Financial Auditing and Reporting 2003-2004

General Report by the Comptroller and Auditor General for Northern Ireland.

Mr John Dowdall, the Comptroller and Auditor General for Northern Ireland, and Head of the Northern Ireland Audit Office today reported the results of Financial Audit work undertaken over the last twelve months.

Resource Accounts

This the third year in which departmental accounts have been prepared on a resource basis. Under the Government Resources and Accounts Act (Northern Ireland) 2001, departments are required to prepare commercial style resource accounts. The Resource Accounts are much more complex than the old style Appropriation Accounts which they replaced. The Appropriation Accounts simply showed the cash spend. Mr Dowdall says “the quality of accounts submitted for audit continues to improve”. Qualified opinions were issued on four resource accounts compared to seven in 2002-03.

Pension Scheme Accounts

The audit opinion on two resource accounts (Teachers’ and Health and Personal Social Services Pension Schemes) was disclaimed on matters arising from new higher financial reporting requirements which came into operation in 2003-04. In both schemes Mr Dowdall was unable to form an opinion on the accounts due to the absence of sufficiently complete and up-to-date actuarial valuations.

Department for Social Development

Mr Dowdall was again unable to form an opinion on the financial statements of the Department. The main reasons for this were:

• Estimated losses of £112.3 million in Income Support, Jobseekers Allowance, Disability Living Allowance and Housing Benefit as a result of errors by officials and customers and fraudulent claiming of benefits. This represented 3.2 per cent of the Department’s total expenditure on benefits. This area has been qualified and reported on for a number of years.
• Weaknesses in the financial control and monitoring of grants paid to Registered Housing Associations.
• Significant weaknesses in financial control and monitoring of urban regeneration and community development grants to voluntary and community bodies.

Department of Health Social Services and Public Safety

Mr Dowdall again qualified his opinion because of a material loss of income as a result of patients incorrectly claiming exemption from health service charges. The total loss of income in 2003-04 was estimated at between £7.0 million and £9.0 million. The report notes that as a result of various initiatives taken by the Department there has been a downward trend in the scale of potential losses in recent years.

Department of Employment and Learning

The report refers to the lack of progress by the Department on the recovery from providers of irregular expenditure on the Individual Learning Accounts scheme. An earlier report on the 2001-02 accounts had identified potentially irregular expenditure of between £1.3 million and £2 million over the lifetime of the scheme. Mr Dowdall says “it is a matter of considerable concern that almost three years after the closure of the scheme providers have not been contacted and recoveries actively pursued. This sends the wrong message to those involved in fraudulent activity and represents a missed opportunity to draw out the lessons learnt from this scheme with the provider network”.

The report also refers to overpayments of up to £460,000 on the LearnDirect e-learning programme. The legal assessment is that only £30,000 of this is recoverable. Mr Dowdall says “I see this as a major deficiency in the scheme rules that only £30,000 of the £460,000 can be recovered. These providers received £430,000 that they may not be entitled to and which cannot be recovered as the scheme guidelines had not been subject to adequate legal scrutiny at the outset”.

Sports Council Accounts 2001-02 and 2002-03

The report refers to irregular expenditure on the Safe Sports Ground programme. Payments totalling some £96,000 in 2001-02 were based on fraudulent documentation and mis-representations from applicants. Mr Dowdall says that the “attempted fraud and widespread irregularities in the scheme could have been prevented by the application of what should be well established control procedures in the administration of grants”. The report also notes subsequent improvements in the Sports Council procedures.

Livestock and Meat Commission for Northern Ireland Accounts 2003-04

The report highlights weaknesses in the accountability framework between the Commission and its sponsor, the Department for Agriculture and Rural Development, which have only recently been addressed. The report also refers to several instances where EU and public sector procurement rules were not observed. These included the awarding of contracts worth £646,000 and £131,000 without public advertisement.

Invest Northern Ireland Accounts 2003-04

As in the 2002-03 financial year Mr Dowdall has qualified his audit opinion because of insufficient evidence on the recording, monitoring and use of funds by third party organisations (TPOs). These are private or voluntary bodies which Invest NI contracts to deliver various initiatives. Revised procedures were introduced in 2003-04 but Mr Dowdall says that these “formal monitoring arrangements do not yet include the structured inspection programme of TPO books and records which I recommended in my report on the 2002-03 accounts”. An ongoing inspection programme was eventually put in place in 2004-05.

The report notes the purchase of land at a cost of £2.3 million to facilitate the expansion of the former IDB’s Granville Industrial Estate in Dungannon. The report calls for a more joined up approach between public bodies in circumstances where public sector development projects require road improvements in the interests of road safety and traffic management. It also refers to a payment of £1,825,000 which was rushed through at the end of the 2001-02 financial year against legal advice and before contractual obligations had been met.

Department of Education – Accounting to Parliament by Education and Library Boards

The report refers to delays in finalising the five Boards’ accounts over a number of years. Mr Dowdall says he looks to the Department to ensure that the Boards’ outstanding accounts are finalised quickly and to a high standard. The report also makes reference to overspending at the Belfast and South Eastern Boards.

Notes for editors

1. The Comptroller and Auditor General is Head of the Northern Ireland Audit Office (the Audit Office). He and the NIAO are totally independent of Government. He certifies the accounts of Government Departments and a range of other public sector bodies. He has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and public bodies use their resources. His reports are published as Parliamentary and Assembly papers.
2. The Comptroller and Auditor General’s report on the on “Financial Auditing and Reporting 2003-04” is published as HC 96 and is available from the Stationery Office throughout the United Kingdom. It is also available on the Audit Office website at www.niauditoffice.gov.uk. The report is embargoed until 00.01 hrs on Thursday, 7 July 2005.
3. Background briefing can be obtained from the Audit Office by contacting: Kieran Donnelly (028 9025 1107).