“frustration of trying to operate in a commercial manner in a restrictive public sector”

Will the Northern Ireland Regional Development Minister’s sacking of the Chairman and a number of Non-Executive Directors from the Board of NI Water – following the identification of 21 contracts, worth £8.4million, where appropriate governance procedures “had not been followed” – prompt a rethink of the minister’s apparent over-ruling of the independent Utility Regulator’s final determination on NI Water’s Price Control 2010-2013 (PC10)? Or has he already brought his proposals to the NI Executive? And despite the ministerial statement, that the report “stated that this was a serious matter for those responsible, namely the NIW Board and Executives responsible for ensuring compliance”, is this an attempt to deflect criticism from the Department itself? From the internal review report [pdf file]

We note that in May 2008 the DRD Permanent Secretary issued revised governance arrangements which dealt inter-alia with timely delivery of NIW’s Assurance Statements and audit matters and including a request to provide minutes of Audit Committee meeting which we understand is not being complied with to date. It was August 2008 before DRD received copies of NIW’s internal audit reports. Also the NIW’s bi-annual representations on internal control have consistently from July 2008 to date reported only ‘partial compliance’ with the requirement to actively follow up internal and external audit recommendations.

DRD was therefore aware that there was an inherent weakness in NIW’s internal control framework and the matter was raised from time to time at QSM meetings and in correspondence. However, it was only recently agreed that the Chair of NIW’s Audit Committee would have a bi-annual meeting with DRD’s Senior Finance Director and Head of the Shareholder Unit which would review assurance on the work of NIW’s Audit Committee and identify and escalate any issues as necessary. DRD told us that at the February 2010 QSM meeting with NIW an internal audit report tracking all ‘red’ recommendations and the improvements which have been made was tabled for the first time. We were informed by DRD that the issue of NIW’s internal audit reports to the Northern Ireland Audit Office was the subject of correspondence with NIW’s Chair of the Audit Committee.

And from Section 4 of the report – “Analysis of Failures by DRD as Shareholder”

4.1 Background

The Shareholder Unit (SU) in DRD was originally established as one element of the overall governance model appropriate to NIW as a government owned company. As noted previously, from 2008-09 NIW was categorised as an NDPB for public expenditure purposes. This was an indirect result of the deferral of domestic water charging which necessitated the continuation of funding by DRD. This change in status coupled with the overall desire of the DRD Accounting Officer to improve public accountability led to the governance architecture for NIW being strengthened in May 2008. [added emphasis]

And

4.3 Findings

A key issue for NIW has been and continues to be the confusion over organisational strategy and the status of the organisation as both a GoCo and an NDPB. This has created an incredibly complex governance and stakeholder environment involving the Utility Regulator, the SU; and from 2008-09, the additional overlay of NDPB accountability requirements. In addition to the complexity of the model, evidence presented to the IRT has highlighted the significant resource commitment required across the entire governance system to maintain the model. This governance structure is heavily demanding on both DRD and NIW and is reflective of the increased public accountability. [added emphasis]

IRT’s key finding for DRD, as Shareholder, relates the slow speed of response to the following events:

• strengthening NED capacity and ensuring this was in line with good governance;
• appointing a new CEO following the Chair’s appointment into dual role; and
• appointing the CEO of NIW as Accounting Officer immediately following reclassification of the organisation as an NDPB.

The IRT recognises that the delays outlined above were in part due to the complex political environment surrounding the Water Reform programme and in part due to the timeline required to secure inter-Departmental approvals and clarification with DFP. That said, these delays contributed to the creation of a governance environment that has led to the circumstances in which the governance failures noted in the previous section have occurred. However, this is no excuse for the failures in procurement which have been identified within NIW.

In terms of DRD’s role in the Internal Audit environment of NIW we consider that prior to May 2008 DRD was slow to act to ensure that NIW was taking internal audit matters seriously. Recent events have demonstrated that the DRD has given enhanced attention to NIW’s performance in following up audit recommendations. The Department has been encouraged by the increased attention this matter has received under the direction of the current CEO to whom it has given strong support and encouragement.

Update As Nevin notes in the comments zone, the Chairman and two of the three non-Executive directors sacked had been re-appointed to the Board of NI Water by the Minister in April 2009.

