Public Audit Committee

Meeting date: Thursday, December 2, 2021

Official Report 609KB pdf

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Section 22 Report: “The 2020/21 audit of the Crofting Commission”

Agenda item 2 is “The 2020/21 audit of the Crofting Commission”. I welcome our witnesses from the Crofting Commission: Bill Barron, chief executive; and Malcolm Mathieson, convener. I invite Malcolm Mathieson to make a short opening statement.

Good morning, and thank you for inviting us to give evidence about the Crofting Commission. As you know, our external auditors submitted a report to us at the end of May, which led to the section 22 report from Audit Scotland in October.

We welcomed the recommendations in the action plan in the auditors’ report and immediately set about implementing them. The Crofting Commission’s board and management, and the sponsor team at the Scottish Government, have united around delivering the action plan. As of today, 33 of the 41 recommendations have been implemented and two more may be signed off when the board meets tomorrow.

At the root of many of the recommendations was a lack of clarity about roles and relationships, some of which arose, as you have heard, from our unusual legislation. We have tackled that head on by working with the Scottish Government to revise our framework document and securing joint training for commissioners, senior management and the sponsor division. All that has progressed incredibly well over the past six months.

Bill Barron and I are happy to address any questions that you may have or any clarifications that you require about what we have done over the past six months to ensure that the recommendations are implemented, and, more importantly, that they are in place for the future.

Before I open the session up to members, I will start with a couple of questions. It is good to hear that you have made a lot of progress, that you have implemented 33 out of the 41 recommendations, and that you hope that another two will be signed off tomorrow. However, the Audit Scotland report raises some significant concerns. Can you tell us the extent to which the issues that were raised in that report have impacted on the key services that the commission provides to the crofting community?

Bill Barron can answer those questions from an operational perspective, but from a board perspective, the board has focused on the commission’s roles and responsibilities. The board now understands its responsibilities and it is clear what is operational and what is strategic, which has been helpful for everyone.

Of course there has been an impact. A lot of senior management time has been diverted to thinking about these matters, but the staff and middle management of the Crofting Commission have progressed and are performing to an exceptional level, so the impact on that side of our work has been minimised.

You will be aware that in 2019-20, we met 13 of our targets, partly met one and missed one, which was about the extent of sickness absence among our staff, and there is nothing that we could have done about that. It has been picked up that in 2020-21, the picture shifted and we met nine targets and missed seven. However, many of those targets were couched in terms of doing as well as, or better than, we did in the previous year, but 2020-21 was the year of Covid, when, for example, grazings committees could not meet, we had issues with connectivity and with the availability of our building, and we had staff who were not able to be present because they had caring commitments. It is therefore not at all surprising that performance, measured in that crude way, appears to have dipped. I assure you that, back at the ranch, the staff are performing extremely well.

According to the Audit Scotland report, some of the roles were a bit blurred, so it is good that they have been clarified and that people know what their roles are.

I highlight the fact that, as I explained initially, we have all attended training sessions. I think that where the roles and responsibilities start and finish is now very clear. That has been a big step forward for the board, senior management and the sponsor team.

That is good to hear.

The Audit Scotland report states that there was “excessive involvement” by the board and the former convener in operational decision making and in matters that would typically be the responsibility of the senior management team. Excluding the office tasks that were performed during the pandemic, why did the board and the former convener become involved in operational decision making?

That is about the definition of “operational decision making”. We were operating during a Covid period. Board members gave out their telephone numbers so that anybody in a crofting community could contact us, because staff were working from home—that was a new environment, and everybody was getting set up with information technology and so on. Board members said that we would assist by answering any queries from people in crofting communities, if we could. At that stage, the board, including the convener, got involved in operational matters. We thought that that was for the right reason: to try to assist Bill Barron and his operational team.

Some of the comments about the previous convener and the role that he was undertaking are not quite correct. It was all done for the right reason, which was very much to try to help Bill and the staff. However, in retrospect, knowing what we know now, we could say that yes, possibly, that veered into operational matters.

Has that now changed?

Absolutely. Well, there is not the same requirement for the board. Home working is now operating. Bill Barron and his team have put in all the procedures, so there is now no requirement for the board to be involved. At the initial stages, the board felt that it was the correct thing to do.

Is everybody now clear on their roles and responsibilities?

When it comes to the board, I can certainly say yes. Bill can answer for himself and his management team.

I echo what Malcolm Mathieson has said. We have had some constructive joint training about the divide between the roles of the board and the roles of senior managers, and the operational strategic split, as it were. It is clear which things are normally delegated to staff to lead on.

It is also clear, and has been made clear to us in the training, that the board is responsible for everything, so it is a question of judgment as to when it asks for more detail. I am absolutely clear that my convener understands how to make that judgment, and it is working exactly as it should.

