Last year the Comptroller and Auditor General for Northern Ireland, Kieran Donnelly, qualified “a larger number of [NI Executive department’s] accounts than usual” and highlighted his concern “that there [were] significant problems within the registered housing association sector in Northern Ireland.”
As the NIAO press release notes, “This pattern has continued in 2010-11”. Six out of the nineteen NI Executive departmental resource accounts have received qualified audit opinions. The full report is available here.
And the NIAO press release highlights some of the key issues noted in the report
Breaches of Spending Controls and Unapproved Payments
• The Department of Culture, Arts and Leisure incurred expenditure for which it did not have the appropriate authority from DFP. The expenditure was therefore irregular. As a consequence, the Department exceeded its spending limit by £2.8 million.
• The Department for Social Development also spent more than had been approved for its use by the Assembly and therefore incurred an excess vote. The Assembly had authorised it to spend up to £447.8 million of resources in one of the Department’s areas of work but it actually spent £458.0 million resulting in an excess vote of £10.2 million. The circumstances in which the Department incurred the “excess” were exceptional and arose from a request from DFP after the Spring Supplementary Estimate had been approved, to identify any opportunities for further spend during the year.
• The Department for Social Development additionally exceeded the amount approved by DFP for it to spend on a city centre regeneration project by £1.7million.
• In the case of the Office of the First Minister and Deputy First Minister, the necessary approval was not obtained from DFP for remedial works at Maze Long Kesh. As a result, expenditure of £3 million in the year was irregular and the audit opinion was qualified because of this.
• Also in the Office of the First Minister and Deputy First Minister the necessary DFP approvals were not obtained for consultancy expenditure on three schemes totalling £524,000. As the necessary approvals were not obtained the audit opinion was qualified for the payments made under these schemes in 2010-11.
• The audit opinion on the Department for Regional Development’s accounts was qualified due to regularity issues relating to expenditure of £4.7 million. The irregularity arose as a result of significant breaches in governance and controls over procurement in Northern Ireland Water Limited (NI Water). NI Water’s 2010-11 accounts included a qualified regularity opinion. The Department’s accounts have, therefore, been qualified as it funded this spending. The Department’s 2009-10 accounts were similarly qualified last year when irregular expenditure of £5.3 million was incurred.
• The audit opinion on the Department of Education’s accounts was qualified because its Arms Length Bodies and a number of schools had paid honoraria to teaching and non-teaching staff of £662,127 in 2010-11. These payments were made without proper approvals being in place from both the Department of Education and Department of Finance and Personnel.
• The audit opinion in the General Consumer Council’s 2010-11 accounts was qualified because of continuing salary payments which did not have the necessary approvals. £51,000 was the amount involved in 2010-11.
• The report also draws attention to unapproved payments to staff at the NI Council for the Curriculum, Examinations and Assessment in 2008-09 and 2009-10 (£116k in total over the two years).
Office of the First Minister and Deputy First Minister
The audit opinion on this Department’s accounts was qualified because there were inadequate controls over certain directly funded bodies. These were funded to the value of £7.5 million in 2010-11.The Department is putting in place a range of corrective measures to address the shortcomings.
Department of Agriculture and Rural Development
Mr Donnelly reported last year that weaknesses in controls relating to the administration of Common Agriculture Policy payments led to irregular expenditure by the Department. During 2010-11 the Department included a further £19.4 million as amounts due to be paid to the European Union in respect of financial corrections and the C&AG again qualified his audit opinion because of this.
While not further qualifying his audit opinion, he has also reported on the management and oversight of the Department’s Central Investigation Services (CIS) Branch, which has responsibility for the investigation of suspected fraud cases. The report notes concern that most of the suspected fraud cases referred to the Department for investigation during 2010-11 had not been reported to the NIAO as is required. The audit also identified shortcomings in the procedures followed within CIS as well as the Department’s management and oversight of its activities.
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 £66.2m. A further estimated amount of £16.3m was underpaid to customers. The corresponding annual accounts of the Agency and the Housing Executive were also qualified on the material levels of estimated fraud and error in benefit expenditure.
The following matters relating to housing were also highlighted by Mr Donnelly’s reports on the Department and the NI Housing Executive.
An interim report by the Department’s regulatory and inspection unit identified significant issues in relation to Helm Housing Association. Mr Donnelly considered that the issues raised were potentially so serious that he could not satisfy himself as to the regularity of £12.1 million of grants issued to Helm during 2010-11 and he qualified his audit opinion because of this.
In addition, while not further qualifying the audit opinion, significant concerns in relation to the Housing Association sector as a whole were noted. The Department pays grants, via NIHE, to the associations of £165 million and the work of the Department’s inspection unit continued to find examples of poor and unacceptable management and governance practices in associations. These resulted in its inspections of four out of seven housing associations receiving no assurance in 2010-11.
Significant weaknesses in control have emerged in respect of response maintenance expenditure incurred by the Housing Executive, the quality of some contractors’ work and overpayments to some of them. Mr Donnelly was unable to gain sufficient evidence to confirm that payments totalling £48.9 million had been made properly.
The report also highlights the current investigations into specific contracts. In view of the seriousness of the issues raised and problems identified Mr Donnelly has initiated a value for money review on contract management and investigations into land and property deals.
Child Maintenance and Enforcement Division
Since 1993 the audit opinion on the Department for Social Development’s Client Funds Accounts has also been qualified. The qualification was applied again in 2010-11 due to errors in the calculation of maintenance assessments and inadequate accounting records to support the level of outstanding maintenance arrears totalling £81.7m.
Belfast Metropolitan College (2008-09 and 2009-10)
The report refers to irregular expenditure on consultants and the College’s deficit.
Statement of Rate Levy and Collection (2009-10)
The report concludes that while Land & Property Services has introduced a number of measures to improve rate collection and debt recovery, the failure to meet collection targets and the increasing level of ratepayer debt is extremely concerning. Mr Donnelly said “Whilst recognising that the current economic climate imposes a number of additional challenges for the Agency, it is important that LPS and DFP ensure that every step, including legal action, is taken to maximise rates income.”
Key points from the audit of the 2009-10 Statement include:
• The report again highlighted the level of delay in completing valuation assessments. While progress has been made, the assessment process is still taking too long. There are still 26,000 domestic valuations outstanding with domestic alterations taking on average 813 days.
• Ratepayer debt increased from £138 million to £157 million while 2009-10 receipts of £995 million were up less than 3 per cent on 2008-09. The Agency did not meet its key collection target of 98 per cent. 94.7 per cent was achieved. Write-offs increased from £6 million to £10 million and are continuing to rise.
• Vacancy inspections continue to be sporadic. In August 2009 an inspection of non domestic properties in 14 Councils resulted in £14 million bills issued on properties that had been recorded as vacant. Various alternative solutions are being developed to supplement resource intensive physical examinations.
The 2008-09 National Fraud Initiative identified 22,000 accounts requiring investigation. It is estimated that around £12 million of fraud and error will be identified.
Theft of Fuel, Oil and Metals
The report also highlights the increasing incidence of thefts of fuel, oil and metals from public sector bodies, principally due to the difficult economic climate and the rising prices which can be obtained for these materials. The report sets out possible ways of tackling these thefts.
Apparently there’ll be a seperate report on the NI Department of Health accounts in December.