setting if you haven't been taking the minutes at these meetings, formal minutes, and certainly not bringing through that information in full as done at that informal meeting to the board, the full board formal meeting. And I'm really concerned about the fact that the accountability aspect is not really clear for the public at this minute and time for anyone who is looking through this. Now I know it's been mentioned, there's been various things said, but how do people, how can people possibly be sure that this organisation that you lead is reporting in a clear manner if you're using that type of system? If we can keep questions brief and answers, please. Aye, sir. I'll be happy to thank you for that. So Mr Kay, I think we've accepted that criticism that was highlighted in the section 22 and I think people could now be assured on the audit trail and the level of information and detailed minutes that we keep, both from the formal board meetings and the various committees, for example the improvement committee, but probably more importantly the informal discussions that we have with the board. So those now are minited and they would be available for people to see as part of an audit trail in the future. I'll come back to my other question, like to strip and on. Thank you, convener. Surely just in one point of clarification for me. So just in terms of the major financial decisions, which clearly the brokerage issue is, was it common practice in NHS Highland for these major financial decisions to be discussed informally and also without the audit trail that was currently heard? Now bearing in mind the comments from Mr Kutsum a moment ago that many stated that boards are not allowed to run deficits. So Mr McMillan, we'd never had to make that decision to seek brokerage before, but we... Sorry, I'm not just focusing upon the brokerage, but just any major financial decision. So we discuss regularly with our board any issues of financial significance, so we would have that discussion formally and informally at the both improvement committees, we have partnership meetings for the Northern Highland area and the Argyll and Bute committees. So the financial position is scrutinised, I would say, quite closely by board members, and that's whether those are revenue consequences or we have separate capital group that looks at the capital consequences. So every month we've sent and continue to send a detailed report pack to every board member, so they would be able to not only see the detail of our financial position, but we would also then go through that with them in informal session, but also in our formal board meetings. I wonder if I can just clarify something about the way the board operates. Obviously we're a very large organisation, a budget of £736 million, and the way it works is through a system of delegated authority, so the board will delegate authority to offices to take decisions throughout the year, because it's not feasible for the board to be taking every decision. So at the beginning of the year we'll set a financial plan for revenue, which is day-to-day budgets and capital for the big spend, and officers go away and manage that and report back to the board every month. So I think it's worth just clarifying that board members don't routinely take the financial decisions directly, but they monitor the overall position which has been delegated to offices. Certainly, I'm not suggesting for one minute that the board should be monitoring every single financial decision, but something as major as what we're discussing today, and certainly what this committee has discussed in the past. That's the kind of point I'm trying to get to here, is in terms of would it have been a common thing for a common position for the board to not be fully involved and to not be fully informed when any decisions such as this example, or potentially others, of a great significance actually had to happen? The board was fully informed that the issue is that the decision was not taken formally at a board meeting and in hindsight. I want to speak to colleagues around that, and we were just to make sure that that can happen. We believed that because of our inability to carry a deficit, that would be the absolute requirement to break even, looking at all options and that we knew that one of those options was brokerage, that the board were well-cited, that that would have been one of the options we looked at. In light of the section 22 report, we will amend the way that we work and I can assure you that if, and I hope it will never happen again, that we require brokerage, that we will deal with things differently, but the routine way of making decisions, every decision is made in public. Informal meetings are about information, about briefings, about development, so that we understand the complex system we're managing. It is not about decision making and there has been no decisions made by board in secret meetings. It would have been very helpful, and perhaps we wouldn't have needed to be here, had the decisions been made in public also been audited in public, what we have in front of us, and I appreciate what you're saying going forward, and that's welcome, but what we have in front of us is you're going to break even on 3 March, we confirm a loan on 6 March, and you're asked to note the loan on 1 April. I take what you say about it in public, but what we need, and what Audit Scotland needs, is the general public, given the amount of taxpayers' money that's spent, we need an audit trail, and that's just not here. I agree with you, and we've given you the assurance that we've taken on board the lesson from that year, so the lesson has been learnt, but the circumstance of getting brokerage is something that, in my experience of over 10 years, we've never been through before, I thought it was absolutely transparent, because it is a routine way of ensuring that you break even, that brokerage is available, and when it was taken it was reported to the board. You certainly would not have found, as was suggested earlier, that board members would have been surprised by that, because they're well aware that that was one of the options that would inevitably have been looked at. I agree with you. I've apologised for that, and I've said that we will make sure that that circumstance will not happen again. Can I just ask, before we move on from this year's brokerage, when you talked about the make-up of your board that's made up of non-executive directors and executive directors, are there those who would be heads of departments that would take it, who are members of the board? Not really heads of departments. The director, sorry. They're directors, they're executive directors. For them, and some of them would be leading up some of these