What things that were said about the previous convener were “not quite correct”?

Nothing in the auditors’ report is technically incorrect. On some aspects, we as a board felt that the language was a bit emotive, because the previous convener was doing what he thought was the right thing.

For example, on the taking of a staff survey, the previous convener took office chairs in the back of his Jeep to staff to help them when they were starting to work from home and, while he was there, he would ask them, “ How are you? How are things?” and so on. When he conveyed that in writing, he put down that he had undertaken an unofficial staff survey, but it was not necessarily that. It was more a case of trying to understand what was taking place.

On the operational side, as I have explained, we were in a situation that nobody had experienced before. The board was trying to assist, and technically, if you like, we veered into operational matters. Nothing in the auditors’ report is technically incorrect, but we feel that aspects of it do not take into account the situation at the time.

The Audit Scotland report mentions operational matters that existed before Covid. Are they still happening now, or has everything changed since Covid?

I think that Bill Barron has explained that, at present, with the training, there is a very clear distinction of what we as a board are responsible for, and I think that there is now an understanding in the commission, including in its staff, of the board’s responsibility.

Everybody is quite clear about their roles and responsibilities.

We should be after the training—and I am sure that we are. Speaking on behalf of the other commissioners, we are certainly very clear now.

Thank you. We will move on to questions from other members of the committee, the first of which are on the leadership and governance of the Crofting Commission.

Good morning, Mr Mathieson and Mr Barron. The impression that I am getting from what you have said so far is that, in effect, what went wrong was circumstantial rather than systemic or attitudinal. Mr Mathieson, could you say at what point you got the impression that the leadership and governance arrangements had broken down after a period of apparent stability?

I think that there was a lack of understanding among the commissioners about the chief executive’s roles and responsibilities, and the board’s understanding was that the chief executive reported to, and was accountable to, the board. We probably only fully appreciated the dual reporting that the chief executive did when, on a couple of occasions—they are in the auditors’ report—things arose that we had not been not fully aware of.

On the biggest learning to come out of this, in the new framework document that we as a board will, I hope, sign off tomorrow, it is now clear that the chief executive is accountable to, and reports to, the board. I think that there was a lack of understanding of the roles and responsibilities prior to the auditors’ report being made available.

It might help to go right back to the start of Covid. The Scottish Government approached me to ask whether it could borrow me for a few weeks to work on the care homes crisis. Hundreds of people were being moved around to do emergency jobs at the time, and the situation was enormously pressured. There was confusion over my status. Was I a Scottish Government person on secondment or a Scottish Government person appointed to the Crofting Commission? What was I? The senior person in the Scottish Government and I spoke to the then convener of the commission and asked whether I could be away for a few weeks. Rod Mackenzie said yes and that, obviously, Covid was much the most significant issue affecting crofters as well as everybody else then. It was agreed on that basis.

We did not consult the whole board at that time. With hindsight, we should have done that. Obviously, things were moving at great pace, but I think that that was the first time that the board felt that there was something a bit funny about the way that decisions were being taken without its formal consultation.

What was your response to the vote of no confidence? What is your understanding of why it has now been withdrawn?

At the time of the vote of no confidence, I was not supposed to know that it had happened. The board had written privately to Fergus Ewing. I discovered the basic content of that letter only when I saw a draft of the Deloitte report in March or April this year. It said things about my style of leadership that were, I think, partly to do with a clash of cultures. Obviously, I am steeped in the public sector—I have done 40 years of it, for goodness’ sake—and my colleagues on the board come from a small business, private sector background. They are impatient for things to be fixed quickly, and they are impatient with bureaucracy. I have learned a huge amount from them—I relish that kind of challenge—but there is a little clash of cultures there.

I considered stepping down, because I do not want to work for a board that does not want me, but my senior managers who knew about the matter and those staff who guessed were absolutely four square in saying that things would be worse if I left.

When it all came out to the point that we were able to talk about it and the board spoke to me about it in June this year, it told me that the problem was constitutional. It was not a personal one about me but was about the way that the roles work and fit together. At that point, it was clear to me that my stepping aside would not fix the problem.

That is why I decided to carry on, attend to delivering the Crofting Commission’s business and work as closely as I could with my board colleagues to resolve those constitutional confusions. The reason that the vote of no confidence was withdrawn a month ago is that we have worked through those constitutional confusions and there is now much greater understanding of the way that the roles interact.

09:15  

I absolutely concur. The issue that the board had is that it was under the impression that the chief executive was accountable to and reported to it. Therefore, it asked why the chief executive was going off and doing other things without telling the board first. It was only after that that it became clear to us that it was not our responsibility to say yes or no to the chief executive going off to do other tasks. I suggest that, over the past five to six months, the board and the chief executive have worked more closely together than they have for many years to deliver the auditors’ recommendations.

