Public Accounts and Public Administration Committee

We have a number of papers to note, as Members will see.

The first of these is a letter from the Chair of the Children, Young People and Education Committee to the First Minister regarding ministerial appointments. This committee has been copied into this letter, setting out the Children, Young People and Education Committee's request for further information from the First Minister regarding the approaches taken in relation to ministerial appointments. This follows the pre-appointment hearing they held for the preferred candidate for the chief executive of the new Commission for Tertiary Education and Research. This ministerial appointment was not listed in the agreement between the Senedd and the Welsh Government, meaning it was not one in which Senedd committees would usually play a role. However, members of the Children, Young People and Education Committee believe that its involvement in this appointment has helped put more information in the public domain about the recruitment process. The letter notes that this was particularly important for this role because of the decision to move to a direct appointment after the public recruitment process was not successful. A copy of the letter has been shared with us, as indicated, given our ongoing inquiry into public appointments in Wales. So, I invite Members to note the letter and propose that we consider the concerns of the Children, Young People and Education Committee as part of our ongoing inquiry into these matters. Are Members content? Thank you.

Our next item is a letter from the Chair of the Finance Committee sent to the Auditor General for Wales and the chair of the Wales Audit Office board regarding notification of audit deadlines. The Chair of the Senedd's Finance Committee wrote to the auditor general and chair of the Wales Audit Office board clarifying the scope of a recommendation it made in its report on its annual scrutiny of the Wales Audit Office and Auditor General for Wales, published in November 2022. It recommends that the auditor general formally notifies the Chair of the Finance Committee in writing if he's unable to complete an audit within the four-month statutory deadline. In clarifying the scope of this recommendation, the letter sets out details of those bodies that will be subject to the reporting arrangement and their respective reporting deadlines. I invite Members to note this letter, unless Members have any comments. Are you content to note? Thank you. I think that’s universal.

Our third item is a letter from the Children’s Commissioner for Wales to the Minister for Social Justice regarding this committee’s report on the review of the Welsh commissioners. The Children’s Commissioner for Wales has written to the social justice Minister welcoming the findings of our recent report on the review of the Welsh commissioners. The commissioner notes in her letter that several of our recommendations speak to issues she has raised with the Minister and Welsh Government previously. The commissioner states that our report reflects long-standing concerns, and the commissioner hopes that the Welsh Government will give full consideration and respond positively to our recommendations. So again, unless Members have any comments, I invite you to note this letter and ask your agreement to consider it alongside the Minister’s full response to our report later in the meeting. Are Members content? Thank you very much.

Our next item is a letter from the Future Generations Commissioner for Wales to me as Chair of this committee. The future generations commissioner has written to us welcoming the findings of our recent report on the review of the Welsh commissioners. He particularly welcomes recommendations 4, 14 and 16, which are especially pertinent to his role and designed to help improve the setting and evolution of annual budgets. So again, I invite Members to note the letter and ask whether they are content to consider it alongside the Minister’s full response, again, to our report later in the meeting. Are Members content? Thank you very much indeed.

The fifth item is the Welsh Government response to this committee’s report on the review of Welsh commissioners. The Minister for Finance and Local Government has written to the committee with her response to our report on our review. The Welsh Government has accepted 13 of our 16 recommendations, but rejected recommendations 7, 12 and 16. So again, I invite Members to note the response and consider whether the response is satisfactory or not, and whether you feel that any further correspondence with the Welsh Government is required. So, Members, do you have any thoughts, comments or proposed actions, or not? Again, for Members’ information, is the clerk, or a member of the clerking team, able to remind us what the rejected recommendations relate to?

We can discuss that during the break if you like, Mark. I'll find the information and we can go through it then.

Okay. Thank you very much indeed.

Chair, I believe Adrian wanted to speak.

Could you repeat that, please?

Chair, I believe Adrian wanted to speak.

Oh, Adrian, yes please.

Apologies. Thank you, Mark, and thank you, Natasha. It's not a point for further correspondence, I don't think, but I just wanted to flag something with the committee in relation to recommendation 5, which refers to 'Managing Welsh Public Money'. It's just to remind everybody this is something that is fundamental to lots of our work on this committee, as you know. The Welsh Government committed to updating MWPM some time ago—before the pandemic, in fact. That update has not yet happened. It's something that is relevant to some other work that my office is doing at the moment in relation to the accounts of the national museum. And of course, since that time, some aspects of MWPM have been overtaken by other developments, such as the new calling-in arrangements for arm's-length bodies. So, just something for the committee to keep in mind, and the importance of that update to such a fundamental document happening as soon as possible.

Okay, thank you very much.

Chair, I can run through the rejected recommendations, if you'd like.

If you could, briefly, that'd be helpful, thank you.

Yes. Recommendation 7, which I'll read verbatim:

'We recommend that, for openness and transparency, the Welsh Government publishes the Welsh Commissioners’ estimates on its website pages for the Commissioners.'

Then, the other rejected recommendation, recommendation 12:

'The Committee recommends the Welsh Government provides information about the evidence supporting the level of increase in the cash limits agreed for Commissioners, as well as the engagement between the parties about it.'

Finally, recommendation 15:

'We recommend the Welsh Government conducts post-legislative review of the legislation governing all Commissioners, including a review of the funding allocated to them, with an update provided to the Committee in due course.'

Thank you very much. Well, I believe we'll have an opportunity to discuss this further later in the meeting, so thanks for just refreshing our thoughts on that. If we have no further comments in public on this at the moment, I'll move on to the next item, which is item 6 in this section, a letter from the Minister for Health and Social Services to both me, as Chair of this committee, and to the Chair of the Health and Social Care Committee, regarding Betsi Cadwaladr University Health Board.

The Minister has responded to the joint letter sent from PAPAC—this committee—and the Health and Social Care Committee regarding Betsi Cadwaladr University Health Board. Members will recall that the committee agreed to work jointly with the Health and Social Care Committee, where appropriate, on matters relating to Betsi. Therefore, I ask Members to consider whether, based on the response we've received to the letter, they wish to discuss holding a joint oral evidence session with the Minister for Health and Social Services and/or the health board or intervention and support team representatives. So, I invite Members to note the letter but also to express any views you may have on engaging with our sister committee to carry out such joint work. Natasha.

Thank you, Chair. I think it would be really, really helpful for everybody to work together on this. Betsi is an issue that I think has been affecting so many people. Even if—. For example, I'm not from the patch, and I know colleagues in this committee aren't, but I think it would be really good for us to have not just the background knowledge, but also, side by side with the other committee, see where the issues and the flaws are, so that when we go forward perhaps we may be able to help and support in any way we can—the wrongdoings that we could, perhaps, turn right later on, going forward.

Okay. Other Members, are you content to work jointly on this basis and as proposed? Again, I've mentioned a number of options in my comments—that we have evidence sessions with the Minister and/or the health board or intervention and support team representatives. Unless you disagree, could I propose that the clerk discusses this with the sister or parallel clerk in the other committee and agrees consensus on this? In my view, we should be hearing from all of them, in terms of the current issues at hand, but, if Members have any contrary views, please express those now.

I've got a question, Chair. I'm ambivalent at this point, so could you just explain the rationale again for doing so? Please ignore my dog, because I need to go and let it out in two seconds.

Right. Well, this committee was concerned not to replicate any work that our sister committee might be doing within its brief in relation, particularly, to clinical matters or matters related to the delivery of health services specifically. However, as you're aware, many of the matters applying to this health board have fallen within the remit of this committee, in terms of the effective and efficient use of public resource, but many of the areas cross the two. So, it was agreed that we would, not in all of our work on this, but where relevant, hold joint sessions with the Health and Social Care Committee to avoid replication and duplication, but also to ensure that we're all hearing at first-hand from the relevant witnesses.

Yes, I think setting it out like that is more clear. That would be my premise on this: are we duplicating? If we're working together, are we doing it in such a way that we are definitively following our mandate? So, within those parameters of what we're looking at, rather than health, clinical based operational working, I'd just be interested to know how we'd separate those but not become a joint health committee, and that would be what I would be more concerned about, but I accept what you're saying in terms of the crossover. So, I'll wait to be convinced. Thank you.

Thank you. Well, I think we've already had some joint working with them, and I think that it was felt that that was quite constructive and objective. But any further thoughts on this, or shall we just ask the clerks to take this forward? Okay, thank you.

Now, bear with me; I keep jumping between buttons on my screen. Our next item, item 2.7, is a response from Digital Health and Care Wales to the report of the Health and Social Care and Public Accounts and Public Administration joint committee on the 'Scrutiny of Digital Health and Care Wales'. Their response sets out their responses to our joint report. The response is detailed and informative but there are some matters Members may wish to consider further. Recommendation 2 sets out that:

'The Welsh Government and Digital Health and Care Wales should set out who is responsible for leading the Welsh Community Care Information System programme.'

This recommendation arose from the committee's concerns regarding the importance of having clarity on who is responsible for this programme and strong leadership for this flagship system. The response to the recommendation did not provide this clarity and states that, quote:

'Dave Street, the SRO for Local Authorities, has signalled his intention to stand down. Welsh Government are working with the Programme to identify a successor.

'Carol Shillabeer, the SRO for Health, has recently been appointed as interim CEO of Betsi Cadwaladr University Health Board in May 2023 and is currently considering her position and will inform the programme shortly of whether she can continue in this lead role.'