organisations who have been through an overspend as part of that. Would have had the chief operating officer who has got responsibility for all of the operating divisions, but the individual operating division managers know. I'm trying to get to some of them. Those who are attending the board would be taking some decisions within their own departments in terms of how they spend money. Is that not correct? The chief operating officer principally, along with support from corporate colleagues. For them to be aware of the fact that this is getting pretty serious now, and the board is taking a decision about brokerage effectively in an additional lending facility, that could have an impact on some of the decisions that they then take. The seriousness of the issue was absolutely crystal clear to everybody around the board table. And brokerage actually relieved the seriousness of it. It prevented us from having to take actions that might have had more of an impact on patients than people that we care for. The seriousness of it is well versed in that, and we've talked about that before. I suppose that the point that I'm making is that, for those people who are sitting around that table, for them, information has been fed to them that, listen, we've just taken the decision on brokerage. It makes it even more serious than it was before, does it not? They never sat around that board table having had a decision about brokerage without it being reported to them. They got it reported, but if they were part of a proper process that followed that up, then the point that I'm making is that the whole organisation then becomes aware of its seriousness, but it's went to red alert because now we're asking the Scottish Government for money. I agree with you, and I think that we could do that better. That is one of the lessons that we've learned, and we will certainly ensure that that doesn't happen again. But I can absolutely categorically say that there would have been nobody at any operational management level that was not aware of the seriousness of the situation. And the measures that we were having to take to secure Reyhaven at the financial balance at the end of the year. They'd been aware that there would have been a number of other discussions taking place, which might have led to a solution, including brokerage. Let me start by just one small positive statement, which is that I noticed that Audit Scotland found that it's the latest financial management review of NHS Highland, that NHS Highland made good progress during 2014-15 in improving the financial management arrangements. Having said that, Audit looked backward at events that have already happened, and I'd like to look a little bit around the issues around the hospital at Regmore. The main issue that was identified was that there was a strong culture of—there was not a strong culture of tight financial management, mainly because the hospital had had enough money. Presumably it had enough money because that money was taken from elsewhere. You had a programme whereby you were making savings in other areas within NHS Highland. Did the money having to be diverted to Regmore Hospital affect the patient experience in any other areas? The issue at Regmore and its financial position had been in place for a number of years. Having enough money refers to the fact that we took a decision to rebase the budget in Regmore. In fact, we wiped off their budget deficit with an additional £5 million as they went into the year starting 12-13. That was because of poor financial management. You were subsidising them. At that point, we were persuaded that there were increased pressures. We had controls in place at that point—this is very early on. Does that relate back to poor financial reporting? The poor reporting is referring to 13-14 and in 12-13. That was over a period of years, but the important point for me is that we did rebase that budget to give that organisation or that part of the organisation the best possible chance of continuing to break even with the pressures that it was describing it was facing. It was therefore very disappointing to us that at the end of 12-13 it was already describing, even though the budget had been rebased, a £2 million overspend, and that deteriorated over the next financial year—the year in question 13-14. That was where there was poor financial reporting throughout 12-13 but into 13-14. Some lack of budgetary control as outlined in the internal audit report and subsequently in section 22. We are talking about poor financial reporting, but should that reflect also poor management of the hospital? Surely that is the bottom line. Yes, those are challenging circumstances, but we required the hospital to deliver a break-even budget, but we would also ask them to look at a recovery plan, and the board and the improvement committee and, in fact, the audit committee were all looking at the outcomes of the internal audit report and the financial recovery plan put in place in Regmore. Early in the year, in 2013-14, the then director of operations and the head of finance were reporting positive progress, but, if the management was poor then, has the management changed or is it still the same management? The management has now changed. We have a different and a new director of operations and a different arrangement to cover the head of finance position. You touched on the 2013 review and I would quote, this was requested after a year or two by the director of finance. Why did it take a year or two to notice that there was a problem? We were taking all measures that we could, so those would have been local measures to oversee, support, train individuals within the organisation, but we weren't seeing the benefits that we expected. We had to question then, and I've described already whether we weren't right, whether there wasn't enough resource in that part of the organisation given the pressures put upon it from other parts of the organisation creating the demand, which is why we took a quite unusual decision to rebase the budget. Having done that, we would have expected the budget to be in control, but, clearly, over 2013-14, it deteriorated further, even than it had in 2013. Why was it that the progress in implementing the recommendations in the 2013-14 internal audit reports, why was that slowed down? Why didn't it happen? I don't believe that it was slowed down. I think that we were pursuing actions with the local team, and we were seeking and being given assurance that actions were being taken. Some of the actions that we understood have been taken, in fact, did not materialise, and we found that there was further deterioration of the position. As I've described to you, it became apparent to us the scale of the position in month 10 in 2013-14, when, by