The board had private conversations with the senior management team, who were very supportive of the chief executive. We felt that, based on the changes that have taken place, the clarity of the roles, responsibility and our understanding and the support that Bill Barron has from his senior management team, it was correct that we withdraw our vote of no confidence.

The initial situation was purely down to the fact that we did not feel that the chief executive was keeping the board fully informed. Subsequently, we found out the reasons why.

In your opening statement, you said that Covid was the cause of the problem, in effect. However, I am getting the impression that there was a latent dysfunction that came to a head during Covid. Is that the right way of characterising the situation?

I think that I said that Covid was the reason for more operational involvement from commissioners. Covid was not the reason for the situation. The roles and responsibilities existed prior to the pandemic, so it is not the reason, but Covid was probably the main driver for the board getting more involved in operational matters.

Do you accept that there was a weakness in the arrangements beforehand?

Oh yes, absolutely.

Looking forward, there will need to be an effort to rebuild trust. How are you going to do that, Mr Mathieson?

The first thing is that we have been very open in all communications between the chief executive and me and, more importantly, between the sponsor division and me. The commissioners get notes and the minutes of every meeting that I have with the sponsor and every meeting with the chief executive.

We are now very open in the way that we ask questions. Rather than board members talking among themselves, we are now very open and detailed in the questions that we ask. Not only is there greater clarity on roles but, over the past six months, much more openness has arisen in all aspects of the commission, ranging from the sponsor, through the board and senior management to the chief executive.

Has a more formal process been developed to ensure that the chief executive is held accountable to the board for his performance?

Yes. The framework document, which we hope to approve tomorrow, now states that the chief executive is accountable to, and reports to, the board. At each of the board meetings, he gives a verbal update on everything that has taken place. The board now receives a lot of facts and information that it might not have received before. A lot of what comes to us is purely for information—we do not act on it—but it means that we are now a lot more clearly aware of what is happening in the organisation than we were before.

Is the board making the best use of the combination of appointed and elected members?

Yes. One of the issues with elected members that we are trying to highlight and hope to resolve is that there was a perception that they were there to represent their constituents. As such, there has been the possibility that elected members could get involved in day-to-day operational matters. On our website, we are making it very clear for the next elections that elected members are there to provide Bill Barron, his senior management team and the Government with experience of crofting matters and crofting communities.

It is important that there is greater understanding of an elected commissioner’s role. That is what we have been focusing on for the past couple of months, and it should come through. Commissioners are appointed for skills and experience that you might or might not get from elected ones—it depends on who stands for election. However, it is a good split, because it brings in specific skills that the commission might require.

Is there now a formal appraisal mechanism for board members?

Yes, that process has already started, although I should point out that I can do appraisals only from when I took over as convener, which was in July. Each commissioner has been sent the initial documents, which have to be back by the first week of January, and I have set aside the second and third weeks of that month for my own discussions with the commissioners. I will document those discussions, and that material will be sent on to the sponsor division. The process is in place and has been started, with the documents going out. We also reviewed the appraisal documentation to ensure that it was relevant for elected and appointed commissioners.

Do you wish to add anything, Mr Barron?

I am aware of all of that; indeed, Malcolm Mathieson has been supported in that activity by my board support experts and with training that we have had. We are happy that a proper process is in place and that it will be fulfilled.

You said that training had already taken place. Will that be a continual and on-going process?

Yes. In fact, one of the biggest things that we have learned from the training that we have just undertaken is that it should have happened when the new board was brought together. The training that we have done over the past six months has highlighted in a very detailed manner what is operational and what is strategic, and what the board should and should not get involved in.

The training was such that the commissioners all felt that, when the new board takes effect from next April, the sessions that we have just had will need to happen in the first six months, because it is imperative that board members know right at the start of their tenure what their roles and responsibilities are. Unfortunately, it has taken us five years to get to that point, so we will want to do that very quickly.

I want to take a slightly different tack on the matter. We had eight new board members out of nine in the space of three months in 2017, which would be a challenge for any board, and we instituted a pretty heavy training schedule. However, we probably front-ended it too much, with a deluge of information coming to people who might not have had any knowledge of how public sector organisations operate. We are now looking to take a more nuanced approach, concentrating on a smaller number of key things up front and taking a bit more time over some of the rest of it.

That said, we all hope that we will not have discontinuity to the same extent at the next elections. It will obviously help things if some of my colleagues stand again and are re-elected.

Before I move to the next set of questions, I want to ask for an update in writing on the framework that has been agreed and the further recommendations that will be implemented after your meeting tomorrow.

