Public Accounts and Public Administration Committee

Bore da. Croeso. Good morning and welcome back to this morning's meeting of the Senedd Public Accounts and Public Administration Committee for our evidence session with Welsh Government officials and the Permanent Secretary, Dr Andrew Goodall, for our scrutiny of the Welsh Government's 2024-25 accounts. This is our second session on this, providing an opportunity for Members to scrutinise Dr Goodall and his senior colleagues on those accounts. So, welcome to Dr Goodall and your team. I'd be grateful, just for the record, if you could begin by stating your names and the roles you hold.

Bore da, Cadeirydd. Diolch am y gwahoddiad y bore yma. Andrew Goodall ydw i, Ysgrifennydd Parhaol Llywodraeth Cymru.

Good morning.

Bore da, pawb. Dominic Houlihan ydw i. Dwi'n gyfarwyddwr pobl a lleoedd.

I'm the director of people and places. Perhaps I'll hand to Sioned next, os gwelwch yn dda.

Bore da, bawb. Sioned Evans ydw i, cyfarwyddwr cyffredinol gwasanaethau corfforaethol, a hefyd y prif swyddog gweithredu.

Bore da i bawb.

I'm Andrew Slade, director general, economy, energy and transport. And I'll pass across to Dean.

Bore da, pawb. Good morning, everybody. My name is Dean Medcraft, I'm the director of finance of Welsh Government.

Diolch yn fawr i chi i gyd. Thank you, everyone. I remind all witnesses and Members that the meeting is bilingual and the headsets provide simultaneous translation on channel 1 and sound amplification on channel 2. I will begin, as convention has it, as Chair, with the first question to yourselves. So, you state that the main variance against the Welsh Government's fiscal revenue departmental expenditure limit budget in 2024-25 related to the Development Bank of Wales reporting adjustments late in the financial year. Why was this? What were the consequences of the late notice and what are you now doing to avoid these late adjustments, going forward?

Diolch, Cadeirydd. Just as we were reflecting with Members last week, we were able to confirm, of course, that we have managed within the funding that's been made available to us across all of the different categories. Just to say, Chair, that maintains a 26-year record now of managing the funding that is given to Welsh Government and through our structures as well. There have been some technical changes that will happen in terms of things that are included or excluded from various aspects of the accounts, and there was a matter that was associated with the Development Bank of Wales that we did need to incorporate. But, Dean, I just wonder whether you could explain that technical set of changes and some of the implications. Thank you.

Thank you, Andrew. Before I go into the technical bit on DBW, because it was a £44 million revenue underspend, I think it's important to put that in the context, as Andrew said, of the overall outturn position, because, for me as the finance director, I've got a balancing act, and that balancing act is that I can't overspend, or we can't overspend as a Government, because of the UK Government's fiscal policy and fiscal rules. Equally, I've got to advise the Cabinet Secretary for finance about having a safe level of reserves at year end, so I can manage year-end positions, because as we all know, this is a complex organisation, and there are variables that come in at just before year end, and even after year end. And the Development Bank of Wales issue of £44 million was one of them, to the level of that £44 million. So, I can't have a zero position on capital revenue, and what I need to do is balance that overall position.

The outturn position was £919 million underspend, which seems a significantly large amount of money, and it actually is. However, if I break that down, about £640 million of that was non-fiscal annually managed expenditure, which is ring-fenced, and we need to pass that back to UK Government. So, I have no control over that. The proportion that is in our control is about £280 million, which is both capital and revenue, which the £44 million is a part of. That bit is under our control, and if you think about that, that is only 1 per cent of the overall expenditure of Welsh Government, so I think that's a really good position to be in, and it's a position, then, from which I can actually land the aeroplane at the year end, and take into account those unknown factors that do come through.

With regard to the specifics of the Development Bank of Wales and that £44 million, like all arm's-length bodies, I need to wait until they have had audited accounts and then I can look at their outturn position and how that affects Welsh Government. The Development Bank of Wales is slightly different to most arm's-length bodies because of its very nature and the very nature that it puts out—I've lost my words now—the sorts of loans and investments, and those loans and investments are volatile, and they're volatile to the market at the point of valuation at the year end. One of the big issues within there is expected credit losses on the financial instruments within their control, which again is a market value at a point in time. So, the £44 million in some ways is a good-news story as well, because the expected credit loss wasn't as much as we expected and also interest on the other investments was higher. But the reason I give the outline at the start is that I can then manage that within the overall position, and I need to wait until I get that position in from the Development Bank of Wales, so it's a balancing act.

Okay, thank you. And just as a supplementary to that, in addition to what you've just stated, are there any other consequences of the late notice that provide lessons for the future?

So, we always communicate with the Development Bank of Wales during the year. I think that communication is pretty good; it could be improved. Like I said, it's actually having that valuation at year end, but I think for the committee and for the people of Wales, what is important is that that is in that known 1 per cent position, which I can then put in the Welsh reserve, and then I can carry that forward on behalf of the Government of the day to spend in the following financial year, so nothing is lost. So, we can slightly improve, but it's in a tolerable position, which I can actually then utilise for the Government for the next financial year.

Okay. Moving on, how do you respond to the Audit Wales findings in their recent report on capital planning in councils that, while the Welsh Government has taken steps to standardise parts of its restricted grants processes, most of this work has focused on revenue grants, creating potential for confusion?

Dean, would you just like to pick up some of the grant responses? Thank you.

Thank you, Andrew. The grants issue obviously is a significant issue for our Welsh Government, because, not being funny, 96 per cent of our money goes out in terms of grants—that's both capital and revenue. The majority of that is revenue grants, so that's why there's a significant focus on it. But equally, capital is equally important for us and, again, it's understanding how that money is utilised across Welsh Government. So, there is focus on it. Each of the portfolio areas understands the money that it's getting every single year, they plan for the capital grants. So, I think there is equal responsibility across portfolios with revenue and capital. And the overall grants position is the way that we fund the NHS, education, local government, so in my mind they're equally as important—revenue and capital. Sometimes, I suggest capital is harder to predict, harder to manage, because of its very nature of building assets, but I believe that we're pretty good at that—we're good at that with our engagement with our partners across public sector Wales. So, I slightly disagree with that statement—I think there is equal emphasis on capital as revenue within Welsh Government.

Cadeirydd, there's still, obviously, a very high volume of grants that are issued from right across Welsh Government, even if we have tried to consolidate some of those examples, particularly working with local government as well. But for a sense of the scale, there were about 10,500 offers that were made through 2024-25. And in respect of any of the recommendations or findings that we've had, certainly through the accounts process—some of the recommendations that Audit Wales have made—we've been able to pick those up through the grants centre of excellence to make sure that we've focused on those and responded. And actually, part of our regular awareness training is making sure that colleagues are aware of some of the ways in which we can make this as effective and as least bureaucratic as possible.

Thank you. Notwithstanding those comments, I think the Audit Wales finding related to standardisation of parts of restricted grants processes, not just the reasons why capital is not as significant as revenue in terms of your focus.

Thank you. So again, as Andrew said, we've got a grants centre of excellence, and I think they embody all good things about Welsh Government. In fact, the UK Government has used our model going forward, and we've supported them on their journey as well. And I think the grants centre of excellence—working with colleagues in legal, subsidy control and governance—have put together excellent materials to put out to grants managers: basically how to do these things properly, safely and compliantly. And with everything, things can go wrong. As Andrew said, the volume is incredible in terms of the number of offers that we put out there, which I think is over 9,000, which includes those capital grants as well. So, I think we have got a good process, good procedures, within Welsh Government, to manage the grants process.

Okay, we'll continue with grants management. Are there any other areas where you're taking action to improve grants management, particularly in response to issues raised in recent years by internal audit services and the auditor general? If so, what are those areas, and when would you expect to fully implement the proposed improvements?

Chair, it's probably worth reflecting that, obviously, we go through and review the opportunity to make improvements on an annual basis as well, but there were two significant processes that were put in place some years ago that we're still following through on. I don't think that removes any of the learning or the feedback that we get from stakeholders about how the process works, including how we assist some of the longer term viability, which is often tied into our annual budget process that takes place.

I think the grant assurance panel that was implemented back in September 2018 was part of enhancing the governance and accountability arrangements. And we still see a real benefit of that, which provides a more independent level of advice, challenge and assurance to grant managers. Also, we've already referred to some of the central work happening around the centre of excellence, but the central due diligence team is also something that we introduced back in 2019. And I think, again, that has provided discipline and advice across the organisation to make sure that people have the support that they need, as well as helping us with the wider scrutiny as well. And of course, as we were reflecting last week about internal audit roles, there are real opportunities to use that internal expertise of internal audit to just keep lifting the lid up on some of these areas, whether it's through our general processes, or, indeed, whether it's through some of the individual experiences as well. But, Dean, you might have some different reflections from me, but they were two key strategic areas.

