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Financial Auditing and Reporting

General Report by the Comptroller and Auditor General for Northern Ireland – 2009

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL7 July 2010

BELFAST:TheStationeryOffice £5.00

FinancialAuditingandReporting

GeneralReportbytheComptrollerandAuditorGeneralforNorthernIreland–2009

IpresentthisreportpursuanttoSections10(4)and11(3)(c)oftheGovernmentResourcesandAccountsAct(NorthernIreland)2001.

KJDonnelly NorthernIrelandAuditOfficeComptrollerandAuditorGeneral 7July2010

TheComptrollerandAuditorGeneralistheheadoftheNorthernIrelandAuditOfficeemployingsome145staff.He,andtheNorthernIrelandAuditOfficearetotallyindependentofGovernment.HecertifiestheaccountsofallGovernmentDepartmentsandawiderangeofotherpublicsectorbodies;andhehasstatutoryauthoritytoreporttotheAssemblyontheeconomy,efficiencyandeffectivenesswithwhichdepartmentsandotherbodieshaveusedtheirresources.

ForfurtherinformationabouttheNorthernIrelandAuditOfficepleasecontact:

NorthernIrelandAuditOffice106UniversityStreetBELFASTBT71EU

Tel:02890251100email:[email protected]:www.niauditoffice.gov.uk

©NorthernIrelandAuditOffice2010

FinancialAuditingandReporting:GeneralReportbytheComptrollerandAuditorGeneralforNorthernIreland–2009

Contents

page

Foreword 1

SectionOne: FinancialAudit 4

QualifiedOpinionsandReportsonAccounts 4

InternationalFinancialReportingStandardsShadowAccountsAuditSummary 9

SectionTwo: NorthernIrelandConsolidatedFund 14

NorthernIrelandConsolidatedFund2008-09 14

StatementofRatesLevyandCollection2008-09 16

SectionThree: ResourceAccounts 32

DepartmentforSocialDevelopment2008-09 32

DepartmentforSocialDevelopment-ChildMaintenanceand 41 EnforcementDivisionClientFundsAccount2008-09

DepartmentofCulture,ArtsandLeisure2008-09 46

DepartmentofHealth,SocialServicesandPublicSafety2008-09 48

DepartmentforEmploymentandLearning2008-09 53

DepartmentofEducation2008-09 58

DepartmentoftheEnvironment2008-09 62

SectionFour: ExecutiveAgencyAccounts 66

LandandPropertyServices2008-09 66


page

SectionFive: Non-DepartmentalPublicBodiesAccountsandOtherAccounts 70

NorthernIrelandHousingExecutive2008-09 70

InvestNorthernIreland2008-09 70

GeneralConsumerCouncil2008-09 71

GeneralTeachingCouncilforNorthernIreland2006-07 71

NorthernIrelandFireandRescueService2008-09 72

StrategicInvestmentBoardLimited2008-09 78

BelfastMetropolitanCollege2007-08 79

SouthEasternRegionalCollege2007-08 88

SectionSix: OtherMatters 94

InvestigationofSuspectedFraudonGrantFundingfortheInstallation 94 ofRenewableEnergyBoilers

GovernanceArrangementsfortheadministrationoftheSocialHousing 94 DevelopmentProgramme

MiddletownCentreforAutism 110

UlsterCamogieCouncil 114


Abbreviations

AADB AccountancyandActuarialDisciplineBoard

AMB AgencyManagementBoard

APP ActualPennyProduct

BELB BelfastEducationandLibraryBoard

BMC BelfastMetropolitanCollege

BSF BuildingSchoolsfortheFuture

BSP BuildingSustainableProsperity

BT BritishTelecommunications

C&AG ComptrollerandAuditorGeneral

CMED ChildMaintenanceandEnforcementDivision

CMT CaseMonitoringTeam

CSA ChildSupportAgency

CS2 ChildSupport2System

CSCS ChildSupportComputerSystem

DAO DearAccountingOfficer

DE DepartmentofEducation

DEL DepartmentforEmploymentandLearning

DFP DepartmentofFinanceandPersonnel

DHSSPS DepartmentofHealth,SocialServicesandPublicSafety

DIVER AtlantisDIDiver[anofftheshelfanalysistoolproduct]

DLA DisabilityLivingAllowance

DOE DepartmentoftheEnvironment

DSD DepartmentforSocialDevelopment

DWP DepartmentofWorkandPensions

EBT EmergingBusinessTrust

EC EuropeanCommission

EJO EnforcementofJudgementsOffice

EPP EstimatedPennyProduct


ERD ErrorReductionDivision

ERDF EuropeanRegionalDevelopmentFund

ESA EmploymentandSupportAllowance

EU EuropeanUnion

FEC FurtherEducationCollege

FRS FinancialReportingStandard

GAAP GenerallyAcceptedAccountingPrinciples

GTCNI GeneralteachingCouncilforNorthernIreland

GB GreatBritain

ICAI InstituteofCharteredAccountantsinIreland

ICT InformationandCommunicationTechnology

IFReM InternationalFinancialReportingManual

IFRS InternationalFinancialReportingStandard

IT InformationTechnology

ITN InvitationtoNegotiate

JSA JobSeekersAllowance

LPS LandandPropertyServices

LRNI LandRegistersofNorthernIreland

MHRA MedicinesandHealthcareproductsRegulationAuthority

MOD MinistryofDefence

MPMNI ManagingPublicMoneyNorthernIreland

MTF MichaelTownsleyandFirm

NCR NetCashRequirement

NDPB NonDepartmentalPublicBody

NDVR NonDomesticVacantRating

NI NorthernIreland

NIA NorthernIrelandAssembly

NIAO NorthernIrelandAuditOffice


NIBTS NorthernIrelandBloodTransfusionService

NICF NorthernIrelandConsolidatedFund

NIFRS NorthernIrelandFireandRescueService

NIHE NorthernIrelandHousingExecutive

OCL OrderChargingLand

OFMDFM OfficeoftheFirstMinisterandDeputyFirstMinister

OIP OperationalImprovementProject

OSNI OrdnanceSurveyofNorthernIreland

PAC PublicAccountsCommittee

PMG PaymasterGeneral

PPE PostProjectEvaluation

PPP PublicPrivatePartnership

RPA ReformofPublicAdministration

RfR RequestforResources

SAB StopAllBills

SERC SouthEasternRegionalCollege

SIB StrategicInvestmentBoard

SSA SocialSecurityAgency

SSE SpringSupplementaryEstimate

UK UnitedKingdom

Abbreviations


Foreword

ThisreporttotheNorthernIrelandAssemblysummariestheresultsofthefinancialauditworkundertakenonmybehalfbytheNorthernIrelandAuditOffice,primarilyonthe2008-09accounts.Itdoesnotincludetheresultsofmyexaminationoftheaccountsofthosebodieswithinthehealthandsocialcaresector.AseparateGeneralReportonthissectorwaspublishedon30June2010.

Theprimefunctionoffinancialauditistoprovideindependentassurance,informationandadvicetotheNorthernIrelandAssemblyontheproperaccountingforanduseofpublicresources.Inaddition,westrivetoassistauditedbodiestoimprovetheirfinancialmanagementprocesses,governanceandproprietyintheconductofpublicbusinessthroughourmainstreamfinancialauditwork.

Despiteachallengingenvironmentforallconcerned,Iconsiderthestandardsoffinancialaccountingremainhigh,demonstratedbythequalityandtimelinessoffinancialreportingin2008-09.Thevastmajorityofaccountssubmittedreceivedanunqualifiedauditopinion.Suchattainmentshelptobuildpublicconfidenceintheprocessofaccountabilityandgovernance.Ihavesummarisedthequalifiedopinionsandreportsissuedontheresourceaccountsandotheraccountsfor2008-09inSection1ofmyreport.

Othersectionsofthereporthighlightsomeofthekeyoutcomesfromourfinancialauditwork.InconductingthisworkIamalwaysmindfuloftheneedtoprovide‘addedvalue’totheauditedbodies.During2008-09auditedbodiesimplementedasignificantnumberofchangesasaresultofrecommendationsarisingfromourfinancialauditwork.

Inconclusion,IwishtotakethisopportunitytothankallthestaffoftheNorthernIrelandAuditOfficefortheircontinuedprofessionalismindeliveryofthefinancialaudits.IamalsoverygratefultothestaffintheFinanceDivisionsofthepublicbodiesauditedfortheircooperation.AsthenewlyappointedC&AGitismyintentiontobuildupontherelationshipsestablishedbymypredecessor,MrJDowdallCB,andtoembracetheongoingchangesfacingthepublicsectorintimesofgreateconomicuncertainty.

KJDonnellyComptrollerandAuditorGeneralNorthernIrelandAuditOffice106UniversityStreetBELFASTBT71EU

7July2010

Section One:Financial Audit

4FinancialAuditingandReporting:GeneralReportbytheComptrollerandAuditorGeneralforNorthernIreland–2009

1.1 QualifiedOpinionandReportsonAccounts

QualifiedOpinions–DepartmentalResourceAccounts

1.1.1 Thequalityofresourceaccountssubmittedforaudithassignificantlyimprovedsincetheintroductionofaccrualbasedaccountingincentralgovernmentfrom2000-01.Inthe2008-09accountingperiodfiveoutofseventeenresourceaccountswerequalified(29percent).Severalofthequalificationswereasaresultofirregularexpenditureduetofailuresinobtainingproperapprovalforbusinesscasestoprovideconsultancy

supportforlargescaleprojects.Figure1illustratesthenumberofqualificationsonresourceaccountsandotheraccountsforafiveyearperiod2004-05to2008-09.

1.1.2 Eachyearthereareintheregionofseventeendepartmentalresourceaccountssubjecttocertification.Themajorityofthesereceiveanunqualifiedauditopinion.Whenqualificationsarise,thisisgenerallyindicativeofweaknessesinfinancialcontrolthatcancompromisetheabilityofdepartmentstoprovidesoundaccountabilitytotheNorthernIrelandAssembly.Figure2containsbriefdetailsofthefiveresourceaccountswhichreceivedqualifiedauditopinionsforthe2008-09financialyear.

Figure1:NumberofQualificationsforAccountingPeriods2004-05to2008-09


0

1

2

3

4

5

6

7

8

2004-05 2005-06 2006-07 2008-092007-08

Resource Accounts Others

Accounting Period

Num

ber

of A

ccou

nts


Figure2

Department NatureoftheQualification

DepartmentofCulture,ArtsandLeisure DCALengagedconsultantstoestablishrightstoclaim(DCAL) ownershiptoallpropertyassetsunderthe responsibilityofinlandwaterwaysandinlandfisheries. ThefindingsofthisworkresultedinDCALbeingunable toprovideevidenceoflegalownershipforcertain landandbuildings.Thereportalsoidentifiedother assetsincludingland,locks,bridgesandweirswhich DCALmayown,butarenotincludedwithintangible fixedassets.

Theaccountswerethereforequalifiedonthebasisthat theComptrollerandAuditorGeneral(C&AG)was unabletoobtainsufficientappropriateevidenceto support: •Therecognitionofassetsvaluedat£3,922,000 withinlandandbuildings;and •Non-recognitionofotherlandandbuildingswhich maybeownedbyDCAL.

DepartmentforEmploymentandLearning Theaccountsregularityopinionwasqualifiedfortwo(DEL) specificreasons: •Irregularexpenditureincurredinrespectoffunding providedtotwoFurtherEducationColleges(FECs)for advisoryfeesonPublicPrivatePartnerships(PPP);and •Irregularityarisingfromnetcashexpenditurein excessofamountsauthorisedbytheNorthernIreland Assembly.

DepartmentofHealth,SocialServicesand TheaccountswerequalifiedontwocountsofirregularPublicSafety(DHSSPS) expenditure: •InJune2009,DHSSPSrequestedapprovalfrom DepartmentofFinanceandPersonnel(DFP)Supply forthirteenvirements1inrelationtothosesubheads, previouslyagreedintheSpringSupplementary Estimates,whichhadbeenexceeded. DFPapprovedallvirementsexceptforanoverspend of£1,153,000onadministrationexpenditure.DFP

1 ThetotalexpenditureonanyRequestforResources(RfR)mustnotexceedtheamountgrantedbytheAssembly.However,therearecertainflexibilitiesavailabletodepartmentstomoveexpenditurewithinRfRs.WhereadepartmentwishestoswitchgrossprovisionbetweenlineswithinaRfR,approvaltodosomustbeobtainedfromDFP.Thisprocessisknownasvirement.



Figure2Continued

Department NatureoftheQualification

consideredthat,althoughoverallestimatecoverwas availablefortheexceeding,thebreachofan administrationlimitwasincontraventionofDFP regulations;and •TheNorthernIrelandBloodTransfusionService(NIBTS) incurredexpenditureof£130,000onconsultancy betweenJuneandDecember2008.DFPrefusedto giveretrospectiveapproval,becauseasuitable businesscasehadnotbeencompletedandapproved priortoengagingtheservicesoftheconsultants.

DepartmentoftheEnvironment Theaccountswerequalifiedduetoirregularityarising(DOE) fromanexcessof£505,000inrelationtotheNet CashRequirementauthorisedbytheNorthernIreland Assembly.Theexcessaroseprimarilyasaresultof variancesbetweenestimatesandoutturninrespectof movementsinworkingcapital;useofprovisions, proceedsfromFixedAssetdisposals;andnon-cashitems.

DepartmentforSocialDevelopment Theaccountsregularityopinionwasqualifiedbecause(DSD) ofthemateriallevelsofestimatedfraudanderrorin benefitexpenditure,otherthanstatepension, administeredbyDSDthroughtheSocialSecurityAgency. (SSA)DFPestimatedthatin2008lossesof£57.2 millionhadarisenthroughoverpayments,representing 1.3percentoftotalbenefitexpenditure. TheDepartmentalsoestimatedthatunderpayments ofbenefitsin2008amountedto£20.9millionwhich is0.5percentoftotalbenefitexpenditure.


QualifiedOpinions–OtherEntities

1.1.3 Wequalifiedfivesetsofaccountsofotherentitiesforthe2008-09year,andtwosetsofaccountsofotherentitiesforthe2007-08year.Detailsareoutlined

atFigure3.[NotethatdetailsofthequalificationofafurthereightaccountsintheHealthsector,arecontainedintheC&AG’sHealthGeneralReportpublishedon30thJune2010.]

Figure3

NameofPublicBody NatureoftheQualification

LandandPropertyServices Theaccountswerequalifiedduetotheongoing disagreementovertheaccountingtreatmentforthe OrdnanceSurveyofNorthernIreland(OSNI) TopographicDatabase.Weconsiderthedataheld inthedatabaseshouldbecapitalisedandrecordedin thebalancesheet,buttheAgencydoesnotagreethat thedatameetstheconditionsforcapitalisation.

NorthernIrelandFire&RescueService Theaccountswerequalifiedasaresultofirregular paymentsarisingfromanincreaseinnon-uniformed Directors’payscaleswhichwasnotauthorisedby DHSSPS.Thetotalsumoftheseirregularpayments, includingemployer’snationalinsuranceandpension costs,amountedto£50,840.

NorthernIrelandHousingExecutive(NIHE) Theopinionontheaccountswasqualifiedonregularity duetotheestimatedfraudanderrorof£10.7million withinHousingBenefitasidentifiedbytheDisability, IncapacityandBenefitSecurityDirectorateStandards AssuranceUnitoftheSSA,fortheyear1Januaryto 31December2007.

SocialSecurityAgency Theaccountsregularityopinionwasqualifiedbecause ofthelevelofestimatedfraudanderrorincertain benefitexpenditure.

DepartmentforSocialDevelopment–Child Theaccountswerequalifieddueto:MaintenanceandEnforcementDivision2 •Theabsenceofadequatedocumentationtosupport thelevelofdebtincludedwithintheaccount;and •Limitedevidenceavailabletoconfirmtheaccuracy ofthemaintenanceassessmentswhichformthe basisofthedebtbalances.

2 TheformerChildSupportAgencyceasedtobeanAgencyon31March2008andfrom1April2009itsoperationsweredeliveredbytheChildMaintenanceDivisionwithintheDSD.



ReportsonAccountsbytheC&AG

1.1.4 Inthe2008-09accountingperiodweissuedreportsonaccountsotherthanthoseassociatedwithaqualificationandthefollowingarecontainedinthisoverallreport:

• DepartmentofEducation(seeSection3.6)

• InvestNorthernIreland(seeSection5.2)

• GeneralConsumerCouncil(seeSection5.3)

• GeneralTeachingCouncilforNorthernIreland2006-07(seeSection5.4)

• StrategicInvestmentBoardLimited(seeSection5.6)

Conclusion

1.1.5 Themajorityofdepartmentsandotherpublicentitiesareproducinggoodqualityaccountsforauditscrutinywhichresultinunqualifiedauditopinions.However,therearestillasmallnumberthatcontaininadequateauditevidencetoenable

Figure3(continued)

NameofPublicBody NatureoftheQualification

Theregularityopinionwasalsoqualifiedbecause wherethemaintenanceassessmentshadbeen calculatedincorrectly,itwasconsideredthatthe financialtransactionsdidnotconformtothe authoritieswhichgovernthem.

SouthEasternRegionalCollege The2007-08accountswerequalifiedasaresultof irregularexpenditureincurredinrespectofadvisory feesonaPPPproject.DFPdeclinedtogrant retrospectiveapprovalfortheupliftinthecosts,therefore theoverspendof£804,539wasdeemedto beirregular.

BelfastMetropolitanCollege The2007-08accountswerequalifiedduetoirregular expenditureincurredinrespectofadvisoryfeeson aPPPproject.DFPdeclinedtograntretrospective approvalfortheupliftinadvisoryfeesthereforethe increaseof£668,988overtheoriginalapprovedsum of£600,000wasdeemedtobeirregular.


ustoexpressanunqualifiedauditopinionorleadtoapublicinterestreportbeingattachedtotheaccounts.Allqualificationsareindicativeofweaknessesininternalcontrolandcompromisetheentity’sabilitytoprovidesoundaccountabilitytotheNorthernIrelandAssembly.Generallythereisnoconsistentpatterntothetypeofqualificationsarisinghowever,inthisparticularaccountingperiod,severalofthequalificationswereasaresultofirregularexpenditureduetolackofproperbusinesscaseapprovalsforconsultancycoststosupportlargescaleprojects.Thisisanissuewhichwewillkeepunderreview.

1.2 InternationalFinancialReportingStandardsShadowAccountsAuditSummary

1.2.1 InternationalFinancialReportingStandards(IFRS)aretheinternationalprinciplesforthepreparationofaccounts.Inthepublicsector,accountingandbudgetingruleshavebeenbasedonUKGenerallyAcceptedAccountingPrinciples(UKGAAP).However,inordertobeinlinewithinternationalbestpractice,HMTreasurydecidedthatforpublicsectoraccounting,IFRSwillreplacethecurrentrules.InorderthataccountsretainalignmentwithbudgetsandwiththerestoftheUKpublicsector,DFPhasrequiredthatthechangeinaccountingprinciplesbeadoptedinNorthernIreland.Thisistobeintroducedwithincentralgovernmentfrom2009-10with

ashadowpreparatoryyearin2008-09.3

1.2.2 ThetransitionfromUKGAAPtoIFRSisthelargestchangetoUKpublicsectorreportingsincetheintroductionofresourceaccountingin2001-02.

1.2.3 TheimplementationofIFRShascausedasignificantamountofworkforpublicsectororganisationsandtheirauditorsasmostareasoftheaccountshadtobere-examinedtoseeifchangesarerequiredunderthenewrules.

DeliveryofShadowAccounts

1.2.4 DFPrequiredDepartments,AgenciesandNonDepartmentalPublicBodiestoproduce2008-09“shadow”accounts.Theseshadowaccountsrestatedthepublished2008-09accountsfromUKGAAPtoIFRSprinciples.TheshadowaccountswerepreparedusingthenewIFRSrulesratherthanUKGAAPrulesthatappliedtothepublishedaccounts.TherestatedIFRSbased2008-09financialinformationisneededforthepreparationofthe2009-10accounts.TheshadowaccountswereauditedbytheNorthernIrelandAuditOffice(NIAO)butnotpublished.

1.2.5 DFPstatedthatoneofthemainadvantagesofproducingaccountinginformationonanIFRSbasispriortothe2009-10accountswasforAccountingOfficerstogainassurancesthattheirstaffhadfullyunderstoodtheimplicationsofthemoveforDepartments’2009-10estimatesandbudgets,whichalsowere

3 LocalgovernmentwillapplyIFRSsfrom2010-11.Shadowaccountswillbepreparedfor2009-10.


tobepreparedforthefirsttimeunderIFRSrules.DFPpointedoutthathavingthisinformationauditedwouldprovidefurthercomfortthatunexpectedimpacts,suchasExcessVotes,werelesslikelytoarise.

1.2.6 InrespectoftheNorthernIrelandPublicSectortherewereover70IFRSshadowaccountssubmittedforaudit.DFPsetadeadlineof30September2009forthecompletionandsubmissiontoNIAOof2008-09shadowaccounts,withtheauditsbeingcompletedby31December2009.ThreeofthefournewHealthandSocialCareBodiesweregivenuntil30October2009tocompletetheiraccountstoallowtimetocompletethetransferoffunctionsandmergeraccountingadjustmentsrequiredduetothereorganisationsundertheReformofPublicAdministration.Thefourthnewhealthbody,whichissmallinmonetaryterms,wasnotrequiredbyDFPtoprepareshadowaccounts.

1.2.7 AllmajorbodiessubmittedaccountstoNIAObytheSeptemberdeadlineandtheauditswerecompletedontime.WhiletenotherbodiesmissedtheSeptemberdeadline,theauditsofsixofthesewerecompletedontime.ThreeofthefourremainingbodieshadnotcompletedtheirshadowaccountsasoftheendofFebruary2010-twoastheirstatutoryUKGAAPbasedaccountswerestilloutstandingandoneduetoanIFRStechnicalissue.Theauditoftheremainingbody’sshadowaccountscannotbecompleteduntiltheauditofitsstatutoryaccountsisfinalised.

1.2.8 ThethreenewHealthandSocialCarebodieswhichwererequiredtosubmitshadowaccountsbytheextendedOctoberdeadlinedidnotsubmitthemuntiltheendofNovember.Thesethreeauditshavenowbeencompleted.

KeyRisks/Mainissuesarising

1.2.9 Ingeneral,financeteamsappliedthenewIFRSrulesmostcompetently,seekingoccasionalguidanceandadvicefromDFPonissuesrequiringclarification.Ourauditsidentifiedsomecommonareasthatcauseddifficulty.Thesewere:

• Leases:therewereissuesaroundtheidentificationofallleaseswithinbodiesandleasedisclosures;

• OperatingSegments:therewereinstancesofdisagreementbetweenauditorsandmanagementwherebodiesappearedtobemanagedasmultiplesegmentsbutaccountedforasasinglesegment.MorefinancialinformationshouldbedisclosedifthereismorethanoneoperatingsegmentasdefinedbyIFRS;and

• Disclosure:themostcommonissuewasnondisclosureofFinancialReportingManualrequirements.Thosebodiesthatcompletedadisclosurechecklist,asrecommendedbyNIAO,hadleastdisclosureissues.

Otherissues:therewerealsoissuesaroundtheaccountingtreatmentofPropertyPlantandEquipment,Private



FinanceInitiative,intangibleassetsandemployeebenefitsthatwereidentifiedbutwerenotmaterial.

Instancesofgoodpractice

1.2.10Quality Working papers: AllbodiessubmittingIFRSshadowaccountswereadvisedbyNIAOinadvanceoftheconversionthatgoodqualitysupportingpaperswouldbeessentialtoensuringthatsufficientauditassurancewasavailabletosupportourauditoftheshadowaccounts.Wealsoadvisedthatworkingpapersshouldbesubjecttoformalqualityreviewbymanagementandshouldcontainsufficientjustificationforaccountingjudgements.

1.2.11Althoughtherewereinstancesacrossdifferentbodieswhereworkingpaperswereinadequate,onthewhole,theworkingpapersprovidedinsupportoftheshadowaccountsweresatisfactorilyprepared.AstheimplementationofIFRSbedsin,weanticipatethequalityofworkingpaperswillimprovefor2009-10onwardsasaresultofgreaterfamiliarisationofthefinanceteams,theauditprocessandourcommentsfromtheauditofshadowaccounts.

1.2.12 Engagement of Audit Committee:InApril2009weissuedadocumentproducedbytheNationalAuditOfficecalled“IFRSBriefingforAuditCommittees”.Thisdocumentsetthescenefor,androletobeplayedby,auditcommitteemembersfortheIFRStransition.Pointsincluded:

• assessingtheadequacyandsuitabilityofmanagement’splan,inparticular-thetimingandadequacyofresources;and

• reviewingthesuitabilityandappropriatenessofkeyaccountingpolicies–inparticular,asinternationalstandardsrequireaccountingpoliciestoexplainanyareasofjudgementwithintheaccountsandprovideanindicationofuncertaintiesaroundaccountingestimates.

1.2.13 IntheIFRSrestatementexercise,engagementofAuditCommitteeswasmorefrequentinthelargerbodies.Suchengagement,particularlyinareasrequiringjudgement,isakeymanagementcontrol.

Qualifications

1.2.14 Themajorityofaccountswereprovidedwithanunqualifiedshadowopinion.ThereweretwelveaccountswhichreceivedunqualifiedshadowopinionsoverallexceptforcertainissueswhichdidnotappeartocomplywithIFRSrequirements.TheseincludedallfiveEducationandLibraryBoards,theBelfast,NorthernandWesternHealthandSocialCareTrusts,DSD,SSA,InvestNorthernIrelandandArtsCouncilofNorthernIreland.

1.2.15‘Exceptfor’mattersrelatedmainlytoinstancesofnoncompliancewithelementsofaccountingstandardsorlackofsupportingevidenceformaterial


disclosures.Wewouldexpectthatraisingtheseissuesshouldleadtothembeingresolvedsatisfactorilyinthe2009-10accounts.Themainissuesraisedwere:

• OperatingSegments–disagreementovercompositionofsegments;

• EmployeeBenefits–noaccrualincludedorinsufficientjustificationforomission;and

• Leases–clarificationneededontreatmentoflongleaseassetswheretherearedoubtsoverlegaltitleandanincompleterecordofleasesheldbybodies.

Conclusion

1.2.16 TherearestillchallengesaheadforbothDepartmentsandNIAOinimplementingIFRSrequirementsforthe2009-10accounts.However,thepreparationandauditofIFRSshadowaccountswasamajorexercisewhichwasonthewholewellmanagedbyDepartments.


Section Two:Northern Ireland Consolidated Fund 2008-09 – Revenue Accounts


14 DecreaseinExcessAccruingResourceslargelyduetofallinamountsreceivedfromDSD(2007-08£53million:2008-09Nil).NIHEHousingandLandSalesin2007-08tookplaceinarisingpropertymarketandrealisedmorethanhasbeenexpected.

15 DecreaseinOtherReceiptsandTransfersmainlyreflectsthattherehadbeenanExcessofPublicExpenditureoverIncomein2007-08(£115million).


2.1 NorthernIrelandConsolidatedFund2008-09-RevenueAccounts

2.1.1 ThetotalrevenuepaidintotheNorthernIrelandConsolidatedFundin2008-2009amountedto£12,527millionasanalysedatFigure4:

2.12 InfulfilmentoftheC&AG’sstatutorydutyweexaminedthedepartmentalaccountsofthereceiptsofrevenue,andwecheckedthatadequateregulationsandprocedureshadbeenframedtoensureeffectiveassessment,collectionandproperallocationofrevenue.Wehavealsosamplecheckedthecorrectnessofthesumsbroughttoaccount.WehavenotedanumberofsignificantissuesinrelationtotheStatementofRateLevyandCollection,whichhaveaffectedtheC&AG’sabilitytofulfilhisstatutoryduty.Thesearedetailedlaterinthissection.Wehavealsonotedonceagainsomeissuesinrelationtoamountsheldinthe

PaymasterGeneralAccount,detailedatparagraph2.1.6.

ConsolidatedFundIssues

2.1.3 IssuesfromtheConsolidatedFundfallintotwocategories:

• thosetomeetexpenditureonservicesforwhichfinancialprovisionisvotedannuallybytheNorthernIrelandAssembly(SupplyServices);and

• thosetomeetexpenditureonservicesforwhichtheNorthernIrelandAssembly,bystatute,hasauthorisedacontinuingchargenotsubjecttoannualvoteprocedure(ConsolidatedFundServices).

IssuesforSupplyServicesareaccountedforintheResourceAccountsandissuesforConsolidatedFundServicesareaccountedforinthePublicIncomeand

Figure4

2008-09 2007-08 £million £million

ReceiptsfromtheUnitedKingdomGovernment:

BlockGrant 11,420 10,334

Otherrevenues:

Rates 940 833

Interestonloansandadvances 107 117

ExcessAccruingResources4 16 88

OtherReceiptsandTransfers5 44 208

12,527 11,630


ExpenditureAccountwhichiscertifiedbytheC&AGunderSection2oftheExchequerandFinancialProvisionsAct(NorthernIreland)1950.

ConsolidatedFundServices

2.1.4 ThePublicIncomeandExpenditureAccounthasbeenpublishedseparatelyasaWhitePaperAccount.Theaccountbroadlydistinguishes:

(i) issuesforpaymentsdeemedtohavebeenmadeoutofpublicincomefortheyearwhichincludesinterestonborrowings,districtcouncils’shareofrevenuefromrates,statutorychargesontheConsolidatedFundforcertainsalariesandexpensesandadvancestofundsandbodies;

(ii) issuesforpaymentsofacapitalnaturemadeoutofborrowingswhichincludepublicdebtrepayments,advancestofundsandbodiestomeetcapitalexpenditure;and

(iii)investmentsofsurplusmoniesintheshort-termmoneymarketandtemporaryadvancesforCivilContingenciestofundurgentservicesonwhichspendingbydepartmentscannotawaitapprovalinaSupplyEstimate.

2.15 Totalissuesin2008-2009amountedto£6,422millioncomparedwith£9,105millionin2007-2008.Thedecreaseinissuesof£2,683millionrelatestodecreasesinamountsinvestedtemporarily(£2,745million)andinterest(£8million),

offsetbyincreasesintheissuesinrespectoftheredemptionofpublicdebtandborrowings(£44million)andincreasesinamountsissuedtodistrictcouncils(£26million).

PaymasterGenerals’Account

2.1.6 ThePaymasterGeneral’sAccount(PMG)isusedasaformofsuspenseaccountforreceiptspassingtotheNorthernIrelandConsolidatedFundandforpaymentsmadefromtheFund.ForanumberofyearswehaverecommendedtoDFPthattheamountsheldinthePMGAccount(excludingtemporaryinvestments,whichareaccountedforinfutureyears)shouldbeminimisedsothatamountsheldinthePublicIncomeandExpenditureaccountorinDepartmentalResourceAccountsarenotmisstated.Althoughthebalancehasreduced,itisstillhigh.ThesumheldinthePMGAccount(excludingtemporaryinvestments)at31March2009was£74million(in2008itwas£92million).MostofthesumheldrelatestoEuropeanUnion(EU)fundsreceived.

2.1.7 DFPadvisedusthatthefollowingactionhasbeentakentoreducethebalanceheldinthePMGaccountwhichrelatedtooldEUprogrammes:

• MoniesremaininginthePMGAccountinrespectoftheoldEUprogrammesrelatesmainlytotheBSPandPeaceIIOperationalProgrammes.TheseprogrammesarebothinclosurestagewithfinalclaimsbeingpreparedforsubmissiontotheEuropeanCommission(EC)inorderto



formallyclosethemanddrawthefinalamountsdue.ReconciliationshavebeenongoingtovalidateexpenditureincludedinfinalclaimstoensurethatEUincomeisproperlyattributedtorelevantdepartments;

• ECauditissueshavebeenidentifiedindepartmentslateinthelifetimeoftheprogramme.Thereforeithasbeendeemedprudenttoreconcileallexpenditurebacktofinaldeclarationstoensuremoniestransferredweremadetotheappropriatedepartments;and

• DFPEuropeanDivisioncontinuestokeepthepositionunderconstantreviewandisconsciousoftheneedtoreducethebalancesasamatterofurgency.However,itisexpectedthefinalPeaceIIEuropeanRegionalDevelopmentFundclaimwillnotbemadeuntilearly2010-11.

2.1.8 DFPissuedguidancetodepartmentsontheaccountingtreatmentforadvancesinrelationtothenewEUprogrammescoveringtheperiod2007-13.Thisguidance,whichwasissuedinJuly2009,requiresdepartmentstodrawdownsuchadvancesfromthePMGAccountassoonastheyarereceived,therebyensuringthatamountsarereflectedinDepartmentalresourceaccounts.

2.1.9 WerecommendthatDFPcontinuesinits

effortstoreducethebalanceheldinthePMGAccount.

2.2 StatementofRatesLevyandCollection2008-09

2.2.1 LandandPropertyServices(LPS),anExecutiveAgencyofDFP,producestheStatementofRateLevyandCollection,whichaccountsforallrateassessmentsleviedandthemeansandextenttowhichthesehavebeendischargedduringthefinancialyear.

2.1.2 TheExchequerandAuditAct(NorthernIreland)1921requirestheC&AGtoexamineaccountsofreceiptsofrevenueand‘ascertainthatadequateregulationsandprocedurehavebeenframedtosecureeffectivecheckonassessment,collectionandproperallocationofrevenue’.ThisincludesanexaminationoftheStatementofRateLevyandCollection.ThereisnostatutoryrequirementforLPStolayanauditedStatementbeforetheNorthernIrelandAssembly.

2.2.3 ThissectionofthereportbringstotheNorthernIrelandAssembly’sattentionsignificantmattersarisingfromtheexaminationoftheStatementofRateLevyandCollection2008-09.Inadditionitprovidesanupdateonprogressmadeinaddressingissuesraisedinpreviousyears’reportsandinthePublicAccountsCommittee’sReportonthe2006-07StatementofRateLevyandCollection.6

2.2.4 Asummaryofratelevyandcollectionintheyear,aspresentedbyLPS,isshownatFigure5andareconciliationofreceiptsdisclosedintheStatementwiththeNorthernIrelandConsolidatedFundisatFigure6.

6 ReportontheStatementofRateLevyandCollection2006-07,ThirdReportSession2008/2009.

FinancialAuditingandReporting:GeneralReportbytheComptrollerandAuditorGeneralforNorthernIreland17

Figure5:StatementofRateLevyandCollection2008-09

2008-09 2007-08 £million £millionArrearsat1April 124 88Assessmentsduringtheyear7 1,088 1,044Refunds 27 14Creditcarriedforwardtonextperiod8 22 16 1,261 1,162Dischargedduringtheyearby:Creditsbroughtforwardfromlastperiod8 16 10Receipts 969 894VacanciesandVacantRatingRelief&Exemptions 60 66RebatesandDiscounts 36 33OtherReliefsandAllowances9 36 34Written-offasirrecoverable 6 1Arrearsat31March 138 124 1,261 1,162

Source: Land and Property Services

7 Assessmentsaremadeupasfollows: 2008-09 2007-08 £million £million GrossAssessments 1,220 1,158 De-rating (120) (114) Vacancies 33 32 Vacancies-adjustment (45) (32) 1,088 1,044

8 Creditscarriedforwardtonextperiodareamountswhichhavenotyetbeenrefunded.UsuallytheseariseasaresultofCertificateofRevisionvaluationreductions.Creditsbroughtforwardfromlastperiodarethecreditscarriedforwardfigureonthepreviousyear’sStatement.

9 ComprisingAllowances/DisabledPerson’sAllowance,ResidentialHomeRelief,Rate/EducationRelief,Transitional/CappingReliefandLonePensionerAllowance

Figure6:ReconciliationofReceiptsintheStatementofRateLevyandCollectiontotheNorthernIreland ConsolidatedFund(NICF)

2008-09 2007-08 £million £million

Receipts (see Figure 5) 969 894

Refunds (27) (14)

Movementincashaccountbalance (2) 3

AmountsTransferredtoNICF (Figure 4) 940 883

Source: NIAO analysis


ConclusionfromtheExaminationofthe 2008-09Statement

2.2.5 ThereisnorequirementforanauditedaccountoftheStatementofRateLevyandCollectiontobelaidbeforetheNorthernIrelandAssembly.However,inthe2006-07Report10weadvisedthatiftheC&AGwasrequiredtoprovideanauditopiniononthe2006-07Statement,hisopinionwouldhavebeenqualified11andadisclaimerissuedduetoalackofaudittrailandsignificantsystemproblems.

2.2.6 Inthe2007-08Report12weadvisedthatasaresultofimprovementsmadebyLPSwithregardstotheaudittrailinrespectofreceiptsandvacancies,althoughtheC&AGwouldstillqualifyanyopinionwhichhewouldhavegivenonthe2007-08Statement,hewouldnotdisclaimhisauditopinion.

2.2.7 LPScontinuestoaddressissuesraisedinpreviousyears’reports.However,therecontinuetobecertainaspectswherewewereunabletoobtainsufficientassurancethatadequateregulationsandprocedureshavebeenframedtosecureeffectivechecksonassessment,collectionandproperallocationoftheraterevenuerecordedinthe2008-09Statement.

