“The Committee views this matter with the utmost seriousness…”

The BBC reports the Northern Ireland Assembly Public Accounts Committee’s (PAC) press release on their report in response to NI Audit Office report into the Farm Nutrient Management Scheme – the actual PAC report is here.

In general there’s little new information on the NI Department of Agriculture’s mishandling of the Farm Nutrient Management Scheme – the largest capital grant scheme ever run by the Department of Agriculture, through which some 4000 farmers received grants worth £121million  – an earlier draft PAC report was leaked to the BBC confirming the NI Audit Office criticisms.

What is notable, however, is the apparent absence of any ministerial involvement at any point – either by the Agriculture Minister or the Finance Minister.

And there is specific detail on the mis-valuation of the publicly owned 100 acre Northern Ireland Plant Testing Station at Crossnacreevy which, in June 2007, the then-Minister, Sinn Féin’s Michelle Gildernew, announced would be sold to cover the cost of the Scheme.

From the PAC report’s Executive Summary [added emphasis throughout]

The proposed sale of Crossnacreevy

9. One of the most disturbing aspects of the Department’s handling of this Scheme was its £200 million valuation of the Crossnacreevy site. Although described at the time as an “initial informal valuation”, it was nevertheless the means by which the Department managed to secure £89 million of additional capital funding from the Department of Finance and Personnel (DFP). Subsequently, a formal valuation by Land and Property Services put the actual site value at between £2.28 million and £5.87 million.

10. The Committee finds this astonishing. It is highly questionable whether the potential sale of Crossnacreevy, particularly as a building development opportunity, was a realistic proposition at that time. This should have been obvious to all concerned. Crossnacreevy is situated in a greenbelt and the possibility of obtaining a change in planning permission had not even been explored. DFP’s failure to effectively exercise its oversight role in this issue is very disappointing — it should have insisted on a formal professional valuation, prior to ratifying the increased capital budget for the Scheme.

11. Following the Committee’s first evidence session on 15 June 2011, additional information was requested from the Department on the Crossnacreevy issue. In reviewing this data, the Committee noted important details that had not previously been disclosed by the DARD witnesses. As a result, the Accounting Officer was recalled. In the wake of that second evidence session, the Committee’s disquiet over DARD’s handling of the Crossnacreevy issue has substantially increased. Particular concerns include:

  • DARD’s failure to disclose key information on the Crossnacreevy valuation to DFP;
  • the unreasonable delay by DARD in establishing a proper valuation for the property and determining its potential for sale;
  • the implausibility of a number of DARD’s explanations to the Committee.

12. Overall, the Committee’s impression is that the Accounting Officer’s evidence on Crossnacreevy lacked frankness, openness and credibility. This is unacceptable. The Committee expects the full co-operation of departmental witnesses in its drive to expose poor practice and highlight important lessons for future application. It should not have to engage in a cross examination. Earlier this year, in its report on Northern Ireland Water, the Committee made clear that witnesses must answer all questions accurately and not omit relevant and important facts. Regrettably, this clear and unequivocal message failed to register within DARD.

13. It is a matter of profound disappointment that, after such a short period of time, this issue should again have to be highlighted to an Accounting Officer. The Committee views this matter with the utmost seriousness and, in the circumstances, has decided to draw its concerns to the attention of the Head of the Northern Ireland Civil Service and the DFP Accounting Officer, through separate correspondence.

And from the main text of the PAC report [added emphasis throughout]

33. One of the most disturbing aspects of the Department’s handling of this Scheme was its £200 million valuation of the Crossnacreevy site. DARD put forward the sale of Crossnacreevy in the context of a bid for an additional £89 million for FNMS. In correspondence with DFP, the Department said that an “initial informal valuation” suggested that, with planning permission for the whole site, Crossnacreevy would command in excess of £200 million on the open market.

34. On 12 June 2007, DFP approved the FNMS funding increase, on the basis that its concerns about affordability would be satisfactorily resolved by the future sale of Crossnacreevy. DFP noted that DARD was offering a potential £200 million capital receipt, an amount considerably larger than DARD was seeking for FNMS. In DFP’s view, this was “an important and in the final analysis the persuasive point”. Subsequently however, a formal valuation of Crossnacreevy by Land and Property Services (LPS) put the actual site value at between £2.28 million and £5.87 million. Relocation costs of up to £6 million were also identified, leaving the sale of the site unlikely to yield any net gain.

