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PUBLIC ACCOUNTS COMMITTEE Report on the TOGETHER WITH THE PROCEEDINGS OF THE COMMITTEE Ordered by the
The Public Accounts Committee to be printed Wednesday 9 October 2002 FIRST REPORT FROM PUBLIC ACCOUNTS COMMITTEE Standing Orders under Section 60(3) of the Northern Ireland Act 1998 have provided for the establishment of the Public Accounts Committee. It is the statutory function of the Public Accounts Committee to consider the accounts and reports of the Comptroller and Auditor General laid before the Assembly. The Public Accounts Committee is appointed under Standing Order No. 51. It has the power to send for persons, papers and records and to report from time to time. Neither the Chairperson nor Deputy Chairperson of the Committee shall be a member of the same political party as the Minister of Finance and Personnel or of any junior minister appointed to the Department of Finance and Personnel. The Committee Members were appointed by the Assembly on 24 January 2000. They will continue to be Members of the Committee for the remainder of the Assembly, unless it orders otherwise. The Chairperson Mr Billy Bell and the original Vice-Chairperson Ms Sue Ramsey were previously appointed on 15 December 1999. Ms Ramsey was replaced on the Committee by Mr Conor Murphy on 4th July 2002. The full membership of the Committee is as follows:-
All publications of the Committee (including press notices) are on the internet at archive.niassembly.gov.uk/accounts.htm All correspondence should be addressed to The Clerk of the Public Accounts Committee, Room 371, Parliament Buildings, Stormont, Belfast, BT4 3XX. The telephone number for general inquiries is: 028-9052-1532. The Committee's e-mail address is: michael.rickard@niassembly.gov.uk. TABLE OF CONTENTS Report on the Northern Ireland Tourist Board Introduction Our Principal Recommendations and Conclusions General Findings The Unsatisfactory Nature of the Department's Evidence Grant to the Malone lodge Hotel Use of a Corporate Credit Card in New York Use of Credit Cards in the Public Sector Excessive and Inappropriate Hospitality Spending in New York Unapproved Salary Increases Paid to Directors Payments to the Former Chief Executive Payments to the Former Deputy Chief Executive Discrimination Cases Failure to Follow Proper Procedures in Awarding Print Contracts The Chairman's Conflict of Interest The Government Procurement Service Appointments to the Boards of Public Bodies Inadequate Handling of Staff Complaints Departmental Oversight and Control Failures Proceedings of The Committee Relating to the Report Minutes of Evidence (Wednesday 24th April 2002 & Thursday 30th May 2002) 16 Correspondence of 1 October 2002 from Mr David Thomson, Treasury Officer of Accounts. Note: THE PUBLIC ACCOUNTS COMMITTEE HAS AGREED REPORT ON THE NORTHERN IRELAND TOURIST BOARD INTRODUCTION 1. The Public Accounts Committee met on 30 May 2002 to consider a range of reports on Northern Ireland Tourist Board matters. These were:
2. Our witnesses were:
3. In taking evidence, the Committee focused on a number of issues raised by the C&AG's reports. These were:
OUR PRINCIPAL RECOMMENDATIONS AND CONCLUSIONS ARE AS FOLLOWS: GENERAL 4.1 This report deals with a catalogue of serious failures of management, corporate governance and financial control that should never have been allowed to occur to the extent that they did, for as long as they did, in any part of the public service. Main Report, paragraph 6. 4.2 We have reached the alarming conclusion that, for many years, there was no effective control over expenditure in the Board's New York Office. Main Report, paragraph 8. 4.3 The Department must make absolutely sure that, from the outset, Tourism Ireland and Invest Northern Ireland put in place robust systems of control in all their overseas offices. Main Report, paragraph 8. 4.4 In general we have found in our work to date, that other Departments have readily co-operated with our investigations and answered our questions clearly and directly. However, at the evidence session on this topic, we were disturbed at the extent to which the DETI Accounting Officer and his team gave the impression of defending the indefensible. It seemed to us that they were trying to put a spin on some of the most blatant examples of malpractice and impropriety. The blunt message that we have for any Accounting Officer who is tempted not to answer our questions fully is that we will insist on further investigation by the C&AG and exercise our full powers to call for papers and additional witnesses until we are satisfied that all the relevant facts have been revealed. Main Report, paragraph 9. 4.5 We do recognise that, over the years, many fine and dedicated staff have given quality service to the Tourist Board. It is unfortunate that such dedicated staff were let down by what we have had to conclude was a culture of apathy, incompetence and lack of respect for proper procedures at the top of the organisation. Aspects of this culture appeared to extend right to the heart of the Department itself. In 1998, the Board's own Finance Manager alerted senior management to a wide range of control weaknesses. We commend this individual for exposing important matters of public interest, particularly since it seems to us that staff who raised legitimate questions about standards of propriety and financial control in the organisation were branded as troublemakers and marginalised. Main Report, paragraph 10. 4.6 This Committee wants the Audit Office to pay particular attention to the Tourist Board in future audits, as well as the tourism support activities which have now been transferred to other bodies, because it is clear that expenditure in this area is at a significantly higher risk than it should be. This enhanced level of audit scrutiny should be kept in place until we are convinced that the resources we vote in this area are not at high risk. The Board's problems have been so wide-ranging and deep-rooted and the Department's record so poor in not following-up previous undertakings to put them right, that we are asking the Assembly's Enterprise, Trade and Investment Committee to join us in monitoring progress. The Department has referred to the remedial action it is taking. This should now be put to us in the form of a comprehensive Action Plan addressing the full range of problems which have emerged. Main Report, paragraph 13. 4.7 We were astonished at the poor quality of the Department's evidence to us; this applies both to the written evidence the Department asked to be included in the C&AG's report, and the performance of the Departmental Accounting Officer and his team at the oral evidence session. Main Report, paragraph 14. 4.8 We take an extremely dim view of receiving detailed corrections only one week before the planned evidence session and indeed to receiving further unsubstantiated corrections on the morning of the session. Main Report, paragraph 16. 4.9 From beginning to end there has been a competence deficit in DETI's dealings with us. DFP Guidance states that Departments should check draft NIAO reports meticulously at every stage. However, we want to see the guidance further refined. Departments should be required to apply equally careful checks to any material they ask the C&AG to include in his report. Main Report, paragraph 17. 4.10 The quality of oral evidence given by the Accounting Officer and supporting witnesses was most unsatisfactory. There were a considerable number of instances of what seemed to us to be inconsistent, evasive and even misleading answers to our questions. The Accounting Officer has a constitutional obligation to account to the Assembly for the use of resources which have been voted to his Department and which were under his stewardship. On matters of fact, we have a right to a straight answer to a straight question. In this session, despite the length of time involved, we did not get the factual answers which we needed and were forced to take the unusual step of writing to the Accounting Officer to seek clarification on twenty-five separate issues and to ask for forty-seven additional pieces of information. This is not the first time we have had to make this point with DETI. Following our January hearing on LEDU Fraud we said we found the extent to which officials attempted to "stonewall" our questions disturbing and unacceptable. Main Report, paragraph 18. 4.11 The Accounting Officer's letter to the Committee of 9 July 2002 has addressed many of our concerns and we accept his assurances that the provision of unsatisfactory evidence was not wilful or out of any disrespect for the work of the Committee. However, it is still our view that some of his answers do not stand up well to scrutiny and we draw attention to these in the report. We are still not completely satisfied that this Department has been as open and forthcoming as we, and the public we represent, expect and deserve. We expect an Accounting Officer to recognise, where there is clear proof, that errors were made and to acknowledge the responsibility of those involved. Main Report, paragraph 19. 4.12 It is totally unacceptable for an Accounting Officer to decide for himself what this Committee needs to know; that decision the Committee reserves for itself. Main Report, paragraph 20. 4.13 The Department's reluctance to provide some of the information we asked for creates the suspicion that this might have had more to do with trying to conceal embarrassing details than with genuine confidentiality considerations. Under Standing Order 55 this Committee has the power to send for persons, papers and records. This certainly includes the right to see personnel records and legal advice in cases which have been completed and where large sums of taxpayers' money has been paid out for departmental actions when we consider them relevant to our enquiries. If a department truly believes that certain papers should be treated as confidential we will consider carefully any case it puts to us and act appropriately. Main Report, paragraph 20. GRANT TO THE MALONE LODGE HOTEL 4.14 It is very clear from our evidence session that there were serious shortcomings in the Board's case handling procedures. Main report, paragraph 21. 4.15 The Board's monitoring procedures failed to pick up that the project approved by the Planning Service was materially different to the one which it had approved. By the time the Board recognised its error, it had already paid 90 per cent of the grant, amounting to some £453,000. Main report, paragraph 23. 4.16 We are not persuaded that the failures in this case can simply be blamed on an individual case officer, no longer in the Board's employ. In our view, the failures surrounding this project were much more systemic in nature, than has been conceded by the Department. Main report, paragraph 25. 4.17 We were told that procedures have since been tightened significantly. While this is welcome, it will not, in itself, guarantee that similar failings will not arise in the future. The breakdown in the Malone Lodge case stemmed largely from a failure to properly apply an existing control procedure - the review of the planning permission. Due to the carelessness of the case officer and the absence of an effective supervisory check, the Board failed to detect that the project planning approval did not meet the terms of the Board's offer of assistance. If the Board is to properly fulfil its responsibilities in safeguarding large sums of taxpayers' money, it must ensure that its control procedures are properly applied in future. Main report, paragraphs 26 and 27 . 4.18 Better communication with the Planning Service in this case might have alerted the Board, at a much earlier stage, to the planning irregularities that its own control procedures failed to detect. In keeping with the principle of 'joined-up government', we expect the Board, as a matter of priority, to examine closely how its links with Planning Service can be improved. Main report, paragraph 29. 4.19 One of the most disturbing aspects of this case is that the Board received prior warnings about the planning irregularity, but failed to properly act on these warnings. The Board responded to these warnings on three occasions, each time giving an assurance that payments would not be made until all statutory planning approvals had been satisfied. This assurance was also repeated by the Minister. We were astonished to learn that, despite all these assurances, the Board subsequently made three payments totalling £453,000 to the project, even though the appropriate planning approval had not been obtained. Main report, paragraph 30. 4.20 The misplaced reliance on an earlier, flawed review of the planning permission by the case officer does not excuse the Board's failure to properly investigate the later warnings from the Residents' Association. Had it done so, the improper payment of grant could have been avoided Main report, paragraph 31. 4.21 Despite the Board's apparent recognition of the risks in the project, it had not seen fit to put its instruction to exercise "particular care", in writing. Given the concerns surrounding this case, this instruction should have been formally minuted. Main report, paragraph 32. 4.22 It appears to us that the Board regarded the Residents' Association largely as 'troublemakers' and, as such, failed to give their letters the level of scrutiny warranted. This was a serious error in judgement. Given the important nature of the Residents' Association warnings, the problematic planning history of the project and the amount of taxpayers' money involved, the Board's failure to thoroughly investigate the warnings was nothing short of gross negligence. Main report, paragraph 33. 4.23 We were told that new complaints procedures have been introduced, to ensure that correspondence from external groups is now subject to "more formal action". While we welcome this, we must point out that it is not just the formality of the procedures that is important, but also the quality of the scrutiny which underpins them. Main report, paragraph 34. 4.24 Since the Malone Lodge irregularities came to light, no check had been carried out on the other cases assisted under the scheme. We would ask the Department to arrange for this check to be undertaken and the results reported back to the Committee. Main report, paragraph 35. 4.25 The Board said that it had no evidence to suggest that the project promoters wilfully misled them with regard to planning matters. We found this statement astonishing and the Accounting Officer's explanation wholly unconvincing. We were also astonished to learn that the Board did not even seek an explanation from the promoters, as to why they had not kept the Board informed of the changes to the project. Given that the Board had paid out over £450,000 to a project that did not comply with the conditions of offer, its failure to challenge the promoters points to an appalling degree of indifference to its stewardship of public monies. Main report, paragraphs 36 and 38. 4.26 One of our main concerns on this case is the Board's decision not to enforce 'clawback' of grant. The Board had been given legal advice that reclaiming the grant would be difficult, should the project be delivered according to the original Letter of Offer. Main report, paragraphs 39 and 41. 4.27 We have grave reservations about the Board's handling of the clawback issue. Its approach appears to have been one of 'all is well that ends well'. Although the project now appears to be in line with the offer, the means by which this has been achieved is a matter of concern. The Board's decision not to enforce the conditions of offer means that no action is being taken against the promoters, despite their failure to keep the Board fully informed. In our view, this sends out the wrong message to recipients of grants from the Department and its NDPBs - that conditions can be ignored. This undermines the integrity of selective financial assistance schemes and places taxpayers' money at risk. Conditions of offer are an essential safeguard and we expect the Department to make it clear that they must be rigorously enforced. Main report, paragraph 42. 4.28 This Committee expects Departments and Agencies to be entirely forthright in their dealings with the Audit Office and any action which undermines the effectiveness of the C&AG and this Committee will not be tolerated. Main report, paragraph 43. 4.29 In examining tourism grants in 1995, the Westminster PAC concluded that the Board had operated with sheer laxity in relation to its own guidelines, with early projects showing an astonishing range of failures of supervision and management. We find it disconcerting that, in the wake of such a stern reprimand in 1995, the Board's handling of the Malone Lodge case contained similar failings. It appears that nothing much has changed. It is vitally important, therefore, that in response to this Committee's report, the Department and Board take the appropriate steps to ensure that the lessons are learned and fully applied in the future. Main report, paragraphs 44 and 45. USE OF A CORPORATE CREDIT CARD IN NEW YORK 4.30 We find the circumstances surrounding use of the corporate credit card extremely disturbing. When the problems with the credit card first emerged in 1996 the Tourist Board was negligent in three respects:
Main Report, paragraph 46. 4.31 What is most shocking to this Committee is that, even though £4,000 worth of receipts are still missing, the Department continues to assert that the Manager's spending was wholly commensurate with his work. In the absence of the key supporting documentation the Accounting Officer simply cannot substantiate such a claim; it is disturbing that he would even try to. Main Report, paragraph 48. 4.32 We learned from the C&AG's supplementary report of 22 May that the Tourist Board credit card was still being used inappropriately as late as November 2001. This was despite the fact that the C&AG had reported his concerns about how the card was being used on 21 August 2001. It is unacceptable that the Department failed to take any action for a further three months on a matter which needed to be tackled with the utmost urgency. Main Report, paragraph 50. 4.33 In our view, expenses incurred by the New York Manager while on Tourist Board business in the United Kingdom should have been paid under standard travel and subsistence regulations. We want to know whether the Manager obtained prior approval for the car hire arrangement, the makes and models of cars hired and the extent of any private mileage. Main Report, paragraph 51. 4.34 Given what we know about the Manager's history of charging personal expenditure to the credit card and with over £4,000 of hospitality spending still unsupported by original documentation, we think that it is important that the detail of the credit card statements is subject to a further review by the Department. The review should seek to establish the circumstances of all significant items of expenditure which are not clearly related to hospitality for guests of NITB. We would like this exercise to be carried out in consultation with the Audit Office. Main Report, paragraph 51. 4.35 We think it is questionable whether the New York Manager should contribute virtually nothing out of his own pocket towards his accommodation and vehicle costs when he is on either side of the Atlantic. NITB seems to treat him as though he is domiciled in Northern Ireland when he is in New York and domiciled in New York when he is in Northern Ireland. NITB has pointed out that allowances payable to the New York Manager are consistent with the British Tourist Authority's "overseas conditions of service". This may be so, but the Department must, in our view, find more cost-effective ways of running overseas offices. The New York office cost £1 million to run in 2000-2001. From what we have seen there is likely to be scope for economies. Main Report, paragraph 52. 4.36 The Department has given the Manager a number of formal warnings about his conduct. Yet we are told that the Board will only take a final view on disciplinary action "once due process is complete." Senior management have been aware of the circumstances surrounding the use of the card since April 2001. It is unacceptable that over a year later, they have not taken a final view on the appropriate disciplinary action. We expect to be informed when further disciplinary action is taken. We want to see full details on the disciplinary action on this case as soon as it is completed. Main Report, paragraph 53. 4.37 We are very disturbed at evidence that the New York Manager simply did not have the qualifications and experience specified in the advertisement for the job. We cannot understand how someone could be appointed to this important post, representing Northern Ireland overseas, who did not meet the core criteria. This is a very important matter which seems to reflect adversely on the integrity of public appointment procedures. DFP has, of course, an overall responsibility for promoting proper appointment procedures in the public service. In this case we want DFP to carry out its own independent investigation of the circumstances surrounding the appointment of the New York Manager and report its findings to us in the Memorandum of Reply. We want to know who sat on the selection panel and whether there were any applicants who did have a degree and/or marketing qualification. If there were no such applicants we want to know why the post was not re-advertised. Should DFP be unable to carry this out, we would expect the C&AG to investigate this matter and report back to the Committee. Main Report, paragraph 54. 4.38 We acknowledge that credit cards can be a cost-effective tool in purchasing arrangements. But if their use is not adequately controlled, individuals can bypass the normal procedures for incurring expenditure. It is essential therefore, that Departments put a separate and rigorous control system in place before they issue credit cards to individuals. We therefore welcome DFP's decision to issue comprehensive new guidance on the use of credit cards by public bodies. Main Report, paragraph 56. 4.39 The key message is that credit card transactions must be subject to the same rules that apply to all other methods of public spending. There must, above all, be full documentation of all transactions. Main Report, paragraph 57. 4.40 When public employees incur substantial expenses in the course of their work, there is a well established procedure for the employer to provide an advance or 'imprest' based on the anticipated cost. In our view, Departments should give explicit guidance on what circumstances, if any, staff expenses (travel and subsistence) can be met by Departmental credit cards rather than the usual imprest arrangements. This would be a safeguard for staff, as well as for the public purse. Main Report, paragraph 58. EXCESSIVE AND INAPPROPRIATE HOSPITALITY SPENDING IN NEW YORK 4.41 We were shocked at the laxity in controlling expenditure on overseas hospitality in the Tourist Board. It is particularly disturbing that this laxity seems to have been deeply embedded in the culture of the organisation over many years. Warnings and advice from the auditors and from the Tourist Board's own staff were not acted on. No one emerges with credit from the evidence we heard on this issue but, in particular, the various Accounting Officers involved signally failed in their duty to ensure sound controls were in place and that value for money could be demonstrated. It seems to us that senior staff in the Board and in the Department were well aware of this laxity in overseas spending, but none of them had sufficient regard for the public interest to bring it under control. Main Report, paragraphs 59. 4.42 We recognise that the NITB has, belatedly, accepted the key recommendations of the NIAO Management Letter of March 2001. It is indicative of the Board's attitude that it took a report by the C&AG and a public evidence session by this Committee before NITB could bring itself to put in place some basic procedures. Main Report, paragraph 60. 4.43 We want to make it absolutely clear that even if some of the hospitality expenditure described in the C&AG's report has helped to boost Northern Ireland Tourism revenue (and that is debatable) the failure of the Board to put proper procedures in place for hospitality expenditure is reprehensible. The Departmental Accounting Officer needs to recognise that when he is explaining a value for money judgement it is not enough to point to the benefits alone. He also has to consider the cost, to ensure that there is proper financial control and be able to demonstrate the cost-effective use of public money. Main Report, paragraph 61. 4.44 We find it incredible that four public employees, while working, can spend £74, which is roughly equal to the basic weekly retirement pension in Northern Ireland, on drinks for themselves. Yet the Department sees nothing amiss in this; it offered no adequate explanation, no apology and no regrets. Main Report, paragraph 62. 4.45 It would appear that by 2000 no one in the Tourist Board was prepared to challenge significant breaches of the organisation's hospitality procedures. This is hardly surprising given that Finance staff who had previously attempted to ensure adherence to procedures were in the words of the former Finance Manager subject to "constant hostility, bitterness and resentment". Main Report, paragraphs 63 and 99. 4.46 We want DFP to issue fresh guidance to Departments; they must ensure that all spending incurred in extending hospitality to guests or business contacts is clearly recorded as 'hospitality'. Hospitality at the taxpayers' expense is always a sensitive issue. For that reason the total amount spent each year on hospitality must be recorded separately in the annual accounts of each Department and every subsidiary body. Main Report paragraph 65. 4.47 We want the Department to investigate whether there is any evidence of lapses in recording hospitality and gifts accepted by NITB staff and report back to us what they have found. The Department must make absolutely sure that it has the procedures in place to ensure that all gifts and hospitality received are properly authorised and recorded in the register. Main Report, paragraph 66. UNAPPROVED SALARY INCREASES PAID TO DIRECTORS 4.48 We find it unsatisfactory, but typical of the quality of management decisions in the Board, that salary increases totalling £43,000 over a period of years were awarded to two Directors without the Department's approval. This is a clear example of NITB flouting the terms of its Financial Memorandum with the Department. It is extremely disturbing that the then Chief Executive, who had actually signed the Financial Memorandum in August 1996, awarded these unapproved payments. Main Report, paragraphs 67 and 68. 4.49 It seems to us that the Directors, who were rewarded for taking on these additional duties, did not perform them effectively. The Director of International Marketing was in charge of the New York Office, which as we have established was operating outside normal financial controls. The Director of Finance and Investment was in charge of the Accounts Branch which was paying credit card bills without having original receipts. Main Report, paragraph 69. 4.50 We are concerned at the casual way the Department has treated the failure of senior management in the Tourist Board to follow key requirements set out in the Financial Memorandum. It is not enough for Departments to agree Financial Memoranda with their subsidiary bodies, they must ensure that these requirements are implemented, and take appropriate action where they are not. Main Report, paragraph 70. PAYMENTS TO THE FORMER CHIEF EXECUTIVE 4.51 In 2000-01 NITB awarded its former Chief Executive consultancy contracts worth £34,000. None of this work was subject to public tender, in direct contravention of DFP Guidelines. We found it extraordinary that NITB, with the agreement of the Department, told the C&AG that in this case it regarded competitive tendering as a waste of public money. The Department tried to tell us that the way it awarded further work to the former Chief Executive followed DFP Guidelines: it is clear to us that it did not. This case is very important because the Departmental Accounting Officer himself, the person appointed to ensure proper procedures, was involved in approving an arrangement which did not provide for proper tendering of contracts, or document any rationale to show the value for money of the arrangement adopted. This sets an appalling example to staff at lower levels. Any member of the public might well perceive this as a case of "jobs for the boys". NITB and the Department have no defence against such allegations because of their collective failure to follow the rules. Main Report, paragraph 71 and 72. PAYMENTS TO THE FORMER DEPUTY CHIEF EXECUTIVE 4.52 We are astonished that the Deputy Chief Executive who, we were told, did not enjoy the respect or confidence of his colleagues, who had just been investigated for possible misconduct, was given such a very generous handout to end his contract. Indeed, it seems that this individual's contribution to the NITB was so negative, that it was considered worthwhile to spend £64,000 to dispose of him rather than have him serve out the last year of his contract. We strongly question the appropriateness of handing-out a pay-off in such circumstances. Main Report, paragraph 74. 