NI Auditor General: “a larger number of accounts than usual received qualifications on the grounds of truth and fairness and/or regularity grounds”

The BBC reports the Northern Ireland Comptroller and Auditor General’s report to the NI Assembly on the results of the financial audit on the accounts for 2009-10 of Executive departments and other public sector bodies. Full report here [pdf file]

From the BBC report

The report said several departments were guilty of making irregular payments without proper approval. [added emphasis]

The largest amount identified was £64m pounds incurred by the Department of Agriculture for incorrectly administering EU farm subsidies.

The Northern Ireland taxpayer was also left with a bill of £25m because the European Commission said it was unhappy with the Finance Department’s accounting on two special funding programmes.

Mr Donnelly said a further £1.7m was incurred on the Grand Opera House extension in Belfast because the Department of Culture Arts and Leisure had not received the necessary approval for the expenditure.

The Department of Education spent £2.1m on external consultancy fees on six projects while it overspent by £3.7m on a superannuation scheme for teachers.

And the NI Auditor General helpfully highlights some of the key issues

Department of Culture, Arts and Leisure

Irregular expenditure was incurred on the Grand Opera House Extension/Refurbishment Project amounting to £1.7m for which the Department had not obtained the necessary Department of Finance and Personnel (DFP) approval. DFP advised that retrospective approval had not been granted because neither it nor the Department had the opportunity to challenge the post tender cost over-run or the subsequent client changes. DFP was of the view that had those challenges materialised much of the expenditure might not have been incurred. A similar qualification was attached to the 2009-10 accounts of the Arts Council for Northern Ireland.

The Department also incurred irregular expenditure of £188,000 due to a disallowance by the European Commission of EU funding which will be met by the taxpayer.

The audit opinion was also qualified on the basis of insufficient appropriate evidence to support the legal ownership of certain land and buildings, sporting and fishing rights.

Department of Education

Irregular expenditure of £2.1m was incurred in respect of external consultancy fees on six projects which specifically required the approval of DFP. Approvals were not retrospectively granted due to the Department’s failure to comply with specific conditions as defined in Managing Public Money Northern Ireland. The Department incurred further irregular expenditure amounting to £2.3m on consultancy projects in prior years. [added emphasis]

Department for Regional Development

Irregular expenditure was incurred by Northern Ireland Water which amounted to £5.3m in 2009-10, £9.2m in 2008-09 and £6.5m in 2007-08. Significant exceptions in the procurement and contract management framework of control and application of the financial delegations framework were identified. These issues are currently being considered further by the Public Accounts Committee.

Department of Finance and Personnel

The regularity opinion was qualified on the basis of EU financial corrections amounting to £25m incurred in relation to closure of the Special Support Programme for Peace (Peace 1) and the Northern Ireland Single Programme Document (NISPD) 1994-99 programmes. The European Commission advised there were weaknesses in the audit trails of two funding programmes, for instance, formal compliance with regulations could not be evidenced for all projects audited. The corrections represent a shortfall of EU funding which will be met by the taxpayer. [added emphasis]

Department of Agriculture and Rural Development

Irregular expenditure arose as financial corrections were imposed by the European Commission (EC) due to weaknesses in controls relating to the administration of the Common Agriculture Policy payments that did not comply with the EC’s regulations. The Commission advised that three financial corrections were being applied to the Department primarily due to weaknesses in systems, procedures and processes. The liability of £64m represents a loss of public funds that falls outside the Assembly’s intentions. The regularity opinion was qualified.

The Department incurred irregular expenditure, known as excess votes, of £23.2m and £14.1m in cash and resource terms respectively, as actual spend exceeded the spend authorised by the Northern Ireland Assembly. These excesses were due to clerical errors, for cash, and timing considerations, for resource, as the EU disallowance liability had not crystallised when the estimates’ submissions were drafted.

Mr Donnelly’s report also expresses concern about how a badger population survey was procured. The report concludes that there was a clear conflict of interest in the award of the contract where one tenderer was privy to information on the preferred methodology and that there were significant flaws in the execution of the procurement process. [added emphasis]

Teachers Superannuation Scheme

The Department of Education incurred irregular expenditure of £3.7m on an excess vote on the Teachers Superannuation Scheme. This was caused by the Department’s failure to operate adequate internal controls to manage effectively the estimating process.

Department for Social Development

The regularity opinion has been qualified for a considerable number of years in relation to the material levels of estimated fraud and error in benefit expenditure administered by the Social Security Agency and in housing benefit expenditure administered primarily by the Northern Ireland Housing Executive. The estimated level of losses due to overpayments of benefits amounted to £56.1m. A further estimated amount of £19.5m was underpaid to customers. The corresponding annual accounts of the Agency and the Housing Executive were also qualified.

The Department’s accounts include expenditure of £64m on the Supporting People Programme. £2.2m related to Special Needs Management Allowance where payments have not been appropriately monitored by either the Department or the Northern Ireland Housing Executive since 2003. The regularity audit opinion was also qualified because of this. The corresponding annual accounts of the Housing Executive were also qualified on this matter.

The audit opinion was also qualified on the basis of insufficient appropriate evidence to confirm whether the correct accounting treatment had been applied to account for certain information technology assets and intangible assets. The corresponding annual accounts of the Social Security Agency were also qualified on this matter.

Since 1993 the audit opinion has been qualified on the Child Maintenance and Enforcement Division Client Funds Account. The qualification was applied again in 2009-10 due to errors in the calculation of maintenance assessments inadequate accounting records to support the level of outstanding maintenance arrears totalling £80.7m.

Adds  There’s one other area of interest in the report which has not been pulled out in the reports – possibly because it wasn’t ‘qualified’ by the Auditor General.

Over a five year cycle 14 out of 33 Housing Associations (42%) failed inspections – were awarded overall “unacceptable” ratings – by the Department of Social Development’s Regulatory and Inspection Unit.

In 2009/10 the Housing Executive paid £172.3million in grants under the Social Housing Development Programme to Housing Associations on behalf of the Department.

Here’s the Auditor General’s conclusion

2.6.83 I have not qualified my audit opinion on this area of expenditure but I am concerned that there are significant problems within the registered housing association sector in Northern Ireland. Of particular concern is the high level of underachievement in finance and governance.