2.2.8 Consequently,iftheC&AGwasrequiredtoprovideanauditopiniononthe2008-09StatementofRateLevyandCollection,hisopinionwouldbequalifiedinrespectofthefollowing:

• concernsovercompletenessofthepropertylistinguponwhichratesassessmentsareraised(seeparagraphs2.2.15and2.2.49below);

• vacancies(seeparagraph2.2.21and2.2.50below);and

• significantcontrolproblems(seeparagraphs2.2.22to2.2.32below).

Issuesarising

Assessments

2.2.9 TheaccuracyofAssessmentsincludedintheStatementofRateLevyandCollectionisdependentontheaccuracyandcompletenessoftheCapitalValue(DomesticProperties)orNetAnnualValue(Non-domesticProperties)heldontheValuationListswhichareadministeredbytheCommissionerofValuationandDistrictValuerswithinLPS.

2.2.10 LPSusesanumberofsourcesofinformationfromitswideractivitiesandcouncils,includingsupervisorychecks,aswellasinformationfromratepayersaboutchangestoaproperty,tomaintainthecurrencyoftheValuationLists.

2.2.11 InitsDomesticandNonDomesticRatingReportissuedinMarch2009,InternalAuditprovidedlimitedassuranceoverthemaintenanceoftheValuationListsdueto

10 FinancialAuditingandReporting:2006-07,GeneralReportbytheComptrollerandAuditorGeneralforNorthernIreland11 InaccordancewithprofessionalauditingpracticesadoptedbyallUKnationalauditagencies,aqualifiedopinionis

appropriatewhen‘the auditor concludes that an unqualified opinion cannot be expressed but that the effect of any disagreement with management, or limitation on scope is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion’(InternationalStandardsonAuditing(UKandIreland)700,paragraph37)

12 FinancialAuditingandReporting:2007-08,GeneralReportbytheComptrollerandAuditorGeneralforNorthernIreland



theheavybacklogincaseswaitingtohaveValuationCertificatesissued.

2.2.12 InternalAuditfoundthatattheendofFebruary2009therewereatotalof44,859newdomesticpropertiesanddomesticalterationswhichstillhadtobevalued.Wenotethatthisfigurecontinuedtoincreaseinto2008-09,fromthetotalincludedintheC&AG’s2007-08report(namely37,713at31March2007).WeaskedLPSwhythebackloghasbeenincreasing.Itacknowledgedthatthebacklogpositionthatexistedin2007-08and2008-09wasunsatisfactory.WorktocompleteRevaluation2010wasapriorityandwithlimitedadditionalresourceavailable,thishadreducedtheactualresourceavailableforbacklogclearance.However,aspecialprojectcommencedin2008-09whichsubstantiallyreducedthenumberofoutstandingdomesticpropertiesbytheyearend.LPSadvisedthatthebacklogwasactuallyreducedfrom44,859attheendofFebruary2009to31,941by31March2009.Reductionshavecontinuedandat31January2010,27,499domesticcasesremainedaswork-in-hand.LPSacknowledgestheneedtocontinuetotargetthiswork.

2.2.13 WenotethatinMarch2009InternalAuditreportedthatonaverageittakesLPS229daystoprocessanewdomesticpropertyand1,040daystoprocessadomesticalteration.WeaskedLPSwhyittookthislengthoftimetoprocessthesecases.LPSadvisedusthatthesefiguresrelatetotheaverageageofoutstandingnewdomesticandaltered

domesticcasework,andaredirectlylinkedtothebacklogsreferredtoinparagraph2.2.12.By31January2010performancehadsubstantiallyimprovedto94daysand769daysrespectively.Thenewdomesticfigureiscurrently94days,andimprovementsarecontinuing;thealtereddomesticpropertycasescontinuetobetargeted.

2.2.14 TheValuationDirectoratecurrentlyreliesmainlyonotherLPSstafforCouncils’BuildingControlstaffnotifyingthemthataproperty’susehasbeenalteredortheoccupierhaschangedbeforereviewingwhetherde-ratingorotherexemptionscontinuetoapply.Forexample,exemptionapplieswhereapropertyisusedforcharitablepurposesorde-ratingwhereusedforindustrialpurposes.LPSinformedusthatalthoughithasplanstocarryoutasystematicreview13ofallpropertieswhereexemptionsorde-ratingapply,nosuchreviewshaveoccurredduetoothermajorratingcaseworkcombinedwithresourceconstraints.TheAgencyadvisedthatthesystematicreviewmayresultinfieldinspectionsforcertainproperties.

2.2.15 Testingofassessmentsprovideduswithsufficientassuranceovertheexistenceofassessmentsrecordedonthesystem.However,duetotheconcernsraisedinrelationtothecurrencyoftheValuationListsuponwhichratesassessmentsareraised,weareunabletoconfirmcompletenessandaccuracyofassessments.

13 Asystematicreviewisariskbasedanalysisofavailableinformationtodeterminewhetherthereissufficientevidenceornottoconfirmthecurrentappropriatenessofthedinstinguishment/reliefheld.


Vacancies

2.2.16Duetostaffresourceissuesandcompetingpriorities,LPSstaffhadbeenunabletocompleteinspectionstoverifythevacantstatusofallpropertiesforwhichadeductionwasmade.Therefore,atthebeginningof2008,andinpartnershipwithfourCouncils,LPSundertookapilotstudytovalidatethestatusofpropertiesrecordedontheratingdatabaseasvacant.

2.2.17 Followingdiscussionstheexercisewasrolledoutto25Councilsinthe2008-09financialyear.MagherafeltDistrictCouncilchosenottoparticipateandLPSstaffarecurrentlyundertakinganexercise,includinginspections,toconfirmvacancystatusinthiscouncilarea.

2.2.18 Aspartofthevacancyinspectionexercise,62,000inspectionsheetswerereturnedbytheCouncils.TheresultsoftheexercisearesummarisedinFigure7.

2.2.19 Asat31January2010billstothevalueof£33.9millionwereissuedinrespectofthosepropertieswhichhadbeenincorrectlyrecordedasvacantonthe

systemorwherenobillhadissuedduetothedifficultyofcollectingfullbillinginformation.Furtherbillsmaybeissuedinrespectofthe24,000propertiesstillbeingprocessed.

2.2.20WenotethatLPSpaidtheCouncils

£0.46milliontoundertakethisexerciseonitsbehalfandthatworkcontinuestocleansedataacrossLPSsystemsasaresultofthefindingsofthisexercise.

2.2.21 Theresultsofthevacancyinspectionsandtheworkstilltobeundertakeninrelationtoanumberofpropertiesmeansthattherewasinsufficientevidencetoconfirmentitlementtovacancyreliefswhichtotal£60million.Consequently,weareunabletoconfirmcompleteness,existenceandaccuracyofvacancies.

SignificantControlProblems

ITSystemProblems

2.2.22 ThecurrentITsystem,ABBACUS,wasintroducedtoreplaceanobsolescentITsystem,improveservicesinratecollectionandHousingBenefitandto


Figure7:Resultsofvacancyinspections

Propertiesconfirmedasvacant 21,000

Propertiesforwhichbillshavenowbeenissued 17,000

Propertiesrequiringfurtherbillinginformation,valuationactionorunder 24,000investigationtoconfirmtheirstatus

Total 62,000

Source: Land and Property Services


meetnewrequirementsinratingreform.Implementationofthesystemwasphased,withfullimplementationplannedforFebruary2007.

2.2.23 Phase1(CoreRateCollection)becameoperationalinOctober2006.However,deliveryofPhase2(ManagementInformation)didnottakeplaceuntilApril2007,whilePhase3(HousingBenefit)tookplaceinJuly2008.ThekeyelementsofPhase4,whichconsistedoftheratingreformstobeimplementedon1stApril2007,weredeliveredonscheduleinFebruary2007.Subsequenttothistherehasbeenaprogrammeofadditionalratingreforms,mainlyasaresultoftheNIExecutiveReviewandthesehavebeendeliveredinlinewiththechangecontrolprocesscontainedinthecontract.Eachreformhashaditsownindividualtimetable.

2.2.24 Inpreviousyears’C&AG’sReportswenotedsomeoftheproblemsarisingfromtheintroductionofthenewITsystem,namelyinadequatesystemfunctionalityandspecificationandthelackofvalidationchecks.

2.2.25 WenotethataspartofthewiderFinancialReviewproject,theAgencyisintheprocessofspecifyingandimplementinganumberofsystemandbusinessprocessimprovementstoaddresstheweaknessesidentified.

2.2.26 Althoughavalidationcheckoninput

informationisabasicelementofmostITsystems,thesystemspecificationand

thesystemsubsequentlyprovidedbythesupplierincludedlimitedpromptsorcontrolsbuiltintothesystemsurroundingtheinputofvaluesintokeydatafields.Consequently,ratepayernumberswereincorrectlyinputintothevaluefieldsandbillsforincorrectamountsissuedtoratepayers.

2.2.27 WearepleasedtonotethattheAgencyhasundertakenareviewofsysteminputscreenstoidentifyallfinancialdatainputfieldsandintroducedasystemcontrolwherebydatainputischeckedagainstoccupancyreferencenumbers.Wherethereisamatchthesystempromptstheusertocheckthatthevalueinputiscorrect.However,thiscontrolonlybecameoperationalfromJuly2009andthuswasnotinplaceduringtheyearofourexamination.

2.2.28 InitsReport(paragraph2.2.3)PACrecommendedthatalloutstandingsystemproblemsareresolvedasamatterofurgency.Inlightofthis,weaskedLPSwhenitenvisagedthattheresidualsystemissueswouldbeaddressed.LPSadvisedthatfundingin2009-10(andpotentiallyinsubsequentyears)islimitedandworkonimprovingtheITsystemhashadtobeprioritisedalongsidefurtherratingreformdevelopmentwork.TheFinancialReviewprojectisaddressingfinance-relatedproblemsandsubjecttotheavailabilityoffundingwillbecompletedbytheendof2010-11.Aprogrammeofworktoaddressdatarelatedissuesisongoingbutduetofundingconstraintsthisworkhashadtobere-prioritisedandonlythekey


problemareaswillbecompletedbytheendof2010-11.

InternalControlProblems

2.2.29 AlthoughconsiderableworkhadbeenundertakenbyLPStoimplementpreviousInternalAuditrecommendations,anumberofsignificantissuesremaininrelationtoratecollectionandvaluations.

2.2.30 Consequently,InternalAuditconcludedthatoverallonlyalimitedlevelofassurancecouldbeprovidedonLPSinternalcontrolsystemsfortheperiod1stApril2008to31stMarch2009.InaccordancewithHMTreasuryGovernmentInternalAuditStandards,thelimitedratingofinternalauditassuranceisdefinedas‘Thereisconsiderableriskthatthesystemwillfailtomeetitsobjectives.Promptactionisrequiredtoimprovetheadequacyandeffectivenessofriskmanagement,controlandgovernance.’

2.2.31 Thekeyoutstandingissuesidentifiedwere:

• controldeficiencieswithinratescollectionincludingaccesstoandpermissiontoreallocatesuspenseaccountpayments,theabsenceofapprovedauthorisationlimitsandinadequatemanagementchecks;

• significantdomesticandnon-domesticvaluationbacklogs,whichcouldpotentiallyimpactonthetimingandvalueofratecollection;and

• internalcontrolweaknessesrelatingtodataprocessing,storageandtransmissiononLPSInformationandCommunicationTechnology(ICT)systems(seeparagraph2.2.32).

2.2.32 Whileanoveralllimitedopinionwasgiven,wenotedthatInternalAuditconcludedthatanunacceptablelevelofassurancewasappropriateinrelationtothereviewofICTsystems.TheunacceptableratingofInternalAuditisdefinedas‘Thesystemhasfailedorthereisarealandsubstantialriskthatthesystemwillfailtomeetitobjectives.Urgentactionisrequiredtoimprovetheadequacyandeffectivenessofriskmanagement,controlandgovernance’.

Othersignificantconcernsarisingfromourauditwork

2.2.33 Thefollowingissueswerealsonotedaspartofourauditwork.

RatepayerDebt

Debt at 31 March 20092.2.34 Inthe2007-08Reportweadvised

thatLPShadcompletedasignificantrestructuringexercisetoreallocate80stafftowardsdealingwithrateaccountsthatwereinarrearsinordertoreducethearrearscarriedforwardat31stMarch2008(£124million).LPSalsoadvisedthatthesuccessfulimplementationofarevisedarrearsstrategyhadreducedthelevelofdebtto£67millionat31stDecember2008andthatworkcontinuedtofurtherreducethisdebt.However,by



31stMarch2009ratepayerdebthadrisento£138million.WeaskedLPSwhyratepayerdebthaddoubledwithinthisfourmonthperiodandisgreaterthanthealreadyhighlevelofratepayerdebtat31stMarch2008.LPSadvisedthatthe£67milliondebtat31stDecember2008,referredtoprioryeardebt,whichwasfurtherreducedto£53millionattheyearend.Thefigureof£138millionismadeupofprioryeardebtandratesnotfullydischargedbytheendoftheratingyear.£85millionrelatestoassessmentscreatedduring2008-09andparticularlyinrelationtoassessmentscreatedduringtheyearwherelessthan12monthsisavailabletocollecttheratesdue.DespiteconcertedeffortsbyLPStotargetdebtduring2008-09throughtheallocationofadditionalstaffingresourcesandincreasingthenumberofratepayerstakentocourt,thecurrenteconomicclimatehashadasignificantimpactonratepayers’abilitytopayin-year,andconsequentlydebthasincreasedonthatforthepreviousyear.

2.2.35 Duringourreviewofratepayerdebtat31stMarch2009weweresurprisedtonotethatanumberofdebtorswerepublicsectorbodiesandlargecompanies.Onepublicsectorbodyowed£0.845million,whileonehighstreetstoreowed£0.49million.Weaskedwhysuchbodieswouldbeinarrearsattheyearend.LPSadvisedthatdelaysinnotifyingitofchangestopropertiesresultsinapercentageofbillsbeingissuedtothewrongpeopleorwiththewronginformation,leadingtodelaysinpaymentuntilqueriesareresolved.

2.2.36 LPSadvisedthatthefollowingactionhasbeentakentoimprovecollectionofpublicsectorrates:

• InAprilandMay2009,itreviewedallbillingaddressesandcontactdetailsforpublicbodiesandanumberoflargeorganisationstoensurethatbillswereissuedtothecorrectpeopleintherelevantorganisationsattheappropriatetime.Asaresult,90percentofbillswereissuedby30thJune2009;and

• LPShasinitiatedaprojecttointroducenewbillingandpaymentarrangementsforpublicsectorratepayerswitheffectfrom1stApril2010.

Stop all Bills2.2.37 TheITsystemallowsLPStostopthe

automaticissueofbillstoratepayerswhereforexample,thereisanagreedpaymentarrangement;NIHEdirectcreditpayments;NISocialSecurityAgencydirectdeductioncases;andcomplicatedContinuousRevisioncases.Inour2007-08Reportweadvisedthatinseveralinstancesthe‘StopallBills’(SAB)statushadbeeninplaceonindividualratepayers’accountsforaconsiderableperiodoftimewithnoevidenceofanyactivityonthepartofLPStoremovethe‘stop’.ConsequentlywequeriedwhatactionhadbeentakenbyLPStoensurethatsuchstopsareremovedfromaratepayers’accountonatimelybasis.LPSadvisedusthatalarge-scalereviewofSABshadbeencompleted.Followingthis,regionalofficemanagershave


beenrequiredtoreviewanABBACUSreportofSABseachmonthandtakeanyremedialaction.

2.2.38 However,duringourexaminationofthe2008-09StatementwenotedthatthereportproducedbyLPSonlydetailsSABsthathavebeenputinplaceduringthecurrentmonth.Therefore,unlessaSABisremovedinthemonthinwhichitisraised,itwillnotbeactionedinsubsequentmonths.

2.2.39 FollowingthemajorSABexerciseattheendofAugust2008,thenumberofSABswasreducedto7,163caseswithacombinedfinancialvaluewas£15.3million.AlthoughLPSadvisedusthatoutstandingSABsallexistedforvalidreasons,theprocessofonlyreviewingSABsactivatedinthecurrentmonthmeansthattheremaybeaconsiderablenumberofratepayeraccountswhereaSABstatusisinplacewhichmaynolongerbevalid.Insuchcasesratesbillsshouldhavebeenissued.

2.2.40 WeaskedLPStoprovidedetailsofthevalueandnumberofallSABcasesat31stMarch2009andwhatactionitwastakingtoensurethatallSABcaseswerevalid.LPSadvisedusthatitisunabletoreportontheSABpositionat31stMarch2009,becauseAbbacusoperatesasabillingsystemandthereforefocusesoncurrentvalues;itisnotdesignedtorollbacktopastdates.LPStoldusthattherewere18,795SABcases,totalling£46millionat15thFebruary2010.LPSadvisedusthatstaffcontinuetoactiontheSABreportonamonthlybasisbut

thecurrentreportfromABBACUSonlyprovidesdetailsonSABsputinplaceinthepastmonth.AnewreporthasnowbeendevelopedfromthedebtmodelintheDIVERanalysistoolforreportingonandanalysingaccountswithaSAB.Thisreportisundergoingfinaltestchecks,andoncesignedoffwillbeactionedpromptly.

Write-offs2.2.41 Wenotethatat31stMarch2009there

wasasignificantamount,£6million,ofratepayerdebtwhichdatesbackto2004-05orearlieryears.Thecontinueddelayinrecoveryincreasestheriskofasignificantlossofpublicfunds.Whilstwrite-offshavehistoricallybeenlow,delayedrecoverymayleadtohigherwriteoffs,asamountsinarrearsapproachtheStatuteofLimitationsdeadlineforrecovery.LPSadvisedusthatthe£6millionofoutstandingdebthasbeenreducedto£1.3millionasat22ndFebruary2010,with£247,000fullyenforced.

2.2.42 FollowingNIAOandAssemblyinterest,LPSundertookareviewofwrite-offarrangements.Thisreview,whichwascompletedinAugust2008,foundthat:

• Nowrite-offactionhadbeentakeninRegionalOfficessinceSeptember2006duetotheintroductionofthenewsystemandanumberofITandoperationalissues;and

• Thetotalvalueofcaseseligibleforwrite-offswasestimatedat£8m,withtheCouncils’shareestimatedat£3.6m.



TheAgencytoldusthatthesystemdeliveredbytheITsupplierincludedwrite-offfunctionalityinlinewiththeoriginalspecification,whichwassimilartothatincludedinthepreviousratingITsystem.However,furtherfunctionalityrequirementswerelateridentifiedtopermitimmediatewrite-offs,giventhecasesthathadaccumulatedforwriteoffduringthemigrationtothenewITsystem.

2.2.43 WenotethatworktodeliverfullfunctionalityofITwrite-offswasnotcompleteduntilFebruary2009andthatasaresultofarecentreviewofasampleof200cases,LPShasestimatedthat11,000RegionalOfficecasesareeligibleforwrite-off.

2.2.44 LPSconsiderthatinthecurrenteconomicclimateitwouldbeprudenttobudgetforanincreaseinthelevelofdebtwhichneedstobewrittenoff.ToreducetheimpactonCouncilsandtheadministrativeburdenonLPS,LPShasproposedaddressingthewrite-offbacklogoveratwoyearperiod,with£5milliontobewrittenoffin2008-09and£10millionin2009-10.TheCouncils’EstimatedPennyProductfor2009-10willreflectthesewrite-offs.

Order Charging Land2.2.45 Duringourexaminationofthe2008-09

StatementwewereinformedthatLPShasthepowertosecureadebtagainstapropertybylodginganOrderChargingLand(OCL)withtheEnforcementofJudgementsOffice(EJO).Thismeansthattheownercannotsellthepropertyuntilthedebtispaid.Inaddition,LPShaspriority

overothercreditorssuchasbanksormortgagecompanies.

2.2.46 However,thereiscurrentlynofunctionalityinABBACUStoregisteranOCLwiththeRegistrationsectionofLPS.LPStoldusthatmanualadministrationwouldrequiremoreresourcesthanarecurrentlyavailableandthattherearecurrentlyinsufficientfundstofinancetherequiredchangetotheITsystem.However,amanualworkaroundhasbeenputinplaceand,althoughnoOCLswereregisteredduring2008-09,248applicationshavebeenregisteredduringthe2009-10financialyear.

NonDomesticVacantRating

2.2.47 SincetheintroductionofNonDomesticVacantRating(NDVR)inApril2004LPShasbeenunabletoestablishfullownershipdetailsofnondomesticvacantpropertiesonwhichachargeshouldbemade.IntheC&AG’s2007-08ReportweadvisedthatasatFebruary2009therewereonly78NDVRpropertieswhereownershipremainedunknown,withanannualratingliabilityof£0.195million.

2.2.48 However,duringourexaminationofthe2008-09Statementwewereadvisedthatthefiguresprovidedinpreviousyearsdidnotinclude“closedcases”,thatis,propertieswherethecurrentownershipisknownbutwheretherewasaperiodwhereownershipdetailswereunknownandthereforenopaymentwasreceived.Therearecurrently982closedcases.


2.2.49 Inadditiontotheabovecases,LPSadvisedthatthereare377propertieswhichhaveneverbeenassessedforrates.Consequently,thevalueofassessmentsandtheNDVRexemptiondisclosedinthe2008-09StatementofRateLevyandCollectionisunderstated.

2.2.50 LPSadvisedusthattheNDVRteam

isrequiredtocarryoutreviewsofallpropertieswhereNDVRstatushasbeeninplaceformorethanoneyear.However,althoughthereareapproximately1,000suchproperties,noreviewhadtakenplacetoconfirmvacantstatus.LPSadvisedthatreviewscommencedinJanuary2010.

FraudRisk

2.2.51 Duringtheexaminationofthe2008-09Statementweidentifiedinstanceswherethesameofficercreatedandauthorisedmanualadjustmentstoratepayers’accounts.Wealsonotedthattherewerenolimitsrestrictingtheamountthateachgradeofstaffmayauthorise.Asaresulttherewasanincreasedriskthatstaffmayamenddatatogainfinancialadvantageforthemselvesorothers.

2.2.52 ThefindingsofInternalAuditinrespectofsystemfailings(notedatparagraph2.2.31)alsoraisesconcernsregardingtheriskoffraud.

2.2.53 LPSadvisedusthatfrom3rdJune2009ABBACUSsystemcontrolsareinplacewhichrequirethataccountadjustmentsarecreatedandauthorisedbydifferent

gradesofstaffinaccordancewiththeapprovedlimits.

Housing Benefit2.2.54 LPSareresponsibleforassessingrebates

forowneroccupierswhoareclaimingHousingBenefitandneedhelptopaytheirrates.Rebatesincreasedto£32millionin2008-09from£29millionin2007-08.

2.2.55 TheSocialSecurityAgencyResourceAccountfor2008-09wasqualifiedasaresultoffraudanderror.TheDepartmentforSocialDevelopmentestimatedthatapproximately£1.2millionofHousingBenefitforowneroccupierswasoverpaidthroughfraudanderrorin2008-09.Thereistherefore,inourview,aninherentriskthattherebatesgivenbyLPSmaybeatriskoffraudanderror.

National Fraud Initiative2.2.56 During2008-09LPSparticipatedin

theNationalFraudInitiative(NFI).ThisexercisematchedRatesdatawithElectoralOfficedata.HousingBenefitforOwnerOccupiersdatawasmatchedwithanumberofothersourcesofdata,forexample,pensionsandHousingRents.Atotalof89,762matchesneededtobeinvestigatedbyLPS,forexample,whereanindividualisregisteredtovotebuttheiraddressisnotregisteredforrates.

2.2.57 Theinvestigationprocessisongoing.CheckingoftheHousingBenefitmatchesidentified458fraudcasesand441errors,totalling£0.893millioninhousingbenefitpaymentsasat15thFebruary

14 Rateevasionisthefailuretodiscloseinformationregardinganoccupancythatwouldenableanassessmenttoberaised.



2010.Amountsarisingfromevasion14,fraudorerrorsinrespectofRatesmatcheshaveyettobequantifiedand23,267matchesareunderinvestigationbyLPS.LPSanticipatesthatinvestigationofthesematcheswillgeneratesubstantialnewrevenuesasaresultofratesevasion.ItisimportantthatLPSprocessestheseitemsassoonaspossibletoensurethatnofraudorerrorgoesundetected.

2.2.58 TheC&AGwillreportmorefullyontheNFIlaterthisyear.

InterestPayments

2.2.59 During2008-09LPSpaid£1.1milliontoratepayersinrespectofinterest.WeaskedtheAgencywhysuchpaymentswerenecessary.

2.2.60 LPSadvisedthatTheRates(PaymentofInterest)RegulationsNI2007facilitatedtheintroductionofinterestpaymentsfrom1April2007whereanamountreceivedbyDFPissubsequentlyrepaidoroff-setagainstaratesbill.

2.2.61 PaymentofinterestwasinitiallyintroducedinrespectofappealsresultingfromthereviseddomesticratingsystembasedonCapitalValues.LPSadvisedthatfollowinglegaladvice,thepaymentofinterestregulationswereextendedtoincludeallrefunds/off-sets(withspecifiedexceptions)tosatisfyhumanrightsobligations.

2.2.62 WeaskedLPSwhatstepsithastakentoreducetheamountofinterestpaid.LPSadvisedthattheprimaryfactorinfluencingthepaymentofinterestis

theclearanceofbacklogswithinthevaluationandoperationalprocesses.LPSiscurrentlyworkingacrossDirectoratestostreamlinetheend-to-endratingservicebydesigningandimplementingaservicedeliverymodel.

AccountabilityDevelopments

2.2.63 Asnotedatparagraph2.2.5thereiscurrentlynostatutoryrequirementforapublished,auditedaccountoftheStatementofRateLevyandCollectiontobelaidbeforetheNorthernIrelandAssembly.Inordertoimproveaccountabilityandcorporategovernanceofthesignificantamountofpublicfundsrecordedinthisaccount,wehaverecommendedthatDFPpursuewithurgencythepreparationofafullsetofauditedfinancialstatements.

2.2.64 DFPadvisedthataprojecthascommencedthatwillenhancetheaccountabilityinduecourse.LPShasappointedaprofessionallyqualifiedaccountanttoleadtheprojectteamtodeliverafullyauditableresourcebasedcollectionaccount,whichwillincludeanannualreport,by2010-11.

2.2.65 LPSrecentlypreparedashadowresourcebasedaccountfor2008-09andthisisbeingexaminedbyNIAO.IssuesarisingfromourworkwillbebroughttoLPS’sattentioninorderthattheyareaddressedpriortosubmissionofthe2010-11accountsforaudit.


PublicAccountsCommittee

2.2.66 ThefindingsfromNIAO’sexaminationofthe2006-07StatementofRateLevyandCollectionwereconsideredbytheNorthernIrelandAssembly’sPublicAccountsCommittee(PAC)inSeptember2008andinNovember2008PACissueditsReport15onthereasonsforthefinancialandoperationaldifficultiesatLPS.PACmadeanumberofimportantrecommendationstoensurethatwhathadgonewrongwasfixedandthattheresultingadverseconsequencestoratepayers,Councilsandstaffwereaddressed.DFPhassincesetoutanactionplantoaddresstheserecommendations16.

2.2.67 Progresstowardsimplementationofthe14acceptedrecommendationswhichfalltoLPStoimplementismonitoredbytheLPSAuditandRiskCommitteewhichmeetsquarterly.AtthemeetingheldinJanuary2010,theCommitteewasadvisedthatsixofthe14recommendationshadbeenfullyimplemented,sevenpartiallyimplementedandtheremainingonewasinhand.Therecommendationinhandisthatreferredtoatparagraph2.2.28ofthisreport.

2.2.68 RegularupdatesonoutstandingPACrecommendationswhichfalltoDFPwereprovidedtotheDepartmentalBoardduring2009.AtitsmeetinginOctober2009theBoardagreedthatinfuture,outstandingrecommendationswouldbereportedtoandmonitoredbytheDepartmentalAuditandRisk

Committee.LPScompletesaquarterlyreportforDFPonprogressagainsttherecommendations,whichisincludedinDFP’sreviewofprogressagainstallPACrecommendations.Inaddition,LPSprovidesaquarterlyupdateofprogressagainstitsrecommendationstotheAssemblyFinance&PersonnelCommittee.

ThePennyProduct

2.2.69 AnEstimatedPennyProduct(EPP)fortheincomingyearandanActualPennyProduct(APP)followingthecloseofafinancialyearareproducedbyLPS.InformationfromtheStatementofRateLevyandCollectionisusedbyLPSinthecalculationoftheAPP.

2.2.70 LPSusesavailabledatafromthevaluationlists,factorsinvariouscomponentssuchasvacancylevels,allowancesandwrite-offs,andthecostofcollectionandthenestimatestheincomeeachCouncilcouldraisethroughonepennyonthedistrictrate.CouncilsthenusetheEPPfortheirfinancialplanningandstriketheDistrictRate.DFPusestheEPPtopaymonthlyinstalmentsofrevenuetoeachcouncil.

2.2.71 Attheendoftheratingyear,LPSthencalculatestheactualamountthathasbeencollectedineachcouncilarea.ThiscalculationisknownastheActualPennyProduct(APP).

2.2.72 IftheAPPishigherthantheEPP,thatis,theamountcollectedismorethantheamountpaidoverbyDFP,theCouncilgetsanadditionalpayment.IftheAPP

15 ReportontheStatementofRateLevyandCollection2006-07,ThirdReportSession2008/2009.16 DepartmentofFinanceandPersonnelMemorandumontheThirdandFourthReportsfromthePublicAccountsCommittee

Session2008-09.



islowerthantheEPP,thatis,theamountcollectedislessthantheamountpaidoverbyDFP,thedifferenceis‘clawedback’fromtheCouncil.

2.2.73 Inthe2007-08ReportweadvisedthattheMinistryofDefence(MOD)andBritishTelecom(BT)hadbeensuccessfulintheirappeals,regardingthevaluationofanumberoftheirpropertiesandassetsandthatthetotalBTrefundwas£5.3millionandtheestimatedtotalMODrefundwas£9.9million.AsaresulttheAPPforanumberofcouncilswassignificantlylessthattheEPP.Inordertoassistcouncilswiththeirbudgetaryprocessandinanattempttoreduceanyhardshipinthecurrenteconomicclimate,theMinisterforFinanceandPersonnelannouncedanumberofmeasures.Theseincluded,forthosecouncilswhichwerefacinga‘clawback’position,allowingthemtospreadtherepaymentoftheMODandBTreductionsoveraperiodoffiveyears.

2.2.74 APennyProductWorkingGroupwasestablishedinJuly2007todiscussissuessuchasthemethodologyforcalculatingtheEPPandAPPandwaystoimprovethesecalculations.ThegroupcomprisesrepresentativesfromLPS,LocalGovernmentFinanceOfficers,DOELocalGovernmentDivisionandDFPRatingPolicyDivision.

Increasedcosts

2.2.75 TotalexpenditurefortheITReplacementProjectfortheperiod2004-05to2011-2012wasestimatedat£10.5million.

However,theestimatedtotalcostoftheprojectatthetimeofitsclosureinJune2008was£13million.LPSadvisedusthat£13millionisstillarealisticestimateforthetotalcostoftheproject.However,wenotethatthiscostdoesnotincludeexpenditureforABBACUSinrelationtotheRatingReformProject(estimatedat£1.5million)andtheFinancialReviewProject(estimatedat£2.9m),asboththeserequirementsemergedafterthesigningoftheABBACUScontract.

Conclusion

2.2.76 PACconsideredthefindingsonthe2006-07StatementofRateLevyandCollectioninNovember2008andmade28recommendationsforimprovement.DFP’sresponsetotheserecommendationsinJanuary200917waspositiveandvariousactionshavebeenimplementedorareon-goingtoresolvefinancialandoperatingsystemproblems.Forexample:

• Progresshadbeenmadeinimprovingaccountabilitybytheproductionofshadowaccrualsbasedaccounts,togetherwithanannualreportandsupportingnotes;

• VacancyinspectionswereundertakeninconjunctionwiththeCouncilsresultingintheissueofbillstotaling£32.6millionby22December2009;

• Increasedco-operationwithCouncils

throughthesettingupofaLPS-LocalAuthorityStrategicSteeringGroup;and

17 SetoutintheDepartmentofFinanceandPersonnelMemorandumontheThirdandFourthReportsfromthePublicAccountsCommitteeSession2008-09.


• InputvalidationcontrolswereintroducedinJuly2009.

2.2.77 Asaresult,wehavenotedimprovements

ontheissuesrecordedinthe2006-07and2007-08Reports.However,asindicatedabove,DFPandLPShadnotbeenabletoaddressalloftheissuespriortothepreparationofthe2008-09Statementandworkcontinuesto:• Ensurethatresidualsystemissuesare

addressed;

• CleansedatawithintheITsystem;

• Improveratecollection;

• Investigateremainingvacancyinspectiondata;and

• EnsurethecompletenessandaccuracyoftheValuationLists.

2.2.78 Asaconsequence,anyopiniononthe2008-09Statementwouldbequalified.


Section Three:Resource Accounts



3.1 DepartmentforSocialDevelopment 2008-09

3.1.1 TheDepartmentforSocialDevelopment(DSD)isresponsibleforadministeringawiderangeofexpenditureaimedathelpingthoseinneed,promotingmeasurableimprovementstohousinginNorthernIrelandandtacklingdisadvantageamongstindividualsandcommunities.ThroughtheSocialSecurityAgency(SSA),DSDisresponsiblefortheadministrationofsocialsecuritybenefits.OnbehalfofDSD,theNorthernIrelandHousingExecutive(NIHE)isresponsibleforadministeringHousingBenefitRentandRatesfortenantsandLPSisresponsibleforadministeringHousingBenefitRatesforowneroccupiers.

3.1.2 TheDepartmentalResourceAccount(RequestforResourcesA)providesforexpenditurebyDSDon“afairsystemoffinancialhelptothoseinneedandtoensurethatparentswholiveapartmaintaintheirchildren;encouragingpersonalresponsibilityandimprovingincentivestoworkandsave.”

3.1.3 During2008-09,DSDaccountedfor£3.88billioninbenefitsadministeredbySSA,including£1.91billiononnon-contributorySocialSecuritybenefits,£1.88billiononcontributorySocialSecuritybenefitsand£87.3milliononSocialFundexpenditure.Additionally,DSDaccountedforexpenditureof£482milliononHousingBenefit,comprising£398millionforHousingBenefitRentand£52millionforHousingBenefitRates

(tenants)whicharebothadministeredbyNIHEand£32millionforHousingBenefitRates(owneroccupiers)whichisadministeredbyLPS.

3.1.4 Thissectionofthereportreviewstheresultsofmyauditofthebenefitexpenditureandsetsoutthereasonformyqualifiedauditopinion.MyauditofthisexpenditureexaminedtheworkundertakenbyDSDtoestablishtheestimatedleveloffraudanderrorwithinthebenefitsystem.IalsoprovideanupdateontheissuesIreportedonlastyear.

3.1.5 ForaconsiderablenumberofyearsIhavequalifiedmyauditopinionbecauseofsignificantlevelsoffraudanderrorinbenefitexpenditure.Ipublishedadetailedreport18onSocialSecurityBenefitFraudandErroron23January2008whichwasconsideredbyPACwhosubsequentlypublishedareport19onsocialsecuritybenefitfraudanderror.PACacknowledgedthatwhilethevastmajorityofbenefitsarecorrectlypaidtocustomersthelevelsofinaccuracyremaineddisappointinglyhigh,despiteimprovementsmadebyDSDintacklingfraudanderror.PACwasparticularlyconcernedaboutthelevelofofficialerrormadebySSAstaffleadingtooverpaymentsandunderpaymentsofbenefit,althoughitrecognisedthatthecomplexityofthebenefitsystem,andthelimitationsoftheITsystemcontributetothehighlevelsofofficialerror.

18 NIA73/07-08SocialSecurityBenefitFraudandError19 26/07/08RPublicAccountsCommittee


Backgroundandtheaccounting arrangementsforthisexpenditure

3.1.6 TheSSAisanExecutiveAgencywithinDSD.Benefitexpenditureaccountedforwithinthe2008-09AgencyAccountisalsoincludedwithinthe2008-09DSDResourceAccount.

3.1.7 Myauditofthe2008-09SSAAccounthasbeencompletedandIreportedontheresultson29June2009.Iqualifiedmyopiniononregularitybecauseofmateriallevelsofestimatedfraudanderrorinbenefitexpenditure,otherthanStatePensionwhichaccountsforahighlevelofthetotalbenefitexpenditureandhasalowleveloferror(seeparagraph3.1.16).

3.1.8 DSD’sResourceAccountalsoaccountsforHousingBenefitexpenditure.HousingBenefitRentandHousingBenefitRates(tenants)areadministeredbyNIHEandHousingBenefitRates(owneroccupiers)isadministeredbyLPS.

3.1.9 Ireportedtheresultsofmyauditofthe2008-09NIHEAccountson25June2009.IqualifiedmyopiniononregularitybecauseofsignificantlevelsofestimatedlossesduetofraudanderrorinHousingBenefit.