4.53 We asked to see a copy of the reference provided to the former Deputy Chief Executive as part of his settlement. The reference, signed by the Chairman, was totally positive in tone. It made no mention of the problems his management style had created for the organisation, the opinion he was held in by his colleagues, or the circumstances of his departure. In our view the reference gave a misleading impression to any prospective employer. We consider that it was wrong for the Board to dispose of a troublesome employee in a way that left other public employers exposed. Main Report, paragraph 75. 4.54 It seems to us that the problems in this case were a clear result of appointing the wrong person for the job. We find it astonishing that the Board did not require either a degree or a professional marketing qualification for a senior management job which was so important to the successful marketing of Northern Ireland. We want the Department to review its procedures for appointing senior staff to its NDPBs. It is vital, for the future of the Northern Ireland economy, that high calibre appointments are made to these posts. Main Report, paragraph 76. DISCRIMINATION CASES 4.55 Since 1997 NITB has spent £114,700 defending and settling discrimination cases. In that period five employment cases were settled out-of-court. A further three cases are ongoing. This level of litigation is unusual and unhealthy for an organisation of the size and status of the Tourist Board. These cases would seem to indicate that it is not just financial management which is incredibly weak in NITB, the standard of personnel management also appears to be wholly unsatisfactory. Main Report, paragraph 77. 4.56 We are left with the distinct impression that conscientious whistleblowers, who raised legitimate questions about standards of financial control and propriety in the organisation, were branded troublemakers and marginalised. Main Report, paragraph 78. 4.57 NITB paid £22,500 to an unsuccessful applicant for the post of Group Marketing Director in 1996. The successful applicant was the former Deputy Chief Executive. We are aware that legal counsel advised NITB that its failure to keep a proper record of the interview process would weaken its case at a Tribunal. It is unacceptable for a public body to display such a casual approach to proper recruitment practices. Main Report, paragraph 79. FAILURE TO FOLLOW PROPER PROCEDURES IN AWARDING PRINT CONTRACTS 4.58 The Tourist Board was in clear breach of its own simple rules that all contracts over £15,000 should be put out to open competition. The Department was unable to provide us with a satisfactory explanation why basic tendering procedures were broken over and over again for the best part of a decade. Main Report, paragraph 80. 4.59 One of the most shocking aspects of this is that, as far back as 1997, senior staff in the Board were fully aware that the way they were handling print contracts was wrong and that they would be exposed if the C&AG found out about it. Main Report, paragraph 81. 4.60 In our view, the Board completely failed in its duty to adhere to the core public service values of fairness, objectivity and propriety in its award of substantial print contracts to W&G Baird. It is clear, that other companies in the printing sector who were not given the opportunity to tender, or whose lower bids were ignored, were treated most unfairly. It was totally unacceptable for the Board to persist with flawed tendering procedures which it knew to be wrong. Main Report, paragraph 82. 4.61 Information supplied by the Department revealed that over £885,000 of print work was awarded to companies other than W&G Baird between 1994-95 and 1999-2000. 97% of the work was awarded to firms submitting the lowest tender. In the same period W&G Baird obtained print contracts worth £1,436,000. W&G Baird was the lowest bidder for only 13% of the work it was given. These figures suggest a quite extraordinary degree of favouritism towards W&G Baird in the award of print contracts. Main Report, paragraph 83. THE CHAIRMAN'S CONFLICT OF INTEREST 4.62 The C&AG asked the former Deputy Chief Executive what was the source of his market intelligence on the only bidder for the Breakaways contract, he was told that it had arisen in discussion with the NITB Chairman. We found this new information worrying because we had been told repeatedly that Mr. Bailie had no involvement in these contract procedures. Yet here he was having a conversation with an official about the bid for a brochure and suggesting that checks should be carried out on the credit worthiness of the bidder. Main Report, paragraph 86. 4.63 It was, in our view, entirely wrong for the former Deputy Chief Executive to raise any aspect of the "Breakaways" competition with the Chairman, and when he was approached it was inappropriate for the Chairman to give advice. The Department told us that the Chairman was sufficiently insulated by the Tourist Board's procedures in relation to conflicts of interest; he played no role in awarding print contracts. The Accounting Officer told us that the Chairman had assured him that he also played no part in the tender at the Baird's end. Main Report, paragraph 89. 4.64 After extensive correspondence the Department eventually conceded that the discussion between the Chairman and the former Deputy Chief Executive, however casual, should not have taken place. It is disturbing that the Accounting Officer did not recognise much sooner that the use of advice which emanated from the Chairman on any publishing contract was not consistent with the degree of separation of interests which is essential for public confidence in the integrity of the Board's purchasing procedures. Main Report, paragraph 89. 4.65 One of the standard safeguards for dealing with conflict of interests is the requirement for Board members to withdraw from any meeting considering matters which they (or close family members) have a direct or indirect pecuniary interest. The Tourist Board case has demonstrated that this type of safeguard is incredibly easy to circumvent, and is completely worthless and ineffective in circumstances where off-the-record discussions about a publishing contract take place between a Chairman and a senior official. Main Report, paragraph 90. 4.66 We must emphasise that an ill-judged discussion of this nature can cause irreparable damage to public confidence in the integrity of the procedures for awarding contracts, irrespective of the quality of formal safeguards an organisation might have in place for dealing with conflicts of interest. Main Report, paragraph 90. THE GOVERNMENT PROCUREMENT SERVICE 4.67 We want DFP to provide this Committee with details of any other public bodies who have consistently refused to use the Government Procurement Service for purchasing particular services or commodities. We want the C&AG to pay particular attention to these bodies in future audits. Main Report, paragraph 93. APPOINTMENTS TO THE BOARDS OF PUBLIC BODIES 4.68 In our view, one of the key lessons from the Tourist Board case is that it is highly undesirable to make an appointment to the Board of a public body and completely inappropriate to make an appointment to the sensitive position of Chairperson, in circumstances where the prospective appointee's company is carrying out substantial commercial business worth over £1.4m with the public body. The only effective way of dealing with conflicts of interest of this magnitude is to prevent them from happening in the first place. The solution is as simple as that. Main Report, paragraph 94. 4.69 While we welcome the action now being taken by the Department to tighten up its procedures for handling conflicts of interest, we think this does not go far enough. In our view, the guidance needs to spell out clearly that it would not be appropriate to make an appointment to the Chair of a public body in circumstances where the prospective appointee's company is carrying out substantial commercial business with the public body. Main Report, paragraph 98. INADEQUATE HANDLING OF STAFF COMPLAINTS 4.70 Having seen the documentation, we accept that the Finance Manager's allegations, that NITB were breaching proper procedures, were investigated and some minor changes followed. But the far-reaching changes in attitudes and procedures which were called for, never happened. Indeed the then Chief Executive in response to the Finance Manager said; "there have been a number of clear lapses in relation to procedures but nothing overly serious". He went on to say that she should accept that "a balance must be struck between getting our job done and maintaining procedural standards". We find this astonishing. It is little wonder that we found numerous examples of NITB staff failing to follow key procedures, given this was the attitude at the top of the organisation. Main Report, paragraph 102. 4.71 In our view, the investigation into the serious allegation of impropriety in the handling of the Breakaways contract was hopelessly inadequate on a number of counts:
Main Report, paragraph 103. 4.72 The failure to deal properly with the serious concerns of staff has undoubtedly contributed to the appalling working relations within NITB. Like so many of the problems facing the Tourist Board a change in attitude is called for and this change has to come from the top. It seemed to us that the Departmental Accounting Officer was reluctant to face up to the inadequacies in the Acting Chief Executive's handling of this complaint. The Committee wants to receive a commitment from the Department that staff complaints will receive a proper hearing and investigation and that staff are formally notified in writing of the outcome of such an investigation. This is no more than what is generally recognised as good practice, and it is deeply disturbing that we have had to press the Accounting Officer to accept this in a formal commitment. Main Report, paragraph 104. DEPARTMENTAL OVERSIGHT AND CONTROL FAILURES 4.73 Given that there was a senior departmental representative on the Board, who attended all its meetings and had, so the Department told us, a 'close understanding' of the Board's activities, it is difficult for this Committee to accept that the Department could not have identified these significant breaches of proper procedures at a much earlier stage. In light of this, we are repeating the recommendation we made in the LEDU fraud report that DFP review, and where necessary tighten, its guidance on the role and responsibilities of the departmental representatives on the Boards of NDPBs. Main Report, paragraph 105. 4.74 The Committee's view is that the causes of the problems experienced by the Tourist Board lie as much with the Department and its Accounting Officers, as they do with the Tourist Board. In a case such as this, where there were persistent administrative failings in an NDPB, year after year, we believe the primary responsibility must be that of the Departmental Accounting Officers. They have signally failed to perform their supervisory duty. Main Report, paragraph 106. 4.75 The Department told us that a serious deficiency in its oversight arrangements was that from 1993 it had used the "holding company model" as the framework for its relationship with its NDPBs. We agree that this was a serious deficiency. The idea that these NDPBs could be so self-contained that the Departmental Internal Audit Service should be reporting to them alone should have been recognised as dangerous nonsense at the outset. Main Report, paragraph 107. 4.76 It seems to us that the internal audit set-up at the Tourist Board was fundamentally defective. The Department's Internal Audit Service carried out the internal audit function for the Board, but we note from the C&AG's Memorandum of 22 May 2002, that there had been a failure to report significant audit findings, either to the Department or to the Audit Office. Main Report, paragraph 108. 4.77 The Departmental Accounting Officer relies on his internal audit staff to provide him with an assurance that key financial and management controls are operating effectively in the NDPBs under his control. This cannot happen when serious lapses in control arrangements are not formally reported. Full disclosure of internal audit work is also crucial to the C&AG's ability to form a sound opinion on the Departmental Accounts and to report to us on his findings. We welcome DFP's decision to issue fresh guidance on this matter. Main Report, paragraph 109. 4.78 It is clear to us that the Department needs to have a critical look at the culture and effectiveness of its Internal Audit Service. Main Report, paragraph 110. 4.79 In our view, the arrangements the Departmental Accounting Officer had in place for discharging his responsibilities in relation to the Tourist Board were wholly inadequate. We hope the Accounting Officer now understands that, in the circumstances where he is primarily accountable for every pound voted to him and he passes on to an NDPB, it is not enough to accept that if a Financial Memorandum exists, the necessary controls are in place. He should ensure, with the support of a vigorous, independently-minded and well resourced Internal Audit Service, that the controls are being applied effectively. Main Report, paragraph 111. 4.80 At the evidence session we formed the impression that the Departmental Accounting Officer was attempting to shift the responsibility for deficiencies in control in the Tourist Board to the Board's Accounting Officer. It was only after further correspondence with this Committee that the Departmental Accounting Officer fully acknowledged his responsibility for, "ensuring that an effective system of internal financial control is maintained and operated." The Committee wants it made absolutely clear to all Accounting Officers that we attach great weight to the section of the Accounting Officer's Memorandum from which this phrase is taken. We expect the Accounting Officer to be able to demonstrate for all the subsidiary bodies for which he is responsible, that he has mechanisms in place to ensure that financial controls are working in practice. Main Report, paragraph 112. 4.81 The DETI Accounting Officer has now outlined the steps which have been taken to improve the situation. This Committee will ensure that the implementation of these new arrangements is monitored very closely. Main Report, paragraph 113. GENERAL FINDINGS 5. It is very clear from the evidence presented to us that the way in which the Tourist Board has been operating in recent years falls far short of what we expect in a public body. This not only lets down the taxpayer, it lets down people in the tourism industry who have a right to expect a professional and efficient organisation to administer the £15 million of public money per annum which is available to support tourism. 6. This report deals with a catalogue of serious failures of management, corporate governance, and financial control that should never have been allowed to occur, to the extent that they did, for as long as they did, in any part of the public service. Control over credit card and hospitality expenditure was virtually non-existent. The Board's own tendering procedures were broken over and over again for the best part of a decade. We found fundamental errors in the Board's core business of awarding grants to hotels, salary payments to directors which were not properly approved, defective recruitment procedures and wholly unsatisfactory arrangements for dealing with conflicts of interest and staff complaints. There was also a very unhealthy level of litigation on equal opportunities issues. 7. It seems to us that the whole management ethos of the Tourist Board was wrong. Financial controls were seen as a hindrance to getting the job done. Approvals from the Department were not sought when required. Guidelines and rules were there to be broken. It is important that this ethos is changed and changed quickly. There is now a new Chief Executive of the Tourist Board, we wish him well. It is important that the Department supports him in the challenging task ahead. 8. We have reached the alarming conclusion that, for many years, there was no effective control over expenditure in the Board's New York Office. Responsibility for New York and the other overseas offices has, of course, recently moved from NITB to Tourism Ireland Limited. Invest Northern Ireland also operates a number of overseas offices. The Department must make absolutely sure that, from the outset, Tourism Ireland and Invest Northern Ireland put in place robust systems of control in all their overseas offices. 9. In general we have found in our work to date, that other Departments have readily cooperated with our investigations and answered our questions clearly and directly. However, at the evidence session on this topic, we were disturbed at the extent to which the DETI Accounting Officer and his team gave the impression of defending the indefensible. It seemed to us that they were trying to put a spin on some of the most blatant examples of malpractice and impropriety. The blunt message that we have for any Accounting Officer who is tempted not to answer our questions fully is that we will insist on further investigation by the C&AG and exercise our full powers to call for papers and additional witnesses until we are satisfied that all the relevant facts have been revealed. Chairman's Letter to the Accounting Officer, 26 June 2002, Appendix 10. 10. We do recognise that, over the years, many fine and dedicated staff have given quality service to the Tourist Board. It is unfortunate that such dedicated staff were let down by what we have had to conclude was a culture of apathy, incompetence and lack of respect for proper procedures at the top of the organisation. Aspects of this culture appeared to extend right to the heart of the Department itself. In 1998, the Board's own Finance Manager alerted senior management to a wide range of control weaknesses. We commend this individual for exposing important matters of public interest, particularly since it seems to us that staff who raised legitimate questions about standards of propriety and financial control in the organisation were branded as troublemakers and marginalised. C&AG's Report on the 2000-01 Accounts,
paragraph 22. 11. As one of our members pointed out at the evidence session, there was a disturbing contrast between the treatment of unsatisfactory senior managers and the handling of junior staff, mainly women, who raised concerns about poor procedures in the Board. Minutes of Evidence, paragraph 678. 12. The Department acknowledged that, during the 1990s, there were substantial deficiencies in both NITB management and in its own arrangements for monitoring and controlling this important NDPB. The Department moved much too slowly to deal with these deficiencies. We have now received an assurance from the Accounting Officer that he is ".totally committed to effecting the necessary changes". He has outlined steps taken to improve the situation, beginning with the decision not to renew the Chief Executive's contract in March 2000. Accounting Officer's Letter of 9 July 2002, Appendix 12. 13. This Committee wants the Audit Office to pay particular attention to the Tourist Board in future audits, as well as the tourism support activities which have now been transferred to other bodies, because it is clear that expenditure in this area is at a significantly higher risk than it should be. This enhanced level of audit scrutiny should be kept in place until we are convinced that the resources we vote in this area are not at high risk. The Board's problems have been so wide-ranging and deep-rooted and the Department's record so poor in not following-up previous undertakings to put them right, that we are asking the Assembly's Enterprise, Trade and Investment Committee to join us in monitoring progress. The Department has referred to the remedial action it is taking. This should now be put to us in the form of a comprehensive Action Plan addressing the full range of problems which have emerged. THE UNSATISFACTORY NATURE OF THE DEPARTMENT'S EVIDENCE 14. We were astonished at the poor quality of the Department's evidence to us; this applies both to the written evidence the Department asked to be included in the C&AG's report, and the performance of the Departmental Accounting Officer and his team at the oral evidence session. 15. It is a long-established practice that Audit Office reports are cleared with Departmental Accounting Officers before publication to ensure accuracy and completeness and to confirm a balanced and fair presentation. Ensuring that the report is accurate, complete and fairly presented means that this Committee is presented with an agreed set of findings as a basis for conducting an effective examination. This enables the Committee to concentrate constructively on the main issues involved and not be distracted by disputes on essential facts. 16. The Department was sent the first of four drafts of the C&AG's report on the Tourist Board Accounts on 21 August 2001 and a final version was agreed by the Accounting Officer on 13 December 2001. Given this, we found it most unsatisfactory that the Department sent us substantial corrections to material which had already been included in the C&AG's report at the Department's request. The Department clearly had a reasonable period of time to get its contribution to the C&AG's report right; it is a serious matter that it did not. This Committee has repeatedly stressed, as has the Westminster Public Accounts Committee before us, the importance of agreed reports. We take an extremely dim view of receiving detailed corrections only one week before the planned evidence session and indeed to receiving further unsubstantiated corrections on the morning of the session. Accounting Officer's Letter of 20 May 2002,
Appendix 4. 17. The Department told us that the late corrections to the agreed report were due to the exceptionally high turnover of senior management within the Tourist Board; current staff did not have in-depth knowledge of these matters. During its preparations for the hearing, the Tourist Board said it found evidence that some information it supplied for the agreed report was incorrect. We do not consider this explanation to be acceptable. There was nothing in the additional material submitted to us that could not have been made available had the Department looked for it earlier. From beginning to end there has been a competence deficit in DETI's dealings with us. DFP Guidance states that Departments should check draft NIAO reports meticulously at every stage. However, we want to see the guidance further refined. Departments should be required to apply equally careful checks to any material they ask the C&AG to include in his report. Accounting Officer's Letter of 20 May 2002, Appendix 4. 18. The quality of oral evidence given by the Accounting Officer and supporting witnesses was most unsatisfactory. There were a considerable number of instances of what seemed to us to be inconsistent, evasive and even misleading answers to our questions. The Accounting Officer has a constitutional obligation to account to the Assembly for the use of resources which have been voted to his Department and which were under his stewardship. On matters of fact, we have a right to a straight answer to a straight question. In this session, despite the length of time involved, we did not get the factual answers which we needed and were forced to take the unusual step of writing to the Accounting Officer to seek clarification on twenty-five separate issues and to ask for forty-seven additional pieces of information. This is not the first time we have had to make this point with DETI. Following our January hearing on LEDU Fraud we said we found the extent to which officials attempted to "stonewall" our questions disturbing and unacceptable. Chairman's Letter to the Accounting Officer
of 26 June 2002, Appendix 10. 19. We accept that the Accounting Officer had to deal with an extensive range of issues, in what was an exceptionally long session. However, this is no excuse for providing inconsistent and confusing evidence. The Accounting Officer's letter to the Committee of 9 July 2002 has addressed many of our concerns and we accept his assurances that the provision of unsatisfactory evidence was not wilful or out of any disrespect for the work of the Committee. However, it is still our view that some of his answers do not stand up well to scrutiny and we draw attention to these in the report. We are still not completely satisfied that this Department has been as open and forthcoming as we, and the public we represent, expect and deserve. We expect an Accounting Officer to recognise, where there is clear proof, that errors were made and to acknowledge the responsibility of those involved. Accounting Officer's Letter of 9 July 2002,
Appendix 12. 20. The Accounting Officer told us he had been hesitant in giving full details of certain matters during his evidence to the Committee because ".of having to deal with sensitive personnel information." The Accounting Officer ought to have shared his difficulties with the Committee, and if he felt it appropriate, offered to submit a confidential note supplying the information we requested. It is totally unacceptable for an Accounting Officer to decide for himself what this Committee needs to know; that decision the Committee reserves for itself. When we asked for additional material to be sent to us as a result of unsatisfactory evidence, we were told that a number of items could not be released because they related to confidential personnel matters. We do not accept this. The Department's reluctance to provide some of the information we asked for creates the suspicion that this might have had more to do with trying to conceal embarrassing details than with genuine confidentiality considerations. Under Standing Order 55 this Committee has the power to send for persons, papers and records. This certainly includes the right to see personnel records and legal advice in cases which have been completed and where large sums of taxpayers' money has been paid out for departmental actions when we consider them relevant to our enquiries. If a department truly believes that certain papers should be treated as confidential we will consider carefully any case it puts to us and act appropriately. Accounting Officer's Letter of 9 July 2002, Appendix 12. GRANT TO THE MALONE LODGE HOTEL The adequacy of the Board's project monitoring and control procedures 21. It is very clear from our evidence session that there were serious shortcomings in the Board's case handling procedures. In May 1999, the Board offered financial assistance of some £503,000 for an 18-bedroom extension to the Malone Lodge Hotel. The Board's offer included a pre-commencement condition that copies of any statutory approvals that were required, such as planning approvals, were to be obtained before building works commenced. Another condition was that the project promoters would not, without the prior written approval of the Board, make any material alterations or additions to the project. 22. Unknown to the Board, the required planning permission for the 18-bedroom hotel extension was refused by Planning Service. Instead, the promoters sought and obtained planning permission for a 6-bedroom extension to the hotel, with a separate permission for 6 (2-bedroom) apartments in an adjoining building. The project actually delivered by the promoters - a 6-bedroom extension to the hotel and a separate apartments complex - was therefore materially different from the one which the Board had approved. Contrary to the offer conditions, no written approval for these changes was obtained from the Board. Indeed, the promoters failed to keep the Board informed about the changes to the approved plans. 23. The Board's monitoring procedures failed to pick up that the project approved by the Planning Service was materially different to the one which it had approved. The Board also failed to note that the planning permission received specifically precluded interconnection between the hotel and apartments buildings. The fact that the hotel and apartments could not be interconnected meant that the project being developed was not, therefore, a 51-bedroom hotel, as required by the Board's financial assistance offer. However, by the time the Board recognised its error, it had already paid 90 per cent of the grant, amounting to some £453,000. C&AG's report on Malone Lodge, paragraphs 2 to 5 and 15. 24. We asked the Accounting Officer why the Board's controls had failed to identify the planning discrepancies in this case. He told us that the Board's case officer had not checked the project planning approval in sufficient detail. The Accounting Officer accepted that this had been a serious breakdown in procedure and one which should not have happened. When we asked whether the case officer had been disciplined, we were told that he had left the Board's employ before the problem had come to light. Minutes of Evidence, paragraphs 37, 38, 81
