APPENDIX 1
Letter to Ian Pearson MP, Parliamentary
Under-Secretary of State, Northern Ireland Office from Rt Hon
Michael Mates MP, Chairman of the Committee
SCRUTINY OF NORTHERN IRELAND DEPARTMENTS'
ACCOUNTS
The Northern Ireland Affairs Sub-Committee took
evidence from officials about Northern Ireland Departments' Accounts
on 8 September. While grateful for officials' efforts to address
our concerns, we remain concerned about a number of important
points on which I am writing to seek clarification.
DEPARTMENT OF
FINANCE AND
PERSONNEL (DFP)
Resource Accounts and Financial Management
Following concerns raised in a report by the
Comptroller and Auditor General for Northern Ireland (C&AGNI),
the Committee asked about the extremely high proportion of accounts
which have received a negative audit opinion recently (10 in 2001-02
and seven in 2002-03 out of 17 departments) and why departments'
financial management had not shown more significant signs of improvement.[1]
We were told that poor performance was due to "a lack of
financial skills, difficulties over management information systems,
and . . . the introduction of the devolved administration that
coincided with the preparations for resource accounting".
[Q1] We were surprised by this response given that departments
must have been aware of both devolution and resource accounting
requirements well before their implementation. We also understand
that Northern Ireland departments had the advantage of a "dry
run" prior to the full implementation of resource accounting.
[Q3] It appears from the C&AGNI's report, that departments
were particularly ill prepared for the increased financial management
required by resource accounting, as only two of the seven qualified
accounts in 2002-03 would have received a negative audit opinion
under the cash based system of accounting.[2]
Poor performance has been exacerbated by the lack of a resource
based accounting system, which has meant increased manual effort
to produce accounts at the year end. We would be grateful for
a detailed explanation of why these problems arose in Northern
Ireland and the steps that have been taken to ensure that future
departmental financial management and performance will improve.
Accounting Services Programme
We understand that the Treasury's programme
called "faster closing" which is designed to accelerate
the publication of resource accounts will bring forward to before
the 2006 recess the date for the production and laying before
the House of Commons of all 2005-06 accounts, and that DFP is
seeking to adhere to this timetable. We were told by Northern
Ireland officials that a new accounting system, the Accounting
Services Programme (ASP), is being developed currently for implementation
across all Northern Ireland departments. This appears sensible
as the production of resource accounts was hampered by the lack
of an appropriate resource based accounting system, and success
in meeting the "faster closing" timetable will depend
in large measure on the creation of a much better financial management
system than is available at present [Q19].
However, a problem is apparent in reconciling
the aspirations of DFP to meet the Treasury timetable for "faster
closing"' in July 2006 with the timetable for the completion
of the ASP which is March 2008. Mr Hunter, the Permanent Secretary
of DFP, explained that "establishing . . . and rolling out
the new management information system . . . will take from April
2006 through to March 2008", but that it remained DFP's "aspiration"
to meet the "faster closing" deadline of 2006.[Q30]
In these circumstances, it is difficult to understand how meeting
the 2006 deadline can be a realistic aspiration, and elsewhere
in his evidence to us Mr Hunter appeared to cast doubt that it
could be met. [Q19]
We are concerned not only that the date for
"faster closing" of Northern Ireland departmental accounts
appears most unlikely to be met, but that the focus upon ASP which
will deliver enhanced financial management information fully only
after 2008, may very well detract from departments' efforts to
improve the present poor position in the intervening years resulting
in continuing high levels of negative audit opinions. We would
find it helpful to have a note setting out how these timetabling
pressures will be managed and, in particular, how the DFP aims
to meet the Treasury's "faster closing" deadline will
be achieved; what resources will be devoted to overcome the continued
problems with financial reporting in the period until ASP is fully
operational in 2008 and what approach will be adopted; and whether
the ASP project is progressing according to DFP's timetable.