Thank you, Andrew. And then to put some colour on this: so we've looked at recent additional claims, schedules, match funding, duplication of funding, which have resulted in some losses—we've learned the lessons from there. So, we go in through a series of lunch-and-learn sessions with grant managers. I think we've met 300 of them over the last year to increase their level of knowledge and performance. I've personally written out to all senior civil servants across the organisation to explain to them the importance of a standard award letter to be compliant, to understand the rules of engagement. So, again, we're on a continuous learning journey here, and I think that that's good for this organisation.

Okay. Thank you. Again, developing this, why is the value of the Welsh Government's grant expenditure for specific sectors in 2024-25, notably central Government and public corporations and Welsh Government sponsored bodies, significantly different to that in the preceding financial year?

Dean, we're still with the numbers there. Do you mind picking that one up as well? Thank you. Diolch.

Thank you, Andrew. I've got to think of the numbers, but I think it's true to say that the overall value of the percentage of grant expenditure has gone up from one year to the next. If I remember, it's gone up by £800 million from 2023-24 to 2024-25. But I think the proportionality has remained stable, that’s my opinion, and I'll come on to show why I think that in a minute.

But, again, like I said, the grants are the biggest way we fund things across the public sector in Wales, across the NHS, local government. The level is set by the UK Government in its block grant down to Wales, and then it's up to the Cabinet in Wales the proportion that they spend on each of the sectors. So, that's a political choice. However, that proportionality has remained stable over the last few years, about 94 per cent of spend, if I recall. And that is after looking at the spend on grants compared to the overall operating expenditure of Welsh Government.

If I take out the fair value gains and losses, and fair value gains and losses are those estimates of valuations driven by the wider economy for student loans, if I take that out, then the figure is 94 per cent in 2023-24, 2024-25. So, there has been stability at 94 per cent. So, I don't think it's actually changing proportion, but the value has changed by £800 million. Thank you.

Okay. Diolch. Thank you. I see no other indications of anyone wishing to speak. At this point, I should state for the record that we've received apologies from two Members today, from Rhianon Passmore and Adam Price. I'd like to welcome Cefin Campbell, who's substituting for Adam Price, and who will now take up the questions.

Diolch, Mark. Bore da. My first question is: at the time of our preparation for this session, you had yet to publish any revised chapters of 'Managing Welsh Public Money', despite telling the committee that you would do so as officials updated them, with the aim of completing a comprehensive overview of the entire document by December 2025. So, basically, why haven't we seen any updates, and what does this say about where updating 'Managing Welsh Public Money' sits in your priorities?

Diolch am y cwestiwn.

We have obviously spoken about this in some detail in previous areas, and irrespective of this being an update it is actually a very complex and technical task for us to work through. We know that the process, when we've undertaken it before, has taken upwards of 18 months or so. So, there has been a need to focus on some particular issues, including subsidies that are particularly important, and to make sure that we have got some resource allocated.

We have had some problems with what is still a pretty tight internal resource to put it in place as we would have intended, and also, a lot of the team who are associated with needing to provide the update have very technical roles, not least associated with the annual accounts process, and obviously some of the delays that we've been through over recent months or so will have affected some of that availability.

Having said that, whilst we need some of that expertise to be available, and that can't be avoided, we have had a secondee join our organisation, just in January, just to be solely dedicated to moving through this piece of work, just to try and make some progress, irrespective of the wider updates, but just to make sure that we are able to work through some of the priority areas. So, as I said, the subsidy control areas, recommendation 18 from the public accounts committee report, which we had worked through.

Dean, again, I know you'll want to come in perhaps a bit more technically on this, but it's probably worth highlighting that, irrespective of the wish to update, we've not exposed or experienced any governance issues associated with that. And, obviously, we do want to make sure that, whilst this is a translation of some of the wider advice that's available around using public money, the Wales-based version still remains very appropriate to our particular outlook and the way in which Welsh Government, and, obviously, Senedd scrutiny works as well.

Dean, I know you've brought in that additional resource within the team—

Yes.

—but we are also frustrated to not be able to just push on with some of the timetable, because we just want to get the task done as well. Over to you, Dean.

Thank you, Andrew. And I'd like to say how much I value 'Managing Welsh Public Money'. As a new finance director—well, not new, 18 months now—I've actually used it, I've looked at it for guidance and support. However, I do apologise that we haven't got a shiny new version I could share with you as a committee. However, as Andrew said, I've had to prioritise, and I've got statutory functions I need to deliver as well. We are going through it incrementally, and looking and reviewing across the seven main chapters, and the annexes, basically, and updating those that require priorities.

So, Andrew's already mentioned that we're replacing the state aid with subsidy control. I'm looking at the accounting officer, and I'm nearly there on completion of them. It's got to go through a formal governance process, but I really do believe that, with the additional resource that Andrew's just mentioned, I can do future prioritisation. And, in addition to that, I've just appointed—and this is showing how I'm prioritising this—a new senior official, whose job will be to update and maintain 'Managing Welsh Public Money' going forward, so, hopefully, we will never be in this position again.

And, in context, on the seven main chapters and indexes, we are basically there with four of them. So, we are making big strides, and, hopefully, this time next year, we will be in a position where all the chapters will be refreshed. But, as Andrew said, nothing has fallen down. The actual existing guidance and frameworks are still relevant today. I use them, and, equally, my team are there on hand to offer support, both within Welsh Government and to the wider public sector as well, which they do on a daily basis.

So, I do apologise that we haven't got a shiny new book to show you, but we are on the road. And I think we have made significant strides, and I've got things in place now to deliver going forward. Thank you.

Thank you for the explanation there. You just used an analogy that you're on the road to completing this review. So, could you give us an indication of a revised timetable, when we can expect to see this being published?

Dean, do you just want to give an estimate? Thank you.

Thanks, Andrew. So, as I said, I'm there with four out of the seven chapters [Correction: chapters and annexes]—four out of the seven main themes—so three to go. I've got that dedicated resource in there, so I would expect, with a fair wind over the next six months to a year, I will be there with it completed. I can't guarantee that, because things do change, but that's my expectation, that's what I want. And that's the commitment I've given to the Permanent Secretary, and I'll give to you as a committee.

Okay, diolch yn fawr. Thank you.

Okay. Cefin, you have no further questions? I've lost you.

Chair, we can still see and hear you.

My screen has disappeared. In which case, can I invite Mike Hedges to take up the questions, please?

Diolch, Cadeirydd. The first question I've got is: what are your oversight arrangements for Industry Wales, and what action did you take after the Auditor General for Wales provided a qualified regulatory opinion on the 2022-23 accounts due to the company's failure to follow public procurement regulations?

Diolch yn fawr iawn. Thank you very much. I just wondered, Andrew, if you'd just like to pick up some wider reflections on Industry Wales. Dean, you may need to come back, perhaps, on some of the technical issues about the qualified result, but, Andrew, that may be a bit more in your area. Thank you.

Thanks, Andrew. I think, Mr Hedges, the qualifications issue has actually gone away. The accounts-related point has been dealt with. I think colleagues from Audit Wales, and the auditor general, working with the company, have now sorted that question out.

You asked about governance. Obviously, Industry Wales has its own board, with a chair. It's got a small team with a chief executive. There's a sponsorship team within my team of officials, and we attend the board meetings as observers. We have a relationship with the arm's-length body, as we would with a number of our other wholly owned companies. And that's the pattern that we use, in terms of governance arrangements.

If this was a business, it would be a wholly owned subsidiary of Welsh Government. It appears in the Welsh Government accounts. However you decide to manage it, as an arm's-length company, at the end of the day, am I right in saying it is Welsh Government's responsibility?

Well, the company and the company directors have their own responsibilities, but, yes, we own it as a company and, therefore, it features in our consolidated accounts, as you've just described, and the decisions around the future of the organisation, which, of course, is one of the things I'm sure we're going to come on to, is ultimately a matter for Ministers.

I'm coming on to it now. Can you tell us about the review of Industry Wales? Who carried out the review? How did the reviewer consult key stakeholders throughout each stage of the process? And what are the findings in summary form?

So, the review was undertaken by a member of my team, a senior civil servant, the deputy director who had previously run our sectoral work on the advanced materials and manufacturing sector, and, indeed, had been involved, I think, in 2012-13, in the establishment of Industry Wales. So, he had plenty of background and knowledge about the organisation.

I think, from memory, he conducted about 28 interviews with a range of stakeholders. Those were colleagues, internally within Welsh Government, with Industry Wales and with the Industry Wales forums. So, these are four forums that the organisation, the company supports: Aerospace Wales, Technology Connected, Net Zero Industry Wales, and the Welsh Automotive Forum.

The key findings of the review were that the work undertaken by Industry Wales could, effectively, be swept up into activities elsewhere, either within Government or within other bodies that existed, and therefore a range of options were put to Ministers about how things could be taken forward, and Ministers concluded that they wanted to bring Industry Wales's work to a close. Slightly different in relation to the forums that the company has supported, so we're in discussions with the forums. We've already, I think, with their help and assistance, sorted out the future for the Aerospace Wales forum. We're nearly there with one of the other three, and work continues on the other two. So, that's the programme of work that's in place.