to 94 and 141 to 147. 25. We are not persuaded that the failures in this case can simply be blamed on an individual case officer, no longer in the Board's employ. It is clear, for example, that there was no supervisory check on the work of the case officer. We also note that the Board's Quality Assurance team failed to detect the planning irregularities, when it physically inspected the hotel premises some nine months later. In our view, the failures surrounding this project were much more systemic in nature, than has been conceded by the Department. C&AG's report on Malone Lodge, paragraph 15. 26. The Accounting Officer told us that procedures have since been tightened significantly. He said that the Board now uses professional help from within the Department of Finance and Personnel's Construction Service, to ensure that planning consents, received in support of applications for payment of grant, conform to the project approved by the Board. We were also told that the Board has revised its quality assurance procedures, so that inspectors will now have the report from Construction Service and a copy of the approved plans, on an inspection visit. 27. While we welcome the introduction of these new procedures, this will not, in itself, guarantee that similar failings will not arise in the future. The breakdown in the Malone Lodge case stemmed largely from a failure to properly apply an existing control procedure - the review of the planning permission. Due to the carelessness of the case officer and the absence of an effective supervisory check, the Board failed to detect that the project planning approval did not meet the terms of the Board's offer of assistance. If the Board is to properly fulfil its responsibilities in safeguarding large sums of taxpayers' money, it must ensure that its control procedures are properly applied in future. Minutes of Evidence, paragraphs 38, 45 to 51 and 56. 28. In response to the issues raised in this case, the Board had told the Audit Office that it considered there was scope to improve its communication and co-operation with the Planning Service. We asked the Accounting Officer to elaborate on what new procedures had been agreed over the 18 months since the irregularities in this case came to light. We did not get a satisfactory answer to our question. The Accounting Officer simply repeated what he had already told us - that the Board now uses Construction Service to check planning approvals. 29. In our view, the additional check by Construction Service in no way obviates the need for the Board to improve its direct communication and co-operation with Planning Service. Better communication with the Planning Service in this case might have alerted the Board, at a much earlier stage, to the planning irregularities that its own control procedures failed to detect. In keeping with the principle of 'joined-up government', we expect the Board, as a matter of priority, to examine closely how its links with Planning Service can be improved. Minutes of Evidence, paragraphs 45 to 51. 30. One of the most disturbing aspects of this case is that, even though the Board received prior warnings about the planning irregularity, it failed to properly act on these warnings. In June and July 1999, the Lower Malone Residents' Association wrote to the Board warning that the owner of Malone Lodge was building apartments and pointing out that these represented a "covert application for a commercial extension to the hotel". The Board responded on three occasions, each time giving an assurance that payments would not be made until all statutory planning approvals had been satisfied. This assurance was also repeated by the Minister. We were astonished, therefore, to learn that, despite all these assurances, the Board subsequently made three payments totalling £453,000 to the project, even though the appropriate planning approval had not been obtained. It was only after a further letter from the Residents' Association, in October 2000, that the Board eventually recognised its error. C&AG's report on Malone Lodge, paragraphs 3, 9 and 10. 31. When we asked how, in the light of the warnings in 1999, the Board still failed to detect the irregularities; the Accounting Officer told us that the fault lay in the initial breakdown in procedure by the case officer (paragraph 23 above). We do not accept this explanation. The misplaced reliance on an earlier, flawed review of the planning permission by the case officer does not excuse the Board's failure to properly investigate the later warnings from the Residents' Association. Had it done so, the improper payment of grant could have been avoided. Minutes of Evidence, paragraphs 37, 141 and 142. 32. We were surprised to learn that, because of the history of planning difficulties in this case and the Residents' Association complaints, the Board had instructed its case officer to exercise "particular care" on the project. Unfortunately, this had no demonstrable effect on the work of the officer concerned. Nor apparently, did it result in an effective supervisory check. We also noted that, despite the Board's apparent recognition of the risks in the project, it had not seen fit to put its instruction to exercise particular care, in writing. Given the concerns surrounding this case, this instruction should have been formally minuted. C&AG's report on Malone Lodge, paragraph 15 33. It appears to us that the Board regarded the Residents' Association largely as 'troublemakers' and, as such, failed to give their letters the level of scrutiny warranted. This was a serious error in judgement. Even where it is believed that the issues raised by a pressure group have little or no substance, it is still incumbent upon a public body to exercise due diligence, to ensure that no material matter is overlooked. Given the important nature of the Residents' Association warnings, the problematic planning history of the project and the amount of taxpayers' money involved, the Board's failure to thoroughly investigate the warnings was nothing short of gross negligence. 34. During the evidence session the Board's Chief Executive told us that new complaints procedures have been introduced, to ensure that correspondence from external groups is now subject to "more formal action". While we welcome these new procedures, it must be borne in mind that in the Malone Lodge case, it was the former Chief Executive himself who wrote to the Residents' Association, stating that payments would not be made until all statutory planning approvals had been satisfied. Clearly therefore, it is not just the formality of the procedures that is important, but also the quality of the scrutiny which underpins them. Minutes of Evidence, paragraphs 143. 35. Because of the control failures in this case, some £453,000 of taxpayers' money was wrongly paid to the promoters. We asked the Accounting Officer if the Board had checked whether there were any other cases where the requisite planning permission had not been obtained before grant was paid. Unfortunately, this was another instance during the evidence session where we did not get a satisfactory answer. The Accounting Officer merely told us that he was not aware of any other such cases and commented that the Board had examined its procedures. It would appear, therefore, that since the Malone Lodge irregularities came to light, no check has been carried out on the other cases assisted under the scheme. Accordingly, we would ask the Department to arrange for this check to be undertaken and the results reported back to the Committee. Minutes of Evidence, paragraphs 40 to 44. On the Board's lack of enforcement of its Letter of Offer conditions 36. The Board said that it had no evidence to suggest that the project promoters wilfully misled them with regard to planning matters in this case. We find this statement astonishing. The Board's Letter of Offer included clear and very specific conditions attaching to the grant, including stipulations that:
37. Contrary to these conditions, the promoters submitted one set of plans, showing a single integrated hotel, for approval by the Board. They submitted a different set of plans, for a hotel and separate apartments, for approval by the Planning Service. The Board was unaware that two sets of plans existed. The promoters then accepted three grant instalments of around £450,000 of taxpayer's money from the board, even though they did not have planning permission for a 51-bedroom hotel. And by having an interconnection between the hotel and the apartment building, the promoters also breached a condition of planning permission, forbidding such a link. C&AG's report on Malone Lodge, paragraphs
14 and 15. 38. In light of this, we asked how, precisely, the Board had arrived at its view that it had not been misled by the promoters. Once again, we were disappointed with the poor quality of the response to our question. The Accounting Officer sought to explain the promoters' failure to keep the Board apprised of developments by referring to the 12 to 15 month lapse of time between the original processing of the case and the submission of grant claims. We find the Accounting Officer's explanation wholly unconvincing. We were also astonished to learn that the Board did not even seek an explanation from the promoters, as to why they had not kept the Board informed of the changes to the project. Given that the Board had paid out over £450,000 to a project that did not comply with the conditions of offer, its failure to challenge the promoters points to an appalling degree of indifference to its stewardship of public monies. Minutes of Evidence, paragraphs 72 to 80
and 95 to 102. 39. One of our main concerns on this case is the Board's decision not to enforce 'clawback' of grant. Under the Letter of Offer, the applicant is required to repay grant if any information provided to the Board is misleading, or there has been a failure to disclose any material fact, or if any material change is made to the works without the prior written consent of the Board. We asked how the Board's decision not to clawback grant could be justified, given that the project very clearly did not meet the terms of the offer. 40. We were told that the project that has finally been delivered by the promoters is, in essence, the same as the one originally approved by the Board. This followed Planning Service approval of a revised planning application in February 2002. The Accounting Officer assured us, however, that there was no question of the Board having casually accepted matters. He pointed to the Board's letter of March 2001 to the promoters which made it clear that failure to deliver the project and comply with all the offer conditions would result in the Board demanding repayment of grant. C&AG's report on Malone Lodge, paragraph
19. 41. We asked whether the Board has, at any time, sought a legal opinion on whether the grant already paid could be recovered. The Board had been given legal advice that reclaiming the grant would be difficult, should the project be delivered according to the original Letter of Offer. Minutes of Evidence, paragraphs 130 to 133. 42. We have grave reservations about the Board's handling of this matter. Its approach appears to have been one of 'all is well that ends well'. Although the project now appears to be in line with the offer, the means by which this has been achieved is a matter of concern. The Board's decision not to enforce the conditions of offer means that no action is being taken against the promoters, despite their failure to keep the Board fully informed. In our view, this sends out the wrong message to recipients of grants from the Department and its NDPBs - that conditions can be ignored. This undermines the integrity of selective financial assistance schemes and places taxpayers' money at risk. Conditions of offer are an essential safeguard and we expect the Department to make it clear that they must be rigorously enforced. Minutes of Evidence, paragraph 1071. 43. One other area of concern was the provision of misleading information to the C&AG by the Board. Following discovery of the planning irregularities, the Board wrote to the project promoters in March 2001 stating that the project "was certified and operating in contravention of the statutory planning approval". Yet, some five months later, in a letter to the Audit Office, the Board stated that it "does not consider that the hotel has at any time been operating in contravention of the statutory planning approval". Despite extensive questioning by the Committee, the Accounting Officer and the Chief Executive signally failed to explain the inconsistency. We have concluded that the Board's response to the Audit Office was misleading and, as such, wholly unacceptable. This Committee expects Departments and Agencies to be entirely forthright in their dealings with the Audit Office and any action which undermines the effectiveness of the C&AG and this Committee will not be tolerated. C&AG's report on Malone Lodge, paragraphs
5 and 14. 44. Overall, this case has highlighted a range of weaknesses within the Board's core business area of awarding grants to hotels. It is of particular concern that this is not the first time that the Board's handling of tourism development grants has been found wanting by a Public Accounts Committee. In examining the scheme in 1995, the Westminster PAC concluded that the Board had operated with sheer laxity in relation to its own guidelines, with early projects showing an astonishing range of failures of supervision and management. 45. We find it disconcerting that, in the wake of such a stern reprimand in 1995, the Board's handling of the Malone Lodge case contained similar failings. It appears that nothing much has changed. It is vitally important, therefore, that in response to this Committee's report, the Department and Board take the appropriate steps to ensure that the lessons are learned and fully applied in the future. Minutes of Evidence, paragraphs 149 and 1071. USE OF A CORPORATE CREDIT CARD IN NEW YORK 46. We find the circumstances surrounding use of the corporate credit card extremely disturbing. We learned that, in 1996, the New York Manager charged personal expenditure to this credit card. We asked the Department to provide details of what had happened in 1996, but were told there were no records. In 1997, following discussions with then Chief Executive, the Manager stopped using the card. In the C&AG's report, the Department stated that the New York Manager stopped using the corporate card on the instructions of senior management, because of concerns about its use. The Department told us eight days before our evidence session that this was incorrect; there had been a discussion, but no instruction to stop using the card. We do not find the Department's revised version of events at all convincing. In the absence of any contemporary documentation the full story will perhaps never be known. What we can say is that when the problems with the credit card first emerged in 1996 the Tourist Board was negligent in three respects:
Minutes of Evidence, paragraphs 214 and 713. 47. The Manager started to use the card again in December 1999, but told no-one in the Tourist Board. An Accounts Clerk spotted the card was being used in July 2000 and on three occasions asked for the receipts to be sent to Head Office; these requests were ignored. Incredibly, no-one else noticed that the monthly bill from the British Tourist Authority included thousands of pounds of credit card spending until April 2001. By this stage the Manager had charged £24,000 to the card and could not or would not supply back-up documentation for much of this spending. Minutes of Evidence, paragraphs 254 to 276. 48. The Department told us that the Manager eventually produced duplicate receipts for some credit card expenditure, leaving a balance of £4,023 for which there are no receipts. The Manager has now agreed to repay this amount, at the rate of £100 a month. It will be November 2005 before the full amount is recovered by NITB, six years after use of the credit card resumed. What is most shocking to this Committee is that, even though £4,000 worth of receipts are still missing, the Department continues to assert that the Manager's spending was wholly commensurate with his work. In the absence of the key supporting documentation the Accounting Officer simply cannot substantiate such a claim; it is disturbing that he would even try to. Accounting Officer's Letter of 9 July 2002, Annex 25. 49. The Department told the C&AG that it had a written statement from the Manager that the card had not been used for personal expenditure, and assured him that all expenditure was appropriately incurred. The Department later admitted to us that items of personal expenditure had been charged to the card since its use was resumed in 1999, and these had only recently been repaid. As we have seen (paragraph 46 above) the Manager had a history of using the card improperly for personal spending dating back to1996. C&AG's Report on the 2000-01 Accounts,
paragraphs 2 to 7. 50. We learned from the C&AG's supplementary report of 22 May that the Tourist Board credit card was still being used inappropriately as late as November 2001. This was despite the fact that the C&AG had reported his concerns about how the card was being used on 21 August 2001. It is unacceptable that the Department failed to take any action for a further three months on a matter which needed to be tackled with the utmost urgency. C&AG's Memorandum of 22 May 2002, Appendix 5. 51. When we insisted on seeing all credit card statements for the New York Manager's card we discovered that the potential scale of the abuse was more serious than we first thought:
Given what we know about the Manager's history of charging personal expenditure to the credit card and with over £4,000 of hospitality spending still unsupported by original documentation, we think that it is important that the detail of the credit card statements is subject to a further review by the Department. The review should seek to establish the circumstances of all significant items of expenditure which are not clearly related to hospitality for guests of NITB. We would like this exercise to be carried out in consultation with the Audit Office. Accounting Officer's Letter of 9 July 2002,
Annexes 25 and 28. 52. We think it is questionable whether the New York Manager should contribute virtually nothing out of his own pocket towards his accommodation and vehicle costs when he is on either side of the Atlantic. NITB seems to treat him as though he is domiciled in Northern Ireland when he is in New York and domiciled in New York when he is in Northern Ireland. We note that the rent and other overseas allowances he received were higher than his basic salary. In the two year period up to March 2001 he received over £49,000 in rent allowance and a further £16,000 in allowances in respect of car leasing, car parking, car registration and insurance. The taxpayer also paid his electricity bills (£1,738), car repair costs (£2,809) and medical/dental bills (£3,030). NITB has pointed out that allowances payable to the New York Manager are consistent with the British Tourist Authority's "overseas conditions of service". This may be so but the Department must, in our view, find more cost-effective ways of running overseas offices. The New York office cost £1 million to run in 2000-2001. From what we have seen there is likely to be scope for economies. C&AG's Memorandum of 22 May 2002, Appendix
5. 53. The Committee considers that the Manager of the New York Office has acted in an entirely unacceptable way for a public employee. He resumed use of the credit card, without the knowledge of senior management. He did not respond to numerous requests to supply the original invoices to support this spending. He told the Department the card had not been used for personal spending when it had. He submitted duplicate claims for expenses. He has been drip-feeding the Department receipts since his re-use of the card was discovered. The Department has given the Manager a number of formal warnings about his conduct. Yet we are told that the Board will only take a final view on disciplinary action "once due process is complete." Senior management have been aware of the circumstances surrounding the use of the card since April 2001. It is unacceptable that over a year later, they have not taken a final view on the appropriate disciplinary action. We expect to be informed when further disciplinary action is taken. We want to see full details on the disciplinary action on this case as soon as it is completed. Minutes of Evidence, paragraphs 214 to 219,
713 and 714. 54. At our evidence session we expressed our concern that the qualifications and experience of the New York Manager did not match the duties and responsibilities of the job. For that reason we asked to see a copy of the newspaper advertisement for the post. NITB had asked for candidates who had a good knowledge of the US market and a good degree and/or marketing qualification. We are very disturbed at evidence that the New York Manager simply did not have the qualifications and experience specified in the advertisement for the job. We cannot understand how someone could be appointed to this important post, representing Northern Ireland overseas, who did not meet the core criteria. This is a very important matter which seems to reflect adversely on the integrity of public appointment procedures. DFP has, of course an overall responsibility for promoting proper appointment procedures are followed in the public service. In this case we want DFP to carry out its own independent investigation of the circumstances surrounding the appointment of the New York Manager and report its findings to us in the Memorandum of Reply. We want to know who sat on the selection panel and whether there were any applicants who did have a degree and/or marketing qualification. If there were no such applicants we want to know why the post was not re-advertised. Should DFP be unable to carry this out, we would expect the C&AG to investigate this matter and report back to the Committee. Accounting Officer's Letter of 17 May 2002,
Appendix 3. USE OF CREDIT CARDS IN THE PUBLIC SECTOR 55. This case is a classic illustration of the serious problems which we are finding with credit cards across the public sector in NI:
56. We acknowledge that credit cards can be a cost-effective tool in purchasing arrangements. But if their use is not adequately controlled, individuals can bypass the normal procedures for incurring expenditure. It is essential therefore, that Departments put a separate and rigorous control system in place before they issue credit cards to individuals. We therefore welcome DFP's decision to issue comprehensive new guidance on the use of credit cards by public bodies. Minutes of Evidence, paragraphs 214 and 215. 57. The key message is that credit card transactions must be subject to the same rules that apply to all other methods of public spending. There must, above all, be full documentation of all transactions. 58. When public employees incur substantial expenses in the course of their work, there is a well established procedure for the employer to provide an advance or 'imprest' based on the anticipated cost. In our view, Departments should give explicit guidance on what circumstances, if any, staff expenses (travel and subsistence) can be met by Departmental credit cards rather than the usual imprest arrangements. This would be a safeguard for staff, as well as for the public purse. EXCESSIVE AND INAPPROPRIATE HOSPITALITY SPENDING IN NEW YORK 59. We have already made it clear in our Report on the Fire Authority for Northern Ireland (2/01R, 20 September 2001) that hospitality is an area where it is particularly important to ensure propriety in the use of taxpayer's money and we expect all such expenditure to be within the framework of appropriate guidelines. We were shocked at the laxity in controlling expenditure on overseas hospitality in the Tourist Board. It is particularly disturbing that this laxity seems to have been deeply embedded in the culture of the organisation over many years. Warnings and advice from the auditors and from the Tourist Board's own staff were not acted on. No one emerges with credit from the evidence we heard on this issue but, in particular, the various Accounting Officers involved signally failed in their duty to ensure sound controls were in place and that value for money could be demonstrated. It seems to us that senior staff in the Board and in the Department were well aware of this laxity in overseas spending, but none of them had sufficient regard for the public interest to bring it under control. C&AG's Report on the 2000-01 Accounts, paragraphs 8 to 21. 60. In March 2001 the Audit Office urged the Tourist Board to revise its guidance on hospitality in New York. The auditors wanted the Tourist Board to set a realistic limit on the cost of hospitality provided to clients. The auditors did not want the limits to be set in stone; they foresaw that on occasion a senior officer would approve, in advance, a higher level of spending. The Tourist Board stubbornly rejected this advice. At the evidence session we learnt that NITB had finally come round to see the benefits of such a system. The Accounting Officer told us that the Board had agreed to set a limit of $75 to $80 (approximately £50) per head. Any expenditure over the limit would have to be approved by a line manager within 48 hours. We recognise that the NITB has, belatedly, accepted the key recommendations of the NIAO Management Letter of March 2001. It is indicative of the Board's attitude that it took a report by the C&AG and a public evidence session by this Committee before NITB could bring itself to put in place some basic procedures. C&AG's Report of the 2000-01 Accounts,
paragraph 9. 61. The Department told us that the level of spending in New York can only be judged in the context of what has been achieved. They appear to be saying that this was a case of the end justifying the means. We do not except this. We want to make it absolutely clear that even if some of the hospitality expenditure described in the C&AG's report has helped to boost Northern Ireland Tourism revenue (and that is debatable) the failure of the Board to put proper procedures in place for hospitality expenditure is reprehensible. The Departmental Accounting Officer needs to recognise that when he is explaining a value for money judgement it is not enough to point to the benefits alone. He also has to consider the cost, to ensure that there is proper financial control and be able to demonstrate the cost-effective use of public money. Minutes of Evidence, paragraphs 868 to 869. 62. In one case we asked the Department to provide further details of a £74 bill for drinks for four (two staff from NITB and two from the Irish Tourist Board). The Department told us the purpose of this meeting was to discuss potential hotel venues for tourist road shows. This in no way justifies the spending we saw. We find it incredible that four public employees, while working, can spend £74, which is roughly equal to the basic weekly retirement pension in Northern Ireland, on drinks for themselves. Yet the Department sees nothing amiss in this; it offered no adequate explanation, no apology and no regrets. Minutes of Evidence, paragraphs 863 to 869.