The response also states that, as the senior responsible owners report directly to the Welsh Government, it is for the Welsh Government to comment on whether it is realistic for Carol Shillabeer to undertake both roles and the steps being taken to undertake two roles concurrently. The Welsh Government's response to this recommendation states that:

'At the time of this submission, the joint SROs (the interim Chief Executive of Betsi Cadwaladr University Health Board and the Deputy Chief Executive at Caerphilly County Borough Council) remain accountable for the successful delivery of the programme. However, in line with revised governance arrangements for all Welsh Government funded Digital Transformation projects, as discussed and agreed between'

the Minister, the Digital Health and Care Wales's chair and her officials, the programme

'is expected to be among the first programmes transitioning to adopting these arrangements, resulting in DHCW’s CEO becoming accountable for WCCIS’ delivery.'

Thank you, Mark. Just one point to lob into your consideration. It's in relation to your recommendation 14, which was about projects that have been adversely affected by capital funding constraints. I think both responses maybe could have gone into a bit more detail there. I don't think either list any projects that have been adversely affected, but neither do they make it clear that none have. So, that may be an area that you want to seek a little further information on, either through correspondence, or if you undertake further work jointly with the other committee. Thank you.

Thank you. Natasha.

Thank you, Chair. There's just one area that I'm very interested in and I think the committee might find it prudent to just keep an eye on, going forward. It's on pack page 65, it says that

'NHS England announced in 2022 a major investment "to support electronic patient records to be in all NHS trusts". The wording of the statement suggests this is the sharing of data between settings within each Integrated Care System (ICS).'

Obviously, officials are seeking clarification on this. With regard to funding, I think they're going to be keeping an eye on whether funding will be available or not, and I just think it would be good for us to know whether the Welsh Government will be investing in this from our side, going forward, to ensure that that connection between the data of patients within Wales going to England, et cetera, and vice versa, is going to be there and accessible for people who really need it. So, it would be good to keep an eye on that just from a financial aspect.

Okay. Thank you. Given the matters I highlighted in my preamble, Adrian's comments and Natasha's comments—and I think we also had a recommendation relating to the cross-border element to this, which was again raised with me in north Wales last week by medics, by GPs—are Members content to ask our clerk to talk again with the clerk of the Health and Social Care Committee to consider whether there's consensus on some further joint work on this? Okay. Thank you very much indeed.

That takes us to our ninth item, a letter from Fiona Stewart, the managing director of Green Man, to myself as Chair of the Public Accounts and Public Administration Committee. The managing director, as indicated, wrote in relation to our evidence session held on 5 July with the Welsh Government on its acquisition of Gilestone Farm. Ms Stewart has written to us to clarify a number of points raised during the session, as she sees them, and provide more details about her proposals for the farm. Can I invite Audit Wales officials to comment on this letter? I'll then bring in Members. Do Audit Wales officials have any comments?

Not a huge number, Mark. I will ask Matt to come in. As you know, he's closer to the detail. But I believe you have Andrew Slade coming in to the committee in a few weeks' time, and I think it might be opportune to use that as an opportunity to clarify with the Welsh Government quite where they are on the issue of Green Man, because I believe we're getting close now to a further renewal of the lease for the agricultural use of the land, and so it's important that the committee gets clarity on that. But, Matt, would you like to say anything further?

Yes. I would just add that, certainly in terms of what was said in the letter about processes around the acquisition, there's nothing that was inconsistent with our knowledge at the time that led into our work that we reported last January. Beyond that, I'm aware there's been some reaction to some of the content of the letter and some media coverage. That's not really a matter for us from an Audit Wales perspective, but I know, as well, there is other evidence that has emerged around results from the town and community council survey that was undertaken, as well. So, there are a number of issues, as Adrian said, that you might want to take the opportunity to pick up in the margins of a forthcoming meeting. I think the Welsh Government is still due to provide a response with some further information off the back of the session that you held on 5 July, as well, so I think it's probably worth trying to consider all that material in the round, rather than just dealing with this letter in isolation at this point as well.

Thank you. I'll open up to Members. I would caution that there are elements to the letter received that were, as Matt described, based on evidential material, and there were elements that were, perhaps, more controversial and have provoked responses from others. I suggest that if we wish to discuss those aspects to this letter, we defer that to a private session later. But having said that, and with that codicil, Rhianon.

I have had a concern around this from the beginning. I'm not talking about the actual acquisition or the process and mechanisms that were followed by the Welsh Government, which seem to be, from everything we know, ordinary and normal, whether or not we agree with it. This shows to me and demonstrates quite clearly the dangers of receiving lobbying material from different organisations, because you get into a tit for tat. This is a letter that seems well written, it seems well researched. There are references to bullying that we won't go into, but once you open up the floodgates to having petitions from individual groups coming into this committee, this is the landscape we will be in. Unfortunately, it's now occurred, and I just think everybody has a right to redress. So, I think we can't not take information like this once we've started to do that as an ordinary process, and I just think it's a very unfortunate situation. I just think this committee needs to be, in a sense, secure from any type of petitioning from any type of lobby group. It does seem concerning that a charity has been set up whose purpose appears to be just a 'No, we don't want something' group. That's a comment that is general, that can apply to any development, outside a development of national significance or inside, that we could be open to in the future. So, I'd like to underscore that I have been concerned about this for a very long time. I think we can learn lessons from this. Thank you.

Thank you. As I indicated, the sensitive matters that you alluded to at one point we'll discuss in private, because we've also received correspondence that also appears well written expressing a counter opinion. For us, it's getting the wheat from the chaff in terms of the relevant matter, because this committee agreed right at the outset, following matters raised by Members in the Chamber and in correspondence to this committee, that this was within our remit because it involved the expenditure of Welsh Government funding and whether or not procedures had been followed as they should have been and in accordance with the specified criteria, and that's—

We'll agree to disagree, Chair. Thank you.

Yes. Natasha.

Thank you, Chair. Just one or two things. I'm happy to note the letter on this occasion, and I take what you said and what Rhianon said on board, but flying Mike Hedges's flag, I have been named in this letter personally, and in the name of transparency, on page 71, I just want to make everybody aware I've had zero communication whatsoever from Fiona Stewart or anybody else concerning Green Man and the question that I asked in relation to Direct Healthcare Group. So, nothing has been sent to me, nothing has been corresponded with me. I was slightly concerned—. Obviously, the letter's very nice, it consists of lots of woke words and phrases and terminology that everybody gets very excited about, but I didn't find there was very much substance at the same time in it as an actual plan, actual things, actual figures going forward. So, yes, I know we're going to talk about it in private session, but I just wanted to make everyone clear that from my side, nothing has happened. If there was, I'd be very clear with the committee on what was happening, if there was anything. But aside from that, I just didn't find that it actually provided more information than what we already perhaps knew.

I'm also conscious that the letter is now in the public sphere, and another Member was also named who hasn't had an opportunity to comment one way or another. So, again, I don't think we should pursue that publicly at this stage. Mike.

It would be much simpler, wouldn't it, if Green Man just bought it off the Welsh Government at the price the Welsh Government paid for it, then it would be nothing to do with the Welsh Government; it would just be a purely commercial transaction. I think that would be a much cleaner way of doing it. I would urge the Green Man people—who think they can make money on it, or they wouldn't be doing it—to actually buy it.

If I recollect, the letter that we're discussing at some point states it would have been unaffordable for them in their view, which is why they followed the path they did. But that's their contention, and I'm not one to comment. Obviously, if the Welsh Government was to fund business propositions that couldn't afford to fund or raise funding for themselves, that raises questions about wider matters. But then we have bodies such as the Development Bank of Wales whose job is to consider whether investment by public bodies and using public funding has merit or otherwise. But as I say, in terms of statements one way or another, as in this letter, that 'we couldn't afford it otherwise', we're not in a position to judge without further evidence or work by the audit office.

Can I just ask a rhetorical question? If they can't afford it, how is it commercial?

Well, it's a very valid point, Mike. I don't know whether the auditors have any thoughts on this, bearing in mind the criteria within which such applications for funding should operate.

I think, Chair, you've explored some of these matters in previous sessions, and in the session in July with the Welsh Government as well. I think our letter set out some of the Welsh Government's considerations around its initial decision to buy rather than giving a loan or grant funding to support the purchase as well. So, I don't think we have a view either way, but I'm mindful that in the session in July you explored some issues around how this process sat alongside other economic development investment processes as well, and then Members raised some questions about that on the day, too. So, I think that's some of the broader context to what's also said in the letter about comparisons with other investments that the Welsh Government will make to support other economic development opportunities as well. I know there are some issues that fell out from the previous evidence on that as well that you may want to reflect on in due course, but that's all I'll say the moment.

Okay, thank you. Rhianon.

I just feel that we are becoming judge and jury. We should be looking at processes and have they been followed. We are not the determiner of any grant application form. That's why we have our professional officers who are doing that. Granted, if there's been a deviation from that process, or that protocol or that mechanism, or it's not sound, then fine, we will look into that. But we're not here with all the evidence to determine this project or any other project unless we've sat down with all that detail, and I think we're straying into that ground, so I'll repeat that. Thank you, Chair.

Perhaps I could bring this public session conversation about this to a close, by advising Members—and you're probably aware—that following the evidence session that we had with the Welsh Government, we wrote to the Welsh Government with several additional queries and we're awaiting the Government's response. I therefore suggest that once this is received, the committee consider its contents and then decide on our next steps. So, on that basis, could I invite Members to note the letter received and invite your agreement to the course of action I've just described? Thank you.

