Financial Audit and Reporting 2001-2002

Financial Audit and Reporting 2001-2002: 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 is the first year in which departmental accounts have been prepared on a resource basis. Under the Government Resources and Accounts Act (Northern Ireland) 2001, departments are now required to prepare commercial style resource accounts. This represents the most fundamental change to financial reporting in central government since the mid 19th century. The new 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 qualified his opinion on ten of the seventeen resource accounts for the financial year 2001-02. In some instances accounts were qualified on several counts.

Nine accounts were qualified on matters arising from the new technical demands and higher reporting standards placed on departments under resource accounting. Mr Dowdall says that this does "not imply that the integrity of transactions recording the inflow and outflow of cash in departments has deteriorated. It has however meant that departments have not reached the new higher reporting standard set." The report recognises that, in many respects, the resource accounts exercise has been successful. One of the key benefits is that all of the departmental resource accounts, even those which are qualified provide a great deal more information on the operations of departments. However the report concludes that "with ten out of seventeen accounts for 2001-02 not achieving an unqualified opinion there is clearly a considerable challenge for the departments concerned to bring their financial reporting up to the standard the Assembly and Parliament have a right to expect."

Three of the ten resource accounts that received a qualified audit opinion in 2001-02 would have been qualified anyway under the cash based system of accounting.

Department of Social Development

The audit opinion would have been qualified anyway on three separate counts.

a significant level of estimated fraud and incorrectness in certain social security benefits. The Department's own Benefit and Review Team estimated a level of fraud and error of some £120 million in relation to Income Support, Job Seeker's Allowance, Disability Living Allowance and Housing benefit, as a result of errors by officials, errors by customers and fraudulent claiming of benefits. This area of expenditure has consistently been qualified and reported on by Mr Dowdall over the last number of years.

weaknesses in financial control and monitoring of urban regeneration and community development grants to voluntary and community bodies.

weaknesses in financial control and monitoring of grants paid to Registered Housing Associations.

Department for Employment and Learning (DEL)

Mr Dowdall's opinion on this account would have been qualified anyway under a cash based system because of potentially irregular expenditure of between £1.3 and £2 million on the Individual Learning Accounts (ILA) scheme. ILAs were introduced in Northern Ireland in September 2000, as part of a UK wide scheme designed to bring back into learning those people who had not done any for some time and those who lacked skills and qualifications. The scheme was closed just over a year later in both Great Britain and Northern Ireland due to allegations of potentially serious fraud and abuse. Mr Dowdall's report refers to:

700 cases of learners for whom training providers claimed incentives from DEL but when these learners were surveyed they said that they had not received training.

A sudden growth in the number of English based distance learning providers claiming incentives from DEL during the summer months 2001. The report suggests that this may have been due to the fact that the incentives in Northern Ireland were higher than in Great Britain.

A list of 120 suspect ILA providers prepared by the Department for Education and Skills (DfES) on the basis of complaints received in England. Fifty of the providers appearing on this list were operating in Northern Ireland and up to 31 March 2002 the Department had paid around £307,000 to them. Validation checks subsequently carried out by DEL suggest that most of the payments to providers on this list may have been irregular.

The National Audit Office has also reported on the ILA scheme. This report was considered at an Evidence Session by the Public Accounts Committee (PAC) at Westminster on 4 November 2002.

Department of Health Social Services and Public Safety

Mr Dowdall 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 2001-02 was estimated at between £9 million and £11 million compared to around £15 million in 1999-2000. 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.

Executive Agency and Non-Departmental Public Body Accounts

Northern Ireland Child Support Agency - Client Funds Accounts 2001-2002

Mr Dowdall qualified his opinion for the eighth consecutive year due to:

Overpayments of maintenance by non-resident parents estimated at £1.1 million and underpayments estimated at £1.5 million; and

Inaccurate assessments of maintenance which led to significant errors in the amounts owed by non-resident parents.

Sports Council 2000-2001 Accounts

The report states that "the Sports Council has not been handling senior officials' expenses with the scrupulous care that the Assembly would expect". It also reveals that in Mr Dowdall's opinion, payments of over £380,000 under the Safe Sports Award Programme were irregular as they were paid in advance of need.

Environment and Heritage Service Accounts 2001-02

The report reveals that a large proportion of the £3million paid by the Agency to District Councils for Waste Management was in advance of need. This was because much of the equipment paid for (various types of collection bins) was still in storage at supplier sites.

Notes for editors

1. The Comptroller and Auditor General (C&AG) 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 and the Northern Ireland Assembly 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 Financial Audit and Reporting 2001-2002 is published as HC 551 and NIA 107/02 of Session 2002-2003 and is available from the Stationery Office throughout the United Kingdom. The report is embargoed until 12.00 noon on Thursday 3rd April 2003.
3. In previous years the Comptroller and Auditor General's Report on financial audit was published along with the Appropriation Accounts in one volume. Under new arrangements each department is required to produce its own Resource Account. Individual Resource Accounts, which are now published separately, include an audit certificate from the Comptroller and Auditor General. The C&AG may also append a report to explain the reason for any audit qualification or to report on other issues of public interest. This volume brings together C&AG's reports on individual Resource Accounts, together with his reports on other government bodies.
4. Background briefing can be obtained from the Audit Office by contacting Kieran Donnelly (028 9025 1107).