Examination of Witnesses (Questions 100-199)
DEPARTMENT OF
ENTERPRISE, TRADE
AND INVESTMENT
AND INVEST
NORTHERN IRELAND
13 FEBRUARY 2006
Q100 Mr Williams: Well, it certainly
worked out to be a very convenient arrangement. So now you are
dependent on external auditors doing the work that the National
Audit Office would do. Who appointed those?
Mr Quinn: The companies themselves.
Q101 Mr Williams: Who?
Mr Quinn: The companies themselves
would appoint their external auditors.
Q102 Mr Williams: Would the Department
have a say in it?
Mr Quinn: No, I do not think it
would under normal company practice.
Q103 Mr Williams: It would be the
board and, therefore, in particular the senior members of the
board who would have been selecting the auditors?
Mr Quinn: Yes. Could I just come
back briefly, Mr Williams, on the convenience point. We have issued
fresh guidance to the Department and to its NDPBs on dealing with
third party organisations and one of the things we are insisting
on is provision for the Northern Ireland Audit Office access to
their books.
Q104 Mr Williams: So I assume these
auditors changed at regular patterns so they did not become part
of the family and they were not allowed to continue indefinitely,
was that the case?
Mr Morrison: That is really up
to the decision of the board. It has become the practice among
large companies to rotate auditors but it is not necessarily a
requirement, or it was not at that time.
Q105 Mr Williams: There is always
the danger and we observe this, and the National Audit Office
observe this, you cannot have your auditors for too long because
there is a danger of cosiness. It is a natural development of
the relationship. It looks as if the auditors sleep walked through
an incredible range of, what can we call them, weird judgments.
First of all they did not notice that the body was acting ultra
vires in giving loans that were above the ceiling that was
set down for them, did they?
Mr Quinn: That is correct.
Q106 Mr Williams: That was not in
just one area, it was in a couple of areas.
Mr Quinn: Yes.
Q107 Mr Williams: Is it not something
you would have expected auditors to have picked up?
Mr Quinn: Yes.
Q108 Mr Williams: Perhaps I should
ask Mr Dowdall.
Mr Dowdall: Certainly we are very
hot on anything that is ultra vires and we would have expected
to pick up things like that.
Q109 Mr Williams: Ultra vires
is one of the cardinal sins in government, is it not?
Mr Quinn: The point that we would
have hoped the external auditors would have picked up would have
been the apparent absence of a fully functioning bad debt policy
and the treatment of bad debt in EBT books.
Q110 Mr Williams: So did the auditors
draw the attention of the accounting officer, for example, to
the fact that normal rules on competitive tendering were not being
observed?
Mr Quinn: No. I am assuming that
the auditors of EBT regarded their duty as being to the company,
not to the funding bodies.
Q111 Mr Williams: So who should have
drawn it to your attention?
Mr Quinn: I think the LEDU representative
on the EBT board, as the Report says, was well placed to observe
a number of matters.
Q112 Mr Williams: Is he still there?
Mr Quinn: He is not.
Q113 Mr Williams: When did he leave?
Mr Morrison: He stepped down in
November 2003. He finally resigned in November 2004.
Q114 Mr Williams: There was no signed
contract with Mrs Townsley's company. How on earth could that
slip through?
Mr Quinn: It was just bad practice.
When the IFI issued its Letter of Offer to EBT in 1996 it appended
a draft contract but that was never signed by the parties concerned.
Even if it had been, I think what the Invest Northern Ireland
examination suggested was that it was not sufficiently robust
and comprehensive to support a contract on this scale.
Q115 Mr Williams: You said it was
drafted but who drafted it?
Mr Quinn: We do not have direct
knowledge of that. What we do know is that it was attached to
the International Fund for Ireland's Letter of Offer.
Q116 Mr Williams: But it had to be
drafted before she was due to join the organisation.
Mr Quinn: Yes.
Q117 Mr Williams: So there was a
lapse by whoever was administering at that stage.
Mr Quinn: Yes.
Q118 Mr Williams: Who was responsible?
Mr Quinn: I could surmise that
the International Fund staff, perhaps even the Business Enterprise
Team, may have drafted the contract but we just do not know. In
any event, our view is when the contract was seen it should have
been queried.
Q119 Mr Williams: In this whole process,
has anyone actually been disciplined?
Mr Quinn: Yes. The Department
is not the employer so—
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