that time, we had a new management team looking at the financial position. Can you remember what the hospital for 2014-15 was supposed to do? I think it was forecast to overspend £7.8 million? Sorry, which year? 2014-15. I'm not sure that I recognise that figure. To be honest, the target for Regmore in 2014-15 was to overspend £6 million. How robust are the plans that you've actually gotten placed for Regmore hospital? We're now very confident, Mr Beattie, that the plans are robust. In fact, we've seen in the last financial year 2014-15 that you referred to an improvement in their position. Although they would task them to reduce the deficit by £3 million, they were just short of that. In fact, they had made great inroads into reconfiguring their services and taking waste out of the system, reducing some of the demand, but also transforming the way that they're delivering services. Their reliance on additional supplementary staff had reduced and they were making significant impact into how they were addressing some of the other pressures that they'd experienced in the year. At the moment, we've obviously had a couple of audit reports that have come forward with recommendations, apart from Audit Scotland. How many of those recommendations are still outstanding and how many have been completed? A number of them have been completed, but there are some multifactorial and rather complex issues that were identified within the audit reports, which are yet not completely complete. We've done the straightforward things around training of staff, budgetary control, where we've been looking at responsibilities for budget managers. Broadly, there are two types of recommendations. One is around controls, and I think those are either complete or almost complete, but one of the recommendations, for example, was to return to financial balance in Raidmore. Clearly, that's not going to help them overnight, so that stands as an incomplete recommendation. It will be until Raidmore returns to balance, which is going to be two years' time. Another recommendation was around a complete review of all the services Raidmore provides. Again, that's not a simple thing that you can do within the hospital. It involves a whole lot of NHS Ireland and, in fact, beyond NHS Ireland's board. The recommendations carried a huge range, and the ones that are fairly simple are either done or almost done. The ones that are more complicated are in it. There's a plan to complete them, but they're not yet complete. I talked before about the savings that were made elsewhere in order to compensate for Raidmore hospital. Where about were the bulk of the savings made in order to channel money into Raidmore? We looked across the whole of the organisation. We were trying to reduce costs in any areas that we possibly could. We were ensuring that any additional resources were targeted to where the biggest pressures were. For example, around supplementary staffing, we would be looking to reduce costs overall across the organisation. Some of those would have benefited the overall position across Highland, but we were trying to do that focusing on quality and without detriment wherever we possibly could to our other services. We've always looked at central services. We've exceeded the target for making savings within the central core of our every year. We'll also look at things like smarter procurement and getting things bought at a cheaper price. There's a whole range of things that we look at that are not just around direct services, but any area that is looking to achieve underspends would be applied to Raidmore. How satisfied are you, in fact? Can you give a guarantee that any future increases in overspending at Raidmore hospital will be quickly identified and quickly addressed? Clearly, that is not going to go away over the next year or two. I can give an assurance that we're comfortable with the management arrangements in Raidmore at the moment. We have arrangements in place for that, regularly reporting both locally and through to the Highland Health and Social Care partnership and to the board. Things would be very quickly identified and we could take remedial action in a timely way. I'll ask a brief question before we bring in Tabish Scott. Thank you very much, convener, and good morning, colleagues. I'm just wondering if I could go back and this is on the same issue, of course. I could go back to the point that was made about your senior management being well aware of the end of the previous financial year of the implications. If I might just quote back to you what we were told in Inverness by Chris Brown, this is column 39, a bit of additional activity was commissioned in early in the hospital right at the end of the year without a recognition of the financial implication of that decision. The financial implication came through the following month, et cetera. Is that right? Are you confident that that would not now happen again? Yes, I believe that that sprang was quite right there. The point that I've alluded to already is that additional work in the form of waiting list initiative work, which would have been paid at premium rate, had been commissioned by the local management team. The costs for that were not clear to us until the January position where there was a £400,000 adverse movement in month 10 due to those waiting list initiative payments. That was of concern to us and, in fact, that contributed to our need to secure brokerage at year end. Is it possible to clarify something just to say that at the time those decisions were made by individual managers within Ravenmoor, whereas now they're made by the Ravenmoor senior management team, so there's more control and visibility around decisions of around waiting list initiative payments? I'm sure everybody will be very comforted by that thought, the idea that you can just make a decision which runs to hundreds of thousands without people understanding the implication worries us a great deal as parliamentarians, never mind what committee we're sitting in. It's good to know that wouldn't happen again. David Scott. Thank you. Can I just ask a couple of supplementary questions to Colin Beattie's questioning on Ravenmoor? The director of finance said that the Ravenmoor is going to overspend by £6 million in the 14-15 financial year. Is that correct? That was a sight. Is it going to hit the target? Or is it too early to say? No, it's resulted in £6.9 million overspent. So, is it routine for Ravenmoor hospital to overspend? Well, as Miss Mead said, we rebased Ravenmoor for the year 2012-13, and that year overspent by £1.9 million and it's overspent since that year. So, it has overspent the budget that you've given it every year? For the last three or four years. The last three or four