Absolutely. Once the board signs it all off tomorrow, we will certainly do that.

Colin Beattie has some questions on the sponsorship arrangements between the Scottish Government and the Crofting Commission.

Before I get on to that, I have to say that it is easy, sitting here, to forget how serious this section 22 report is. The impression that I am getting is that there is nothing to see here and that we should move on; there were just little technical hitches, we have sorted it all out and everything is cuddly again.

However, I come back to the fact that the report is extremely poor, and for that, the senior management, past and present, is responsible. I expect senior management to have the skills, knowledge and commitment to ensure that we do not get into this sort of situation and that we do not have to look at these reports. Yet here we are.

I realise that, from your perspective, you feel that a great deal of work has been done, with the changes to the board and everything else. I am concerned about ensuring that we do not see the Crofting Commission in front of the committee again as the subject of a section 22 report, but I am not really hearing much to reassure me that the senior management skills are there and that the people in charge are capable of managing this adequately. I think that Bill Barron said that extensive training was given to the new board members when they came in, eight out of nine having changed, but whether they are elected, appointed or whatever, they all have a responsibility that they cannot walk away from. They should have the skills to deal with that, and if they do not, they are clearly unsuited to the job.

We have seen the results of what appears to be failure after failure in the management process, which is why the section 22 report was issued. I am happy to hear your comments on that, but we cannot walk away from the fact that this is a serious report that highlights serious deficiencies. It will certainly take time for the committee to understand and accept that the changes to be implemented will be a step change in the situation. We might be just a little bit naive if we simply accept that everything has been fixed, because I see no evidence of that at this point.

All I can say is that the board as constituted today is totally committed to ensuring that the situation never arises again. You talked about the need for necessary skills and experience. With the three appointed commissioners, you can get the skill set that you require, but if you have six elected commissioners, you will have to work with those individuals. We have been very fortunate in having a very capable group of elected commissioners, and I hope that that will be the case as we move forward.

As Bill Barron has said, there was a lot of training at the very start to try to give people an understanding of the differences between a commercial environment and a more public sector environment. What this board has learned will be passed on to the next board. I also point out that I and one of the other appointed commissioners are here for another three years, and we will ensure that the lessons learned from what happened in the past will be carried forward into the future. Bill can speak for the management, but I certainly think that the relationship is lot closer now than I have seen it in my five years on the commission.

Let us move on to the safer ground of sponsorship arrangements. Serious concerns about how they worked come out in the report. How did it come about that the Government’s sponsor division seemed to relate to the senior management team rather than the convener?

I cannot comment for the previous convener, and I am not aware of the nature of that relationship. Bill Barron might be able to update you on that matter.

That goes back to the predecessor board that was in place from 2012 to 2017. As you know, there were governance difficulties with that board towards the end of its term. I became chief executive, initially on an acting basis, five months before the elections, and I was having all sorts of discussions with the Scottish Government about how we could keep the organisation going, how we could restore its credibility with crofters and so on.

At that time, we probably got into the bad habit of having a strong connection between me and the sponsor team, and we tried to reset that when the new board came in. The new convener, Rod Mackenzie, was chalk-and-cheese different from his predecessor, and he started to meet the sponsor team with me. However, because the relationship between me and that team was already quite strong, Rod probably felt that he was not entirely necessary, and we did not do enough to strengthen the direct relationship between the sponsor and the then convener.

09:30  

Did anyone in the Government’s sponsor division comment at all on the unusual route of contact?

No. I suspect that they were caught up in the same mistake that I was. Having been through a very troubled time with the previous board, they found themselves in the comfort zone of talking to a civil servant, and none of us spotted the importance of correcting that.

Malcolm Mathieson has already touched on the current relationship with the sponsor division. Are you satisfied that it is now providing the required support?

From a personal angle, I would say absolutely. The division was exceptionally helpful in ensuring that the major changes that we as a board wanted in the revised framework document were made. Some of those changes—for example, the fact that I as convener and Bill Barron as direct report now do appraisals—brought in things that did not happen in the past, and previously the board had had absolutely no input into that sort of thing.

I have found the sponsor division to be exceptionally helpful during the past six months, and any time that we have asked for assistance or clarification, we have received it very quickly. I certainly have experienced an openness in the past six months. I cannot comment on what transpired prior to that, but as convener, I am very pleased with the support from and our openness with the sponsor division.

I should also note that sponsor division colleagues have been part of the joint training that we have been talking so much about. In other words, the training has been undertaken by the board, the management and the sponsor.

During the discussion, we have touched on the use of Scottish Government staff, including in the role of chief executive. They are provided by the Scottish Government on Scottish Government terms; in fact, I think that almost all your staff are secondments, and it is unusual for that to happen to such an extent. What are the advantages and disadvantages of such an approach?