I think, as Andrew has mentioned, overall, my reflection is that there are lessons that we can learn from the process. There's always stuff that you can do around improved communication, and I think there are a number of areas where we would handle things very slightly differently. But, overall, the business of closing down a company is not much fun. I speak from experience, I've been on the receiving end of Government closing an arm's-length body. It isn't a very pleasant business, and we're trying to manage it as well as we can in order to look after those involved, but also to protect public money and ensure that the work of a body like Industry Wales is aligned to ministerial objectives.

Coming on to, perhaps, the most important bit, will people working and looking for support about advanced manufacturing sectors in Wales be affected by these changes?

We don't believe so, in the sense that we think there are other routes that you can use in order to provide the kinds of support that, as you have just said, might be required by the advanced manufacturing sector or the materials sector. We're also working closely with UK Government, as you know, on the industrial strategy. So, the landscape has changed a lot and is changing, and a key reason for the review was the fact that the world has shifted a lot since 2013 and we need to be ready to respond to that.

I know that the Chair has written asking for a copy of the review, and we are very happy to provide that. The team are just double-checking for the redaction of personal information and any confidential information, but I'll be writing to you as a committee with that review report in the next few days, and you can then see for yourself what the reviewer found.

Moving on now to other arm's-length bodies. After the review of only two arm's-length bodies, you told the committee you don't plan to restart the tailored review programme, with a delay in rolling out the self-assessment model. What has stopped the reviews meant for obtaining assurance on whether the Welsh Government's arm's-length bodies remain fit for purpose, are well governed and properly accountable? And I think it was this committee—it might have been another one—we certainly looked at Amgueddfa Cymru.

Diolch yn fawr. Dom, I know we were reflecting on this more generally in the part 1 session last week, but would you mind just picking up some of the specifics there about governance and the process of the tailored reviews? Thank you.

Yes, absolutely. Thank you, Andrew. Good morning—bore da, pawb. Thank you for your time this morning. Thank you for the question, Mr Hedges. Our original intent was to complete one review of each public body per Senedd term. We undertook two tailored reviews and it was quickly identified that each tailored review was complex, taking somewhere between 12 to 24 months to complete, and therefore our original intent was unachievable, due to those timescales. At the same time, I think it's worth highlighting that the UK Government also withdrew its guidance on tailored reviews in August 2023, noting that only 34 per cent of their planned reviews had been completed between 2016 and 2020.

Following an internal discussion with our public bodies reference group—that's where we bring together directors who are responsible for the sponsorship of our public bodies—we agreed that we would trial the UK Government's self-assessment model, and that any future reviews would then take place on a risk-based approach. We wrote to the committee, I believe in June, with details of the self-assessment model. We identified, this year, that 20 bodies will undertake the self-assessment model. So far, we've had 14 completed responses and six are due back by the end of March. So, we are on track for delivery of all 20.

The self-assessment model covers themes of organisational efficacy, efficiency, governance and accountability. And if, following a discussion following the self-assessment model, further work is undertaken, then there are a number of additional things we can do, including a critical friend review, tools from the Welsh Government policy gateways, our integrated assurance hub, and, where necessary, an internal rapid review. So, there are mechanisms in place there.

More widely, I would just highlight that there are perhaps some additional layers of control as well. In addition to each of our arm's-length bodies having their own internal processes—including, for example, their own chief executive or senior leadership team, their own audit and risk committees and other mechanisms—through our partnership teams we have established governance frameworks, as well as risk registers and other assurance mechanisms. We also have the external assurance through Audit Wales and through audit and risk mechanisms. And, finally, from a Welsh Government perspective, all directors who have sponsorship of arm's-length bodies are required to undertake an annual internal control questionnaire, where we look at their satisfaction with the risk controls in place for their public bodies. So, there's a number of activities that we do to make sure that there's effective governance in place for our arm's-length bodies.

And, finally, if I may, just more broadly, I'm not complacent in this area and we will need to review the self-assessment model after completion of all 20 bodies. I will be keen to explore the benefits, and, indeed, any limitations of the methodology of the self-assessment model. And subject to undertaking that review, which we'll do in line with our internal public bodies reference group, we'll then look to put in place ongoing arrangements over the next Senedd term so that our public bodies undertake their assessments accordingly.

Thank you for that.

Cadeirydd, it's probably worth sharing as well that two thirds of the bodies have already completed the self-assessment in that time, but we are expecting the final six, Dom, I think, to complete by the end of March as well. So, that will be a process that will have completed a full cycle as well.

Yes.

Thank you for that. I have just a couple of comments, which you may not wish to respond to. I think, if the company had gone into receivership, we should not have given the same answers that I've just heard now. So, I think that it doesn't fill me with confidence that everything is okay. But, moving on—you can fill me with confidence in this—are you content with the overseeing of public bodies in Wales that impact on the consolidated accounts of the Welsh Government?

I think that's probably more in the budget world, Dean, so I just wondered if you had any reflections on that. But, Dom, if there's anything that you feel is about that general governance, please do come back. So, just the implications of the complexity of drawing in a number of these bodies into our Welsh Government accounts, thanks, Dean.

Thanks for the question, and, yes, I do agree that it is complex in how we draw them into the Welsh Government consolidated accounts. So, you talked earlier about Industry Wales, for example, and that qualification issue, if I can draw on that one as an example. The qualification has actually gone. However, they are not consolidated into us; their resource outturn is, but not consolidated into accounts. It's due to accounts boundaries and classifications. All those issues we go through every year and try to get the classifications correct. When the classification is correct, they do come into our boundary, but that is a moving feast. That's why, when I said earlier as well about 'Managing Welsh public money', it's keeping up to date, understanding all those issues, and the sheer complexity of the accounts. So, that's where I come from. Arm's-length bodies, that is complex. Other bodies that we sponsor, other bodies that we fund, how they actually come into the overall outturn position is a really complex issue. That's why we talked about, last week, how long it takes to do these accounts. This is a Government account not a departmental account, and it is complex. Thank you, Andrew.

Tell somebody who isn't an accountant that, and what they will say is that you have two things, don't you? You have the overall balance sheet and you have income and expenditure accounts. Outside those two, where does the complexity come in?

The complexity comes in because, as I said, I have to consolidate the NHS accounts, I deal with the education sector, I deal with roads, I deal with valuations, I deal with a £10 billion student loan asset estimation—all those things are significantly complex. I would suggest it's more than a balance sheet and profit and loss, and I've been an accountant for 35 years qualified, and I have significant experience—private sector, public sector—and these are the hardest accounts I deal with.

Okay. But the student loans, that really is different. If it was done by anybody else apart from Government, it would be a Ponzi. But the thing is that it's all underwritten, isn't it, and you have the loans going out and the money coming in. What am I missing?

Well, I think the sheer volume of said loans, the complexity of an estimation. We need to use Department for Education modelling, because of the sheer size of the student population across the UK. The Welsh bit is only small; we have not got the funding to do our own modelling, so we have to rely on others. I would suggest there's a degree of speculation about repayments, and speculation on what they can actually pay back as well. I think that is an issue for UK Government, Scottish Government, Northern Ireland Government, as we went into last week. Nobody has really cracked this. This is not an easy thing to do, but we do it with the best modelling available to us, which Audit Wales have actually looked at, which Audit Wales actually agree is the best modelling available to us as a Government.

Okay. Thank you for that. I'll just make a comment at the end. I think this is something that's going to explode, and it'll be a UK Government problem, not a Welsh Government problem, because they're underwriting it. It was never going to work. People aren't paying back the amounts that they're meant to, and, at some stage, we'll start having mass write-offs, and that will change the whole status of what we have. But I'll stop on that. Thank you, Chair.

Thank you.

Thank you. Cefin Campbell has some further questions on governance, before moving on to some questions on losses. So, Cefin, I'd be grateful if you could take up the questioning.

Thank you, Chair. Sorry, I had a blip on my computer earlier on, so if I can just return to a set of questions around governance. Diolch yn fawr iawn. Thank you. So, in its 2013-14 and 2014-15 accounts, the Welsh Government said it had established a centre for expertise. It had re-established a community of practice and launched training for staff to improve programme and project management. Yet, in its May 2025 report on the Wales infrastructure investment strategy, Audit Wales found the Welsh Government didn't have a clear understanding of infrastructure programme and project management skills across the organisation. So, what happened, and how would you describe the current position?

Thank you very much. To you next, Sioned, thank you very much.

Sioned, if you'd like to just pick up that question just on the project management aspects—.

Ymddiheuriadau—roedd y miwt ymlaen gyda fi.

Diolch yn fawr iawn am y cwestiwn. Mae'r ffordd yr ydym yn rheoli projectau'n hollbwysig i ni. Un o'r pethau sydd wedi bod yn ffocws i fi ers symud i'r swydd yma yw trio creu'r sylfeini gorau i ni gefnogi rhaglenni llwyddiannus. Felly, mae eithaf lot wedi digwydd ers i ni drafod hwn y tro diwethaf.

I'll just quickly turn to English. There's quite a lot that's gone on since I've been in post and moved this forward. One of the things that I really wanted to do was to bring the team much closer to me, so that I had the oversight that I need to have to be able to drive this in the way that I need to drive it for the organisation. I have a project delivery background, so not only is it something that falls within my responsibility, it's something that really truly interests me, and it is something that is absolutely essential for us as an organisation to drive the programmes forward for Government.