years. And before, and since you had to rebase it in 2012-13, I'm making an assumption that there was an overspend in previous years as well. Yes, it was rebased because the overspending in the previous year was over £4 million, I think. And that's very fair. And when you benchmark that against other hospitals, is that a routine thing that happens in NHS audit and NHS budgeting that a hospital likely more routinely overspend its budget? I think when we've actually done benchmarking with Ravenmoor in terms of cost, it's comparable with other acute hospitals. And I think if you looked at other NHS organisations financial reports, you do find the acute sector is always the one that takes the brunt of the cost pressure. And by acute sector you mean hospitals? Hospital sector, sorry, yes. In terms of hospitals? Yes. Okay, and is there therefore, do we just accept that? I mean, do you accept as a management team and as a board? Is it just part of running the NHS that the hospital, in this case, Ravenmoor routinely overspends by one or up to your point this morning, £6.0 million? No, I don't think we accept that, which is why we've got a three-year target to return Ravenmoor to balance, but it's hard, you know, it's hard work. It's a very difficult and complex area to return to balance. Can you probably spend more time discussing how we can relieve pressure in the acute sector than we do in anything else? You know, it is about making sure that admissions are appropriate, that people are discharged timely, that we're freeing up capacity in the hospital to deal with people that require acute care. So it is a huge amount of focus for not just for NHS Highland, but across the NHS. Sure, that's true. And in the context of running the budget for the NHS Highland as a whole, do you and have you in the past made an allowance for the working financial assumption that Ravenmoor will be over its budget by some amount? We did in the last financial year, as Mr Kentons described, so that expectation of overspend of £6 million was actually bringing the overspend in Ravenmoor down from £9.6 million the previous year, so we'd expected them to improve and we'd budgeted for that across the organisation. We're expecting an additional recovery in the next financial year and a return to balance the year after. That's fine, but presumably the logic of that also means that, as my colleague's been asking, that has implications for other areas of spending because you have to make that assumption about an overspend in one part of the operation. You can't spend as much money as you no doubt you're under pressure to do in other areas of activity. Indeed, and it's looking at the whole system as we were attempting to describe. Ravenmoor is the result of the demand placed upon it by other parts of the sector. Can just follow up. My question is for Gary Coots, the chairman, and it's a follow-up to Colin Beattie's point on Ravenmoor. You did say that you found savings at Ravenmoor of 3 million, which is half of the overspend. As one of the local members here, you'll understand, and I know that you're fully aware, of the concerns elsewhere in Highland, not taken into account at Argyllin Bute, but in particular Skye, also Fort William and Caithness. Skye, in particular, people around Portree with the redesign of the services. They are concerned that the savings at Ravenmoor will be to the detriment of local staff and local services elsewhere in the Highlands, and I would be failing in my duty if I didn't. I know it's a huge challenge. You are the most rural health board in the whole of Scotland, but I think Ravenmoor has to be the centre of excellence and the centre of specialism. I know how valued it is in the Highlands, but nobody would want that to the detriment of Portree, Caithness and indeed Fort William. So I just wonder if you could take the opportunity on the record to make sure that you will be looking at the efficiencies within Ravenmoor. We will still have that centre of excellence, but it will not be detrimental to areas such as Portree and Skye. Of course, Ravenmoor is a centre of excellence, so it will remain a centre of excellence, and that is a centre of excellence for people in Skye, as well as Caithness, as well as the folk that live around Inverness. The redesign proposals that we are working through at the moment in relation to North Skye, and there is still a lot of work to be done with local people and local clinicians to finally decide on the exact way that those services will be configured, will not be a cost saving. They will improve the quality of the service that we get and give to people. They will change the way that that service works, but those are being driven by a desire to improve the quality of provision and providing the correct facilities for our staff to work in and for patients to be able to get the care they need. They are not a cost-driven exercise. Given that half of the savings in your response to Colin Beattie, half of the £6 million deficit came from within Ravenmoor, can you give a guarantee that none of the rural services and the rural hospitals will be affected detrimentally in order to reduce the deficit at Ravenmoor? NHS Highland, when we are looking at savings and efficiencies, has a set of principles that we work to, and the top of the list is safety. We will not compromise safety, and below that is access and patient experience. We want to enhance all those things. It is a really complicated system that we manage, as I know you know very well, Mary. Somebody might want to have a service locally, but it is safer and better to provide that service elsewhere, and that is a balance that we have to strike all the time. We need to work that through with local clinicians and local communities. I can give you an absolute assurance that NHS Highland is committed to its quality approach and that we will use that as the benchmark when we are looking at savings. We will use that as the benchmark when we are looking at redesign of services and patients and the people who rely on our services will always be at the centre of what we do. I am glad that you appreciate the concerns of the people on Skye, and I think that they are not unreasonable. My next question is to Nick Kenton. Nick, what is the level of non-decurring savings expected in this recent financial year 2014-15, and how does that compare with the level that is predicted by the board's delivery plan? If we look back at the trend in 2012-13, our non-recurring savings were 55 per cent of the total, in 2013-14, 62 per cent, and in 2014-15, it reduced to 60 per cent. We are heading in the right direction by reducing our reliance on non-recurring savings. What we have also done is reduced our underlying deficits, which is, in simple terms, the