MHS Board Minutes 25 April 2007

Chair
Chrissie Dunn

MHS Board Members
Ian Reynolds (Deputy Chair)
Celia Bennett
Maureen Edmondson
John Harwood
Deryk Mead (by videoconference)
Alick Simmons

MHS Board Adviser
Fred Landeg representing Chief Veterinary Officer, Defra

Secretariat
David Bramley, MHS

Officials participating
Steve McGrath, MHS
Mike Greaves, MHS
Kevin Goddard, MHS

The Chair welcomed all attendees to the meeting including Fred Landeg, Defra’s Deputy Chief Veterinary Officer, who was representing the Chief Veterinary Officer (CVO). Apologies had been received from Jane Downes, MHS Veterinary and Technical Director, and Kathryn Davies, MHS Director of Corporate Services.

The Chair reminded MHS Board members and adviser of their obligation to declare any relevant interests before agenda items were discussed.

MHS Board members agreed the minutes as an accurate record of the MHS Board meeting held on 21 February 2007.

Actions Arising

All actions arising from the February meeting were recorded as complete except for:

• with regard to the action at para 6 of the February minutes, the Chair of the MHS Board reported that she, Ian Reynolds and the FSA and MHS Chief Executives had met, prior to the Board meeting, to discuss how to clarify the roles and responsibilities of the MHS Board, the MHS executive and the relationship with the FSA Board. The MHS Chief Executive had agreed to put together a proposal which would initially go forward to the Chair of MHS Board, Deputy Chair of the MHS Board and FSA Chief Executive for consideration before being considered more widely

Action: MHS Chief Executive

• with regard to the action at para 20, an intersessional note on MHS Financial Management would be circulated later this week

Action: Kathryn Davies

• with regard to the action at para 22, an explanation on the numbers of pre-August 1996 cattle had now been received and this would be discussed under Item 7 – Update on Over Thirty Month Implementation Review Group [see para 21, bullet 3]
• with regard to the action at para 27, the possibility of holding the next MHS Audit Committee on the same date as the MHS Board meeting on 28 November was being explored and may need to be considered following the appointment of a new independent member of the Audit Committee

Action: MHS Board Secretariat

The Chair reported that:

• the MHS Board Effectiveness Review had considered the CVO’s role as adviser to the MHS Board to be effective. The Chair informed the MHS Board that a proposal had been made for a paper to be produced for the FSA Board proposing that the CVO become a full member of the MHS Board. The MHS Board were supportive of such a proposal being considered by the FSA Board
• the MHS Board had held a briefing on the Transformed-MHS proposal, which would go forward as part of the review of options for the delivery of official controls. The Chair thanked the MHS Chief Executive for ensuring that the MHS Board were kept informed of developments
• the MHS stakeholder meeting which had been scheduled for 29 June would be postponed pending the FSA Board decision on the review of options for the delivery of official controls on 19 July 2007. The stakeholder meeting would be held as soon as practicable after the FSA Board decision
• Dame Deirdre Hutton, Chair of the FSA, was planning to observe the MHS Board meeting on 28 November 2007 [Post-meeting note: the date of this meeting has changed and it will now be held on 20 November 2007.]

MHS Chief Executive’s Report (Paper 07/19)
The MHS Chief Executive said that he would provide some supplementary verbal briefing to his written report and would be happy to answer any questions. This was his second report to the MHS Board and future reports would continue to evolve over time and provide a focused and balanced overview of key challenges, successes and failures.

Review of Delivery of Official Controls
The MHS Chief Executive said the MHS was not waiting for the outcome of the review but was transforming now, wherever possible. This included working with industry more effectively. For example, trying to provide commercial incentives for industry to make more efficient use of MHS resources and reviewing the service provided to small abattoirs.

The MHS Chief Executive reported that he had written to MHS colleagues to, directly and frankly, express his view of the MHS and the challenges and issues that it faces. Overall, the reaction to the letter from staff and UNISON had been supportive.

Breaches
The MHS Chief Executive reported that there had been no breaches of TSE regulations despite ineligible animals being presented for slaughter. This was due to a combination of Food Business Operator (FBO) and MHS vigilance.

MHS Financial Position as at end March 2007
The MHS were currently finalising the accounts for 2006/07 for which the current MHS Chief Executive had responsibility for the last quarter. The indication was that there was an overall favourable variance of £0.1m to the net cost of operations. This was in line with forecasts and demonstrated good financial management. The MHS had absorbed the £0.6m revenue loss in the final financial quarter associated with the removal of the ‘minimum charge of 45% of throughput’ previously charged to FBOs for the delivery of official controls.

The MHS Chief Executive said that in future years he would wish to submit the MHS budget to the MHS Board for their approval. Due to timing constraints, this had not been possible this year. In response to a question from an MHS Board member, the MHS Chief Executive agreed to provide MHS Board members with a retrospective paper on the MHS budget.
Action: MHS Chief Executive

2007/08 Budget
The MHS had received a budget delegation of £35.0m from the FSA, which did not cover exceptional items bid for by the MHS, which totalled £3.0m. The MHS was identifying possible cost cutting measures, which may have serious consequences on delivery capability.