So, we've taken a number of practical steps since I moved into this space. One of the things we particularly wanted to do was improve the governance. So, we now have a very, very structured model, where senior responsible owners—those are the people who actually lead projects for us—now have to be able to identify and show to us, on an online Government tool—this is a UK Government-recognised standardised tool—what experience they have to be able to take forward that work. That gives us the confidence then to be able to invest in our training and our development of those individuals to ensure they are the best possible candidates to take this activity forward.

We've also ensured that, in terms of paperwork, RPA forms—so, risk assessment profiles—are undertaken in a far more timely manner. We've got some way to go on that, if I'm being truthfully honest for you. So, there are some more disciplines that we need to bring in to make sure that those are taken forward. But they also need to happen much, much earlier upstream in terms of how we look at our projects, so that we've got a proper understanding of the risks and resources and the opportunities that every project has, and that we map those and that we keep the documentation so that we can go back and learn what we did really well and also, critically, learn what we can improve on for the next time. So, the documentation, the governance has increased.

We have managed to identify and train 250 project professionals across the Welsh Government. Identifying them has been really, really important for us. So, training them—again, really important for them. Eighty-four of those 250 are existing senior responsible owners, so we've been able to sweep them up, pick them up, make sure that they have the resources and the skills they need to be able to move forward. And 166 of those 250 are some part of a project board, moving forward. So, really, the assurance is that I am taking a very personal interest in this and looking to reconfigure the team in a certain way—it's focused in a certain way to ensure that we have that level of expertise in a hub that can be shared out, in a way, across the entire organisation to ensure that we can then push the best practice to every corner of the organisation. Diolch.

And that 250 staff, Sioned, just to give a sense of scale, it's a targeted group of colleagues, but it's close to about 5 per cent of the overall workforce of the organisation as well. So, it's a really important discipline, to make sure that the right people are trained.

Indeed, yes.

Diolch yn fawr i chi. Os caf i ofyn cwestiwn atodol, mewn gwirionedd, beth yw'r amserlen sydd gyda chi ar gyfer gweithredu pob un o'r 141 o argymhellion sy'n ymwneud â threfniadau rheoli rhaglenni a phrosiectau Llywodraeth Cymru? Fe wnaethoch chi sôn amdanyn nhw y llynedd. Sut ydych chi'n rheoli neu'n ymgorffori'r newid diwylliannol y gwnaethoch chi sôn amdano hefyd, sydd mor bwysig o ran gweithredu'r argymhellion ac amcanion y newid yma?

Mae hwnna mor bwysig. Mae'r diwylliant yn rhywbeth y mae'n rhaid i ni weithio arno ac edrych arno drwy ffocws rili, rili clir. Mae pawb yn brysur, fel y gallwch chi feddwl. Mae'r 141 yn darged mawr. Dwi wedi gofyn i'r tîm edrych ar y rheini eto. Dwi'n meddwl bod yna ffordd y gallwn ni roi'r rheini i mewn i ffordd y gallwn ni ei rheoli yn well, er mwyn eu datblygu nhw. Beth dŷn ni wedi ei wneud, though, yw cracio rhai o'r targedau sydd yn fwyaf anodd; dŷn ni ddim wedi mynd am y pethau sy'n fwyaf rhwydd, ond eto mae yna dipyn o amser gyda ni i fynd i wneud hwnna. Dwi ddim eisiau rhoi, ar hyn o bryd, amser arno fe, ond gallaf ddod nôl o fewn y chwe mis nesaf efo rhaglen waith i fod yn rili clir ynglŷn â beth y gallwn ni wneud gyda hwnna. Rŷn ni'n eistedd ar audit, sy'n fy ngwneud i'n rili anghyfforddus, a dwi eisiau newid hwnna o fewn y flwyddyn nesaf, os gallwn ni.

Diolch. Dwi'n siŵr y byddai aelodau pwyllgor y dyfodol yn falch iawn o gael y rhaglen waith yna wrthych chi. Os caf i symud ymlaen i gwestiwn gwahanol, mae nifer yr archwiliadau cynghori, neu archwiliadau nad yw'r gwasanaethau archwilio mewnol wedi rhoi barn arnyn nhw, wedi cynyddu o flwyddyn i flwyddyn ers 2020-21, gan gyfrif, mewn gwirionedd, am 10 o'r 59 o adroddiadau archwilio mewnol yn 2024-25. Felly, er mwyn i ni ddeall, beth sydd y tu ôl i'r duedd hon a beth mae'n golygu i'r sicrwydd cyffredinol rŷm ni'n ei gael o waith y gwasanaethau archwilio mewnol?

Just to speak generally, first of all, obviously, internal audit as a function and as a profession continues to develop. Again, we've picked that up over the last couple of years around the committee to clarify its really important role, including that internal independent voice, which we really need to use as well. There is a trend of using advisory engagements to add some more colour to some of the audit process as well. It gives some flexibility to internal audit to respond to issues in a way that perhaps gives a bit more value to the organisation, and consolidates what I would describe as a trusted adviser role in the organisation, where it's a proactive offer of assistance to make sure we're able to track areas in the organisation.

It's probably worth saying generally that, in providing an audit opinion, whilst there are a range of areas where a formal assurance opinion is given, the advisory reports still do feed into the head of internal audit's annual opinion, which is reflected in the annual accounts. So, if there were problems identified, it is something that will still influence. Having said that, one of my worries is that the process can seem as though what it's trying to do is to avoid the more formal process of internal audit, which works very well.

Actually, the trend is an interesting one in respect of how it's represented in our annual accounts, because there is a difference in the figures back from 2021 and 2021-22 in terms of the baseline there. But, of course, we were experiencing something very different and significant then in respect of working our way through the pandemic response. Alongside a series of other functions and responsibilities in the Welsh Government, we repurposed a lot of our Welsh Government staff into underpinning the pandemic response, and internal audit was actually part of that. If you go back to 2019-20, before the range that's actually covered in this year's annual accounts, actually, the percentage of advisory reports that were being given then was actually around 22 per cent, compared with the 17 per cent that is in this year's report. So, I personally feel that what we've done is recover the core function of internal audit and that balance of advisory mechanisms, which I think we should still use as part of the approach and the machinery in our organisation in governance terms. But, actually, I think it's a recovery of the numbers. So, just to say that it was, I think, 10 out of 59, as you said in your own question, this year, but it was nine advisory reviews out of 40 back in 2019-20, just to give you a little sense of comparison as well. Dean, you oversee internal audit and you might just have, again, a more technical view. Thank you.

Thank you, Andrew. A bit like Andrew, I like stats and I like numbers, but Andrew, I think, has got most of them across. As the Member suggested, the numbers have gone up by 17 per cent. But the overall number of internal audit reviews has gone up significantly as well in that period, from 44 to 59, which is a 34 per cent increase. And as Andrew quite rightly said, before the pandemic we were at 40. So, I would say there's more assurance going to the principal accounting officer, and the advisory is just one part of the overall armoury for internal audit. So, I think this is a really good story, and the stats bear that out as well. Thank you.

Ocê. Diolch yn fawr iawn. A'r cwestiwn olaf ar y rhan hon: yn ei gyflwyniad i gyfrifon 2024-25, nododd y cadeirydd archwilio a sicrwydd risg fod pwyllgorau archwilio a sicrwydd risg y grŵp wedi newid i fyrddau sicrwydd grŵp. Allech chi esbonio, felly, beth yw'r rhesymau dros hyn, a pha wahaniaeth mae hynny'n ei wneud? Sut fydd hyn yn effeithio ar bwyllgor archwilio a sicrwydd risg Llywodraeth Cymru wrth symud ymlaen i'r dyfodol?

Yes, you're right—the chair of our audit and risk committee called this out as a positive change through this year. You can always have a bit of underlying anxiety about making some significant changes, because we've really relied on our audit and risk approaches to underpin the governance and the annual accounts process over recent years. But there were definitely some triggers for wanting to do this, because I think we should always try to actively review whether we can do things in a better way. I think one of the triggers for us here was the Treasury audit and risk handbook, which we adopt as an organisation. We probably find that that works really well when it translates through to the organisational level audit and risk arrangements. That will be the equivalent of departments elsewhere, but it's perhaps of less effectiveness when we look at the group structures, because, of course, we delegate some of these responsibilities down through our accountable officer arrangements and the director general arrangements, and I think that, at a group level, not at the organisational level, groups were struggling to maybe fulfil some of the asks that are set out in the handbook. So, we were getting some feedback from colleagues that maybe the purpose wasn't working quite as we had seen.