, , ,

  • Conor Murphy appears to be getting away scott free here. He appointed Mellor not only as Chairman originally but then as interim CEO.And he used nothing but glowing language when he talked about Mellor on his appointment.

    Where was the political judgement?

  • The Minister said: “I welcome the reappointment of Chris Mellor, John Ballard and Ruth Thompson to the Board of NI Water. Chris will serve as Chair for another four years; the other members have been appointed for a period of three years. All three have served the Board well over the past three years, during what can only be described as an extremely challenging time. I am therefore reassured that, going forward, the Company will continue to avail of their experience and detailed knowledge of the business.

    “These appointments help to ensure continuity and the retention of relevant business experience on the Board at a time of continued transformational change.

    “The next few years will be a very significant period for NI Water as it continues to roll out its investment programme; a programme aimed at delivering real benefits to customers and the environment, by further improving the quality of drinking water and by securing better wastewater services. Moreover, this programme must be delivered in the context of a challenging economic and trading environment.”

    The Minister concluded: “I am confident that, under the continued chairmanship of Chris Mellor, NI Water has a strong Board, with the ability and capacity to meet these challenges.” DRD press release 07 April 2009

    Obviously a Minister of great discernment.

  • Pigeon Toes

    “We note that in May 2008 the DRD Permanent Secretary issued revised governance arrangements which dealt inter-alia with timely delivery of NIW’s Assurance Statements and audit matters and including a request to provide minutes of Audit Committee meeting which we understand is not being complied with to date. It was August 2008 before DRD received copies of NIW’s internal audit reports.”

    Funny the DRD’s own governance of contracts was such a shambles in 2008.

  • That April 07 statement would come back to haunt a Minister in a normal functioning democracry.

  • Coll Ciotach

    I agree – he should have said that he totally despised him and considered his appointment as a retrograde step

  • lamhdearg

    Did i hear right, in announcing the sackings did the minister say that (the sackings) ” would leave US open to legal action” if i heard right who will pay for these legal actions,win or lose it will be us the tax payer, Our ministers are a bunch of clowns, in my opinion.

  • Pigeon Toes

    I think he meant the contracts could be legally challenged.

    I for one hope that a losing contractor sues the arse of them.

    About time too.

    Though it might not be the only solicitors letter they receive in the coming weeks

  • lamhdearg

    ohh, thanks Pigeon Toes,The thought(the sackings would lead to legal actions) has been annoying me all weekend.

  • Pigeon Toes

    Probably will, what has been puzzling me this week has been this http://www.belfasttelegraph.co.uk/news/local-national/data-supremo-sacked-after-leaks-to-press-14718063.html
    “The man in charge of the protection of personal data relating to people in Northern Ireland has been sacked for allegedly leaking information to the media…A commission spokesman said Mr McCrory had breached confidentiality, but said there would be no police probe into this claim because the information leaked only concerned Mr Mc Crory”

  • Brian Walker

    Pete, Not being up to speed, I’m completely foxed by all this. Are you telling us that NIW’s accounts were late because they were affected by the decision to freeze charges? That there was a row between the department and NIW about taking some matters off balance sheet? Or what – that it isn’t clear whether it’s a publicly owned trading company or an NDPB unusually subject to direct ministerial overrride? Might we be told what the story is in relatively straighforward terms?

  • The McLaughlin and Harvey case, the Henry Brothers case, the Rathlin Ferry saga, Northern Ireland Water sackings …

    Where will it all end? Is there a problem in the relationship between DRD and the DFP’s CPD, the department that oversees public procurement? Why has the Northern Ireland Audit Office been taking a back seat role in these local difficulties?

    Will the Minister be appearing at Monday’s meeting or will he be away off on a St Patrick’s junket instead? Will the Committee for Regional Development hold the DRD to account or will it sit back and await direction from the Minister?

  • “this is no excuse for the failures in procurement which have been identified within NIW.”

    Pete, I can find no mention of the DFP’s Central Procurement Directorate (CPD) [pdf file] in the internal review report yet CPD is the lead player in procurement:

    In Northern Ireland 96% of procurement spend is now subject to the professional influence of Centres of Procurement Expertise (CoPEs). .. There are a number of centres with specialist procurement expertise across the public sector, including the Roads Service, NI Water, Translink, ..

    Many of the new approaches to Public Procurement put in place following the Review of Public Procurement in 2001 are now being replicated in the other devolved administrations. ..