63. The Department has emphasised that the level of hospitality spending must be set in the context of the high cost of living in Manhattan. We do, of course, recognise that the task of promoting Northern Ireland tourism in a location such as New York is likely to require levels of expenditure on hospitality considerably in excess of what would be regarded as the norm within the United Kingdom. However, we must remind the Department that the examples of inappropriate and excessive hospitality referred to in the C&AG's report were not confined to New York. In one example from the 2000-01 financial year the New York Manager, while on business in London, included a £161 dinner for three in his expenses. The bill included £68 for alcohol. This was well outside the thresholds for Great Britain laid down in the Board's Financial Procedures manual. Yet no explanation was given by or sought from the New York Manager at the time. It would appear that by 2000 no one in the Tourist Board was prepared to challenge significant breaches of the organisation's hospitality procedures. This is hardly surprising given that Finance staff who had previously attempted to ensure adherence to procedures were in the words of the former Finance Manager subject to "constant hostility, bitterness and resentment" (see also paragraph 99). C&AG's report on 2000-01 Accounts, Annex A. 64. In many cases we found it impossible to ascertain the cost per head of hospitality because of the lack of proper information on the numbers attending events. We suspect that the Department has been attempting to exploit these information deficiencies in order to put the best possible gloss on the matter. For example, the C&AG's report referred to a meal for two at a prestige restaurant which cost £234 (£117 per person). The bill included £72 for alcohol. On the morning of our evidence session the Department contacted the Committee Clerk to suggest that there had actually been three people present, reducing the cost per head to £78. We asked to see the additional evidence supporting this new claim. The Department could only produce the original bill, there was no new evidence, and it could not even name the mysterious 'third man'. We are amazed the Department expects us to accept the uncorroborated recollections of staff, years after the event, as valid evidence. C & AG's Report on 2000-01 Accounts,
Annex A. 65. In its Annual Accounts for 2000/01 the Tourist Board stated that it spent £26,000 on hospitality. However, we have since learnt that a further £19,000 was spent on food and drink that year - in New York alone. This amount was not classed as hospitality but as 'Trade Promotions' and included in the accounts under the general category of 'Other Expenses'. In our view, this classification meant the Board was significantly understating the level of hospitality spending incurred. We want DFP to issue fresh guidance to Departments; they must ensure that all spending incurred in extending hospitality to guests or business contacts is clearly recorded as 'hospitality'. Hospitality at the taxpayers' expense is always a sensitive issue. For that reason the total amount spent each year on hospitality must be recorded separately in the annual accounts of each Department and every subsidiary body. C&AG's Report on the 2000-01 Accounts,
paragraph 12. 66. We asked the Department if the New York office held a register of the gifts and hospitality that staff had received. We learned that this register had existed since October 1999, but no entries have been made in it. This is very surprising, particularly given that the Board's guidance makes it clear that even the most modest level of hospitality has to be recorded. This looks like yet another area where basic administrative safeguards are being ignored. We want the Department to investigate whether there is any evidence of lapses in recording hospitality and gifts accepted by NITB staff and report back to us what they have found. The Department must make absolutely sure that it has the procedures in place to ensure that all gifts and hospitality received are properly authorised and recorded in the register. Accounting Officer's Letter of 9 July 2002, Annexes 33 and 34. UNAPPROVED SALARY INCREASES PAID TO DIRECTORS 67. We find it unsatisfactory, but typical of the quality of management decisions in the Board, that salary increases totalling £43,000 over a period of years were awarded to two Directors without the Department's approval. This approval was an absolute requirement. We accept that the Directors in question were undertaking additional duties, but are disturbed that the Department could offer no explanation of why an increase at the level of 15 per cent was considered appropriate. In our view, this level of payment was excessive. Accounting Officer's Letter of 9 July 2002, Annex 14. 68. This is a clear example of NITB flouting the terms of its Financial Memorandum with the Department. It is extremely disturbing that the then Chief Executive, who had actually signed the Financial Memorandum in August 1996, awarded these unapproved payments. The Department's evidence shows that the Board's Chairman was also involved in this decision. The Accounting Officer told us that it was an oversight that the Financial Memorandum was not followed; if so, it was a very expensive oversight. The Board's decision not to fill the vacant Director of Finance post, but to give those responsibilities to the Director of Investment, led to an equality case which cost the Board £30,000. This case is considered in more detail at paragraph 78. C&AG's Report on the 2000-01 Accounts,
paragraph 44. 69. It seems to us that the directors who were rewarded for taking on these additional duties did not perform them effectively. The Director of International Marketing was in charge of the New York Office which, as we have established, was operating outside normal financial controls. The Director of Finance and Investment was in charge of the Accounts Branch which was paying credit card bills without having original receipts. 70. We are concerned at the casual way the Department has treated the failure of senior management in the Tourist Board to follow key requirements set out in the Financial Memorandum. It is not enough for Departments to agree Financial Memoranda with their subsidiary bodies, they must ensure that these requirements are implemented, and take appropriate action where they are not. C&AG's Report on 2000-01 Accounts, paragraph
32. PAYMENTS TO THE FORMER CHIEF EXECUTIVE 71. In 2000-01 NITB awarded its former Chief Executive consultancy contracts worth £34,000. None of this work was subject to public tender, in direct contravention of DFP Guidelines. We found it extraordinary that NITB, with the agreement of the Department, told the C&AG that in this case it regarded competitive tendering as a waste of public money. The Department tried to tell us that the way it awarded further work to the former Chief Executive followed DFP Guidelines: it is clear to us that it did not. The guidelines state that an employee, whose contract is not being renewed, can only be offered further employment or consultancy work in exceptional circumstances. There must be documentary evidence to show that such an arrangement represents value for money taking into account the normal requirements for competition. The Department has admitted that there is no contemporary documentary evidence explaining its decision. In our view, whether or not the decision was documented, the fact remains that the decision to award the consultancy contract to the former Chief Executive without tendering was wrong. C&AG's Report on the 2000-01 Accounts,
paragraph 41. 72. We pressed the Accounting Officer to tell us who had authorised this contract and were given a string of contradictory and confusing replies and corrections. Eventually we were told that the decision was made by the Chairman of NITB following consultation with the Department's Principal Finance Officer and the then Permanent Secretary. This case is very important because the Departmental Accounting Officer himself, the person appointed to ensure proper procedures, was involved in approving an arrangement which did not provide for proper tendering of contracts or document any rationale to show the value for money of the arrangement adopted. This sets an appalling example to staff at lower levels. Any member of the public might well perceive this as a case of "jobs for the boys". NITB and the Department have no defence against such allegations because of their collective failure to follow the rules. C&AG's Report on the 2000-01 Accounts,
paragraphs 40 and 41. PAYMENTS TO THE FORMER DEPUTY CHIEF EXECUTIVE 73. The Tourist Board paid £60,000 in compensation to the former Deputy Chief Executive when his contract was bought-out in December 2000. NITB paid an additional £4,000 for employment consultancy and provided a reference. This was presented as a "redundancy consequent upon a reorganisation of management responsibilities". It was only after intensive questioning by the Committee, both at our evidence session and in writing, that the Accounting Officer admitted this was not the whole story. There were "stresses and strains" in the NITB management team because of the management style and approach of the former Deputy Chief Executive, resulting in a lack of respect and confidence in his judgement. Indeed a number of allegations were made about his management style which resulted in an investigation by the Department's Head of Personnel. Following the review, the Acting Chief Executive decided a charge of misconduct was not warranted, but he stressed to the Deputy Chief Executive the need for appropriate behaviour. C&AG's Report on the 2000-01 Accounts,
paragraphs 38 and 39. 74. We are astonished that the Deputy Chief Executive who, we were told, did not enjoy the respect or confidence of his colleagues, who had just been investigated for possible misconduct, was given such a very generous handout to end his contract. Indeed, it seems that this individual's contribution to the NITB was so negative, that it was considered worthwhile to spend £64,000 to dispose of him rather than have him serve out the last year of his contract. We strongly question the appropriateness of handing-out a pay-off in such circumstances. This individual had already received a generous relocation package of £12,500 and, in addition, an out-of-court settlement of £22,500 was made to a former employee whose application for this post had been unsuccessful because of poor appointment procedures (this settlement is considered in more detail at paragraph 79). C&AG's Report on the 2000-01 Accounts,
paragraphs 38 and 44. 75. We asked to see a copy of the reference provided to the former Deputy Chief Executive as part of his settlement. The reference, signed by the Chairman, was totally positive in tone. It made no mention of the problems his management style had created for the organisation, the opinion he was held in by his colleagues, or the circumstances of his departure. In our view the reference gave a misleading impression to any prospective employer. We consider that it was wrong for the Board to dispose of a troublesome employee in a way that left other public employers exposed. Minutes of Evidence, paragraph 365. 76. It seems to us that the problems in this case were a clear result of appointing the wrong person for the job. We find it astonishing that the Board did not require either a degree or a professional marketing qualification for a senior management job which was so important to the successful marketing of Northern Ireland. We want the Department to review its procedures for appointing senior staff to its NDPBs. It is vital, for the future of the Northern Ireland economy, that high calibre appointments are made to these posts. Accounting Officer's Letter of 17 May 2002, Appendix 3. DISCRIMINATION CASES 77. NITB had, until the re-organisation of its activities in 2001-02, about 120 members of staff. Since 1997 NITB has spent £114,700 defending and settling discrimination cases. In that period five employment cases were settled out-of-court. A further three cases are ongoing. Seven of these eight cases were taken by women, four of whom complained of sex discrimination. This level of litigation is unusual and unhealthy for an organisation of the size and status of the Tourist Board. These cases would seem to indicate that it is not just financial management which is incredibly weak in NITB, the standard of personnel management also appears to be wholly unsatisfactory. Accounting Officer's Letter of 9 July 2002, Annexes 7, 8 and 10. 78. In 2001 the former Finance Manager took an equality case against NITB, claiming sex discrimination. Northern Ireland Tourist Board paid out £30,000 in May 2001 in an out-of-court settlement, but did not admit liability. A further two members of the finance staff have initiated discrimination cases against the Tourist Board. The former Finance Manager had previously made a serious formal complaint about poor financial procedures in NITB (this is explored further in paragraphs 99 to 102 of our report). We are left with the distinct impression that conscientious whistleblowers, who raised legitimate questions about standards of financial control and propriety in the organisation, were branded troublemakers and marginalised. C&AG's Report on the 2000-01 Accounts,
paragraph 42. 79. NITB paid £22,500 to an unsuccessful applicant for the post of Group Marketing Director in 1996. The successful applicant was the former Deputy Chief Executive. We are aware that legal counsel advised NITB that its failure to keep a proper record of the interview process would weaken its case at a Tribunal. It is unacceptable for a public body to display such a casual approach to proper recruitment practices. C&AG's Report on the 2000-01 Accounts,
paragraph 44. FAILURE TO FOLLOW PROPER PROCEDURES IN AWARDING PRINT CONTRACTS 80. Over an eight-year period between 1992 and 2000 proper tendering procedures were not applied to almost £4 million of print contracts. The Tourist Board was in clear breach of its own simple rules that all contracts over £15,000 should be put out to open competition. Compliance with these competition rules is a fundamental requirement for all public bodies. The Treasury Officer of Accounts made this crystal clear in his evidence to us. Compliance was even more important in the Tourist Board case because large contracts were being awarded to W&G Baird, a company connected to the NITB Chairman. We acknowledge that since the C&AG reported NITB have tightened up procedures. But the Department was unable to provide us with a satisfactory explanation why basic tendering procedures were broken over and over again for the best part of a decade. C&AG's Memorandum of 22 May 2002, Appendix
5. 81. One of the most shocking aspects of this is that, as far back as 1997, senior staff in the Board were fully aware that the way they were handling print contracts was wrong and that they would be exposed if the C&AG found out about it. Yet, absolutely nothing was done until a complaint was received from a Northern Ireland company in February 2000. C&AG's Memorandum of 22 May 2002. 82. In our view, the Board completely failed in its duty to adhere to the core public service values of fairness, objectivity and propriety in its award of substantial print contracts to W&G Baird. It is clear that other companies in the printing sector who were not given the opportunity to tender, or whose lower bids were ignored, were treated most unfairly. It was totally unacceptable for the Board to persist with flawed tendering procedures which it knew to be wrong. 83. At the evidence session the Department tried to put a spin on this. We were told that "everyone benefited" from the defective tendering procedures because the same defective procedures were used for all contracts - "It was not a matter of having a process that suited W&G Baird". We do not accept this. Those companies who were not asked to submit tenders did not benefit. We discovered that although other companies were awarded contracts under the defective procedures, they did not benefit to the same extent as W&G Baird. Information subsequently supplied by the Department revealed that over £885,000 of print work was awarded to companies other than W&G Baird, between 1994-95 and 1999-2000 (see Table 1). 97% of the work was awarded to firms submitting the lowest tender. In the same period W&G Baird obtained print contracts worth £1,436,000 (see Table 2). W&G Baird was the lowest bidder for only 13% of the work it was given. These figures suggest a quite extraordinary degree of favouritism towards W&G Baird in the award of print contracts. Table 1: Print Contracts Not Awarded to W&G Baird
Source: Accounting Officer's Letter to Chairman of 9 July 2002, Annex 37. Table 2: Print Contracts Awarded to W&G Baird
Source: Composite Report, Appendix 3C, Annex B * This includes £380,577 in respect of work awarded to W&G Baird without any other firms being asked to bid. **This amount relates to the 1995 Holiday Breakaway brochure, the Department was unable to provide us with details of the other bids received for this contract. Accounting Officer's Letter of 9 July 2002,
Annex 37. THE CHAIRMAN'S CONFLICT OF INTEREST 84. When the C&AG was preparing his report on print contracts he was given assurances by the Department that the Chairman of NITB had acted entirely properly in all matters in relation to NITB procurement decisions. The C&AG was told that:
C&AG's Report on the 1999-2000 Accounts, paragraph 15. 85. Prior to our evidence session on 30 May 2002 we asked the C&AG to carry out a further review of the case work surrounding print contracts in order to see if it was possible to provide the Committee with a firm assurance that there was no impropriety associated with these contracts. Committee's Clerk's Letter to the Accounting Officer, 25 April 2002, Appendix 1. 86. One of the key points emerging from the C&AG's further work was that there had been a discussion between the Chairman of NITB and the former Deputy Chief Executive about a 1997 tendering exercise for producing "Holiday and Winter Breakaway" booklets. The contract, which was for an all encompassing publishing service, was being handled by the Government Procurement Service (GPS). Bairds had previously carried out the printing work at a total value of £612,000. They did not bid on this occasion, saying that, "in its present form, the project does not have the necessary commercial potential." There was only one bid and the Government Procurement Services was of the view that this bid fully met the specification. However, the Tourist Board challenged this on the grounds that it had "market intelligence that the company concerned was in a weak financial position". The C&AG asked the former Deputy Chief Executive what was the source of his market intelligence on the only bidder for the Breakaways contract, he was told that it had arisen in discussion with the NITB Chairman. We found this new information worrying because we had been told repeatedly that Mr. Bailie had no involvement in these contract procedures. Yet here he was having a conversation with an official about the bid for a brochure and suggesting that checks should be carried out on the credit worthiness of the bidder. C&AG's Memorandum of 28 May 2002, Appendix 6. 87. At the evidence session the Accounting Officer insisted that it was entirely appropriate for the Chairman to discuss the Breakaways contract because it was not a print contract; it was a publishing contract, and that "W&G Baird Ltd was never in for the contract, never likely to be in for the contract and had not tendered". In our view, the Department's arguments were totally unconvincing. In particular the Accounting Officer's attempt to persuade us that there was a meaningful distinction between print and publishing was unsound and seemed to us misleading. Within days of the hearing new documentary evidence emerged which confirmed our view. We learned that the firm which won the "Breakaways" contract constructed its bid on the basis that the printing work would be sub-contracted. The firm in question had invited Bairds to submit a tender for printing but were told "I regret that we are unable to furnish you with a quotation .. as this company may wish to tender directly." All of this suggested that Bairds had a more significant potential interest in the "Breakaways" contract than the Accounting Officer had previously indicated to us. Indeed it was subsequently reported [i] that, at the time the Breakaways contract was placed, W&G Baird had close links with a Leeds publishing firm, BA Publishing, who were involved in public sector contracts. This firm changed its name to Corporate Document Services in 1998 and was purchased by the Baird group in December 2000. Minutes of Evidence, paragraph 993. 88. In order to establish the true facts we decided to take the unusual step of calling for all of the papers relating to the 1997 "Breakaways" contract. Because the Government Procurement Service maintained an admirably thorough record of this contract we were able to build-up a clear picture of what had happened. These papers revealed, for example, that Baird's had sufficient interest in "Breakaways" to ask for and consider the tender documentation. They also showed very clearly that the Deputy Chief Executive used the "market intelligence" he had obtained from the Chairman to exert heavy pressure on the Government Procurement Service to have the contract re-specified and the competition re-opened. He also made unflattering comments about the bidding company and said NITB would not want to do business with them. The papers show that he made these comments before he had even studied the bid. Such was the pressure exerted by the former Deputy Chief Executive that the Government Procurement Service began to make preparations for re-tendering. However, it is to the credit of GPS that in the final analysis, this pressure was resisted. 89. This was a case where the Chairman's company had previously undertaken substantial work on the Breakaways brochures and might be asked to bid again, if the single bid under the 1997 competition was rejected. In such circumstances it was, in our view, entirely wrong for the former Deputy Chief Executive to raise any aspect of the "Breakaways" competition with the Chairman, and when he was approached it was inappropriate for the Chairman to give advice. The Department told us that the Chairman was sufficiently insulated by the Tourist Board's procedures in relation to conflicts of interest; he played no role in awarding print contracts. The Accounting Officer told us that the Chairman had assured him that he also played no part in the tender at the Baird's end. After extensive correspondence the Department eventually conceded that the discussion between the Chairman and the former Deputy Chief Executive, however casual, should not have taken place. It is disturbing that the Accounting Officer did not recognise much sooner that the use of advice which emanated from the Chairman on any publishing contract was not consistent with the degree of separation of interests which is essential for public confidence in the integrity of the Board's purchasing procedures. Accounting Officer's Letters of 28 June 2002 and 9 July 2002, Appendices 11 and 12. 90. One of the standard safeguards for dealing with conflict of interests is the requirement for Board members to withdraw from any meeting considering matters which they (or close family members) have a direct or indirect pecuniary interest. The Tourist Board case has demonstrated that this type of safeguard is incredibly easy to circumvent, and is completely worthless and ineffective in circumstances where off-the-record discussions about a publishing contract take place between a Chairman and a senior official. By their very nature such discussions will normally go undetected. The Committee only became aware of this one because it featured in a formal complaint by a member of staff who had concerns about propriety (the handling of this complaint is considered in detail in paragraphs 103 and 104). We must emphasise that an ill-judged discussion of this nature can cause irreparable damage to public confidence in the integrity of the procedures for awarding contracts, irrespective of the quality of the formal safeguards an organisation might have in place for dealing with conflicts of interest. C&AG's Memorandum of 28 May 2002, Appendix 6. THE GOVERNMENT PROCUREMENT SERVICE 91. The Government Procurement Service provides purchasing services to public bodies and also gives independent professional advice on purchasing matters. Purchasing through GPS is often more efficient and cost-effective because clients can make use of properly approved supplier listings for a wide range of services. Use of GPS's professional expertise gives its clients the additional assurance that purchasing decisions will comply with complex purchasing legislation. 92. It seems significant to us that since 1997, NITB had been awarding all its major contracts, with the exception of the printing contracts, in which the Chairman's company had an interest, through GPS. Following GPS's insistence in 1998 that proper tendering procedures be observed in relation to the Breakaways contract, it is telling that GPS were not used again for print contracts until April 2000, a full two years later. This is remarkable given that the Department itself had been using GPS exclusively since 1997. The Accounting Officer has admitted to us that he regrets the Department did not insist then, as it does now, that all its NDPBs make use of GPS's services. Accounting Officer's Letter of 9 July 2002, Annexes 40 and 41. 93. In our Composite Report on Issues Dealt with by Correspondence (3/01/R, 7 November 2001) we highlighted a case where the Department of Employment and Learning breached purchasing regulations by awarding a contract worth almost £1 million without holding a public competition for the work. In that case, as in the Tourist Board, the Government Procurement Service was not used. We want DFP to provide this Committee with details of any other public bodies who have consistently refused to use the Government Procurement Service for purchasing particular services and commodities. We want the C&AG to pay particular attention to these bodies in future audits. Composite Report of 7 November 2001, (3/01/R). APPOINTMENTS TO THE BOARDS OF PUBLIC BODIES 94. In our view, one of the key lessons from the Tourist Board case is that it is highly undesirable to make an appointment to the Board of a public body and completely inappropriate to make an appointment to the sensitive position of Chairperson, in circumstances where the prospective appointee's company is carrying out substantial commercial business worth over £1.4m with the public body. The only effective way of dealing with conflicts of interest of this magnitude is to prevent them from happening in the first place. The solution is as simple as that. 95. This is the second time we have had to make this point to DETI and, on this occasion, we expect the views of this Committee to be taken seriously. In our Composite Report on Issues Dealt with by Correspondence (3/01/R, 7 November 2001) we expressed concern that DETI did not accept our proposition that it was undesirable to make an appointment to the Board of a Public Body in circumstances where there was potential for a serious conflict of interest. 96. In our Composite Report we recognised that Board members who have a private sector background can bring valuable business skills to bear in the running of public bodies. We also recognised that experienced people in the hotel and catering industry should not be precluded from appointment to the Board of NITB because their business receives NITB grants. However, we considered that there was a clear distinction between this type of situation and making a Board appointment in circumstances where appointee's company was carrying out substantial commercial business with a public body. In such circumstances we said that it would be extremely difficult for any public body, even a well-managed one with sound procedures, to deal effectively with the perception that potential suppliers were not being treated equitably. We therefore recommended that guidelines on public appointments should be looked at again in the light of the Tourist Board case. Composite Report of 7 November 2001 (3/01/R), Appendix 3b, Annexes B, C & D. 97. We pressed DETI further on this at the evidence session and, in subsequent correspondence, the Department assured us that it was committed to best practice with regard to handling conflict of interest. It informed us that the post of NITB Chairman was advertised at the end of June 2002 and that the issue of conflict of interest had been given prominence in the information pack and material provided to applicants. This development, we were told flowed from discussions with this Committee. We have now reviewed this material and welcome the emphasis placed on the following points:
Minutes of Evidence, paragraphs 998 to 1027. 98. While we welcome the action now being taken by the Department to tighten up its procedures for handling conflicts of interest, we think this does not go far enough. In our view, the guidance needs to spell out clearly that it would not be appropriate to make an appointment to the Chair of a public body in circumstances where the prospective appointee's company is carrying out substantial commercial business with the public body. Accounting Officer's Letter of 28 June 2002, Appendix 11. INADEQUATE HANDLING OF STAFF COMPLAINTS 99. In two separate cases staff made serious formal complaints about poor procedures in NITB. On 31 March 1998, the then Finance Manager formally recorded a range of serious concerns about non-compliance with financial procedures in a memorandum addressed to the Board's Chief executive and Accounting Officer. She made the following key points:
C&AG's Report on the 2000-02 Accounts,
paragraph 22. 100. We asked the Department if it had seen this memorandum and, if so, when. We were told it had been brought to the attention of the Department's Principal Establishment and Finance Officer in April 1998. Accounting Officer's Letter of 9 July 2002, Annex 20. 101. We then pressed the Department on what action it took once it became aware of the memorandum. We were told that:
Accounting Officer's Letter of 9 July 2002, Annex 20. 102. Having seen the documentation, we accept that the Finance Manager's allegations, that NITB were breaching proper procedures, were investigated and some minor changes followed. But the far-reaching changes in attitudes and procedures which were called for, never happened. Indeed the then Chief Executive in response to the Finance Manager said; "there have been a number of clear lapses in relation to procedures but nothing overly serious". He went on to say that she should accept that "a balance must be struck between getting our job done and maintaining procedural standards". We find this astonishing. It is little wonder that we found numerous examples of NITB staff failing to follow key procedures, given this was the attitude at the top of the organisation. Accounting Officer's Letter of 9 July 2002, Annex 20. 103. In the case of the second complaint, senior management did not properly investigate an allegation of impropriety in the award of the Breakaways contract (see paragraphs 86 to 90 above). A member of staff alleged that inaccurate information which was damaging to the bidder for the 1997 Breakaway contract had come from Bairds. We were told that the Acting Chief Executive considered this allegation, discussed it with the Chairman and concluded that the actions of his senior colleagues and comments of the Chairman were perfectly reasonable and appropriate in the circumstances. In our view, the investigation into the serious allegation of impropriety in handling of the Breakaways contract was hopelessly inadequate on a number of counts:
C&AG's Memorandum of 28 May 2002, Appendix
6. 104. The failure to deal properly with the serious concerns of staff has undoubtedly contributed to the appalling working relations within NITB. Like so many of the problems facing the Tourist Board a change in attitude is called for and this change has to come from the top. It seemed to us that the Departmental Accounting Officer was reluctant to face up to the inadequacies in the Acting Chief Executive's handling of this complaint. The Committee wants to receive a commitment from the Department that staff complaints will receive a proper hearing and investigation and that staff will be formally notified in writing of the outcome of such an investigation. This is no more than what is generally recognised as good practice, and it is deeply disturbing that we have had to press the Accounting Officer to accept this in a formal commitment. Minutes of Evidence, paragraph 1045 to 1060. DEPARTMENTAL OVERSIGHT AND CONTROL FAILURES 105. The Committee heard example after example of procedures and requirements being ignored. The Accounting Officer has accepted there were 'serious shortcomings in the administration of the NITB' and 'substantial deficiencies in management and in the control regime'. Given that there was a senior departmental representative on the Board, who attended all its meetings and had, so the Department told us, a 'close understanding' of the Board's activities, it is difficult for this Committee to accept that the Department could not have identified these significant breaches of proper procedures at a much earlier stage. In light of this, we are repeating the recommendation we made in the LEDU fraud report that DFP review, and where necessary tighten, its guidance on the role and responsibilities of the departmental representatives on the Boards of NDPBs. Minutes of Evidence, paragraphs 390 to 393. 106. We now know that, as early as April 1998, the Department was well aware of the former Finance Officer's serious concerns about how the Tourist Board was being run. The Committee's view is that the causes of the problems experienced by the Tourist Board lie as much with the Department and its Accounting Officers, as they do with the Tourist Board. In his reply to our written questions the Accounting Officer referred to the guidance in Government Accounting and pointed out that the Chief Executive of the Tourist Board as a subsidiary Accounting Officer also has a responsibility for the failures addressed in this report. This may be so, however, in a case such as this, where there were persistent administrative failings in an NDPB, year after year, we believe that the prime responsibility must be that of the Departmental Accounting Officers. They have signally failed to perform their supervisory duty. Accounting Officer's Letter of 9 July 2002, Appendix 12. 107. The Department told us that a serious deficiency in its oversight arrangements was that, from 1993, it had used the "holding company model" as the frame work for its relationship with its NDPBs. The way this worked was that the Department was at the centre and each of the businesses such as NITB and LEDU, operated as independent units. The standards were ensured by internal audit, working directly to the Chief Executive of each business. We agree that this was a serious deficiency. The idea that these NDPBs could be so self-contained that the Departmental Internal Audit Service should be reporting to them alone should have been recognised as dangerous nonsense at the outset. Minutes of Evidence, paragraphs 393, 394 and 981 to 986. 108. It seems to us that the internal audit set-up at the Tourist Board was fundamentally defective. The Department's Internal Audit Service carried out the internal audit function for the Board. But we note from the C&AG's Memorandum that there had been a failure to report significant audit findings, either to the Department or to the Audit Office. C&AG's Memorandum of 22 May 2002, Appendix 5. 109. The Departmental Accounting Officer relies on his internal audit staff to provide him with an assurance that key financial and management controls are operating effectively in the NDPBs under his control. This cannot happen when serious lapses in control arrangements are not formally reported. Full disclosure of internal audit work is also crucial to the C&AG's ability to form a sound opinion on the Departmental Accounts and to report to us on his findings. We welcome DFP's decision to issue fresh guidance on this matter. C&AG's Memorandum of 22 May 2002, Appendix 5. 110. We note from the C&AG's report that the Department's Internal Auditors took the view that hospitality expenditure can only be judged in terms of whether it is a successful marketing tool. Internal Audit regarded the level of spending as a 'side issue'. Either Internal Audit did not have a good grasp of the standards of behaviour expected when dealing with public money, or they were 'watering down' their reports in the face of pressure from NITB senior management. Either way, Internal Audit's view that the level of hospitality spending is a side issue, is not acceptable. It is clear to us that the Department needs to have a critical look at the culture and effectiveness of its Internal Audit Service. C&AG's Report on the 2000-01 Accounts, paragraph 18. 111. When a new Accounting Officer is appointed to a department he is issued with a copy of the Accounting Officers Memorandum which sets out his responsibilities in relation to Non-Departmental Public Bodies. The Departmental Accounting Officer must be satisfied that: "the financial and other management controls applied by the Department are appropriate and sufficient to safeguard public funds and, more generally, that those being applied by the Non-Departmental Public Body conform with the requirements of both propriety and of good financial management." In our view, the arrangements the Departmental Accounting Officer had in place for discharging his responsibilities in relation to the Tourist Board were wholly inadequate. We hope the Accounting Officer now understands that, in the circumstances where he is primarily accountable for every pound voted to him and he passes on to an NDPB, it is not enough to accept that if a Financial Memorandum exists, the necessary controls are in place. He should ensure, with the support of a vigorous, independently-minded and well resourced Internal Audit Service that the controls are being applied effectively. 112. At the evidence session we formed the impression that the Departmental Accounting Officer was attempting to shift the responsibility for deficiencies in control in the Tourist Board to the Board's Accounting Officer. He told us that the prime responsibility for NITB's poor procedures lay with the Chief Executive and his management team. It was only after further correspondence with this Committee that the Departmental Accounting Officer fully acknowledged his responsibility for, "ensuring that an effective system of internal financial control is maintained and operated." The Committee wants it made absolutely clear to all Accounting Officers that we attach great weight to the section of the Accounting Officer's Memorandum from which this phrase is taken. We expect the Accounting Officer to be able to demonstrate, for all the subsidiary bodies for which he is responsible, that he has mechanisms in place to ensure that financial controls are working in practice. Minutes of Evidence, paragraph 986. 113. The DETI Accounting Officer has now outlined the steps which have been taken to improve the situation:
This Committee will ensure that the implementation of these new arrangements is monitored very closely. Accounting Officer's Letter of 9 July 2002, Appendix 12. PROCEEDINGS OF THE COMMITTEE PROCEEDINGS OF THE PUBLIC ACCOUNTS COMMITTEE SESSION 2001-2002 Members present: Mr Beggs (Acting
Chairperson) Mr John Dowdall, Comptroller and Auditor General (C&AG) was examined on
[Adjourned until Tuesday 16 May 2002 at 11:30am] * * * * PROCEEDINGS OF THE COMMITTEE SESSION 2001-2002 Members present: Mr Bell (Chairperson) Mr John Dowdall, Comptroller and Auditor General (C&AG) was examined Mr Leo O'Reilly, Treasury Officer of Accounts was examined. The Comptroller and Auditor General's reports on
were considered. Mr Bruce Robinson, Accounting Officer of the Department of Enterprise, Trade and Investment, Mr Wilfie Hamilton, Principal Finance Officer of the Department of Enterprise Trade and Investment and Mr Alan Clarke, Chief Executive of the Northern Ireland Tourist Board were examined [Adjourned until Tuesday 13 June 2002 at 10:30am] * * * * PROCEEDINGS OF THE COMMITTEE SESSION 2002-03 Members present: Mr Bell (Chairperson) Mr John Dowdall, Comptroller and Auditor General (C&AG) was further examined. Draft Report (The Northern Ireland Tourist Board) proposed by the Chairman, brought up and read. Ordered, That the draft Report be read, paragraph by paragraph. Para 1 to 3 read and agreed to Paras 4.1 to 4.82 postponed Paras 5 read and agreed to Para 6 to 7 read and agreed to subject to amendment Paras 8 read and agreed to Para 9 read and agreed to subject to amendment Paras 10 to 16 read and agreed to Para 17 read and agreed to subject to amendment Paras 18 to 19 read and agreed to Para 20 read and agreed to subject to amendment Paras 21 to 33 read and agreed to Para 34 read and agreed to subject to amendment Paras 35 to 40 read and agreed to Para 41 read and agreed to subject to amendment Paras 42 read and agreed to Para 43 read and agreed to subject to amendment Paras 44 to 52 read and agreed to Paras 53 to 54 read and agreed to subject to amendment Paras 55 to 60 read and agreed to Para 61 read and agreed to subject to amendment Paras 62 to 78 read and agreed to Para 79 read and agreed to subject to amendment Paras 80 read and agreed to Paras 81 to 82 read and agreed to subject to amendment Paras 83 to 86 read and agreed to Paras 87 to 88 read and agreed to subject to amendment Paras 89 to 91 read and agreed to Para 92 read and agreed to subject to amendment Para 93 read and agreed to Para 94 read and agreed to subject to amendment Para 95 read and agreed to Para 96 read and agreed to subject to amendment Paras 97 to 114 read and agreed to [Meeting adjourned until Wednesday 9th October 2002 at 10:30am] * * * * PROCEEDINGS OF THE COMMITTEE SESSION 2002-03 Members present: Mr Bell (Chairperson) Draft Report (The Northern Ireland Tourist Board), proposed by the Chairman, brought up and read. Ordered, That the draft Report be read a second time, paragraph by paragraph. Para 1 read and agreed subject to amendment Para 2 to 3 read and agreed to. Para 4.1 to 4.81 postponed Para 5 to 19 read and agreed to Para 20 read and agreed subject to amendment Para 21 to 53 read and agreed to Para 54 read and agreed subject to amendment. Para 55 to 95 read and agreed to. Para 96 read and agreed subject to amendment Para 97 to 113 read and agreed to Para 4.1 to 4.81 read and agreed subject to changes to be made to reflect amendments agreed in paras 5-113. Resolved, That the report be the First Report of the Committee to the Assembly (Session 2002/3003) Ordered that the report be printed. [Adjourned until Wednesday 16 October 2002 at 10:30am] Minutes of Evidence MINUTES OF EVIDENCE Wednesday 24 April 2002 Members present: Mr Beggs (Acting Chairperson) Ms Armitage Mr Carrick Mr Close Mr Dallat Mr McClelland Witness: Mr J Dowdall ) Northern Ireland Audit Office 1. The Acting Chairperson (Mr Beggs): The Committee welcomes Mr John Dowdall, the Comptroller and Auditor General. 2. Mr Close wishes to raise some issues in relation to the Committee's hearing in May with the Northern Ireland Tourist Board, to which we ask Mr Dowdall to respond. 3. Mr Close: We want to draw out the most from the hearing and satisfy ourselves and those outside that the Committee is performing its functions effectively and efficiently in the interest of the taxpayers. 4. A worrying aspect of the report is the unauthorised use of a credit card in New York and the type of expenditure incurred. If I have read the report correctly, the Department has known about the matter for over a year. I propose that we ask the accounting officer to let us have a note before the hearing of what disciplinary action he has taken in the case. If we wait until the hearing for that information we will not have enough time to react. That information is required to allow the Committee to frame questions and follow-up on the matter. 5. In the LEDU fraud case that was considered by the Committee recently, it was clear that LEDU had been slow to investigate the full extent of the problems that confronted it. 6. When I read the Comptroller and Auditor General's report on tourism, I was struck that he has only been able to take a very limited look at the extent of the expenses - for example, on the credit card. We need to know if there have been other checks on this man's expenses. For example, were there other expenses that were not charged to the credit card? We do not know this from reading the report, and we should. What were the normal expenses claimed prior to the unauthorised use of this card? I would appreciate it if the Comptroller and Auditor General would look at this aspect. 7. The print contracts with W&G Baird Ltd are an important issue. It has been aired before. However, in view of recent correspondence from Graham & Heslip Ltd and other matters, I am not sure that we have all the necessary information. Will the Comptroller and Auditor General look again at the casework surrounding the print contracts to see if, at our briefing session next month, he can give us a firm assurance that there has been no impropriety associated with these contracts? I would find that helpful in clarifying how we pursue this with the accounting officer when he is here. I would also like the Comptroller and Auditor General's views and advice on whether it would be beneficial to have the New York manager present at that particular session. No one could give better evidence than the individual that we would be referring to. 8. Mr McClelland: I would like further information on some areas before the meeting. The Audit Office tells us that there was a £60,000 payment to buy out the former deputy chief executive, and we need to know more about his terms and conditions of appointment. How was he appointed, and what was his overall remuneration package? Following on from what Mr Close said, it would be helpful to have the same information about the appointment and remuneration package of the New York manager. Can we have both of those areas looked at prior to the meeting? 9. Mr Dowdall: I am conscious that the Committee will have before it a wide range of issues at next month's session on the Northern Ireland Tourist Board. These are complex problems, which have been revealed in the course of our financial audit work rather than our in-depth value-for-money studies. I know that the resulting short reports do not provide all the information that the Committee feels it needs to conclusively deal with these matters. 10. Mr Close raised the question of disciplinary action. If the Committee writes to the accounting officer to ask him to provide more information, he should be able to do that in time for the next session. 11. With regard to the expenses on credit cards, I could undertake some more work in the intervening period. There is not a great deal of time until the next session so I will need the Department's full co-operation, which I am sure I will have, and I would be prepared to take another look at that area. 12. Similarly on the question of print contracts, the point is that since we made our report last year many other issues have been bubbling around, and it might be as well to take stock of all of that and see whether it affects any of the key conclusions. In the time available we will do what we can. 13. I could embrace in that approach Mr McClelland's request for further information. Those particular points are already touched on in the report, and we could probably take them a bit further and get the extra factual information that Mr McClelland has asked for. 14. Mr Close's final point on whether the Committee should ask the New York manager to attend is an interesting one. The Committee has full power to call people, although it may not have exercised it to date and will probably do so only sparingly. However, it is important to recognise that that power exists. The prime purpose of a session, such as that which the Committee will have next month, is to give the accounting officer the opportunity to fulfil his duty, which is to account for all those matters, including the detail of the New York manager's expenditure. He should have that opportunity in full. After that, in the light of his evidence, the Committee can decide whether it has any outstanding concerns, and whether it wants to use its wide-ranging powers exceptionally to call a supplementary witness to give further evidence. 15. Mr McClelland: Given my interest in the remuneration packages and contracts, can the Committee ask for the CVs of the deputy chief executive and the New York manager? 16. Mr Dowdall: Yes. In my view, the Committee's power to call for people and papers covers anything of that nature. 17. Mr McClelland: I want to examine those people's backgrounds. I know about their appointment, the package that was offered and their wages, but I would like to know where they came from before I make any decisions. Therefore the Committee should ask for that information. 18. The Acting Chairperson: The terms and conditions of the contracts are important, but why should the Committee examine a person's CV? 19. Mr McClelland: I am curious about the remuneration package for the deputy chief executive, and whether it is what one would expect, given the person's background. In other words, if a person came from a £100,000-a-year job, he or she would expect a certain level of remuneration if the contract ended prematurely, for example. However, a person who came from a less well-paid job, or a less senior position, could expect a different remuneration package. Therefore, before making a value judgement about that remuneration, I would like more information about what the person was worth prior to his taking up the appointment. 20. The Acting Chairperson: Are members content that Mr Dowdall take that matter on board? 21. Mr Dowdall: That would be one to add to the Committee's letter to the Department asking it to provide further information. 22. The Acting Chairperson: The accounting officer must be available to answer all pertinent questions, and today's discussion should give him some indication of the Committee's concerns and the probable lines of questioning. 23. There was also the question of the Committee Clerk's writing to find out what disciplinary action has been taken. Is the Committee content that that should be taken care of as well? 24. Members: Yes. 25. Mr Dallat: Is it in order to request that the Tourist Board chairman be present as a secondary witness? 26. The Acting Chairperson: The Committee can call all persons and papers; it can decide whom to summon. Perhaps Mr Dowdall will comment on that. 27. Mr Dowdall: As I said, the Committee has the power to call supplementary witnesses. However, it should consider that option only if it is not satisfied with the accounting officer's role. In my experience of Public Accounts Committees, it is very rare for a chairman to attend the sessions. He should be called only if the Committee is not satisfied with the accounting officer's evidence and makes a conscious decision to take matters further. 28. The Acting Chairperson: The accounting officer is the one who is accountable. 29. Mr Dowdall: Constitutionally, that is his job. 30. Mr Dallat: I asked that question because the chairman figures prominently in the report. Surely that makes this case somewhat different from the others. 31. The Acting Chairperson: The Committee agrees that the accounting officer must account for the money. If the Committee is not satisfied with his answers, it can use its powers to call other witnesses. However, it is to be hoped that he will be fully briefed on the areas that the Committee wishes to examine. MINUTES OF EVIDENCE Thursday 30 May 2002 Members present: Mr W Bell (Chairperson) Ms Ramsey (Deputy Chairperson) Ms Armitage Mr Beggs Mr Carrick Mr Close Mr Dallat Mr McClelland Ms Morrice Witnesses: Mr B Robinson ) Department of Enterprise, Mr W Hamilton ) Trade and Investment Mr A Clarke: ) Northern Ireland Tourist Board 32. The Chairperson: I welcome Mr Bruce Robinson, Mr Alan Clarke and Mr Wilfie Hamilton to the Public Accounts Committee. I also welcome Mr Dowdall and his team from the Audit Office and Mr Leo O'Reilly, the Treasury Officer of Accounts and his team from the Department of Finance and Personnel. Mr Robinson will introduce his colleagues to the Committee. 33. Mr Robinson: Alan Clarke is the chief executive of the Tourist Board, and Wilfie Hamilton is the principal establishment and finance officer in the Department of Enterprise, Trade and Investment. 34. The Chairperson: Before we take evidence, I should let you know how I shall conduct the meeting. I shall deal first with the report 'Northern Ireland Tourist Board: Grant to the Malone Lodge Hotel'. We shall then go into the main session, dealing with the report 'Northern Ireland Tourist Board Accounts 2000-01'; after that we shall discuss the awarding of print contracts. 35. There has been a great deal of media hype surrounding matters involving the Department and the Tourist Board. I wish to make it clear that such hype has nothing to do with the Public Accounts Committee. This is the first occasion that the Committee has had to discuss this with you. The Committee accepts no responsibility for the media hype. I wish to assure everyone that I am not here to preside over a kangaroo court and that the Committee is not conducting a witch-hunt against any Department or person. However, the Committee will conduct its inquiry in a professional manner. I wish to put that on the record before we start. 36. I wish to deal with the award of a Northern Ireland Tourist Board grant to the Malone Lodge Hotel. The report highlights some worrying lapses of control in a project that involved £500,000 of taxpayers' money. Several members wish to question you about that. 37. Paragraph 9 of the report states that in June and July 1999 the Lower Malone Residents' Association wrote to the board informing it that the owner of the Malone Lodge Hotel was building apartments at 62 and 64 Eglantine Avenue. It pointed out that these represented "a covert application for a commercial extension to the hotel." 38. The board responded to this on three occasions, stating each time that payments would not be made until all the statutory planning approvals had been satisfied. Despite those assurances and the fact that the appropriate planning authority had not been obtained, the board gave £450,000 to the project. The failure to control the grant payments is a worrying lapse in the board's procedures. How do you explain this? Why did the Tourist Board's controls fail to identify the discrepancies? 39. Mr Robinson: I agree that this was a serious breakdown in procedure. The case officer did not check the planning approval that had been passed to him, but the procedures have been tightened significantly since then. The Tourist Board now uses the professional advice of the Department of Finance and Personnel's Construction Service to ensure that planning consent received in support of applications for grant payment conform to the project that the Tourist Board approved for that grant. This serious breakdown in procedure should not have happened. 40. The Chairperson: Have there been other cases where planning permission was not obtained before a grant was paid? 41. Mr Robinson: I am not aware of any. 42. The Chairperson: Have you checked? 43. Mr Robinson: The Tourist Board has examined its procedures. 44. Mr Clarke: We are not aware of any similar situations. The main issue was the interconnection between the building and the extension. The case officer overlooked that and the matter of planning consent. 45. Mr Dallat: Paragraph 16 of the report states that the Tourist Board "considers there is scope to improve its communication and co-operation with the Planning Service." 46. That is an understatement - £500,000 is no mean sum. Can you elaborate on the new procedures agreed with the Planning Service over the past 18 months? Can you also explain how a cheque for £453,305.70 reached the bank, given that, presumably, it would have been checked by a supervisor and then by a line manager? 47. Mr Robinson: The key to strengthening the system is the use of the professional help of the Department of Finance and Personnel's Construction Service to ensure that the project conforms to Tourist Board approval. That is how the controls have been substantially improved. At a general level, the Tourist Board is considering further developments. However, the statutory requirement of the Planning Service is to ensure that projects conform to requirements other than planning ones. In such circumstances, the Planning Service will adopt its own position. 48. Mr Dallat: The Minister wrote to the residents assuring them that this would not happen, yet the procedure still failed. How will the new arrangements prevent that happening again? 49. Mr Robinson: The Department of Finance and Personnel's Construction Service will give the Tourist Board the assurance that the planning approval conforms to the project that the Tourist Board approved. Outside professional advice will assure that there is conformance. 50. Mr Dallat: Therefore there will be no more cheques flying around without being checked and double-checked? 51. Mr Robinson: The key point is the precondition that appropriate planning approval must be received. That is how that condition will be fulfilled. 52. Mr Dallat: In paragraph 14 of the report, the board's letter to the Audit Office dated 1 August 2001 contains worrying inconsistencies. The fourth bullet point in paragraph 14 states that "the Board does not consider that the hotel has, at any time, been operating in contravention of the statutory planning approval." However, paragraph 5 states that the board wrote to the promoter five months earlier stating that "the project was 'certified and operating in contravention of its statutory planning approval'." 53. Do you agree that the board's reply to the Audit Office was misleading? 54. Mr Robinson: The board now has in place a project that conforms to the project that was approved. That is the reference, as I understand it, to the response of 1 August 2001. 55. Mr Dallat: Do you, Mr Robinson, as departmental accounting officer, consider that the board's response to the Audit Office was acceptable? 56. Mr Clarke: We have also revised our quality assurance procedures. When our quality assurance inspector inspects a new property, he now ensures that he has with him a copy of the approved plans and the quantity surveyor's report from the Construction Service. Our quality assurance inspectors now make a double check: one for planning consent and another by our quality assurance service to check that planning consent has been granted. 57. Mr Dallat: Mr Chairperson, that is not an answer to my question. I shall put it to Mr Robinson again. Do you, as departmental accounting officer, consider that the board's responses to the Audit Office were acceptable? 58. Mr Robinson: That the procedures are now in place and that the project was delivered in accordance - [Interruption]. 59. Mr Dallat: Do you believe that the responses to the Audit Office were acceptable? 60. Mr Robinson: This is the question referring to the fourth bullet point? 61. Mr Dallat: Yes. 62. Mr Robinson: That the delivered project was in agreement, eventually, with the project approved by the board? That is what the letter states. 63. The difficulty I have is the precise point. Do you mean the cross-reference to paragraph 5 that refers to the Tourist Board's letter to the promoter saying that the project did not have appropriate approval? 64. Mr Dallat: The fourth bullet point of paragraph 14 states that "the Board does not consider that the hotel has, at any time, been operating in contravention of the statutory planning approval." 65. That was misleading. Do you consider the board's response to the Audit Office to be acceptable? 66. Mr Robinson: Bullet point four of paragraph 14 also makes it clear by saying that "the Board has relied on.the letter dated 13th April 2001 from Planning Service to the effect that planning permission has been granted for a hotel with 39 bedrooms and for the conversion of 2 dwellings to 6 self-contained apartments." 67. Mr McClelland: Perhaps we could get information from the Planning Service on this. Mr Robinson seems to be saying that the Planning Service misled us, not the Tourist Board. Would that be appropriate? 68. The Chairperson: There seems to be a contradiction between the fourth bullet point of paragraph 14 and paragraph 5. 69. Mr Clarke: I shall try to clarify that. The issue is the interconnection between the building and the extension. When we first did the certification exercise, we understood that the connection was in place. The planning consent specifically stated that that interconnection should not be in place. The case officer did not pick up on that when he read the planning consent. The certification was initially for a hotel and self-catering apartments. Since the interconnection has been put in place, we now have certification for a hotel, which was the original project. 70. The Chairperson: Is that why the fourth bullet point of paragraph 14 is so different from paragraph 5? They say completely different things. 71. Mr Clarke: We assumed that the interconnection was in place, whereas the planning consent given by Department of the Environment specifically did not allow an interconnection at that time. 72. Mr Close: Welcome, Gentlemen. In the third bullet point of paragraph 14, the board stated that it has no evidence that the developer wilfully misled it on planning matters. I want to understand exactly what is being said. 73. As I understand it, the promoter submitted one set of plans, showing a single integrated hotel for approval by the Tourist Board. He submitted a different set of plans for a hotel and separate apartments for approval by the Planning Service. You were unaware that two sets of plans existed. The promoter then accepted three grant instalments of about £450,000 of taxpayers' money from the board even though he did not have planning permission for a 51-bedroom hotel. By building an interconnection, the promoter breached the condition of planning permission. How precisely did the board arrive at its view that it had not been misled by the promoter? 