I think probably some of the industry of the group audit and risk arrangements was beginning to be seen a bit more negatively. There’s a lot of effort in producing the papers, setting these things out, standing items perhaps taking over some of the time, removing the opportunity to really focus on the issues that are of real concern within the structures as well. I would say there was a little bit of a feel that this was turning into a bit more of a tick-box exercise, which had some value, of course, to governance on the one hand, because it gives that wider assurance, but not really getting to the core of some of the problems. And I think there was probably something on the assurance side that wasn't working quite right. Some of the committee arrangements were making it feel as though the DGs were being held to account for assurance in their areas, whereas actually the mechanism at group level was intended to support their accountability, and actually more assure them of their director's oversight arrangements as well. So, I think those were the triggers for it, just picking up on some of the feedback, even if we were still getting the basics and the nuts and bolts right.

We wanted to use the opportunity to reach out and look at other experience elsewhere. We talked this through with DGs, with, obviously, audit and risk non-executive members. We liaised with the Scottish Government about some of their experiences and, through the chair of the audit and risk committee, we were able to come out with some really good recommendations. And I think, to finish on this one, the benefits that we're seeing on this are; firstly, better conversations about the risks and assurance; I would say more time on the highest risk issues, but still providing some safe space for challenge from non-executive members in particular; and some greater flexibility to bring in some expert advice into the room when those more in-depth discussions are taking place. I think the quality of the papers has improved as well—it just feels more targeted. And I think that repositioning of the accountability role is more helpful for accountable officers who, of course, end up in front of the committee itself, accounting to the Public Accounts and Public Administration Committee for their own responsibilities as well. So, it gives, I think, a further level of support to them as well. Obviously, I'm very happy to give some ongoing reflections on that, but, as the chair responded in the annual accounts, we think this has bedded in really quickly and we've seen a pretty immediate impact from it as well.

Okay. No more questions, Chair. Thank you. Diolch.

Thank you very much indeed. In that case, can I invite Tom Giffard to ask his questions?

Thank you, Chair. Last October, you provided information about the recovery of grants from businesses in receipt of COVID-19 economic resilience fund support that had not responded to the Welsh Government's request for information as part of its post-completion monitoring. Can you provide an update? Are you on course to complete the process and provide a final closing report to the committee by the end of March?

Yes, thank you. We spent some time, as I remember, in the committee last year, and whilst of course the pandemic itself is behind us, thank goodness, and we are focusing on other areas, inevitably, the audit and follow-through process still takes some time to work its way through. Obviously, we've had to align and allocate resource to oversee that process as well. So, we've continued, as we committed in the committee last year, to work through the post-completion monitoring, and the team has contacted all recipients to seek further information. There is an intention to finally close down this process, which we would expect to be done by the end of April. But if there are any remaining non-responses from clients, they all remain live on our systems so that we can inform any future schemes as well.

You may recall that we were reporting last year that the fraud and error rate has been very low, mainly because we took a very proactive approach to the way in which we set up the process in the first place. There have been no instances that have been raised during the past 12 months in this area. The error rate—it's not a fraud rate—is almost negligible in terms of what our experience is on the overall process to date. If we look at some of the equivalent experiences that have happened through COVID loans elsewhere, some of the individual schemes, for example, in England, have had fraud and error rates that have been as high as 4 per cent, so we're pleased that we were able to learn in the early days of implementing to avoid some of those areas. Having said that, there are still arrangements in place around a number of companies where we're still waiting for some of the finalised information. So, there are about 400 outstanding pieces of information that we need. That's associated with, I think, about £20 million-worth of loans that were made at the time. That's out of the £1.6 billion figure. We've chased up all of those individual companies. If we don't get those final responses, invoices will be issued in order to be able to track them back. But even that outstanding amount probably represents around about 1 per cent of the overall sums that were allocated at this time, which would be low for an error rate, but we continue to pursue those at the moment. Andrew, your teams directly oversee this, and I'm aware that we had one of the directors with us as we explained this last year, but did you have any reflections on the process? Thank you.

I think you've covered it beautifully, Andrew. A huge amount of work has gone into this. We're probably now increasingly into the category of diminishing returns in terms of the overall effort compared with the amount of money that is potentially at stake, but, as you say, we will carry on pursuing all of the companies who haven't yet provided us with the information. As you say, that doesn't mean that there's anything wrong necessarily, it's just we haven't got all the details and therefore we can't release those companies from their conditions. And, as you've said, at the moment it's a sum of around £20 million in that category, out of £1.6 billion. We haven't identified, to date at any rate, any cases of fraud. I believe local government colleagues have identified three potential cases of fraud, but, again, against the overall sum of money involved and outlaid through the pandemic and in follow-up, it's a very, very small percentage, and I would say it compares favourably with schemes run elsewhere.

Thank you. Moving on, have you leased the building in Ebbw Vale you refurbished, which you expected TVR Automotive Ltd to occupy? If so, on what terms, and does it provide the level of income that you expected?

Do you want me to take that one, Andrew?

I know there are some commercial aspects about it, Andrew, but, yes, over to you, if you don't mind. Thank you.

Thanks, Mr Giffard. We are in discussions with a potential tenant. Heads of terms, I think, have been agreed, but, obviously, we're in the middle of a commercial negotiation with them. I believe there is a back-up tenant prospect in the event that those discussions don't conclude. So, that's all in hand, and we'll have more to say about that in future, but I can't say anything more today.

Okay. But you are confident that it would meet the level of income you would have expected.

There's definitely interest. We're well advanced with discussions with a particular company, and that's been very positive.

And can you provide an update on the progress you've made in obtaining a fair market value for the Welsh Government's shares in TVR Automotive?

We're right in the middle of that process at the moment, so I can't say anything more about that today. When we come to that point—and I'll probably want to follow up with the committee and write to you all—we'll set out the position in relation to TVR in the round, not just associated with the shares, if that makes sense, because there have been other components of the relationship with the company. We'll set that all out for you as a committee.

So, you'll write to us on both the shares and the building. Okay. Great.

How much has the Welsh Government agreed to provide the Global Centre of Rail Excellence to cover the capital requirements for design and development work over the next six months, preparing for early contractor involvement in detailed design, working towards a fixed construction cost?

Andrew, can I stick with you, please? Thank you.

Yes, of course. I may need to check that, but I think it's just over £4 million, Mr Giffard.

The Welsh Government has issued a going concern letter of assurance to the Global Centre of Rail Excellence. What are the financial implications of that? Does it go beyond the additional funding announced in December 2025? Does it remain the case that no construction work will be carried out until private investment is secured?

That's an interesting question. The letter of comfort, which, as you hint, underpins the question of going concern for the company, doesn't bring with it any particular additional financial expectations or connotations. It's an important mechanism that we use with a number of our companies to make sure that directors can fulfil their fiduciary duties, mainly because of the nature of Government funding and annualised budgets and so on. You've got to be able to make auditors content that the business is a going concern, and the letter of comfort is part of that. So, no, we're not expecting any additional funding requirements to come out of that. That's distinct from the general direction of the project, where work continues, as you say—design work, development work. But there's no construction as yet, no.

Allied to that, the Cabinet Secretary for Transport and North Wales's written statement noted the Welsh Government would consider a final decision on the Global Centre of Rail Excellence in 2027. However, the additional funding has been provided for six months only. What does that mean for the global centre beyond June?

It means that, around about the autumn time, and we think probably certainly by Christmastime, the next Government in the next Senedd will need to be in a position to take a view on the strategic plans for the project and what happens next. But there's enough time there and—we hope—funding, in terms of the work that's ongoing, to get us to that point and allow the next administration to form a view on the way forward.

Moving on, can you share the outcome of the review of the Welsh Government's purchase of Gilestone Farm, which you told the committee would be completed this month? If not, when do you expect to be able to do so?

The finalised report will be coming to me at the end of February. It is this month, as you said. That will allow me to talk through any particular lessons that we need to learn or any assurance processes about it. I'm very happy to write to the committee once I've received that, and to give some assurance maybe on any processes that we've changed around that as well. It's a clear report. It's being done outside of the individual group area where this work was originally undertaken as well. So, that means they can report to me as the Permanent Secretary. Thank you.

Will we hear about the medium and long-term future of Gilestone Farm then? When would we expect that?

Andrew, do you want to pick up those wider reflections on Gilestone Farm? Thank you.

As I've mentioned to the committee before, we are pursuing our hierarchy for treatment of assets in terms of discussions with a number of partners about potential uses of the farm. We have a tenant at the moment who manages the farm for us on a farm business tenancy. Again, I would imagine that will be a decision for the next administration in terms of timing. On Mr Giffard's question about the review, as you've said, Andrew, you've asked another part of the Welsh Government to undertake that review and have a look at what we did in relation to Gilestone Farm, but I think also more generally in relation to purchases of property and assets. That will be separate from the future of Gilestone Farm itself.

Just to be clear, there's no timescale on when we would expect to hear the long-term plans for Gilestone Farm. It will just be in the in-tray, if you like, for the next Government—that's what you anticipate.

Effectively, yes, because, as I say, a range of discussions are still ongoing, and I don't imagine they will be concluded by the time the Senedd rises.

On what evidence did officials conclude that giving Welsh Government funding to Wrexham AFC, which is now part owned by a US investment company, represented value for money? What advice did officials provide to Ministers about the decision, including compliance with the UK subsidy regime?