35. The Committee asked DARD how it had obtained the £200 million valuation. The Accounting Officer explained that, in late May 2007, at his behest, a member of his staff had elicited from Land and Property Services that development land in Greater Belfast, with full planning permission, was changing hands at up to £2.5 million an acre. The Accounting Officer said that he multiplied the £2.5 million figure by 80 acres (the approximate size of the Crossnacreevy site) and came up with a figure of £200 million[2].

36. The Committee finds this astonishing. Crossnacreevy is situated in a greenbelt outside Greater Belfast and the possibility of obtaining planning permission commensurate with the valuation had not even been explored. Consequently, the valuation of the site as a building development opportunity could not have been regarded as a realistic proposition at that time. Indeed, having heard the Accounting Officer’s explanation as to the source of the £200 million figure, it is difficult to see how it could be regarded as a valuation at all. Rather, it appears to the Committee to be a gross misrepresentation.

37. When the Committee asked DARD why a formal valuation had not been obtained, the Accounting Officer said that, due to the urgency of the funding situation, there had not been sufficient time. This is not convincing. The urgency of the funding situation cannot justify the presentation of a figure that is essentially groundless, as some form of credible initial valuation. Moreover, according to the Department, its £200 million “valuation” was obtained at some point between the 25 May and 31 May. DFP’s approval, however, was dated 12 June. Given the importance of this matter, it seems to the Committee that LPS could have been asked to provide a credible valuation within that timeframe.

Recommendation 7

38. The circumstances surrounding the Crossnacreevy valuation are unacceptable, unprofessional and reflect poorly on the Department’s financial management capability. High standards of financial management should be a feature of every well-run Government department. The Committee recommends that processes are put in place to ensure that departmental bids for funding are underpinned by a rigorous cost analysis and, where appropriate, independent professional scrutiny.

The role of DFP in relation to Crossnacreevy

39. The Committee is also very disappointed with DFP’s failure to effectively exercise its oversight role in this issue. It should have insisted on a formal professional valuation, prior to ratifying the increased capital budget for FNMS.

40. The Committee is also concerned about the opportunity cost of the £89 million additional capital funding provided to FNMS. Other projects or programmes that would otherwise have been supported, in the absence of the additional FNMS funding, are bound to have been lost or delayed. The Committee asked for details of these projects and programmes but DFP said that it is not possible to specify them.

Recommendation 8

41. DFP has a vital oversight role within the public sector budgetary control process. The Committee recommends that DFP reviews its budgetary approval procedures to ensure that, in future, decisions to provide major funding packages are based on costings that have been properly substantiated.

Further concerns about DARD’s handling of the Crossnacreevy issue

42. Following the Committee’s first evidence session on 15 June 2011, additional information was requested from the Department on the Crossnacreevy issue. In reviewing this material, the Committee noted important details that had not previously been disclosed by the DARD witnesses. As a result, the Accounting Officer was recalled.

43. In the wake of that second evidence session, the Committee’s disquiet over DARD’s handling of the Crossnacreevy issue has substantially increased. Particular concerns include:

  • DARD’s failure to disclose key information on the Crossnacreevy valuation to DFP and to this Committee;
  • the unreasonable delay by DARD in establishing a proper valuation for the property and determining its potential for sale;
  • the implausibility of a number of DARD’s explanations to the Committee.

44. In its evidence, DARD indicated that the Crossnacreevy review process took some nine months, to March 2008, to establish the value of the property and its potential for sale. In the Committee’s opinion, however, there were undue and indefensible delays by the Department in moving the process forward.

45. The Committee found that, on 1 August 2007, LPS had provided DARD with a detailed valuation of Crossnacreevy, amounting to £10 million. LPS also pointed out that the site lay in a greenbelt and, as such, there was a presumption that planning permission for alternative use would not be given. Crucially, however, DARD did not share this important information with DFP. This was despite it being clear from DFP’s June 2007 approval (paragraph 34) that the affordability of FNMS was a key condition and one that was only deemed to have been satisfied by the anticipated £200 million receipt from the sale of Crossnacreevy. Moreover, DFP had made clear that approval was being given pending ratification of the position by the Executive, as part of the normal budgetary process in September 2007.