That moves us on to our tenth item, which is a letter from the chief executive of Cardiff Airport to me as Chair of this committee. The chief executive has responded to our letter of 3 August 2023 seeking clarification on points raised during our evidence session on 22 June. I invite Members to note the letter and consider whether there are any further points of clarity or information required. Natasha.

Sorry, Chair, I feel like I'm piping up. I promise this is the last one on papers to note. I did ask previously, but just to put on record, in the last paragraph of the letter, there was a question raised about the interest accrued on the loan and also there not being any interest payments being made on that year. I have asked the committee to perhaps please go and just clarify that for me going forward, and I just wanted to make that clear to everybody that that was my humble request in relation to that paragraph.

Thank you. Any further thoughts or comments or proposed actions? No. Okay, thank you very much indeed.

Item 2.11 is the Welsh Government's organisational response to the auditor general's report '"Cracks in the Foundations"—Building Safety in Wales'. The Welsh Government has provided a response to this recent report. I therefore invite the auditor general to provide initial comments on the response, noting that Members will have a further opportunity to discuss the report and the response in private later when discussing and agreeing the next steps in relation to the report's findings. So, auditor general, Adrian, could I invite you to comment?

Very briefly, there's nothing major to say on the response at this stage. I think, if anything, it's probably more sensible to wrap it up with the briefing later in the meeting around the report. That, in turn, will inform the committee's consideration of what, if anything, you want to do next to build on that work.

Okay, thank you. In that case, at this stage, could I invite Members to just note the item? Thank you.

Item 2.12 is a letter from the Permanent Secretary to me as Chair of this committee on the Welsh Government's annual report and accounts 2020-21. This is in response to several follow-up queries we raised regarding the Welsh Government's annual report and accounts for 2020-21. Could I again invite the auditor general to comment?

On the first section of the response, Mark, around the secondment arrangements for the Permanent Secretary and the application of the policy further, I think the Permanent Secretary has made the Welsh Government's position very clear in their letter. I'm not sure how much further the committee will get in pressing on the issues that I know were of concern to it, though potentially you may at some point wish to get some clarity as to quite why the secondment policy seems to still diverge from the practice that we're seeing currently.

For the second part of the letter in relation to estimates of fraud and waste around the COVID business grants, if I may, I'll just invite Matt to say a few words there in respect of some of the numbers that are quoted, as I think those are relevant to the committee's consideration.

I'll just stress what the Welsh Government said in the letter as well about providing more detailed information in its governance statement for 2022-23, so there'll be an opportunity to come back to this when you see what's said in that as part of the accounts for 2022-23 as well, but we just wanted to draw attention to some of the figures in the letter.

The Welsh Government is now referring to an estimate of a 7.74 per cent level of fraud and error for the grants that it administered in 2020-21. That's a slightly higher percentage figure than we quoted in our memorandum this time last year and that was referred to in the Welsh Government's 2020-21 accounts. That's because it's based on a slightly different method of calculation. So, instead of saying what percentage of cases were identified as potential fraud or error, it's based on what percentage of the total value of grants awarded under a particular scheme were thought to be subject to fraud or error. So, that is a higher figure than was quoted in the accounts at the time, which was 4.17 per cent. But, essentially, that just reinforces what we said in our opinion on the accounts and in our memorandum, that there were limitations at the time in the Welsh Government's estimates around fraud and error as well.

So, we just wanted to highlight that particular point. But, as I said, there will be more information on developments with the Welsh Government's post-completion monitoring and follow-up arrangements in the 2022-23 accounts, based on what the Welsh Government has committed to including in that document.

Okay. Thanks very much, Matt. Members, I invite you to note the letter but also to discuss it, if you have any comments or if any further follow-up is required. Any further matters of concern could also be raised—I think as Matt alluded to—during scrutiny of the Welsh Government's annual report and accounts 2022-23. So, Members, do you have any thoughts, comments, or are you content for us to pick that up in our forward work on the subsequent accounts? Okay, thank you.

Right, well, that brings us to item 3 on our agenda today, which is maximising EU funding. Clerks, do you want a short break at this point?

Yes, please, Mark, if we could just take a short break so that we can get the witnesses in and just test that the ICT and the translation are working.

Okay, thank you. What time would you suggest we ask Members to be available again?

Shall we go for 10:05, just to give you an opportunity to have a quick break and for us to make sure everything is working?

Thank you very much indeed.

Okay, thank you.

Right, we'll have a quick break, then, as stated.

Okay, croeso. Welcome back to the Public Accounts and Public Administration Committee meeting this morning. We're now moving to our third item, which is maximising European Union funding. We have an evidence session with Welsh Government officials. Could I begin by welcoming them to this meeting and inviting them to state their names and roles for the record?

Okay, I'll jump in. Peter Ryland. I'm the director for regional investment and borders, which role includes being chief executive of the Welsh European Funding Office, which is responsible for the European regional development fund and the European social fund.

Thank you.

Bore da. My name is Hugh Morgan. I'm head of Rural Payments Wales and director of the paying agency for the European common agricultural policy, which is the overarching programme that covers the rural development programme.

Okay, thank you very much indeed. As you'll both expect, we have a number of questions. I'd be grateful if both Members and you could be as succinct as possible to enable us to a cover the wide range of issues this topic has generated. I will begin, as is normal practice, as Chair, perhaps reflecting on the levels of commitment of EU funds, and to explore how overcommitments are being managed. So, how have the Welsh European Funding Office and the Welsh Government determined the right level of overcommitment in the context of not being able to transition activity into the next round of EU programmes?

An excellent place to start, if I may. It's an art as much as a science, I have to say, on this one. It's all about balancing risk. So, our objective in overcommitting—just to take a step back to why we do it in the first place—is because we know that, with the best will in the world, across a large and diverse programme, some projects will underdeliver to some extent and, when their final claims come in, we will find that they haven't claimed as much as they'd intended. And, indeed, we're seeing with the projects that have closed already that that is the case, to the extent of about 4 per cent. So, if that were to be continued across the whole of the programme, then that would be putting us at risk, to some extent, of being able to draw down all the funds. So, we overprogramme, and we do it to such extent as we have to have estimate those underspends to come in, and, so far, we're seeing pretty much what we expected. The basis of that is done on experience, it's done on close monitoring and on detailed knowledge across all of the programmes, across all of the projects. All of our programme monitoring division work very closely throughout the life of the project with the project teams, with the beneficiaries, to understand what the likely outturn is going to be, to understand where there are potentials for larger decommitments as a result of projects just—. Sometimes, it's a good-news story; they may draw down less money than they'd intended because they've managed to make more savings and managed to keep the costs down. It's not necessarily an underperformance issue. So, what it's based on, really, I suppose, is detailed information that you build up and up and up across each priority within each programme.

Our appetite for overcommitment in the other direction is tempered by the fact, of course, that we don't go into subsequent programmes. So, in the past, knowing that there was another programme, knowing that most programmes, to some extent, have a kind of similarity, if you like, with some activities that could be eligible both under the current programme and the following programme, has given us some room to be fairly bold in overcommitment levels, because we know that if things turn out such that people actually do spend everything that they said they're going to, we'd be able to soak it up in the following programme. Obviously, we don't have that cushion this time around, so we've had to peg it back a little bit, and that's created a narrower window, effectively, for us to be able to land the programmes in a way that makes sure that we've got enough eligible expenditure to draw it all down—to draw down all the funding that's committed from the European Union, that is—without exposing the Welsh Government's domestic budgets to an unreasonable risk in terms of potentially having to pick up the tab in the event of everybody actually spending the money that they expected. So, as I say, thus far, of the projects that have closed, the indications are that we're probably about right.

Okay, thank you, Peter. Hugh Morgan, do you wish to add something?

Yes, a similar point to Peter, actually. Looking at the rural development plan, we started an overprogramming level of around 2.7 per cent, based on the first half of the programme where we were seeing decommitment levels around the 2 per cent mark. We increased our overprogramming to 5 per cent later on in 2020 due to the increased level of decommitments that we were seeing as a result of COVID and the uncertainties around Brexit. And we actually increased it all the way up to 9 per cent in 2021, because we were seeing the impacts of inflation and the time constraints left for the programme.

So, again, we've looked at the historic trends in the programme. We've worked closely with our beneficiaries to see where they were in terms of final outturn position. We're actually down to around 1.5 per cent overprogrammed at the moment. But, unlike Peter, we have got a new domestic programme that's running on the farming side, which can absorb some of the overprogramming should we end up in that position at the end of the year. So, in general terms, we're pretty comfortable, and fortunate that we did overprogramme, otherwise we wouldn't be able to maximise the EU spend.

Thank you. Rhianon Passmore, is that your hand up? Yes, it is.

Thank you, Chair. Apologies if I'm straying into future questioning. I totally understand the logic of that overcommitment, but, on your comment on straying into domestic budgets, how have you assessed that risk in these times of critical financial deficits for all of those on programmes and who have applied for funding? Surely they are going to maximise that funding. How have you assessed whether or not it will stray into the full complement of the fund? And, therefore, we have exposed ourselves, haven't we? We have to deliver, don't we? We can't not deliver. We'd have to go over to domestic.