It's probably worth clarifying, first of all, that the Welsh Government hasn't provided any funding directly to Wrexham football club. The funding that was provided for supporting the stadium improvements has come from Wrexham County Borough Council. It's a contractual relationship between those two parties, rather than directly with the Welsh Government. Having said that, of course, the Welsh Government did provide wider funds that have been able to be used for some of that stadium development. There was a £25 million grant that was provided to Wrexham County Borough Council in 2021, and that was intended to be a catalyst for some of the expected improvement works on the Wrexham Gateway project. Those timings were obviously before some of the change of arrangements around the club's future as well.

Of course, one of the intentions for the stadium improvement from a Wrexham perspective is to accredit the ground for international fixtures and to allow that to be a wider stimulus as well. Obviously, that is a wider aspiration than just for the football club itself. I know locally that people are very grateful for the ongoing support to allow that to be returned and to be accredited in that kind of a way. But the contractual relationship would be more a matter for Wrexham County Borough Council to describe and respond to.

Was there any advice provided by officials about compliance with the UK subsidy regime?

Given it's a contractual arrangement elsewhere—. Andrew, again, because you oversee this area, you may have some further insight at this stage. But our role was to provide the wider funding envelope for the area through the gateway scheme. But, Andrew, anything from you?

That's right, Andrew. As you say, as the contracting party and the accountable body for this particular public investment. Wrexham County Borough Council will have done the work on subsidy control. I'm sure, where they needed support from us, so technical support, that would have been provided. I would need to check that. But, fundamentally, that would be a matter for the council in this instance.

Have you submitted the final closure reports to the European Commission for the east Wales and west Wales and the Valleys programmes? Are there any related financial implications?

Yes, we have submitted those final reports. We were reporting part 1 of the annual accounts review last week, just about the significance of the closure of the European programmes, that £2.4 billion that we've been able to work through, the 100 per cent retention of the funding that came our way as well. Obviously, there have been some practical arrangements, so, if I could put it this way, financial implications to the organisations, in the sense of the way in which we have taken the 180 staff and worked through new arrangements for those staff, who are unable to carry on working for that part of the organisation, of course, because the process had finished at this stage.

Again, just to quote my line from today, Andrew, you also oversee this area, so I didn't know if you wanted to speak on anything. But we obviously have to have some residual interest in what is happening in case there are any further clarification questions that come through the accounts. We will pick those up inevitably as they happen, but it has been a positive experience to close it down. In terms of the error rates that are tolerated in this, we are well within those that have been set by the European Community as well, which I think is thanks to great work by the staff in the Welsh European Funding Office. Andrew.

I would just echo all of that, Andrew, and say for Wales plc we should all be proud of that, because the efforts have been spearheaded by WEFO, the funding office, but it's a huge partnership across the whole of Wales with public and private sector partners and the third sector. And it is no small thing to land a £2.6 billion programme and get it all submitted in with a 100 per cent claim of the European Union funding, and, as you've said, with a less than 1 per cent—nought point something per cent, whatever it is—error rate, against an accepted community threshold at the European Union level of around about 2 per cent. It's very complex stuff managing all of this, so there is much for us to celebrate there.

As you say, auditors, including the European Court of Auditors, can come back. They would audit the European Commission, and then, in turn, might want to come and have a look at us again, but we understand at the moment that those checks have all been satisfactory to date. We maintain a small core of staff, effectively as sort of reservists, if you like, to come back and address some of these points. So, we're not keeping a standing team going, we've got them deployed on other things. But we've got enough institutional memory in the system to help us with that, because that's an important part of the process of closing down the programmes. It's been a huge success and a great team effort across Wales.

Dean, do you want to translate that into anything that is relevant for the technicalities of the annual accounts? Thank you.

I was going to come in, Andrew, about the ongoing risk. There is, as Andrew said, a risk that they could come back until 31 December 2030. We have put that contingency in. The European funding audit team comes under me, and what I've done is redeployed those staff, and I'm talking about five people, but then I can call on them at any time, just in case the European auditors do come in, because they are experts, and they are ready to be deployed, just in case we need them. So, that's the contingency we've put in place between us.

Thank you. My last stop on the whistle-stop tour of projects across the country is Cardiff Airport. Earlier this week, the Competition Appeal Tribunal was due to hear Bristol Airport's case against the Welsh Government's proposed £206 million investment in Cardiff Airport. What can you tell us about this? When is a ruling expected? What does that mean for the Welsh Government's financial support in the airport in the meantime?

Andrew, I'll go straight to you. Thank you.

Thank you. Yes, Mr Giffard, as you say, the hearing took place, so the hearing is over but the tribunal case is still live, and it's a matter of sub judice, so I've got to be very careful about what I say here. The tribunal has to go away and now decide on how it wants to find in relation to the case, and there are a number of active matters flowing from the hearing that we're in the process of pursuing. So, yes, the case is still very much ongoing.

When we get the judgment, we don't know, that's entirely a matter for the tribunal and in their hands. I believe the chair of the panel said at the end of the hearing, or indicated, that that could potentially be before the end of this Senedd, or before the pre-election period, but it may not be then, it may be later. It's entirely in the gift of the panel; they've got a lot to go away and think about.

These are relatively new mechanisms under the new subsidy regime, so there's a range of things that I think the tribunal will want to look at, and we will update you as a committee as soon as we know more and the proceedings are fully completed—I think that's the key thing. Because, potentially, even after a judgment has been handed down, there could be an appeal by one party, so that would prolong things further, and we won't be able to set out everything until we've got through that process.

Okay—

Oh, and you asked about funding, sorry.

Yes. Ongoing funding.

Yes. We carry on with the subsidy plan as set out, unless and until the tribunal says something different, basically.

So it doesn't impact the short-term ability to do that. Okay. That's it from me, Chair.

Thank you very much indeed. Before we move on, can I just ask a further question following the earlier responses on Industry Wales? How do you respond to the statement by Industry Wales that, despite assurances that the Welsh Government will work closely with them and their forum partners to develop a transition plan ensuring continued support for advanced manufacturing sectors, no formal meetings with officials to discuss handover arrangements had taken place by early January?

Andrew, do you want to pick that up again?

That is a little bit tricky, because, in a sense, for Industry Wales, there isn't a transition to something else, because the work of Industry Wales is finishing and the organisation will be closed in a few months' time. For the forums, the four that I mentioned earlier, there are plans in place and work is definitely ongoing there. I know that my team had quite a long session and workshop with the Industry Wales team on 21 January. I believe that the chief executive is in talking to my team today. I know that the Cabinet Secretary has asked to meet both the chair and the chief executive, so there's plenty of engagement going on.

On the sectors themselves—and it's back to Mr Hedges's point from earlier on—we believe that there are mechanisms to support the sectors in an appropriate way that can take on the work of Industry Wales, so we don't see any particular risks there. We are working closely with the sectors and with business representative organisations.

As I said earlier, there are elements of the closure process and how we handled it that I think we could have done a bit differently. Probably with these things, you can never communicate enough, but the necessary work is in hand. Industry Wales itself as a company comes to an end and that has implications for colleagues working there. I completely understand that, and we're very mindful that it has a set of impacts on individuals and we're trying to manage that process as smoothly as we can. But it doesn't formally transition into something else. That's what I suppose I'm saying. The work of the forums is under discussion, but for Industry Wales as the core body, that work comes to an end.

Just to clarify, will there be formal meetings, and if so, when will that happen?

There are meetings going on. As I say, even today there's a meeting going on. So, all of those things are happening. As I say, the Cabinet Secretary has asked to meet the chair and chief exec. There are discussions ongoing with the forums. All of that is in hand. We will do everything we reasonably can to make the rest of this process over the next few months as smooth as we can possibly make it.

Okay, thank you. I'd just also pick up on a response from Mr Slade earlier when he indicated that he could go back to Wrexham County Borough Council for clarification regarding Wrexham AFC and compliance with the UK subsidy requirements. I'd be grateful if you could do so and share that with us. I should declare an interest, I obviously represent Wrexham within the region I represent and have had discussions with the council myself regarding the Wrexham Gateway project and with Wrexham University, so I'd better place that on the record just for formality's sake. Cefin Campbell, could I bring you back in to ask questions on losses, please?

Diolch, Cadeirydd. Mae'r cwestiwn cyntaf yma ynglŷn â cholledion. Mae e'n ymwneud â rhyw £1.6 miliwn a wnaeth Llywodraeth Cymru roi i elusen ar gyfer datblygu canolfan forwrol ym Mhorthcawl. Fe ddywedodd adroddiad gan Archwilio Cymru nad oedd yna ddiwydrwydd dyladwy digonol wedi bod, ei fod e ddim yn ddigon trylwyr, a'i fod e'n rhy hwyr. Ydych chi'n derbyn hyn, ac a allech chi fod wedi osgoi'r golled yna o £1.6 miliwn?