46. In the Committee’s opinion, any fundamental change to the position should immediately have been signalled to DFP and the Executive, especially where realisation of the anticipated £200 million receipt was being called into serious question. The Committee found, however, that it was not until April 2008, almost nine months later, that DFP was informed of the proper valuation and even then, only on an informal basis. This was completely unacceptable.

47. The Accounting Officer said that, in his view, the £10 million valuation and the information that Crossnacreevy was in a greenbelt were not that important. Consequently, he did not consider it necessary to share them with DFP. In the Committee’s opinion, that is absurd. Both issues were fundamental to whether DARD would be able to fulfil its obligation to DFP and the Executive, of delivering a substantial receipt within the March 2011 deadline.

48. The Accounting Officer also said that he wrote to DFP on 2 January 2008 to notify them that, because Crossnacreevy was in greenbelt and the Belfast Metropolitan Area Plan (BMAP) was closed for new objections, there would be a delay in applying for a change of use for the property. He said that, by implication, he was telling DFP that the anticipated receipt from the sale of Crossnacreevy might not come in. By contrast, DFP told the Committee that they did not read into the letter that DARD was not going to get the £200 million receipt; rather, they saw it merely as articulating a delay due to logistical problems.

49. The Committee also asked DARD why, having been told by LPS that Crossnacreevy was in a greenbelt, it had not immediately checked the position with Planning Service. The Accounting Officer said that he had been cautious about doing so because he did not want to be seen to be improperly influential. In the Committee’s opinion, that explanation is also absurd. Contacts between Government departments are a daily occurrence and enquiries of the sort that DARD needed to make could in no way be construed as seeking to exert undue influence. Indeed, despite the alleged caution, the Accounting Officer stated that he himself contacted Planning Service by telephone in October 2007 to enquire as to whether further objections could be lodged within the BMAP process. At that stage, the window for lodging objections had been closed since January 2005, some two and a half years earlier. Bizarrely, however, the Accounting Officer said that his understanding of the discussion with Planning Service was that the BMAP process remained open to objections. It was only some two months later, in correspondence with Planning Service, that DARD realised its mistake. The Committee finds this astonishing.

50. The LPS letter of 1 August 2007 also advised DARD that it could engage a specialist planning consultant to provide guidance on the potential for re-designation of Crossnacreevy. The Accounting Officer said that he considered this to be the most important element in the LPS letter, as he felt he had to test the planning position through the private sector. The Committee finds his explanation unconvincing, not least because it took the Department over five months to actually appoint a planning consultant.

51. That consultant provided DARD with a Planning Position Statement. Described as being mainly a desktop assessment and costing only £2,600, this appears to have been a relatively simple piece of work. LPS subsequently used the Planning Position Statement to finalise the Crossnacreevy valuation (paragraph 34), completing this work within five days. The evidence strongly suggests, therefore, that the work of the planning consultant and LPS, which underpinned the final valuation, could have been concluded at a much earlier juncture, probably in August 2007. In the Committee’s view, the delay to March 2008 is indefensible. By that stage, the additional £89 million FNMS funding had already been ratified within the Executive’s budget.

52. The undue delay by DARD in establishing a proper valuation for Crossnacreevy and determining its potential for sale is particularly disappointing because the Committee has serious doubts about whether the additional funding, or at least a substantial proportion of it, was really necessary (see paragraphs 68-71).

Update  Someone at the BBC may have actually read the PAC report.

[But they still don’t get it? – Ed]  Possibly…

Here’s a question, given the “absurd” explanations currently on offer.

Is it believeable that, after securing the provisional approval from the Department of Finance for the required £89million for the FNM Scheme on the basis of the misrepresentation of the value of the Crossnacreevy site, that the Accounting Officer did not inform the Agriculture Minister of its true value when that was confirmed to him on 1 August 2007?

Bearing in mind that the Agriculture Minister was due to attend a NI Executive meeting in September 2007 when the £89million was to be ratified…

And, if so, when did the NI Agriculture Minister discover the true value of the Crossnacreevy site?