DSD’sarrangementsformonitoring andreporting

3.1.10 DSDcontinuestoregularlymonitorandmeasuretheestimatedlevelsoffraudanderrorwithinthebenefitsystem.Essentiallythisinvolvestwomainexercises,Financial

AccuracymonitoringandBenefitReviews,theresultsofwhicharecombinedtoestablishthetotalestimatedlevelofirregularpaymentsduetofraudanderrorwithinthebenefitsystemresultinginoverpaymentsandunderpayments.

3.1.11 FinancialAccuracymonitoringprovidesameasureofinternalSSAerror(OfficialError),whileBenefitReviewsprovideameasureofcustomerfraudandcustomererror.OfficialerrorforHousingBenefitisestimatedaspartoftheBenefitReviewprocess.DSDexaminesstatisticalsamplesofbenefitawardsonacontinuousbasisforthepurposesofFinancialAccuracymonitoringandonarollingprogrammebasisforthepurposesofBenefitReviews.Acommonsampleisusedforbothexercises.

3.1.12 Financialaccuracytestinginvolvesexaminationofcustomercasepaperstoascertainifthecustomerisreceivingthecorrectamountofbenefitaccordingtotheirpresentcircumstances.ThemeasurementofcustomerfraudanderrorthroughtheBenefitReviewexercisesinvolvesathoroughreviewoftheperson’sentitlementto,andthelevelof,benefitinpaymenttoestablishifitiscorrectorincorrectbymeansofavisitto,anddetailedinterviewwith,thecustomer.IfincorrectnessduetooverpaymentsandunderpaymentsisdetectedthisisreportedaseithercustomerfraudorcustomererrorbasedoncriterialaiddownintheBenefitReviewGuideastowhetheritisduetoadeliberateattempttodeceiveDSDoranunintentionalerrorbythecustomer.


3.1.13 DSDpresentstheresultsoftheseexercisesinNote41(entitled‘PaymentAccuracy’)totheresourceaccounts.Thisnotealsoexplainstheextentofstatisticaluncertaintyinherentwithintheestimatesoffraudanderror.Theestimateoffraudanderrordisclosedintheaccountsis,nevertheless,thebestmeasureavailable.

3.1.14 Aspartofourauditworkinthisareamystaffexaminedandreperformedasub-sampleofDSD’scaseworkduringtheyearforboththeFinancialAccuracyandBenefitReviewexercises.MystaffalsoreviewedthemethodologiesappliedbyDSDincarryingouttheseexercises.IcanreportthatIamcontentthattheworkundertakencontinuestobeofagoodstandardandtheresultsproducedarereliableandcomplete.

Qualifiedopinionduetoirregular benefitpayments

3.1.15 Iamrequiredtoreportmyopinionastowhetherthefinancialstatementsgiveatrueandfairview.Iamalsorequiredtoreportmyopiniononregularity,thatis,whetherinallmaterialrespectstheexpenditureandincomehavebeenappliedforthepurposesintendedbytheNorthernIrelandAssemblyandthefinancialtransactionsconformtotheauthoritieswhichgovernthem.

3.1.16 Note41,referredtoinparagraph3.1.13,disclosesthebestestimateofallsuchirregularpayments.Thisshowsthatsome£1.44billion(34percent)oftotalbenefitexpenditurerelatestoStatePensionpaymentsmadein2008.DSD

estimatesthatin2008fraudanderrorwithinStatePensionpaymentsresultedinoverpaymentsof£2.2million(0.15percentofrelatedexpenditure)andunderpaymentsof£2.3million(0.16percentofrelatedexpenditure).DSDalsoestimatesthatforotherbenefits,fraudanderrorgaverisetooverpaymentsof£55.0million(2.0percentofrelevantexpenditure)andunderpaymentsof£18.6million(0.7percentofrelevantexpenditure).

3.1.17 IhavethereforequalifiedmyopinionontheregularityofbenefitexpenditureotherthanStatePensionbecauseofthelevelofoverpaymentsattributabletofraudanderrorwhichdonotconformtotheintentionoftheNorthernIrelandAssembly;andbecauseofthelevelofunderandoverpaymentsinsuchbenefitexpenditurewhicharenotinconformitywiththerelevantauthorities.

Estimatedlevelsoffraudanderror

3.1.18 DSDestimatesthatin2008lossesof£57.2millionhavearisenthroughoverpaymentofbenefitstoclaimants,representing1.3percentoftotalbenefitexpenditure.Figure8showsthevalueandpercentageofestimatedoverpaymentsoverthelastfiveyears.

3.1.19 DSDhasintroducedanumberofimprovementstoitsmeasurementprocessesovertheseyears.Newmethodologieshavemostrecentlybeenintroducedin2008.Thefiguresfor2007havebeenre-calculatedusingthenewmethodologiestoenableaconsistent



comparisontobemade.Figurespriorto2007havenotbeenre-calculatedasitwasnotpracticalorcost-effectivetodosoandarethereforenotdirectlycomparableto2007and2008.HoweverDSDisoftheopinion,basedontherecalculationofthe2007totalestimatedfraudanderrorfigures,thatchangesarisingfromthenewmethodologyinrelationto

previousyears’figureswouldbeminimal.Notwithstandingthesedifferencesthereisageneraltrendofoverallreductioninoverpaymentsduetofraudanderroryearonyear,bothinthevalueoffraudanderrorreportedandalsointhepercentageoftotalbenefitexpenditurethatthevalueoffraudanderrorrepresents.Thedecreaseinoverpaymentsismostly

Figure8:EstimatedOverpaymentsduetofraudanderrorinbenefitexpenditure

2008* 2007* 2006 2005 2004-05 £million £million £million £million £million

Overpayments

Officialerror 19.8 25.2 29.2 25.2 34.7

Customererror 21.7 19.1 18.8 21.0 17.8

Customerfraud 15.7 15.2 21.4 32.6 31.1

TOTAL 57.2 59.5 69.7 78.8 83.6

%ofbenefitexpenditure 1.3% 1.5% 1.8% 2.1% 2.3%

Figure9:EstimatedUnderpaymentsduetoerror

2008* 2007* 2006 2005 2004-05 £million £million £million £million £million

Underpayments

Officialerror 17.6 23.9 19.6 19.6 8.6

Customererror 3.3 3.2 2.9 4.2 3.9

TOTAL 20.9 27.1 22.5 23.8 12.5

%ofbenefitexpenditure 0.5% 0.7% 0.6% 0.6% 0.3%

Footnotes:1.AsindicatedinNote27totheaccountstheestimatesinbothtablesarequotedtothenearest£0.1mandpresentedwith95per

centconfidenceintervals,whichincludeadjustmentstoincorporatesomenon-samplingsourcesofuncertainty.2.From2005onwardsestimatesforfraudanderrorhavebeenreportedonthecalendaryearbasisratherthanthefinancialyear.3.Figuresintheabovetablescontainindividualpartsthathavebeenroundedtothenearest£0.1millionforpresentationalpurposes.

*StatePensionhasbeenincludedforcomparativepurposesonly.In2007and2008theauditopinionwasnotqualifiedinrespectoffraudanderrorrelatingtothisbenefit.


attributabletoacontinualreductioneachyearinthelevelofbothcustomerfraudandofficialerror.

3.1.20 Withintotalbenefitexpenditureof£4.27billionin2008,StatePensionaccountsfor£1.44billion(34percent).ExcludingStatePensiontheleveloferrorinestimatedoverpaymentsreportedbyDSDthisyearis2.0percent(£55.0million).

3.1.21 DSDalsoestimatesthatunderpaymentsofbenefitsin2008amountto£20.9millionor0.5percentoftotalbenefitexpenditure.Figure9givesamoredetailedanalysisofestimatedunderpaymentsandtheimpactofthechangesinmeasurementprocessesreferredtoinparagraph3.1.19appliestothesefiguresalso.Incontrasttotheoverallreductioninoverpayments,therehasbeenageneralincreaseinunderpaymentsduetoerroroverthelastfiveyearsfrom£12.5million(0.3percentoftotalbenefitexpenditure)in2004-05to£20.9million(0.5percentoftotalbenefitexpenditure)in2008.Howevertherehasbeenareductioninestimatedunderpaymentsin2008ascomparedtothepreviousyear.

3.1.22 Errorsinbenefitawardscanarisebecauseofinternaldepartmentalerror(officialerror),customererrororcustomerfraud.Figures8and9showtheestimatedlevelsofoverpaymentsandunderpaymentsduetoeachofthese.Estimatedcustomererrorlevelshavenotchangedsignificantlyovertheperiod,perhapsindicativeofthelowerlevelofcontrolthatDSDhasoverthis.However,therehasbeenprogresssince

2004-05inreducingtheestimatedlevelsofcustomerfraud.

3.1.23 Estimatedofficialerrorlevelshavevariedoverthefiveyearperiodbuttherehasbeenageneraloverallreductionfrom2004-05to2008.IcontinuetohighlightthiscategoryoferrorasitismyviewthatthisistheareawhereDSDcontinuestohavethemostcontrol.ThetotalestimatedlevelsofofficialerrorreportedbyDSDfor2008are£19.8millionofoverpaymentsand£17.6millionofunderpayments.Thisrepresentsanaverageaccuracyrateof99.1percentandisafurtherimprovementfromlastyear.SSAsetfinancialaccuracytargetsforthesixmajorbenefitsthatitisresponsibleforadministeringandtargetswereachievedforfour,withafurtheroneachievingthetargetwithinthestatisticallevelsoftoleranceset.

3.1.24 ThereisnofinancialaccuracytargetsetforHousingBenefit.ItismyunderstandingthatNIHEhassetaProcessingAccuracyTargetof96percentthatrelatestothepercentageofcasesforwhichthecalculationoftheamountofbenefitduewascorrect.DSDtoldmethattheoutturnfor2008-09was97percent.

3.1.25 BenefitReviewsofHousingBenefitwerenotcompletedfor2008.Thelevelsoffraudanderrorhavebeenestimatedbyapplyingthepercentageerrorfromearlieryears,from2007forHousingBenefitfortenantsandfrom2004-05forHousingBenefitforowneroccupiers.IaskedDSDwhyaBenefitReviewhasnotbeencarriedoutsince2004-05onHousingBenefitforowneroccupiers.DSDtoldme



thataBenefitReviewhasbeenscheduledfor2009-10.

3.1.26 ThetotalestimatedmonetaryvalueoflossesduetoofficialerrorforallbenefitsexceptforIncomeSupport,Carer’sAllowance,andStatePensionhasdecreasedwhencomparedtolastyear.Thetotalestimatedmonetaryvalueforunderpaymentsduetoofficialerrorforallbenefits,exceptforIncomeSupport,IncapacityBenefitandSocialFundpayments,hasalsodecreasedwhencomparedto2007.IparticularlywelcomethesignificantreductioninlossesduetoofficialerrorforDisabilityLivingAllowance(DLA)from£5.0millionin2007to£0.9millionin2008andthecorrespondingreductioninofficialerrorunderpaymentsfrom£2.8millionin2007to£1.0millionin2008,andtheonepercentincreaseinfinancialaccuracyrates.ThisisacomplexbenefittoadministerandSSAhasdonewelltoreduceofficialerrorrates.

3.1.27 Performanceacrossdifferentbenefitsvariessignificantly.Thebenefitssystemiscomplexandsomebenefitsareeasiertoadministerthanothers.Note41ofDSD’sresourceaccountshowsthatlevelsoffraudanderrorarelowestforthosecontributorybenefits,suchasStatePension,whichareeasiertoclaim,relativelyeasytodetermineandlargelyunaffectedbychangesincircumstances.Fraudanderrorismorefrequentinmeanstestedbenefits,whereaclaimant’sfinancialcircumstancesarerequiredtobetakenintoaccount.

3.1.28 StatePensionCreditisameanstestedbenefitintroducedin2003.IhavebeenconcernedaboutthesignificantlevelsofestimatedfraudanderrorreportedbyDSDforthisbenefit.TheestimatedlevelofoverpaymentsduetofraudanderrorinStatePensionCreditfor2008remainshighat£13.5millionandthisrepresents4.0percentofbenefitexpenditure,anincreasefrom£12.2million,4.0percentofbenefitexpenditure,in2007.Theestimatedlevelsofcustomerfraudinthisbenefitareproportionallylow(£1.1million,0.3percentofbenefitexpenditure)andthisislikelytobeattributabletotheapparentlowerpropensitytocommitfraudincertainagegroups.Itistheleveloferror,bothcustomerandofficial,thatisamatterofconcern,£5.4million(1.6percentofbenefitexpenditure)ofestimatedoverpaymentsinStatePensionCreditisduetocustomererrorbutthemajorityofoverpayments(£6.9million,2.1percentofbenefitexpenditure)isbecauseofofficialerror.ThissituationisalsoevidentinrelationtoStatePensionCreditunderpaymentswith£1.6million(0.5percentofbenefitexpenditure)duetocustomererrorandthemajorityofunderpayments,£8.7million(2.6percentofexpenditure)duetoofficialerror.

3.1.29 LastyearDSDadvisedmethatithaddevelopedaspecificStatePensionCreditAccuracyImprovementPlanfor2008-09toco-ordinateactivitiesthatwillimpactdirectlyonaccuracylevelsforthisbenefit.Followingthisfinancialaccuracylevelshaveimprovedfrom


94.3percentin2007to95.3percentin2008suggestingthattheseactivitiesmayhavehadsomeimpact.DespitethisDSDhasagainfailedtoachieveitsfinancialaccuracytargetforthisbenefit.

3.1.30 IrecommendthatDSDcontinuestoimprovefinancialaccuracyperformanceforthisbenefit.

3.1.31 Ingeneral,IacknowledgetheconsiderableeffortandresourcesthatDSDhasputintoreducingtheincidenceoffraudanderror.Itcurrentlyhasanumberofongoingprogrammesinplaceaimedatcounteractingthelevelsofbenefitfraudanderror.

ChangesinCircumstances

3.1.32 Note41ofDSD’sresourceaccounthighlightsaspecificcategoryofDLAcaseswhere,asaresultofareviewofentitlement,thebenefitallowanceisadjustedbecausethecustomer’sconditionhasgraduallyimprovedordeterioratedtoanextentthatitnowimpactsontheircareand/ormobilityneedsresultinginachangeintheDLAaward.Thesecasesarecategorisedas‘benefitcorrect,changeincircumstances’.Itisnotpossible,withinthelegalrulesgoverningthebenefit,toestablishwithanycertaintyaretrospectivedatefromwhichtoadjustthebenefitbecausethechangehasoccurredgradually.InthesecircumstancesthelegislationgoverningtheadministrationofDLAdeterminestherearenooverpaymentsorunderpaymentsandthebenefitisadjustedfromthedateofthereview.Thereforethesecasesare

omittedfromtheestimatedoverpaymentsandunderpaymentsreportedbyDSD.

3.1.33 For2008,DSDestimatesthattheamountcustomersarereceivinginexcessofDLAentitlementforthisspecificcategoryofcasestotalled£38million(2007:£22.2million)andtheamountcustomersarereceivingbelowtheirDLAentitlementtotalled£19.4million(2007:£47.1million).ResultsfromtheDLAbenefitreviewperformedin2008showthatalmostoneinfive(18.2percent)casesreviewedcontainedachangeincustomercircumstances–areductionfromthe22.3percentofcasesreportedinthepreviousDLABenefitReviewin2006wherechangesincircumstancesweredetected.Iacknowledgethatthesecasesarelegallyandprocedurallycorrect.However,identifyingwhencustomers’circumstanceschangeattheearliestopportunityisimportantforbothDSDandthecustomerandIthereforeencourageDSDtocontinuetolookforwaystofurtherreducetheincidenceofchangeincircumstancescases.IaskedDSDwhatwasbeingdonetomanagethis.DSDtoldmethatitwillcontinuetorobustlyapplyitsDLAinterventionstrategywhichisdesignedtoidentifyandreviewthosecaseswhereachangeinthecustomer’scircumstancesisthoughtmostlikelytooccurnecessitatinganadjustmentintherateofbenefit.ThisriskbasedapproachanalysesresultsinconjunctionwithStatisticsandConsultancyBranchonanongoingbasistoupdatethecriteriausedtoidentifythehighriskDLAcasesforreviewinordertooptimiseinterventionoutcomes.



Recentdevelopments

Economic downturn3.1.34Therecentdownturnintheeconomyhas

hadasignificantimpactontheworkofDSD.Unemploymentbenefitregistershavegrown.NewJobseekersAllowance(JSA)claimsforDecember2008were130percenthigherthanthesamemonthinthepreviousyear.IacknowledgethatDSDisworkinghardtomanagetheincreasedworkload.On26January2009theMinisterannouncedplanstorecruitanadditional150newstafftotheSSA’sJobSeekersAllowancefrontline.DSDhastoldusthatitundertookarangeofproactivemeasuresincludingreprioritisingresourcestoassistwithJSAclaimsprocessing,andtheuseoffulltimeworkingforparttimestaffandadditionalovertimewithstaffagreementwhereavailable.

Employment and Support Allowance3.1.35 InJune2007theWelfareReformAct(NI)

waspassedbytheNIAssembly.ThisActintroducedanewwork-focusedbenefitforthosewhoareoutofworkduetoillnessordisability.ThenewEmploymentandSupportAllowance(ESA)replacesIncapacityBenefitandIncomeSupportonthegroundsofincapacity.SinceitsintroductioninOctober2008,DSDhaspaidout£4.6millioninESAclaims.Itisanticipatedthatformaltargetsmaybeintroducedin2010-11forthisbenefit.

3.1.36Someinternalcheckswereperformedin2008-09onESAdecisionmakingbutthesehavenotbeenformallyreported.Itisanticipatedthatformaltargetsmaybeintroducedin2010-11.

Benefit Security Review3.1.37During2008acomprehensivereview

oftheworkofBenefitSecuritywasperformedwithaviewtoexploringtheopportunityfordeliveringimprovedoutcomes.AreviewteamwasestablishedandtermsofreferenceapprovedbytheAgencyManagementBoard(AMB).Theapproachoftheteamincludedbenchmarkingwithsimilarorganisations,extensiveconsultationswithinternalstakeholdersandpreliminarydiscussionwithSSATradeUnionSide.TheSteeringGroupapprovedadraftreportwhichwaspresentedtoAMBon2December2008.

3.1.38 Thereportidentifiedareasforimprovementandmaderecommendationsforactioninseveralareasincludingfraudprevention,frauddetection,customererror,officialerrorandmeasurementofperformance.

3.1.39 IaskedDSDwhentheformalconsultationonthereportwillbecompletedandwhatthetimetableforimplementationoftherecommendationsisandDSDconfirmedthatconsultationwithstaffandTradeUnionshasnowtakenplaceandanimplementationplanisbeingdeveloped.Thereportcontains31recommendationsand,whilesomearemoredetailedthanothersandtimescaleswillthereforevary,itisintendedthatthemajorityofthereports’recommendationswillbeimplementedduring2009-10.

Close working with GB3.1.40 DSDiscloselyalignedwiththeGB

DepartmentofWorkandPensions(DWP)onitscounterfraudactivityand


isfullyinvolvedwithDWPcolleaguesincontributingtothedevelopmentofpoliciesandinitiativeswhichbuildonsuccessesintacklingfraud.HoweverarecentreviewbySSAidentifiedthescopeforcloserworkingwithDWPandtheneedforamoreintegratedapproachtocounteractingerrortobeadopted.SSA’sErrorReductionDivision(ERD)hasfurtherdevelopedregularcommunicationandsharingwiththeDWPfraudanderrorteamandisnowrepresentedonDWP’sErrorReductionBoard.

3.1.41 DSDhasextendedERDsremittomirrorDWP’sFraudandErrorStrategyDivisionandanSSAErrorReductionBoardhasbeenestablished.TheinitialaimoftheErrorReductionBoardistoensurethatongoingerrorreductioninitiativesaredevelopedandintegratedintoapublishedErrorReductionstrategy.Itisenvisagedthatthesedevelopmentswillcontributetotheachievementoffinancialaccuracytargetsandthereductionoflossesarisingasaresultoffraudanderror.

3.1.42 Iwelcomethesedevelopmentsandwillmonitortheirimpactonfutureperformance.

Conclusion

3.1.43 DSDhascontinuedtoaddressthematterswhichgiverisetothelongstandingqualificationofmyopinionandIwelcometheeffortsbeingmadetofurtherimprovetheaccuracyofbenefitpayments.Totallevelsoffraudanderrorhavecontinuedtodecreaseandinthepastfiveyearsestimatedlevelsofoverpaymentsas

apercentageofbenefitexpenditurehavealmosthalved.Iacknowledgethat,havingmadesignificantprogressinrecentyears,itisincreasinglymoredifficultforDSDtomakefurthersignificantimprovements.Ithashadparticularchallengestoovercomethisyearincludingefficienciesasaresultofthe2008-2011budgetsettlement,theongoingdeliveryofitsmodernisationprogrammeandtheimpactoftheeconomicdownturn,andIamthereforeencouragedtonotethattherehasbeenafurtherimprovementinoverallperformance.DSDhasreportedsuccessinreducingtheamountofofficialerroroverandunderpaymentsduetofraudanderrorfrom£25.2million,and£23.9millionrespectivelyin2007,to£19.8millionoverpaymentsand£17.6millionunderpaymentsin2008(asshowninFigures8and9).

3.1.44Alongsidethis,IrecognisethedifficultiesfacedbyDSDwithregardtothecomplexityofmanyofthebenefits,thelimitationswiththeITsystemsandtheresourcingpressuresarisingasaresultofthecurrenteconomicdownturn.IcontinuetosupportthevariousinitiativesthataimtolowerthelevelsoffraudanderrorinbenefitexpenditureandIencourageDSDtocontinuewiththepositiveaction.

3.1.45IconsiderthattheestimatedlevelsoffraudanderrorreportedarematerialandIhavequalifiedmyregularityopinionontheaccounts.



DepartmentforSocialDevelopment

3.2 ChildMaintenanceandEnforcementDivision

ClientFundsAccount2008-09

3.2.1 TheformerChildSupportAgency(CSA)ceasedtobeanAgencyon31March2008andfrom1AprilitsoperationsweredeliveredbytheChildMaintenanceandEnforcementDivision(CMED)withinDSD.CMED’smainpurposeistopromoteandsecureeffectivechildmaintenancearrangementsforchildrenwholiveapartfromoneorbothparents.

3.2.2 DSDisrequired,underdirectionsfromDFPtoprepareaCMEDClientFundsaccount,whichreportsthereceiptsofchildmaintenancefromnon-residentparentsandpaymentstoparentswithcare,andtotheSSA,wheretheparentwithcareisinreceiptofbenefit.ThedirectionsalsorequireDSDtoprovideinformationonthelevelofdebtoutstandinganditsassessmentofhowmuchofthisdebtislikelytobecollectable.TheadministrativecostsofthedivisionareincludedwithinDSD’sResourceAccounts.

3.2.3 Thissectionofthereportprovidesasummaryofthesignificantmattersarisingfrommyauditofthe2008-09CMEDClientFundsAccountandthebasisforthequalificationofmyopinion.MyopiniononthisAccounthasbeenqualifiedsince1993.

QualifiedAuditOpinion

3.2.4 IamrequiredtoexamineandcertifytheCMEDClientFundsAccountandreporttheresultstotheNorthernIrelandAssembly.Iamrequiredtoobtainsufficientevidencetosatisfymyselfthat,inallmaterialrespects:

• theaccountproperlypresentsthereceiptsandpaymentsfortheyearended31March2009;

• Note6totheaccountpresentsatrueandfairviewofthedebtoutstandingasat31March2009;

• theaccounthasbeenproperlypreparedinaccordancewiththeGovernmentResourcesandAccountsAct(NorthernIreland)2001andDFPdirectionsmadethereunder;and

• thefinancialtransactionsconformtotheauthorities20thatgovernthem,the‘regularity’opinion.

3.2.5 Inrespectofmyviewonthedebtoutstanding,Iamunabletoformanopinionasthescopeofmyauditwaslimitedbecauseofinsufficientevidencetosupporttheaccuracyandcompletenessofthedebtbalancestotalling£80.9million.IhavealsoqualifiedmyregularityopinionasIdonotconsiderthefinancialtransactionsconformtotheauthoritieswhichgovernthemwherethemaintenanceassessmentshavebeencalculatedincorrectly.

20 ChildSupport(NorthernIreland)Order1991;ChildSupport(NorthernIreland)Order1995;ChildSupport,PensionsandSocialSecurityAct(NorthernIreland)2000;ChildMaintenanceAct(NorthernIreland)2008


BasisofQualifiedAuditOpinion

3.2.6 In2008-09DSDcollected£16.0millionfromnon-residentparents(2007-08£13.7million)andmadepaymentsof£12.8million(2007-08£10.5million)toparentswithcare.Inaddition,£2.5million(2007-08£3.1million)wastransferredtotheSSAwherepersonswithcarewereinreceiptofbenefit.

3.2.7 MyopinionontheCMEDClientFundsAccount2008-09hasbeenqualifiedforthefollowingreasons:

• theabsenceofadequatedocumentationtosupportthelevelofdebtincludedwithintheaccount;and

• limitedevidenceavailabletometoconfirmtheaccuracyofthemaintenanceassessmentswhichformthebasisofthedebtbalances.

Iwillexplaintheseissuesfurtherinthefollowingparagraphs.

Absence of adequate support documentation

3.2.8 DSDmaintainstheCMEDClientFundsaccountingrecordsontheChildSupportComputerSystem(CSCS)andontheChildSupport2(CS2)system.BothofthesesystemshavealonghistoryofproblemsandareunabletodirectlygeneratetheinformationneededtopreparetheAccount.Themaintenanceoutstandingat31March2009,disclosedinNote6.1totheAccount,isderivedfromthetotaldebtbalancesrecordedonthesetwosystems,in

conjunctionwithaseriesofcomplexmanualworkarounds.However,thisdebtcannotbebrokendownonanindividualcasebycasebasis.Intheabsenceofasatisfactoryaudittrail,myexaminationofdebtbalanceswasseverelylimited,thereforeIconcludethatthereisasignificantuncertaintyovertheaccuracyandcompletenessofthedebtbalancesreportedintheAccount.ConsequentlyIhavequalifiedmyauditopiniononthebasisthatthescopeofmyauditwaslimitedinthisregard.

Accuracy of maintenance assessments3.2.9 Theaccuracyofthecalculationofa

maintenanceassessmentforchildsupportisakeyelementintheprocessastheassessmentformsthebasisofthepaymentsmadebynon-residentparentstopersonswithcareandalsothecalculationoftheamountduewhereadebtbuildsup.Mystaff’sauditofdebtbalancesandmaintenanceassessmentsoverthelastfifteenyearshasidentifiedasignificantnumberoferrors.DSDisunabletodemonstratetomethatotherassessmentsmadeinpreviousyearsandrecordedasabalancedue,havebeenreviewedandcorrected.Ihavethereforeconcludedthattheleveloferrorwithinthesystemisstillmaterial.In2008-09mystafftestedasmallsampleofdebtbalancesasameansofassessingthepercentagerateoferrorinthesamplewithoutestimatingthevalueoferrorinthewholepopulation.Mystaffexamined28casesandfound12errorsindicatinganoverallcaseerrorrateof43percent(2007-0837percent),duelargelytoerrorsinmaintenancecalculationsbutalsoduetoerrorsin



recordscausedbyITissues.Inoneinstancedebtowingwasoverstatedbyover£22,000asaresultofCMEDfailingtotakeintoaccountthatthenon-residentparenthadbeeninreceiptofbenefitssince2004.Inanothercasedebtwasunderstatedbyalmost£4000,becausenon-residentparent’sincomewastakenasmonthlypayratherthanfour-weeklypay.

3.2.10TestingcarriedoutbyDSD’sCMEDCaseMonitoringTeam(CMT)indicatedthattherewasanincreaseinthelevelofcashvalueaccuracy.CMThasreportedcashvalueaccuracyof96percentfor2008-09(92percentin2007-08).ThesefiguresrelatetotheaccuracyofnewmaintenanceassessmentsandreassessmentsofexistingcasesundertakenbyCMEDduringtheyear.Inrecognisingtheimprovedaccuracyofcurrentworkweunderstandthatitwilltakeanumberofyearsforimprovementstobereflectedinthewholecaseload.

3.2.11 Itisthereforemyopinionthattheleveloferrorwithinassessmentscontinuestobeunacceptable.IaskedDSDtocommentontheselevelsoferror.DSDtoldmethattherecontinuestobeastrongfocusonaccuracywithmanagerscommittedtocontinuousimprovement.Thefocusonlastdecisionaccuracyremainsanimportantaspectoftheimprovementprocess,providingmanagementwithindependentfeedbackonthecurrentaccuracyposition.DSDalsoexplainedthatatkeystagesofthecase,forexamplepriortoreferralforenforcementactionafullreviewofthemaintenanceassessmentanddebtbalanceisundertaken.

Debtlevels

3.2.12TheDepartmentisrequiredtodisclosethebalancesoutstandingfromnonresidentparentsinrespectofmaintenanceassessments.Whereanon-residentparentdoesnotmakepaymentsinaccordancewiththemaintenanceassessmentandDSDisresponsibleforcollectingthosepayments,anymissed,orshortfallin,paymentswillberecordedasdebt.TodateDSDhashadnolegislativepowerstowriteoffdebt.Debtoutstandinghasaccumulatedsincetheinceptionofchildsupportin1993andtherewasafurtherincreasein2008-09.InNote6totheAccountDSDreportsgrossdebtoutstandingof£80.9millionasat31March2009,(£77.2million21at31March2008).Thegrossdebtoutstandingincreasedby£3.7millionbetween31March2008and31March2009comparedto£5.6millionbetween31March2007and31March2008.Note6alsoreportsthatDSD’scurrentassessmentisthat£33.3million(41.2percent)islikelytobecollectable(2007-08£34.9million21;45.2percent).

3.2.13Thesebalancescomprisealmost32,000individualcasesofdebt,someofwhichdatebackto1993andDSDhasestimatedthat£47.6million(2007-08£42.3million21)isdeemedprobablyandpossiblyuncollectible.IcontinuetobeconcernedattheincreasinglevelofdebtintheAccountandtheproportionofthedebtthatisunlikelytoberecovered.

3.2.14Inresponsetoapreviousrecommendationarisingfrommyaudit,acollectiontarget

21 Debtbalancesfor2007-08havebeenrestatedsincemyreporton2007-08accounts(seenote41of2008-09annualaccounts)


fordebtarrearswasintroducedin2007-08(£1.5million).InmyreportlastyearIexpressedmydisappointmentatthelowtargetlevelsetandwasoftheviewthatitwasnotsufficientlychallenging.In2007-08theamountofdebtcollectedwas£2.5million.Thetargetwasincreasedto£2.5millionfor2008-09and£2.8millionwascollected.For2009-10thetargethasbeenfurtherincreasedto£2.8million.Inotetherehasbeena12percentimprovementintheamountofdebtcollectedin2008-09comparedto2007-08.However,inmyopinion,thetargetlevelsstillfallwellshortofthatwhichIwouldconsidertobestretchingandarestilllowerthantheamountbywhichdebtisincreasingyearonyear.Iwillcontinuetomonitordebtlevelsandwillreportagainnextyearontheprogressmadeinreducingthelevelofdebt.DSDtoldmethatmanyoftheimprovementsimplementedaspartoftheOperationalImprovementProject(OIP)haveenhancedabilitytocollectchildmaintenance.DSDalsoadvisedthattheseparationofarrearscollectionsfromthecollectionofongoingmaintenanceenhancesmanagementinformationavailable.However,thekeytostemmingtheincreaseindebtlevelsisasmuchaboutearlyassessmentandensuringcasesdonotfallintoarrearsinthefirstplace.Inadditiontothe£16millioncollectedbyDSDin2008-09(2007-08£13.7million),DSDhasadvisedmeitalsosecuredmaintenancearrangementsof£6.8millionin2008-09(2007-08£6.0million).Bysecuringeffectivemaintenancearrangementsfromtheoutset,DSDisguardingagainstthegrowthofchildmaintenancedebt.

CostsofCollection

3.2.15 IhavecontinuedtomonitorthecostsofcollectionforCMEDClientFundsbecauseofconcernsthattherateofreturnislow,particularlyincomparisontohowGreatBritainperformsinthisarea.CMEDrunningcostsareincludedwithinDSD’sresourceaccountsbutareseparatelyidentified.InresponsetomypreviousconcernsDSDintroducedanewcostofcollectiontargetin2008-09.DSDtoldmethatthetargethasbeenachievedwithanactualcostofcollectionof72pence(2007-08:84pence)forevery£1collectedagainstatargetof82pence.InotethatDSDhassetatargettoachieveacostofcollectionof70penceforevery£1collectedin2009-10.DSDhasstressedtheneedforamorecompleteunderstandingofcaseloadandgeographicalvariancesbetweenGreatBritainandNorthernIreland.FurtheranalysisshowstheimpactofdifferingearningslevelsinNorthernIrelandcomparedwithGreatBritainandtheimpactofvariancesincaseloads,suchastheproportionofnonresidentparentsonbenefit,orwithNilassessments.DSDbelievesthattakingthesefactorsintoaccount,collectioncostsarecomparablewiththoseoftheGreatBritainAgency.DSDconfirmedthattheimportanceofvalueformoneyandefficiencywouldcontinuetobeakeyconsideration.

RecentDevelopments

3.2.16 DSDhascontinuedwiththeformeragency’scommitmenttorollouttheOIPwhichisnearingcompletion.Alongsideimprovingthequalityofserviceto



clientsandtheimprovedaccuracyofmaintenanceassessments,thisprojectisaddressingsignificantproblemswiththecomputersystemswhicharecentraltocasemanagementandtheaccountingprocesses.DSDisdependentonimprovementsinGreatBritaininITservicesandduring2008-09twomajorupgradesoftheCS2systemwereimplemented.Inadditiontotheseenhancementstothecomputersystems,DSDhasalsointroducedfurthernewinitiativesaimedatimprovingdebtenforcementandreducingthelevelofdebt,includingthelaunchofanEnforcementMediaCampaignthathighlightedtheenforcementpowersthatDSDcanandwillapply.Whileitistooearlytoassessthefullbenefitthatallofthesechangesandinitiativeswillbring,DSDhasindicatedthatinitialresultsarepositive.Inaddition,DSDtoldmethattheOIPhadbroughtaboutsignificantimprovementsinperformancethroughchangestobusinessprocesses,operatingmodelsandITsystems.ItadvisedmethatasaresultofOIPover3,600morechildrenbenefitedfromchildmaintenancearrangementsandanadditional£2.7millionofregularchildmaintenanceandanadditional£2millionofarrearswerecollected.Unclearednewschemeapplicationshavereducedsignificantlyand86percentofnewapplicationsarenowclearedwithin18weeks.IwillkeepunderreviewDSD’scontinuedfocusonperformanceimprovementandmodernisationofchildsupportthroughitsredesignedimplementationprocess.

3.2.17 TheChildMaintenanceAct(NorthernIreland)2008,introducedduring2008,

placesadutyonDSDtoraiseawarenessamongparentsoftheimportanceoftakingresponsibilityforthemaintenanceoftheirchildrenandtoproviderelevantinformationandguidancetohelpestablisheffectiveandappropriatemaintenancearrangementsforchildren.Italsoprovidesfortheintroductionofaredesignedschemein2011withmoresimplifiedrulesforthecalculationofmaintenanceandgivesDSDadditionalpowersinrespectofrecoveringandsettlingdebt.

Conclusion

3.2.18 IhavequalifiedmyopiniononthedebtbalancesinNote6totheAccounts,becauseoftheabsenceofadequatedocumentationtosupportthelevelofdebtincludedwithintheAccount,andalsothelimitedevidenceavailabletometoconfirmtheaccuracyofthemaintenanceassessmentswhichformthebasisofthedebtbalances.IhavealsoqualifiedmyregularityopinionasIdonotconsiderthefinancialtransactionsconformtotheauthoritieswhichgovernthemwherethemaintenanceassessmentshavebeencalculatedincorrectly.

3.2.19 Fundamentalchallengesremainintermsoftheextentoferrorwithindebtbalancesandthelevelsofaccuracyinthemaintenanceassessmentcalculations.IwelcomethesignificanteffortsbyDSDtoaddressthelong-standingproblemsandIwillcontinuetomonitortheimpactonperformance.


DepartmentofCulture,ArtsandLeisure2008-09

Basisofauditopinion

3.3.1 IconductedmyauditinaccordancewithInternationalStandardsonAuditing(UKandIreland)issuedbytheAuditingPracticesBoard.Myauditincludesexamination,onatestbasis,ofevidencerelevanttotheamounts,disclosuresandregularityoffinancialtransactionsincludedinthefinancialstatementsandthepartoftheRemunerationReporttobeaudited.ItalsoincludesanassessmentofthesignificantestimatesandjudgmentsmadebytheAccountingOfficerinthepreparationofthefinancialstatements,andofwhethertheaccountingpoliciesaremostappropriatetotheDepartmentofCulture,ArtsandLeisure’s(DCAL)circumstances,consistentlyappliedandadequatelydisclosed.