The main advantage is administrative convenience. Other non-departmental public bodies of a not dissimilar size would have a human resources team of, perhaps, three, but we do not have an HR team as such. Obviously, we look after the wellbeing of our people, but aspects such as pay negotiations, terms and conditions, disciplinary arrangements and so on are provided for us.

Could you not do the same thing simply by recruiting people on the Scottish Government’s terms and conditions?

We could do—

But you do not.

When the Crofting Commission was formed out of the previous Crofters Commission, which was an agency, the proposal at that time was to move staff from being part of the Scottish Government for HR purposes into a sort of normal NDPB arrangement. However, there was a backlash against that and, had we made the change at the time, there would have been considerable disquiet and probably quite a lot of staff losses. Parliament decided to leave the Crofting Commission the option of doing this either way.

Did the Parliament decide that?

It is in the Crofting Reform (Scotland) Act 2010.

It is embedded in the act that Scottish Government staff will be used.

The act says that the Crofting Commission may use its own staff or staff provided by the Scottish Government.

The act gives the option.

Yes.

I should also clarify that the revised framework document says that any subsequent chief executive may or may not be a secondment from the Scottish Government. That gives the board the opportunity to recruit outside the area, if required.

I do not think that that is quite right. The chief executive has to be a Scottish Government appointee, although the recruitment can be from wherever.

That is correct. The appointment has to be approved by the cabinet secretary, but the board can look at employing someone from outwith the Government.

But it never has.

To date, it has not been able to. The framework document has only just been altered to reflect that.

Okay. The proposals for an expanded role in grazings for the commission were not subject to final board approval before the national development plan was published. What have been the consequences of that?

The consequences are that the national development plan says that the commission will deliver something that the commission has not agreed to deliver, so there is a continuing tension between us and the Scottish Government in relation to that.

How long do you anticipate that continuing?

It is difficult to say. The commission is not against the proposals in the plan; we can see the value in all of them. It is a question of prioritisation of resources. If we had a different set of priorities or a bigger envelope of resources, the problem would go away and we would willingly do the things that the Government has said it wants us to do.

There is every prospect that there might be a conversation about resources that would take the heat out of the issue. The Government’s other option is to direct us to do it, but it would prefer to do it with us, by consensus.

I know that you did not ask me about this aspect, Colin, but the root of the problem was muddled communication. There were a number of conversations between the Government, the board, me and SMT colleagues about what was going in the plan, and drafts were shared, but this was a muddle that never got nailed down before the document went to print.

So the actual concern is not a question of disagreement on a point of fact but disagreement on prioritising the proposals—is that correct?

Yes.

Okay. I have one last question. Malcolm, you have been fairly clear that you are happy with the current relationship between the sponsorship division and the Crofting Commission.

Yes.

Does anything still need to be done to improve that relationship or to make it more effective?

There will always be things to improve but, just now, I feel that as problems and situations arise, there is an openness in the relationship that means that we will discuss things straight away. I cannot say that it is a perfect relationship and that nothing will ever happen but there is now an openness so, if anything crops up, we will not be in the same situation as we were before; we will be able to discuss it very clearly at the start.

Okay. Thank you.

Richard Leonard now has a set of questions on weaknesses in business planning.

Good morning, Mr Mathieson and Mr Barron. I apologise for being so late and am sorry that I missed your answers to the earlier questions.

The committee wanted to look at business planning, which was highlighted in the Audit Scotland report. A medium-term financial plan was put together. Where do you stand with that and what steps have you taken to improve the financial situation of the commission?

Finance is one of our strong suits. We have an exceptionally strong finance officer, who has received plaudits from auditors on how he manages the finances year by year.

The issue that Deloitte has raised over the past two or three years is forward planning. Deloitte has asked us to look ahead to see whether we will be financially sustainable in two, three and five years. That is an interesting question for us, because more than 75 per cent of our spend is on staff, all our budget comes from the Scottish Government and we get it a year at a time. You will appreciate the challenge of what to write in the medium-term financial plan when we do not know what our budget will be.

When Deloitte told us to do a medium-term financial plan, we wrote one that outlined our management responses to the possible scenarios of resources going either down or up. The plan detailed the staff that we would have to lose if resources went down and where we would like to expand if resources went up.

Deloitte came back and asked us to do that more thoroughly by looking further ahead and tying it in more definitively with the stated objectives in the corporate plan. Therefore, the second version of the financial plan last year was better, but Deloitte has given us a number of other things to improve, so we will be doing another financial plan in the near future. That will be tied in with a new corporate plan that we will develop around the time of the election, so it is a work in progress.

Do you mean your election to the commission next year.

Yes—I am sorry.

You had my heart beating there. [Laughter.]