74. Mr Clarke: The planning application was for an hotel extension of 18 rooms. Some of those were in the form of hotel suites - six rooms and several hotel suites - 18 hotel bedrooms in all. We did not pick up on the fact that the planning consent did not allow the interconnection. We then had to certify those rooms that were not connected to the hotel as self-catering apartments. We certified them as self-catering apartments, but they were hotel suites. They were precluded from being classified as hotel suites in our terminology because no interconnection existed with the hotel. 75. Mr Close: However, you were not misled? 76. Mr Clarke: We do not believe that we were misled. 77. Mr Close: Gullible, however. If you were not misled - 78. Mr Clarke: Our error was in not picking up on the interconnection in the planning consent. 79. Mr Close: With respect, your error was to pay £450,000 of taxpayers' money to a project that was not in compliance with the original letter of offer. It was not as if it was done in one fell swoop. There were three separate instalments, yet not once did bother your barney to check whether you were being misled. 80. Mr Robinson: When the original claim came in, the mistake was in not identifying that the planning approval did not comply with the project presented. 81. Mr Close: Who made the mistake - the Tourist Board or the Department of Enterprise, Trade and Investment? 82. Mr Robinson: A case officer in the Tourist Board made the mistake. 83. Mr Close: Do you accept any responsibility for it? 84. Mr Robinson: The Department accepts responsibility for ensuring that procedures are in place. 85. Mr Close: The procedures were not in place. 86. Mr Robinson: The procedures were in place but they were not applied properly. 87. Mr Close: Someone, therefore, was responsible for not following procedures. 88. Mr Robinson: That is correct. 89. Mr Close: Has action been taken against that person? 90. Mr Robinson: The person concerned no longer works in the Tourist Board. 91. Mr Close: Does that person still work for the Civil Service? 92. Mr Robinson: I do not know. 93. Mr Close: You do not know where that person has gone? 94. Mr Robinson: I do not. I shall find out and write to the Clerk of the Committee. 95. Mr Close: I would appreciate that. Given that the Tourist Board allocated £450,000 of taxpayers' money, did it not expect the promoter to notify it of such a fundamental change to the project? Had the money been coming out of your own pocket would you not have expected to be informed of such a major change to the plans? 96. Mr Robinson: The application for the grant was submitted 12 to 15 months after the Tourist Board processed the original case. Considerable time had elapsed. 97. Mr Close: The lapse of time meant that you did not expect to be informed? 98. Mr Robinson: The lapse of time contributed to - [Interruption]. 99. Mr Close: I want to know whether you would expect to be informed, not whether the lapse of time was a contributory factor. If you were paying a great deal of money to someone who made major changes to plans would you not expect him to inform you? 100. Mr Robinson: It would depend on how much the changes differed from the original. 101. Mr Close: What explanation did the developer give for not informing the board of the change to the project? 102. Mr Clarke: The developer should have informed the board of the change. The board was adamant that it would recall the grant payment if the project was not delivered according to the original letter of offer. 103. Mr Close: What explanation did the developer give for not informing the board of the change to the project? 104. Mr Clarke: The board understood that the developer's grant application was for an 18-bedroom extension. However, the planning consent was not in line with that. 105. Mr Close: Did you ask the developer to explain why he had not informed the board of the change to the project? 106. Mr Clarke: The board has always been - [Interruption]. 107. Mr Close: Did the developer give the board an explanation? 108. Mr Clarke: I do not know. 109. Mr Close: I shall take that as a "No". 110. Mr Hamilton: Mr Clarke does not have first-hand knowledge of the details. We would have to check to find out what happened. Some time elapsed between the original application and the project. The understanding was that the developer planned to build rooms and apartments. I am not defending the breakdowns in procedure, but the basics were in place. There was a problem with the link between the rooms: if the rooms were linked, they would have been classed as apartments, but the same basic structures would be in place. The Tourist Board made a procedural error and misread the new material as matching the original letter of offer. If significant changes were made, the board ought to have been informed. It should not have been the responsibility of an individual in the board to pick up on the changes. We do not have a record of the exchanges between the Tourist Board and the promoter, but we shall check up on it for the Committee. Obviously, someone in the Tourist Board was directly involved in them. 111. Mr Close: I appreciate that. I am endeavouring to determine the extent of the breakdown in procedures, for it strikes me that the board did not even try to get reasons - or perhaps I should say "excuses" - from the developer. I hope that the letter contains an explicit - 112. Mr Robinson: The Tourist Board made it very clear that it would seek repayment of the grant. 113. Mr Close: We shall come to that hurdle in due course. I was pursuing the explanation for not letting the board know about changes to the project to ascertain the extent of the breakdown in procedures. 114. Paragraph 19 tells us that the board "would not seek repayment of grant monies from the promoters if the agreed project was delivered." 115. That strikes me as a case of "All's well that ends well". The attitude seems to be that it does not really matter, since it was not your money but that of those fools, the taxpayers. How can you justify paying taxpayers' money, given the behaviour of the promoters and that the project very clearly did not meet the terms of the letter of offer. You had already told the promoters that you would withdraw the money if they did not keep to the letter of offer. 116. However, they did not meet the terms of the letter. The precondition of obtaining statutory approvals was not met. The promoters failed to keep the board informed of changes to the project and did not obtain its prior written approval for them. Nevertheless, you tell us that, if a project is agreed, you will not seek repayment. How can you justify your use of taxpayers' money in such circumstances? 117. Mr Robinson: First of all, there was no question of casually accepting matters. Paragraph 5 makes that absolutely clear: "the Board also informed the promoters that 'failure to deliver the project and to comply with all the conditions will result in NITB . demanding that you repay all monies received on account of this grant.'" The Tourist Board's stance is therefore clear. 118. Mr Close: But what action did it take? I have listed three preconditions that were not met. I need not explain what a precondition is: it is something that must happen before something else can follow. What was to follow was the payment of a grant. The payment was made in three instalments totalling more than £450,000, and the preconditions were clearly not met. 119. Mr Robinson: It is also clear in paragraph 19 that the project is essentially the same as that which the board assessed and approved. 120. Mr Hamilton: The important thing is that the breakdown in procedures, which we do not wish to repeat, was instrumental in initiating payment of the grant. That was not revisited with either of the subsequent payments. The single instance of a breakdown in procedures, important though it might have been, was the only failure in the entire process. 121. Faced with such a serious breakdown in procedures and its consequences, the board had to make a decision. Clearly, it could not pay public money for a scheme not in line with policy. The development of the hotel was a very important part of a policy aimed at developing four- and five-star hotels; the policy for accommodation in Belfast was very important. As long as the project could be retrieved by the subsequent granting of the correct planning permission, we would have provided the funding. We would not have paid under any other circumstances. Reclaiming the money and thus putting the hotel into receivership at that time would have been a very bold step, since the grant had been paid and used on the premises. We had to decide the most appropriate action at the time, and that was to serve notice. We were remedying the situation. 122. We acknowledge that we could not correct the original fault; however, we intimated that if it did not remedy itself within a reasonable period, we would take action. We allowed the promoter the opportunity to pursue the required approvals with the Planning Service. We are not in any way being complacent. 123. Mr Close: You paid the money, yet now you say that you will not seek repayment. Is that not complacency? 124. Mr Hamilton: That is not what we are saying. 125. Mr Close: Therefore you will seek repayment? 126. Mr Hamilton: We would have sought repayment if the project, as we saw it, had not been delivered. However, the project has been delivered in accordance with the original policy. 127. Mr Close: Has the project been delivered according to the terms of the original letter of offer, including interconnection? 128. Mr Hamilton: Yes. Those rooms are classified as part of the hotel. 129. Mr Close: There is a substantial difference between your definition of preconditions and mine; the man in the street might also define them differently. The promoter did not obtain the prior written approval of the Tourist Board for changes to the project and failed to keep the board informed of those changes. The precondition with regard to statutory approvals was not met. All those preconditions were in the letter of offer and none of them was met. The Tourist Board, however, says that it will not seek repayment of moneys from the promoter if the agreed project is "finally" delivered. A coach and horses will be driven through preconditions in order to satisfy the promoter and to substantiate the payment of a grant that should not have been paid in the first place. It is nonsense for the Tourist Board to say that it is satisfied that the planning permission received in February 2002 adequately discharges a precondition of its letter of offer of May 1999. Paragraph 19 stated that "copies of any statutory approvals required are to be obtained before building works comprised within the project commence." 130. Everything is fine and dandy - the Tourist Board has not been misled and will not necessarily seek repayment of the money. Has the Tourist Board at any time sought legal advice on whether the grant already paid could be recovered? 131. Mr Clarke: The board has taken legal advice. 132. Mr Close: What was that advice? 133. Mr Clarke: The board was advised that should the project be delivered according to the original letter of offer, reclaiming the grant would be difficult. 134. Mr Close: Setting aside all the preconditions, has it been delivered according to the original letter of offer? 135. Mr Clarke: As I have already acknowledged, the one failure in procedures was in the board's not picking up on that aspect of the planning consent. 136. Mr Close: I shall probably return to the matter, but at this stage I rest my case. It seems that the definition of "preconditions" is misunderstood. 137. Mr Hamilton: There is no difference of opinion on the meaning of "preconditions". Conditions in the letter of offer were missed at the original assessment, and all subsequent actions were taken in an attempt to remedy that. Everything hinges on events at the assessment. I take your point; however, it was not a matter of the conditions continually being disregarded. Eventually, it was necessary to determine whether the project matched the objectives of the original application for an hotel and the number of bedrooms in it; and whether it served the interests of the Northern Ireland tourism economy. The board tried to achieve those objectives throughout; a conscious decision was taken not to pursue the project until the planning position was resolved. Pursuing legal action at the time might have had serious consequences for the Malone Lodge Hotel. The decision was not a lackadaisical one; it was not taken merely to comply with an applicant. All roads lead back to the original breakdown in procedure. 138. Mr Close: Those roads were discovered by alert residents called "taxpayers", who feel that they have been very badly done by. This Committee represents them. 139. Mr Hamilton: I understand that. 140. The Chairperson: I do not want a repeat round. The questions have been answered, albeit not to our complete satisfaction. Perhaps the Deputy Chairperson's question could be brief; there is much business to cover. 141. Ms Ramsey: Further to Séamus Close's last point, Mr Robinson, were three separate payments made on 23 March, 30 March and 13 September 2000? I listened closely and each of you stated that there had been a serious breakdown in procedure. I do not dispute that. 142. Between 1998 and August 2001, the residents' association sent 11 letters to the board and three to the Minister. By "a serious breakdown in procedure", do you mean that those letters were ignored? Who was the caseworker? Has that person been disciplined? Where does that person work now? 143. Mr Robinson: The mistakes in correspondence and payments were the fault of the initial breakdown in procedure. The original decision was based on the board's belief that planning consent had been granted, whereas it had not. 144. Mr Clarke: All the letters received responses. The project should have been given more attention. The board has introduced new complaints procedures to ensure that correspondence is subject to more formal action. I have no further information about the caseworker. 145. Ms Ramsey: Was the caseworker disciplined? 146. Mr Clarke: As Mr Hamilton said, the caseworker left the board's employment before the problem came to light. 147. Mr Hamilton: The case officer left the board long before the problem was identified. 148. Mr Robinson: We shall write to the Clerk of the Committee. 149. Mr Close: We have discussed the serious breakdown in communications, the failure to follow procedures and the implementation of new procedures, but this is not the first time that such reasons have been given for the Tourist Board's mistakes. The eleventh report of the Westminster Committee of Public Accounts, session 1995-96, states that "In the wide range of cases considered in the Comptroller and Auditor General's report, the Department / Board failed properly to address key value for money issues in appraising. projects, failed to monitor the fulfilment of conditions of assistance and the performance of projects, and failed in many cases to maintain proper documentary records. It is clear to us that in introducing this scheme, the Department, and subsequently the Board, operated with sheer laxity in relation to their own guidelines. The early projects show an astonishing range of failures of supervision and management." 150. No doubt officials said then that they had tightened the procedures. The procedures must be extremely lax if they continue to fail seven years on. 151. Is the public expected to accept that there will be dramatic changes? Nothing much has changed since 1995-96. 152. The Chairperson: Another committee published that report; therefore it is not for us to discuss. 153. The Committee has much business to get through. Although not completely satisfied with it, we thank you for your evidence. I am concerned about several matters that your answers did not deal with fully. They include grant allocation, especially the adequacy of the board's project monitoring; procedural breakdown and the board's failure to enforce the conditions in the letter of offer; and the board's failure to liaise effectively with the Planning Service. MINUTES OF EVIDENCE Thursday 30 May 2002 Members present: Mr Bell (Chairperson) Ms Ramsey (Deputy Chairperson) Ms Armitage Mr Beggs Mr Carrick Mr Close Mr Dallat Mr Hilditch Mr McClelland Ms Morrice Mr O'Connor Witnesses: Mr B Robinson ) Mr A Clarke ) Northern Ireland Tourist Board Mr W Hamilton ) Mr J Dowdall ) Comptroller and Auditor General Mr L O'Reilly ) Treasury Officer of Accounts 154. The Chairperson: We must discuss the use of British Tourist Authority (BTA) credit cards, the amount spent on hospitality in New York, payments to serving and former members of staff and the criteria used to award printing contracts. 155. A troublesome aspect of the report is that the Department of Enterprise, Trade and Investment has had to correct, or elaborate on, many points that were cleared with the Comptroller and Auditor General before publication. The Committee has repeatedly stressed the importance that it attaches to agreed reports. When did the Comptroller and Auditor General start to clear the report? 156. Mr Dowdall: I started to consider the report at the end of August last year. 157. The Chairperson: How many drafts were there? 158. Mr Dowdall: The first draft was issued at the end of August; there were three further drafts. 159. The Chairperson: When did Mr Robinson sign it off? 160. Mr Dowdall: In mid-December. 161. The Chairperson: The Department had reasonable time to get the report right. Why did it get it wrong? It is a serious matter, because the Committee depends on agreed reports. If a report has not been agreed when submitted, the Committee is on shaky ground. 162. Mr Robinson: The Department is committed to producing agreed reports and it works hard to do that. A dear accounting officer letter ordered the Department to supply extra information and to amend some information. It is not, therefore, without precedent. It is not a comfortable matter for me to deal with. The core of the problem is the exceptional turnover of senior management, which is one of the Tourist Board's biggest difficulties. In the past four years, there has been a turnover at senior management level of more than 100%, and at times the board has not been at full complement - for much of last year it was at 50% of its complement. That lack of stability contributed to the board's difficulties because senior staff did not have in-depth knowledge of matters dating from several years earlier. During preparations for the hearing, more evidence came to light that showed that some information contained in the agreed report, which was published before Christmas, did not apply. 163. The board has worked hard over the past few weeks with the Comptroller and Auditor General to gather supplementary information. We acknowledge that some of the supplementary information that we submitted to the Committee is incorrect. There have also been difficulties on the Comptroller and Auditor General's side. For example, in the latest report, the Comptroller and Auditor General states that the agreement with the Procurement Service applies to New York. We now know that that is not the case. That is a result of moving at enormous speed, and I appreciate that information submitted to the Committee must be correct. 164. These are important matters and it takes time to check them. The supplementary information provided to the Committee Clerk on 20 May should have shown that one of the hospitality items listed in the annexe to the original report applied to three people rather than two. We must be realistic; I am not offering apologies. 165. The Tourist Board must get it right: it should get it right. That should be its goal. I understand that the Committee does not want to be on shifting sand. However, I hope that it will appreciate how seriously the Tourist Board treats the matter and the detail that it must go into as a result of the meeting. 166. Although I am uncomfortable about returning to your original point, it goes right to the heart of a key issue with which the Tourist Board has been grappling for several years. 167. The Chairperson: I am glad that you acknowledge that a draft of the agreed report is a priority. The Committee must obtain agreed reports; it takes a dim view of agreed reports not being delivered on time. However, I understand your point; you have answered my question as fairly as you can. You have acknowledged that as accounting officer your job is to ensure that the Committee receives agreed reports on time. 168. I wish to introduce to the Committee a quotation from the editorial of 'The News Letter', 27 February 2002, which seems to be an accurate analysis of what has happened in the Tourist Board. I should like your comments on it. It described the Northern Ireland Tourist Board as a "mismanaged, rudderless organisation in which anything goes." The editorial goes on to say: "Isn't it about time that something was done about the way the Tourist Board is being run? It has displayed all the signs of being out of control for too long." 169. Can Mr Robinson answer the question that 'The News Letter' posed then and which I am posing now - is it not about time that something was done about the way in which the Tourist Board is run? 170. Mr Robinson: I expect that throughout the course of today's evidence several serious shortcomings in the running of the Tourist Board will be established. However, I also expect that the board will have an opportunity to demonstrate to the Committee that significant steps have been taken on that account. 171. The Chairperson: I assure you that the Tourist Board will get a fair opportunity to do that. 172. Mr Robinson: Thank you, Chairperson. I will not gloss over the shortcomings. I understand the point that Mr Close made about the previous report. There have been shortcomings in three major areas. It has already been mentioned, with regard to the Malone Lodge Hotel, that adequate systems were not properly operated. I am sure that the Committee will return to the failure to produce documentation to support expenditure appropriately. There were also inadequate systems from which sufficient assurance could not be derived, irrespective of how they were operated. I refer to print procurement, in particular. 173. There were also shortcomings in the Department of Enterprise, Trade and Investment. The Department sought to manage the Tourist Board on a model that it used throughout the Department in the mid-90s. It has not worked for the Tourist Board. The board has produced significant changes. Undoubtedly, one of the issues that will be discussed will be the use of the internal audit service and its work in the Department. However, management change in the Tourist Board has been a key issue. 174. The Tourist Board's remit has been too wide. It is a comparatively small organisation, with a comparatively small management team. It has been asked to do too much. Two significant steps have been taken to remedy that. Invest Northern Ireland has taken over much of the work of providing grants to the industry so that the Tourist Board can concentrate on other work. The establishment of Tourism Ireland Ltd means that the overseas office network that promotes Northern Ireland is part of its network, rather than that of the Tourist Board. 175. The remit of the Tourist Board has been changed in two significant areas to allow the management team to focus on the two key tasks: to market Northern Ireland successfully as a tourist destination; and to develop the product in Northern Ireland to meet tourists' expectations. 176. Any scrutiny of the Tourist Board's performance - and today is a serious scrutiny of its performance - must consider its results. The Comptroller and Auditor General's report is about the accounts; it is not a value-for-money report - it does not seek to be. It is important that we have the opportunity to say that in the last decade tourism expenditure in Northern Ireland has doubled; that visitor numbers are up by 50%; and that the bed-stock for visitors is also up by 50%. The success in America has been even greater. In the past six years, there has been a 180% increase in the number of beds sold to American tour operators. 177. I admit, and the reports make it clear, that there have been serious shortcomings. However, the Tourist Board has achieved good results that must be taken into account if today's inquiry is to be considered a proper scrutiny of the Tourist Board's performance. 178. The Chairperson: I am glad that you recognise that this inquiry is about proper scrutiny of the Tourist Board. 179. Mr Clarke: I have been in this position for just over seven months. In that time, I have made the Northern Ireland Audit Office Report and the Comptroller and Auditor General's recommendations key issues for the Tourist Board. Over that time, we have introduced new financial procedures, and we have recently completed training for all staff in them. We are taking action to address some of 'The News Letter' allegations. I am committed to the wise use of taxpayers' money for the greatest economic return to the Northern Ireland economy. 180. The Chairperson: I am pleased to hear that, Mr Clarke. Every member of the Committee supports the work of the Tourist Board. However, we have a statutory duty to scrutinise this matter. The proper procedures that will be established as a result of this scrutiny will help the Tourist Board in its quest to attract more tourists. There is no one in Northern Ireland, or even in the Tourist Board, who believes more than I that tourism has a great future in Northern Ireland and that it will play a major part in its economic development. Do not run away with the idea that we are here to run down the Tourist Board: we want the board to emerge from this a successful organisation. 181. Mr Hamilton: We welcome that. We also appreciate your earlier remarks about the media reporting; much was reported out of context, leaving many in the Tourist Board discouraged. It is important that you say that. 182. In 1999, the Department made a major commitment to changing the Tourist Board. Mr Robinson mentioned the organisational change that involved Tourism Ireland Ltd (TIL) and Invest Northern Ireland taking over certain functions of the Tourist Board to leave it leaner and more focused. In addition, we made significant changes to the management of the Tourist Board, appointing a new chief executive and management team. This action started about three years ago. It follows on from earlier changes that clearly did not have the desired effect. We have not waited for things to happen. People might not have understood what was happening or why certain changes were made, but, as you say, the important thing is to make tourism in Northern Ireland as effective as possible. That is what the Department has been trying to do. 183. The Chairperson: I appreciate that, but I am sure that many share my opinion that poor procedure in an organisation does not help its staff; the procedure must be improved. 184. Mr Hamilton: You are quite right. 185. The Chairperson: We agree on that. 186. Mr O'Reilly, the report illustrates the serious problems with credit cards in the public sector in Northern Ireland. We have come across this before. Public bodies issue credit cards without proper control or guidance, and the cards have become a mechanism for bypassing the normal careful treatment of hospitality and expenses. They are given to staff who, for the most part, are not trained to use them; some officials seem, when they get their hands on a piece of plastic for which they are not personally paying the bills, seem to lose all sense of value for money and, in some cases, all sense of propriety. Would you like to comment on that? 187. Mr O'Reilly: We are aware that the Comptroller and Auditor General, on foot of considerations by the Committee, first highlighted difficulties with credit card use two years ago. In that report, he referred to guidelines that the Department of Finance and Personnel had issued on a Northern Ireland version of the Government procurement card, which is a version of a credit card designed specifically for Government use. Subsequently, we issued guidelines on the use of that card in Northern Ireland that we believe were comprehensive and which could be used as a model for all public bodies when introducing credit card schemes. The Public Accounts Committee again raised concerns about the use of credit cards at a later hearing with the Fire Authority for Northern Ireland. 188. After that hearing, we issued further guidance on the Committee's concern that individuals could use the credit cards for personal expenditure. We emphasised the point that even if the intention had been to repay the money, such activity should still be considered a disciplinary offence. However, you have properly highlighted the difficulties that arise when credit cards are in use. They allow expenditure by an individual, enabling him to bypass the standard systems of control whereby individuals spend money in the course of their duties on behalf of their organisation and then submit a formal claim. The claim is then checked, and payment is made to reimburse the expenses. The use of credit cards allows that system to be bypassed. It is essential, therefore, that Departments put a separate and rigorous control system in place before they issue credit cards to individuals. Properly used, credit cards can be a useful way of incurring expenditure on behalf of the taxpayer. 189. However, because of the concerns raised in the report, we are reviewing our guidance on the use of credit cards by public bodies. We shall issue comprehensive guidance shortly to all Departments and accounting officers on their use. We shall include points made by the Committee this morning before we finalise the guidance. 190. The Chairperson: Thank you. That is very useful for the record. 191. Ms Ramsey: Mr Hamilton, you mentioned the changes that the Department has put in place in the Tourist Board's management team and the new chief executive. You then described what is happening in the Tourist Board. Would such action have been taken without the report or without the Comptroller and Auditor General's involvement? 192. Mr Robinson: Which action in particular? 193. Ms Ramsey: The changes in staff, the changes in the management team and the appointment of the new chief executive. 194. Mr Robinson: The changes in management pre-date the report. 195. We recognise that the Tourist Board's remit has been too broadly drawn for such a small organisation; it has been stretched. The changes in Tourism Ireland Ltd and the office network pre-date the report. Establishing Invest Northern Ireland continued through 2001; its principal aim was to concentrate the payment of grants in one body. It is exceptionally difficult to build up teams and professional skills and to offer opportunities for career progression in a small organisation such as the Tourist Board. Invest Northern Ireland, however, provides an opportunity to create and retain a cadre of professionals and build upon their skills. All that pre-dates the work of the Comptroller and Auditor General on the accounts. 