gap between your ongoing income and your ongoing spend. We have reduced that down from £7.8 million in 2013-14 to £5.6 million heading into the new financial year. Sorry, you spoke rather quickly there, and you are a wee bit far away from the microphone. It might be my hearing that is not as good as it used to be, but could you perhaps tell me what the non-recurring deficit is now? It is heading into 2015-16. It is now £5.6 million against the target of £6 million, so it is lower than our target position. Have you met your target for reducing the non-recurring deficit in 2014-15? That takes me on to... Colin Beattie was also generous enough to mention the news from the most recent year, and I take what you say about transparency and keeping board members in the loop. However, I have to say the papers that I have today are still a wee bit confused, and I am sure that others are. The first paper is from Elaine, and it is dated 20 April. Subject to audit, NHS Highland has delivered a break-even for 2014-15. So you have delivered a break-even. Then, when I read the Audit Scotland reports, the board anticipates an underlying deficit of £6 million, and then further over, in page 14, underlying deficit of £5.6 million. So I have got £5.6 million, I have got £6 million, and I have got break-even. Now, are we talking about break-even? Are we talking about an underlying deficit of non-recurring? This is not clear. We are talking about both, so it is entirely possible to break-even but have an underlying deficit. For example, if your income is £100 million a year and your expenditure is £110 million a year, then you have an underlying deficit of £10 million, but if you have made one-off savings of £10 million in that year, you have broken even, but you have an underlying deficit. So the position that we have ended this year is our in-year position at the end of 2014-15 is a break-even, so get to audit. You have managed that break-even by the non-recurring savings, for example. Where does the £6 million, if you sold off hospitals or something? Give me an example of the non-recurring £6 million that has allowed you to break-even this year that you will not have that money in future years. The vast majority of those will be on holding post-vacant, so those sort of savings are always available to you. So £6 million of vacancy management? Yes, that is entirely possible on our budget. That is entirely possible and still have a quality of service to patients with a £6 million vacancy management. It would not be the only figure within the £6 million, but it would be a fairly large part of it. Other things would be if you have, say, a new development coming on board, if you delay the start of it, that creates a non-recurring saving as well. So there would be a whole package of things. But what we have done is to try and bring the underlying deficit down where we have vacancies held for long-term, we have asked managers to convert those into recurring savings by saying, okay, that post we have managed without it for a year, let's take that post out and call it a recurring saving. So what we have tried to do is ask people to say, don't make non-recurring savings, let's make them recurring now, and that will help with the underlying position. So if you have managed to take out £6 million, including it seems to be a considerable amount of vacancy management, are you overstaffed? Can you, if you still deliver the same service at the same quality, you have managed to take £6 million out with vacancies Does that mean you were grossly overstaffed? I don't think so. I think this is where managers are managing to hold post vacancy for a while, and they knew their financial position, so they're living with that. Some of those posts, it has been possible to take those posts out from a redesign, it's an overstaffing, it might be a redesign of services, but some of them they've said, no, we can't hold that vacancy forever, so they will fill that post, so I wouldn't want you to think that we're overstaffed to the tune of £6 billion. It's interesting to know that you can hold posts vacant with no detrimental impacts. So my final question here is to Gary or Elaine Mead, and it's back to the Enrack funding. You've been given a total of £13 million, but £5.5 million in this financial year. If you hadn't had that £5.5 million, would you have had, forget the underlying deficit, would you have been seeking brokerage again? A range of other actions that we would have taken during the year, and Elaine has explained those in detail at board meetings as to the sort of things that we might have to do. We're very glad that we've been able to get our fair share of funding, and that has allowed us to be able to manage the year-end position a lot more comfortably and not to make some of the decisions that might have inconvenienced some of our patients. We certainly wouldn't have put safety at risk, but we would certainly have had to look at things that some people would have found inconvenient, and we would not have wanted to have done. So getting our fair share in the year has been very good news for Highland. Has it, if I just go back to Nick Kenton's question, some of the savings that you might be hard on stream, does this allow you to relax and think, oh, we don't need to bother with that, we've got an extra £5.5 million, so we don't need to look at efficiency savings? Absolutely not. We are absolutely focused on improving our services. We are convinced within NHS Highland that there are numerous places in every part of our operation where there are still efficiencies that we can achieve, and that is always going to be to the benefit of patients. We run a programme, and we've discussed it with our local MSPs before, around redesign, where we want to eliminate waste, whether it's unnecessary procedures, unnecessary admissions, reducing those admissions, and we think that there is a huge scope there, but every penny that we can get out from these processes will be reinvested in the quality of care that we deliver, and that's what we will be doing. I have no more questions, convener, but I do think that it's worth putting on the record that it's not only NHS Highland that has not received its full funding formula, Grampian, and indeed Lothian have faced the same constraints. I have two reflections, one from Collin Cair and one from Tavish Scott. Okay, Mr Coots, I suppose this one. Are you confident that the non-executive directors of the board are aware of their legal responsibilities? Yes, absolutely. I mean, every single non-executive that joins my board undertakes a training programme, and we refresh that training programme as a group, so not only do we want to know that people have been through the training, but we want to do it as a group