The next question is for both witnesses. When I read the report, one of the things that stood out was that there was a failure to properly involve the commission in setting the budget in the year that is under review in the Audit Scotland report. Mr Mathieson, before you became convener of the commission, you were the chair of the commission’s audit and finance committee—

I was that committee’s vice-chair.

What steps are you taking to avoid a repeat of what was clearly a failure in communications and in the relationship between the commission and the setting of the budget, and the interaction between the commission and the Scottish Government?

We have always done it that way, but we are going to change and do it differently. There is no “Let’s go back to when it was right”—we have always done it this way.”

In the past, we have involved the board closely in the decisions about priorities, business plans and staffing, and in some of the smaller decisions about accommodation and information technology that have implications for the budget, so there is closeness at that level.

Deloitte flagged up to us that, in the earlier discussions, we did not have drafts of the whole budget in those discussions so that board members could see the discussions’ immediate financial implications. Instead, we had the discussions and got a good understanding of the board’s priorities and aims, then worked through the budget as an arithmetical exercise, to cast light on that. I do not think that things will fundamentally change when we share budget numbers in more detail earlier in the process, but that will close the loophole.

From the perspective of the audit and finance committee, I say as an accountant that the calibre of financial control in the commission is absolutely superb. At each audit and finance committee meeting we have a very detailed analysis of the current financial state of the commission, with projected outcomes to the end of the year. Because 65 to 70 per cent of the commission’s budget is staff costs, as the AFC, we were always aware of where the commission would be within the coming year. We were comfortable with the information that we were receiving from Bill Barron and the finance team. However, as Bill said, we have followed the recommendations; I believe that the audit and finance committee is now getting involved earlier. We were, though, confident about the information that was being conveyed to the AFC.

Maybe I am misreading the situation, but is not it odd that the directly elected commissioners do not shape the budget of the Crofting Commission, or were excluded from the process? Mr Barron, I know that you said that that was the normal state of affairs, but why would that be? I do not understand that.

I disagree that the commissioners did not shape the budget. They did shape the budget, because they told us their priorities and aims and, sometimes, what they wanted us to do with IT. Therefore, it was clear that the board was in charge of directing how resources were used. In my view, Deloitte has picked up a technicality about the fact that the conversations were not numerical enough early enough. Deloitte says that they should have been numerical; we are fine with doing that.

However, our non-staff budget is about £700,000 a year, so we are not talking about huge amounts. An awful lot of that is, for all practical purposes, fixed spend on accommodation, communications and travel, for example. It is a question of how much detail we need to go into at an early stage and whether we make the conversations numerical at an early stage.

09:45  

I turn to workforce planning, staffing and so on. I want to hear your views on the progress that is being made in planning the commission’s workforce. Again, I accept that the organisation is not huge, but you will, nonetheless, need a workforce plan. Have you reached conclusions about whether the mix of the senior management team is correct, and whether you need additional resources in that area? Perhaps Mr Barron can comment first.

We are on a journey in that respect, too. We produced the first of our new-style workforce plans at the start of 2020, revamped it at the start of this year and will do another one in the near future.

The big change in the area follows the Deloitte recommendation that we get an independent examination of the commission’s structure and staffing need. That examination was commissioned from external consultants; their report came in just a couple of weeks ago, and the board will be discussing it with them tomorrow. The report and the judgments that the board bases on it will enable us to take workforce planning to a new level, because we will be able to say that we now have evidence about where we ought to be and what we need at senior management level and on the front line. It will allow us to have more evidenced conversations with the Scottish Government on how that will be implemented.

I concur with Bill Barron. The manpower review was completed by independent consultants about three weeks ago, and the document that was produced is worth while. In fact, it has clarified for the board the necessary skills and structure of a senior management team. The board will be discussing the recommendations at tomorrow’s board meeting; the document has provided us with a very good blueprint for how the commission should be structured.

I also picked up the suggestion that there ought to be an accountable officer who would be a deputy to Mr Barron. Is that part of the plan?

It is not: Deloitte is wrong about that. The Scottish public finance manual does not permit me to appoint a deputy accountable officer; instead, it says that I should appoint someone who would be the leader if I am not available. I would not be entitled to give that person accountable officer status, nor would the permanent secretary, if I was going to be away only for a short time or if I was contactable. That person is in place and designated under, I think, paragraph 7.1 in the public finance manual, which sets out how we are supposed to do that.

We will look at your evidence and at the supporting documents to which you have referred.

I can write to you, quoting that bit of the manual.

That would be helpful.

I have just a couple more questions. When he gave evidence to the committee on the section 22 report, the Auditor General for Scotland said that there is an “Improvement Plan”—which I believe had a capital I and capital P. Can you give us an insight into where you are on that journey?