3.3.2 IplannedandperformedmyauditsoastoobtainalltheinformationandexplanationswhichIconsiderednecessaryinordertoprovidemewithsufficientevidencetogivereasonableassurancethatthefinancialstatementsandthepartoftheRemunerationReporttobeauditedarefreefrommaterialmisstatement,whethercausedbyfraudorerror,andthatinallmaterialrespectstheexpenditureandincomehavebeenappliedtothepurposesintendedbytheAssemblyandthefinancialtransactionsconformtotheauthoritieswhichgovernthem.However,theevidenceavailabletomewaslimitedduetoafailuretoprovideadequatesupportingevidenceforownershipof

certainfixedassetsandasaresultIwasunabletoobtainsufficientappropriateauditevidencetosupport:

• Therecognitionofassetsvaluedat£3,922,000withinlandandbuildings;and

• Non-recognitionofotherlandandbuildingswhichmaybeownedbyDCAL.

3.3.3 InformingmyopinionIalsoevaluatedtheoveralladequacyofthepresentationofinformationinthefinancialstatementsandthepartoftheRemunerationReporttobeaudited.

Qualifiedopinionarisingfrom limitationinauditscope

3.3.4 ExceptforthefinancialeffectsofsuchadjustmentsasmighthavebeendeterminedtobenecessaryhadIbeenabletoobtainsufficientauditevidenceconcerningthelegalownershipoflandandbuildings,inmyopinion:

• thefinancialstatementsgiveatrueandfairview,inaccordancewiththeGovernmentResourcesandAccountsAct(NorthernIreland)2001anddirectionsmadethereunderbyDFPofthestateofDCAL’saffairsasat31March2009,andthenetcashrequirement,netresourceoutturn,netoperatingcost,netoperatingcostsappliedtodepartmentalstrategicobjectives,recognisedgainsandlossesandcashflowsfortheyearthenended;



• thefinancialstatementsandthepartoftheRemunerationReporttobeauditedhavebeenproperlypreparedinaccordancewithDFPdirectionsissuedundertheGovernmentResourcesandAccountsAct(NorthernIreland)2001;and

• inmyopinion,informationwhichcomprisestheDirectors’ReportandtheManagementCommentaryincludedwithintheAnnualReport,isconsistentwiththefinancialstatements.

3.3.5 Inrespectaloneoftheabovelimitationonmyworkrelatingtothelegalownershipoflandandbuildings:

• IhavenotobtainedalltheinformationandexplanationsthatIconsiderednecessaryforthepurposesofmyaudit;and

• properaccountingrecordshavenotbeenmaintained.

OpiniononRegularity

3.3.6 Inmyopinion,inallmaterialrespects,theexpenditureandincomehavebeenappliedtothepurposesintendedbytheAssemblyandthefinancialtransactionsconformtotheauthoritieswhichgovernthem.

Report

3.3.7 DCALengagedconsultantstoestablishrightstoclaimlegalownershiptoallpropertyassetsundertheresponsibilityof

inlandwaterwaysandinlandfisheries.ThefindingsofthisworkresultedinDCALbeingunabletoprovideevidenceoflegalownershipforcertainlandandbuildings.Thereportalsoidentifiedotherassetsincludingland,locks,bridges,andweirswhichDCALmayown,butarenotincludedwithintangiblefixedassets.Inoted:

• Thefinancialstatementsincludetangiblefixedassetswithanetbookvalueof£19,707,000.Includedinthisamountarelandandbuildingswithanetbookvalueof£10,245,000ofwhichDCALcannotprovelegalownershipfor£3,922,000;and

• Thereportoftheconsultantsidentified

approximatelyfiftyassetswhichmaybelongtoDCAL,butarenotincludedintangiblefixedassets.

3.3.8 TherewerenoproceduresIcouldhaveundertakenaspartofmyaudittosatisfymyselfregardingverificationofownershipfortheseassets.IwillkeepDCAL’sactionsandprogressinresolvingthismatterunderreview.


DepartmentofHealth,SocialServicesandPublicSafety2008-09

3.4 IrregularExpenditure

3.4.1 InthissectionofthereportIcommentonthreeissuesimpactingontheDepartmentofHealth,SocialServices&PublicSafety’s(DHSSPS)ResourceAccountin2008-09.TwoofthesearisefromexpenditurenotbeingapprovedbyDFPandconsequentlyIhavequalifiedmyregularityopinionontheseissues.ThethirdissuehasledtoaregularityqualificationinoneofDHSSPS’ssponsoredbodies’accounts,theNIFire&RescueService,andIreportonithereinthecontextofthedepartment’ssponsorshiparrangements.

RegularityissuearisingfromDFPrefusal toapprovevirementrequest

3.4.2 TheNorthernIrelandAssemblyannuallyapprovesestimatesforeachdepartmentwhichsetoutindetailtheresourcesrequiredforpublicservicesforthatfinancialyear.Theestimatesaresubdividedinto“RequestsforResources”(RfR),eachofwhichequatestoadepartmentalobjective.Beneaththese,eachRfRcontainsoneormorefunctionallinesknownassub-heads.TheAssemblyapprovesresourceconsumptionatRfRlevelandactualexpenditureisreportedagainsttheestimatewithinNote2totheResourceAccount.

Qualifiedopiniononregularityof financialtransactionswithinthe ResourceAccount

3.4.3 Virementrelatestothereallocationofresourcesbetweensub-heads,butbelowRfRlevel,withouttheneedforAssemblyapproval.DFPapprovalisrequiredtomovebetweendifferentsectionswithinanRfR,although,duringtheyear,budgetmovementsareapprovedbytheExecutive.On16June2009,DHSSPSrequestedapprovalfromDFPSupplyforthirteenvirements,inrelationtothosesubheadspreviouslyagreedintheSpringSupplementaryEstimateswhichhadbeenexceeded.

3.4.4 Allvirementrequestswereapprovedexceptforanoutstandingadministrationsum.ThisamountisinrelationtoadministrationexpenditureforHealthandSocialCarepolicydevelopmentwithinsub-headRFRAandisanoverspendof£1,153,000.DFPconsideredthat,althoughoverallestimatecoverisavailableforthisexceeding,anadministrationlimitisbeingbreachedincontraventionofDFPregulations.Consequently,IconsiderthisexpenditureisirregularasitdidnotobtainalltheapprovalsrequiredandIhavequalifiedmyregularityopinioninrespectofthismatter.

3.4.5 IencourageDHSSPStorevisitandstrengthenitsestimatesandsupportingbudgetarycontrolsystemsgiventheregularityissuethathasarisen.



Conclusion

3.4.6 Onthebasisofthisfinding,inonematerialrespect,Iidentifiedthatexpendituredidnotconformtotheauthoritieswhichgovernedit.

Regularityissuearisingfromthe NorthernIrelandBloodTransfusion Service

3.4.7 InmyreportonthefinancialstatementsofDHSSPSfor2007-08,IidentifiedthatexpenditurewasnotappliedforthepurposesintendedbytheNorthernIrelandAssemblyandthatthetransactionsdidnotconformtotheauthoritieswhichgoverneditinonematerialrespect.ThisrelatedtocostsincurredintheemploymentofspecialistadvisorsfortheDevelopingBetterServicesprojectbyoneoftheDHSSPS’ssponsoredbodies,theWesternHealth&SocialCareTrust,andconcernedtheabsenceofbusinesscaseapprovalsforexpenditureof£2.4million.

3.4.8 Iamdisappointedtonotethatasimilarissuehasariseninanotherarms’lengthbodythisyear.TheNorthernIrelandBloodTransfusionService(theService),establishedin1946,isoneofanumberofSpecialAgencies,sponsoredbyDHSSPS.ThecorepurposeoftheServiceisthecollection,processing,testinganddistributionofbloodandbloodcomponents.UndertheBloodSafetyandQualityRegulations2005,theServiceisrequiredtoholdaBloodEstablishmentAuthorisation(Licence)whichisgrantedbytheMedicinesandHealthcareproductsRegulationAuthority(MHRA).

ThelatterinspecttheServiceonaregularbasistoensureitscompliancewithrelevantstandardsandfailuretosatisfyaninspectioncould,inextremis,resultinwithdrawalofitsLicence.

3.4.9 AnMHRAinspectioninApril2008

revealedanumberofseriouscontrolweaknesseswithrespecttotheService’sQualityManagementSystem.MHRAconcludedthatsignificantfailingsinelementsofgoodpracticemeantthattheoperationwasinsufficientlyrobustandhadthepotentialtoresultinpatientharm,althoughtherewasnoevidencethatanypatienthadcometoharm.TheServicewasadvisedthatfailuretotakethenecessaryremedialactionwithinthespecifiedtimescalecouldresultinthelossofitsaccreditation.Inresponsetotheseweaknesses,theServicedevelopedandimplementedacomprehensiveactionplan.Followingasubsequentinspectionlaterintheyear,MHRAconfirmedthatalloftheseriouscontrolweaknessesidentifiedhadbeenaddressed.

3.4.10 TosupportitinrespondingtotheMHRA’sinspectionfindings,theServiceengagedexternalconsultantstoassistin:

• aformalrootcauseanalysistoidentifythecausesoffailurewhichhadtobesubmittedtoMHRAalongwithacorrectiveplanby10June2008;and

• theimplementationofthisplan.

3.4.11TheServicesubmitteditsfirstbusinesscasefor£85,500(representingexpenditureonconsultantsfortheperiod



8Juneto30November2008,excludingexpenses)toDHSSPSforapprovalattheendofJuly2008.ThiswasrevisedinliaisonwithDHSSPSandafinalbusinesscasefor£112,000(whichincludedexpenses)wassubmittedtoDFPinmidNovember2008.Asecondbusinesscasefor£31,600wassubmittedtoDFPon3December2008seekingapprovaltoextendtheuseofconsultantsto31December2008.DFPapproved£13,600ofthesecondsubmissiontwodayslaterbutinFebruary2009,advisedDHSSPSthat,whileitacceptedthattheexpenditureincurredwasfullyjustifiedandlegitimate,retrospectiveapprovalon£130,000expenditure(i.e.£112,000fromthefirstsubmissionplus£18,000ofthesecond)incurredbetween8Juneand3December2008,wouldnotbegrantedandwasthereforeirregular.ThiswasbecauseasuitablebusinesscasehadnotbeencompletedandapprovedpriortoengagingtheservicesoftheconsultantsinJune2008.DFPalsonotedthatthiswasfurthercompoundedbythefactthattheMinisterforHealthhadnotgivenapprovalforthisprojectpriortoengagingtheconsultants.

Qualifiedopiniononregularityof financialtransactionswithinthe ResourceAccount

3.4.12 Iamcontentthat,exceptfortheappropriateapprovalfromDFP,thereisproperdocumentationtosupporttheexpenditureincurred.However,Iconsiderthisexpendituretobeirregularasitdidnotconformtotheauthorities

whichgoverneditatthetimeandIhavequalifiedmyregularityopinioninrespectofthismatter.

3.4.13 Thereisnodoubtthatthisexpenditurewasnecessaryandurgent,butthefailureoftheServiceandDHSSPStosubmitthebusinesscaseintimecontravenedDFPregulations,establishedinresponsetocriticismsmadebythePACoftheuseofconsultancyinthepublicsector.AlsoofconcernisthequestionofhowcontrolswithintheServicedeterioratedtotheextentidentifiedbyMHRA.

3.4.14 IwelcometheopenandfulldisclosureofthismatterintheDHSSPSAccountingOfficer’sStatementonInternalControl.DFPhasacknowledgedthatboththePermanentSecretaryandDirectorofFinanceofDHSSPShavewrittentomanagementwithinthedepartmentandthewiderhealthandsocialcaresectorstressingtheabsoluterequirementtohaveproportionatebusinesscasesapprovedpriortoanydecisiontoincurexpenditureonconsultants.DFPiscontentthatDHSSPShasnowtakenstepstoensurethereisnorecurrenceofconsultancyexpenditurewithoutthenecessarypriorapprovalsinlinewithAnnex2.3ofManagingPublicMoneyNI.

3.4.15 TheremayalsobeaneedforDHSSPStoliaisewithDFPtodeterminewhatactionshouldbetakeninurgentcaseswhereitisnotpracticaltostrictlyfollowDFPregulations.


Conclusion

3.4.16 Onthebasisofmyfindings,inonematerialrespect,IidentifiedthatexpenditurewasnotappliedforthepurposesintendedbytheNorthernIrelandAssemblyandthatthetransactionsdidnotconformtotheauthoritieswhichgovernedit.

3.4.17 IwillkeepdevelopmentsunderreviewandmaycommentfurtherinmyHealthGeneralReportinduecourse.

Overallconclusiononregularityissues impactingontheResourceAccount

3.4.18 Otherthanthefindingsidentifiedabove,inallothermaterialrespects,incomeandexpenditurewasappliedforthepurposesintendedbytheAssemblyandthefinancialtransactionsconformedtotheauthoritieswhichgovernedthem.

RegularityqualificationontheNorthern IrelandFire&RescueService Accounts2008-09

3.4.19 NorthernIrelandFire&RescueService(NIFRS)isanexecutivenon-departmentalpublicbodysponsoredandfundedbyDHSSPS.InmyopiniontheexpenditureandincomeofNIFRSisregularexceptfor£50,840ofexpenditureonapayawardwhichwasprogressedwithoutdepartmentalapproval.AreportonthismatterhasbeenincludedwiththeNIFRSaccounts(seeSection5).

3.4.20 MyNIFRSreportnotesthatthepayawardtonon-uniformedDirectorswasmade

withouttherequisiteapprovalofDHSSPSandbeforethematterwasreferredtotheNIFRSBoardoritsRemunerationCommittee.IwelcomeDHSSPS’spromptandcomprehensiveresponsetowhatIconsidertobeaseriousbreachofNIFRScorporategovernance.Thisincluded:

• arestrictionofNIFRSdelegationlimits;and

• seekingassurancesfromNIFRSthatresponseswouldbeputinplacetoensuresuchbreachesofcontrolwouldnotberepeated.

3.4.21 InmyFinancialAuditingandReporting:2007-08Report(NIA115/08-09),IrecommendedthatDHSSPSreviewedthesponsorshipprocedureswhichapplytoNIFRS.HavingexaminedthislatestNIFRSmatter,InoteagainthatDHSSPS’ssponsorshipprocedurescouldbeimproved,althoughIacceptthismayhavebeeninsufficienttopreventtheirregularexpenditureincurredbyNIFRS.DHSSPS’sresponsetotheNIFRSpayawardprovidesameansbywhichmyrecommendationcanbeimplemented.Inparticular,Iintendtomonitorprogressontwoissues:

• theclarificationandapplicationoftheNIFRSFinancialMemorandum;and

• DHSSPS’sroleinmonitoringtheapplicationofDFPpayremitguidancetoitssponsoredbodies.


NIFRSFinancialMemorandum

3.4.22NIFRSprocessedthepayawardtonon-uniformedDirectorsfollowingajobevaluationcommissionedbytheChiefFireOfficerwithouttheapprovalofDHSSPS.TheChiefFireOfficerinformedmystaffthatinhisview,theNIFRSFinancialMemorandum,establishedbyDHSSPSin2005,causedsomeconfusionduetoambiguityintwoofitsclauses.Thisincludedparagraph4.1.8whichrequiredNIFRStofollowNationalJointCouncilTermsandConditions(whichthejobevaluationsdid)andparagraph4.1.5whichrequireddepartmentalapprovalofallsubstantivechangesofdutiestoemployeesaboveAreaManager(thenon-uniformedDirectorswereabovethislevel).

3.4.23 IrecommendtheNIFRSFinancialMemorandumisclarifiedastothelimitsofdepartmentaldelegationwhichapplytopayawardsandjobevaluations.

ApplicationofDFPPayRemitGuidance

3.4.24 Therequirementtoseekpriordepartmentalapprovalforpayawardsissetoutintheannual‘PayRemitApprovalProcessandGuidance’issuedbyDFP.IamconcernedwithDHSSPS’shandlingofDFP’s2008payremitguidanceasitappliedtoNIFRS.The‘PayRemitApprovalProcessandGuidance’isissuedtoalldepartmentswhoareresponsiblefordistributingittotheirsponsoredbodies,andfortheFinanceDirectorate’sreviewandapprovalofsponsorbodysubmissionsbeforetheyareforwardedtoDFP.Ifoundthat:

• DHSSPShadnorecordofforwardingthepayremitguidancetoNIFRSwhohavetoldmethatitreceivedthisfromanothersource;

• theNIFRSpayremitsubmissionwasforwardedbyDHSSPStoDFPwithoutFinanceDirectorateapprovalandtheissueofthenon-uniformedDirectors’payawardbeingpickedup.ItwasDFP,notDHSSPS,whichnotedthatabusinesscasetosupportanincreaseinthesecircumstanceswasabsent.Indeed,DHSSPSonlybecameawareofthesefundamentalbreachesoffinancialcontrolwhenDFPaskedquestionsaboutthesubmittedNIFRSpayremit;and

• threeotherNIFRSpayremitsrelatingto2008-09hadbeenscrutinisedandapprovedbyDHSSPSandreceivedDFPapproval.

3.4.25 IrecommendthattherequirementsofDFP’spayremitguidanceareappliedinfuturetoallNIFRSpayremitsubmissions.InotethatDFPhasrequesteddetailsofthestepsthatDHSSPSistakingtoensurethatallitsarm’slengthbodiesareadheringtoproperfinancialandgovernancecontrolsandIwillcontinuetoreviewthismatter.



DepartmentforEmploymentandLearning2008-09

3.5 IrregularExpenditureandExcessVote

3.5.1 ThissectionofthereportexplainsthebasisofthequalifiedauditopinionIhaveplacedonthe2008-09ResourceAccountsfortheDepartmentforEmploymentandLearning(DEL).

3.5.2 Thissectionisdividedintotwopartsasmyregularityopinionwasqualifiedfortwospecificreasons:

• irregularexpenditureincurredinrespectoffundingprovidedtotwoFurtherEducationColleges(FECs)onadvisoryfeesonPublicPrivatePartnerships(PPP)(paragraphs3.5.3to3.5.20);and

• irregularityarisingfromnetcashexpenditureinexcessofamountsauthorisedbytheNorthernIrelandAssembly(paragraphs3.5.21to3.5.28).

QualificationarisingfromtheirregularexpenditureincurredinrespectoffundingprovidedtotwoFECsonadvisoryfeesonPPPs

3.5.3 TheresourceaccountforDELincludesexpenditureinrespectoffundingforthesixFECs.Thisyear’saccountincludespartfundingofexpenditureincurredonPPPprojectsbytwoFECs–BelfastMetropolitanCollege(BMC)andtheSouthEasternRegionalCollege(SERC)whichwereestablishedinAugust2007.

MuchoftheexpenditurereferredtointhisreportwasincurredbythelegacyFECswhichnowformpartofBMCandSERC.

3.5.4 Theselargescaleprocurementprojectsrequiredthecollegestoappointadvisoryteamsoftechnical,legalandfinancialexperts.InaccordancewiththedelegatedlimitsforapprovalofexpenditurethecollegessoughtandreceivedMinisterialandDFPapprovaltoappointtheseexpertsin2002forBMCand2003forSERC.Theapprovallimitswereupto,butnotexceeding,£600,000fortheBMCprojectand£400,000forSERC.

3.5.5 DELadvisedmethattheprocurementprocessfortheadvisoryteamwasmanagedbytheGovernmentPurchasingAgency(nowCentralProcurementDirectorate).Thecontractswerebothonafixedpricebasisandthesameadvisoryteamwasappointedtoeachproject.Theadvisoryteamacceptedtheoverrunriskwherethemanagementofthatriskwasconsideredtobewithinitscontrol.

3.5.6 ThefundingagreementinplacebetweenthecollegesandDELstipulatedthatDELwouldreimburse90percentoftheexpenditureincurredbyeachofthecolleges.

BMC

3.5.7 TheadvisoryteamappointedwastoprovidesupportfortheprocurementphaseoftheprojecttoreplacetheCollegeSquareEastandBrunswickStreetcampuseswithanewfacilityatTitanicQuarter.


3.5.8 Whenthecontractwastenderedtheacceptedbidwasforatotalof340consultancydaysatadiscountedcostof£300,000orhalftheapprovedfeeceiling.

3.5.9 Astheprojectwasnearingcompletion,towardstheendof2008,itbecameapparentthatthefinalcostoftheadviceprovidedwasintheregionof£2,200,000,morethanseventimesthecontractedforamount.FollowingnegotiationsbetweentheconsultantsandBMCthiswasreducedto£1,500,000,subjecttotheachievementofthefinaldateforsigningofftheproject.DELhasadvisedthatthefinancialclosureofthisprojectwasachievedon2April2009andnofurtherconsultancycostswereincurred(seeSection5).

SERC

3.5.10InthiscasetheadvisoryteamwasappointedtoprovidesupportforaprojectofnewbuildsinDownpatrick,Ballynahinch,LisburnandNewcastle.

3.5.11TheacceptedbidfortheSERCcontractwasfor423consultancydaysatacostof£358,000.Thefinalpositionhoweverrevealedthatthetotalcostswere,infact,£1,347,000oralmostfourtimesthecontractedforamount(seeSection5).

Qualifiedopiniononregularityof consultancyspend

3.5.12 Oncetheprojectswereunderwaytheywerebothsubjecttoaseriesofdelaysandvariations.Thesevariationsledto

furtherworkbeingcarriedoutonthepartofbothadvisoryteams.InbothcasesthecollegesandDELconsideredthatthereasonsforthedelayswereoutsidethecontroloftheadvisoryteams.

3.5.13DespitethefactthatDELhadarepresentativeontheprojectboardofeachCollegeitdidnotcontactDFPforapprovaltotheadditionalcostsastheyarosebutinsteadwaiteduntilthefinalcostoverrunwasknown.DELapproachedDFPforretrospectiveapprovaltopaythefeesinmidMarch2009.Itsoughtapprovalforthefollowing:

• BMC-anincreasefromtheoriginalapprovallimitof£600,000to£1,500,000(anincreaseof£900,000);and

• SERC-anincreasefromtheapprovallimitof£400,000to£1,347,000(anincreaseof£947,000).

Thetotalincreaseinthetwoprojectswastherefore£1,847,000withDEL’s90percentshareoftheadditionalexpenditurebeing£1,662,000.

3.5.14InitsreplytoDEL,DFPstatedthatretrospectiveapprovalcouldonlybegrantedinlinewiththerulescontainedin`ManagingPublicMoney’andassuchtwoconditionsneededtobesatisfied;

• ApprovalwouldhavebeengrantedhadDFPbeenapproachedproperlyinthefirstplace;and



• DELwastakingstepstoensuretherewasnorecurrence.

3.5.15Withregardtothefirstcondition,DFPinterpretedthistomeanthatadepartmenthadalreadycompletedabusinesscasetosupportthedecisiontospend,buthadneglectedtoforwardittoDFPforapproval.Withregardtothesecondconditionitinterpretedthistomeanthatspecificmeasureshadalreadybeenputinplacetoensurethattheneedtoseekretrospectiveapprovaldidnothappenagain.

3.5.16WhilstDFPrecognisedtheDELMinisterhadaskedforapapertobepreparedonthelessonslearnedfromthisexperienceandthusDELhadinpartsatisfiedthesecondcondition,asabusinesscasehadnotbeensubmittedtosupporttheapprovalrequestforeitherprojectthenthefirstconditionhadnotbeensatisfied.DFPcouldnottherefore,grantretrospectiveapprovaltotherequest.

3.5.17IaskedDELtoexplainhowthefailuretoobtainappropriateDFPapprovalforthisexpenditurehadarisen.DELtoldmethattheseprocurementshadbeencomplexandsubjecttosignificantdelayswhichmeantthattheenvisagedtimescalesof16monthsforeachprojectextendedtofiveyearsfortheSERCprojectandsevenyearsinthecaseofBMC.FurthermoreDELexplainedthatgiventhecomplexitiesoftheprojectsitwouldnothavebeenpracticabletochangeadvisersduringtheprocurements.DELalsoinformedmethatduringtheselongprocurements,advisoryfeeswerenot

monitoredagainstapprovalsandhenceitdidnotseekapprovalfortheincreasedcosts.Aspartofa“lessonslearned”exerciseinrespectofthisprocurementDELhasadviseditwillbetakingstepstoensurethereisnorecurrenceofthisoversightandDFPadviceandguidanceisfullycompliedwith.

Conclusion

3.5.18Iamconcernedthatlargecontractoverrunswereincurredinbothofthecontractsdescribedabove.IrefertoarecentPACreportonthe‘UseofConsultants’whichmadereferencetosuchacircumstanceasfollows;22

‘Frequentandlarge-scaleincreasesincontractcostsraisedoubtsaboutthestandardofprojectappraisal,managementandcontrol;areoftennon-competitiveinnature;andcanhindertheachievementofvalueformoney.’

3.5.19Asnotedabove,underthetermsofthefundingagreementbetweenDELandthecolleges,eachcollegewasduetobereimbursed90percentoftheexpenditureincurred.AsDELacceptedthattheadditionalcostswereaninescapablecommitmentforthecollegesthey,inturn,hadanexpectationthattheywouldbefundedbyDEL.AsDELhasnowrecognisedthisexpenditureinitsresourceaccount,IconsiderittobeirregularasitdidnotconformtotheauthoritieswhichgoverneditatthetimeasDFPdidnotgiveretrospectiveapproval.Ihavequalifiedmyregularityopinioninrespectofthismatter.

22 Report:16/07/08RPublicAccountsCommittee


3.5.20 IwelcometheopenandfulldisclosureofthismatterintheDELAccountingOfficer’sStatementonInternalControl.

Qualifiedopiniononregularityarising fromthenetexpenditurebeinginexcess oftheamountsauthorisedbythe NorthernIrelandAssembly.

Explanationanddescriptionofthe ‘excess’

3.5.21 In2008-09DELspentmorecashthantheNorthernIrelandAssembly(theAssembly)hadauthorisedittoandbysodoing,DELbreachedtheAssembly’scontroloveritsexpenditure.Ithasthereforeincurredwhatistermedan`excess’,forwhichfurtherAssemblyapprovalisrequired.IhavequalifiedmyopiniononDEL’sresourceaccountonthisbreachofAssemblycontrol.

3.5.22AspartofmyauditofDEL’sresourceaccount,Iamrequiredtosatisfymyselfthat,inallmaterialrespects,theexpenditureandincomeshownintheresourceaccounthavebeenappliedtothepurposesintendedbytheAssemblyandconformtotheauthoritieswhichgovernthem;thatis,theyare`regular’.Indoingso,IhavehadregardtothelimitstheSupplyEstimates,asapprovedbytheAssembly,havesetonexpenditure.

3.5.23 TheAssemblyauthorisesandsetslimitsonexpenditureontwobases-`resources’and`cash’.SuchamountsaresetoutintheSupplyEstimatesforwhichapprovalandauthorityisgivenintheannualBudgetOrders.

3.5.24Thereisasingle`NetCashRequirement(NCR)’forDEL.ThisrepresentsthemaximumamountofcashthatmaybeprovidedtoDELfromtheConsolidatedFundtomeetitsfundingrequirements.

3.5.25TheStatementofParliamentarySupply

includedwithintheDELresourceaccountfor2008-09showsthattheNCRoutturnwas£780,947,570.98whichis£15,767,570.98or2.1percentgreaterthantheEstimateNCRof£765,180,000.00

DEL’sexplanationfortheExcessVote

3.5.26 DELtoldmethatthereasonsfortheExcessVotewere:

• AnadjustmentwasrequiredtothetreatmentofStudentLoansInterestReceivableasaresultofclarificationreceived,postyearend,fromDFPonthecorrectbudgetarytreatment.TheconsequenceofthisadjustmentisthattheNCRfigureintheSpringSupplementaryEstimateswasunderstatedbytheamountofStudentLoansInterestReceivable.Thenetimpactofthisadjustmentaccountsfor£10,130,570.98oftheoverspend.AdetailedreconciliationofResourcestoCashRequirementisgiveninNote4totheResourceAccount;and

• DuetoanadministrativeerrorinAccountNIapaymentof£5,637,000.00totheStudentLoanCompanywhichwastobepaidonthe1April2009wasprocessedon31March2009.



ActiontakenbyDELtohelpprevent arecurrence

3.5.27 IaskedDELwhatithaddonetoensurethissituationdoesnotrecuranditinformedmethat:

• StudentLoanInterestReceivablewillbeaddressed,inlinewiththenewDFPguidance,duringthein-yearAnnuallyManagedExpenditureforecastingexercise;

• ItwillreviewitscashmanagementproceduresagainstexternalguidanceandincomparisontootherNorthernIrelandDepartments,toensuretheyareasrobustandeffectiveaspossible;and

• AccountNIhasconfirmedthatprocedureshavebeenenhancedtomitigateagainsttheriskofarecurrence.

Summary

3.5.28 InformingmyopinionontheDEL2008-09resourceaccounts,Iamrequiredtoconfirmwhether,inallmaterialaspects,theexpenditureandincomehavebeenappliedforthepurposesintendedbytheAssemblyandthefinancialstatementsconformtotheauthoritieswhichgovernthem.Onthebasisofmyfindings,Iconcludethattheoutturnnetcashrequirementof£780,947,570.98wasinexcessofthe£765,180,000authorisedbytheAssembly.Theexcessof£15,767,570.98isthereforeirregularandwillrequirean`ExcessVote’tobe

approvedbytheAssembly.Myauditopinionhasbeenqualifiedinthisrespect.

Conclusion

3.5.29 ExceptfortheirregularexpenditureincurredwhereproperapprovalwasnotobtainedfromDFPandcashexpenditureincurredwhichwasinexcessofthatauthorisedbytheNorthernIrelandAssembly,theexpenditureandincomehavebeenappliedforthepurposesintendedbytheAssemblyandthefinancialtransactionsconformtotheauthoritieswhichgovernthem.


DepartmentofEducationResourceAccounts2008-09

3.6 IrregularPaymentstoExternalConsultants

3.6.1 InaccordancewiththerequirementsofManagingPublicMoneyNorthernIreland(MPMNI)andDAO(DFP)06/05,DFPhasdelegatedtodepartmentsauthoritytoenterintocommitmentsandtospendwithindefinedlimits,subjecttocertainrestrictions.PriorDFPapprovalisrequiredforeachseparateengagementofexternalconsultantsexpectedtocostover£75,000(orotherwiseagreedwithDFP).DFPapprovalinsuchinstancesisonlygrantedoncompletionofasatisfactorybusinesscase.

3.6.2 ItisageneralconditionofDFPapprovalthatitmustbenotifiedifatanytimecostsoranyotherkeyassumptionsvarybymorethan10percentfromtheestimatesgiveninthebusinesscaseuponwhichtheapprovalwasbased,orifimplementationisdelayedbymorethan24months.

3.6.3 Ifadepartmentwishestomakeanysignificantchangetoaprojectortoitsproposalforprocurement,afterapprovalhasbeengranted,DFPagreementmustbeobtainedbeforeanyexpenditureiscommittedandbeforeprocurementiscommenced.

RetrospectiveApproval

3.6.4 IfexpenditurehasbeencommittedorprocurementcommencedwithoutDFPapprovalthenDFPmaybepreparedto

considergrantingretrospectiveapprovalinexceptionalcircumstancesandonlyunderspecificconditionsasdefinedinMPMNI,namely:

Condition1–whereitwouldhavebeengrantedapprovalhaditbeenapproachedproperlyinthefirstplace.DFPmayconsiderthisconditionsatisfiedwhereadepartmenthadcompletedasuitablebusinesscasepriortocommittingtheexpenditure,butneglectedtoforwardittoDFPforapproval;and

Condition2–theDepartmentistakingstepstoensurethereisnorecurrence.Evidenceofspecificremedialactionswillberequiredtosatisfythiscondition.

3.6.5 InMarch2009,DFPadvisedtheDepartmentofEducation(DE)thatretrospectiveapprovalhadnotbeengrantedonconsultancycostsforthreeprojects,namelyHolyCrossCollegeStrabaneandDerryDiocese(comprisingStCecilia’sCollegeDerryandStMary’sCollegeDerry)PublicPrivatePartnerships(PPPs),andtheReformofPublicAdministration(RPA)ProjectManagementConsultancySupport.DFPcopiedthecorrespondencetomeinlinewithguidanceinMPMNI.

HolyCrossCollegeandDerry DiocesePPPs

3.6.6 Management,financialandlegalexternalconsultancycostsof£352,122tosupportbothHolyCrossandDerryDiocesePPPprojectswereapprovedin2002.Thefinalconsultancyspendin



theprojectswas£807,263forHolyCrossand£877,083forDerryDiocese.Mostoftheexpenditurewasincurredpriorto2008-09.In2009-10DEhasadvisedthat£101,109additionalexpenditureinrespectofHolyCrossand£138,654forDerryDiocesehasbeenincurred.Thisexpenditureisduetoanupliftinconsultancyratesasaresultoftheexpirationoftheoriginalconsultancyframework,asadvisedbyDE.Inthecontextofthe2009-10accounts,basedoncurrentcircumstances,thisexpenditureisirregular.Thetotaloverspendrepresentsanincreaseof£1,332,224whichis378percentinexcessoftheapprovedspend.IaskedwhytherewassuchasignificantincreaseandDEadvisedmethatthiswasduetoacombinationoffactors.AsignificantchangeintheprojecttookplacewhentheoriginalsinglePPPprojectwassplitintotwoseparateprojects.AdditionalchangesinthescopeoftheprojectoccurredasaresultofemergingGovernmentpolicyontheuseofPPP.Furthertotheincreasedexpenditurebroughtaboutbythesechangesinscope,theassociateddelaysinprocurementresultedinanincreaseinthedailyrateschargedbytheconsultants.

3.6.7 InconsideringretrospectiveapprovalontheHolyCrossPPPproject,DFPstatedthat:

“given the financial close for the PPP project was reached in September 2006

and the fact that DFP only received the consultancy business case in July 2007

and again in January 2009, we are not

convinced that the business case was completed at the appropriate time.”

and

“it is particularly worrying from the Department’s response that the Department

does not have an understanding of where retrospective approval is required.

There have been a number of occasions where DE have recently sought

retrospective approval and this clearly shows that the Department has not been

successful in taking steps to ensure that there is no recurrence.”

3.6.8 InthecaseoftheDerryDiocesePPPproject,DFPacknowledgedthat,particularlyinPPPprojects,theremaybeapressingneedtocontinueconsultancysupportandthatitwouldbeimpossibletohaltthissupportwhilstaconsultancybusinesscaseisbeingprepared.NonethelessthereisanexpectationthatasaveryminimumDEwouldbeexpectedtoinformDFPofthesituationandcompleteabusinesscaseassoonaspossibleandnottowaituntiltheworkhasbeencompleted.TheDerryDiocesePPPfinancialclosewasinDecember2008butthebusinesscasewasnotforwardedtoDFPuntilJanuary2009.

3.6.9 DFPrepeateditsconcernthatDEhadnotbeensuccessfulintakingstepstoensurenorecurrenceofrequestsforretrospectiveapproval.


RPAProjectManagementConsultancy Support

3.6.10Thetotalapprovedexpenditureforthisconsultancywas£320,000.Anadditional£27,900expenditurewasincurred.AccordingtoDFPitwasthesubmissionofaPostProjectEvaluation(PPE)thatrevealedasubstantialchangeinthescopeoftheconsultancycontract.DFPstated:

“this change was so substantial that it would have been necessary to submit a

revised business case to DFP for approval. As DFP was not consulted it is clear

that retrospective approval of this change in scope is required.”

3.6.11ItismyunderstandingthatDFPcouldnotbesurethatabusinesscasewascompletedattheappropriatetimebecauseDEwasunabletotracedocumentationofthechangeinscope.Inaddition,DFPwasnotsatisfiedthatDEwastakingadequatestepstopreventthissituationarisingagainandthelackofrecordskeptinthiscasesuggeststhatDE

wasfailingtofollowthecorrectbusinesscaseprocess.

NeedforfurtherRetrospective Approvals

3.6.12Followingnotificationoftheabovethreecases,DEwasaskedbyDFPandmyOfficetodeterminewhetheritwasawareofanyotherprojectswhereDFPapprovalhadnotbeensought.DEidentifiedafurtherthreeconsultancyprojectswhichhadnotcompliedwiththerequirementsofMPMNIandwhereretrospectiveapprovalfromDFPwouldbesought(Figure10).ThethreeprojectsareDownandConnorDeLaSallePPP,Lagan/TorBankPPPandBelfastEducationandLibraryBoard(BELB)StrategicPartnership(whichisahybridofPPPandconventionalprocurement).

3.6.13 Iaminformedthatallofthesecasesincurredadditionalexpenditurewhichexceededthe10percentthreshold.Mostofthisexpenditurewasincurredpriorto2008-09.TheDepartmenthasadvisedthatinthecaseofBELBStrategicPartnershipprojecttherehasbeenno

ProjectTitle Approved Additional Additional Expenditure Expenditure Expenditureas a%ofApproved £ £ Expenditure

DownandConnorDeLaSallePPP 442,000 158,000 36%

Lagan/TorBankPPP 321,000 174,000 54%

BELBStrategicPartnership 1,034,000 1,769,000 171%

[DE responsible for 50 per cent of this expenditure] 517,000 884,500


Figure10:ProjectsidentifiedthatrequireretrospectiveapprovalfromDFP


expendituresince2007-08.However,inrelationtoDownandConnorDeLaSalle,expenditureof£199,159isexpectedtooccurin2009-10andforLaganCollege/TorBankexpenditureof£224,762and£46,508isexpectedtooccurin2009-10and2010-11respectively,ascompletionofmilestonesstillremainoutstandinginbothinstances.