Well, the reality is that, of the 81 projects that have closed already, actually across those, on average, they are underclaiming by about 4 per cent compared to the allocation that they've been given. So, it's not a given, actually, that they will definitely spend everything that they've been allocated. Remember that the money is not grant in aid. We give people an allocation. They have to come back to us with evidence of eligible defrayed expenditure that stands up to audit to be able to demonstrate that they're allowed to actually receive the kind of funding that we've allocated to them. In quite a number of cases, that doesn't actually happen at all. So, it's not a given. Yes, it's a risk, ultimately.

It's difficult to know where to begin on this one, because I'm conscious of the time the Chair has already outlined. The architecture of the programmes is such that the amounts that we can draw down from the European Union are based on the total eligible expenditure of the project, including all of the match funding. So, we know that we have a certain amount of room for manoeuvre across each priority in that sense. Each individual project does not necessarily have to be funded at the same level as the priority as a whole. That actually gives us some room for manoeuvre and some room to soak up some of that additional level. If any given priority does overspend, we can generally soak it up across other priorities where we know there are underspends. Ultimately, if it came to it, we could turn to some projects that are run within the Welsh Government and consider scaling them back. It's getting a bit late in the day for some of that. But, to be honest, at this stage, we are more worried about maintaining levels of commitment and we are still, actually, approving changes to the programme, to individual projects, to be able to keep that level of commitment above 100 per cent, just to be able to soak up what we know is going to come in by way of underspend. So, it is a risk, but, at the moment, I'm more worried about it going the other way—

I do get that. It's the devil if you do and it's the devil if you don't. It's just my question really is: how have you assessed that risk? But I presume it's an ongoing, iterative process as you've described, and we'd be bashing the hell out of you'd not committed 100 per cent. You know that would happen.

Yes, that's the size of it.

Thank you, Chair.

Natasha Asghar, briefly.

Thank you so much, Chair. Good morning, gentlemen. You mentioned, obviously, if, for any reason, there would be a reason where the responsibility fell on the Welsh Government—. Sorry to be the bearer of bad news, but, in case that eventuality occurred—and you mentioned that we would, obviously, have to take from Welsh Government projects, et cetera—what areas would be the areas that that money would be coming from exactly? You don't need to go into too much depth and detail; I accept time commitments and things, but what sorts of projects are we looking at that would have to either be scaled back or scrapped in order to fund the commitments that you've made?

We'd have to play it by ear when the time comes, to be honest. The Welsh Government projects cover something like 50 per cent of our programmes, so, actually, there's quite a lot of room for manoeuvring in all of that. We would probably be looking at the projects that are already indicating that they're expecting underspends and teasing out exactly the extent of that. We would possibly look at projects that would be risky from an audit point of view; some of the projects have compliance records that are stronger than others, shall we say, and that might be a consideration, but it's probably too early to say yet.

Okay. At what point would you know?

It would be a gradual—. I don't think there'd be a single tipping point; it's a gradual thing, as we've talked about. The way that this is managed is on the basis of ongoing, constant monitoring of where projects are, what we're expecting, what's actually coming in when people submit their final claims, because it's not always what they tell us to expect. So, there's no single tipping point; this is a major, ongoing piece of work.

The final payment application that we need to put in to the European Commission under proposed revisions to the regulations is not now due until 31 July 2025. So, actually, there is a certain amount of time to be able to monitor this, although, clearly, all of our final claims, we would expect to be in from projects by about March next year.

Thank you, Chair, for allowing me to ask the question.

Okay. There we go. Obviously, you detail your work to minimise the risk of exposing the Welsh Government from having to use domestic funding. Has either WEFO or Welsh Government allocated any specific financial resources to cover projects if they do all spend in line with profile and take the total level of expenditure over the level of EU grant available, and if so, what?

I haven't. The whole point of what we do is that we administer the European funding, and what you're talking about here would be a charge on Welsh Government domestic funds, if that were to happen. So, no, I don't have a budget for that; my job is to make sure that doesn't happen.

Okay. Hugh Morgan.

On the rural development programme side, we have made a provision of £13 million through the new domestic rural investment schemes programme, and also to note that some of our commitments under the RDP will naturally fall into the domestic programme anyway, such as the maintenance on tree-planting payments that we make. So, we've already accounted for £13 million in the domestic programme to account for any slippage or any kind of valid claims that come in that couldn't be paid or processed under the European RDP.

Okay. Thank you very much indeed. Moving on to my final question in this section: why has the reported level of overcommitment for the rural development programme fallen by around £6 million between March and July of this year?

For the points that Peter was highlighting earlier. It's a demand-led programme; we're in constant discussions with beneficiaries in terms of projected outturn forecasts. You won't be surprised that every project wants to hang on to the money as long as possible in the hope that they will be able to deliver the full spend on the grant award that we've given, but inevitably they get to a point where these projects have to come to an end, and if they haven't delivered fully, then for reasons such as they've been able to deliver for less or they weren't able to quite deliver the full extent of the projects, then we will be decommitting. A number of projects over the last couple of years have actually been terminated because they didn't actually start or there was no detail of progress for such things as getting planning permission or problems in the supply chain. So, it's a combination of projects that have actually been terminated because they weren't delivering, or decommitment because they weren't delivering fully, or decommitment because they weren't fully using the full allocation or full grant award that was made to them. And that is the reason why we went with such a high level of overprogramming back in 2021. We were starting to see the long-term impacts of the COVID restrictions and, obviously, the impacts, then, of inflation coming through.

Okay, thank you. Rhianon Passmore.

Thank you. That's all very clear, and I can understand the approach that you're taking, or having to take, with that. Is there not a danger that—? We are in very volatile times, aren't we, so we've gone from a period of COVID into a period of financial criticality for everyone. Is there any danger that you could be informed by any recipient, that those late in the day in receiving those committed funds could say that they'd been treated differently, because you may assess it differently, based on how much of your funds have already gone out, if that makes any sense at all? In the sense that if you're talking about it as an iterative process, those projects and programme streams that are at the end of this cycle are going to be treated much more severely than those at the beginning, if they haven't yet completed their programme, because you know that the money could be tight. Does that make sense?

Yes. We made it quite clear from the outset, when we were approving projects, particularly in the n+3 period of this programme, that this was time-limited funding that was available to them. And during the appraisal process of these projects, we basically made sure that they understood the terms of engagement. We have been as flexible as possible, recognising the impacts that have obviously happened over the last three years. I think we've been quite fair and open with them, and transparent with them, in terms of the time limits and the kind of level of checks and balances that we have to do as a paying agency, then, to make sure that we're validating the expenditure that's coming in and getting the claims processed in time.

A bit different to Peter and WEFO, we actually have to have all of the expenditure claimed and paid by the end of this year. So, basically, we'd given projects a final deadline of 7 July earlier this year, but recognising that there were still ongoing pressures in the supply chain and inflation costs, and we have allowed a limited number of extensions, to give every project every opportunity to deliver in the time frames to which we're working.

Okay. Can I invite Natasha Asghar to take up the next two sets of questions, please?

Thank you so much, Chair. Hi, gentlemen. So, I'm going to begin by asking whether there are any further updates on the spend outturn beyond what is currently in the public domain—so, June for structural funds and July for the rural development programme—please.

Shall I start with that? Yes. So, I can give you some figures as at the end of August, in fact. Let's start with the headline figures that were in the Auditor General for Wales's report, saying that, at the end of December, there was £576 million still to be spent. Well, at the end of August, that was down to £356 million for us. And, if I may, the reason this figure, of course, is interesting is because you, the committee, I guess, will be seeking assurance that we are going to be able to make full use of this funding. So, the other side of the coin, if you like, for the things we've just been talking about, making sure we're not overexposed, whether we're going to make full use of it.

So, it's worth knowing that, of that £356 million still to spend, there's another £112 million—yes, £112 million—that is on our desks, as it were. So, these are claims that we've received and are being processed, so we know that those are coming in. And that leaves £244 million of claims still to be received, so that's the scale of what's left. Now, of that, some £203 million is actually down to 22 specific operations, so, if you like, 82 per cent of what we still need to get in is being delivered by 10 specific projects. So, we have a pretty good handle on what to expect and when to expect it. We've worked with those projects particularly closely. They tend to be the bigger ones—bigger infrastructure projects' funds that were hit hardest, I suppose, by the issues we touched on before: COVID and war, and so on. When infrastructure projects are shifted to the right, it's really, really difficult to recover that time. So, permanent damage, effectively, is done to those timetables. So, they're the ones that are always, actually, quite heavily loaded towards the back end of the programme that we will not expect to see their claims coming in until after Christmas, really, for the most part. So, that's where we are, £244 million to go, and we've got a pretty good idea of where most of that is.

Peter, do you mind giving us, just for the benefit of the committee, some examples of some of these projects that you're waiting on—it could be anything—off the top of your head?

Well, road projects, rail projects, big infrastructure things, basically—

So, the metro, for example, the A40, given some of your projects.

Construction, yes. And also the broadband. All of these things, we've been giving extensions in time to, if not money. You know, people are coming back to us and saying, 'This is what's happened as a result of supply chain disruption, and all that sort of thing, so can we have more time to deliver what we said?' And, of course, we've co-operated with that as best as we possibly can.

Fine. Thank you so much for that. Okay. So, I just wanted to know in relation to the structural funds programme the extent to which the current spend levels put the structural funds programme on a trajectory to maximise the draw-down of EU funds by the end of 2023.