    The [Procurement] Board is chaired by the Finance Minister. Membership of the Board comprises the Permanent Secretaries of the 11 Departments, in order to ensure that there is compliance with the agreed policies and procedures in all Departments, their Agencies, NDPBs and public corporations. ..

    The Central Procurement Directorate also provides expertise, advice and a co-ordinating role and, where appropriate, directly procures strategic requirements.

    Considering the mess that exists across the procurement sector perhaps the wrong people have been sacked.

  • Pigeon Toes

    ” current CEO to whom it has given strong support and encouragement.”

    Was that “strong support and encouragement” not there previously?

    There should had to have been an awareness within DRD that procedures were not being followed if they were following the own er procedures.

    Of course, given that NIW are a separate body from DRD it is much easier for the axe to be swung.

    Not that I would be suggest a cover up or anything.

  • Pete, one of the sacked directors is to appear on the Nolan show this morning

  • Declan Gormley is on Nolan now.

  • Declan Gormley is on Nolan now. He says his reputation has been torn down.

  • Apparently Declan and another member joined the board at the same time; Declan was the one who was sacked.

  • Conor Murphy not available. Declan dismissed by email!!

  • Deputy Ferris said:

    “I want to commend Sinn Féin Minister Conor Murphy for his swift and decisive action in sacking senior board members of Northern Ireland Water when it was found that there was serious mismanagement in relation to the awarding of contracts.

    “His actions, aimed at restoring public confidence, stand in stark contrast with the dithering of Minister Mary Coughlan and her colleagues when the scandal about the waste of public money by the Board of FÁS.

    “Roddy Molloy, who had presided over the waste of millions of taxpayers money, was given a golden handshake and a pension worth almost €2 million in order for him to resign.

    “Perhaps the Fianna Fáil/Green government could learn a thing or two from the actions of Conor Murphy. However, I seriously doubt that anyone in this government is capable or willing to take such decisive action.”

  • Pigeon Toes

    http://news.bbc.co.uk/1/hi/northern_ireland/8567777.stm

    Why does this all feel so uncomfortably and personally familiar?

    Why also does it look increasingly like the current CEO was brought in to do a hatchet job?

  • Pigeon Toes

    O h and let’s not forget the “independent investigators”

  • Edwin Poots has spoken recently about the difficulty of sacking civil servants who are incompetent. Is it Government policy then to sack someone else instead, even someone who is competent?

    TotalitariaNIA has an interesting piece on this theme entitled Beyond Satire

    Sometime later, he -on the basis that the buck stops with him as Chief Executive- oversaw a process whereby contractors were suspended without any offence having been investigated or proven. Indeed, no offence has ever been proven (or properly investigated).

    There you are; just find a few scapegoats. Is that the current level of Government competence/governance in Northern Ireland.

    Perhaps those words of Declan Gormley need to be published here in full:

    But Mr Gormley, 52, has denied he did anything wrong.
    “I do not agree with the decision and believe it was unmerited and without due cause,” he said.
    “I utterly refute any wrong doing on my behalf in discharging my duties as a non-executive director at Northern Ireland Water during my 20 months on the board.
    “At all times I have acted in accordance with my responsibilities as a company director, and reiterate that I have done nothing during my period on the board which would merit any sanction never mind dismissal.”
    [source BBC]

    Peter???

  • Pigeon Toes
  • Missed it. The official transcript should make interesting reading. Presumably the Minister will have checked his facts with his departmental legal eagles!!

  • bohereen

    oh Christ, there is no way to get rid of these “ministers” and their grand gestures and populist poloicies, no upper house, no opposition. Looks like we can all look forward to a long period of govt by text vote on Nolan, BBC lunchtime radio and Belly Telly polls.

  • Pigeon Toes

    http://www.hsj.co.uk/dismissal-and-suspension-of-non-executive-directors/1711238.article

    “Here’s an interesting piece on the suspension and dismissal of non executive directors in the NHS
    Clearly, there is a need to protect the position of non-executives, recognising that the independence and scrutiny they provide may at times make them unpopular, particularly with their executive directors. A balance is required. On the one hand, non-executive directors need to express views and provide input without fear of removal from office. On the other hand, trust boards need to operate effectively. Sometimes relationships at board level prevent effective operation. Where this is an issue, it will invariably be desirable for the will of the majority to prevail”.