If I just open up, Andrew, but it will come, perhaps, to you again on this area. I know the organisation, and the event itself happened some 10 years or so ago, but, of course, we've needed to make sure that any wider or general concerns would have been picked up in that interim period, and that was just pending some other investigations that were happening at that time. As we were just reflecting more generally, if I speak about the context for this in the context of the Welsh European Funding Office and that £2.4 billion-worth of EU funding, I think we've been able to show a very high degree of discipline on the overall scheme that's affected the audit process. So, I'm reassured that, in overall terms, this is a more exceptional kind of experience. But, Andrew, do you just want to speak a bit more directly about that experience, and although I know it's over time, it's maybe just worth highlighting to the committee any reflections and any changes? Thank you.

Thanks, Andrew. All the points you make are very fair. As you have noted, this was a decade ago and the funding landscape and the control arrangements are very different now and have developed significantly, including, Mr Campbell, it's fair to say, as a result of reports undertaken or inquiries undertaken by PAC, the work of Audit Wales and so on, as well as what's happened at the European Union levels. There have been quite a lot of changes there to the regimen. Overall, I feel, big picture, as Andrew's just said, the fact that we were able to submit 100 per cent of claims to the European Union for the £2.6 billion funds at the end of last year is a testament to the fact that we have had strong controls and they have been properly exercised in the vast majority of cases.

That said, there were points raised in the Audit Wales report that we have followed up on. I asked internal audit, off the back of Audit Wales's work, just to do a review of the particular programme that this Porthcawl project had sat within to see if there was a systemic issue or there was something wider, and that wasn't the finding. The finding was that this had been a bit of a one-off.

The problem related specifically to verification of match funding, and I was just reflecting, actually, as you were asking your question, back to some of the points that Andrew was making earlier. In this decade, in relation to our grants management processes, we've had the grants assurance panel brought in. Andrew mentioned the centre of excellence, all the work that we now do in terms of central due diligence, and I was just jotting down some of the things that we do differently now, 10 years on. We've changed the nature of the grant award letters, we do much more verification and validation of match funding, not least in light of this particular experience. We've got a claim stage checklist that is used by grant managers across the organisation, we've got comprehensive desk instructions—I think Dean touched on some of that—guidance, standards for due diligence, new monitoring arrangements, and then we've got new sets of controls around retention of documentation. So, there's just a whole suite of things that have changed over the last 10 years that partly have been informed by this experience, but more generally informed by governance work audits and reports from this committee.

Thank you. Just on the back of that, we've also seen losses of two dairies in north Wales reported in the 2024-25 accounts. So, are the circumstances similar? What lessons again can we learn from this process in regard to these two dairies?

I would probably need to check, because this used to be my area, Mr Campbell, but it isn't now, so I'm going on the basis of a degree of past knowledge, but I think they were both project grants. One would have been under the rural development programme, I think, and the other was domestic funding to support innovation in the dairy sector. So, one of the projects was around continental cheese production, I think, from memory. The other was around sterilised milk in bottles and different sorts of processes there. And I think, in each case, the issue was more to do with management arrangements or failings in the way that the enterprise had been managed and in terms of their ability as a management team to meet the grant conditions. So, that's why we've ended up with this situation of losses.

We always learn lessons from these types of instances, but they do happen, and it goes a little bit back to discussions we've had with the committee over a number of years around risk. There's an element of risk associated with funding a start-up company or an innovative new process, and sometimes the risk pays off and sometimes it doesn't. But if there are any systematic or sort of systems lessons from those projects, I'm confident that the team will be looking to learn those, based on my experience of working with them.

It's probably worth saying that, whilst obviously registering these two areas within the annual accounts, the dairy sector is really important for us across Wales. There are over 80 dairy providers who are accredited in this space.

I think, as you were just saying, Andrew, it's that balance, because we have invested in a range of successful projects related to the dairy sector, and of course we do have a responsibility in Government with ministerial support to look to invest in any start-up businesses, but they are subject, as you were outlining, Andrew, to appropriate due diligence checks. So, we are always looking to mitigate the risk, but you can't remove all of the risk on these areas if you're going to take that sort of supportive approach to the sector as a whole. Hopefully that's helped to answer that question. Thank you.

If I can just carry on on the theme of losses, the 2024-25 accounts show another loss relating to the Wales life sciences investment fund. So, what are your own reflections on the loss and how do you respond to the recent media coverage about the Welsh Government missing out on a huge payday for shareholders as a result of the recent acquisition of Verona Pharma?

Andrew, do you mind picking up this one as well? Dean, you may feel that there's a technical accounts kind of issue on this, but I know one of the factors around this, when Welsh Government exited, was because there was no Welsh presence that was going to be there on an ongoing basis. But over to you, thank you.

No, that is right, and that's the principal reason or point, I think, underpinning the story that Mr Campbell refers to. So, because there was no longer a connection to Wales, the core objectives and key measures associated with the fund didn't apply, so the fund manager was asked to exit at the earliest available commercial opportunity.

On the life sciences fund more generally, basically, what's happened in the accounts, Mr Campbell, this year, is that the closure of the fund a couple of years ago now has tracked through into this year's figures. This was covered in some length with colleagues on the committee, I think, back in September of 2023; I remember talking to the committee then about some of the lessons that we've learned from the fund.

I mean, overall, the development bank, which was overseeing that arrangement in terms of the funds managed, is delivering everything back to Welsh Government that we expect. So, if you see things in the round, the totality of the investments, that situation is very positive. In relation to this one, the fund, I think, overall was about £55 million; the write-off is around £20 million. And as I said, I think I remember saying this in the meeting in September of 2023, had one of the investments gone in a slightly different direction, the fund overall would have been in surplus. So, it's back to that point Andrew was making about risk, really. You do your best to get the risk analysis right, you do your best to get diligence right beforehand, but you are then subject, to some degree, to what goes on in the markets, and external factors.

So, just on the life sciences fund, obviously COVID had an impact. The Woodford fund—you'll remember that collapsed and that had knock-ons for us. There was a particular type of technology that was being pursued by one of the companies and that didn't work out, or they didn't get the approvals that they were looking for, and because the fund was still relatively small in the scheme of things, certainly internationally for pharma, and because it was concentrated on a handful of projects, the implications if one of those projects goes off track, or a couple of them—that has a very significant bearing. So, that was one of the lessons learned in terms of the spreading of risk within the portfolio.

Diolch yn fawr—

With regard to the—

Sorry, go on.

Sorry. With regard to the technical bit, Andrew nearly got the figure right: £20.6 million was the write-off, Andrew. But the budget impact of that was addressed through bad debt provision over a number of years. So, that was in my year-end position that I've reported earlier. And on advice from the Development Bank of Wales, there was no prospect of further recovery of those moneys, and that's why we've had to recognise it in the way we have in the accounts for this financial year. Thank you.

Ocê, diolch yn fawr iawn. Y cwestiwn olaf am golledion. Rŷch chi'n adrodd am golled o £2.1 miliwn yn ymwneud â'r rhaglen Trawsnewid Trefi—Adeiladu'r Dyfodol, sy'n deillio o gywiriad o £4.1 miliwn i wariant yn dilyn yr hawliad terfynol gan WEFO. Sut digwyddodd hyn, a beth yw'r canlyniadau ehangach?

Yes, the Building for the Future programme ran between 2018 and 2024, and its fundamental role was to support the acquisition and development of derelict or underutilised buildings in town centres. So, it just was a policy around renewal, which Welsh Government was able to take forward, obviously with local authority and community partners as well. I think I'll come to the sum that's outlined in the accounts in a moment, but it's again worth just saying for the record that all projects delivered under the programme were successfully completed. Our assessment was that they provided value for money and they do contribute significantly to the town and community settings, as was originally intended by Ministers.

We needed the process to satisfy the WEFO and European audit mechanism, and as we've been outlining before about WEFO success, it has adopted a position of zero errors if there are any irregularities or any missing evidence as well. But as corrections are technically and perhaps even inevitably issued along the way, because of the joint nature of this approach, Welsh Government actually retained the legal capacity via legal award to choose to pass on corrections to partners, or it would look to retain it, given the potential knock-on effect of that on some of the communities, subject to that assessment of actually schemes having been completed and delivered as intended. So, Ministers received advice about choosing whether that was going to be the process or not at this time, and it was felt that there would be a high risk of perhaps undermining some of the local funding if Welsh Government did not take on that responsibility. So, the decision that the Minister made was in the context of value for money, the wider public sector, acting to protect perhaps some of those local areas, and that's why the decision was made to register this as a loss in the accounts, as you've said.

It’s probably worth saying that was part of the review process in general terms in here. There are always lessons learned, delivery issues that are observed. Three areas were just trying to make sure that all of the audit trails were as complete as possible. There are external factors that affect some of the deliveries of these areas, and sometimes there is insufficient support maybe at the early stage, or perhaps some local authorities didn't quite have the right level of contingency. But on the other hand, that means that we can step into those early planning reflections. We can improve the documentation and the audit process, and just make sure that we are around and available to enhance the support available to partners and stakeholders when they are discharging this work with us as well. But there was a formal ministerial decision that was made that translates into the annual accounts, and that's why we've reflected that funding in this way and taken it into the Welsh Government accounts rather than through local authority mechanisms.