Yes, I'm still confident that we'll be able to do that. I'm in other people's hands to some extent on that now. We are so late in the programmes that if one of those projects, or all of those projects, were to turn to us and say, 'Do you know what? Actually, we can't make it' or 'This isn't going to cost as much as we thought it would', or the timetables have slipped so that the projects that we have approved will now run beyond the end of December 2023, and some of the expenditure that we had expected to be EU supported therefore cannot be EU supported—. So, if there are big shifts of that sort at this stage, it's now too late really to do anything about it, from my point of view. We've only a few months left, so we wouldn't be able to redeploy that money to other projects so that it could usefully be deployed to whatever they're doing.

So, I don't have any indications from any of those projects that we're working with that there any horrors of that sort yet to come out of the woodwork, so I am, at this stage, still confident that, yes, we will be able to draw down 100 per cent of the funding that we have been earmarked in the operational programmes. In fact, on the European social fund side, I'd say we're probably there already and I'm confident that we'll be able to do that. There's a degree of flexibility across the programmes that the Commission allows you to use over-expenditure in one part of the programme to draw down funding on another side, up to about 15 per cent. So, if we were to make use of that on the ESF side, I'd say we're probably there already. The European regional development fund side, as I've said to you, that's subject to some of these big construction-based projects that still have yet to put their final claims in.

Great. Thank you so much. A last few couple of things about the RDP, if that's okay, now. So, I've done a little bit of homework on my own—I will also ask some of the questions that have been prepared for us as well—but I just wanted to know: what's been the total value of funding that's been netted off by the UK Government as a result of the slow rate of RDP spend? And also if there were any steps that you had perhaps taken to mitigate the impact of this netting off.

I can't remember off the top of my head what that number was—I think it was around £100-odd million—but I'd need to double-check the numbers with colleagues and get back to you, if that's okay, on the netting off. A bit like Peter, my focus at the moment is on trying to maximise the EU element. From an EU perspective, we've now paid £788 million of the £842 million programme, which represents just over—. I think it was about 78—no, sorry, 91 per cent. We’ve got over £50 million-worth of claims in, so, when we combine the two together, we’re almost at 97 per cent of the total commitment level, 99 per cent of the programme level, but we are expecting the programme value to change as a result of our final modification. Again, this is one of the risks that we’re both managing in terms of exchange rate fluctuations, which is why we’ve got this final modification. So, from a spend perspective, or from an anticipated spend perspective, we have enough claims in to get us to 99 per cent, we’re working with the final set of beneficiaries to get the final set of claims in between now and November, and that should take us slightly over the revised programme value, and maximised the spend by the end of the year at a programme level.

Okay. Pardon me, gentlemen, as I'm not the biggest agricultural expert and EU expert when it comes to spending, so you may have to humour me for the next question or two that I'm going to ask you. So, I only was elected in 2021, but, in June 2020, Audit Wales published its report into rural development grants made without competition. The Welsh Government subsequently confirmed this decision, and that it may lead to disallowance by the Commission, going forward. So, do you know roughly what that figure of disallowance was?

I'd have to double-check. There were a number of historical issues that happened in the unit before I took over. They were identified when I took over, so we were pleased that the Audit Wales report recognised some of the activities that we'd already done to correct the historical issues. The Commission had started with a kind of indicative worst-case scenario around £33 million. I think we got that down to around £2 million or £3 million in the end, but, again, I'd have to double-check the final number.

I think the point to make here is we were comfortable that they were representing value for money, and a lot of those project awards were strategic initiatives that the Welsh Government wanted to support. I think there was one outlier in the five cases that Audit Wales specifically looked at, which we sought to correct with the beneficiary. But, again, I can’t confirm the actual final number there, but I think it was around £2 million or £3 million in the end.

That's great. The Welsh budget included £27.3 million of funding for the rural economy and sustainability programme for 2022-23 for farmers and land managers. Can you just confirm this funding has been spent in full on the actual farmers and land management, perhaps just to highlight the values that have been spent on each of the schemes?

Sorry, what was that—£27 million?

Yes, £27.3 million of funding for the rural economic and sustainability programme, and that was for 2022-23.

Right. So, again, we're talking of the domestic programme there.

Yes.

So, again, I'd have to confirm in writing the final spend position on the domestic side. We obviously had, again, demand-led schemes. We would have made a number of schemes available to farmers and land managers on that front. Obviously, one of the things that we’ve got to be mindful of in the domestic world is that we’ve no longer got the flexibility of the multi-annual financing that’s available under the RDP, so that allocation would have been specific for that year. So, if the demand wasn’t there or the delivery wasn’t there in that one year, then we would have potentially ended up with an underspend. I’ll have to follow that up in written procedures if that’s okay, but I think, off the top of my head, the allocation was specifically made, but we'd need to confirm the final spend on those.

If you could, please, in your response, Hugh, be as specific as you can, to avoid back-and-forth, that would be really, really appreciated.

Yes.

Okay, so I wanted to ask you also whether your deadline of 7 July 2023 for most beneficiaries to submit their final claims—I know you've mentioned claims coming through—under the RDP was actually achieved. You did say that they had been so far. But what are some of the implications, going forward, if indeed the claims that you're going to be receiving are not met according to the timetable that you have in place?

We've always had a procedure of re-evaluation and considering extensions, but as we, obviously, get closer to the deadline, we've been very specific that there have to be exceptional circumstances that are impacting these projects. Over the course of the summer, we allowed 115 projects, worth around £14 million of unclaimed expenditure, to be extended through to September, with a view to getting those claims in in October. We allowed a small handful to go through to October—I think £3 million-worth of expenditure there—to be claimed in November.

What we were always mindful of with the 7 July deadline was the volume of claims that we'd be receiving and the number of checks and balances that we'd have to do to get those all validated and paid by December. So, in one sense, allowing the extension just allows us to flatten out that workload a little bit from our perspective as well. The teams now are focused, really, on clearing the in-situ checks that we've got to do and the validation of the claims that are in for everything that came in in the summer, and, obviously, we'll then move and focus our attention on the projects that are going to come in in September and October so that we get those done in readiness for final claims to be paid in December.

So, we were always conscious that we'd see these kinds of requests coming in to allow an extension, which is why we agreed a procedure that would allow, under exceptional circumstances, for those to be extended.

You mentioned a couple of times 'exceptional circumstances'. Just for my benefit, and I'm sure the committee would love to hear, what are some examples of exceptional circumstances for you in your department?

We've got a couple of cases where the planning applications that were granted were called in by the Welsh Government for review, so, again, beyond the beneficiaries' control. We've had a couple of projects that have been subject to legal challenge, so, again, beyond the beneficiaries' control. Then, on a case-by-case basis, we'll look to see whether there were just delays in the supply chain or delay in getting the planning approvals.

But, in all cases, what we've asked for is the evidence and reassurance that these projects can still deliver so that the funding can be claimed and paid. I think we will have to, probably, get to a point, if projects are coming back to us now and saying, 'Look, that extension isn't giving me enough time', where we may have to draw the line and say, 'Look, enough is enough; we've got the deadlines to meet from a Commission perspective', and we won't be able to allow any further extensions.

Okay. Why was only an additional £4 million of EU grants spent on the rural development programme in July?

Sorry, in what context?

Apparently, only an additional £4 million of EU grant was spent for the rural development programme in July. Was that for a specific reason or was there any particular cause behind that being spent, or any change in the structure, programme et cetera that caused this to be spent?

Not in July. Obviously, if you look at the Audit Wales report, it's got there the profile of spend across the entirety of the programme. It will show that there was a dip during 2020-21 with the impacts of COVID and Brexit, and then, obviously, it's got a trajectory to the end of December. Our actual delivery against that trajectory is slightly different to how Audit Wales would've highlighted it, in that we have specific payment windows in which we have to pay some element of the RDP. So, for example, the agri-environment part of the RDP and the woodland creation part of the RDP are specific to application windows that run from 1 December to 30 June. Against that projection that Audit Wales gave, we would've been above that projection earlier in the year with the payment of those agri-environment schemes. We've been level with that projection, but we're going slightly below that projection at the moment, because whilst we've got £50 million-worth of claims in, £32 million of that won't be released until December because of the payment window. So, we will see a spike again in the following months. But it depends, really, when the claims come in and when the validation checks are completed, so, again, we may have some months when we're spending less than in other months. But, overall, we're satisfied that we're on trajectory to get to that maximum spend by the end of the year.

Fine. I do have one question, and it's not going off track; it is related to what we're talking about. Perhaps you could give me some clarity on it and, being the gentlemen in the job, you're probably the only ones who can. In July, I believe that the Welsh Government announced that Glastir would end in December 2023 and be replaced with an interim habitat scheme for 2024, ahead of the introduction of the sustainable farming scheme coming into play in 2025. Glastir area-based contracts are approximately, from what I've been told, £33 million. So, can you confirm if the interim habitat scheme will receive an equivalent budget, and, if not, where will the money go or have gone?

Okay. Again, policy colleagues and finance colleagues are obviously looking at the budget position that you highlighted earlier with the Welsh Government. I believe that that advice is starting to be formulated for the Minister to make a final decision. I'm not in a position to confirm the budget on the interim habitat scheme at this point, but, when the budget position is confirmed and the announcement made, I'm sure there'll be a written statement or an announcement made in the Senedd on the budget that's allocated to that scheme.