so that the rest of the colleagues around that table know that everyone else has understood and knows their role and responsibilities. Given that there's a training programme, how do you evaluate it? Well, there's that evaluation of every non-executive every year. There's a formal evaluation that I conduct with all of the board members, and we discuss areas of where they have contributed well around each of the main aspects of governance, where we believe that they still need some support to be able to improve their performance on certain areas of governance, and we have additional support and training identified where necessary. That includes looking at what other boards do, looking at other NDPBs do, and looking at best practice. Orate Scotland provides an awful lot of support to non-executives in directing them to areas of questioning, etc. That they should be able to look at. It is a tough job, and they don't get an awful lot of time to do that job. We try and recruit the best people with the skills that they have, but we want to develop those people when they're in post. Thank you. Can I just ask one question on NRAC again? By understanding the profiling of the additional funding for NRAC was that it was originally to be three and a half million in 14, 15 and then 11 and a half in 15, 16, and then, as you've just indicated to Mary Scanlon, it changed to five and a half and eight and a half. Why did it change? There was a change to the calculations and the formula in year. Mr Kent might be able to give a little bit more due to that. So there's a government change to the formula rather than your request to front-load it, shall we say? It wasn't actually a change in the formula. If you refer into 2014-15, or if you refer into 2013-15, we began the year with an allocation of 2.5 million. That was a movement to target. Towards the end of the year, the government received additional climate consequential funding and decided to use some of that to move boards who were on the target towards targets. So they then allowed another £3 million to be moved to NHS Hyman to move towards targets, so money which became available towards the end of the year to the government, and that was the government's decision. So it wasn't changing the formula. It was changing the profile of moving us towards targets. How late in the financial year did that arrive? Did you know about that? Obviously, it was a budget consequential from London. It was notified to us in January 2015. After the ultimate statement in December. And you had from January to the end of the financial year therefore to spend that additional resource or to use that to offset the deficit, I suppose, dear. Yeah, to use it to mitigate the savings programme. Yes, okay. Thank you. Just before you ask the committee to come in, just go back to the issue of vacancy management which you touched on, Mr Kenton. Can I ask him whether there would be something that would be submitted to the board in the form of a paper or a discussion that took place? I take it that this is a strategy to save money as vacancy management is up. No, I think it's a governance issue. And our staff governance committee will be looking at vacancy rates and those issues constantly. I think that what is really important to note is... I must ask Mr Kenton the question if you can just confirm that. I said that so we got about this session. So just taking you back to your statement, Mr Kenton, you stated that in terms of recurring savings and non-recurring savings, we are managing this through vacancy management, so effectively not filling posts. I take it that this is a strategy that's in place. Is that correct? Well, it's routine management to hold post-vacant if that's feasible. So is that paper a board paper that's been submitted, a board paper that we could refer to that confirm this approach? Well, as I say, it's routine management and we will be part of our savings programme which will have been approved by the board, would have assumed some level of vacancy management. So would you regard that as best practice for us not to fill posts as a way of saving money? I know what happens across the whole sector. I'm not claiming that it doesn't. I've seen it happen in local government. But is this an example of best practice as a way of saving money? I don't think you can understand. I think it's more complicated than that because there will be a whole range of reasons why vacancies are not filled. Sometimes they can't be filled because of how to fill posts. So I think it just depends on the circumstance. To be fair, going back to the question on the Meridith scandal that touched on this, you confirmed that a way of saving the six million that you referred to quite helpfully is not to fill in certain posts for a certain period of time. Is that correct? That is correct. That's one way. So I actually did hear that properly then? Yes, that is one way. To confirm that, so I take it to save that money. Again, we're going back to the way in which the board goes about its business. For us to ensure that that's taken forward, we ensure that there are some paperwork on audit trail of how we go about that business. Because I take it that people don't just say, well, I'll tell you what, I just won't bother filling in that vacancy because that's what I've decided not to do. In fact, I would probably guess that probably a number of your heads of departments are desperate to fill in some of these posts, but they've been advised at another level that they're not to fill them in to save money. So all I'm asking for is, could you provide us with the audit trail for that? Because it's part of the work that we've done here that we need that information. So is there an audit trail for that? It's routine business. You're the director of finance, so I would expect you to confirm the point that you made a connection with. We are now making savings as a result of not filling in vacancies. I just take it that there must be some kind of trail to confirm that this is the approach that's been taken. I don't know what my speed wants to come in on that. There is a process, but this is something, Mr Martin, that is practised as... I've not said it isn't. I've just asked the... So we would not have taken in that financial year a paper to the board to say we are doing this because that's something that we would have done as a matter of routine. So no, there would not be a paper. Other than the papers that we put to the staff governance committee, where we monitor clearly staff vacancies and they're very aware of us needing to hold or being unable to fill some vacancies. So an example might be in corporate services. We would have a working practice of any vacancies we would expect in corporate services, that's non-front-line