3.6.14 IaskedDEwhytheexpenditureontheBELBStrategicPartnershipprojectwassomuchinexcessofthatapprovedanditadvisedmethattheoriginalproposalwasinrelationtoasixschoolPFIcluster.TheprojectscopeincreasedsignificantlytoanewBuildingSchoolsfortheFuture(BSF)typestrategicpartnershipwiththisasphase1andconsequentlytheInvitationtoNegotiate(ITN)documentationhadtoberedraftedtotakeaccountoftheadditionalrequirementsthestrategicpartnershiphadproduced.Theprojectwasoriginallyscheduledtohaveadurationof17months,howevertherevisedprojectranfor49months.

3.6.15 Thetotalapprovedexpenditureinthesethreecaseswas£1,797,000comparedtoafinalfigureof£3,898,000,givingrisetoirregularexpenditureof£2,101,000inpreviousandfutureyearsforwhichDEisresponsiblefor£1,216,500.

DE’sinternalcontrols

3.6.16 InFebruary2007DE’sFinanceDirectorissuedguidanceonbusinesscaseclearanceprocedureswithinthedepartmentandtoitsNon-Departmental

PublicBodies(NDPBs).Theguidancehighlightstheneedforsufficienttimetobebuiltintothebusinesscaseprocesstoallowconsiderationbythedepartment’sFinanceDivisionandDFP.Italsoindicatesthatapprovalsinprincipleshouldnotbegranted,norshouldcommitmentstofundingbegivenpriortocompletionofasatisfactorybusinesscaseandinadvanceoftheFinanceDirector’sorDFP’sapproval.

3.6.17 Theguidancealsostipulatesthatinsubmittingbusinesscasesforconsideration,HeadsofDivisionandChiefExecutives’ofNDPBsshouldconfirmthattheyarecontentwiththeregularity,proprietyandvalueformoneyoftheproject.Theseconditionsarealsocontainedinaletter,issuedbytheFinanceDivisionon9May2008,toHeadsofDivisionandBrancheswithinDE.HeadsofDivisionwereaskedtoensurethatacopywassenttotheirrespectiveNDPBs.ThisadditionalguidancewasunderpinnedbyaseminarheldinJune2008forallHeadsofDivisionsandHeadsofBrancheswithinDEandrepresentativesofitsNDPBs.

3.6.18 DErecognisesthatthefailuretoobtainthenecessaryapprovalsisamajorbreakdownintheprojectmanagementofthesixcasesandthatthisbreakdownandfailuretoobtainretrospectiveDFPapprovalresultedintheadditionalconsultancyexpenditurebeingirregular.

3.6.19 IwelcomethedisclosureofthismatterintheAccountingOfficer’sStatementonInternalControlandtheproposedactions


tobeundertakenoverthecomingmonthstoenhancethearrangementswithinDEanditsfundedbodiestoensurerobustandeffectiveprocessesareinplace.

Conclusion

3.6.20 Expenditureamountingto£2,576,624hasbeenidentifiedforwhichDEhasnotobtainedthenecessaryDFPapproval.Thisexpendituredidnotconformtotheauthoritiesandisirregular.Thisexpenditurehasbeenaccountedforinyearsotherthan2008-09andthereforeIwascontentnottoqualifymy2008-09regularityopinion.

3.6.21 IwillkeepdevelopmentsunderreviewandwillfollowupwithDEtoensurethattheproposedactionsarefullyandproperlyimplemented.

DepartmentoftheEnvironmentResourceAccounts2008-09

3.7 ExcessVote

3.7.1 In2008-09,theDepartmentoftheEnvironment(DOE)spentmorecashthantheAssemblyhadauthorisedittospendandbysodoing,breachedtheAssembly’scontroloveritsexpenditure.Ithadthereforeincurredwhatistermedan‘excess’forwhichfurtherAssemblyapprovalisrequired.IhavequalifiedmyopinionontheDOE2008-09resourceaccountonthisbreachofAssemblycontrol.

3.7.2 ThissectionofthereportexplainsthereasonsforthisqualificationandprovidesinformationontheextentandnatureofthebreachtoinformtheAssembly’sfurtherconsideration.

3.7.3 AspartofmyauditofDOE’sresourceaccounts,Iamrequiredtosatisfymyselfthat,inallmaterialrespects,theexpenditureandincomeshownintheresourceaccounthasbeenappliedtothepurposesintendedbytheAssemblyandconformtotheauthoritieswhichgovernthem;thatis,theyare‘regular’.Indoingso,IhavehadregardtothesupplylimitssetonexpenditurebytheAssembly.

BackgroundtotheExcess

3.7.4 TheAssemblyauthorisesandsetslimitsonexpenditureontwobases–‘resources’and‘cash’.SuchamountsaresetoutintheSupplyEstimatesforwhichapprovalandauthorityisgivenintheannualBudgetOrders.



3.7.5 ThereisasingleNCRfortheDepartment.ThisrepresentsthemaximumamountofcashthatmaybeprovidedtoDOEfromtheNorthernIrelandConsolidatedFund(NICF)tomeetitsfundingrequirements.

3.7.6 TheNCRlimitwassetoutintheNorthernIrelandMainSupplyEstimatesfor2008-09,asamendedbytheNorthernIrelandSpringSupplementaryEstimates.TheSpringSupplementaryEstimates(SSEs)2008-09setthelimitonthisNCRat£130,569,000.Thebreachreportedbelowisagainstthislimit.

BreachoflimitonNCR

3.7.8 TheoutturnNCRintheStatementofSupplytoDOE’s2008-09resourceaccountis£131,073,478.76whichis£504,478.76(0.39%percent)inexcessoftheamountauthorised(2007-08comparators:outturn£129,614,000;estimate£135,670,000).

3.7.9 DOEnowproposestoasktheAssemblytoauthoriseafurthergrantofsupplyfromtheNICFof£504,478.76bywayofanExcessVote.

ExplanationsfortheExcessVote

3.7.10AsexplainedinthefootnotetotheStatementofParliamentarySupplyandNote4totheresourceaccounts,theexcessaroseprimarilyasaresultofvariancesbetweenestimatesandoutturninrespectofthe:

• movementinworkingcapital(varianceof£1,434,000between

estimatesandoutturn).Thedirectivetopayinvoiceswithin10daysofreceiptissuedbytheFinanceMinistergeneratedareductionincreditorswhichwasnotforeseenatthetimetheSSEswerefinalised.Thisreductionwasparticularlypronouncedinrelationtotheearlypaymentofgrants;

• useofprovisions(varianceof£942,000betweenestimatesandoutturn).AcontributoryfactortothisvariancewasthepaymentofthelegalcostsassociatedwithjudicialreviewsinMarchwhichhadnotbeenanticipatedattheSSEstage;

• proceedsoffixedassetdisposals(varianceof£300,000betweenestimatesandoutturn);and

• non-cashitems(varianceof£803,000betweenestimatesandoutturn).

TheaboveissuesarenecessarytoreconciletheresourceoutturntotheNCR.Althoughtherewasaresourceoutturnunderspendof£2,886,000in2008-09,thereconcilingitemsdetailedaboveresultedintheexcessNCRof£505,000.

ActiontobetakenbyDOEto helppreventarecurrence

3.7.11 IhaveaskedDOEwhatitwillnowdotoensurethatitsestimateproceduresaresufficientlyrobusttoavoidfutureexcesses.Itinformedmethatimprovementswillbeneededinforecasting,specificallyinrelationtocontributingitemsdetailed


above;namelymovementinworkingcapital,theuseofprovisions,proceedsoffixedassetdisposalsandnon-cashitems.DOEthereforeproposestoengagemorerobustlywithallbusinessareas,butmorespecificallyitsthreeExecutiveAgencies(PlanningService,theNorthernIrelandEnvironmentAgencyandtheDriverandVehicleAgency),followingtheprovisionofestimatedfiguresforitsSSEs.AstheseestimatesareusuallyrequestedbymidDecemberfromallbusinessareas,DOEnowintendstoseekfinalclarificationofthesefiguresbymidJanuarypriortotheSSEsgoingto‘print’.

3.7.12DOEhasalsoadvisedmethatCentralFinancestaffwillalsonowmonitorthecashdrawndownovertheperiodJanuarytotheendofMarchagainsttheestimatedNCRfigureintheSSEs.IfitisenvisagedthattheestimatedNCRfiguremightbeexceeded,thedepartmentalBoardwillbeadvisedasamatterofurgencysothattimelycorrectiveactioncanbetaken.

Summaryandconclusion

3.7.13 InformingmyopinionontheDOE2008-09resourceaccounts,Iamrequiredtoconfirmwhether,inallmaterialrespects,theexpenditureandincomehavebeenappliedtothepurposesintendedbytheAssemblyandthefinancialstatementsconformtotheauthoritieswhichgovernthem.Onthebasisofmyfindingsabove,IconcludedthattheoutturnNCRof£131,074,000wasinexcessofthe£130,569,000authorisedbytheAssembly,resultinginanexcessof

£505,000,andthatitwasthereforeirregular.Myauditopinionhasbeenqualifiedinthisrespect.


Section Four:Executive Agency Accounts


LandandPropertyServices2008-09

AccountingfortheTopographic Database

4.1.1 LandandPropertyServices(LPS)isanAgencywithinDFP.From1April2008,followingthemergerofLPSwithLandRegistersofNorthernIrelandandOrdnanceSurveyofNorthernIreland(OSNI),LPShasbeenresponsiblefortheofficialsurveyingandtopographicalmappingofNorthernIrelandanditaimstomaintainatopographicdatabasetostandardsofcurrency,completenessandaccuracythatmeetstheneedsofitscustomers.

4.1.2 ThetopographicdatabaseisadefinitivecomputerisedmapofNorthernIrelandandconsistsofgeodeticnetworksandtopographicinformationfromlargescalesurveyaccumulatedovermanyyears.Incomearisesfromsalesandlicensingofmaps,data,copyrightandotherrepaymenttasksarisingfromthedatabase.Apartfromthecommercialapplicationofthedatabaseanelementofthedataiscollectedandmaintainedinthenationalinterest.Todatenovaluehasbeenplacedonthiselementofmappingwork.

4.1.3 Thetopographicaldatabasecomprisestwokeyelements:topographicaldata(thedatabase)andsoftware(thedatabasemanagementsystem).Thedatabasemanagementsystemwhichisacombinationofthesoftwareandlicensesfortheuseofthirdpartysoftwarethatallowsdatatobeorganised,retrieved

andmanipulated,hasbeencapitalisedintheLPSaccountsastangiblefixedassetsinlinewithbothFRS10GoodwillandIntangibleAssetsandFRS15TangibleFixedAssets.Iconsiderthistobetheappropriatetreatment.

4.1.4 However,asdisclosedbyLPSatnote1.17totheaccounts,thedatabaseisnotreflectedinthebalancesheet.On-goingcostsofmaintainingthedatabasehavebeenchargedtotheoperatingcoststatementasincurred.LPShasnotcapitalisedthedatabaseasitconsidersthatitisaninternallygeneratedintangiblefixedassetwhichshouldonlybecapitalisedwherethereisareadilyascertainablemarketvalue,evidencedbyanactivemarketinsimilarassets.LPShasadvisedthatasitsdataisuniqueandhasneverbeenactivelytraded,itconsidersthatnovaluecouldbeattachedtoitinthefinancialstatements.LPSalsostatedthatthecosttomaintainthedatabaseexceededtheincomegenerated.

4.1.5 Inmyreportsonthe2000-01OSNIaccountsandeachsubsequentyear’saccountssincethenIhavecarefullyconsideredtheaccountingtreatmentofthedatabaseanddisagreedwithLPS’saccountingtreatmentbecauseIregardthedatabaseasatangiblefixedassetwhichshouldbecapitalisedinaccordancewithFRS15.

4.1.6 HavingconsideredtherepresentationsmadebyLPSitremainsmyopinionthatthedatabasehasphysicalsubstanceandisheldforuseintheproductionofgoodsandservicesonacontinuingbasis.



4.1.7 Inmyreportsonthe2006-07and2007-08accountsIadvisedthattherewasevidencethatthedatabasehasamaterialvalueandconsequentlymyopiniononthoseyears’accountwasqualified,asbynotrecognisingthevalueofthedatabaseinaccounts,theunderlyingvalueofLPSanditsoperatingcostsaremateriallymisstated.

4.1.8 The2008Budgetannouncedthat,from2009-10,theaccountsofgovernmentdepartmentsandbodiesinthewiderpublicsectorwillbeproducedinaccordancewithinternationalfinancialreportingstandards(IFRS)asinterpretedbyaIFRS–basedFinancialReportingManual(iFReM).Inthe2007-08financialstatementsOSNIadvisedthatithadgivencarefulconsiderationastohowtheintroductionofIFRSwouldprovideabasisforresolutionoftheissueandithadalreadypreparedadraftaccountingpolicytodealwiththeintroductionofIFRS.Accordingly,postmerger,LPSproposestocapitaliseelementsofthetopographicaldatabaseasintangiblefixedassets.

4.1.9 Inmy2007-08ReportIwelcomedthesignificantearlyconsiderationgiventothismatterbutadvisedthatthequalificationissuewouldcontinuetoapplyuntiltheintroductionofIFRS.

4.1.10IhavethereforequalifiedmyopiniononLPS’s2008-09accountsbecauseofmycontinuingdisagreementwiththedecisionnottocapitalisethedatabasethisyearandtheevidenceofamaterialvalueofthedatabase.

SurplusRegistryIncome

4.1.11 UnderSection84oftheLandRegistrationAct(NorthernIreland)1970(the1970Act)andSection16(1)oftheRegistrationofDeedsAct(NorthernIreland)1970,DFPhasthepowertomakeanorderprescribingthefeestobechargedbytheLandRegistersofNorthernIreland(LRNI)forservicesprovided.

4.1.12 The1970Act,asamendedbyTheRegistration(LandandDeeds)(NorthernIreland)Order1992,statesthatfeesaretobeatasufficientleveltoenableLRNI“tomeetsomuchoftheoperatingexpensesoftheLandRegistryasisattributabletoitsregistrationfunctions”.

4.1.13 SincethemergerofLRNIwithLPSfrom1stApril2008,fulldetailsofthefeeincomeandthecostofservicesforthethreeseparateregisters(theLandRegistry,theRegistryofDeedsandtheStatutoryChargesRegistry)areshownatNote3totheLPSAnnualAccounts.

4.1.14 InmyReportontheLRNIAnnualReportandAccounts2006-07(NIA41/06-07)InotedmyconcernsregardingthelevelofsurplusincomegeneratedbyLRNIsince2003-04whichhasarisenprimarilyfromLandRegistryservices,sincetheintroductionoftheLandRegistry(Fees)Order(NorthernIreland)2003(the2003Order).Ialsonotedthattherehadbeenanescalatingupwardtrend,with£19.08millionofsurplusincomegeneratedbyLRNIsince2003.


4.1.15 TheLandRegistry(Fees)Order(NorthernIreland)2007andTheRegistrationofDeeds(Fees)Order(NorthernIreland)2007,bothofwhichcameintooperationon1April2007,substantiallyreducedfeespaidformanytransactions.However,despitethissurplusincomeof£9.37millionwasgeneratedin2007-08andalthoughtherewasadownturnintheeconomyin2008-09,LPSstillgeneratedsurplusincomeinrespectofregistryservicesof£2.24million.Consequently,thesurplusincomegeneratedsince2003hasrisento£30.69million.

4.1.16 The1970Act,asamended,requiresthatfeesshouldmeettheoperatingexpensesoftheLandRegistryasisattributabletoitsregistrationfunctions.Asinpreviousyears,thesurplusincomeintheLandRegistrywasusedtocoverdeficitsintheRegistryofDeedsandStatutoryChargesRegistry,withnetsurplusesarisinginrespectofregistryservicescontinuingtobesurrenderedtoDFPattheendofeachfinancialyear.Itappearsthereforethatthesurplusesarebeingusedforpurposeswiderthanthosespecificallypermittedbythe1970Act.

4.1.17 MyReportonLandRegister’s“LandWeb”Project(NIA168/07-08),stressedtheimportanceofnotgeneratingexcessivesurpluses,asthisindicatesthatLRNIcustomersarepayingtoomuchfortheserviceprovided.Indeedanyexcesscouldbeconsideredasaformoftaxation.TheReportalsorecommendedthatDFPandLRNIre-examinethefee

structurecurrentlyinplaceandrealignthefeestoreflectthecostofdeliveringtheservices.

4.1.18 MyReportontheLandRegistersofNorthernIrelandAnnualReportandAccounts2007-08(NIA174/07-08)furtheradvisedontheimportanceofLRNI(nowLPS)continuingtomakeeffortstoreducesurplusincomethroughregularreviewandrevisionoffees,inlightofchangesinthepropertymarket.IaskedDFPandLPSwhatactiontheyhadtakenwithregardtothisandwhethermyrecommendationthatpastsurplusesearnedaretakenintoaccountwhensettingrevisedfees.IwasadvisedthatLPS,inconjunctionwithDFP,considerifafeesorderisneededeachyear.Aspartofthisprocesspastsurplusesandfuturehousingmarketactivityareconsideredwhendecidingifarevisiontofeesisrequired.LPSisforecastingthatfeesforthecurrentyearwilldeclinecomparedto2008-09levelsanditisexpectedthatnosurpluswillbegenerated.


Section Five:Non-Departmental Public Bodies Accounts


5.1 NorthernIrelandHousingExecutive2008-09

5.1.1 InaccordancewithArticle21(3)and(4)oftheHousing(NorthernIreland)Order1981,asamendedbytheAuditandAccountability(NorthernIreland)Order2003,IhaveauditedtheaccountsoftheNorthernIrelandHousingExecutivefortheyearended31March2009andInowreportthereon.

HousingBenefit

5.1.2 LevelsoffraudanderrorforHousingBenefitarereportedonacalendaryearbytheDisability,Incapacity&BenefitSecurityDirectorateStandardsAssuranceUnitoftheSocialSecurityAgency.Myreportfortheyearended31March2008highlightedthefactthatthelevelsoffraudanderrorforHousingBenefitfortheyear1January2007to31December2007,issuedinMay2008,highlightedestimatedlevelsoffraudanderrorof£10.7moverpayments(customerfraud£2.8m,customererror£6.7mandofficialerror£1.2m)and£1munderpayments(customererror£0.7mandofficialerrorof£0.3m),some2.8percentofhousingbenefitexpenditure.AtthedateofreportingtheSocialSecurityAgency‘FraudandErrorforHousingBenefit’Reportfortheyear1January2008to31December2008isnotavailable.

5.1.3 IrecognisetheconsiderableeffortsandresourcescommittedbytheHousingExecutivetoaddresshousingbenefitfraudanderror.TheHousingExecutive

hasarobustFraudandErrorStrategyinplacetodetectandprosecuteinstancesofcustomerfraudandtominimiseinstancesofcustomererror.Amajorreviewofthestrategywasundertakenthisyearandaplandrawnupaddressingcurrentissuesandactionstobeundertakenoverthenexttwoyearstoensurethatthestrategyremainsfocusedandrelevantinaddressingthisimportantmatter.ThisincludestheHousingExecutive’sinvolvementintheNationalFraudInitiativeandasubstantialinvestmentinadditionalstaffresources.IwouldencouragetheHousingExecutivetocontinuetoemploystrategiestoreducethelevelsofloss.

5.1.4 Iremainconcernedaboutthelossesofthisamountandhavequalifiedmyopiniononthefinancialstatementsonregularity.

5.2 InvestNIAccounts2008-09

5.2.1 InFebruary2006,theWestminsterCommitteeofPublicAccounts(PAC)consideredsignificantconflictofinterestissuesrelatingtotheestablishmentandmanagementofEmergingBusinessTrust;thestandardsofcorporategovernanceintheLocalEnterpriseandDevelopmentUnit,andtheDepartmentofEnterprise,TradeandInvestment’sstewardshipofitsNPDBs.

5.2.2 Initsreport,PACnotedthatitwasworryingthattheblatantconflictsofinterestandothermajorcontrolweaknessesinthiscasewerenotdetectedbytheauditors.OneofthePACrecommendationswasthatthese



matterswerebroughttotheattentionoftherelevantprofessionalbody.AcopyofthePACreportwassenttotheInstituteofCharteredAccountantsinIreland(ICAI)forconsideration.InJune2006,ICAIreferredthemattertotheAccountancyandActuarialDisciplineBoard23(AADB).

5.2.3 TheAADBinvestigatedtheconductofEBT’sauditors,McClureWatters,andtheroleandconductofMrsTheresaTownsley,aDirectorofEBT,herhusband,MichaelTownsleyandtheirfirmMTFCharteredAccountants.InJanuary2009theDisciplinaryTribunalofAADBupheldthecomplaintsbroughtbytheAADBandfinedMcClureWattersandMrRolloMcClure,therelevantauditpartner,£6,000each.MrMcClurewasalsoreprimanded.McClureWatterswasorderedtopaycostsof£60,000.

5.2.4 InMarch2009,AADBthenconcludedthat,havingconsideredtheevidenceandexternalcounsel’sadvice,therewasnorealisticprospectthatadisciplinarytribunalwouldmakeanadversefindinginrespectoftheconductofTheresaTownsleyorMichaelTownsley.Theinvestigationwasclosedanditwasconcludedthatnofurtheractionwouldbetakenagainstthem.

5.2.5 IunderstandtheappointedCompanyInspectorhascompletedhisinvestigationintotheconductofthedirectorsofNovatechLtd.TheDepartmentiscurrentlyconsideringthewayforwardinthiscase,inconsultationwiththeDepartmentofFinanceandPersonnel.

5.2.6 TheDepartmentagreed,intheMemorandumofReply24publishedinJuly2006,thatitwouldprovideanupdatetotheCommitteeontheoutcomeoftheseinvestigations.ProgressreportswereprovidedtotheNorthernIrelandAssemblyPACinNovember2006,March2008andNovember2008.AfurtherprogressreportwillbeprovidedtotheNorthernIrelandAssemblyPAClaterthisyear2010.

5.3 GeneralConsumerCouncilAccounts2008-09

5.3.1 AsdisclosedintheStatementonInternalControl,section7,SignificantInternalControlProblems,theGeneralConsumerCouncilincurredexpenditureonastakeholderengagementevent.TheActingAccountingOfficerisundertakingareviewoftheinternalcontrolsaroundthisexpenditure,andhospitalityingeneral.Iwillreportfurtherontheoutcomeofthisreview,ifnecessary.

5.4 GeneralTeachingCouncilforNorthernIrelandAccounts2006-07

Non-compliancewiththeLegislative RequirementsforAuditin2005-06

5.4.1 TheGeneralTeachingCouncilforNorthernIreland(GTCNI)wasestablishedbytheEducation(NorthernIreland)Order1998andcameintoexistenceinOctober2002.Inaccordancewithparagraph12ofSchedule1tothe1998Order,GTCNIshall,inrespectofeachfinancialyear,prepareandsubmit

23 TheAccountancyandActuarialDisciplineBoard(AADB)istheindependent,investigativeanddisciplinarybodyforaccountantsandactuariesintheUK.TheAADBisresponsibleforoperatingandadministeringindependentdisciplinaryschemesfortheseprofessions.

24 NorthernIrelandDepartmentofFinanceandPersonnelMemorandumonthe46thReportfromthePublicAccountsCommitteeSession2005-06.(CM6879)


totheComptrollerandAuditorGeneral(C&AG)andtheDepartmentofEducation(theDepartment)astatementofaccountswhichtheC&AGshallexamineandcertify.

5.4.2 ThefirstsetofGTCNIaccountswereproducedfor2005-06.TheDepartment,onbehalfofGTCNI,tenderedandappointedaprivatesectorfirmtoprovideexternalauditprovision.Thelegislativerequirementfortheaccountstobeexaminedandcertifiedbymyselfwas,however,unintentionallyoverlooked.

5.4.3 The2005-06accountswereauditedandcertifiedbytheappointedexternalauditorsandtheaccountslaidbeforetheAssembly.However,duringthecourseofthe2006-07audittheoversightintheauditarrangementsforGTCNIwereidentifiedandmyOfficewasadvisedaccordingly.

5.4.4 FollowingdiscussionsandcorrespondencewiththeDepartmentandGTCNIareasonablecourseofactionwasagreedwhichIconsidermeetsthenecessaryauditandaccountabilityrequirementsstipulatedinthe1998Order.

5.4.5 Inrelationtothe2005-06accountsmystaffcarriedoutareviewoftheauditdocumentationandothersupportingpaperstoensurethatsufficientandrelevantauditevidencehadbeenobtainedbytheappointedexternalauditorstoformanopinionontheaccounts.

5.4.6 Inlightofthisreview,Iamsatisfiedthattheunqualifiedopiniononthe2005-06accountsissupportedbytheauditevidence.

5.4.7 Theauditarrangementsforthe2006-07accountsonwardshavenowbeenregularised.

5.5 NorthernIrelandFireandRescueService2008-09

IrregularexpenditurefollowingPay Awardstonon-uniformedDirectors

Overview

5.5.1 InaccordancewithSchedule1section15(4a)oftheFireandRescueServices(NorthernIreland)Order2006,IhaveauditedthefinancialstatementsoftheNorthernIrelandFireandRescueService(NIFRS)fortheyearended31March2009.Ihavequalifiedmyopinionasaresultofirregularpaymentsarisingfromanincreaseinnon-uniformedDirectorspayscaleswhichwasnotauthorisedbytheDepartmentofHealth,SocialServicesandPublicSafety.Thetotalsumoftheseirregularpayments,includingemployer’snationalinsuranceandpensioncosts,amountsto£50,840.

5.5.2 TheChiefFireOfficerofNIFRScommissionedBelfastCityCouncilinJune2007toperformanindependentjobevaluationreviewforeachoftheBoard’sthreenon-uniformedDirectors.TheoutcomeofthisreviewwasthatinAugust2008NIFRSawardedthenon-



uniformedDirectorsincreasesintheirpayscaleswithpaymentsofarrearsbackdatedtoApril2007.AlthoughtheChiefFireOfficerinformedtheChairman,thesejobevaluationsandthesubsequentpayawards,werenotbroughttotheattentionoftheNIFRSBoardortheNIFRSRemunerationCommitteeandpriorapprovalwasnotsoughtfromtheNIFRSsponsordepartment,theDepartmentofHealth,SocialServicesandPublicSafety(theDepartment),asrequiredby:

• TheFireandRescueServices(NorthernIreland)Order2006(includingtheDepartment’sNIFRSFinancialMemorandumpreparedinaccordancewiththeOrder);and

• DepartmentofFinanceandPersonnel(DFP)payremitguidance.

5.5.3 ThismatterwasidentifiedbyDFPinNovember2008anddrawntotheattentionoftheDepartment.TheDepartment’sInternalAuditunitcompletedaninvestigationoftheissuesleadingtotheirregularexpenditureandasaresultofthefindingstheDepartmentinstigatedanumberofactions.Theseincluded:

• arestrictionofNIFRSdelegationlimits;and

• seekingassurancesfromNIFRSthatresponseswouldbeputinplacetoensuresuchbreachesofcontrolwouldnotberepeated.

Commissioningofnon-uniformed Directors’jobevaluationsreview

5.5.4 InApril2007,informaldiscussionsbetweentwoofthethreenon-uniformedDirectorsandtheChiefFireOfficertookplaceregardingtheperceivedlackofequalityofpayscalesbetweenthenon-uniformedDirectorswhencomparedtouniformedPrincipalOfficers.Thisperceivedinequalitygaphadbeenwidenedfurtherasaresultofa4percentrewardpaid,withoutDepartmentalobjection,toNIFRSuniformedPrincipalOfficersin2007-08.ThesediscussionspromptedNIFRStoundertakeajobevaluationreviewofthethreenon-uniformedDirectorposts.ThepostsincludedtheDirectorofFinanceandPerformance,theDirectorofHumanResourcesandtheDirectorofPlanningandCorporateAffairs.

5.5.5 Althoughtherewasanunderlying

perceptionofinequalityofpayscalesatseniormanagementlevelNIFRSdidnotseeklegaladviceonthematter.

5.5.6 BelfastCityCouncil(BCC)wascommissionedbytheChiefFireOfficertocompletethejobevaluationofthenon-uniformedDirectors.Paragraph4.1.8oftheNIFRSFinancialMemorandumoutlinesthatemployeesofNIFRSaresubjecttolevelsofremunerationandtermsandconditionsofserviceasagreedbytheNationalJointCouncil(NJC).TheselectionofBCCwasmadeonthegroundsthatNIFRSbelievedtheCounciltobeoneofthefewNorthernIrelandsourcesforthistypeofjobevaluation,


andduetoalongstandingarrangement,whereBCChadprovidedthisservicetoNIFRSformanyyearsforemployeesatalllevels.ThereisnodocumentationtosupportthisnoristhereevidenceofconsultationwithCentralProcurementDirectorateofDFP.ThearrangementbywhichBCCwasselectedtoundertakethejobevaluationdoesnotfollowpublicprocurementbestpracticeasestablishedbyHMTreasuryandendorsedbyDFP.NIFRSareintheprocessofsubjectingjobevaluationworktotender.

5.5.7 Thejobevaluationrecommendedthatthethreenon-uniformedDirectorspostscouldberankedonequalmeritandthatthepayscalesshouldbeincreased.Mystaffwereinformedthatthiswasbasedonadesktopreview.ThisanalysedtheresultsofaquestionnairecompletedbyeachDirectorandotherinformation,whichindicatedthattherolesandresponsibilitiesofallthreepostshadsignificantlyincreasedsinceanindependentreviewin2003.

Implementationofthefindingsofthe jobevaluationsreview

5.5.8 TheChiefFireOfficeracceptedtherecommendationfromthejobevaluationandapprovedthepayawards.PaymentbeganinAugust2008andwasbackdatedto1April2007,theapproximatedatewhenconcernsovertheequalityofremunerationwithintheorganisationhadbeenraised.

5.5.9 NIFRShasaRemunerationCommittee,comprisedofBoardmembers,whose

primaryroleistoreportandmakeappropriaterecommendationstotheBoardonthesalariesandconditionsofserviceforuniformedPrincipalOfficersandnon-uniformedDirectors.ItwasnotuntilJanuary2009,aftertheDepartmenthadmetwiththeChairmanthepreviousmonthtodiscussthismatter,thattheBoardanditsRemunerationCommitteebecameawareofthenon-uniformedDirector’sjobevaluationandthepayawards.ThiswasfivemonthsaftertheincreasedpaymentshadbegunandaftertheDepartment’sInternalAuditunithadconducteditsinvestigation.

5.5.10 InacceptingthefindingsofthejobevaluationtheChiefFireOfficerdidnotseekpriorapprovalfromtheDepartment.TheChiefFireOfficerinformedmystaffthat,inhisview,theNIFRSFinancialMemorandum,establishedbytheDepartmentin2005,causedsomeconfusionduetoambiguityintwoofitsclauses.Thisincludedparagraph4.1.8whichrequiredNIFRStofollowNationalJointCouncil(NJC)TermsandConditions(whichthejobevaluationdid)andparagraph4.1.5whichrequiredDepartmentalapprovalofallsubstantivechangesofdutiestoemployeesaboveAreaManager(thenon-uniformedDirectorswereabovethislevel).TheChiefFireOfficerhoweverdidnotattempttoseekclarificationfromtheDepartment.Paragraph11.1oftheFinancialMemorandumoutlinesthattheDepartmentwillresolveanyquestionsarisingfromtheinterpretationofanyofitsstatements,afterconsultationwithNIFRS.Thefailuretoseekclarificationonthe



jobevaluationhasmeantthatthepayawards,subsequentlyimplemented,wereinbreachoftheFinancialMemorandumandconsequentlyirregular.

5.5.11Thenon-uniformedDirectorshadatleastaperceivedconflictofinterestinajobevaluationwhichexaminedtheirrolesinNIFRS.OnoneleveltheypotentiallystoodtopersonallygainfromthesuccessfulimplementationoftherecommendationsofthejobevaluationswhileatthesametimetheywouldhavebeenthekeysourceofadvicetotheChiefFireOfficer.Suchadviceshouldhaveincludedassurancethatthejobevaluationwasbeingprogressedinaccordancewithproperprocedures,includingDepartmentalandDFPauthorisation,andrepresentedvalueformoney.ThereisnorecordthatthemeritsofindependentadviceorassurancewereexaminedbytheChiefFireOfficerandthenon-uniformedDirectors.

TheDepartment’sresponsetothepay wardsmadetonon-uniformedDirectors

5.5.12TherequirementtoseekpriorDepartmentalapprovalforthepayawardissetoutintheannual‘Pay Remit Approval Process and Guidance’. ThisprocessisupdatedannuallyandissuedintheformofguidancebyDFP.TheguidanceidentifiestheneedforpriorDepartmentalapprovalofthistypeofexpenditureandstatesthatpublicbodiescoveredbytheExecutive’sauthoritymustnotenterintopaycommitmentspriortotheappropriateapprovalsbeingsought.Italsostatesthatcommitment

toorexecutionofapayawardwithoutappropriateapprovalswillbedeemedirregularexpenditureandtreatedassuch.

5.5.13Inotethatthe2007-08NIFRSpayremitsubmissioninJanuary2008didnotincludeanydetailofthepossiblepayawardsfornon-uniformedDirectorseventhoughthejobevaluationhadbegunbyJune2007.Whilstitwouldhavebeentooearlyinthereviewprocesstoprovideanyaccuratedetail,itshouldhavebeenanopportunitytoprovidetheDepartmentandDFPwithenoughinformationtoindentifyapotentialfuturepaycommitment.

5.5.14TheDepartmentfirstbecameawareofthepayawardinNovember2008asaresultofthe2008-09NIFRSpayremitsubmission.ThiswasthreemonthsafterthepayawardhadbeenmadetothenonuniformedDirectors.Inaddition,thepayremitguidancerequiresapayincreaseofthissizetobesupportedbyabusinesscase.Nobusinesscasewasprovided.ThepayawardswhichhadalreadybeenimplementedbythisdatewereinbreachoftheDFPpayremitguidanceandconsequentlyirregular.

5.5.15IamconcernedwiththeDepartment’shandlingofDFP’s2008payremitguidanceasitappliedtoNIFRS.The‘Pay Remit Approval Process and Guidance’isissuedtoallDepartmentswhoareresponsiblefordistributingittotheirsponsoredbodies,andfortheFinanceDirectorate’sreviewandapprovalofsponsorbodysubmissionsbeforeforwardingthemtoDFP.Ifound:


• TheDepartmenthadnorecordofforwardingthepayremitguidancetoNIFRSwhohavetoldmethattheyreceivedthisfromanothersource;and

• TheNIFRSpayremitsubmissionwasforwardedbytheDepartmenttoDFPwithoutFinanceDirectorateapprovalandtheissueofthenon-uniformedDirectorspayawardsbeingpickedup.ItwasDFP,nottheDepartment,whichnotedthatthenon-uniformedDirector’spayawardbreachedHMTreasurylimitsandthatabusinesscasetosupportanincreaseinthesecircumstanceswasabsent.

5.5.16RespondingtotheidentificationofthepayawardstheDepartment’sInternalAuditunitconductedanimmediateinvestigation.ThekeyconclusionofthisinvestigationwasthatNIFRShadbreacheditsowngovernanceandaccountabilitycontrolsandthatthishadcontributedtotheproposedpayawardsbeingpaidwithoutapprovalfromtheDepartment.ConsequentlythisexpenditurehasbeenheldbytheDepartmenttobeirregularandnoretrospectiveapprovalhasbeengranted.

5.5.17TheDepartmentinformedNIFRSofInternalAudit’sfindingsinJanuary2009andinstructedNIFRStoinstigateanumberofactionsdesignedtorestrictNIFRSdelegationlimitsandtoenableNIFRStoprovideassurancesthatsuchbreachesofcontrolarenotrepeatedinthefuture.Theseactionsincluded:

• Returningthepayofthenon-uniformedDirectorstotheprevious

levelswhichoccurredwitheffectfromFebruary2009;

• Recoveryoftheirregularpayments;

• WideningtheremitoftheRemunerationCommitteetoalljobevaluationsandpayremits;

• CommissioninganindependentjobevaluationforbothuniformedPrincipalOfficersandnon-uniformedDirectorsinNIFRS;

• DepartmentalattendanceatBoardmeetingsandallothercommitteemeetings,includingRemunerationCommitteemeetings;

• SignificantamendmentofthedelegatedauthoritygrantedtoNIFRS.Thisincludedremovingthedelegatedauthoritytoimplementanyjobevaluations;

• IncreasingtheregularityoftheDepartmentalaccountabilityreviewsofNIFRStofourayear;

• InitiationofaquinquinnialreviewtoexamineallaspectsoftheNIFRS/Departmentalrelationship,financialarrangementsandcorporategovernance;and

• SeekingNIFRStoconsiderthecompetenceofitsofficersintheirrespectiverolesbasedontheoutcomeoftheDepartment’sinvestigationandtakemanagerialordisciplinaryactionasappropriate



inlinewithNIFRSpoliciesandprocedures.