196. Ms Ramsey: A memorandum from the Comptroller and Auditor General deals specifically with the New York office. In Paragraph 3 of the supplementary report we are told that the New York manager receives more in additional allowances - almost £37,000 last year - than he does in his salary of £31,000. Are all managers of Tourist Board overseas offices paid the same generous allowances? 197. Mr Robinson: The pay structure for managers of overseas offices is exactly in line with that of the British Tourist Authority, which follows that for the general overseas placement of civil servants from the United Kingdom. 198. Ms Ramsey: Does the British Tourist Authority continue to pay its New York staff such high rates? 199. Mr Hamilton: Yes. 200. Ms Ramsey: I have been led to believe that such payments ceased in 1994. 201. Mr Clarke: The British Tourist Authority still pays an overseas allowance. There is also a mobility allowance, because the British Tourist Authority's policy was to move staff around the overseas offices. We can check that and send the Committee the information. 202. Mr Robinson: It is recognised across the system that placing people overseas is expensive. That is your key point. Some organisations opt for local recruitment as more cost-effective. For example, 10 years ago 100% of the Industrial Development Board's staff was deployed locally. Now, probably 50% of the staff of Invest Northern Ireland's North American offices, for example, is recruited locally. The local market rate is paid and there is no involvement in the extensive range of allowances. 203. Ms Ramsey: May we have a copy of the advertisement for the New York manager's position. If I apply for a job I know that I shall receive a basic salary and that I shall have to pay a mortgage and bills from that. However, the officer was given additional allowances of £37,000 last year and his salary was only £31,000. 204. Mr Hamilton: First, that may be because he is a relatively junior officer. Secondly, those allowances are the norm. They apply even in European Union institutions. It is common for overseas allowances to equate to salary. 205. Ms Ramsey: I should appreciate a copy of the advertisement. 206. Mr Robinson: Do you wish to know the structure on which an officer going overseas is placed? 207. Ms Ramsey: Yes. 208. The Chairperson: May we have a copy of the advertisement. 209. Mr Hamilton: We shall consider both. The advertisement might not have stated the allowances explicitly. That information may come from elsewhere. 210. Ms Ramsey: You say that the New York manager was a junior officer. 211. Mr Hamilton: Relatively junior; a deputy principal, I believe. 212. Mr Robinson: The allowances would have been New York allowances, which would not be identical to any overseas office. 213. Ms Ramsey: I do not dispute that, but he was senior enough an officer to get a credit card. Page 9 of the report tells us that the New York manager, albeit a junior manager with a junior grade in the Civil Service, was using a credit card that senior management believed not to be in use. We are also told that he could not, or would not, supply back-up documentation for much of the thousands of pounds that he had charged to the credit card. Most shocking is that not only did the Tourist Board then pay all the credit card bills, it also claimed, according to paragraph 6, page 10, that all the spending was appropriately incurred. In paragraph 5, we are told that it is not Tourist Board policy to provide staff with credit cards, so why was this card issued in 1992? 214. Mr Robinson: The card was issued to the New York manager by the British Tourist Authority, which issued cards to all its managers. The difficulty arose through a misunderstanding about whether the card was authorised or not. Several issues were raised with the New York manager on how he used the card in 1997. In discussion with the chief executive, who raised these issues, the New York manager decided to stop using the card. The card was not withdrawn, and clearly that should have been properly resolved at the time. He did not use the card again until December 1999. He used it in December 1999 and February 2000 and resumed constant use in June 2000. That is the background. 215. The unsubstantiated reference to the amounts unpaid, which is in paragraph 3, discusses the remaining $10,617 spent on restaurant meals. As requested, he has produced vouchers that show that this was properly incurred, and that figure has been reduced to $3,753. 216. Ms Ramsey: When did he produce these? 217. Mr Robinson: He has been producing these by getting them from restaurants since we have been pursuing this with him. 218. Mr McClelland: Since when? 219. Mr Robinson: Since last summer. 220. Ms Ramsey: He has been drip-feeding you receipts. 221. Mr Robinson: He has been producing receipts for us. 222. Ms Ramsey: He has been drip-feeding you receipts. By how much has it come down? 223. Mr Robinson: The figure of $10,617 has been reduced to $3,753. 224. Ms Ramsey: I am sure that he is tired running around getting all those receipts. 225. Why did he stop using the card? You say that the British Tourist Authority issued it under guidelines, but it was not Tourist Board policy to issue credit cards. Earlier, you said that there have been serious shortcomings in the Tourist Board. The Tourist Board's policy is not to issue credit cards, yet the British Tourist Authority was issuing them. Were you not aware of that? 226. Mr Robinson: Yes, because the British Tourist Authority was re-invoicing the Tourist Board with the expenditure incurred. 227. Ms Ramsey: Did the manager ask for it? 228. Mr Hamilton: At that time, the manager was co-located with the British Tourist Authority; it used credit cards as a means of keeping in touch with its transactions - that was its norm. 229. Ms Ramsey: He did not keep in touch with his transactions if he cannot provide receipts. 230. Mr Hamilton: It was to enable the British Tourist Authority to relate costs directly to the Northern Ireland Tourist Board. 231. Ms Ramsey: Was the New York manager the only person to hold the British Tourist Authority credit card? 232. Mr Robinson: British Tourist Authority credit cards were also issued to other overseas managers. 233. Ms Ramsey: May the Committee have a list of them. 234. Mr Robinson: Yes. 235. Ms Ramsey: Was this his only card? 236. Mr Robinson: It was the only card of his that had anything to do with the Tourist Board. He might have had personal cards. 237. Mr Close: It has been stated that the British Tourist Authority issued this card, and I do not dispute that. However, the report also states that this was at the request of the Northern Ireland Tourist Board. 238. Mr Robinson: That is what I said; there was no question but that the Tourist Board knew that the card had been issued. 239. Mr Close: There is a difference between knowing that it had been issued and requesting that it be issued. The Tourist Board requested that the card be issued. 240. Mr Robinson: It was reissued. 241. Mr Close: In 1992, at the request of - 242. Mr Robinson: Yes. That is correct. 243. Mr Close: Therefore rather than slip it over to the British Tourist Authority, someone in the Northern Ireland Tourist Board asked that this card be issued to the New York manager. 244. Mr Robinson: As I understand it - 245. Mr Close: Is that correct? 246. Mr Robinson: The British Tourist Authority said - 247. Mr Close: Is that correct? 248. Mr Robinson: Yes. However, it was in response to promptings from the British Tourist Authority, not the other way round. 249. Mr Close: At the request of the Northern Ireland Tourist Board in 1992. 250. Mr Robinson: That is exactly what the report says. 251. Mr Close: Is that correct? 252. Mr Robinson: Yes. 253. Mr Close: Thank you. 254. Ms Ramsey: I thank Mr Close for his intervention. Who requested that the credit card be issued against the policy of the Tourist Board? 255. Mr Robinson: As we made clear in the subsequent submission to the Committee, the credit card was not withdrawn; one of the errors in the original report was the suggestion that it was the policy not to have credit cards. The credit card was not unauthorised at any time. I made that point in a letter to the Committee on 20 May. I set out in that letter that no definite decision had been taken to end its use; therefore, by definition, the statement about the policy is incorrect. 256. Ms Ramsey: The report states that the Tourist Board - and I must commend the officer in the finance department responsible - identified the reuse of the card in April 2000. Your letter of 20 May tells us that the use of the card was identified in April 2001, which is now back to July 2000. That is six months before the date given to us. However, nothing happened as a result of this being identified in your letter. You say that senior management discussed the use of the credit card with the New York manager in 1997; what did those discussions cover? If the New York office knew in 1997 that invoices were required to support the credit card, why were they not sent then? 257. Mr Robinson: The invoices supplied are for the expenditure from when the use of the card restarted in December 1999. There was also expenditure on it in February 2000, but its constant use started again in June 2000. 258. Ms Ramsey: In July 2000, the accounts clerk requested supporting documentation for the credit card. Why did the New York office not supply that; how often did it have to be asked for the supporting documentation, considering that concern was raised about the use of the card? 259. Mr Robinson: The request was made and was identified. This issue must be pursed constantly, and I accept entirely that that should not have been the case. 260. Ms Ramsey: If I were an employee of yours how often would I be allowed to refuse your request for documentation? How often was the New York office asked to provide documentation? 261. Mr Robinson: The accounts department was pressing for the information; information came through, but it was incomplete. 262. Ms Ramsey: Roughly how many times? 263. Mr Hamilton: I do not know how many times; I do not think that anyone knows. 264. Ms Ramsey: Five times, 10 times, or more? 265. Mr Clarke: My understanding is that it was two or three. 266. Ms Ramsey: What happened when the requested information did not come through? 267. Mr Robinson: You can see that information has been coming through. It has been coming through slowly; that is not satisfactory, but it has been coming through. It should be recognised that we are discussing the documentation to support the charges. The credit card statements show how the money was spent. The marketing manager is responsible for ensuring that his work is done appropriately. That is a further control. 268. Ms Ramsey: He was asked for documentation, but he did not provide it. He was asked again and did not provide it. You say that he was asked three times, so he was asked yet again and did not provide the documentation. Was he disciplined? 269. Mr Robinson: He has been disciplined for not supplying the documentation. 270. Ms Ramsey: For that alone? 271. Mr Hamilton: May I clarify. The reality is that - [Interruption]. 272. Ms Ramsey: - he was in New York having a good time, and nobody knew what he was doing. 273. Mr Hamilton: A great deal has been said along those lines, sadly. The guy did not provide the supporting documentation that he ought to have. That is absolutely wrong; Mr O'Reilly discussed such matters in the guidance. The use of credit cards is equivalent to all forms of expenditure and there should be documentation. He did not have the documentation; he was poor in administration, and he misplaced many of the receipted invoices. That was totally wrong, and he has been taken to task for that. 274. However, the expenditure is wholly commensurate with his work. That was reported through the channels by the sales director, as Mr Robinson said, and there is no question in my mind of the expenditure's being personal, wrong or inappropriate. 275. There is a distinction between the use of the credit card for the purposes for which it was issued and the provision of supporting documentation. We have no answer on the supporting documentation - that is clear-cut. However, it is completely wrong to imply that the expenditure was inappropriate; that he acted in his own self-interest; and that he was having a good time. Such implications do not reflect the excellent results that this person has achieved for Northern Ireland in the United States - something that is attested to, all over the United States market. 276. We must distinguish between what he did not do administratively and what he did as a sales person. We must set some of this in context, because it is very easy to get a wrong impression of this person. Unfortunately, that impression already exists. 277. Mr McClelland: How do we know if we do not have the documentation? You keep insisting that this expenditure was not inappropriate, but if you do not have the documentation and the Committee does not have the documentation, how do we know whether it was appropriate or inappropriate? 278. Ms Ramsey: I thank Mr McClelland for asking that. This is the second report that we have dealt with this morning. With regard to the first report, Mr Robinson told us that there had been a serious breakdown in procedure. The second report has identified serious shortcomings in the Tourist Board. Mr McClelland has asked how we are to know that we are not being drip-fed documentation. The public is being drip-fed information. We are here to represent the taxpayers, who are not being told why this money was spent or why a credit card was used when such use was not Tourist Board policy, yet we are told in the report that the Tourist Board had requested the credit card to be issued. 279. Mr Robinson: The director for international marketing in Belfast manages that job in New York, and the individual in New York has a plan to work to each year. That plan sets out goals and targets, and tasks to be undertaken. The individual agrees a budget at the start of the year. Since April of last year a further step has been introduced. Each month he agrees, ahead of time, those whom he will target - companies and individuals, be they airline people, tour operators, people involved in the travel trade or journalists who can influence and get business into Northern Ireland. He then goes and meets those people. 280. He has set that all up with his line manager, who is then aware of where he is going, what he is doing, and when he is entertaining people. Those charges had been coming through on the board's credit card until November last year, and now come through on his expenses claim. That is where we draw the distinction. 281. Mr Hamilton has made it clear that that is not good procedure and administration. However, in managing value for money - the money that is being spent in New York and what Northern Ireland gets back for it - that has been done, and done strictly, since April last year. The fact that the individual has produced and has been able to provide substantiating documentation for 75% of the amount that was outstanding at the start of the year demonstrates that the individual has been doing the job that was sought of him. 282. The Chairperson: We are not judging his professional integrity or ability; we are simply asking questions about the credit card. 283. Mr Robinson: Mr McClelland was driving at how could we have the confidence to believe; that is what I sought to answer. 284. The Chairperson: We have no gripe with the competence of the manager to do his job. 285. Mr Hamilton: That is the point I made earlier. 286. The Chairperson: That has no bearing on our questions. 287. Mr Hamilton: On Mr McClelland's point about where the material came from, the report was not a value-for-money report. In the light of everything that had happened, we felt it appropriate to supply the supplemental information. In the information that we gave the Committee, we were saying that when the individual attended a certain hospitality event, or did a certain promotion, that is what he was trying to achieve. That had been agreed with this manager. That is why we set that all out - to try to explain what he was doing for the Northern Ireland economy. 288. Ms Ramsey: I do not dispute the issue of value for money or the 180% bed occupancy that has been requested for this year. However, the public do not look at value for money in the report - they see it in black and white. They see that there is no documentation to substantiate his claims that he is doing A, B and C. We are here to see that taxpayers' money is spent properly and ensure that they have value for money - not the Tourist Board or the manager having value for money. 289. Mr Hamilton: I understand that. 290. Ms Ramsey: In 1992, the Tourist Board requested that the credit card be issued. That went against your own policy. In 1997, according to the Department's letter to the Committee of 20 May 2002, the manager ceased to use the card, and it was not used for two years until December 1999. Why did the individual stop using it in 1997? Was he requested to stop, or did he decide to stop using it? Why did he begin to reuse it in December 1999? 291. Mr Robinson: He has told us that he was requested to stop using it after discussion with the former chief executive. 292. Ms Ramsey: For what reason? 293. Mr Robinson: He was asked to put any charges through his expenses claims and to produce all of the supporting documentation at the time, and then he would be reimbursed. That was the discussion, as I understand it. 294. He started to reuse it in December 1999, and again in February 2000, because he said that he could not cover the amount of expenditure that he was incurring in his job on his personal credit card at that time. He then resumed using it, as I have already said, in June 2000. 295. The Chairperson: May the Committee see the credit card statements? 296. Mr Robinson: Absolutely. The C&AG and his staff have had access to those statements. 297. The Chairperson: I request that we have sight of them. 298. Mr McClelland: Your officer was clearly an energetic young man who began his working life at the tender age of 17 as a car salesman - a most noble profession; he spent a while in other jobs before becoming deputy principal in your New York office. Was that job advertised? 299. Mr Clarke: My understanding is that it was. 300. Mr McClelland: Page 42 of the report states that in May 2001 the Northern Ireland Tourist Board paid out £30,000 to a former employee in an out-of-court settlement; acting on legal advice, you did not seek the approval of the Department of Enterprise, Trade and Investment before you made the payment. Why? 301. Mr Robinson: The Tourist Board acted on legal advice to settle. It should have sought approval from the Department. 302. Mr McClelland: What was the employee's job? 303. Mr Robinson: He was the finance manager. 304. Mr McClelland: Have other members of the finance staff initiated discrimination cases against the Tourist Board? 305. Mr Robinson: There are two cases outstanding from the finance department. 306. Mr McClelland: To paraphrase Oscar Wilde "to lose one accountant, Mr Robinson, may be regarded as a misfortune; to lose several looks like carelessness." Was there a particular reason for your losing finance officers at this rate? 307. Mr Hamilton: They are not necessarily lost; they are pursuing action. 308. Mr Robinson: One of them is still employed in the Tourist Board. 309. Mr McClelland: Other cases are pending. There is a feeling in the Committee that finance staff might have challenged the failure of management to go through proper financial procedures and that is why you are losing them. 310. Mr Robinson: There has been a complete turnover of senior staff in all areas of the Tourist Board in the past four years. That has created difficulties, so we have been engaged, particularly in the past year, in putting in place a new management team. Some of them are in place, but the job is not yet complete because there must also be a basic review of the roles of senior management in the Tourist Board. 311. There have been substantial changes as work has been transferred to Invest Northern Ireland and to Tourism Ireland Ltd. At present, a review is being held into the appropriate management structure, and that will completed in the next few months. The turnover of staff has been across the board. 312. Mr McClelland: The Committee is seriously concerned about such a high turnover of staff, specifically in the finance department, and the out-of-court settlements, whether as a result of legal advice or not. This is taxpayers' money. 313. Mr Clarke: May I reassure Mr McClelland that since I came into office we have appointed a qualified accountant as director of corporate services; we have employed a new finance manager. That personnel will be responsible for all our central contracting procedures. We now have a much stronger monthly audit committee meeting and, of course, all actions go to our board from that committee. Our director of marketing now sits on the audit committee; we have also improved internal communication to manage meetings more effectively. Most importantly perhaps, we have introduced new financial procedures that have been verified by external accountants, and we have put in place public accountability training for all our staff and board. We have substantially strengthened finances in the past seven months. 314. Mr McClelland: The phrase "the past seven months" bothers me, the inference being that it is closing the stable door after the horse has bolted. Further to the issue of personnel, in paragraph 44 we learn of an out-of-court settlement of £25,000 to a former employee whose application for the post of marketing director was unsuccessful because of poor appointment procedures. Was Mr Alexander, the former deputy chief executive, the successful candidate? 315. Mr Robinson: Yes. 316. Mr McClelland: Let us again examine Mr Alexander's CV. It is interesting. Was Mr Alexander paid a resettlement fee to come to Northern Ireland? 317. Mr Robinson: Yes. 318. Mr McClelland: How long did Mr Alexander remain with the Tourist Board? 319. Mr Robinson: He worked for the Tourist Board for four years. 320. Mr McClelland: When he left, did he receive a settlement fee? 321. Mr Robinson: Mr Alexander had a five-year contract. His position as deputy chief executive was radically changed with the establishment of Tourism Ireland Ltd. The responsibility for most of his duties moved to Tourism Ireland Ltd, so his job ceased to exist at that stage. 322. Mr McClelland: How much was he paid to go? 323. Mr Robinson: His payment was the final year of his contract. 324. Mr McClelland: Sixty-four thousand pounds? 325. Mr Robinson: Sixty thousand pounds. Four thousand pounds was outplacement. 326. Mr McClelland: He was paid a substantial sum of money to come here; we paid an unsuccessful candidate an out-of-court settlement; Mr Alexander was paid reasonably well; and we paid him £64,000 to go. Overall, I suggest that the taxpayer paid a great deal during that time. 327. Mr Robinson: Are you asking whether that payment was in line with his contract? 328. Mr McClelland: Yes. On reading Mr Alexander's CV, if an executive director of the conference centre at Nottingham moves to a job that will put him directly into line to be the chief executive of the Northern Ireland Tourist Board, I can easily understand why the Northern Ireland Tourist Board was threatened with court proceedings and made an out-of-court settlement. 329. How much has the Tourist Board spent in the past five years in defending complaints of discrimination and in the payment of out-of-court settlements? 330. Mr Robinson: I am not sure whether the question concerns how many of the settlements - [Interruption]. 331. Mr McClelland: How many other out-of-court settlements have been made in the past five years? 332. Mr Robinson: There have been three. 333. Mr McClelland: Of what value were they? 334. Mr Robinson: Each was for £500. 335. Mr McClelland: Are any cases pending? 336. Mr Robinson: As I said earlier, three other cases are under consideration. 337. Mr McClelland: Are legal expenses involved? 338. Mr Robinson: Yes, but I do not have a note of those. 339. Mr McClelland: Serious problems in procedures emerged earlier. Similar problems in financial and personnel management are evident. No doubt, others will arise before the end of the day. The Committee is concerned at those problems. 340. Mr Robinson: Those issues are important to the Tourist Board and to the Department of Enterprise, Trade and Investment. For that reason we sought to address them in the way which earlier was made clear to the Chairperson. The breadth of remit of the organisation was too wide, and we addressed that. 341. There has been extensive change, and turnover, in the senior management team, which we have addressed. I understand entirely why the Committee is concerned. 342. Mr Hamilton: The Tourist Board is a relatively small organisation that was set up as a non-departmental public body (NDPB). The arrangements for NDPBs presuppose that they will be autonomous in terms of personnel and finance, so that is the way in which the Tourist Board is set up. The finance and personnel sections, which cover professional areas, are extremely small. This is a difficult area to cover and there have been difficulties. As Mr Robinson has said, the change in staff has exasperated that. They are small sections and there have been problems, which you are right to highlight. 343. Mr McClelland: Did the chairman of the board at any time raise any concerns about procedures, finance and personnel? If I was the chairman of a board and that was happening to my organisation, I would be screaming blue murder and raising questions. 344. Mr Robinson: The major issue for any board or chairman would be to ensure that a senior management team was in place to undertake those responsibilities. Therefore, the prime issue has been recruiting and filling the posts, so that people are in place to do the job. 345. Mr McClelland: I do not want to personalise the matter, but I lectured at university for years, where we ran degree courses in management, and tourism and management. When I look at the CV of someone who is employed by the chief executive - [Interruption]. 346. Mr Hamilton: That is not a CV in its entirety. 347. Mr McClelland: The CV is not in entirety because you refuse to provide it. 348. Mr Hamilton: We do not have it. 349. Mr McClelland: That is my background, and my eyebrows are raised when I see the individual's level of marketing and management - no aspect of his background says that he is chief executive material. 350. Mr Robinson: He was the deputy chief executive. 351. Mr McClelland: I am aware that he was employed as the deputy, but the deputy chief executive would have eventually been in line to become possibly the chief executive of the Northern Ireland Tourist Board. 352. Mr Hamilton: I am unaware of exactly what the deputy chief executive's competences were, but it is unhelpful for us to speculate on what duties he fulfilled or what responsibilities he had in his past career when we do not know anything about them. 353. Mr McClelland: You appointed him. 354. Mr Hamilton: I know. 355. Mr Robinson: The position of chief executive has undergone a significant amount of change. However, for anybody to speculate as to who might or might not have been a candidate for that job is mere speculation. 356. Mr McClelland: Did Mr Alexander indicate why he left or where he was going? 357. Mr Robinson: He left because there was no longer a job for him after the creation of Tourism Ireland Ltd. 358. Mr McClelland: Could you not have slotted him in somewhere else? 359. Mr Robinson: The acting chief executive at that time considered all those issues, and his recommendation was that - [Interruption]. 360. Mr McClelland: He considered it would be better to write him a cheque for £60,000 and take him to the airport? 361. Mr Robinson: His contract was examined, and the legal advice was that the payment should be made to him under his contract. 362. Mr McClelland: Did he receive a job reference from the chairman of the board? Is it within our remit, Mr Chairperson, to ask for the job reference that he received when he left? 363. The Chairperson: Did he receive a job reference? 364. Mr Robinson: I do not know. 365. Mr McClelland: I would like to see the job reference after he left, and who wrote it. 366. The Chairperson: Perhaps you could let us have that. 367. Mr Carrick: I refer you to paragraphs 31 to 36 of the report, which deal with payments to directors. Paragraph 31 says that payments totalling £23,500 were made to two directors without departmental approval. Paragraph 32 makes it abundantly clear that such payments are an absolute requirement. Paragraphs 33 to 36 explain at length why, in your view, the two directors had to take on additional work. You seem to have missed the key point, which was that the Tourist Board did not have the authority to make such payments. The explanation seems to avoid answering that key issue. Who decided to pay those increases? 368. Mr Robinson: The decision to pay those was taken by the then chief executive. 369. Mr Carrick: The decision was taken contrary to the absolute requirement that there had to be departmental approval? 370. Mr Robinson: Yes. 371. Mr Carrick: Why did the chief executive not ask for the Department's approval? 372. Mr Robinson: The then chief executive explained that it was necessary to do it in those circumstances, but he did not give any satisfactory explanation as to why he did not refer it to the Department. 373. Mr Carrick: Did you, as accounting officer, press him for a further explanation as to why he took that action contrary to the absolute requirement? 374. Mr Robinson: Yes. He gave me the explanation that I have just provided. He admitted that he should have gone to the Department for clearance. 375. Mr Carrick: You have said that the explanation was unsatisfactory, given the absolute requirement for departmental clearance. Having come to that conclusion, did you, as accounting officer, take any disciplinary action against the chief executive, and if not, why not? 376. Mr Robinson: I did not take any disciplinary action against the chief executive. I considered all the circumstances. Although it was a breach of procedures and the chief executive should not have done it, by the same token he explained the reasons for doing it. The Department has retrospectively given approval for the payments and justified them in those circumstances. Disciplinary action was not justified. 377. Mr Carrick: Did you issue a warning that his actions were contrary to the absolute requirement and that it should not happen again? 378. Mr Robinson: I did not issue a written warning. 379. Mr Carrick: In retrospect, do you think that you should have done? 380. Mr Robinson: I certainly expressed my dissatisfaction to him. The situation has highlighted the need to underscore where departmental approval is required. We have been addressing that. That was the lesson that I learned, more than the individual's performance. 