What I call our improvement plan is the same thing as the 41 Deloitte recommendations. Had you been here at the start of the meeting, Mr Leonard, you would have heard that we have already implemented 33 of them and are hoping to get to 35 of the 41 tomorrow. We are well on track, in that respect.

We have other improvement plans. Indeed, one recently emerged from the joint training that we have undertaken—and which, in fact, was one of the actions in the first improvement plan—and I expect it to be adopted by the board tomorrow, too. It is an on-going process, but we have put an enormous amount of energy into following up on the recommendations.

I also point out that, although we still have six recommendations to meet, they are consequent on other recommendations being taken forward. In other words, we have to complete one thing before we can move on to another. Once we approve the manpower plan tomorrow, further recommendations will start to be actioned.

My final question is on an issue that, again, we reflected on in the evidence session with the Auditor General. I think that a report with recommendations was produced by consultants in 2016. It appears that some of the recommendations that have come from the Deloitte audit echo issues that were raised then. The question that lingers in my mind—forgive me for missing the first part of the meeting—is this: what confidence can we, as the Public Audit Committee of the Parliament, have that things will be different this time, and that the improvement plan will be implemented and some fundamental issues addressed and solved?

I draw a clear distinction between the difficulties in 2016 and the report that is before you now. I listened to the evidence that the Auditor General gave you a few weeks ago. He said that there were similarities between 2016 and 2020 because there were

“strong personalities, differences of opinion and … incongruent individual … priorities”

within the board. That is absolutely true. Every healthy board of an NDPB in Scotland will include different views. The issue is how you bring them together.

The fact that you can describe the troubles that we are having now and the troubles that we had in 2016 with that phrase does not mean that there is any similarity between them. One of the pieces of evidence for that is in how the media have reacted. The media in the crofting counties were all over the difficulties in 2016; by comparison, they are not very interested in the current report.

Another piece of evidence is the reaction of the staff. When we were at the depth of the problems in 2016-17, our staff satisfaction rating was 46 per cent. When we measured it last April, at the height of all the current issues, it was 65 per cent, which is a record high for us. The situations in 2016 and now are like chalk and cheese: they are not the same.

You asked how we can be confident that the necessary changes will be cemented. There are two answers to that. One is that we are documenting a lot more. The new framework document goes into areas that were left vague before about how my dual accountability works. Documentation will strengthen us.

The other answer is continuity on the board. Malcolm Mathieson and one of his appointed colleagues will continue beyond the election. I hope that some of the currently elected commissioners will stand and be re-elected. If we can get more continuity, rather than having breaks between one board to a completely new set of members, that will help.

I concur. One of the other appointed commissioners and I will be there for another three years, so it is our intention to ensure that whoever is on the board is brought up to speed quickly with what has happened over the past years and what we are doing at present to ensure that it does not happen again. The continuity of having two of us remain on the board is certainly a benefit. That puts the responsibility on us to ensure that everybody is aware of what has taken place, that they are aware of what we have put in place and that it is carried through.

Mr Barron described the situation as being not untypical of what happens in other parts of the public sector. When I read and understand what has happened, I see a high degree of turbulence. The former convener left and the one before that left under extraordinary circumstances that I have not quite got to the bottom of. There was, of course, also a vote of no confidence or a call for your resignation. Those instances are not necessarily recognisable as typical of how things have been in other parts of the public sector.

We are asking these questions not because we want you to fail but because we want you to succeed. It is extremely important that the crofting communities and the crofting way of life be sustained, sustainable and successful. You have a key part to play in that, so I wish you well.

I presume that there is a continuing relationship with the auditors from Deloitte so that they can help you and work with you through the improvement plan to ensure that things get on to a sustainable track that will lead to the support that the crofting communities need.

Yes, there is. Deloitte is working with the audit and finance committee and it is feeding back to Bill Barron and his team. Again, from a board perspective, we have a lot of confidence in our auditors. Their help—if you like—and experience are invaluable to us.

Good morning. I listened carefully to Colin Beattie’s line of questioning in which he asked where the problems arose. In his opening remarks, Malcolm Mathieson said that many of them arose from unusual legislation. I will go back to that for a moment in order to allow him to elaborate on that for the record, and to make it clear to the committee and everyone else whether he is saying that the problems in the Crofting Commission arose from dysfunctional legislation, management failures or a bit of both.

I explained to start with that board members assumed, incorrectly, that the chief executive who reported to them was accountable to the board. One of the major issues was that when the sponsor—via the Government—asked Bill Barron to help them out in other situations, our view as the board was, “Hold on a minute—that’s our responsibility”. We did not appreciate at the time that, as a secondee from the Scottish Government, Bill’s reporting structure was to the Government via the sponsor division. That clarification means that we are a lot clearer about roles and responsibilities, on who reports where and so on.