Okay. Fine. Now, I'd like to ask you a bit about some of the programme adaptations. The auditor general's report stated that there may be limited scope to extend or set up new schemes or projects, and I wanted to know if anything has moved in relation to something being 'no scope', or in relation to the time being available.

Again, the audit was back at the beginning of the year. At that point, we'd overprogrammed the rural development plan specifically. We were delivering domestic schemes, so from an RDP perspective, we were relatively comfortable that we'd done everything that we could from a programme perspective. Where we're at at the moment is preparing that final modification that goes to the Commission, which will look to ensure that we're aligning the spend and the projected outturn with the allocations at specific measure level. So, again, as Peter alluded to, the programme has got an overarching budget, but it's also broken down into specific measures and specific priorities that we're trying to achieve. So, we haven't run anything different or anything new since the beginning of the year, but we are now kind of finalising and matching the programme at measure level to where we expect the final outturn position to be at the end of the year. And that modification should be going to the Commission at the end of this month.

Thank you for that. The one element that I think a lot of people sometimes forget is the exchange rate. How much of it are you actually monitoring, because it does have a huge impact on the spending, what we've got, what we're going to be paying out, et cetera. So, are you going to monitor this, going forward, and is there any particular risk to the amount due to go out, perhaps, linked to the exchange rate?

Yes. We are regularly monitoring the exchange rate. So, again, from a programme perspective, we've used a planning rate of 0.85, but actually, when you look back across the entire programme period, the exchange rate has been as low as 0.69 and as high as 0.92, so quite a variation there. If you look at the programme, for example, back in a couple of previous modifications, the programme value was £834 million. We're now working on the basis that it's £842 million, but, with the final modification going in, we're actually looking at the programme going up to £846 million. Now, obviously, that's when we're getting the final modification approved, but the actual rate is applied as and when the payment is made.

So, again, it's a moving feast in terms of what the final spend position will mean in terms of an exchange rate, but if you just look from where Audit Wales were at the beginning of the year, as things are at the moment, we've got to spend an extra £4 million to maximise the EU element. To give you some context, for every increase or decrease of a penny in the pound, it could have an impact of around £1 million at a programme level. Again, the kind of rationale for the overprogramming was to account for that. Obviously, the risk is that it could go the other way as well, but at the moment the long-term analysis has suggested that 0.85 is the right planning rate to be applied. So, again, the final modification, combined with the overprogramming, should see us there or thereabouts in terms of maximising the programme level.

I think I should highlight that obviously there is that small risk that, because of that ongoing exchange rate and because we are still waiting for claims to come in, whilst we're comfortable we'll exceed the overall programme level, we might still have those slight anomalies at a measure level that we've got to really focus on over the next three months.

All right, thank you for that. Are you confident that any further changes that may be required in order to move money from one pot to the other, or however you refer to it—between the structural funds priority pots, I should say—can be accommodated with the 15 per cent flexibility it currently has under the EU rules?

The 15 per cent is there in the closure guidelines, so you don't need permission for that. Obviously, they check our workings to make sure that they're happy with them, but it's not like a formal programme modification that has to be approved by our independent monitoring committee, chaired by Mike Hedges, and then approved by the Commission themselves. It's there, and that's the whole point. It is flexibility, so that's within our gift, if you like, to be able to work with that. Does that answer the question? Is that what you had in mind?

Yes, that's exactly it. Thank you very much for that. I just wanted to ask another sub-question before I go to my final question. Some RDP schemes, such as—and this is one I'm just giving you off the top of my head—the enabling natural resources scheme, have apparently lagged behind other measures in terms of rate of spend. So, I just wanted to know what the reasoning has been to support such a spend for such schemes, when funding could have perhaps been committed to other schemes to support investment in, perhaps, farming and rural communities, et cetera.

The enabling natural resources and well-being scheme was actually quite late being established in the programme, and you're right, there is a substantial amount of funding that was given there. I mentioned earlier the fact that the later we were getting into the programme, the more we were challenging, if you like, the beneficiaries in terms of the ability to deliver the projects, and these ENRaW projects were a cohort of those. Whilst there were delays, and, obviously, there were some delays on our part in terms of getting them approved, they are roughly—. I'm just looking at our numbers here. They have delivered over 80 per cent of their expenditure in the time that they were given. There is a couple of million now that we've allowed extensions for. They were collaborative projects, which, inevitably, are a bit more complex in terms of their delivery, but, overall, we're confident that they delivered the primary objectives. We just need to work with them now on finalising and confirming the final position and getting the final claims in.

All right, fair enough. My final question is how the anticipated 30 September modification in the rural development programme is actually progressing now, and what will the modification involve. If you can shed some light on that for the committee, I'd be really grateful.

The modification proposals should be going out this week to the programme monitoring committee as part of the written procedure, and then will be submitted to the Commission by the end of the month. There are quite a few measures where we're moving funding around, so it's probably better that I follow that up in writing, but we're basically moving funding between the measures. Like I said, where we've got project spend already at the allocated value and we've got funding left to pay there, we may put more money in. Where we've identified projects that might not deliver to the grant awards that we've given, we'll be taking money out. But across all of the measures—. I'm not going to go through them one by one now, but I'm quite happy to share with you the kind of proposal that we're putting to the Commission so that you can see where we're moving funding from one measure to the other. But this will be our last modification, which is basically aligning the RDP allocations with what we expect to be the final outturn position on the spend come December.

Fine. It would be really useful to have that information at hand going forward. Thank you so much. Thank you, Chair. My questioning is done.

Thank you. I invite Rhianon Passmore to take up the next couple of sets of questions.

Thank you very much, Chair. It's in regard to working with projects and beneficiaries around timeliness of delivery—obviously, we're coming to the tail end of programming—and whether you as Welsh Government or WEFO have made any notable changes to approaches—which is partly what I asked you earlier—to monitoring the projects and schemes as they approach key deadlines, as well as differences in approaches to actually how you are funding them. I presume the latter is set.

They're closely connected, of course, those two questions, aren't they? I suppose the biggest change in terms of our monitoring processes is that the programme monitoring division that performs this work is still very much in business at a stage where we had anticipated that they would probably be winding down, but there are so many projects that have slid to the right that have needed close support. They've had a lot of questions: 'Can we do this? Can we do that? Can we spend money over here instead of over there? Can we modify our business plans?' So, it's lots of really detailed nitty-gritty hard work, actually, to work with individual projects to help them adapt to the changes in circumstances that they've had to deal with. So, it's not a fundamental shift in the way that we work, but there's been far more of it and it's gone on for far longer than we had anticipated.

If I can just interject on that point, Chair—bearing in mind this evolving picture, because we are where we are, and it is where it is; I accept that—have you got the capacity to deal with that, or is it something that you've chosen to do to make it work?

It's tight. Could I use more people? Yes, of course I could. But everybody's tight in terms of resources, aren't they? There are no major gaps, if you like. Do we have to prioritise a little bit to focus some work on some of the projects that are most likely to be in need of particular support? Yes, of course we have to do that. So, is there enough? Yes, I think we have enough, if you like. If by 'enough', the measure is will I be able to adapt and work with enough of these projects to be able to deliver full programmes, then yes, I think we do. Could we have done it better, could we have done it more promptly, could we have done it in a way that is more resilient overall as a programme? Yes, possibly, with more resources. It depends on the idea of 'enough', because I suppose there's no single benchmark on that.

I think I've touched there perhaps on the second part of your question, in terms of the funding arrangements. Yes, we have moved funds around. We're on 14 September and all of the expenditure has to be done by the end of December this year. And we are still looking at approving some modifications to individual projects even now. We hadn't anticipated doing that way back when. That of itself is—

If I can just drill down into that, sorry. Would you say, then, that you are maximising each project with that individual attention as far as you can?

Yes, I think so. We're maximising each project in the sense that where people come to us and say can we modify their business plans, we'll be as co-operative as we possibly can, so that gives them the best possible opportunity to make the most of the funding that's been allocated to them. Do we give them more time where we can? Yes, we do. That creates a problem for us in the sense that what has happened across the programme is that it's compressed all the work that needs to be done for more individual projects and overall programme closure into a window that's very, very tight. And coming back to your question about resources, my worry is more perhaps around the processing side of the division—the WEFO team—than it was about the programme management side of it, in the sense that there's a colossal amount of stuff to get through.

I touched earlier on on a proposed change to the regulation. This is a regulation that, I should say, applies to me and not to Hugh—the structural funds and the rural funds are quite different in many respects. The regulation is the one that sets the date by which we need to put in our final claims and closure packs. They put that back, so the final payment application needs to be in by 31 July 2025. That's created a bit of a window for us to be able to use the resources that we do have, some of which are very specific skill sets, to be able to get through that process. It's a problem—this issue of compressing the work into this last window—across the European Union; it's affected people all over the place. So, that's good. It doesn't, though, change anything about the final date for which project expenditure is eligible. So, the deadline of December 2023 for individual projects doesn't change.

So, we don't really have a lot of room in that sense to be able to extend anything any more, except insofar as we're constrained by our own processing time, the back end of it, we do have a bit of a breather, and that does mean that we can allow a few projects to take a bit longer than we'd originally said we'd have to give them. So, yes, we are stretching that as much as we can, and it's far busier as a programme management function than we'd anticipated at this stage.

Thank you. This is respectively to you both, WEFO and Welsh Government: which of the projects that are still in situ or left to complete do you have the most concerns over in terms of their completion?

We touched on this earlier as well. I mentioned the big projects that have yet to put in their final claims. They're all in the construction space, in one way or another.

