Northern Ireland Tourist Board Contract to Manage the Trading Activities of Rural Cottage Holidays Ltd

Government departments and their sponsored bodies administer public money and are responsible for the proper conduct of public business. The Assembly and the public expect that government bodies will do this to the highest standards. When conflicts of interest are not disclosed or managed properly this undermines public confidence in the standards of public administration.

A report published the Comptroller and Auditor General, examines conflicts of interest on the part of a senior official in the Northern Ireland Tourist Board (NITB) and NITB’s subsequent handling of this conflict of interest, leading ultimately to the dismissal of the senior official. A conflict of interest arose during the letting of a marketing support contract, valued at £22,000 net, for a 5 year agreement to manage the trading activities of NITB’s subsidiary company, Rural Cottage Holidays Limited, to a company, Travel Solutions. The owner of Travel Solutions was known to the Board’s Director of Industry Development. The rolling nature of further disclosures involving these individuals, and also the Director’s wife, placed NITB in an increasingly difficult position. Weaknesses in formal guidance and proper reporting of the position increased the risk of, at worst, impropriety and, at best, reputational damage. The report sets out important lessons for handling potential conflicts of interest relevant to the wider public sector in Northern Ireland. Mr Dowdall said:

“The Director of Industry Development did not act in accordance with the standards of conduct expected of public officials. However, this case demonstrates the importance of properly assessing, managing and reporting potential and perceived conflicts of interest, as soon as they are identified.”

Main Findings

• The owner of Travel Solutions, which also trades as Cottages in Ireland, was the successful bidder for a contract to manage Rural Cottage Holidays Limited’s sales andmarketing operations. He was a friend of the Director of Industry Development and lateremployed the Director of Industry Development’s wife.
• The NITB Chief Executive does not recall any disclosure of the friendship until in oraround February 2005, by which time the Director of Industry Development had been aware of the bidders and had entered into negotiations with them. The timing of thisdisclosure is disputed by the former Director of Industry Development. There was nowritten note kept of this disclosure and of the discussion that took place. On being informed of the Director of Industry Development’s friendship with one of the bidders, theNITB Chief Executive assigned responsibility for progressing the contract and assessing the bids to another senior official. However, the Director of Industry Development continued to have some involvement in the process. The report noted that, to avoid any perception of conflict, the Director of Industry Development should have been excluded from any involvement in the procurement process or meetings associated with the contract after he had disclosed his friendship with the owner of Travel Solutions.
• Rural Cottage Holidays Ltd’s sales and marketing operations were transferred to the successful bidder, in October 2005, under a five-year agency agreement rather than by a sale of the company as had been originally advertised. A review by the Department’s internal auditors found that NITB took adequate measures in selecting the preferred buyer but the decision to enter into an agency agreement was a significant change which should have been approved in advance by the NITB’s Board. The impact of the belated disclosure of the potential conflict of interest and the change from an outright sale to to a trade disposal should have alerted NITB to be particularly careful in the proper handling of the conflict. The report noted that the various actual conflicts that arose subsequent to Travel Solutions winning the bid increases concerns over the original delay in disclosing the relationship during the procurement phase.
• In December 2006, one of the unsuccessful bidders complained to the Department of Enterprise, Trade and Investment about aspects of the contract. As a consequence of this complaint, NITB discovered that the Director of Industry Development and his wife were directors of a company, Holidaymatters.com, which promotes holidays outside Northern Ireland. On the inception of Holidaymatters.com, its directors were the owner of Travel Solutions and the Director of Industry Development’s wife. Investigation of the complaint led to NITB’s Director of Industry Development being dismissed for gross misconduct in January 2007.
• The Department noted that NITB considered each disclosure as it was made and took decisions and actions which it considered appropriate at each stage in the context of the information provided and available guidance. The Department also told us that NITB took vigorous and decisive action on receipt of additional information from a third party in December 2006 which led to the Director of Industry Development’s dismissal.
• Mr Dowdall has set out a number of important lessons for public bodies and senior officials in handling conflicts of interest. He recommends that public bodies need to be alert to the existence of conflicts of interest. Also, senior officials need to recognise warning signals of potential conflicts, particularly when senior officials have been recruited from the private sector, when there is a close connection between individuals and organisations they come into contact with in the public sector and those they knew previously. Training in public sector standards of propriety is important. He emphasises that individuals should have no involvement in transactions where they have a conflict of interest.
• Mr Dowdall highlights the importance of strong governance arrangements. It is an important element of effective corporate governance that Boards and Audit Committees should oversee key aspects of officials’ work.