One of the biggest changes in the framework document is that it is very clear that the chief executive reports to and is accountable to the board. The confusion about that is, therefore, gone. As Bill touched on earlier, the board members are all individuals from very commercial backgrounds who expected that the commission would be operating in a very commercial manner, including, for example, that the chief executive reports would report to it. A lot of the problems stemmed from that; it has been resolved.

In making that journey, why would you not have first arrived at the position of having concerns about the framework and governance and so on, rather than jumping to things such as votes of confidence in the chief executive? It seems to me that that was the wrong way around. Did you raise the concerns with the Government? Did you say to it, “Your legislation isnae fit for purpose?” If not, why not?

That was because the situation never arose. On the relationships and how things were working, there was never a situation in which something happened on which the board took a divergent view. That simply did not happen. I therefore suggest that the correct understanding did not really exist for the first four years of the board. It was therefore only when a decision was made—due, as Bill explained, to very difficult circumstances—that the board was surprised that the relationship was not as we thought. That was purely because no situation had arisen that called it into question.

What is the position now? Has the commission said to the Government that the legislation is perhaps not fit for purpose?

Absolutely. The framework document has been agreed between management, the convener and the sponsor. As well as having the framework document, the board is now a lot clearer about roles and responsibilities—not only from a legal or document perspective, but from an operational perspective.

I have a slightly different take. There are two odd things about our constitution. One is that not only am I on civil service terms and conditions, but I am appointed by the Scottish Government, which chooses the chief executive of the Crofting Commission. That creates a slightly funny dynamic from the off.

What Malcolm has been explaining is that we have learned how to live with that legislation. We have recognised that although the route by which I got my job is unusual, my job is to be entirely accountable to the board in exactly the same way as any other chief executive would be accountable. That means that, if, in the future, they want to change me, I should respect that, because that is where accountability ought to be.

10:00  

The other unusual thing about our constitution is that six members of the commission change on one day every five years. That has raised eyebrows with regard to how one achieves continuity and avoids the problem of too many people at the same time not understanding the role. That is another issue that the Scottish Government is thinking about. It might not be easy to change that.

I will finish by following up on the questions that Richard Leonard asked about the improvement plan and looking to the future.

There have been several mentions of the recommendations and the fact that 33 out of 41 recommendations have been achieved. Who agrees that those have been achieved?

The board agrees: it signed off on the recommendations. At our last board meeting, I think that we had achieved 29 or 31 of them. At that stage, the board reviewed the report and the recommendations internally; it was not simply a case of ticking the box. We set out what has happened over the past six months and all the actions that have been taken. Prior to the board meeting, the report went to the board, which reviewed it and had the chance to question Bill and his management team on the actions. The board could then say that the recommendations had been achieved.

However, that will be audited by Deloitte. Although we, as a board, say that we accept the achievement of the recommendations and can see that it is happening, ultimately Deloitte will review and confirm that when it comes to do an annual audit

Is the crofting community itself seeing the benefit of achievement of the recommendations or is it to early to tell? Are the changes and recommendations mostly structural and internal? When will people see the benefits of achievement of what is in the improvement plan?

I hope that the crofters in the crofting communities are not too directly affected; even although they will be indirectly affected, because distracted management—as it were—affects the whole operation. I think that there is a lot of support from crofting communities. They are behind the commission and want it to succeed and get round the difficulties. However, I do not think that they feel directly affected by them.

I concur with that. The feedback that the commission has received from crofting communities is that there are probably two or three incredibly important items for them, and those important items are not included; I think that they see it as an internal document. It is to their benefit that the internal structure and operations of the commission have improved, but it does not affect their day-to-day involvement with the commission.

Are the remaining recommendations that you continue to work on the most difficult and challenging?

Not particularly. For example, one of them is around longer-term financial planning, and we have to get a manpower report and decide on a management structure and cost it before we can do another three or four years of financial planning. The majority of the recommendations that are left are, in fact, subsequent to ones that we have completed. They follow on.

I have a final question. Will Deloitte conduct a follow-up audit to check whether it agrees that the recommendations have been completed satisfactorily?

As far as I am aware, it will review the document as part of its annual audit, which I would expect it to do.

As nobody else has any final questions, I thank Malcolm and Bill for their evidence. We will reflect on the answers that they have given us and look forward to getting written reports on how they intend to take forward the recommendations of the staffing review, whether the framework was agreed, and the further recommendations that will be implemented after the meeting tomorrow.

I thank the committee for the opportunity to explain the progress that we have made.

I will suspend the meeting to allow for a changeover of witnesses.

10:04 Meeting suspended.  

10:08 On resuming—