Can I make an interjection, Chair, if I may? It's slightly concerning that they are the big projects, but logically they would be in terms of supply chain issues around Brexit and then inflation and all the rest of it. How worrying is that? If they were smaller projects, it's almost better, because, obviously, these could have the biggest impact if they were very late. Could you scale that up in terms of your risk register in your brains, please, Hugh and Peter?

How worrying? On a pre-mitigation level, very worrying in the sense that we have quite a lot of eggs in one basket there and if the basket gets dropped, then there's very little point in doing anything about it. On a post-mitigation level, it's not so worrying. This comes back to your question about working with these guys so that we know what's going on. I'm not desperately worried about the metro and the roads and that sort of thing: they're either through Welsh Government projects or Transport for Wales—these are people who we know well and work with closely. And you can physically see progress on these projects—

Yes, I see them in my constituency.

So, it's only a proxy, but it's some reassurance that something has happened—you can see the thing, so they must be spending the money and so on. So, the confidence that the claims will come in in due course is there, if you like, for those.

I'm going to connect this, actually, to the question you asked earlier on about resources. Resources for us is something of an issue, but it's also a huge issue across the programmes amongst the beneficiaries. Again, some very specific skill sets are involved, and for some beneficiaries, where they can see there is no follow-on activity, some of those key people are beginning to vote with their feet. It doesn't destroy the capability within individual projects, but it does degrade it. And again, that means that they come to us and say, 'Can we have a bit longer, not so much to do the work, but to actually put the claims together and get them in to you and with all of the necessary evidence for audit trails and things?' So, it is a risk. There are dangers around this and the mitigation to it, as I say, is to work as closely as we possibly we can, picking up on any early warning signs of trouble in individual beneficiaries, so that we can get in there and help them if we can. And, as I say, there's no magic bullet to this; it's just down to a lot of nitty-gritty hard work.

Thank you. Hugh, I'm conscious that you haven't said anything to me on these matters, but in regard to the number of active projects that have passed their due end date within the structural funds programme, how many of these are there? Can you articulate some specifics for us as a committee, or do you want to write to us?

Sorry, that was structural funds, yes? That's for Peter, yes? Yes.

In regard to structural funds programming, those projects within that, how many of them have passed their due-to-end date?

Oh, right. I've got a figure of about 80 in my mind, but I'd have to check.

Can you write to us with that?

Yes, I can do that. Yes.

I'm going to move on, then, to the rural development programme, if I may. So, this is a monitoring question in terms of socioeconomic projects. Obviously, these have been hugely beneficial to Wales in the past. So, are they being delivered as expected within the RDP?

Generally, yes. Going back to your question that was levelled at Peter, if I can expand on that a little bit as well. As I mentioned, the RDP is split into two main areas: the agri-environment and woodland element, which we refer to as the 'RDP IACS', the integrated administration and control system, and then you've got the socioeconomic elements. In terms of risk, on the agri-environment side of things, we've got the final claims in—they came in as part of the single application form earlier in the year—but we won't be making those payments until December. So, a high level of confidence there. The risks for us were around the socioeconomic elements, because of the very nature of their delivery, with collaboration, dependence on supply chains, dependence on planning, and so on and so forth.

We're slightly different to Peter, in that we've got a number of projects and they range in value. So, they range from small grants all the way up to a couple of multimillion-pound projects. So, the fact that we're already at around 99 per cent-worth of expenditure there submitted, the fact that we've got a bit of headroom in the projects that have been extended, if they come in or don't come in, it has less of an impact for us on the RDP. So, from that perspective, we're pretty comfortable on that front. But, socioeconomics, if I look at the headline numbers, on the socioeconomic side of things, we've actually spent 92 per cent of the allocations or the commitments that were made under the socioeconomic part of the programme, but we've only got 3 per cent of those claims in now. So, you can see that the biggest risk for us is in terms of these socioeconomics coming in. And as I alluded to earlier with Natasha, we've looked at the exceptional circumstances where we've allowed some of these projects to extend beyond 7 July. So, overall—

And that's the additional difficulty, isn't it?

Yes.

So, how many of those, then, have been extended or are planning to be extended? You talked about 92 per cent versus the 3 per cent, so what's the actual detail around that?

So, obviously, we extended a bit more than this, but at the moment we've got 115 projects for which we've allowed extensions through to September, and I think we had about 10 for which we allowed extensions through to October. And that covers around £80 million-worth of that expenditure that we're expecting to come in.

Okay. Thank you, Chair. I think that's my questions done. I'm thinking that you'll be taking question 5, Chair, is that correct, as Adam's not here?

I can. I had anticipated that you might, but I'm happy to do so.

I can continue. That's fine.

That's great. Thank you.

Yes, okay. In terms of eligibility checks—let me get my teeth in—and the robustness and the rigour involved with that, what practical steps, then, have WEFO and Welsh Government taken to work with projects and beneficiaries around good record-keeping, really, following the end of the programmes, because obviously we all know that this is an integral issue and very important to our assessment and European assessment?

I was hoping somebody would ask something like that, so thank you, because actually what you're shining a light on there is, to my mind, almost more of a risk than—. There's almost more of a risk in, 'Can we keep the money?' than there is in, 'Can we get the money in the first place?' We've talked about overcommitment and how we make sure that that's maintained at a level where we make sure we draw the money down, and working with beneficiaries and so on to make sure we get the money, but if the explanations and the audit trails and things aren't there when auditors come along and ask for them as part of the closure process, then that puts not just those individual projects at risk, but the entire programme. Again, there's no sort of individual magic wand that we can wave that addresses this problem. It is down to working with individual projects, and they vary quite a lot in their capacity in this respect—

If I can interject, if it's okay, for clarity and for my understanding and, I presume, for that of others as well, when people are applying, or organisations or businesses are applying or whatever they are, a critical element of that is their acceptance that they will be measuring and monitoring appropriately. If they don't do that, surely the onus is on them; it wouldn't come back to you as Welsh Government or WEFO. I know you're going to say the opposite, but surely the onus is on them for that, and therefore they would be the ones that would have to replace any funding if they weren't up to spec, surely.

That's so, except that, as you say, it's not quite that straightforward; you know, I was going to push back a little bit. The issue is that if somebody is audited, they’re audited as part of a programme. They're not audited—. We do deal here with programmes, not lists of discrete projects. They're connected, and the issue would be that if there are problems with an audit trail in an individual area, then that's something that initially we, WEFO, should have picked up through our initial screening. It's something that the European funds audit team, based in the Welsh Government but reporting primarily to the Commission, should have picked up. If a European auditor finds trouble with an individual project, then they take a step back and say, 'Well, what does this tell me about the overall controls for the programme as a whole?'

Which is my capacity question.

[Inaudible]—together across the whole of the programme. And if there is a correction at programme level, then it's not reasonable or legally enforceable, actually, to impose that correction across all of the beneficiaries included in the programme. That would land on the Welsh Government, and that's why the controls that we and the technical and financial appraisal team undertake are so important. An individual project can put the whole programme at risk.

Okay. Thank you for that. I did understand that, but it's good to have it spelt out. So, in regard then to my next question, whether WEFO or the Welsh Government have made or intend to make any significant changes to the eligibility checks to speed up the processing as the deadlines get closer. I'm sure that's just going to be a 'yes' or a 'no'.

Yes, we've made some. There's a limit to what we can do, for all the reasons we've just been talking about. They still have to be robust, but we have looked at how we can group claims together, for instance, in a way that means—. Each time you put a claim in, there's an overhead with it, if you like, so if you consolidate claims, then it delays the time it takes to get money out to beneficiaries, but that actually might be worth it, even from the beneficiary's point of view, if it saves work overall, and if, for example, it changes some of the slightly arcane sampling theories that go around some of this. If the overall level of testing can be reduced by consolidating claims into a single population that you're then testing, then that can help as well. So, yes, there are things we can do. We've explored all of those and taken them where we can within what we think, for the auditors, will be acceptable. If we think we're sailing a bit close to the wind, perhaps, on some of those things, we'll run it past TFAT first, and make sure they'll be happy with it. So, yes, there are some things that we can do.

Yes, carry on, Hugh.

I was just going to say that it's slightly different from our perspective. The RDP is governed by a set of key and ancillary controls. That governs that kind of exact requirement on our eligibility and validation checks. So, we have to maintain those for the eligibility of the funds. Under the RDP, we're subject to annual clearance of accounts, so, basically, for every European financial year—October to October—we'll submit the accounts. Audit Wales are actually the certification body that comes in to check that we're following all the rules and regulations set out in the Commission. So, from our perspective, we can't really deviate from those controls until the end of the programme.

So, from our perspective, what we've tried to do is mitigate the risk by aligning ourselves in a way that can deal with the workload that's coming in throughout the course of the year, recognising that we're expecting a lot of projects to come in this year. And just to give you a kind of headline, we've processed more claims and payments this year than at any time during the programme, because of the combination of a higher volume of claims coming in and a higher value of claims coming in. But we're having to work within the regulative framework and the key controls that are set for the programme, and we can't deviate from that.

No, thank you for explaining the position there. I think that's interesting, and, obviously, it shows, doesn't it, the dynamic fluidity of the situation in terms of understanding that this is a last approach for these types of funding at the moment, as we stand.

So, my next question is around the structural funds programming. What is the updated analysis on the error rate for structural funds since the 2022 report by the Welsh Government's European financial audit team?

