Financial Auditing and Reporting 2008

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 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 will be published on 3 June 2009.  Some of the key issues noted in this report are:

Procurement Issues

Weaknesses in the process of procurement is a theme which has emerged in the report in relation to different topic areas.

• Mr Dowdall notes legal challenges against the Department of Finance and Personnel (DFP) and the Department of Education (DE) made by unsuccessful bidders over procurement procedure.  Whilst the Court has ruled on remedies in these cases, he is concerned that following an ex-gratia payment to Partenaire, government could be seen to be a ‘soft touch’ for litigation by disappointed tenderers and others.  
• In a case involving the Ordnance Survey of Northern Ireland (OSNI), Mr Dowdall concluded the audit trail in support of procurements of Global Positioning System equipment was weak or inadequate.  In addition, as a result of failures and non-compliance with legal obligations under UK and European Union procurement regulations, OSNI was unable to demonstrate that it achieved value for money or that the procurements were fair and impartial.
• In the procurement of the Rathlin Ferry Service. Mr Dowdall is concerned that most of the issues identified in an investigation into propriety allegations, arose primarily as a result of poor implementation by officials of what should have been well established procedures.  This fuelled a perception of favouritism and the notion of bias and wrong-doing and was potentially very damaging to the reputation of the Department for Regional Development.

In this current economic climate it is more important than ever to ensure that taxpayers get best value for money.

Statement of the Rates Levy and Collection 2007-08

Mr Dowdall’s previous General Report covered the position up to April 2008 and consequently many of the issues identified during the examination of the 2006-07 statement and referred to in the Northern Ireland Assembly’s Public Accounts Committee (PAC) report in November 2008 persisted during the 2007-08 year. The PAC made a number of important recommendations and DFP has since set out an action plan to implement these recommendations.

Mr Dowdall noted that as a result of additional work undertaken by the Land and Property Services (LPS) in respect of the 2007-08 statement, NIAO was able to verify the completeness, existence and accuracy of the £894 million receipts balance apart from an unreconciled difference of £174,000 and, in terms of vacancies, LPS was able to provide a complete listing of vacant properties for the £32m recorded which was an increase of 49% from £22m the previous year.  However due to inspections not being completed to verify the vacant status of properties he was concerned that the value is misstated and that bills were not being raised where necessary.  Delays in issuing bills may increase the risk that amounts may not be collected.

Ratepayer arrears carried forward at 31st March 2008 were £124m, compared with £88m at 31 March 2007 and £48m at 31 March 2006. Concern is expressed that the level of arrears rose by £36m and the level of collection decreased by 2.6% in 2007-08 compared to 2006-07. The lack of timely resolution of this significant problem by the Department and LPS will place an increased financial burden on ratepayers to repay multiple years’ rates bills at one time and this could impact on recoverability.  Increasing arrears and delays in their recovery increases the risk of significant loss to public funds.

There therefore remain certain aspects of the statement over which Mr Dowdall is still unable to obtain sufficient assurance and if he were to give an audit opinion on the 2007-08 statement it would be qualified on the basis of inadequate audit evidence in verifying vacancies of £32 million, concerns over the completeness of the property listing upon which rates assessments are raised and continuing significant system control problems.

Department for Social Development Housing Regulatory and Inspection Unit

The Regulation and Inspection Unit within the Department for Social Development is responsible for planning and carrying out a programme of regular inspection of Housing Associations. The report draws a comparison between the Unit and the Welsh model. It identifies existing good practice within the Unit but also highlights a series of areas where the process in Northern Ireland could be further enhanced. Recommendations include:
 

• Completing the entire programme of inspections as a priority – 10 inspections have not been finalised and 5 inspections are outstanding;
• Publishing all inspection reports on the Department’s website;
• Aligning the inspection gradings with those used in Wales to provide clearer understanding of performance;
• Continuing to monitor the length of time taken to produce and deliver reports (the average time taken to complete reports in 2007-08 was 225 days); and
• Giving more prominence to areas of good practice in reports.

Prompt Payment Practice and Performance in the Education Sector

A target of 95 per cent of invoices paid within 30 days is considered best practice for performance of prompt payments to suppliers.  DE is responsible for Education and Library Boards.  None of the five Boards achieved the best practice performance target. The performance achieved ranged from 80 per cent in the Belfast Board to 55 per cent in the South Eastern Board when measured by volume of payments made. In the other 3 Boards the performance level was broadly similar, averaging 75 per cent. The performance by value of bills paid showed a significant improvement but again none of the Boards achieved the 95 per cent target.  Mr Dowdall recommends that the Boards and all central government bodies should commit to paying all suppliers as promptly as possible and all bodies should aim to meet the Government’s current commitment to prompt payment within ten days.

Child Support Agency – Client Funds Account

Mr Dowdall’s opinion on the Child Support Agency’s Client Funds Account has been qualified since the Agency’s inception in 1993.  In 2007-08 the qualification continued owing to the absence of adequate documentation to support the level of debt included in the account and limited evidence available to confirm the accuracy of the maintenance assessments made by the CSA which form the basis of the debt balances.

The Agency is not permitted to write off debt and gross debt has been accumulating and is reported at £82.6m at 31 March 2008.  Of this £35.7m (£29.9m in 2006-07) is considered to be collectable debt.  Mr Dowdall expresses his concern at these rising levels and at the Agency’s debt collection target which he does not consider to be challenging.  His views were shared by the PAC in its recently published report on the Agency Client Funds when the Committee expressed the view that the level of debt was unacceptable, the growth in the level of debt is worrying and the Agency needed to be faster and better at collecting the money owed.