Financial Auditing and Reporting 2004-2005

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 in the past twelve months.

Strengthening Corporate Governance in Central Government Bodies

Mr Dowdall has reported on a number of failures in corporate governance in Northern Ireland public bodies in recent years. In his General Report he endorses recent good practice guidance from HM Treasury and others on corporate governance. The report identifies certain aspects of governance arrangements which need to be developed in the central government sector.

• strengthening Boards by ensuring members have the appropriate skills, expertise and understanding of their role.
• inclusion of independent non-executive members with relevant skills on Boards to bring an effective challenge function.
• promotion of a risk management culture.
• ensuring that the correct governance arrangements are in place between Government departments and their sponsored bodies.

Department of Agriculture and Rural Development

Mr Dowdall calls on the Department to learn lessons from failings in its administration of Processing and Marketing Grants. He estimates that up to £3.3 million of grant funding was given in which there was insufficient evidence of compliance with the required procurement procedures. This report emphases the importance of proper procurement procedures in preventing fraud and getting value for money.

Department for Social Development

The level of losses through fraud and error in social security benefits in 2004-05 is estimated to be over £120 million. This is 3.3 per cent of expenditure on benefits. There is also significant uncertainty about the accuracy and completeness of benefit overpayments debtors totalling over £46 million. The audit opinion on the 2004-05 accounts was qualified because of these factors.

As in previous years, the audit opinion was also qualified because of weaknesses in financial control and monitoring expenditure of over £66 million in 2004-05 on Urban Development and Community Development grants.

Because of improvements in the Department’s controls over Registered Housing Associations, it was no longer considered necessary to qualify the audit opinion in connection with these.

Northern Ireland Child Support Agency

The audit of the Agency was once again qualified due to the errors found in maintenance assessments. In his report Mr Dowdall noted that the level of errors was higher than in previous years and said ‘In my opinion, the Agency should be concerned by the results which seem to indicate a deterioration in performance’.

Furthermore, Mr Dowdall limited the scope of his audit opinion as a result of the Agency not providing him with sufficient evidence to support the assumption that certain categories of debt were fully collectable.

In his report he also expressed concerns that the Agency has currently no debt reduction target or strategy to reduce the escalating levels of debt. In the conclusion to his report Mr Dowdall said ‘Fundamentally the Agency’s performance impacts upon one of the most vulnerable groups in society, the children who are reliant on its services. I would recommend that the Agency continue to address the difficulties outlined in this report as a manner of urgency’.

Invest Northern Ireland

In 2004-05, Invest NI inspected a number of private sector and voluntary bodies which deliver initiatives for it (Third Party Organisations, or TPOs) following concerns raised by NIAO in 2002-03 and 2003-04. These inspections identified a range of problems including corporate governance problems, the risk of conflicts of interest, and the financial viability of some of the TPOs.

In one of the organisations, which received £1.7 million of public money over nine years, Invest NI’s inspection noted serious concerns about how funding provided by the former Local Enterprise Development Unit and its successor, Invest NI, was spent. The inspection has developed into a wider forensic investigation to determine if any impropriety has occurred.

Education and Library Boards

The report refers to the scale of overspending in the Belfast and South Eastern Education and Library Boards. The Department of Education has calculated that the BELB accumulated deficit at 31 March 2005 is £10.8 million. The report says that “it is unacceptable that BELB overspending in 2001-02 only came to light so recently and that the scale of overspending in 2003-04 could not be determined accurately for so long”. The South Eastern Board’s estimated cumulative deficit at 31 March 2005 is £21.6 million. However, the report makes the point that SEELB’s accounts for 2003-04 and 2004-05 have not yet been finalised.

The importance of all Boards producing high quality accounts on time is re-iterated. The report states that “notwithstanding the advances made by BELB and SEELB in clearing prior years’ accounts, they need to demonstrate sustained improvement”. One of the conclusions in the report is that lessons were not learned following overspending by Boards in the 1990s. However the report also draws a ention to wide ranging reforms initiated by the Department to prevent further recurrences of overspending.

Ten schools had deficits over £100,000 in 2003-04 and 98 had surpluses over £75,000. The report makes the point that financial discipline at the level of individual schools is also important. Better and quicker financial information at school level, and the readiness to deal with emerging problems, will be central to this.

The report also recommends that the Department of Education should further strengthen its professional accountancy skills, particularly at senior management level.

Notes for editors

1. The Comptroller and Auditor General is Head of the Northern Ireland Audit Office (NIAO). 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 papers.