Ocê. Diolch, Cadeirydd.

Thanks very much, Cefin Campbell. That brings us to my final question, and in fact our final question to you this Senedd term in terms of scrutiny of Welsh Government accounts. Noting that it is the last time you'll come before this committee in relation to Welsh Government accounts, we invite you to share any final reflections you may have with Members.

Diolch, Cadeirydd, a diolch am eich amser y bore yma, wrth gwrs.

My first reflection—you may choose to bring in other colleagues, but these are just from myself. First of all, I did have a reflection about something really helpful that was introduced at the start of the committee's tenure. I don't know whether all Members would recall this or would have been part of it, but you decided to do an informal contact with myself and the directors general, reflecting our accountable officer roles—obviously mine as the principal accounting officer. And I think, at the outset of the committee, it just allowed some recognition that we were going to be in front of you quite a lot, but maybe a chance to just develop a bit more of a relationship in advance, as we have returned to come under scrutiny in various areas. I know you'll be thinking in legacy terms along the way, but we thought that that was a really good initiative, and I hope has translated into some of the open conversation that we've had around the table, around the public accounts committee as well.

I'd reflect that it feels that, looking back over the last five years, there have been some issues of ongoing interest from the committee that have been difficult to draw a line under, and I know you've got a real breadth of areas of interest around the annual accounts process on the one hand, but much further and wider than that around what Government gets up to through the accountable officer roles. It may just be worth reflecting on whether there is an opportunity to fix some of those recommendations, and then we can get on to delivering it for some future scrutiny as well. So, that's just a little bit of a reflection over these recent times.

I want to say—and this is a personal view; I've been around the committee over many years—that I really appreciate the environment that has been created to be able to respond, to speak openly and to try to help the committee. That is what we are here for as well. There is genuinely something about the way in which we very much take seriously the scrutiny role, and, as you would expect for these types of events and all of the others that have occurred, we approach them very seriously and we prepare to give the best answers that we can as well. But I think the tone of the environment that is provided is really helpful to us.

And then my final comment, Chair, would be just to recognise that it's always a serious process about preparing for the annual accounts and, obviously, coming through the scrutiny process, but, I hope, if we look back over these recent years, you will see our serious efforts and attempts to respond to the recommendations of the committee, both in terms of the questions that are posed to us in these sessions, but in particular the translation of the recommendations. I personally look back at the annual accounts process, but obviously the report that we produce, and I do think it is more accessible, it's more transparent, and I think we've done an awful lot on the formatting of it to help, I hope, bring to life a little bit about what Welsh Government gets up to, even though we are here for very specific reasons as well. So, I just wanted to give those three or four reflections to you, and hopefully they'll be of use to you as you hand over some of these responsibilities to your successor body as well.

Thank you. Can I just invite Cefin Campbell to come in?

Diolch, Gadeirydd. Sori, dwi wedi meddwl am un cwestiwn ychwanegol y dylwn i fod wedi'i ofyn yn gynharach, felly ymddiheuriadau am hyn. Ryw flwyddyn yn ôl, fe ysgrifennodd y Prif Weinidog at y pwyllgor i ddweud y byddai hi'n cyhoeddi llawlyfr ar gyfer y posibilrwydd o Lywodraeth newydd. Ydych chi'n gallu cadarnhau os ydy hwn yn mynd i gael ei gyhoeddi ochr yn ochr â'r cod gweinidogol? Fe wnaeth hi roi'r ymrwymiad yma ryw flwyddyn yn ôl. Felly, rŷn ni flwyddyn yn ddiweddarach; ydyn ni'n gwybod a ydy'r llawlyfr yma yn mynd i gael ei gyhoeddi'n weddol fuan?

Diolch am y cwestiwn unwaith eto.

I just wanted to comment on that, as the handbook, which is our version of the Cabinet handbook that has existed—in previous committee sessions, we've talked about the importance of that being set in the context of Wales—is ready for us to reissue. We needed to wait for some of the final changes, both on the issuing of the ministerial code, but, as you will have seen recently, the First Minister appointing an independent adviser on ministerial standards. That is a significant entry that just needs to go into that handbook. Our intention is to just do the final updates now. Almost all of that work has been undertaken over these recent months, but that was the last thing that we were really waiting for, and you'll have seen that the First Minister announced that just very recently as well. So, we will pick that up and make sure that we return that to the committee as an update, and obviously it will remain an important reference point, particularly with some of the changes that are ahead of us later this year as well.

Iawn. Diolch, Gadeirydd.

Diolch. Thank you. I'm sorry; Dr Goodall, had you concluded your reflections?

I had. They were my three or four issues, if they were helpful to you. If you want to ask any other members, Chair, of course feel free. They were just from myself. Thank you.

I think Dean Medcraft may have a comment.

Thank you, Chair. Thanks for the opportunity to give some reflections. From my point of view, I want to thank the committee. I can't say it's my favourite part of my job, coming here, because of the significant amount of work that we put into this, and the questions that you could ask does put me on tenterhooks, I've got to be honest. However, what I've valued is how we've improved the accounts through your help. The process that we've gone through last week, today, and the significant efforts that we've done to try and comply with your needs—that, I think, has given us something that we can all be proud of. That's where I would come from.

If I could give some advice back, I think we do value the recommendations that come out, but if I reflect on last year's, when we came and sat before you, the recommendations didn't come out for about six months. So, for me to act on those recommendations, if we could have them sooner. I understand there are probably resource issues, as I've reflected on as well, and that that's why that was the timeline, but the sooner you can get them out to us, the sooner I can act on them for next year and improve again. Thank you.

Thank you very much indeed. Does anybody else have any final comments? Sioned Evans first, and then Andrew.

Diolch yn fawr iawn i chi. Diolch i'r pwyllgor am y cwestiynau heddiw. Dwi wedi adlewyrchu lot ar hwn ers bod yn y swydd yma.

First of all, I just want to point out that staff work really hard in really difficult situations to be able to bring, essentially, the programme for government, which we've been able to deliver this year, and all the other statutory functions that we've addressed on behalf of the Government in this year. The challenge, actually, is really healthy for us. Again, I'll echo what the Permanent Secretary and Dean have said, in that it helps us to become better.

Diolch yn fawr iawn i chi am hwnna.

We do know as well, and you will know from the last session, there are some really big decisions that we need to face into coming to the next Government, and how we go forward in terms of infrastructure investment. We've talked quite a lot about grants, and I can't remember the specific figure that Dean mentioned, but 95 per cent of our funding goes out in grants through that system. We know we have infrastructure there that will be heading towards end of life at some point over the next term. It's really important that we give some thoughts to that and how we take that forward, so that you as a committee can have the best possible evidence, and that we as an organisation can learn what went well and build on that, but also address the things that have not gone so well, so that we can make sure that we continue to improve as an organisation.

Cultural change is really critical. I think that's a really big ask for us as an organisation, as it is with every organisation. We are working through that, not least with our move towards more Government functional standards, so that we are becoming more consistent and coherent in how we're reporting things. Target operating models—I mentioned that last time—what we do, how we're going to do it, and then the enterprise architecture underneath as well, how we can do that. Also, our renewed and very welcome focus on the Welsh language—

—ar yr iaith Gymraeg a'r defnydd mewnol o'r Gymraeg yn arbennig fanna. Diolch yn fawr iawn i chi am bopeth. Diolch.

Diolch yn fawr, pawb. Thanks, everybody. Andrew, is your hand up again?

Yes, just very briefly to add my thanks, Chair, to you and the committee. We value this relationship and your work is important. As Dean and Andrew and Sioned have all said, your recommendations are taken seriously and they help us improve. So, thank you for those.

Two thoughts, just to build on Andrew's point—because the relationship is important—the work that we can do with committee early on in the committee's life to build that relationship, working relationship, is really important. Then, second, obviously, risk has come up time and time again in all of these sessions: how we handle risk, how we treat risk, what's an acceptable risk, tiered or measured to against the thing that you're trying to achieve. I think allowing the committee arrangements that come after you to think that through early on, to get some sort of sense about how risk appetite works and explore that area, I think is very worth while.

Diolch yn fawr. Thank you very much, all, for your comments. Clearly, your engagement with this committee is key to its effective scrutiny work, which is also key to the effective and efficient use of public resource across Wales. So, thank you for your engagement. I know it's not easy. I think one of you mentioned the preparation you have to put into this and it can be quite nerve-wracking. I've recently had to give evidence as a witness on a number of occasions to Senedd committees in the context of my proposed Bill. I know that no matter how well prepared you are, it's still more nerve-wracking than being on this side of the table.

Clearly, we will capture the open-ended ongoing matters in the legacy work we undertake for our successor committee, and no doubt, before too long, you'll be invited to begin your engagement with them. As always, I'll remind you that a record or transcript of today's meeting will be shared with you to check for accuracy, and otherwise, again, thank you for being with us today.

I now propose, Members, in accordance with Standing Order 17.42 (ii, v, vii and ix) that the committee resolves to meet in private for the remainder of today's meeting. Are Members content? I see that Members are content and, therefore, would be grateful if we could be taken into private session.