5.5.18 InresponsetothistheBoardheldanumberofworkshopsandestablishedaspecialsub-committeetolookintothepayawardsissue,addresstheconcernsoftheDepartmentandactionthepointsoutlinedinparagraph16.ThesubcommitteeestablishedanactionplantoaddressDepartmentalconcernsandmyunderstandingisthateachoftheseisbeingaddressed.

Conclusion

5.5.19 IamconcernedthatthesystemsofcorporategovernanceinNIFRSwereunabletopreventthepayawardstonon-uniformedDirectorsbeingmadewithouttherequisiteapprovaloftheDepartmentandbeforethematterwasreferredtotheNIFRSBoardoritsRemunerationCommittee.ThisledtoaseriousbreachofNIFRScorporategovernance.IwillmonitortheassurancesthatNIFRShaveprovidedtotheDepartmentandinparticulartheenhancedrolefortheRemunerationCommittee.ItisimportantthatNIFRSensureinfuturethatthenecessaryapprovalsareinplacebeforeexpenditureonpayoranyothermatterisincurred.

5.5.20 Therewasatleastaperceivedconflictofinterestforthenon-uniformedDirectorswithregardsthisjobevaluation.TheystoodtogainfromthefindingsofthejobevaluationyetitwasalsotheirroletoprovideadviceandguidancetotheChiefFireOfficerthatsuchissueswere

processedinaccordancewithprescribedproceduresandofferedthebestvalueformoney.ThisconflictwasnotidentifiedbyanyoneinNIFRS.IrecommendthatNIFRSisalerttosuchconflictsandaddressesthesewheretheyoccur.

5.5.21 InitsreportonJob Evaluation in the Education and Library Boards (18/07/08R)thePublicAccountCommitteenotedthatjobevaluationschemesshouldfeaturechecksandbalancessuchasmonitoringandreportingschedules.TheRemunerationCommittee,comprisingBoardmembers,shouldensureNIFRSjobevaluationsaresubjecttochecksandbalanceswhereconflictsofinterestsmaybeanissueforNIFRSstaff.

5.5.22Inotetheincompletedocumentationsupportingthejobevaluation,includingtheoriginsoftheevaluation,thebasisfortheappointmentofBCCtoundertaketheevaluationandtheabsenceofabusinesscaseinthe2008payremitreturn.Iamsurprisedthatajobevaluation,promptedbyperceivedemploymentequalityconcerns,wasprogressedwithoutthebenefitoflegaladvicesettingoutthepreciserelevanceofthisissueandanypotentialliabilitiesarising.NIFRShasnowsoughtlegaladvice.

5.5.23 AsrequiredbytheDepartmentNIFRShaltedthepayincreasesinFebruary2009andsoughttorecoverthesumsirregularlypaid.TodateNIFRShaverecovered£7,240bywithholdingtheannualinflationaryupliftduetothenon-uniformedDirectorsin2007-08and


2008-09.NIFRSistoseeklegaladviceonitspositionwithregardsboththerecoveryandreturningthenon-uniformedDirectorstotheirpreviousratesofpay.Iwillfollowupdevelopmentsontheselegalissues.

5.5.24 IwelcometheDepartment’spromptandcomprehensiveresponsetothismatter.InmyFinancial Auditing and Reporting: 2007-08 Report (NIA115/08-09)IrecommendedthattheDepartmentreviewsthesponsorshipprocedureswhichapplytoNIFRS.Theresponsetothenon-uniformedDirector’spayawardsprovidesameansbywhichmyrecommendationcanbeimplemented.IwillmonitortheDepartment’sprogressandwillbelookingfortheDepartmenttoensurethat:

• TheNIFRSFinancialMemorandumisclarifiedastothelimitsofDepartmentaldelegationwhichapplytopayawardsandjobevaluations;and

• TherequirementsofDFPpayremitguidanceforsponsorDepartmentstoreviewandapprovesponsoredbodysubmissionsareapplied.

5.6 StrategicInvestmentBoardLimitedAccounts2008-09

ReportontheCompositionoftheBoard ofDirectors

5.6.1 TheStrategicInvestmentBoardLimited(SIB)isacompanylimitedbyguarantee,establishedbytheOfficeof

theFirstMinisteranddeputyFirstMinister(OFMDFM).SIB’sroleistoinformandhelpimplementMinisters’policyforimprovingpublicinfrastructure.

5.6.2 TheprincipalactivitiesofthecompanyaretoprovideadvicetotheNorthernIrelandExecutiveinrelationtotheformulationandimplementationofitsprogrammeofmajorinvestmentprojectsandtoprovideadviceandassistance(includingresearch,consultancy,advisoryandotherservices)tobodiesinrelationtotheimplementationoftheirinvestmentprojects.

5.6.3 Inthe2008-09year,SIBhadfivedirectors.ItsdirectorsareappointedbyOFMDFM.Twoofthesedirectorswereexecutivedirectorsandtheremainingthreewerenon-executivedirectors.

5.6.4 Thetermofappointmentofoneofthethreenon-executivedirectorsendedon30September2008.Hehasbeenreappointedforafurthertermfrom1October2008.Thetermsofappointmentoftheremainingtwonon-executivedirectorscametoanendon31March2009.

5.6.5 Goingforwardintothe2009-10year,SIBthereforehasonenon-executivedirectorandtwoexecutivedirectors.Thisisadeparturefrombestpracticeinthepublicsector.ItssignificancemustbejudgedinthecontextthatSIBisahighprofilebodywithademandingsetofrisksand,asanon-departmentalbodysponsoredbyOFMDFM,shouldbesupportedbygovernancearrangements



whichshouldfullyreflectthehighstandardsrequiredbythepublicsector.

5.6.6 ThiscurrentpositionisundesirableandcontravenesSIB’scorporategovernancearrangements.Inparticular,therewasaseriousriskthattheremainingnon-executivedirectorwouldhavehadtochairtheboardandallthesubcommitteesincludingtheauditcommittee.Iamadvisedthat,asaninterimmeasure,SIBhasengagedanindependentpersonwhoisnotamemberoftheBoardtochairitsAuditCommittee;otherwisetherewouldnotbeaseparationoffunctionbetweentheChairmanandChairoftheAuditCommitteeinaccordancewiththeguidancewithinHMTreasury’shandbookforauditcommittees.Whilesuchanarrangementisanacknowledgementoftherequirementsoftheguidance,nonethelessitcannotberegardedasidealpractice.TheAuditCommitteeshouldhaveaquorumoftwonon-executiveDirectors.Non-executivedirectorsalsohaveanimportantroleinadvisingandchallengingexecutivedirectorswhichasinglenon-executivedirectorcannotfulfilfully.AsSIBwasestablishedasalimitedcompany,bestpracticeisthatthenon-executivedirectorsshouldoutnumbertheexecutivedirectors.

5.6.7 Twoopencompetitionshavebeenheldtoidentifysuitablecandidatestoserveasnon-executivedirectorsforSIB,thelatestofwhichconcludedinMarch2008.Theappointmentshaveyettobemade.

5.6.8 OFMDFMtoldmethatitacceptsthatthepresentsituationwithregardtothenumberofnon-executivedirectorson

theStrategicInvestmentBoardisnotideal.OFMDFMtoldmethatithasbeencarefullyconsideringtherisksandotherissueshighlightedbyNIAOsincethedepartureofthetwooutgoingnon-executivedirectors,andithassoughttomitigatetherisksasfaraspossible.OFMDFMfullysupportedSIB’sactioninengaginganinterimindependentchairforitsauditcommitteetoavoidaconflictofrolesforthecompanychairman.

5.6.9 Furthermore,OFMDFMnotedthatithaskeptMinistersfullyappraisedofcorporategovernanceissuesasthesehaveemergedandhassoughttoensurethatSIBcancontinuetofunctionhavingregardtoitsArticlesofAssociation,relevantstatutesandrelevantDFPguidanceanditcontinuestomonitorthesituationclosely.

5.6.10 OFMDFMadvisedmethatMinistersarecurrentlyconsideringtheissueofappointingfurthernon-executivedirectorstoSIBbasedonthemostrecentcompetition.

5.7 BelfastMetropolitanCollegeReport

Qualificationarisingfromirregular expenditureincurredinrespectof advisoryfeesonaPublicPrivate Partnershipproject

Introduction

5.7.1 IwasappointedasauditorofBelfastMetropolitanCollege(BMC)undertheInstitutionsofFurtherEducation(PublicSectorAudit)Order(NorthernIreland)


2008.Iamrequiredtoexamine,certifyandreportuponeachstatementofaccountspreparedbytheCollege.

5.7.2 ThepurposeofthisreportistoexplainthebackgroundtomyqualificationofBMC’sfinancialstatementsfor2007-08,andtocommentonthedelayinproducingtheAnnualReportandAccounts.

Background

5.7.3 BMCisfundedbytheDepartmentforEmploymentandLearning(theDepartment)andwascreatedon1August2007fromamergeroftheBelfastInstituteofFurtherandHigherEducation(BIFHE)andCastlereaghCollegeofFurtherandHigherEducation(CCFHE).BMChasover53,000studentsenrolledonfull-timeandpart-timecoursesmakingitoneofthelargestcollegesofFurtherandHigherEducationintheUK.Thereareover1,000full-timeand800part-timestaffemployedintheCollegeanditsannualbudgetissome£45million.

5.7.4 ItisledbyaDirectorwithAccountingOfficerstatus,responsibleforensuringthattheCollegemaintainsanappropriatesystemoffinancialmanagementandforensuringthatthereareadequateprocedures,controlsandstructureswithintheCollegetoensurethatitconformstotherequirementsofproprietyandofeconomical,efficientandeffectivefinancialmanagement.TheCollegealsohasaGoverningBody,responsibleforsecuringtheefficientandeffectivemanagementofCollegeactivitiesandproperty.

5.7.5 SincetheCollege’sformationon1August2007ithasexperiencedanumberofchallenges,including:

a.Anumberofchangeswithinseniorposts,withthreedifferentChairsoftheGoverningBodyandfourdifferentDirectorstodate.AtpresentthepostsoftheDeputyDirectorofBusinessServicesandtheHeadofFinance,whoreportsdirectlytotheDeputyDirector,arevacantalthoughinterimpostholdershavebeenappointedonaconsultancyoragencybasis;

b.TheCollegehasexperiencedfinancialdifficultieswhichledtheDepartmentinSeptember2009tocommissionconsultantstocarryoutanEfficiencyReview25oftheCollege.ThefinancialdifficultiesthatconcernedtheDepartmentincluded:

• therewaslackofclarityovertheprecisefinancialpositionoftheCollege;

• theCollege’sfinancialforecastshadbeensignificantlyrevisedonanumberofoccasions;

• thefinancialforecastsprovidedshowedsignificantprojecteddeficitsforthecurrentandfutureyears;and

• theCollege’sinternalauditorscouldnotprovidethenecessarylevelofassuranceovertheadequacyandeffectivenessofcontrolswithinthefinancedepartment.

25 AnEfficiencyReviewisundertakeninaccordancewithArticle18oftheFurtherEducation(NorthernIreland)Order1997-”TheDepartmentmayarrangeforthecarryingout(whetheraspartofaninspectionunderArticle102ofthe1986Orderorotherwise)byanypersonofstudiesdesignedtoimproveeconomy,efficiencyandeffectivenessinthemanagementoroperationofaninstitutionoffurthereducation.”



c. Thetwolegacycollegesmergedtheiraccountingsystemsbuttheimplementationofthenewsystemcreatedanumberofsignificantproblemsinproducingreliablefinancialinformation.Forexample,theCollegehadnotproducedanymanagementaccountsfortheyearended31July2009until18December2008andforatimeduring2007-08,thebalanceontheCollege’sbankstatementscouldnotbeproperlyreconciled;and

d.TheCollegechangedbankersleadingtoproblemswhenthirdpartieslodgedmoneyintothewrongbankaccount,creatingdifficultiesforBMCinaccessingthesefunds.

EfficiencyReview

5.7.6 TheEfficiencyReviewwascompletedinApril2009anditsfindingsincluded:

a.weaknessesintheperformanceoftheseniormanagementteam;

b.asignificantnumberofweaknessesinfinancialcontrolsduetoaweakcontrolenvironment.Problemsincluded:anewfinancialsystemthatwasinadequatelytested;delaysinprocessingandrecognisingpurchaseinvoices;bankaccountsnotreconciled;delaysinrecoveringdebtors;andalackofpropercontroloverstaffcosts;

c. concernsovertheCollege’sabilitytoachieveabalancedbudgetin2008-

09,theCollegehavingincurredadeficitof£6.2millionin2007-08;

d.poormanagementinformationincludingalackofclearprocessesforhandlingkeystudentinformationandacomplexreportingsystemthatwasnotuser-friendly;

e. therewaslittlesynergy,withinstrategicplanning,betweencorporateplanning,curriculum,estateandfinancialplanning,andtherewasnocomprehensiveestatesstrategy;and

f. delaysinimplementingauditrecommendations;

5.7.7 IntheMemorandumofResponsetoaPublicAccountsCommitteereportonfinancialmanagementinthefurthereducationsectorinNorthernIreland26theDepartmenttoldtheCommitteethatitwasworkingwiththeGoverningBodyandseniormanagementtocompileandimplementacollegeimprovementplanbyDecember2009toaddressthefindingsoftheEfficiencyReview.TheplanwouldestablisharevisedstrategicandfinancialplansettingouttheactionsrequiredtostabilisetheCollege’sposition,andappropriatetargetsandperformanceindicatorsagainstwhichprocessescanbeassessed.TheCollegeappointedconsultantsinJanuary2010toassisttheminproducingtheCollegeImprovementPlan.

5.7.8 InotethattheEfficiencyReviewregarded“theearlyappointmentofapermanentDirectorforBMCascriticaltoitsfuture

26 DepartmentofFinanceandPersonnelMemorandumontheTwelfthandThirteenthReportsfromthePublicAccountsCommittee,Session2008-09,dated16September2009.


success”.ThispostwassubsequentlyfilledinNovember2009.HowevertheEfficiencyReviewalsoreferredtoskillsgapswithinthefinancefunction,andconcludedthatthecapacityconstraintsinthatdepartment“mustbeaddressedimmediately”.IamconcernedthatpositionswhicharekeyforthefinancialmanagementoftheCollegearecurrentlyvacant:

• TheDeputyDirectorofBusinessServiceshadbeenabsentfrom3June2009andsubsequentlylefttheemploymentofBelfastMetropolitanCollegeon31October2009.Howeveroneoftheconsultantsfromtheteamreferredtoinparagraph5.7.7abovehasundertakenthisrolesince4January2010.

• TheHeadofFinanceposthasbeenvacantsince30September2009.Howeversincethatdatethisrolehasbeenundertakenonaninterimbasisbyatemporarymemberofstaff.

5.7.9 IamconcernedinlightoftheissuesthattheCollegefacesthatkeyfinancialpositionsarebeingconductedthroughinterimshorttermappointmentsandwouldurgetheCollegetoaddressthisasamatterofurgency.

Issueswiththetimelinessandqualityof financialstatementspresentedforaudit

5.7.10IreceivedacopyoftheCollege’sdraftfinancialstatementsinOctober2008andconductedapreliminaryreviewtoensuretheywereofsufficientquality

toallowauditworktocommence.Inotedanumberofsignificanterrorsandomissionswithinthedraftfinancialstatementsoriginallypresentedtomeforaudit.AlthoughsomeofthedelaywascausedinaccountingforthePublicPrivatePartnership(PPP)attheMillfieldcampus,mostofthedelaywasduetothepoorqualityofthedraftfinancialstatementsandthesubsequentdelayinbringingthefinancialstatementsuptoastandardexpectedofapublicbody.

5.7.11Thepoorqualityofthedraftfinancialstatementspresentedtomeforaudit,thenumberofdraftsrequiredtoeventuallybringthemuptoanacceptablequalityoverasignificantperiodoftime,andthesignificantcontrolproblemsnotedinparagraphs5.7.5and5.7.6above,wereunacceptable.HowevertheCollegewassubsequentlyabletopresentmewithareasonablesetoffinancialstatementsandIobtainedsufficientappropriateauditevidencetoenablemetoformanopiniononthem.


5.7.12 In2001,theDepartmentauthorisedoneofthelegacyfurthereducationcolleges27whichnowformspartoftheBMCtoinitiateaprocurementprocesstoreplacetwoofitscitycentrebuildingswithasinglebuildingbasedattheTitanicQuarter.ThisprojectwastobeprocuredasaPPP.

27 TheformerlegacyCollegeundertakingthisprocurementwasBelfastInstituteofFurtherandHigherEducation(BIFHE).CastlereaghCollege,theotherlegacyCollege,whichmergedwithBIFHEinAugust2007toformBMC,wasnotinvolvedinthisprocurement.



5.7.13Ateamoftechnical,legalandfinancialadvisorswasrequiredtoassistwiththislargescaleprocurementexercise.InJanuary2002,inaccordancewiththedelegatedlimitsforapprovalofexpenditure,thelegacyCollege’ssponsordepartmentsoughtDepartmentofFinanceandPersonnel(DFP)approvaltoappointadvisors.DFPapprovedexpenditureuptoalimitof£600,000.

5.7.14TheprocurementprocesswasmanagedbytheProcurementService(nowknownastheCentralProcurementDirectorate,CPD).ThecontractfortheappointmentoftheconsultancyadvisorswasawardedinDecember2002onafixedpricebasis.Theacceptedbidwasfor340consultancydaysatacostof£300,000(excludingVAT).Thiscostincludedanyoverrunriskwherethemanagementofthatriskwasconsideredtobewithinthecontractor’scontrol,thatis,thebidof£300,000coveredthecostofanyoverrunwhichcouldbedirectlycontrolledbythecontractor.TheDepartmentagreedtoreimbursethelegacyCollege90percentoftheexpenditureincurred.

5.7.15Atthetimeoftheappointment,theadvisoryteam’stenderproposalsenvisagedthattheirserviceswouldbeprovidedoverathirteenmonthperiod.HoweveroncethePPPprocurementprojectwasunderway,aseriesofissuesledtodelaysandvariationstothePPPcontract.Additionaltimewasincurredbytheadvisoryteamwhichtheyconsideredtobeoutsideoftheircontrol,leadingtoadditionalcostsoverandabovethe

originalPPPconsultancycontract.Issuesincluded:

• uncertaintysurroundingtheCollege’spotentialinvolvementintheSpringvaleCampusandtheramificationsthismighthavehadontheCollege’swiderestatestrategy;

• prevailingeconomicconditionsledtofundingtermsfromtheBidder’sintendedfinancierbeingrevisedtwicewithinfivemonths,whichthenledtotheBidderseekingtorenegotiateitschargetoBMC;

• theBidderexperiencedfundingconstraintswhichthenledtofurtherdelaysandadditionalworkwhilstanotherfinancierwasfound;

• thematerialisationofaplanningrequirementleadingtotheneedforanewdesignsolutionforcarparking,whichinvolvednegotiationsonfundingbetweenDecember2006andJune2008;

• delayinthereceiptofplanningpermission;and

• theproposaltobuildthecampusatTitanicQuarterledtoprotractednegotiationswithanumberofbodiestosecuretheleasefortheland.

5.7.16 Asaresultofthesechanges,thePPPprocurementphasewasnotcompletedbytheadvisoryteamuntilApril2009,overfiveyearsafterthedateenvisagedatthetimeoftheappointmentofthe


advisors.TheadvisoryteamsubmittedaschedulereflectingproposedchargestoBMCfor2,247consultancydaysatacostof£2,152,898(excludingVAT),anincreaseof£1,852,898andoverseventimeshigherthantheoriginalagreedprice.Ihavebeenunabletoconfirmthe£2.2millionproposedcharge,sincetheCollegecouldnotprovidemewithacopyoftheoriginalscheduleofcoststobebilled.

5.7.17 BMCconductedareviewofthecostsbilledandnegotiatedareductionof£652,898intheinvoicedcoststo£1,500,000(excludingVAT)providedthatthefinancialclosedateforthePPPprocurementwasnolaterthan15January2009.ThePPPadvisorssubsequentlyagreedtoextendthisdeadlineto31March2009,however,thefinancialclosewasonlyagreedinDecember2009.AsaresultthePPPadvisorsquoted£110,250(excludingVAT)foradditionalworkconductedbetween1Apriland3April2009.BMCsettledfeesof£30,070(excludingVAT)forthisadditionalwork.Althoughmostofthereductionfromthequotationwasduetotheworkbeingsignificantlylessthanenvisaged,asmallelementwasachievedthroughnegotiation.SinceBMCcanonlyreclaimtwopercentofVATincurred,thetotalPPPconsultancycosttotheCollegewasactually£1,776,063.BMCtoldmethatofthisamount£372,499,incurredbefore2007-08,wasexpensedbythelegacycollegepre-mergerand£896,489wasaccountedforbyBMCin2007-08asconsultancyexpenditure.With£1,268,988incurredby2007-

08,thebalanceof£507,075willbeaccountedforwithintheCollege’s2008-09accounts.

5.7.18TheCollege’sreviewofcostsnotedabovewasconductedtoverifythevalidityofthetotalhoursclaimedandthefeeratesapplied,andtheDepartment,CPDandtheStrategicInvestmentBoardwereconsultedaspartofthisexercise.ThisprocesswasendorsedbytheDepartmentwhichacknowledgedtheobligationofBMCtopaytheadvisoryteamforallserviceslegitimatelydeliveredinsupportofthePPPprocurementactivity.TheCollegetoldmethatthereasonsforthelargereductionincostsoriginallyinvoicedbytheconsultants(seeparagraph5.7.17above)weremainlyasaresultofareviewandbenchmarkingoftheclaimwithotherstandards.Thebenchmarkingconductedconsistedof:

• abenchmarkcomparisonwithastandardfee,usedforclientadvisers,intheProgrammeforSchools(PfS).Inthisprogramme,afigureofthreepercentofthecapitalvalueofaprojectwasusedforbusinesscases.ThePfSbusinesscasesdiddiffersignificantlyfromtheCollege’scircumstancesinthattheBMCprocurementprocessclearlytooklongertoclosethanenvisagedbyeithertheCollegeortheadvisors;and

• alocalbenchmarkcomparisonwiththeBelfastEducationandLibraryBoard(BELB)schoolsproject.DuringtheCollege’sproject,anumberofpolicyandclientalterationsoccurred



whichmodifiedtheworkrequiredandhenceitscost.TheBELBprojectalsohadanumberofcomplexitieswhichneededtobeaccountedfor.ThisbenchmarkingguidedtheCollegetowardsaconsultancychargeof£1.5million,solongasitwasfullysupportedbyverifiabledocumentation.

5.7.19 Iamconcernedthatalargecontractoverrunwasincurred.IrefertoaPublicAccountsCommittee‘ReportontheUseofConsultants’28wherethecommitteemakesreferencetosuchacircumstancewhenitsaid:

‘Frequent and large-scale increases in contract costs raise doubts about the standard of project appraisal, management and control; are often non-competitive in nature; and can hinder the achievement of value for money.’

5.7.20 InDecember2008BMCsubmittedanexplanationforthecostoverruntotheDepartment.InMarch2009theDepartmentthenwrotetoDFPseekingretrospectiveapprovalforanupliftintheadvisoryfeesfromtheoriginallimitof£600,000,approvedinJanuary2002,to£1,500,000(anincreaseof£900,000)morethandoubletheapprovedlimit.

5.7.21 Initsreply,DFPnotedthatretrospectiveapprovalcouldonlybegrantedinlinewiththerulescontainedin‘ManagingPublicMoneyNorthernIreland’29whichrequiredtwoconditionstobesatisfied:

• DFPhadbeenapproachedproperlyinthefirstplace;and

• theDepartmentwastakingstepstoensuretherewasnoreoccurrence.

5.7.22DFPrecognisedthattheMinisterfortheDepartmenthadaskedforapapertobepreparedonthelessonslearnedfromthisexperienceandthattheDepartmenthadpartlysatisfiedthesecondcondition.However,DFPrefusedtheDepartment’srequestasitdidnotconsiderthatthefirstconditionhadbeensatisfiedsincearevisedbusinesscasehadnotbeensubmittedtosupporttheapprovalrequestfortheadditionalconsultancycosts.

5.7.23 InApril2009theDepartmentnotifiedBMCthatDFPhaddeclinedtograntretrospectiveapprovalfortheupliftinPPPprocurementadvisoryfees.TheDepartmentacknowledgedtheobligationoftheCollegetopaytheadvisoryteamforallserviceslegitimatelydeliveredinsupportofthePPPprocurementactivityandconfirmedthatitwouldupholdtheagreementwiththelegacyCollegetoreimburse90percentoftheadvisoryfeesincurred.

Conclusion

5.7.24AspartofmyauditofBMC’sfinancialstatements,Iamrequiredtosatisfymyself,inallmaterialrespects,thattheexpenditureandincomeshowninBMC’saccountshavebeenappliedtothepurposesintendedbytheNIAssemblyandthatthefinancialtransactionsconformtotheauthorities30whichgovernthem,thatis,thattheyare“regular”.SinceDFPapprovalhadonlybeenreceivedforconsultancycostsof£600,000but£1,268,988ofcostshadbeenincurred

28 Report:16/07/08RPublicAccountsCommittee29 ManagingPublicMoneyNorthernIrelandissuedbyDFPistheauthoritativeguidetotheprinciplesfordealingwith

resourcesusedbypublicsectororganisationsinNorthernIreland.30 Authoritiesincludethelegislationauthorisingtheexpenditure,theregulationsissuedtocomplywiththatlegislation,Assembly

orParliamentaryauthority,andDFPauthority.


upto31July2008,£668,988isirregular.Ihavethereforedecidedtoqualifymyauditopinionontheregularityofthisexpenditure.

5.7.25 TheprojectgovernancearrangementsrequiredtheappointedadvisoryteamtoreportthroughthelegacyCollege’sProjectTeamtothePPPProjectBoard,madeupofmembersofthelegacyCollege’sBoardofGovernors,thelegacyCollege’sSeniorManagementandrepresentativesfromtheDepartment.Whileitbecameapparentthatadditionalworkwasrequired,theextentofthisworkproveddifficulttoquantifyandthefinancial,proprietyandaccountabilityimplicationswerethereforenotadequatelycontrolled.TheCollegetoldtheDepartmentthatitonlybecameawareofthepossibilityofadditionalconsultancycostsin2007.ItisdifficulttoaccepthoweverthattheProjectBoardcouldnothavepredicted,giventhedelays,thatadditionalcostswouldbeincurredandhadnotsoughttomanagethesecostsinadvanceofthatdate.ThisbreakdownincontrolshasnotonlyledtothelegacyCollegeincurringirregularexpenditure,butalsotheDepartment,throughitsfundingoftheCollege31.AlthoughBMCdidachievealevelofabatementintheadditionalcosts,thelackofcontractmanagementcontrolduringthelegacyperiodoftheproject,makesitdifficulttoassesswhethervalueformoneyhasbeenobtainedintermsoftheconsultancycostsincurred.

5.7.26 NeithertheDepartmentnorBMChavebeenabletoprovidemewithreliableevidenceofwhetherornot

DFP’sapprovedlimitforthesecostswaseffectivelycommunicatedtothelegacyCollegeatthetime.HoweverboththeDepartment,(atPrincipalgrade)andthelegacyCollegewererepresentedontheProjectBoardsoitissurprisingthatthereappearstohavebeennoawarenessoftheapprovallimit,nomonitoringagainstit,andnoactiontakenbeforethelimitwasbreached.

5.7.27 IaskedtheDepartmentandtheCollegetoexplainhowthefailuretoobtainapprovalforthisadditionalexpenditurehadarisenandwhatlessonshadbeenlearnt.TheDepartmentandBMCtoldmethattheprocurementhadbeencomplexinnatureforthereasonsoutlinedatparagraph5.7.15above.Asaresult,theoriginaltimescale,whichhadenvisagedthecompletionoftheprojectwithin16months,wasfoundtobeunrealisticinlightofthesignificantdelayswhicharoseasaresultofthecomplexitiesoftheproject.Asaresult,duringthisprolongedprocurementprocess,asignificantamountofadditionalworkwasrequiredwhichincreasedadvisoryfeesinexcessofthelevelsagreedwithinthecontractandthoseapprovedbyDFP.Therewereinsufficientfinancialmonitoringmechanismsandcontrolsinplaceandsotheincreasesinprofessionalfeeswerenotidentifiedinadvanceofthelimitsbeingexceeded.Asaresult,thelegacyCollegesandDELdidnotseekapprovalforincreasedcostsastheywereunawareofthemagnitudeoftheadditionalcostsaccrued.TheDepartmenthascommissionedanindependentinternalreviewoftheissues

31 TheDepartmentforEmploymentandLearning’s2008-09resourceaccountswerealsoqualifiedforfundingtheCollege’sirregularexpenditureandsimilarirregularexpenditureincurredbyanotherCollege.



whichwillhighlightandreportupontheweaknessesinthecontrolsystemsandmakerecommendationsforfuturePrivateFinanceInitiativeprocurement.

5.7.28Ireportedon30November2009onasimilarissueinthe2007-08financialstatementsofSouthEasternRegionalCollege(SERC),againonPPPconsultancycosts.Inotethatthesameteamoftechnical,legalandfinancialadvisorswereappointedbySERCfollowingaseparateprocurementprocess.Significant,additionalcostswerealsoincurredbySERCoverandabovethecontractvaluewithouthavingreceivedDFPpriorapproval.

5.7.29LegaladvisorsassistingSERCwithitsreviewofincreasedconsultancycostsrelatingtoitsPPPprojectnotedthatthecontractrequiredeithertheDepartmentortheadvisoryteamtorequestanyvariationinthecontractandagreetheassociatedpricingimplications.SimilarconditionsappliedtothecontractforconsultancycostswithBMC’slegacyCollegebutitappearsnottohaveagreedtheassociatedpricingimplicationstocontractvariations.ThisplacedthepublicsectorinaweakpositionlegallysincetheDepartmentandthelegacyCollegeknewthatadditionaltaskswerebeingconducted,uponwhichadditionalcostswerelikelytobeincurred,andallowedthemtocontinue.

5.7.30 IaskedtheDepartmentwhythetermsforcontractvariationswerenotfollowed.TheDepartmenttoldmethattheconsortium

providingprofessionalprocurementadvicewasaskedonnumerousoccasionstoquantifytheadditionalcostsbutfailedtodosoinatimelymanner.OnassumingresponsibilityfortheprojectinAugust2007theonlysanctionavailabletoBMCwouldhavebeentostandtheconsultantsdown.Itwasconsideredthatthiscourseofactionwouldnotbepracticable,however,astohavedonesocouldhaveledtotheabandonmentoftheprocesslosingallthetime,resourcesandfundingthathadbeenexpendedtodate,leavingtheCollegewithanurgentneedthatwouldhavehadtobeaddressedbyappointingadditionalprofessionaladvisorsandwouldhaveriskedaclaimfromtheBidderforrecoveryofitsbiddingcosts.

5.7.31Asnotedinparagraph5.7.17above,furtherirregularexpenditureonthesePPPconsultancycostsof£507,075willbeaccountedforinthe2008-09accounts.Iwillconsidertheimpactofthisonmyauditopiniononthe2008-09accounts,whenmyauditoftheseaccountsisfinalisedlaterthisyear.Inaddition,IwillcontinuetomonitortheprogressoftheCollegeinimplementingtheCollegeImprovementPlanwhichaddressestherecommendationsoftheEfficiencyReview.Aspartofthis,IwillmonitortheprogressmadeinseekingtoachievethefinancialstabilityoftheCollege.IwillalsocontinuetomonitortheTitanicQuartercapitalprojectandmay,ifappropriate,reportonanyfurthermattersofimportance.


5.8 SouthEasternRegionalCollege2007-08


5.8.1 TheSouthEasternRegionalCollege(SERC)wasformedon1August2007fromthemergerofthreeFurtherEducationColleges.Priortothisin2003twoofthelegacyColleges32undertookasingleprocurementapproachforthedeliveryoftwocapitalinvestmentprojectswithatotalcapitalvalueof£58.4millionforthedevelopmentof4newcollegecampuses,atDownpatrick,Ballynahinch,LisburnandNewcastle.ThiscombinedprojectwasprocuredasaPublicPrivatePartnership(PPP).

5.8.2 InMay2003thetwolegacyCollegesjointlyappointedateamoftechnical,legalandfinancialadvisorsforthislargescaleprocurementexercise.Inaccordancewiththedelegatedlimitsforapprovalofexpenditure,thelegacyColleges’sponsordepartment,theDepartmentforEmploymentandLearning(theDepartment)soughtDepartmentofFinanceandPersonnel(DFP)approvalforthelegacyCollegestoappointtheadvisors.DFPapprovedexpenditureuptoalimitbutnotexceeding£400,000.

5.8.3 TheprocurementprocesswasmanagedbytheGovernmentPurchasingAgency(nowknownastheCentralProcurementDirectorate).Thecontractfortheappointmentoftheconsultancyadvisors

wasawardedinDecember2003onafixedpricebasis.Theacceptedbidwasfor394.5consultancydaysatacostof£357,508(excludingVAT).Thiscostincludedanyoverrunriskwherethemanagementofthatriskwasconsideredtobewithinthecontractor’scontrol.TheDepartmentagreedtoreimbursethelegacyColleges90percentoftheexpenditureincurred.

5.8.4 Atthetimeoftheappointment,theadvisoryteam’stenderproposalenvisagedthattheprocurementphaseofthePPPprojectwouldbecompletedwithinsixteenmonths,byApril2005.HoweverthePPPprocurementproject,onceitwasunderway,wassubjecttoaseriesofissuesthatledtodelaysandvariationstothePPPcontract.Additionaltimewasincurredbytheadvisoryteamwhichtheyconsideredtobeoutsideoftheircontrol,leadingtoadditionalcostsoverandabovetheoriginalPPPconsultancycontract.Issuesincluded:

• oneofthebiddersexperiencedfinancialdifficultiesandwastakenoverbyanothercompanyleadingtoanewpre-qualificationsubmission;

• theLisburndevelopmentwasoriginallytobebuiltovertwositesbuttheunexpectedavailabilityofadjacentlandledtoamorefavourablesolutionbecomingavailablethatrequiredassessmentbytheadvisoryteam;

• theimpositionofplanningconditionsattheLisburnsiteledtotheneedforanewdesignsolution;

32 ThetwoformercollegesundertakingthisprocurementwereEastDownInstituteofFurtherandHigherEducationandLisburnInstituteofFurtherandHigherEducation.NorthDownandArdsInstituteofFurtherandHigherEducation,theotherlegacycollege,wasnotinvolvedinthisprocurement.



• newstatutorysustainabilityrequirementswereintroducedduringtheprocurementphaserequiringelementsofthebuildingstoberedesigned;and

• carparkingnumbersattheDownpatrickcampuswereunderestimated,leadingtoaredesigntoaccommodatethegreaterneedandanyimpactonplanningconditions.

5.8.5 Asaresultofthesechanges,thePPPprocurementphasewasnotcompletedbytheadvisoryteamuntilApril2008,threeyearsafterthedateenvisagedatthetimeoftheappointmentoftheadvisors.TheadvisoryteamsubmittedaninvoicetoSERCinJanuary2008,sixmonthsafterthecollegewasformed,for1,155consultancydaysatacostof£1,325,436(excludingVAT),anincreaseof£967,928,almostthreetimeshigherthantheagreedtimeandbidprice.SERCconductedaduediligencereviewofthecostsbilled.Thisledto206consultancydaysbeingomittedandareductionintheinvoicedcostsof£282,529to£1,042,907(excludingVAT).AsSERCcanonlyreclaimtwopercentofVATincurred,thetotalPPPconsultancycostisactually£1,204,539.SERCtoldmethat£382,785ofthisamountwasexpensedbythelegacycollegespre-mergerwhennoextensiontothePPPconsultancycontracthadbeenagreed.Thebalanceof£821,754wasaccountedforbySERCin2007-08aspartofthecostofbuildingsunderconstruction.SERCadvisedmethat£601,232ofthe£934,358buildingsunderconstruction

costswereincurredpre-merger,butnotaccountedforbythelegacyCollegesatthattime.

5.8.6 Theduediligenceprocessnotedabovewasconductedtoverifythevalidityofthetotalhoursclaimedandthefeeratesapplied.ThisprocesswasendorsedbytheDepartmentwhichacknowledgedtheobligationofSERCtopaytheadvisoryteamforallserviceslegitimatelydeliveredinsupportofthePPPprocurementactivity.SERCexperienceddifficultiesinobtainingrelevantsupportingevidence.Asaresulttheprocesstookoneyeartocomplete.The£282,529reductionintheadvisoryteam’sfeewasmainlyduetoareductioninprojectmanagementcostswhenSERCchallengedthereasonablenessofclaimingforthenumbersofconsultantsattendingmeetings,SERC’sliabilityforcertaintasksbilledandtheapplicabilityofcertainfeerates.