services, to be held for maybe up to six months period. And that would then generate some non-recurring savings for us. I think what you've done is you've referred to possibly what could be, let's say it's not front-line, but still with some impact, but that's the limit there to that. But there will be front-line elements of this, which is important. But I think the theme for us today, though, is confirming that you are moving forward, you're confident about your financial position. But an element of that is, and just a confirmation from Mr Kenton that yes, we will have vacancies that we are not filling as a way of saving the money. I'm not saying it doesn't happen. All I'm saying is we surely should be able, as part of this process that we're following here, there must be something of some kind of audit trail that confirms the approach that's been taken here, and that's all I'm asking. If you tell me there's not, then it's another part of the whole picture that we have to take into consideration. But I would be really surprised if people were taking decisions not to fill in vacancies, if they hadn't received that information or that approach. And if it hadn't been discussed at the board in any context, I'd be surprised as well, but you might know better than me. So it's been discussed any vacancy control or management at the Staff Governance Committee, which is the sub-committee of the board? Yeah. So the board members would never have, the overall committee of board members, they would never discuss the issue of human resources at any board paper level. They would discuss that at the Staff Governance Committee, and there are members of the board clearly. And do they report to the board when they take decisions? They do. They do. Absolutely. So when somebody says, I need to make these savings, then part of the presentation says yes, here are vacancies, we're not going to fill them, because that's how we're going to save money. Indeed, that would be part of the discussion. So there may be some board papers or something that we can get access to that can confirm that. That discussion, the Staff Governance Committee papers are available, absolutely. Yeah, so we could. Okay. Thank you. Colin Beattie. Thank you, convener. Actually, I've got two questions. One following on from what the convener's been talking about, just now. Somewhere in these papers, it says that you're recruiting three deputy directors, presumably not cheap posts to fill, three deputy directors in order, presumably, to be able to drive through these savings. Adding to the bureaucrats doesn't seem the right way to affect savings, especially if you've got jobs open elsewhere, which might be, I don't know what they are, but they might be consultants or nurses, whatever. What's the rationale? Sorry? Is there who you want to answer on that? I think possibly Elaine Mead, yeah. Happy to answer that, Mr Beattie. The references made in the updated audit report to the three deputy directors of operation. We have in the past taken out a significant number where required to take out 25% of our senior management capacity over time, and we did deliver that. What we found is that in order to transform services rather than just make small step changes, we need to engage the whole expertise of the senior management team to create an environment where people are happy to change what they're doing right at the front line. Our view is that our director of operations, and in the north of Highland we have three director of operations, are fully stretched and covering both health and now, of course, social care for two of those areas, and are not able then to provide some of the guidance, support, leadership to the local teams to allow them to make the changes that they may wish to make. We've discussed that widely, we've discussed that with our union colleagues, we've discussed that with our senior managers and our clinical colleagues, and the view is that this is additional capacity which is required in order to be able to unlock the savings and the transformation of services across the rest of Highland. Are they permanent posts? We've made them permanent posts as we wanted to attract high-caliber individuals, but we see those also as transitional arrangements. Should we find that there are any changes in the current organisational structure, then those may well be transitional posts. So beyond the present cycle of changes and so on that you've got in your budget and whatnot, these people will continue on into the future. So there'll be a cost going forward. There would be, but every time there's a vacancy we'd reconsider the structure and the position. So at the moment those are absolutely identified as three permanent additional posts, which are, in our view, vital to the transformation of the services in NHS Highland. I'll just move on to my second question which leads on from what Mary Scanlon was talking about, NRAC. Or at Scotland's financial management review, which came out in May 2015 there, paragraph 34, there's a statement here that's slightly alarming. It relates to NHS Highland being one of the boards that's been under parity in terms of NRAC and was receiving an increase for 2015-16 of £11.5 million. It then says that it was agreed with the Scottish Government in December 2014 to bring forward £3 million of this allocation to help it manage its financial position in 2014-15. The bit that I'm concerned about and I'd like to comment on is this afforded the board the option of not implementing some of the more challenging areas to deliver savings that could have had a more direct impact on patient services. I would like to understand, has that £3 million in fact gone to compensate for savings that you would have made? Or has it actually incrementally improved your situation? Because obviously you should be making savings and the £3 million should be something extra that you can then use to deliver something additional. Here it seems to be implying, well it's not implying, it's saying it gives you the option not to. It gave us the option in the year not to take some of the more challenging decisions that we may have had to make in order to meet our statutory requirement to break even. So we had a plan and our plan was being executed and we were online to deliver that plan and that's an important point. So we were likely to be able to break even without the assistance. Having the additional NRAC share that came to us late in the year that's helped to actually alleviate some of that pressure on us and in fact in order to make sure we weren't taking resources from front line services that's been some of the benefit towards the additional posts have been used from the NRAC allocation. But the £3 million compensated for savings you then didn't