The MHS Chief Executive noted that under current charging arrangements the MHS could lose money every time it visited certain premises. The MHS was also facing a challenge to its costs and resources from poultry slaughterhouses switching from using their own directly employed poultry inspection assistants PIAs) to MHS-provided PIAs. This could often be at short notice and was due to FBO concerns about employing their own poultry inspection assistants, which could include quality of inspection, lack of flexibility and the costs of staff training as well as holiday cover/pay.

Changes in MHS Charges
The MHS Chief Executive noted that the consultation on proposed hourly chargeout rates to FBOs closed on 23 April 2007. Several responses had been received and some further responses were expected shortly. Overall, responses had been supportive and agreed with the simplification of MHS charges proposed by the MHS. The Chief Executive said the consultation had given the MHS a mandate to implement the changes, which would happen from 28 May 2007.

Avian Influenza
The MHS Chief Executive said that the MHS were contributing to Defra’s lessons learned exercise on the recent H5N1 avian influenza outbreak and would participate fully in an independent review of lessons learned from the control of the outbreak.

Fred Landeg noted that it was routine for a review to follow a disease outbreak to assess successes and weaknesses and ensure lessons were learned. The exercise would examine the roles, responsibilities and communication between Defra and FSA and MHS.

IT Update
The MHS Chief Executive said that IT development was focused on delivering short-term benefits. The MHS were preparing a formal business case for longer-term development of IT and this would be submitted to the MHS Board for consideration in due course.
Action: MHS Chief Executive

In discussion:

• MHS Board members welcomed the Chief Executive’s report as a comprehensive guide to current issues affecting the MHS. A Board member requested that the operational context section drew attention to any interesting trends
• typically, prosecution of a plant following an SRM failure could cost the MHS £1000 to prepare for and result in a £500 fine to the plant
• MHS staff who are genuinely absent from work due to sickness will be supported to return to work as quickly and as comfortably as possible. The MHS will not tolerate sickness absence that is not genuine
• currently, there is no incentive for FBOs to use MHS resources efficiently and the MHS have an obligation to provide services to FBOs on demand. Contractual overtime for MHS staff needs to be set at an appropriate level. If the FBOs operating hours reduce at short notice then consideration should be given to the FBO contributing to payments for contractual overtime

The Chair of the MHS Board welcomed Kevin Goddard, Head of the MHS Business Development Unit, to present this paper. In discussion:

Objective 1 – To deliver customer requirements, as set out in out Service Level Agreements
The MHS met all the performance indicators for this objective except the indicator for BSE controls. This was due to six breaches of the TSE regulations. The MHS considered that the MHS Board’s intended outcome for this objective was partly met. In response, the MHS Board considered that the MHS assessment of their performance was unduly harsh. The MHS had achieved a 99.999% success rate and there was no risk to public health from the six breaches.

The MHS Board agreed that the intended outcome for objective 1 had been met.

Objective 2 – To improve consumer, government and industry knowledge and understanding of our work, and satisfaction with our service delivery
The MHS met three out of five of the performance indicators for this objective, which were the indicators on Defra customer satisfaction, sustainable development and consumer awareness. The indicators that were not met were to achieve 5% increases in (i) industry and (ii) FSA overall satisfaction. There had been a small decrease in satisfaction for both indicators. The MHS considered that the MHS Board’s intended outcome for this objective was partly met.

In discussion:

• industry satisfaction was measured by results of a postal survey sent to FBOs. There had been a 20% response to the survey, which was considered a good response rate for a postal survey
• the FSA overall level of satisfaction could have been affected by MHS and FSA differences in the perception of the importance and function of Service Level Agreements with the MHS placing greater significance on SLAs and referring to them much more frequently. The FSA and MHS had met in March 2007 to discuss how to improve the FSA/MHS SLA and clarify FSA/MHS roles. Alick Simmons, MHS Board member and FSA Veterinary Director, suggested that the level of FSA satisfaction may also have reflected his team’s concerns about the need for MHS reform in the run up to the review of options for the delivery of official controls

The MHS Board agreed that the intended outcome for objective 2 had been partly met.

Objective 3 – To embed legislative changes, in particular the EU Food Hygiene Regulations
The MHS Board agreed that the intended outcome for objective 3 had been met.

Objective 4 – To equip all our staff with the necessary skills, knowledge and information to enable them to deliver our services effectively
The MHS Board agreed that the intended outcome for Objective 4 had been met.

Objective 5 – To operate within delegated resource budget and delegated cash budget for 2006/07
The MHS Board agreed that the intended outcome for objective 5 had been met.