5.8.7 Iamconcernedthatalargecontractoverrunwasincurred.IrefertoaJuly2008PublicAccountsCommittee‘ReportontheUseofConsultants’33wheretheCommitteemakereferencetosuchacircumstancewhenitsaid:

‘Frequent and large-scale increases in contract costs raise doubts about the standard of project appraisal, management and control; are often non-competitive in nature; and can hinder the achievement of value for money.

5.8.8 InFebruary2009SERCsubmittedarevisedbusinesscasetotheDepartmentfortheadvisoryfeesoverrun.InMarch

33 Report:16/07/08RPublicAccountsCommittee


2009theDepartmentwrotetoDFPseekingretrospectiveapprovalforanupliftintheadvisoryfeesfortheCollegePPPprojectfromtheoriginallimitof£400,000approvedinMay2003to£1,347,000(anincreaseof£947,000).Thisrequestwasmadeusingthebestestimatesavailableatthetime.

5.8.9 Initsreply,DFPnotedthatretrospectiveapprovalcouldonlybegrantedinlinewiththerulescontainedin‘ManagingPublicMoneyNorthernIreland’(MPMNI)34.MPMNIstatesthat‘whereresourceconsumptionofexpenditureisirregular,DFPmaybepreparedtogiveretrospectiveapprovalifitissatisfiedthat:

• itwouldhavegrantedapprovalhaditbeenapproachedproperlyinthefirstplace;and

• theDepartmentistakingstepstoensurethereisnoreoccurrence.

5.8.10DFPrecognisedthattheMinisterfortheDepartmenthadaskedforapapertobepreparedonthelessonslearnedfromthisexperienceandthattheDepartmenthadpartlysatisfiedthesecondcondition.However,DFPrefusedtheDepartment’srequestasarevisedbusinesscasehadnotbeensubmittedtosupporttheapprovalrequestfortheadditionalconsultancycosts.

5.8.11InApril2009theDepartmentnotifiedSERCthatDFPhaddeclinedtograntretrospectiveapprovalfortheupliftinPPPprocurementadvisoryfees.Itacknowledgedtheobligationofthe

CollegetopaytheadvisoryteamforallserviceslegitimatelydeliveredinsupportofthePPPprocurementactivityandconfirmedthatitwouldupholdtheagreementwiththetwolegacyCollegestoreimburse90percentoftheadvisoryfeesincurred.

Conclusion

5.8.12AspartofmyauditofSERC’sAnnualAccounts,Iamrequiredtosatisfymyself,inallmaterialrespects,thattheexpenditureandincomeshowninSERC’saccountshavebeenappliedtothepurposesintendedbytheNIAssemblyandthatthefinancialtransactionsconformtotheauthorities35whichgovernthem,thatis,thattheyare“regular”.AsDFPapprovalhadonlybeenreceivedforconsultancycostsof£400,000andas£1,204,539incostshadbeenincurred,theoverspendof£804,539isirregularexpenditure.Ihavethereforedecidedtoqualifymyauditopinionontheregularityofthisexpenditure.

5.8.13TheprojectgovernancearrangementsrequiredtheappointedadvisoryteamtoreportthroughtheProjectTeamtothePPPProjectBoard,madeupofmembersofthelegacyColleges’BoardofGovernors,thelegacyColleges’SeniorManagementandrepresentativesfromtheDepartment.TheDepartmentandSERChaveadvisedmethatwhileitbecameapparentthatadditionalworkwasrequired,theextentofthisworkproveddifficulttoquantifyandthereforethefinancial,proprietyandaccountabilityimplicationswerenotadequatelycontrolled.Thisbreakdown

34 ManagingPublicMoneyNorthernIrelandissuedbyDFPistheauthoritativeguidetotheprinciplesfordealingwithresourcesusedbypublicsectororganisationsinNorthernIreland.

35 Authoritiesincludethelegislationauthorisingtheexpenditure,theregulationsissuedtocomplywiththatlegislation,ParliamentaryauthorityandDFPauthority.



incontrolshasnotonlyledtoSERCincurringirregularexpenditurebutalsotheDepartment,throughitsfundingofit36.AlthoughSERCdidachievealevelofabatementintheadditionalcosts,thelackofcontractmanagementcontrol,particularlyduringthelegacyperiodoftheproject,makesitdifficulttoassesswhethervalueformoneyhasbeenobtainedintermsoftheconsultancycostsincurred.

5.8.14 IaskedtheDepartmentandSERCtoexplainhowthefailuretoobtainapprovalforthisexpenditurehadarisenandwhatlessonshadbeenlearnt.Theytoldmethattheprocurementhadbeencomplexandsubjecttosignificantdelayswhichmeantthattheenvisagedtimescaleofsixteenmonthsfortheprojectextendedtofiveyears.Giventhecomplexitiesoftheprojectitwouldnothavebeenpracticabletochangeadvisersduringtheprocurement.UnfortunatelyduringthislongprocurementadvisoryfeeswerenotmonitoredagainstapprovalsandhencethelegacyColleges,SERCandtheDepartmentdidnotseekapprovalforincreasedcosts.Aspartofa“lessonslearned”exerciseinrespectofthisprocurementSERCandtheDepartmentwillbetakingstepstoensurenoreoccurrenceofthisoversight.

5.8.15ThelegaladvisorsassistingSERCaspartoftheduediligenceprocessnotedthatthecontractrequiredeithertheDepartmentorthelegacyColleges’advisoryteamtorequestanyvariationinthecontractandagreetheassociatedpricingimplications.Theynotedthatasfarastheywere

awarethisdidnothappen.ThisplacedthepublicsectorinaweakpositionlegallyastheDepartment,thelegacyCollegesandSERCknewthatsuchadditionalcostswerebeingperformedandallowedthemtocontinue.IaskedtheDepartmentwhythevariationincontracttermsandconditionswerenotfollowed.TheDepartmenttoldmethat,whilethelegaladvisorswerecorrectinstatingthatthecontractsaid“eithertheDepartmentorthelegacyColleges’advisoryteamshouldrequestvariations”,itshouldbenotedthatthecontractwasanoff-the-shelfGovernmentPurchasingAgencycontractthatwasusedbetweentheadvisoryteamandthelegacyColleges,andinthiscasethereferencesto‘theDepartment’inthecontractshouldbetakentobe‘theCollege’.AstheDepartmentwasnotasignatorytothecontracttheyhadnoauthoritytomakeanysuchrequests.TheDepartmentalsosaidthattheadvisoryteamwasaskedonnumerousoccasionstoquantifytheseadditionalcostsbutfailedtodosoproperly.OnassumingresponsibilityfortheprojectinAugust2007theonlysanctionavailabletoSERCwouldhavebeentostandtheconsultantsdownbutthiswasconsiderednottohavebeenpracticable.TheDepartmentnotedthattohavedonesocouldhaveledtotheabandonmentoftheprocesslosingallthetime,resourcesandfundingthathadbeenexpendedtodate,leavingSERCwithanurgentneedthatwouldstillhavetobeaddressedandriskedaclaimfromthebidderforrecoveryofitsbiddingcosts.

36 DELs2008-09resourceaccountswerealsoqualifiedforfundingtheCollege’sirregularexpenditureandsimilarirregularexpenditureincurredbyanotherCollege.

Section Six:Other matters


6.1 InvestigationofsuspectedfraudonGrantFundingfortheInstallationofRenewableEnergyBoilers

6.1.1 TheDepartmentofEnterprise,TradeandInvestment(DETI)paidanInterregIIIAgranttoCraigavonBoroughCouncil(CBC),asleadprojectpartner,fortheinstallationofrenewableenergyboilersinCBC’sareaandthroughouttheInterregregionofIreland.CBC,inturn,recompensedthesixpartnerorganisationsinvolvedintheinstallations.DETIofferedfundingupto€382,500in2004fortheproject.Theinstallationoftheboilerswaslargelycompletedbetween2004and2005.

6.1.2 DETIandCBCareinvestigatingsuspectedfraudintendersfortheinstallationoftheboilers.Thissuspicionarosefollowingchecksbyfunders.ThevalueofpublicfundsatriskisestimatedbyDETIas€306,842.Thesterlingvaluewilldependontheexchangerateandiscurrentlyestimatedtobebetween£210,000and£230,000.CBChasnotifiedthepoliceofthesuspectedfraud.

6.1.3 DETIiscurrentlyconsideringallegedbreachesofitsLetterofOfferandscopetorecoverthefundsatrisk.

6.1.4 Iwillkeeptheprogressofthisinvestigationunderclosereviewandintendtoreportonitatalaterdate.

6.2 GovernancearrangementsfortheadministrationoftheSocialHousingDevelopmentProgramme

6.2.1 OneofthethreekeyobjectivesfortheDepartmentforSocialDevelopment(DSD)is‘topromotemeasurableimprovementstohousinginNorthernIreland’.In2009-10theDepartmentincurredexpenditureof£155million(2008-09:£128million)ontheSocialHousingDevelopmentProgramme(SHDP)andindoingsoprovided1,838(2008-09:1,136)newsocialhousesinNorthernIreland.

6.2.2 TheSHDPisdeliveredprimarilythroughgrantfundingtotheNorthernIrelandHousingExecutive(theHousingExecutive),aNonDepartmentalPublicBody(NDPB)ofDSD,whichisresponsibleunderlegislationfortheadministrationofgrantstoregisteredhousingassociationsfornewsocialhousingschemes.Priorto1April2007DSDwasresponsibleforpayinggrantsdirectlytohousingassociations.

6.2.3 DSDisresponsibleforhousingpolicyformulationandforhousingassociationregistrationandinspection.ItsHousingAssociationGuidesetsoutthestandardsandproceduresthathousingassociationsareexpectedtocomplywith.DSDhasadedicatedHousingRegulatoryandInspectionUnit(theInspectionUnit)whichundertakesinspectionsofhousingassociations,focusingparticularlyonensuringcompliancewiththehousingassociationguide.FollowingconsultationwithhousingassociationseachinspectionculminatesinanInspectionReport.In



addition,DSDhasprimaryresponsibilityformonitoringtheactivitiesandperformanceoftheHousingExecutive.

6.2.4 TheHousingExecutive’sroleistomanageandadministertheSHDP.IndoingsotheHousingExecutivehasresponsibilityforapprovingandsubsequentlypayinggrantinrespectofhousingassociationsocialhousingschemes,ensuringthatallschemesadheretoDSD’shousingassociationguidestandards.

6.2.5 Housingassociationsareresponsibleforidentifyingsitessuitableforsocialhousing;theplanninganddevelopmentofschemeproposalsandtheirsubsequentconstructionandprojectmanagementtomeetSHDPtargetswhileachievingbestvalueformoney.HousingassociationsarerequiredtocomplywithguidanceissuedbyDSD,andotherauthorities37.

6.2.6 Theresultinggoverningstructureisas

follows:-

6.2.7 IntheGeneralReportfor2007-08theC&AGreportedonDSD’sInspectionUnit.WehavefollowedupthatworkandconsideredtherelationshipsandgovernancearrangementsbetweenDSD,theHousingExecutiveandhousingassociations,specificallyinrelationtotheSHDP.OurworkwasalsopromptedbyreceiptofsomewhistleblowerallegationsmadetotheC&AGrelatingtohousingassociations.

6.2.8 ThescopeofthisreportislimitedtotheviewsexpressedandevidenceobtainedfromDSDandtheHousingExecutive.

DSD’soversightoftheHousingExecutive

RegulationandFramework

6.2.9 On1April2007,theHousing(Amendment)(NorthernIreland)Order2006transferredtheadministrativearrangementsforthepaymentofgranttohousingassociationsfromDSDtotheHousingExecutive.TocoincidewiththistransfernewcontrolsandarrangementsbetweenDSDandHousingExecutivewereintroduced:-

• AnOperatingLevelAgreement(OLA)settingouttheprocessingrequirementsforthemanagementoftheSHDP;and

• Acontroldocumentspecifyingprocedures,policiesandguidelines,regardingtheSHDP,withinDSD’sManagementStatement;FinancialMemorandum;DossierofControlswiththeHousingExecutive.

37 HousingorderNI1992andtheamendedorderdated2006(anddeterminants),IndustrialandProvidentsocietiesact(NI)1969(anddeterminants),HousingAssociationGuide,DSDframework,DSDcriteriaforregistrationandmodelrules,DSDInspections,additionalguidanceissuedbyDSD,registrationwithCompaniesHouseandCharitiesCommission,compliancewithSORPandguidanceissuedbytheNorthernIrelandFederationofHousingAssociations(NIFHA)

DepartmentforSocialDevelopment

NorthernIrelandHousingExecutive

RegisteredHousingAssociations

HousingRegulatory

andInspection

unit

£

£


6.2.10 WenotethattheDossierofControlsstatesthattheHousingExecutiveandDSDwillcarryoutaformalreviewoftheSHDPcontroldocumentonayearlybasis.TheSHDPcontroldocumenthasnotbeenreviewedsinceitwasintroducedin2007.Weunderstandthatareviewiscurrentlyunderway.We recommend that a formal review of the SHDP control document within the Management Statement; Financial Memorandum; Dossier of Controls is undertaken annually.

Oversightmonitoring

6.2.11 AtahighlevelDSDoverseestheHousingExecutivelargelythroughmonthlyliaisonmeetings,andreviewoftheHousingExecutive’sriskregister,quarterlyassurancestatementsandannualStatementonInternalControl.SeniorofficialsfrombothDSDandHousingExecutivealsomeetwiththeMinisteronabi-annualbasis.SinceJanuary2010aseniorDSDrepresentativeattendsHousingExecutiveAuditCommitteemeetingsasanobserver.MinutesoftheHousingExecutiveAuditCommitteemeetingsaretabledatDSD’sAuditCommittee.

6.2.12 WenotethatDSD’sInspectionUnit’sreportsarenotconsideredateitherHousingExecutiveorDSDAuditCommitteemeetings.We recommend that all reports produced by the Inspection Unit are summarised by the Housing Division, and the summary provided to the Housing Executive and presented to its Audit Committee. A summary report should also be presented to the DSD Audit Committee.

6.2.13 TheC&AG’sreportongoodgovernancebetweenDepartmentsandtheirNDPBspublishedin2007stated‘Departmentsandsponsoredbodiesshouldidentifyandevaluatesharedrisksandhowtheseshouldbemanaged,anddefinetheirriskappetite’.

6.2.14 TherearehighlevelstrategicmonthlymeetingsbetweenseniorofficialsofDSDandtheHousingExecutive.TherearealsooperationalmeetingstoidentifySHDPemergingissues.Minutesofthesemeetingsarenotretained.

6.2.15 We recommend that a formal process is put in place to enable DSD and the Housing Executive to identify shared risks and agree appropriate responses to risks. This could be achieved by introducing regular minuted accountability meetings at operational level.

Operationalmonitoring

6.2.16 DSD’sManagementStatement;FinancialMemorandum;DossierofControlswiththeHousingExecutivesetsoutthecontrolstobeexercisedbyDSDinrespectofmonitoringtheHousingExecutiveatanoperationallevel.ThisdocumentstatesthatDSDwillrequireaccesstoalldocumentationto‘assessadherencetothehousingassociationguideandensurefullcompliancewiththerequirementsofthecontroldocument’.

6.2.17 TheManagementStatementfurther

advisesthatDSDshould,fromanoversightperspective,periodically



completeariskassessmentoftheHousingExecutive’sactivitiestakingintoaccountarangeoffactorsincludingpublicmoniesatstake,theHousingExecutive’scorporategovernancearrangementsanditsfinancialperformance.DSDreviewsHousingExecutiveriskregistersatbothcorporateanddivisionallevelbutthereappearstobenoformalconsiderationoftheHousingExecutive’scorporategovernancearrangementsandfinancialperformanceinDSD’sassessmentofriskpertainingtoHousingExecutiveadministrationoftheSHDP.We recommend that DSD enhances its risk assessment procedures in respect of the oversight of the Housing Executive to comply with Management Statement requirements in full.

6.2.18 DSDguidance(thehousingassociationguide)outlinesinternalcontrolsandproceduresforgrantapprovalandpaymentofhousingassociationgrants.HoweverthereisnooverarchingreviewbyDSDoftheHousingExecutive’sapplicationofthesecontrolsandproceduresinrelationtohousingassociationguiderequirements.ItisthereforeunclearhowDSDobtainsassuranceoverthecontrolsappliedbytheHousingExecutiveinrespectofpaymentofthesegrants.We recommend that DSD reviews the Housing Executive’s processes for administering the SHDP to ensure compliance with the housing association guide and that the arrangements for formally reporting assurances are appropriate.

6.2.19 WeunderstandthatDSDmayindirectlymonitortheHousingExecutive’s

compliancewiththehousingassociationguidewhencarryingoutareviewofSHDPapplicationformsduringinspections.WeunderstandthatinreviewingindividualschemestheroleoftheHousingExecutivedoescomeunderscrutiny.Forthistobeofrealvaluewewouldemphasisetheneedtodocumenttheoutcomesandconclusions.

6.2.20 DSD’sInternalAuditunithascompletedareviewoftheproceduresinplacebetweenDSDandtheHousingExecutivewhichincludedensuringthatthemonitoringarrangementsinplaceovertheSHDPareadequateandoperatingeffectively.TheInternalAuditreportconcludedtherewassatisfactoryassuranceinrelationtotheareasreviewed,howeveritmadeseveralrecommendationsaimedatenhancingthelevelofcontrol,including:-

• TheHousingExecutivetoprovideDSDwithdetailsofschemeswhichhavebeenstartedthroughouttheyearincludingthosethathavebeencarriedforward;

• DSDshouldputinplacearrangementstofacilitateregularformalmeetingswiththeHousingExecutivetodiscusstheprogressoftheSHDP;

• Performanceagainstagreedtargetsshouldbemonitoredonaregularbasisandaquarterlyreportonperformanceproduced;

• DSDshouldcrossreferencedepartmentalandHousingExecutive


databasestoensuretheHousingExecutivehasreferredallnecessaryschemesforexamination;and

• DSDshouldensurethatthetransferoffundstotheHousingExecutiveareauthorisedwithinthecorrectdelegatedlimits.

6.2.21 WehaveprofiledtheHousingExecutive’sannualexpenditureontheSHDPforthelastthreeyearsandareconcernedatthehighproportionofspendinthelastmonthofeachfinancialyear.Thisisillustratedinthetablebelow:-

6.2.22 ThisissuewaspreviouslyhighlightedinourreporttotheHousingExecutiveontheresultsofits2007-08audit.Thesituationhasnotimprovedsincethen.DSDhastoldusthatithasconsideredthisissuemanytimes,butgiventhattheprogrammeismanagedonanannualbasismeansthatdeliveryissignificantlyimpactedbythevariousnecessaryapprovalsrequiredforeachscheme.We recommend that DSD in conjunction with the Housing Executive considers what practical measures could be introduced to ensure a more consistent spread of funding disbursement.

6.2.23 WeunderstandthatinmostcasesasignificantproportionoftheoverallapprovedfundingforaSHDPschemeispaidtohousingassociationsatthe‘startonsite’phaseoftheschemebeforeanyorlittleconstructionworkhascommenced.TheHousingExecutiverecordsthenumberofproposedhousesinaprojectas‘newstarts’atthattime.Forexample,followingDSDapproval,theHousingExecutiverecentlypaidapproximately£6m,inadditiontolandpurchasecostsof£10m,tofundthedevelopmentof166unitsattheformerBassBrewerysiteinBelfast.Thiswaspaidoutbeforeanyconstructionworkbeganandamountedtoapproximately90percentoftheoverallagreedSHDPfunding.Theunitsarenotexpectedtobecompleteduntil2012.ThisexpenditureisaccountedforinDSD’s2009-10accounts,yetineffect,thereisnomatcheddeliveryofhousingunits.DSDmaybeundulyexposedtoriskinrespectofadvancefundingofSHDPschemes.Ithasadvisedusthattherationaleforfrontloadingtranchepaymentsistoavoidassociationshavingtoborrow“workingcapital”attooearlyastageofthedevelopmentwhichwouldbeatmuchhigherinterestratesthanmortgagerates.DSDconsidersriskissignificantlyaddressedbythefactthatit

Period Housingassociation Housingassociationgrant Percentageofexpenditure grantexpenditure expendituremadeinthe inthemonthofMarchin madeduringtheyear monthofMarch comparisontototalpayments (£m) (£m)

2007-08 172 59 34%

2008-09 143 30 21%

2009-10 155 65 42%



hasalegalholdonthelandandallofthehousingassociationstockwithahousingassociationguideelement,thereforeintheeventofaworstcasescenarioDSDwouldhaveareasonableexpectationofgettingitsfundingback.

Reviewofgovernancearrangements byDSD

6.2.24 DSD,assistedbyDFP,recentlyundertookareviewoftheprocessofitssponsorshipoftheHousingExecutivetoassistthedepartmentalAccountingOfficerbyprovidinganevaluatedopiniontohimonDSD’ssponsorshiparrangementsandtherelationshipswiththeHousingExecutive.ThereviewfoundthatDSD’ssponsorshiparrangementsanditsrelationshipwiththeHousingExecutiveissatisfactory,butmaybenefitfromsomeimprovementsbeingmade.Thereviewcontained14recommendationsaimedatenhancingthosearrangements.

Communication

6.2.25 TherearepracticesinplacearoundthemanagementandoversightofhousingassociationsbetweenDSDandtheHousingExecutive,includingquarterlymeetingsandregulardiscussions,howevertherearecurrentlynoformalagreedprocedures.Inouropinionthelinesofcommunicationincludingtherolesandresponsibilitiesarenotclearlydefined.Inourviewthisissueneedstobeaddressed.To improve communication between DSD and the Housing Executive we recommend the following practices are formalised in writing:-

• Communication protocols should be agreed;

• Housing Executive to provide DSD with a summary report of any concerns prior to an inspection; and

• Regular progress reports on the inspection programme to be provided to the Housing Executive.

DSDoversightofHousingAssociations Framework

6.2.26 DSD’shousingassociationguidecontainstherulesandproceduresthathousingassociationsmustcomplywithinordertomeettheconditionsforapprovalandreceiptofhousingassociationgrantfromtheHousingExecutive.Theguideiscurrentlyundergoingafundamentalreview.NewproceduresinrelationtoFinanceandGovernanceareineffectfrom1April2010.FollowingarecommendationintheC&AG’s2007-08GeneralReport(referenceNIA115/08/09)adeadlineofMarch2010forcompletionofthehousingassociationguidereviewwasagreed.DSDhasadvisedthatoneofthereasonstheguidewasnotcompletedontimewasduetolegalchangesinprocurementlawwhichisstillbeingupdating.ChapterfouroftheguidedealswithProcurementandithasevolvedsignificantlyinrecentmonths.DSDfeltitbesttocapturetheseaspartofanewprocurementstrategyinupdatingtheguide.Theoriginaltimelinefortheguidehasbeenamendedtoreflecttheextentoftheworknecessarytocompleteissuesnotpreviouslyincluded.The


ongoingreviewofthehousingassociationguidewillprovideconsistentguidanceandclarificationforhousingassociations.

Inspectionunitmonitoring

6.2.27 TheInspectionUnitundertakeson-siteinspectionsofhousingassociationsincompliancewithDSD’sestablishedRegulatoryFramework.Thefirstfullroundofinspections(initiatedinAugust2005)haveonlyrecentlybeencompleted.Anewroundofinspectionshascommencedbutasyetnonehavebeenfinalised.TheInspectionUnithashaddifficultyinthepastcompletinginspectionsonatimelybasisandwecommentedonthisintheC&AG’s2007-08GeneralReport.TheInspectionUnithasnowmovedtoathreeyearinspectioncycle.

6.2.28 TheinspectionprocessculminatesinanoverallratingforthehousingassociationbasedonDSD’sreviewandassessmentofthefourkeybusinessareas:finance,corporategovernance,propertydevelopmentandpropertymanagement.Anoverall‘unacceptable’ratingisappliediftwoormoreoftheseareasareindividuallyclassifiedassuch.DSDhasadvisedusthatunacceptableperformingassociationsaresubjecttoongoingmonitoringviaanagreedActionPlan.Inadditionafollow-upinspectionisscheduledforbetween6and12monthsfromtheissueofthefinalreport.Thislevelofscrutinywillcontinueuntiltheassociationachievesacceptableperformance.Inviewoftheextraresourcesrequiredforthisapproach,DSDhasdevelopeda‘lightertouch’inspection

forthoseassociationswhichhavehadpreviousacceptableperformance.Weunderstandthat‘lightertouch’inspectionswillinvolveensuringthatcontrolsinplaceareoperatingeffectively.Inourviewifthisleadstomorefrequentreviewsforthosehousingassociationsassessedashighrisk,thiswillimprovetheeffectivenessoftheprocessandensurethatirregularitiesarepickeduponatimelybasis.

6.2.29 WeunderstandthatDSDiscurrentlydraftinga‘lessonslearned’reportfollowingthefirstroundoftheinspections.Thepublicationofthisreportwillprovideguidancetohousingassociations.

6.2.30 DSDhasadviseduswhatitconsidersaretheoptionsavailabletohousingassociationsfollowinginspectionreviewswhichhavebeennotedas‘unacceptable’,includingimplementationofanactionplantoaddressthepointsraisedintheinspection,achangeinboardpersonnel,managementorboth,ormergerwithanotherorganisation.DSDmayalsoconsiderimplementingsanctionsorInquiryincertainareas.WenotethatthecourseofactiontakenvariesdependingonwhatDSDconsidersareseriousorfundamentalconcerns.DSDheldaseminar(organisedbytheNorthernIrelandFederationofHousingAssociations)inJune2009wheredelegatesfromhousingassociationswereprovidedwithasynopsisofDSD’sfindingsundereachofthefourinspectionareas,includinggoodpractice,identifyingtrendsandweaknesses,andactionneededtoaddressidentifiedissues.DSDhasalsoprovidedinputintoseminarsheldbytheNorthernIrelandFederationofHousing



Associationsthisyear.We recommend that DSD formally provides housing associations with examples of both good and bad practice identified during the inspection process to better inform them of departmental expectations.

6.2.31 TheInspectionUnitawardedoverall‘unacceptable’ratingsto14(outof33)housingassociationsfollowingtheirfirstinspection.Examplesoffindingsthatcontributedtotheawardofan‘unacceptable’ratingincluded:-

Finance

• Inadequateresourcingofthefinancemanagementfunction.InoneinstancetheChiefExecutivewasundertakingthefinancemanagerroleduetosicknessabsence;

• PoorarrearsmanagementinexcessofthelimitslaidoutinDSDguidance.Inoneinstancethistotalled40.7percent(approximately£741,000at4February2009)ofannualincomevastlyexceedingthe5percentthresholdpermittedbyDepartmentalguidance;

• Absenceoffixedassetregisters;and

• Invoiceauthorisationandpaymentproceduresnotoperatingcorrectly.

Governance

• Limitedskillsetsordiversityofboardmemberswithnoprovisionfortraining;

• Somerolesandresponsibilitiesforseniormanagementmembersnotclearlydefined;

• Nogovernanceormanagementpoliciesinplace.Alsowherepolicywasinplacethiswasnotcompliedwith;

• Managementinformationisnotreported,includingnomechanismsforsettingtargets,budgets,performanceindicators,benchmarkingorriskmanagement;

• Lackofmanagementchallengemechanismfromshareholdersastheshareholdersandtheboardmembersareoneinthesame;

• ContraventionofhousingassociationguideaspropertyfundedisnotusedforthepurposeintendedwithoutDSDauthorisationforchangeofuse;and

• Noncompliancewithprocurementpolicy.

6.2.32 Thetableonthenextpagesetsout

theoverallresultsforeachhousingassociationincludingratingsforeachindividualareaofbusiness.

6.2.33 Allofthehousingassociationsawarded

overall‘unacceptable’ratings,ashighlightedabove,developedactionplanstoaddressDSD’sconcerns.HoweverwenotethatonseveraloccasionsDSDdidnotconsideritappropriatetoimprovetheassuranceratingsfollowingthisprocessbecause


Areainspected No.of Amountofhousing Total Housing associationgrantHousing Corporate Property Property Overall Housing Startsin fundingreceivedAssociation Finance Governance Development Management grading Stock 2009/10 in2009/10(£)

A Good Good Good Good Good 4496 164 11,296,047

B Acceptable Acceptable Good Good Good 180 0 0

C Good Good Good Good Good 812 13 496,375

D Exemplary Good Acceptable Exemplary Good 1877 283 31,112,632

E Exemplary Good Acceptable Acceptable Good 417 83 6,028,979

F Good Good Good Acceptable Good 368 35 8,196,190

G Good Good Good Acceptable Good 145 0 145,047

H Exemplary Good Acceptable Acceptable Good 2622 196 14,174,510

I Acceptable Acceptable Acceptable Acceptable Acceptable 537 10 569,823

J Acceptable Good Acceptable Acceptable Acceptable 821 124 10,750,165

K Acceptable Acceptable Acceptable Acceptable Acceptable 4059 217 13,412,740

L Acceptable Acceptable Acceptable Unacceptable Acceptable 946 0 0

M Acceptable Acceptable Acceptable Unacceptable Acceptable 93 29 2,235,347

N Acceptable Acceptable Acceptable Unacceptable Acceptable 354 0 2,883,114

O Acceptable Acceptable Acceptable Unacceptable Acceptable 743 52 2,641,698

P Acceptable Acceptable Good Unacceptable Acceptable 259 26 1,348,926

Q Acceptable Acceptable Acceptable Unacceptable Acceptable 0 0 0

R Good Acceptable Good Unacceptable Acceptable 4475 427 39,517,156

S Acceptable Acceptable * Acceptable Acceptable 323 0 0

T Acceptable Acceptable Unacceptable Unacceptable Unacceptable 1815 79 8,253,619

U Acceptable Unacceptable Unacceptable Unacceptable Unacceptable 333 77 45,217

V Acceptable Unacceptable Unacceptable Unacceptable Unacceptable 367 10 1,150,348

W Unacceptable Unacceptable Unacceptable Unacceptable Unacceptable 473 0 141,135

X Acceptable Acceptable Unacceptable Unacceptable Unacceptable 444 0 0

Y Unacceptable Unacceptable * Unacceptable Unacceptable 177 1 0

Z Unacceptable Unacceptable Unacceptable Unacceptable Unacceptable 341 0 0

AA Acceptable Unacceptable Unacceptable Unacceptable Unacceptable 194 11 490,824

AB Acceptable Unacceptable Unacceptable Unacceptable Unacceptable 400 1 82,042

AC Unacceptable Unacceptable Unacceptable Unacceptable Unacceptable 203 0 389,779

AD Unacceptable Unacceptable * Unacceptable Unacceptable 987 0 0

AE Unacceptable Unacceptable * Unacceptable Unacceptable 54 0 0

AF Unacceptable Unacceptable * Unacceptable Unacceptable 251 0 0

AG Acceptable Unacceptable Unacceptable Unacceptable Unacceptable 42 0 0

Total 1,838 £155m

*Associationhasnotdevelopedinanumberofyearssothisareacouldnotbetested



theywerenotcontentwiththeproposalsintheactionplanorthehousingassociationsparticipationinaddressingtheissueswasinadequate.Weunderstandthatthishasresultedinthreehousingassociationsbeingsanctioned,namelyWoodvale&Shankill,StudentsHousingAssociationCo-opandDungannon.IntheseinstancesDSDconcludedthatthehousingassociationscannotputforwardnewschemesforhousingassociationgrantfundingundertheSHDP.

6.2.34 Inquiryoptionisthelastcourseofaction

availabletoDSDandwillonlybeinitiatedwhenallotheroptionshavebeenexhausted.Itinvolvestheappointmentofanindependentprofessionaltoreviewthebodyofevidencefollowingtheinspectionandtodeterminepotentialforde-registration.OurpreviousreportontheInspectionUnithighlightedalackofproceduresinplacetoaddresstheInquiryrequirement.Thepositionremainsunchanged;howeverweacknowledgethatDSDhasplacedthisonitsgovernanceagendafor2010.Given the significant number of unacceptable associations, we recommend that emphasis is placed on introducing procedures for Inquiry at the earliest opportunity. This should include outlining procedures for de-registering a housing association.

6.2.35 Wenoteasaresultofpreliminaryfindingsfromthesecondcycleofinspections,DSDhassanctionedafurtherthreehousingassociationsnamelyHabinteg,RuralandBallynafeigh.Thesehousingassociations

werealsodeemedunacceptableinthefirstroundofinspections.

6.2.36 DSDadoptsariskbasedapproachfortheseinspections,drawingontheresultsofthepreviousinspectionsandcarryingoutpre-inspectionriskassessmentsusinganumberofindicators.

6.2.37 As a risk based approach is used to undertake pre-inspection assessments of housing associations we recommend that DSD publishes annually what it considers are the risks affecting registered housing associations and the registered housing association sector in Northern Ireland.Thiscouldactasaself-assessmenttoolforhousingassociations.WehavepreviouslyrecommendedthatinspectionandcompositereportsshouldbemadeavailableonDSD’swebsite.DSDiscommittedtopublishingthesereportsfromroundtwoofinspectionsonwards.Inouropinionthepublicationofthesereportswouldimproveconsiderablytheexistingawarenessofkeyissueseffectingregisteredhousingassociations.

6.2.38 Wenotedfromareviewofthemostrecentaccountsavailableforregisteredhousingassociationsthatbasedonrevenuereserves,inthemain,housingassociationsareinahealthyfinancialpositionwithrevenuereservestotallingintheregionof£130million,including£22millioninrespectofthe14housingassociationswhichweredeemedunacceptable,ofwhichrevenuereservesrangedfrom£256,000to£5.7million.DSDhascommentedthatNorthernIrelandhousingassociationshavefixedassets


totalling£500millionandcombinedloansinexcessof£250millionandtherearemanyreasonswhyassociationsshouldholdreserves,includingtofundmajorlongtermmaintenanceorasameansofmanagingfinancialrisks.

6.2.39 TheupdatedGovernancesectionofthehousingassociationguide(effectivefrom1April2010)dictatesthat‘theremunerationoftheChiefExecutive/SeniorOfficershouldbeopenlydisclosedintheAssociation’sAnnualReportandFinancialStatementsincludingpensionandotherbenefits’.SomehousingassociationshavealreadybeenprovidingthisinformationintheirAnnualReportandaccounts.Ourreviewofthemostrecentaccountsalsohighlightedvariationsinthelevelsofremunerationpaidtoseniormembersofstaffinhousingassociations.

6.2.40 DSD’sHousingDivisionhasresponsibilityforinvestigatingallallegationsoffraudinrespectofhousingassociations.InAugust2008,DSDnotifiedusoftheclosureoftheinvestigationintosuspectedfraudinvolvingthefinanceofficerwithinHabintegHousingAssociation.ThenotificationadvisedthatthedetailswerepassedontothePoliceServiceofNorthernIrelandandDSDconcludedthattherewasnofurtheractiontobetaken.AfurtherinvestigationclosurenotificationwasreceivedinAugust2009statingthatthecasehadbeenpassedtothePublicProsecutionServicetoinvestigatethefraudinvolvingtheissuingandcashingofchequestotallingover£26,000.Thehousingassociation’sbankrefundedthelossinfullandtheDepartmentdetermined

thatthecasewasclosedandnofurtheractionwasrequired.ThiscasewasrecentlyheardatDownpatrickCrownCourt,wheretheformerfinanceofficerpleadedguiltyto12countsofforgeryandfraudandwasgivenatwoyearsuspendedsentence.WeunderstandthatthispersonwasemployedbyanotherpublicsectororganisationfollowingheremploymentwithHabintegHousingAssociation.AlthoughDSD’snotificationhighlightedthatthiscasewasclosed,itisimportantthatallcasesremainopenandactiveuntilallappropriateactionsareconsidered,includingasinthisinstance,thecriminalprosecutionservice.DSDadvisedthatthefrauddidnotinvolvepublicmoneyandthatprogressonallsuchfraudsismonitoredbytheMonitoringsectiontotheculminationofthecase.

6.2.41 Thehousingassociationguidestatesthat‘forallAssociationswithmorethan250unitsatthestartofthefinancialyeartheBoardshouldinclude,withitsauditedfinancialstatements,aStatementonInternalControlthatreferstotheannualreviewoftheeffectivenessoftheAssociation’sinternalcontrolsystems’.Asthetableaboveindicates24ofthe33housingassociationshavehousingstockover250unitsandarethereforerequiredtoreportontheinternalcontrolframework.Wereviewedaccountsforeachhousingassociationandnotedthatsixdidnotrecordanycommentsoninternalcontrol.Thisincludedtwohousingassociationsthatweredeemedunacceptableintheareaoffinance;thereforetherewasnoindicationinthe



annualreportthattheremayhavebeenfinancialcontrolconcerns.FurthermorethelevelofdetailanddisclosureprovidedbythosehousingassociationswhodidprovideStatementsonInternalControlvaried. We recommend that DSD update its monitoring arrangements to include a review of each housing association’s Statement on Internal Control.

6.2.42 Thehousingassociationguiderequiresthatallhousingassociationshaveaninternalauditfunctionto‘appraiseandevaluatecompliancewiththeirpoliciesandprocedures’.We recommend that DSD introduces a requirement for each housing association to provide an annual report from their Internal auditors to DSD and the Housing Executive. This should detail the extent of the internal audit work performed during the year, schemes selected for testing and the findings from the reviews.