have to make? Some of that would have yes, but not all of that as we were on target to deliver break even even within the tight financial constraints that we were experiencing. Just one question you may be able to clarify for me since we meet. The committee that is actually following on from the convener's line of questioning using non-filling of posts, the committee that dealt with that. Now I'm assuming although there are, you said that there was some board members attached to that. I'm assuming that there would be a report given to the full board in formal session as to these decisions being made by that particular committee on that particular issue. And would it be if we went looking for it on the minutes of the board would we find a report there? Yes, Mr Kay, you would. So that is a formal sub-committee chaired by a non-executive director and the reports are available and presented to the board at the board meeting. At the board meeting? So they are minited in the full formal board meeting? There are reported a board meeting. We have some action points from some of those meetings, but we do give the full report and the non-executive actually presents any issues by exception at the board meeting. Yeah, I'm just trying to sort of get the idea of who makes the policy decision at the time to make, formalise the actions that have been taken. So these are management decisions, Mr Kay. So we'd be reporting the action to the staff governance committee and we'd be reporting any consequences of those actions to the staff governance committee. Yeah, okay. But just to be clear though that in terms of Scotland though they have made it clear in this, the latest report this month that non-recurring savings need to be challenged though and it's a challenge for your organisation, that's correct, isn't it? So not filling in these vacancies isn't something that they really want you to continue? They know what happens, but it's not something that they're encouraging or is it? Not encouraging, but we would take an advantage if it was available to us of holding a position. We look at every vacancy though and that's an important point to make that front-line and clinical, critical staffing vacancies. Affects staff at all, doesn't it? They're not held and what we do that staff partnership is a part of our staff governance arrangements and sit alongside us at the staff governance committee. So people are very aware of the decisions that are being made. Could you just clarify then you'd never receive any representations from shop stores or union representatives to say also we need to start filling in these vacancies because it's having an impact on how we deliver our service. We meet with them on a monthly basis, they're not raising that as a significant. So they're happy with that? They understand the situation. So we are continually, so for example with nursing staff, we're continually attempting to employ and recruit nursing staff. So this is about front-line staff that we try and secure and protect. The position is that if we have other staffing then we will take an opportunity to hold those posts wherever we can. So that's finally then just I mentioned the point. So in your view the non-filling of the vacancies doesn't affect staff morale. Staff are happy with that. In fact they have such a good partnership with you that they never raised that as an issue. I, staff partnership has not raised that with me as an issue. So in your experience staff morale is good because we don't fill vacancies that people want to see alongside them. I don't think you can you can make that link immediately. I can't think in many organisations where somebody alongside me would say it's really good that we're doing our job here today. There's a vacancy that's not been filled for the last six months but it really doesn't matter. Most people want to see if they're part of a workforce and to make that service more effective. Quite like to see vacancies filled are they not? Of course. And we attempt to do that but on occasions we've not been able to do that in some specialties and in some circumstances. Mary Scanlon. Yes, on that point the paper that we've very got very late from Audit Scotland yesterday talks about your sickness absence. The Scottish Government target is 4 per cent and NHS Highland has gone up to 4.9. So you're almost 25 per cent above the Government's target. So while the convener talks about morale etc, there's obviously a Government target of the NHS throughout the whole of Scotland to have an average sickness level which of course we understand is unavoidable of 4 per cent. Is it possible that the vacancy management in order to deliver these savings you know if you've got a team of 10 and two people are missing because it's not being filled surely the impact of that workload falls on those who are still there. Have you done any evaluation of the increase in your sickness absence 20 per cent above the Government's target to see whether there is pressure on staff because of the keeping vacancies open for lengths of time? So we continually assess and report back to local management their staff vacancies and the sickness rates and they take local action as required to manage that. That's also reported to the staff governance committee who again in partnership are looking at any increases in staff absence. So yes, we do look at that most carefully and try and reduce wherever we can. So is there an added pressure on the staff who are there to work twice as hard to make up for the vacancy management that you're using, the people who aren't there you know in order to make savings? Is there additional pressure on the staff who are still there to carry on and continue with the quality of service despite reduced numbers of staff? I've certainly seen that in corporate services where we have put pressure on non-front-line staff to continue, that would be fair to say. As I've already said, we try and make sure we alleviate wherever we possibly can pressure on front-line staff if the posts that we're unable to fill then sometimes we're having to replace those with costly supplementary staff. Well that's the point that it does impact on cost savings. Are you concerned that your sickness absence is 25 per cent above the Government's target? We have a number of areas that we're looking at that are of concern to us and certainly we saw a higher and NHS average sickness rate in some of the staff groups that came across to us as part of integration. But you don't think that it's anything to do with your policy on leaving posts unfilled for several months? Not directly. Okay. We don't have any further questions. Can I thank you for your time this morning and your previous session as well? Can I move the committee into private session?