Objective 6 – To improve efficiency
Four out of five performance indicators for this objective were met. The cost per livestock unit (CPLU) indicator was missed by 1.8% due to the impact of acquiring extra MHS staff to meet the industry estimate for OTM processing, which was not realised. Corrective action to steadily reduce the number of contract staff for OTM inspection had been taken throughout the year to meet the actual level of OTM processing.

The CPLU may be adversely affected if the MHS agrees to carry out additional work for government customers. Whilst this work is covered by additional income it is not included in the original budget for the year and the number of livestock units processed may not increase.

Consideration should be given to separating out business as usual and exceptional costs from the CPLU.

To ensure MHS efficiency is understood by industry it is important to adopt a commercial approach and have a more robust indicator for efficiency

The MHS Board agreed that the intended outcome for Objective 6 had been met.

The Chair of the MHS Board summarised that the MHS had achieved five of the six objectives for 2006/07 and partly met the remaining objective. The Chair commended the MHS on its performance and asked Kevin Goddard to update the assessment of MHS performance for 2006/07 in line with comments expressed by the MHS Board and circulate this to MHS Board members for final agreement.
Action: Kevin Goddard

The Chair invited Celia Bennett to provide an update on the IRG’s work. In discussion:

• at the last IRG meeting, held on 28 February 2007, the Group had concluded that sufficient checks and controls are in place and that everything feasible has been done to minimise the possibility of human error
• since the last IRG meeting, a further exception to the regulations had occurred on 9 March 2007 when a sample pot was submitted for testing that contained two brainstems. There was no suspicion of fraud and precautionary measures had been taken including issue of a 21-day Notice of Suspension to the plant concerned
• a letter from Frances Radcliffe from Defra had been received, which aimed to provide a simple explanation of the numbers of pre-August 1996 cattle. The letter was helpful and demonstrated the importance of the messages that IRG has tried to get across to farmers about the presentation of ineligible animals
• in the period November 2005 to December 2006, pre-August 1996 cattle made up 0.06% of OTM cattle presented to fresh meat slaughterhouses in Great Britain. For the period January to mid-March 2007, the percentage had dropped to 0.03%
• some late registrations of pre-August 1996 cattle may be pet animals
• a Defra sponsored industry working group is considering what can be done to encourage farmers to dispose of pre-August 1996 through the Older Cattle Disposal Scheme before it ends in December 2008. Some pre-August 1996 animals may be used for breeding. The MHS Board considered that it was important that Defra continued to reiterate to farmers the importance of not presenting ineligible animals for slaughter
• the report from FVO mission on protective measures against BSE, carried out in November 2006, had been positive and noted that BSE control systems are well implemented and could be considered to be effective and reliable

22. Chrissie Dunn invited Deryk Mead, Chair of the new MHS Audit Committee, to report on the work of the Audit Committee, which had held its first meeting on 22 May 2007. Deryk reported that:

• the roles, responsibilities and relationships between the MHS Audit Committee, MHS Board and MHS Executive needed further clarification. Subject to this, Deryk said that he saw the MHS Audit Committee as subcommittee of the MHS Board that was also responsible for providing assurance to the MHS Chief Executive as the accounting officer for the MHS. The position of MHS Board and Audit Committee in relation to the MHS Budget also needed to be clarified
• the MHS was subject to audits from three separate sources. The Audit Committee agreed total MHS audit activity should be reviewed to assess whether it was set at an appropriate level, there any unnecessary overlaps and that it was delivering value for money for the MHS and taxpayer
• the role of the Audit Committee in relation to risk was to provide assurance that risk was being appropriately managed, not to address individual risks

The meeting had also considered:

• the MHS 2006/07 year end forecast and that the NAO believed that the Comptroller and Auditor General would be in a position to issue a clear audit opinion on the MHS accounts for 2006/07
• some budgets are outside of the control of the MHS. For example the increase to money paid to veterinary contractors is based on the Retail Price Index
• there was little cushioning in the MHS budget. The £3m deficit between the MHS bid and the MHS budget received from the FSA will create challenges for the MHS
• the number of ‘weak’ opinions in official control audits was decreasing
• NAO will be sub-contracting their audit work to KPMG for three years from 2007/08
• the 2007/08 plan for FSA external audit of the delivery of official controls will be risk based with a thematic approach taken in each quarter
• the next meeting of the MHS Audit Committee would be held on 22 May 2007

The Chair of the MHS Board noted that it could be helpful for Deryk to produce a brief paper setting out the key headlines from Audit Committee meeting to the next MHS Board meeting.
Action: Deryk Mead

In response to a question from an MHS Board member, clarification of the risk of foodborne disease originating from catering butchers premises and particularly those dealing with raw and cooked meat would be provided outside the meeting.
Action: Jane Downes

The MHS Board agreed that it would be useful to hold an extraordinary MHS Board meeting following the FSA Board decision on the options for the delivery of official controls in approved premises.
Action: MHS Board Secretariat

The next MHS Board meeting will be held on 25/26 September 2007