6.2.43 Aspartofthehousingassociation

guidereviewprocessDSDaskedusforcommentsontherevisedhousingassociationguidepriortoimplementation.Wemadeanumberofrecommendationsinthehousingassociationguidereviewprocess,butseveralofthesecommentswererejectedbyDSD.Oneofourrecommendedchangesrelatedtotheimplementationofsafeguardstoensurethatauditorindependenceofhousingassociationsisnotcompromised.Werecommendedthatthehousingassociationguideshouldmakeitclearthatinternalandexternalauditservicestohousingassociationsshouldnotbeprovidedby

thesameorganisation.DSDagreeswiththesentimentofourcomments,howeverithighlightsthatitisnotalwayspracticalorcosteffectivetoinsistonthisapproachforthosesmallerassociations.DSDthereforeplacesrelianceonhousingassociationsdemonstratingauditorobjectivityandindependence.DSD should reconsider our comments from the consultation process in the housing association guide review.

HousingExecutiveoversightofHousingAssociations

Monitoringandassurance

6.2.44 TheHousingExecutive’sInternalAuditunitdoesnotundertakeanydirectreviewofhousingassociationsasthisistheresponsibilityofDSD’sInspectionUnit.TheHousingExecutivetoldusthatitsresponsibilityextendsonlytoensuringthatallinformationreceivedfromhousingassociationsintheadministrationoftheSHDPisincompliancewithfundingcontrols.WenotethattheHousingExecutivedoesnotandhasneverundertakenanyon-sitereviewsofhousingassociations.

6.2.45Withoutadefinedmonitoringrole,theHousingExecutivedoesnotknowifallareasofthehousingassociationguidearebeingcompliedwith,forexamplewhetherarchitectsemployedbyhousingassociationshavebeenproperlyappointed.


6.2.46 OnanannualbasistheHousingExecutive’sinternalAuditfunctionreviewstheSHDPcontrolstoensuretheyoperatecorrectly.As DSD is completing a fundamental review of the housing association guide, we recommend that all amendments are reviewed by the Housing Executive’s Internal Audit function to ensure controls are operating and are in compliance with the new guidance.

6.2.47 BothDSDandHousingExecutive’sInternalAudithaveagreedtomeetonaquarterlybasistodiscussissuesofcommoninterestinrelationtogainingassuranceoverhousingassociationsandtheSHDP.Wewelcomethisandbelievethatthiswillenhancecontrolandmonitoringproceduresandprovideadditionalassurance.

6.2.48 WeunderstandthattheHousing

ExecutiveplacesassuranceontheworkoftheInspectionUnitandreliesonDSDinformingitofissuesimpactingontheSHDP.Wehaveevidencednoformalmechanismorbasisonwhichassurance

isshared.ThemovetolightertouchmonitoringintheInspectionUnit’ssecondroundofinspectionsmaynotprovidetheHousingExecutivewithasufficientlevelofassurance.DSDandtheHousingExecutiveshouldformallyagreehoweachpartyobtainsassurancefromthecontrolsintheoperationoftheinspectionprocess.

6.2.49 UntilrecentlytheHousingExecutivedidnotreceivecopiesofhousingassociationinspectionreports.TheHousingExecutivehasadvisedthattheydonotreviewthesereportsforimpactontheSHDPcontrols.We recommend that the Housing Executive reviews the Inspection Unit reports for impact on their controls. This process will promote knowledge sharing and accountability.

Performance,BenchmarkingandSelfAssessment

6.2.50 DSDprovideduswithstatisticsfollowingthecompletedfirstroundofinspectionsasfollows:-

Number Percentage

HousingAssociationsinspected 33*

HousingAssociationsthatfailedtheInspectionoverall 14 42%

HousingAssociationsthatfailedtheareaofFinance 7 21%

HousingAssociationsthatfailedtheareaofGovernance 12 36%

HousingAssociationsthatfailedtheareaofPropertyDevelopment 10 30%

HousingAssociationsthatfailedtheareaofPropertyManagement 21 64%

*Thenumberofhousingassociation’sreducedduringtheyearduetomergers.Thisistheresultingnumberofassociationsasat11February2010



6.2.51 Weareconcernedwiththehighproportionofhousingassociationsthathavereceivedunacceptableratingsinkeyareas.ThefiguressuggestthattherearesignificantproblemswithintheregisteredhousingassociationsectorinNorthernIreland.Particularlyconcerningisthehighlevelofunderachievementforpropertymanagement,anareaofbusinesswhichisofprimeimportancetosocialhousingtenants.

6.2.52 We recommend that a summary of inspection results is published on DSD’s website and circulated to senior management within DSD and the Housing Executive. Along with the statistics, a report should be produced detailing examples which warrant an unacceptable rating.Itisimportantthatpersonschargedwithgoverninghousingassociationsarefullyawareofthestandardsthatareconsideredacceptable.

6.2.53 InlinewiththeotherpartsoftheUKwebelievethathousingassociationsshouldbecontinuallyselfassessingandbenchmarkingthemselves.

6.2.54HousingassociationsarerequiredtosubmitannualinformationtoDSDintheformofanAnnualRegulatoryReturn(ARR).DSDusestheinformationintheARRtocalculatefinancialratiosrelevanttothesocialhousingsectorforthepurposesofbenchmarkingandmonitoring.WenotethatinotherareasoftheUK,similarinformationofthisnatureispubliclyavailable.Thesecondroundofinspectionscouldbeusedasavehicletoundertakeanexerciseofassisting

housingassociationswithintroducingselfassessmenttechniques.

6.2.55 We recommend that DSD publish the overall sector and individual housing association statistics for information purposes.Thiscouldincludethecreationofaseparateon-lineprofileforeachhousingassociationandwouldsupplementDSD’sannualpublicationofkeyperformanceindicators.

6.2.56 TofurtherenhancethemanagementoftheSHDP,we recommend that DSD considers:-

• Obtaining an Independent quality assurance review of the Inspection Unit; and

• Reviewing the provisions governing housing associations with a view to including a requirement for housing associations to gain approval from DSD before the appointment of new members and shareholders.

Progressonpreviousrecommendations

6.2.57 TenrecommendationsweremadefollowingourreviewoftheInspectionUnitlastyear.WeacknowledgethatDSDhasanactionplantoimplementourrecommendationsandprogresshasbeenmadeinkeyareas.ForfourofthetenrecommendationsDSDhasstatedtheycannotbeimplementedbecausetheyaredependentonthecompletionofthenewroundofinspections.Inouropiniontwoofourrecommendationsfollowing


thereviewoftheInspectionUnitareforwardlookingbuttheremainingtwoareretrospective.We recommend that all of the recommendations regarding the Inspection Unit, from the C&AG’s 2007-08 General Report are actioned as soon as possible.

Conclusion

6.2.58 Ourobservationsonthegovernanceofhousingassociationsinthisreportandpreviously,raiseasignificantnumberofconcernsabouttheadequacyofexistingarrangements.DSDsharesmanyofourconcernsabouttheexistingperformanceofasignificantnumberofhousingassociations.WeacknowledgetheeffortsDSDhasmadetodateinidentifyingissuesandinstigatingremedialaction.Annex1summarisesourrecommendationsandweencourageDSDtoconsidertheseasapriority.

Annex1

Summaryrecommendations

Werecommendthat:-

1. AformalreviewoftheSHDPcontroldocumentwithintheManagementStatement;FinancialMemorandum;DossierofControlsisundertakenannually.

2. AllreportsproducedbytheInspectionUnitaresummarisedbytheHousingDivision,andthesummaryprovidedto

theHousingExecutiveandpresentedtoitsAuditCommittee.AsummaryreportshouldalsobepresentedtotheDSDAuditCommittee.

3. AformalprocessisputinplacetoenableDSDandtheHousingExecutivetoidentifysharedrisksandagreeappropriateresponsestorisks.Thiscouldbeachievedbyintroducingregularminutedaccountabilitymeetingsatoperationallevel.

4. DSDenhancesitsriskassessmentproceduresinrespectoftheoversightoftheHousingExecutivetocomplywithManagementStatementrequirementsinfull.

5. DSDreviewstheHousingExecutive’sprocessesforadministeringtheSHDPtoensurecompliancewiththehousingassociationguideandthatthearrangementsforformallyreportingassurancesareappropriate.

6. DSDinconjunctionwiththeHousingExecutiveconsiderswhatpracticalmeasurescouldbeintroducedtoensureamoreconsistentspreadoffundingdisbursement.

7. ToimprovecommunicationbetweenDSDandtheHousingExecutivewerecommendthatthefollowingpracticesareformalisedinwriting:-

• Communicationprotocolsshouldbeagreed;



• HousingExecutivetoprovideDSDwithasummaryreportofanyconcernspriortoaninspection;and

• RegularprogressreportsontheinspectionprogrammetobeprovidedtotheHousingExecutive.

8. DSDformallyprovideshousingassociationswithexamplesofbothgoodandbadpracticeidentifiedduringtheinspectionprocesstobetterinformthemofdepartmentalexpectations.

9. Giventhesignificantnumberofunacceptableassociations,emphasisisplacedonintroducingproceduresforInquiryattheearliestopportunity,includingoutliningproceduresforde-registeringahousingassociation.

10. DSDpublishesannuallywhatitconsidersaretherisksaffectingregisteredhousingassociationsandtheregisteredhousingassociationsectorinNorthernIreland.

11. DSDupdatesitsmonitoringarrangementstoincludeareviewofeachhousingassociation’sStatementonInternalControl.

12. DSDintroducesarequirementforeachhousingassociationtoprovideanannualreportfromtheirInternalauditorstoDSDandtheHousingExecutive.Thisshoulddetailtheextentoftheinternalauditworkperformedduringtheyear,schemesselectedfortestingandthefindingsfromthereviews.

13. DSDshouldreconsiderourcommentsfromtheconsultationprocessinthehousingassociationguidereview.

14. AsDSDiscompletingafundamentalreviewofthehousingassociationguide,werecommendthatallamendmentsarereviewedbytheHousingExecutive’sInternalAuditfunctiontoensurecontrolsareoperatingandareincompliancewiththenewguidance.

15. TheHousingExecutivereviewstheInspectionUnitreportsforimpactontheircontrols.Thisprocesswillpromoteknowledgesharingandaccountability.

16. AsummaryofinspectionresultsispublishedonDSD’swebsiteandcirculatedtoseniormanagementwithinDSDandtheHousingExecutive.Alongwiththestatistics,areportshouldbeproduceddetailingexampleswhichwarrantanunacceptablerating.

17. DSDpublishestheoverallsectorandindividualhousingassociationstatisticsforinformationpurposes.

18. DSDconsiders:-

• ObtaininganIndependentqualityassurancereviewoftheInspectionUnit;and

• ReviewingtheprovisionsgoverninghousingassociationswithaviewtoincludingarequirementforhousingassociationstogainapprovalfromDSDbeforetheappointmentofnewmembersandshareholders.


19. AlloftherecommendationsregardingtheInspectionUnit,fromtheC&AG’s2007-08GeneralReportareactionedassoonaspossible.

6.3 MiddletownCentreforAutism

6.3.1 TheMiddletownCentreforAutism(theCentre)wasofficiallylaunchedinSeptember2004followingthepurchaseofthesitebyMiddletownCentreforAutism(Holdings)LtdinJune2004andthesigningofamemorandumofUnderstandingbetweentheDepartmentofEducation(DE)andtheDepartmentofEducationandScience,RepublicofIrelandinMay2004,tofundtheCentreona50:50basis.

6.3.2 Anoperatingcompany,theMiddletownCentreforAutismLtd,wasincorporatedasacompanylimitedbyguaranteeinMarch2007.ThiscompanyisthemanagementbodyrunningtheCentre.TheCentre’sChiefExecutivewasappointedbythetwosponsorDepartmentsandtookuppostinApril2007andwasformallydesignatedasAccountingOfficerbybothDepartments.

6.3.3 InthepreviousGeneralReport,theC&AGreportedontheCentre.WeindicatedwewouldkeepunderreviewthedevelopmentandprogressoftheCentre.Ourlatestobservationsaresetoutinthefollowingparagraphs.

FundingPosition

6.3.4 TheCentreiscurrentlyinreceiptofrevenueandcapitalfundingfromtheDepartmentofEducationandtheDepartmentofEducationandSkills(DES)(TheDepartmentforEducationandSciencewasrenamedin2010).Between1April2007and31March2010theCentrehasreceivedintotal£2.38millionrevenuefundingand£0.16millioncapitalfundingfromthetwoDepartments.

6.3.5 Ithadbeenexpectedthatanewbuilding

programmeattheCentrewouldbecompletein2010inordertofacilitatethefulloperationoftheCentre.Howevertodateconstructionofthenewbuildinghasnotyetcommenced.In2009,thethenDepartmentofEducationandSciencehadannouncedthat,duetotheeconomicclimate,itwasnotinapositiontoprovidethefundingrequiredtoexpandtheCentreashadbeenintended.Thisrestrictionwasliftedattheendof2009however,atpresent,thecapitalfundingfromDESisrestrictedtothatrequiredtocarryoutmaintenanceworkneededintheCentretofulfilhealthandsafetyrequirements.

6.3.6 ArevisedeconomicappraisalinsupportoftheprojectiswithDFPforapproval.DEadvisedusthatthecurrentpositionwithdevelopmentofthenewbuildingisthattheplanningapprovalforthenewbuildingandmajorrefurbishmentworkswasreceivedinMarch2009.DetaileddrawingsforallbuildingshavenowbeencompletedandtheprojecthasbeenbroughttoTenderreadystage.AfterDESannouncedthepauseinfundingin



April2009DFPadvisedDEthatfurtherconsiderationoftheeconomicappraisalwillhavetoawaitinformationthatDESisabletoproceed.WhiletheliftingoftheDESpausewasannouncedinDecember2009,theyhaveadvisedthatfurtherprogressonthebuildingprojectwillbebasedonamulti-annualplantobeagreedbetweenDE,DESandtheCentre.ThisplanisintendedtotakeaccountofinternationalbestpracticeandthedevelopmentofautismservicesontheislandofIrelandsincetheCentrewasestablished.

6.3.7 TheCentrehadplannedtohaveastaffingcomplementofseventyfourpeopleoncefullyoperationalin2010-11.Atpresentthereare18.3fulltimeequivalentposts.DespitethecurrentoperationalpositionoftheCentre,itsBoardhasindicatedtotheDepartmentsitremainscommittedtotheCentre’sfulldevelopmentthroughtheprovisionoftheoriginalfourkeyservices.TheservicesareTrainingAdviceandGuidance,ResearchandInformation,EducationalAssessmentandLearningSupport.TheBoardhashoweverraisedanumberofreservationswiththeDepartmentsincludingitsconcernthattheprojectcouldbedamagediftheanticipatedlevelsoffundingarenotmadeavailable.

6.3.8 IthadbeenexpectedthattheCentre,whenfullyoperationalin2010-11wouldincur£3.5millionrevenueexpenditureperannum.In2007-08expendituretotalled£443,000,in2008-09£877,000anddraftaccountsfor2009-10expenditureisprojected£1.235million.Thefundingof

thisexpenditureisprovidedona50:50basisbythetwoDepartments.

CoreServices

6.3.9 TheCentre’svisionis‘Tocreate,maintainanddevelopaCentreofExcellenceforchildrenandyoungpeoplewithautisticspectrumdisorders’.

6.3.10 TheCentreworksasasecondlevelspecialistserviceproviderbyrespondingtoreferralsfromlocalprovidersofautismservices,workinginpartnershipwithexistingstatutoryandvoluntaryorganisationstodeliverit’sservices.TheCentreanticipatesthatitspresentdeliveryofserviceswillsoonbeatfullcapacityandthatwithoutafurtherphaseofdevelopmentthelevelofservicecannotbeexpanded.InApril2010,wenotedthepositionwitheachareaofservicedeliveryasfollows:

Training, Advice and Guidance

6.3.11 TheCentreadvisedusthatbetweenDecember2007andFebruary2010,itprovidedtrainingto2738professionals/parentsthroughthedeliveryof110trainingcourses.Atrainingprospectusisbeingdevelopedfor2010-11,scheduling55trainingcourses.

6.3.12 TheCentrealsoadvisedus,ithasbeencommissionedbyrepresentativesofthefiveeducationandlibraryboardsinNorthernIrelandtodevelopaspecialisedmodeloftrainingtoassisteducationstaffinthepromotionofpositivebehavioursandlearninginchildrenwithautistic


spectrumdisordersandcomplexneeds.ThecentreisalsoworkingwiththeSpecialEducationSupportServicewhichprovidestrainingtoschoolsintheSouth.TheCentreaugmentsandcomplementstheleveloftrainingavailabletoschoolsinthesouth.TheroleoftheSpecialEducationSupportServiceistoenhancethequalityoflearningandteachinginrelationtospecialeducationalprovision.

6.3.13 InSeptember2009,DEaskedtheCentretodeliveraninterimoutreachAdviceandGuidanceservicetoschoolsand/orindividualchildrenandyoungpeople.Asaresult,theCentreplansinNorthernIrelandtoprovideaservicetochildrenandyoungpeoplealreadyreferredtotheAutisticSpectrumDisorderAdvisoryServicewhodespitefocusedfirstlevelinterventioncontinuetoexperiencedifficultieswithintheireducationalsetting.InNorthernIrelandandtheRepublicofIreland,theservicewillprovidetrainingtoparentsofchildrenandyoungpeoplewithautism.Wehavebeenadvisedthatastrongco-operativerelationshiphasbeenestablishedwiththeSpecialEducationSupportServiceintheSouthwhichhasresultedinco-joinedtrainingsplannedtobedeliveredthroughouttheyearandtheCentreisalsoworkingwiththeInter-BoardAutisticSpectrumDisorder(ASD)Grouptoprovidetraining.TheCentreisalsoindiscussionwithanumberofuniversitiesandcollegesaboutareasofcollaboration.

Research and Information

6.3.14 TheCentreconsidersitsplansforresearchhavebeenrestrictedbecauseofthe

currentleveloffundingandtheassociatedimpactonrecruitment.ItsresearchdepartmenthasproducedoneformalpublishedbookletandhasconductedaninformalonlinesurveyoftrainingneedsidentifiedbyteachersworkinginspecialeducationinNorthernIrelandandtheRepublicofIreland.

Educational Assessment

6.3.15 TheCentrehassecuredtheservicesoftwoprofessionals,aneducationalpsychologistandanoccupationaltherapist.Theseprofessionalsaresupportingthedeliveryoftheadviceandguidanceservice.SomeworkhasbeenundertakenondevelopingaprojecttomodeltheassessmentservicewhichwillbeofferedfromtheCentrewhenthenewassessmentandlearningsupportbuildingisavailable.

Learning and Support

6.3.16 ALearningSupportCentreManagerhasbeenappointedandsomeworkhasbeencompletedondevelopingpoliciesandproceduresforuseintheLearningSupportCentretoensureanautismcompetentenvironmentforchildrenandyoungpeoplereferredtotheCentrewhenitiscompletedatafuturedate.UntiltheLearningSupportCentreisfullyfunctioning,theLearningSupportCentreManagerisleadingtheimplementationoftheAdviceandGuidanceService.

6.3.17 Weunderstandthatanupdatedphasedmulti-annualplanforthefuturedevelopmentoftheCentreisbeing



prepared,inconjunctionwiththeBoardandtakingaccountofinternationalbestpracticeandthedevelopmentofautismservicesontheislandofIrelandsincetheCentrewasestablished.Weconsiderthat,asamatterofsomeurgency,robustbenchmarkingshouldbeputinplacetocompareoutputsandoutcomesinordertoinformvalueformoneyinthecontextoftheexistingserviceprovision.

GovernanceArrangements

6.3.18 InconjunctionwiththeComptrollerandAuditorGeneral’sofficeinDublinwevisitedtheCentreinFebruary2010asafollowuptoapreviousvisit.

6.3.19 Wearecontentthatthebasicconceptsofgoodgovernanceareinplace.WenotedspecificallythatanappraisalprocesshasbeenundertakenwhichconsideredtheperformanceofBoardmembersandthatreviewshavetakenplaceofthework/effectivenessoftheBoardandBoardCommittees.Aformalperformanceappraisalprocesshasalsobeenagreedfor,andappliedto,allrelevantstaff.WealsonotedthataManagementStatementandFinancialMemorandumisnowinplaceandwassignedon17September2009andacomplianceframeworkhasbeendeveloped.

CompanyLtdbyGuarantee

6.3.20 WewerepreviouslyadvisedbyDEthatitwasplannedtheMiddletownCentreforAutismLtdwouldbeintegratedintothenewEducationandSkillsAuthority(ESA)afteritsestablishmentandsubjectto

suitablearrangementsbeingagreedwiththeDepartmentofEducationandScience.

6.3.21 ESAwasscheduledtocommenceon1January2010,butwasnotestablishedatthatdate.ThedeliveryofeducationalservicesthroughexistingbodiesisnowsubjecttoaconvergenceplanwithnospecificdatefortheintroductionofESA.DEhasadvisedusthatitwasnotplannedthattheCentrewouldtransfertoESAimmediatelyfollowingtheestablishmentofESA.AftertheCentrehadbeengivensuitableopportunitytoeffectivelyembedeachofitsfourproposedservices,thetransferoftheoversightoftheCentretoESAwouldbeconsideredbytheDepartment.DESagreementwouldberequiredforsuchatransfertotakeplace.

6.3.22 TheMiddletownCentreforAutism(Holdings)Ltdcompanywasduetobewoundupduring2009-10.DEadvisedusitremainscommittedtothewindingupoftheholdingcompanybutthattheNorth/SouthnatureoftheprojectmeansthedecisiontowinditupcanonlybetakenwhenbothDepartmentsareinagreementtodosoandatpresentDESisconsideringpotentialtaximplications.

Conclusion

6.3.23 WehaveundertakentwovisitstothisCentreinthepasttwoyearsandwehaveliaisedwithDEandtheComptrollerandAuditorGeneral’sofficeinDublin.WewouldconcludethattheCentreisexperiencingaperiodofuncertaintyandisunabletodeliverthefullrangeofserviceswhichhadbeenenvisaged


intheeconomicappraisalinsupportoftheCentre.KeyservicesincludingworkingdirectlywithyoungpeoplewithautisticspectrumdisordersarenotbeingachieveddespitetheCentreoperatingsince2007anditappearsunlikelythatthepositionwillchangeintheshortterm.DEshouldthereforebeincreasinglymindfuloftheneedtodemonstrateclearlythatvalueformoneyisbeingachievedwiththisproject.Inotetheintentiontoprepareanupdated,phasedmulti-annualplanforthefuturedevelopmentoftheCentreandthatthisplanisintendedtotakeaccountofinternationalbestpracticeandthedevelopmentofautismservicesontheislandofIrelandsincetheCentrewasestablished.

6.3.24 OurresearchprovidedfurtherassurancetheCentreismindfulofcomplyingwithgoodgovernancearrangements.Howeveritwasanticipatedtherisksassociatedwithitsoperationunderalimitedcompanyarrangementwouldceasein2009-10,whichisnolongerthecase,andthereisnowsomeuncertaintyaroundthefuturearrangements.ThisreinforcestheneedforrobustoversightandscrutinyarrangementstobeinplaceatDepartmentallevelandwithintheCentre.

6.3.25 Wewillkeepdevelopmentsunderreviewandwillreportfurtherifappropriate.

6.4 UlsterCamogieCouncil

6.4.1 TheSportsCouncilforNorthernIreland(SportsCouncil)isanexecutivenon-

departmentalpublicbodysponsoredbytheDepartmentofCulture,ArtsandLeisure(DCAL).AmongstSportsCouncil’sprimaryfunctionsisthedutytoprovide‘administrativeservices,equipment,coachingandinstruction’.

6.4.2 WewereinformedinJuly2008thatawhistleblowerhadraisedconcernsinrespectofpaymentsmadebySportsCounciltotheUlsterCamogieCouncil(UCC)forcoachingsessions.TheseconcernssurroundedpotentiallyfraudulentclaimssubmittedtoSportsCouncilbyUCC.ItwasallegedthatdocumentationusedbyUCCtoclaimgrantfundingfromSportsCouncilhadbeenfalsifiedtoreflectahighermonetaryvaluethanthatactuallyincurredbyUCC.Inaddition,whentheseirregularitieswereuncoveredbyUCC,arepaymentwasmadetoSportsCouncil,whichSportsCouncilhadclaimedtheywouldbeunabletoacknowledge.Finally,itwassuggestedthatSportsCouncilhadnotobtainedauditedaccountsforthreeyearsfromUCCbut,incontraventionofthetermsandconditionsunderwhichgrantsarepaid,SportsCouncilcontinuedtomakepaymentstoUCC.WeinformedDCALinJuly2008andaskedthemtoconsiderthematter.

6.4.3 DCALundertookascopingstudytoinvestigatetheseissues.ThescopingstudywascompletedinOctober2008andsupportedtheassertionthatirregularclaimshadbeenmadeandthatthepaymentsprocesswasworthyoffurtherscrutiny.ThisledtoafurtherreviewbeingundertakenbyDARDCentralInvestigationService(CIS).AlthoughCISalsofound



indicationsoffraudulentactivity,theywereoftheopinionthattheevidenceavailablewasnotsufficientandreliabletomeetthestandardofproofrequiredforasuccessfulcriminalinvestigationandthatsuchaninvestigationwouldnotbecommensuratewiththepotentialsumslostandthereforenotinthepublicinterest.AdetailedinvestigationwascompletedbySportsCouncilandforwardedtousbyDCALon29December2009.Itisofsubstantialconcernthatthefullinvestigationtookoverayeartocomplete.Itisourviewthatwhenfraudarises,publicsectorbodiesshouldensurethattheirresponseisbothquickandeffective.38WeaskedDCALwhythisinvestigationtooksuchalongtimetocomplete.DCALtoldusthatthereweresomemitigatingfactors,thechiefonebeingthattherewerelimitedfinancialrecordsavailablewithinUCCandthedetailsofthefinancialtransactionshadtobecompiledfromSportsCouncilfilesandUCCbankaccountstatementsgoingbackanumberofyears.However,DCALarenotsatisfiedwiththelengthoftimetakentocompletethisinvestigation.DCALhasproducedalessonslearnedreportonthiscaseandaresatisfiedthattherigorousapplicationoftherecommendationsofthisreport,commissionedbyDCALandproducedbyDEInternalAudit,willensureanyfutureallegationsareinvestigatedwithameasureofurgency.

6.4.4 ThelessonslearnedreportwasproducedinMarch2010.Wenotethattherecommendationsincluded;

• Suchinvestigationsshouldalwaysbecarriedoutbypersonswhoare

completelyindependentoftheareaandeventsunderreview;

• NeitherDCALnorSportsCouncilcanbesatisfiedatthelengthoftime–18months–takentobringthisinvestigationtoaconclusion.Inthefuture,thereisaclearneedtotreatanyinvestigationrelatingtoapotentialirregularityasapriorityengagement;and

• Communicationthroughouttheinvestigationcouldhavebeenbetter.Inparticular,itisrecommendedthatthedetailsofallmeetingsheldshouldberecordedinsomeform.

WeaskedDCALhowitwouldensurethatalllessonslearnedwouldbeproperlycommunicatedthroughouttheDepartmentanditsArmsLengthBodies.DCALtoldusthatFraudAwarenesstraining,whichhighlightstherequirementsoftheFraudResponsePlan,hasbeenrolledoutacrosstheDepartment.InadditiontrainingisplannedforstaffwithintheArmsLengthBodiesinthiscurrentfinancialyear.DCAL’sAntiFraudPolicyandFraudResponsePlanarecurrentlybeingreviewedtoensurethatthelessonslearntareappropriatelycapturedwithintheguidance.

6.4.5 Duringtheinvestigationitwasfoundthatovertheperiod2000-08atotalof£48,502waspaidtoUCCbySportsCouncil.Ofthis,£14,754hasbeendeemedirregularbecauseUCCwereunabletoprovideevidenceofassociatedexpenditure.Thisincludes

38 ManagingPublicMoneyNorthernIreland,A.4.7.6,‘Respondingquicklyandeffectivelytofraudwhenitarisesusingtrainedandexperiencedpersonneltoinvestigate’.


£1,690.50relatingtoinvoicesthatwereallegedlyfalsified.Thisappearstosubstantiateaspecificallegationmadebythewhistleblower.Inadditiontothis,theinvestigationconcludedthatSportsCouncildidnotreceiveauditedaccountsfromUCCforthefinancialyears2004-05,2005-06and2006-07,therebycontraveningthestandardtermsandconditionsofawardsmadebySportsCouncil.Despitethis,SportsCouncilcontinuedtopaygrantthroughoutthisperiodandmadeafurtherofferofgranttoUCCfortheyear2007-08.

6.4.6 In2007,CentralCamogieCouncil(CCC)identifiedirregularitiesandrepaid£5,469inJanuary2008onbehalfofUCC.SportsCouncilacceptedandacknowledgedthisrepaymentbutdidnotappeartohaveconsideredthattheseinvalidclaimsgaverisetoanysuspicionoffraud.

6.4.7 Ofthepaymentsthathavebeendeemedirregular£9,285hadnotbeenrepaidoncompletionoftheinvestigationreport.SincethenDCALhasadvisedthatfollowupverificationandclaw-backprocedureshavebeenprogressed.SportsCouncilvouchedpaymentsamountingto£5,825tobankstatementsandissuedaclawbacknotificationtoUCCfortheremainderoftheirregularamount(£3,460).SportsCouncilhasnowreceivedalloutstandingamountsduefromUCC.DCALtoldusthatitissatisfiedthatallamountshavebeenrepaid.

6.4.8 WebelievethattherepeatedfailureofUCCtosubmitauditedaccountsand

theattemptedrepaymentof‘invalidclaims’offeredSportsCouncilsufficientwarningsignstohavewarrantedfurtherinvestigation.InNovember2008wereportedonafraudperpetratedintheSportsInstituteforNorthernIreland,39acompanylimitedbyguarantee,fiftypercentownedbySportsCouncil.Weconcludedthatseveralwarningsignsofpossiblefraudappearedtohavegoneunnoticedbymanagement.Asaresult,thefraudwasabletocontinueundetectedfornearlytenmonths.Itisconcerningtoagainnotethatsignificantwarningsignswentunnoticedandasaresultpotentiallyfraudulentactionswereabletocontinueunchecked.

6.4.9 Annex4.7ofManagingPublicMoneyNorthernIreland(MPMNI)detailstheobligationsthatpublicbodieshavewithrespecttothereportingofsuspectedorprovenfraud.NICSDepartmentsshouldreportimmediately,toDFPandtheC&AG,allfrauds(provenorsuspected),includingattemptedfraud,whichaffecttheirDepartmentsortheAgenciesandNDPBssponsoredbythem.40ItisourunderstandingthatDCALincludedthecaseofUCCinafraudreportissuedtoDFPon4August2008,albeitcaveatedbynotingthatSportsCouncilorothershavebeenunabletosubstantiatethisasafraud.Wefurthernotethatthereportoftheinvestigationreferredtothismatterthroughoutasan‘irregularity’butnotasfraudorsuspectedfraud.WeunderstandDCALsoughttheviewsofDARDCISaboutwhetherornotacriminalinvestigationshouldbecommenced.WeaskedDCALwhythismatterhasnot

39 InternalfraudintheSportsInstituteforNorthernIreland/DevelopmentofBallycastleandRathlinHarbours;NIA49/08-09.40 ManagingPublicMoneyNorthernIreland,A.4.7.8.



beenreferredtoasfraudorsuspectedfraud.DCALadvisedusthattheviewofDARDCISisthattheevidenceavailablewasinadequatetoprovefraud.Theterm“irregularity”wasagreedbetweenSportsCouncilandDCALintheabsenceofanyprovenevidenceoffraudulentactivity.

6.4.10Itisouropinionthatthereisahighinherentriskingrant-fundingbodiesofthistype.However,manyofthecontrolsthatshouldbepresentappeartohavebeenabsentinthiscase.PAChavereportedonseveraloccasionsonthefailingsofpublicbodiesinregardtograntfundingincluding:

• Paymentofgrantsonthebasisofinsufficientevidenceastoentitlement;and

• FailurebydepartmentstoestablisheffectivemonitoringofNDPBswhichtheyfundandsponsor,leadingtofailuretodetectwasteandirregularities.

ItisthereforedisappointingthatsimilarissueshavearisenwithinSportsCouncilandthatthelessonscontainedwithinthesereportshavenotbeentakenonboard.

6.4.11InMarch2010,wereceivedfurtherinformationfromanotherwhistleblowerconcerningUCC.Thisinformationappearedtohighlightadditionalissues.ItalsosuggestedthatthisinformationhadbeenmadeavailabletoSportsCouncilbuthadnotbeenavailedof.Wewereconcernedatthisand,withthe

whistleblower’spermission,sharedtheinformationwithDCAL.DCALinformedusthatitreferredthewhistleblower’sinformationtoSportsCouncil,askingittoindicatewhetherthisadditionalinformationmateriallyaffectsitspreviousreportandwouldrequireanyalteration;orwarrantsanewinvestigationbeingundertaken.DCALissatisfied,havingalsotakentheviewofDARDCIS,thatthisnewinformationdoesnotwarranteitheranalterationtotheSportsCouncilreport,oranewinvestigation.

6.4.12SportsCouncilwasalsoaskedtorespondtothesuggestionthatitfailedtoactonofferstoprovideitwiththeinformationatearlierdates.Theyinformedusthatforaperiodof2yearsbeforetheinformationcametolightSportsCouncilhadbeeninreceiptofnumerousrequestsforinformationfromajournalistwhohadbeenpublishingarticlesinrelationtotheUCC.Thisjournalist’sofferofinformationin2008wastreatedasapressrequestinlinewiththeirpreviousdealingswithhimonthisissue.NeverthelessDCALisconcernedthatSportsCouncildidfailtoactwhentheywereofferedinformationrelatingtoasuspectedfraudandwillbefollowingthisupwithSportsCouncilonconclusionofthisreview.WeshareDCAL’sconcernatSportsCouncil’sfailuretoact.Itisimportantthatallpublicbodiesshouldtreatanywhistleblowingallegationsseriously.

6.4.13Inconclusion,whilstwerecognisethatDCALhadsoughttolearnthelessonsfromthisinvestigation,itisourviewthattheshortcomingsidentifiedaboveindicate


thatthisinvestigationcouldhavebeenhandledmoreeffectivelyandshouldhavebeenconsideredasfraudatanearlypoint.WewouldexpectthatinfutureinstancesofthistypeDCALwouldfollowproperinvestigativeprocedures.



Title HC/NIANo. DatePublished

AbsenteeisminNorthernIrelandCouncils2007-08 – 9January2009

ObesityandType2DiabetesinNorthernIreland NIA73/08-09 14January2009

PublicServiceAgreements–MeasuringPerformance NIA79/08-09 11February2009

ReviewofAssistancetoValenceTechnology: NIA86/08-09 25February2009ACaseStudyonInwardInvestment

TheControlofBovineTuberculosisinNorthernIreland NIA92/08-09 18March2009

ReviewofFinancialManagementintheFurtherEducation NIA98/08-09 25March2009SectorinNorthernIrelandfrom1998to2007/GovernanceExaminationofFermanaghCollegeofFurtherandHigherEducation

TheInvestigationofSuspectedContractorFraud NIA103/08-09 29April2009

TheManagementofSocialHousingRentCollection NIA104/08-09 6May2009andArrears

ReviewofNewDeal25+ NIA111/08-09 13May2009

FinancialAuditingandReporting2007-08 NIA115/08-09 20May2009

GeneralReportontheHealthandSocialCareSector NIA132/08-09 10June2009inNorthernIreland2008

TheAdministrationandManagementoftheDisabilityLiving NIA116/08-09 17June2009AllowanceReconsiderationandAppealsProcess

ThePre-SchoolEducationExpansionProgramme NIA133/08-09 19June2009

BringingtheSSNomadictoBelfast–TheAcquisitionand NIA165/08-09 24June2009RestorationoftheSSNomadic

TheExercisebyLocalGovernmentAuditorsoftheirfunctions – 30June2009

AReviewoftheGatewayProcess/TheManagement NIA175/08-09 8July2009ofPersonalInjuryClaims

Resettlementoflong-staypatientsfromlearningdisability – 7October2009hospitals

ImprovingtheStrategicRoadsNetwork-TheM1/Westlink – 4November2009andM2ImprovementSchemes

ThePerformanceofthePlanningService – 25November2009

ImprovingAdultLiteracyandNumeracy – 9December2009

AbsenteeisminNorthernIrelandCouncils2008-2009 – 11December2009

CampsieOfficeAccommodation/ _ 24March2010Synergye-BusinessIncubator(SeBI)

NIAO Reports 2009-2010


NIAO Reports 2009-2010

TheManagementofSubstitutionCoverforTeachers: – 26May2010Follow-upReport

ManagingthePerformanceofNIWater – 16June2010

Theexercisebylocalgovernmentauditorsoftheirfunctions – 23June2010

Schools’ViewsoftheirEducationandLibraryBoard2009 – 28June2010

GeneralReportontheHealthandSocialCareSectorby – 30June2010theComptrollerandAuditorGeneralforNorthernIreland-2009

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