So, there is—just to take a step back for everybody—an annual report by the European funds audit team to the Commission, which includes an error rating, and by 'error' they mean anything that's been booked, charged to European budgets that ought not to have been. And the last report that we had was at the beginning of 2023, and the reporting was on the previous year—so, 2022—for which the error rate was 0.05 per cent. And the threshold at which the European Commission decides there's a problem is 2 per cent, so, clearly, we were very well short of that.

Excellent. And, then, in regard to the rural development programme, whether the Welsh Government has seen any further reduction in the number of administrative mistakes relating to the interpretation of the RDP scheme rules. And that's since the position reflected in the Audit Wales 2022 audit work, following on from that piece of work.

I take it you're talking about the certification of accounts there.

The position of the Audit Wales 2022 audit work, but I would presume that would include the accounts. But in it, there was a segment on the administrative mistakes category, and that was around interpretation of the RDP scheme rules and regulations. I don't know whether you've got any light to shine upon that, or whether you wish to write to us.

I'll need to write to you on that, I'm afraid, but as part of the clearance of accounts procedure, as Peter was alluding to there, if the Commission finds that there might have been some anomalies in the administration process as a result of the eligibility of the beneficiary, what we will ultimately do, if it's appropriate, is to recover those funds from the beneficiary under the RDP. So, whilst there might have been an error rate highlighted in the accounts, it could be that we've actually recovered that funding from the beneficiary, if that was appropriate to do so.

I totally understand that, but this question is scoped around the Audit Wales 2022 report work, and it does specifically mention interpretation of scheme rules and administrative mistakes pertaining to that. So, if you could just write to us with that, Chair, I think that would be very useful. Thank you very much. Thank you, both.

Okay, thank you. I'm conscious we're over time. I don't know how quickly you have to run off. Hopefully, you'll be agreeable to our writing to you with any questions we haven't had chance to get to yet. I'm just wondering—. Natasha, you have the next section. Could you perhaps shrink that to a core, substantive question?

Thank you so much, Chair, I'll do my best. Gentlemen, I want to talk about staffing, because I know it's been something that a lot of people are concerned about. So, I just wanted to know—. Obviously, with the changes taking place, there will be a lot of people perhaps moving, there may be a loss of, potentially, knowledge, skills and experience, which may be deployed to other areas once the programme comes to an end. I just wanted to know how have you managed to retain staffing levels, going forward?

These are sub-questions now, Chair; I'm going to try an be as succinct as I can. So, in relation to how are you going to be trying to recruit staff internally, because, in many Government departments, we're noticing that staff are leaving, there's a huge churn, going forward, have you been successful in retention, training and development? And also what other options, for example, like agency staff, have you perhaps potentially pursued in order to fill vacancies, and how has that worked out for you?

And in relation to the RDP, what are you going to be doing to manage competing priorities for staff working on the RDP as well, because, obviously, there is a change taking place that's affecting a lot of people, and whether any external recruitment campaigns for staff to work on the RDP have been successful?

So, Chair, I tried my best there. I hope I succeded in being as succinct as I can. Gentleman, please, if you can answer those questions however you so wish, I'd be really grateful.

I'll try and be succinct and say, 'All of the above.' Some time ago, over a year ago, I was talking to the Permanent Secretary about all of these issues—[Inaudible.]—surprises, and I have now, for some time, had a string of delegations beyond what I would normally expect for a director in Welsh Government in terms of making recruitment and retention decisions in terms of bringing in, as you say, agency staff, and allowances and all of those things. So, this is something that has been recognised, as I say, by the Permanent Secretary and the chief operating officer some time ago, so I do have a degree of discretion on that that I wouldn't otherwise, that I don't have, for instance, in respect of the part of my division that is not the managing authority, which is WEFO.

It is a threat, of course, but, on the other hand, I had a senior team meeting across WEFO the other day, and I looked around the room, and, on a quick count, 23 of the 24 people in that room were in WEFO seven years ago when they were last doing this programme closure process. So, the amount of experience and commitment and corporate knowledge and memory in the organisation is colossal, far more than I have any reasonable right to expect in that sense. So, I'm very, very fortunate.

So, it's there, but people do make plans. Part of what we're doing beyond all the things you mentioned is actually working very closely with people to recognise that we shouldn't take their commitment to seeing these programmes through for granted. So, we work with them to understand what their future ambitions are. This is routine management anyway, to some extent, you could say, and we do do this. But we're also looking at particular arrangements that we can put in that will help them make moves into whatever they want to do afterwards, at the point at which it makes sense for them to go, as opposed to them seeing the opportunity and saying, 'I must go now, because the opportunity might not be there when the programmes actually come to a close.' So, yes, lots of things going on in that space, and I'll mention Karl James in particular as one of my team who is leading a lot of work, particular projects, to address those things specifically. Hugh.

Thanks, Peter. So—. Sorry.

Carry on, please.

Okay. Just very briefly then, just to cover the points that were made there: so, as a paying agency, we've got to maintain structures that allow the appropriate level of delegations and separations of duty. We proactively met the requirements from the Commission in terms of our staffing levels and our training. We've always looked to fill any vacancies throughout the period programme. We got to a position earlier this year where we saw a specific gap appearing at the administrative level, our external fixed-term appointment recruitment exercise was successful, and we filled those 15 posts. We've maintained the hierarchy structure that we need through a combination of temporary promotions, and we're currently now doing substantial promotions as part of the Welsh Government recruitment drive.

We've been working on the basis that the RDP has been coming to an end for quite a while now, and obviously the ramping up, if you like, of the domestic schemes that have been coming in as a replacement to them. So, inevitably, we're starting to move staff from elements of the RDP into elements of the domestic programme. So, we're maintaining the dual drumming in that respect. We have obviously got the sustainable farming scheme as another element that we're working on as well. But, again, as Peter mentioned, I was also looking at the management structure within RPW, and, again, I've got people there who have delivered multiple CAP programmes and will be taking that experience with them to the domestic programme going forward.

So, I think we're in a relatively comfortable position—definitely to see out the programme, and then I think it's a case of what individuals want post programme; again, as Peter was alluding to, we'll be happy to support them. I think the only difference, of course, from our perspective, is that our set of accounts going now in January—sorry, in February—for the period that we're operating at the moment, we'll have a final set of accounts that need to go in by June for the first quarter of the next European financial year, and then that's it; all we have then is the potential of a European audit coming in at some point over the next two years, but, if that doesn't transpire, then, in essence, our requirements from the programme perspective are done and dusted at the end of June.

Well, okay, thank you. Well, the final set of questions that were for me are quite extensive. There won't be time to cover them all, so we will write to you with most of them. I'll just throw a couple out at you only, just to get a taster, but these relate to replacement funding against the backdrop of wider Senedd scrutiny. So, what, if any, engagement is WEFO or other Welsh Government departments having with the planning and delivery of projects through the shared prosperity fund, what the likelihood is that replacement funding will match the levels provided by the rural development programme, and, finally, how does the Welsh Government respond to concerns raised by NFU Cymru that the Welsh Government has not met previous commitments to develop a replacement for the rural development programme in collaboration, also considering the opinion of a rural development advisory board?

Shall I start, Hugh, with the SPF, and then hand over to you for the rest of it? 'Very little' is the answer to your question, Chair. This is ground that's been covered, of course, a number of times, including by the Minister for Economy, in front of Senedd committees. So, we as WEFO—. And, in fact, as I mentioned earlier on, I'm the director for regional investment, so this covers the post-European world as well, so the team, such as it is—it's very small—that works in this space, also reports to me. But the shared prosperity fund is something that is being delivered entirely by the UK Government, so we don't have a role in that, and, as has been discussed in other committees, there was a discussion at one point, but it was a bit late and there was a deadline and it was impossible to close the gap between the two administrations in terms of consensus, if you like, on how the fund should work. So, for the time being, we have no involvement. We have some insight, because, of course, we've talked to a lot of people who are involved in it; a lot of them are beneficiaries or have been beneficiaries of EU funding. So, no, no direct involvement in the shared prosperity fund. Hugh.

Just very quickly then on the RDP replacement fund—and we've committed to a reply, written, on the UK replacement funding—the Minister for rural affairs has announced the rural investment schemes and made allocations worth £200 million earlier—I think it was in 2021—around those schemes, to support the rural economy and nature and environment. So, I think we’ll confirm the exact numbers there, and the detail of that, in written procedure.

In terms of engaging with the unions, obviously we've now introduced the Agriculture (Wales) Act 2023. There's been extensive consultation and collaboration on co-designing the new system of farm support, expecting a final consultation on those proposals to be coming out later this year. And again, if there's anything specific on the oversight of that investment panel—not investment panel, it was the oversight board—I think we'll need to follow that up with written procedure.

Okay, thank you. Well, as I say, there are a number of items we didn't have time to cover, which we will write to you about. I’d be grateful if you are able to provide a written response to those.

So, it just falls to me to close this session by thanking you both for attending and answering our questions, advising that a transcript of today's meeting will be published in draft form and sent to you for you to check for accuracy before the final version is published. So, thank you once again.

Thank you. Pleasure.

Thank you. Diolch yn fawr.

And Members, I propose that in accordance with Standing Order 17.42(ix), the committee resolves to meet in private for the remainder of today's meeting. Are all Members present content? Thank you. Therefore, I'd be grateful, clerking team, if you could take us into private session.