Efficiency Review Targets
The Sub committee was interested to learn how
Northern Ireland departments intended to meet the efficiency savings
recommended in Sir Peter Gershon's review.[Q27] Whilst we were
pleased to learn that departments had efficiency plans in place,
it remains unclear how any efficiency savings are to be accurately
measured or verified. Without such assurance, departments are
unlikely to demonstrate transparently and convincingly that efficiency
targets have been met. It would be useful if you could provide
a note setting out details of how efficiency savings will be verified
and measured.
Use of Consultants
The Committee was troubled by the conclusions
of a Northern Ireland Audit Office (NIAO) report that some £8.4
million had been spent on consultants without a proper business
case, and that the variable standard of data provided to DFP meant
that its monitoring was limited.[3]
Mr Hunter was frank about the Department's shortcomings: "We
. . . had not been monitoring closely department practices in
respect of the engagement of consultants and with hindsight that
was something that we should have been looking more closely at."
[Q35]. The Committee would find it helpful if you could provide
reassurance that the monitoring of consultants is now being conducted
properly, and provide an outline of the new procedures which have
been put in place to achieve this.
DEPARTMENT FOR
SOCIAL DEVELOPMENT
(DSD)
Disclaimer Audit Opinion in 2001-02 and 2002-03
The Sub committee was particularly concerned
to note DSD's second consecutive adverse audit opinion in 2002-03
resulted from the same failings as were noted in 2001-02. Significant
fraud and error were the principle causes of the negative audit
reports, and it seemed to us, therefore, that there has been a
sustained failure to address these important failings with sufficient
urgency. Mr Shannon, Permanent Secretary of DSD, assured us that
the Department was now "working vigorously" to reduce
fraud and error, but evidently these efforts have yet to be audited.
[Qq36,43] We would be grateful for a comprehensive list of actions
taken in 2002-03 and 2003-04 to tackle these problems, and an
estimate of their likely impact.
Reasons for Fraud and Error
In addition to the point above, the Sub committee
wanted to know why high levels of fraud and error persisted, totalling
some £120.9 million in 2002-03, 7.6% of the expenditure on
Income Support, Jobseeker's Allowance, Disability Living Allowance,
and Housing Benefit. We were disconcerted to hear officials explain
this figure as the product of "a complex business" which
was "not unique to Northern Ireland." [Q48]. After considerable
probing, the Sub committee was told that "poor management",
"poor training", and "inexperienced staff"
had contributed to the problem. This was exacerbated by a "substantial
number . . . 300 odd" of poorly trained "casual, temporary
staff" hired by the Housing Executive. [Qq49,Q 52]
It seems astonishing that any department would
employ large numbers of poorly trained and badly managed temporary
staff in order to process benefits claims, and officials unfortunately
were not in a position when giving evidence to the Sub committee
on 8 September to provide detailed reasons why staff of poor calibre
were recruited. We would appreciate a detailed note on the background
to what was clearly an entirely unacceptable situation. We would
also like the Department to explain why this problem was not identified
before fraud and error had reached high levels, and what reassurance
there is that this situation will not recur.
Child Support Agency
The Committee was also interested in whether
the corrective steps taken to improve the "quality and accuracy"
of the Child Support Agency's payments had worked. We were reassured
to hear that performance had improved on the new scheme, but were
disappointed to learn that the old scheme persists (although we
acknowledge that performance in that scheme has improved recently).
[Q56] It would be helpful to have a note setting out the timetable
for the migration of the old schemes to the new system, and an
indication of the milestones which have been put in place to achieve
that goal.
14 October 2004
1 General Report by the Comptroller and Auditor General
for Northern Ireland, Financial Auditing and Reporting: 2002-03,
HC673, Session 2002-04. Back
2
HC673, p 7, paras 6 and 7. Back
3
Northern Ireland Audit Office, Use of Consultants by Northern
Ireland Departments, 2003-04, HC 641, p 11, para 13. Back
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