Financial Auditing and Reporting 2009

Financial Auditing and Reporting - Report to the Northern Ireland Assembly by the Comptroller and Auditor General 2009

Kieran Donnelly, the Comptroller and Auditor General for Northern Ireland and Head of the Northern Ireland Audit Office (NIAO), today reported the results of financial audit work in the past twelve months and provided comment on a range of topics and issues.  The report does not include the results of his examination of the accounts of those bodies within the health and social care sector. A separate report on this sector was published on 30 June 2010.  Some of the key issues noted in this report are:

Statement of the Rates Levy and Collection 2008-09

The Statement of the Rates Levy and Collection details the amount of annual rate assessments and subsequent receipts, as reduced by reliefs, rebates and irrecoverable debt.  Rate collection is administered by Land and Property Services (LPS).  The Public Accounts Committee considered the findings on the 2006-07 Statement of Rate Levy and Collection in November 2008 and made a large number of recommendations for improvement.  The Department of Finance and Personnel’s response to these recommendations in January 2009 was positive and various actions have been implemented or are on-going to resolve financial and operating system problems.

Key points arising from the audit of the 2008-09 Statement.

• Rate-payer debt at 31 March 2009 was £138 million, up £14 million on previous year. Despite concerted efforts by LPS to target debt during 2008-09 through the allocation of additional staffing resources and increasing the number of ratepayers taken to court, the current economic climate has had a significant impact on ratepayers’ ability to pay in-year, and consequently debt has increased on that for the previous year.
• The Comptroller and Auditor General was unable to confirm the completeness and accuracy of rate assessments of £1,088 million. This was due to concerns about the currency of the Valuation Lists upon which rates assessments are raised. There remains a large backlog of domestic alterations which still have to be valued. There remained as work in hand at January 2010, 27,499 domestic properties awaiting valuation - (down from a peak of 44,859 properties in February 2009). In March 2009 it was taking LPS 229 days to value a new domestic property and 1,040 days to process a domestic alteration. By January 2010 this had reduced to 94 days and 769 days respectively.
• Previous audit reports highlighted adverse financial consequences of suspending inspections or checks on properties recorded as vacant.  By January 2010 £33.9 million of bills had been issued in respect of 17,000 properties which had been incorrectly recorded as vacant.  Further bills may be issued in respect of 24,000 properties still being processed.
• The IT system allows LPS to stop the automatic issue of bills to ratepayers.  Valid reasons for this include when there is an agreed payment arrangement.  Mr Donnelly is concerned that these ‘stops’ are not removed when appropriate on a timely basis.  LPS told the Audit Office that there was some £46 million of such stopped accounts at 15th February 2009.
• During 2008-09 LPS participated in the National Fraud Initiative. Housing Benefit for Owner Occupiers data was matched with a number of other sources of data, for example, pensions and Housing Rents.  The investigation process which is ongoing and had identified 458 fraud cases and 441 errors totalling £893,000 as at 15th February 2010.  

Belfast Metropolitan College 2007-08

Belfast Metropolitan College (BMC) was formed on 1 August 2007 from a merger of the Belfast Institute of Further and Higher Education and Castlereagh College of Further and Higher Education.  It is one of the largest colleges in the UK with an annual budget of £45 million.  BMC is funded by the Department for Employment and Learning which had set a deadline of 30 January 2009 for the completion of the 2007-08 audited accounts.   The audit was significantly delayed only being completed in May 2010, some 15 months after the Department’s deadline and 22 months after the year end.  In the end, Mr Donnelly’s opinion on the accounts was qualified.  

The significant delay in completing the audit resulted from:

• The poor quality of the draft accounts; and
• Significant internal control problems leading to an Efficiency  Review

An Efficiency Review was completed in April 2009.  The review’s findings included that there had been weaknesses in the performance of the senior management team, significant weaknesses in financial controls, poor management information and concerns over achieving a balanced budget in 2008-09.  The College had incurred a deficit of £6.2 million in its first year.

Mr Donnelly commented that “the poor quality of the draft financial statements presented to me for audit, the number of drafts required to eventually bring them up to an acceptable quality over a significant period of time, and the significant control problems noted were unacceptable.”  He also noted his concern that key finance posts were being filled through interim short term appointments and urged that this should be addressed urgently.

Mr Donnelly qualified BMC’s 2007-08 accounts because proper approval was not obtained from the Department of Finance and Personnel (DFP) for significant overruns on consultancy costs incurred in procuring the Titanic Quarter premises through a Public Private Partnership.   The contracted fixed cost of a team of technical, legal and financial advisors had been agreed at £300,000 but BMC was charged £2.2 million, some seven times higher than originally agreed.  The additional cost was as a result of additional time spent on problems which the team considered outside of their control.  Nevertheless, BMC negotiated a final settlement of £1.5 million, some £700,000 less than originally requested.