381. Mr Carrick: That falls into the admission that we have heard this morning about a serious breakdown of procedures and serious shortcomings - those were your own words. Here we have another example of regulations and absolute requirements being ignored. The Department appears to have said "all's well that ends well". Mr Close mentioned that attitude. As a Committee, we find that difficult to comprehend. 382. Mr Robinson: I appreciate that point. 383. Mr Hamilton: It is not a matter of saying "all's well that ends well". Situations like that often hinge on whether a chief executive or an employee believes that he or she has the power to do certain things. In that case, he should have come to the Department. At the time, he clearly thought that he did not need to seek departmental approval. 384. To avoid any confusion in future, we are drawing up details of all aspects of the financial framework for each of our NDPBs. We are informing them of who to go to in the Department in those circumstances and how to seek approval. Specific details will be articulated. It will not be left to discretion in future. We are doing that right across the board. 385. Mr Carrick: With respect, there was no discretion. Paragraph 32 of the report - this section has been agreed - states: "Under no circumstances should the Board make: a) salary or other related payment to a member of the Board's staff which is in excess of the individual's entitlement" 386. That is clear; there is no discretion at all. You say that the chief executive was unaware of that, did not understand it or blatantly ignored it. Which of those is correct? 387. Mr Hamilton: I do not know precisely, but I do not think that it would be blatantly ignored. 388. Mr Carrick: Nevertheless, the outcome was that - 389. Mr Hamilton: I understand what you are saying. 390. Mr Carrick: I refer you, Mr Robinson, to the 'Northern Ireland Appropriation Accounts 1999-2000'. I have a question that relates to paragraph 16 of that report. I refer briefly to the print contracts. The Department is quoted as saying that it: "attends NITB's Board meetings and has a close understanding of NITB operations." 391. That is a clear, definite statement. It attends meetings and has a close understanding. Given that close understanding, how could the Department fail to identify that and other significant breaches of proper procedures as described in the report? 392. Mr Robinson: I agree that that should not have happened. However, as you have drawn out in your question, the primary onus in that case was on the acting chief executive to get those approvals from the Department. Attendance at the board meetings is secondary in that regard. 393. Mr Hamilton: Some breakdowns in procedures were specific and would not have come to the board's attention. We may have been aware of other issues that were not to our satisfaction. For example, we pressed for new financial procedures, which were established in 1997. There have been other changes since. At that time, we had a holding-company model in the Department, with each of the businesses operating within a consistent policy framework. The standards were ensured by internal audit, working directly to the chief executive of the business. 394. There was a sea change in 1998-99 when we needed to move on to different ways of doing business. We now insist on representation on the audit committees and that the internal audit standard is applied through the Department. At that stage, we would not even have been getting the detailed audit reports. Those went specifically to the then chief executive. Looking back, you are correct that some of the things we tried to do were perhaps not picked up or some of the standards we set were not followed through. We have since been trying to make good that situation. 395. Mr Carrick: I have listened carefully to your explanation, but do you agree that the attendance of departmental officials at the board meetings was presumably to observe, monitor and ensure compliance with the Department's procedures? 396. Mr Hamilton: I only partially agree. For example, to put it into context, print contracts were not discussed at the board meetings. We know that through our attendance. 397. Mr Carrick: Why were print contracts not discussed? 398. Mr Hamilton: It was not a board matter; it was an executive matter. 399. The Chairperson: Was the acting chief executive not a senior civil servant from the Department of Enterprise, Trade and Investment? 400. Mr Robinson: That is correct. 401. The Chairperson: There was also that link. 402. Mr Robinson: There is no doubt that approval should have been sought. 403. Mr Carrick: Are you familiar with the accounting officer's memorandum of procedures for the Tourist Board? 404. Mr Hamilton: Yes. 405. Mr Carrick: What is your understanding of your responsibility for the proper running of your Department's NDPBs such as the Tourist Board? 406. Mr Hamilton: We are responsible for ensuring that appropriate systems and internal controls are in place. Therefore, we have the assurance that expenditure is incurred properly. 407. Mr Carrick: Paragraph 37 of the memorandum states that the departmental accounting officer must be satisfied that the financial and other management controls applied by the Department are appropriate and sufficient to safeguard public funds and, more generally, that those being applied to the NDPB conform to the requirements of propriety and good financial management. 408. How have you been discharging responsibility to ensure that the controls being applied by the tourist board conform to the requirements both of propriety and of good financial management during the years of the problems with expense claims and purchasing procedures? 409. Mr Robinson: We do that through the arrangements that we have in place with the NDPB accounting officer. There is a memorandum for the NDPB accounting officer, and there is also a financial memorandum in place. That structures the arrangements, and there is a set of requirements. 410. Mr Carrick: Perhaps you will respond in writing to the Committee on that matter. You talked about arrangements with the chief executives of NDPBs. On reflection, do you feel that the lines of communication are clear enough and effective enough, because it seems that there is a breakdown if you say that arrangements are in place, but those procedures have not delivered? 411. Mr Robinson: I agree. That is evident from the fact that we have agreed the report with the C&AG that there were breakdowns in many places. The steps that we have taken to redress that ensure that we now have a full management team in place with appropriate background, that the operating plan and plans for the tourist board are properly in place, and that proper procedures must be in place. 412. The financial procedures manual, which was updated in July 1997, has been updated again and it is being issued with appropriate training to all staff so that we can reinforce the procedures in support of the structures. We keep people fully informed of that through circulation of information from the Department of Finance of Personnel or through "Dear Accounting Officer" letters (DAOs). The utilisation of the internal audit service is a key way in which I can get assurance that the processes are in place. We have constructed a departmental audit committee, and that will be the main vehicle through which I can get reassurance, as accounting officer, that the systems are in place and that they are being properly operated. 413. That is the procedure and process that we currently operate to do that. However, I accept that there were breakdowns in it previously. 414. Mr Carrick: Thank you, Mr Robinson. The Committee accepts that significant changes to procedures were subsequently put in place, but do you understand that the problems are as much to do with you, your Department, and the Department's former accounting officers, who are no longer with us, as they are to do with the Tourist Board? That is the point that I am trying to get across. 415. Mr Robinson: I accept that entirely, and I sought to convey that I agree with that point when I responded to some of the Chairman's questions at the beginning. I made clear that financial procedures were introduced in 1997 in response to the report that Mr Close referred to earlier. Those have not delivered - I make no apology for that; it is very much the point that has been made - and we have taken another significant look at them. At the heart of the problem is a stretched management team with a very broad remit; we have addressed that, but that is not sufficient in itself. The financial procedures manual has been revised again, and the new director of corporate services, who has an express remit to make sure that that is in place, is professionally trained. As accounting officer, I must ensure that the Department assures itself, and assures me, that that is working. The primary vehicle for that is through the departmental audit committee and the internal audit service. 416. Mr Carrick: I return to paragraph 10 of the February 2002 report on the NITB accounts for 2000-01. The director for international marketing and the investment director, who was the acting director of finance, received 15% bonuses. Is that correct? We are told that those individuals had responsibility for ensuring that proper financial procedures were followed in the overseas offices. How can you justify those bonuses in the light of the failure of the New York office to comply with the financial procedures? 417. Mr Robinson: I correct you on one point, Mr Carrick - those were not bonuses. They were payments to take on extra responsibilities in the exceptional circumstances. There was no director of finance in the organisation. The director of investment took on those additional responsibilities, and that was what the extra payment was for. 418. Mr Carrick: OK. Let us not get hung up on the word "bonus". They were "additional payments" representing something like 15% of their salaries. 419. Mr Robinson: Those were temporary payments. They have been discontinued in the case of the director of finance and investment, given the recruitment of the new director of corporate services. 420. Mr Carrick: Are you saying that you have no difficulty in justifying the additional payments in the light of the additional services? Those services were being supplied at a rate of around 15%. 421. Mr Robinson: I have also put that in the overall context of a stretched management team. 422. Mr Carrick: I shall pursue that a little further. Why did the directors receive such a large increase - a 15% increase - when paragraph 31 of the report states that the usual increases for taking on additional work, or work at a higher level, are either 6% or 8%. How was a figure of 15% arrived at? 423. Mr Hamilton: This was not a case of temporary promotion. It was a case of taking on another job on top of their own job. It was not a temporary promotion to work in the same area - it involved a wider remit. 424. Mr Carrick: OK, but paragraph 31 talks about 6% or 8% compensation for those taking on additional work. Here we have an increase of 15%. 425. Mr Hamilton: Yes, those are the rates that someone may get should he or she be temporarily promoted. 426. Mr Carrick: Why was that decision taken? Mr Robinson said that it was not a temporary promotion. 427. Mr Robinson: Those were specialist positions with specialist skills. The Tourist Board had difficulty in recruiting people for those two posts who had a marketing and financial background. It is not only the Tourist Board that has difficulty. The wider Civil Service has difficulty in recruiting and retaining staff with specialist skills. 428. Mr Carrick: You were able to identify people with those specialist qualities from within your small, overstretched pool of employees that could justify the 15% increase. 429. Mr Robinson: That was also done on a cost-benefit analysis, which is referred to in paragraph 35 of the report. 430. Mr Carrick: Did any junior members of staff take on additional duties during that period, and what was their level of compensation for the additional work? 431. Mr Robinson: I am not aware of any examples. 432. Mr Carrick: Will you find out and report back to the Committee? 433. Mr Robinson: Yes. 434. Mr Carrick: The explanation as to why you were content to award the consultancy contracts to the former chief executive is given in Paragraph 41: "A competitive tendering process would, in the view of the NITB, have incurred nugatory expenditure and have been a wasteful use of public funds." 435. I regard that as an amazing and extraordinary statement. It is no wonder that the board cannot reassure the public over its print purchasing procedures if that is its attitude to tendering. 436. Does Department of Finance and Personnel guidance allow public bodies to make the judgement that tendering contracts worth more than £30,000 is a waste of time? 437. Mr O'Reilly: No. However, before I address that point, I assure the Committee that no public body is allowed to ignore tendering procedures. Procedures are in place to ensure that public bodies demonstrate that they are obtaining value for money in their purchasing. Should a body want to deviate from normal standard purchasing procedures, it would be expected to demonstrate the reasons for doing so, and to record those clearly. 438. In the case involved, guidance on the re-employment of non-departmental public bodies' employees as consultants states that it is not normal practice for public servants to be offered further employment once they have left the employment of public bodies. There are exceptional cases in which, if it represents good value for money, it should not be ruled out. 439. However, the guidance goes on to say that in such exceptional circumstances Departments must have documental evidence that, if there is a need for the further work, the way it is to be done, the timescale, the remuneration arrangements, and the arrangements themselves must represent good value for money having regard to the normal requirements for competition. 440. Mr Carrick: Was any clearance sought from you in that instance? 441. Mr O'Reilly: No. 442. Mr Hamilton: The guidance to which Mr O'Reilly refers is what the Tourist Board and the Department acted on. Further work was to be done, but the then chief executive's contract was not being renewed. There was to be a change of approach and a change of leadership, but he was equipped to do that work. Estimating what a senior consultant would cost in the open market satisfied the competition requirement. Having weighed up that cost, a decision was made that to engage the then chief executive was cost-effective in the public interest. 443. Mr Carrick: Where you aware of that exercise demonstrating good value in that particular instance, and, on reflection, given the level of concern of the committee and the lack of open tendering, would you have done things differently? 444. Mr Robinson: A degree of market testing was done, but I am sure that I would now insist that it be done differently. 445. Mr Carrick: Was any documentation supplied to you about the market testing procedure? 446. Mr Robinson: No, I do not think that there was. 447. Mr Carrick: Is there any available? 448. Mr Hamilton: There is no documentation because it was just an inquiry to establish what the costs would be. 449. Mr Carrick: Finally, if there is be a departure from the normal procedure of open tendering in future, as accounting officer, would you insist that some record and papers on the exercise of market testing be kept to demonstrate that it is giving value for money as opposed to the open tendering process? 450. Mr Robinson: Absolutely. I would go further and say that it should have been handled differently, in accordance with proper procedures. 451. The Chairperson: I indicated at the start of the meeting that I intended to adjourn for lunch, but we have quite a bit of work still to do. I want to bring in Mr Close, and when he is finished I shall adjourn for lunch. 452. Mr Close: I could starve you all into submission. With the way that things are going that might be the best approach. 453. I want to follow up the point that Mr Carrick made. However, before that I want to get the record straight on something else. When the permanent secretary was replying to questions on the use of the credit card I noted that he said that the chief executive requested the individual concerned to stop using it. The initial report from February states in paragraph 2: "As a result senior management requested that the card should not be used." That was then massaged when we received additional documents, dated 20 May, which say: "There was discussion within NITB about the use of the credit card but no definite decision was taken to end its use. Were we responding to the report today we would have suggested the following alternative wording in paragraph 2 'As a result senior management discussed usage of the card with the New York manager and he ceased to use it from 1997 until December 1999.'" 454. At the very least, there is confusion. The initial report, which I again stress was an agreed report that went through a number of drafts, used the words "requested. not be used." That was then changed, on the back of further information, in the document dated 20 May. Now, in the evidence today, the words "requested to stop using" are again used. Is it too much for me to ask which is accurate? The report has been through the hoops. There have been three drafts, taking months, to clear the report. It was cleared and then it was changed, which demonstrates to me either an attempt to lead astray or gross incompetence. It is now being changed again. Was the word "request" used or not? 455. Mr Robinson: Let me be absolutely clear. I apologise. The letter of 20 May states: "discussed usage of the card. and he ceased to use it". 456. Mr Close: Therefore, the word "request" that you used earlier was not used in the letter. 457. Mr Robinson: That is my understanding. 458. Mr Close: Mr Chairperson, you see the difficulties that we face. 459. Mr Beggs: If you refuse to pay the expenses, would he stop using it? Is it not easy to resolve the situation? 460. Mr Robinson: The British Tourist Authority (BTA) is incurring the charge. 461. Mr Hamilton: The question also arises of whether the charges were properly incurred. 462. Mr Close: A great many systems and procedures do not seem to be working. There is a problem with language and the way that people understand its use. I am having great difficulty in establishing the veracity of many statements and the events that occurred in the organisation that we are discussing. It does neither the Tourist Board nor the Department any good. It may be claimed that procedures are not in place and systems are not working, but it is the job of the permanent secretary to ensure that systems are in place and working. It is patently obvious that there are more systems that do not work than there are that do. 463. The Chairperson: I made that point earlier. 464. Mr Close: That point cannot be made often enough. The longer that this evidence session continues, the greater the difficulty I have, on behalf of the taxpayers, understanding what is happening in the Tourist Board and the Department. 465. I return to Mr Carrick's point about the appointment of consultancy contracts to the former chief executive, and the points raised by the Treasury Officer of Accounts, who effectively said that no public body can ignore tendering. Paragraph 40 of the C&AG's report states: "Before his departure, NITB agreed to appoint the former Chief Executive as a consultant". 466. Who made that decision? 467. Mr Robinson: I believe that that decision was made by the acting chief executive of the Tourist Board in consultation with the Department. 468. Mr McClelland: What was the name of the acting chief executive? 469. Mr Robinson: His name was David McAuley. 470. Mr Hamilton: That is not correct, because David McAuley followed - [Interruption]. 471. The Chairperson: What was the name of the person responsible for the decision? 472. Mr Hamilton: We are dealing with the chief executive. The acting chief executive followed him, so he was not in place when the chief executive left. At that stage, I assume that we would have been dealing with the chairman of the Tourist Board and the permanent secretary to the Department. 473. Mr McClelland: Is it correct to say that the chairman of the board made the decision? 474. Mr Robinson: In essence, the Department made the decision. The departmental representative on the Tourist Board would have been involved in that decision. 475. Mr McClelland: Was the acting chief executive consulted? 476. Mr Hamilton: The acting chief executive was not in place at that time. 477. Mr McClelland: Was anyone in place at that time? 478. Mr Hamilton: No. 479. Mr Close: Again, let the record show that I am confused. I was told that the decision was made by the acting chief executive, then I was told that it was made by the chief executive, then I was told that it was made by the chairman, and then I was told that it was made by the chairman in consultation with the Department. Who made the decision? Did the chairman of the board make the decision? Is that correct? 480. Mr Robinson: The decision was taken by the Department - by the permanent secretary of the Department and the deputy secretary, who was the Department's representative on the board. 481. Mr Hamilton: The situation, Mr Close - [Interruption]. 482. Mr Close: The situation is confusing. 483. Mr Hamilton: To clarify the matter, the board itself must enact any decisions that involve Tourist Board staff. Any correspondence would come from the Tourist board, and the Tourist board, or the chairman acting in consultation with senior officials in the Department, would have taken the actual decision. 484. Mr Close: We shall take this step by step so that we are left in no doubt. How did that particular issue get to the Tourist Board, and how was it initiated? I assume that there was a board meeting, and somebody on the board, at whatever position, decided that the board must look at using the chief executive, who was about to leave, in a consultancy role. 485. Mr Robinson: The key decision was that the chief executive was going to leave at the end of his contract, which was due to run out in March. 486. Mr Close: This meeting happened around November or December. 487. Mr Robinson: Yes. There was board meeting, but the key decision - [Interruption]. 488. Mr Close: Was there a board meeting? 489. Mr Robinson: I am sure there were discussions about how - [Interruption]. 490. Mr Close: There would have been a board meeting, and, presumably, there would be minutes of that meeting - a meeting at which an important decision to throw aside Treasury Officer of Accounts' procedures and your own procedures was about to be taken. There will be minutes of that board meeting. 491. Mr Robinson: As we said earlier, the key decision was that the chief executive's contract was finishing at the end of March, and was not going to be extended. 492. Mr Hamilton: There were issues about further work that had to be done. Work had to be done, and he had the ability to do it. 493. Mr Close: I do not doubt that, but I am trying to get at the procedures. With a background that a job had to be done, which is laudable, there would have been a meeting of the Northern Ireland Tourist Board at which that would have been discussed. Emerging from those discussions, no doubt there would have been a proposal - duly proposed and seconded - to do that. We are talking about driving a coach and horses through proper procedures again. I would not like to think that there was just a wee huddle of people deciding that they had better offer the man another job or whatever. That would not enter my mind at all, and - [Interruption]. 494. Ms Morrice: If the chief executive was still in place, was it him that recommended that he should be kept on at the end of his contract? Is what we are getting at is that there was no question of that happening? 495. Mr Robinson: No. That would not have been discussed at the board for the very reason that the chief executive was present. 496. Mr Close: No such discussion took place at the board meeting? 497. Mr Hamilton: You would need to check exactly what took place at the board meeting. There were certainly discussions between senior officials, and we shall check that, Mr Chairperson. 498. Mr Close: Was a letter of offer given to that individual? 499. Mr Hamilton: A letter was issued, yes. 500. Mr Close: May we have a copy of that please? No doubt it is dated. 501. Mr McClelland: Who signed the letter? 502. Mr Hamilton: I am sure that it is dated and signed. I could offer our recollection, but it would be safer if we provided a copy. 503. Mr Close: At this stage you do not know who signed it? 504. Mr Hamilton: I think it was the chairman. 505. Mr Close: What role did the Department play in that? 506. Mr Hamilton: The Department was involved because the chief executive's first job was with NI-CO (Northern Ireland Public Sector Enterprises), which is a company that the Department wholly owns. He went to cover the position of chief executive in NI-CO because it had no chief executive at that time. The recruitment process to find a new chief executive for NI-CO had not been successful, so there was a need for a chief executive there. It was felt that the chief executive of the Tourist Board was well qualified to do that job, and that is the first task that he had in that position. He went to NI-CO as its chief executive, and he undertook a review of it. He had a background in understanding international markets and tradable services, so he went to review NI-CO and its way forward. He was there for some months. 507. Mr Close: Did the permanent secretary agree that deal? 508. Mr Robinson: Yes. 509. Mr Close: Is that stated in writing anywhere? 510. Mr Robinson: I am not sure that it is in writing, but I am aware of it. 511. Mr McClelland: NI-CO is a large organisation, and it is well known in Northern Ireland. He moved to one of the most demanding jobs in Northern Ireland, but he still found time to do consultancy work. If I became chief executive of NI-CO, I would have difficulty fitting in a round of golf every month, never mind doing consultancy work for the Tourist Board. 512. Mr Robinson: NI-CO was significantly smaller than the Tourist Board, and it employed fewer than 20 people. 513. Mr McClelland: Yet he still had time to do that work? 514. Mr Hamilton: My recollection is that the additional consultancy work was not necessarily contemporaneous with his NI-CO duties. In other words, it was done over 18 months. 515. Mr Close: He had two and a half months of his contract to run. An understanding, or deal - call it what you will, because it did not follow proper procedures - was arrived at. The Tourist Board continued to pay his salary while he was seconded to NICO. He also had the consultancy post. How long was that supposed to last? 516. Mr Hamilton: I cannot remember the precise number of days, but it was to be spread over two years. 517. Mr Close: It was around120 days, was it not? 518. Mr Hamilton: Yes. It was something like that. 519. Mr Close 520. Over how many years were those 120 days spread? 521. Mr Hamilton: I think it was two years. 522. Mr Close: He was hard pressed, was he not? There are only 730 days in two years. Was he paid £34,000? 523. Mr Hamilton: That is correct. 524. Mr Close: You are probably more aware of the rules governing consultancy work than I am. The discussion has touched on the reasons for having consultants and the various tests that have been done. Were all the tests on the use of consultants carried out under your procedures? 525. Mr Hamilton: It is my understanding that the guidance to which Mr O'Reilly referred was the principle establishment for finance officers' guidance, which laid down the circumstances in which NDPB staff could be kept on beyond the period of their employment. 526. Mr Close: I am talking about a different policy; I am sorry if I misled you. I was talking about policy on consultancy. 527. Mr Hamilton: I understand that. I was trying to relate the policy to the appointment, because the then chief executive's job was referred to as a consultancy post. I accept that. However, as I understand it, the original concept was that he would be engaged to do further work. 528. Mr Close: Yes. However, we are talking about language. All I have to go on is the brief report, which uses the word "consultant". As I understand it, the Tourist Board has rigorous, documented rules governing consultants. They are based on the Department of Finance and Personnel's rules, which date back to around 1995. Is that correct? 529. Mr Hamilton: Yes, but I am not sure about the date. 530. Mr Close: Did a manager confirm in writing the need for the consultancy? Were the trade unions involved? Managers usually sign on such projects. 531. Mr Hamilton: I do not think so. 532. Mr Close: Were none of the NITB procedures on the use of consultants followed? I accept that it is not a value-for-money report. However, the explicit guidance on consultancy, which was adopted by NITB, lists questions that are supposed to be answered before decisions are made. Were those rules followed? 533. Mr Clarke: Perhaps I can clarify the answer. I may be barking up the wrong tree, but the only NITB policy on the use of consultants of which I am aware was published only two or three months ago. However, there may have been a previous policy. 534. Mr Close: However, the 1995 - [Interruption]. 535. Mr Clarke: I am unaware of that. 536. Mr Robinson: The former chief executive undertook that work on the basis of Mr O'Reilly's reference to the severance terms for NDPB staff. That reference is dated March 1994, and it was stated that the former chief executive was well qualified to complete those tasks. The Tourist Board itself undertook two specific tasks. First, the chief executive reviewed the activities of NI-CO. The second task related to Rural Cottage Holidays Ltd, a project established by the Tourist Board, and all of that work, including the property leases, had to be standardised. The former chief executive also undertook that task. 537. At the same time, a major piece of consultancy work to develop the area around the Giant's Causeway had been undertaken for the Tourist Board and other interested parties. The chief executive was also engaged in follow-up work that had to be done on that. The fire at the Giant's Causeway visitors' centre overtook all of that, and the former chief executive tried to find a quick solution to replace the visitors' centre. 538. Mr Close: I accept that, and it is all very laudable. However, I am concerned about systems, procedures and how you make your appointments. Other references have been made to conflicts of interest and public perception et cetera. What do you think the taxpayer believes is going on? Could they not be forgiven for appreciating that a little group gets together and it's a case of jobs for the boys and "I'm all right Jack", and because the taxpayer pays for that everything is cosy? It is a big problem whenever there is no suitable rebuff to those types of assertions because of your collective failure to have procedures in place, or where those procedures are in place to disregard them and cast them aside - and not for the first time. I do not question the work that was done, but its methodology leaves a lot to be desired and poses many questions that the Committee is trying to address on taxpayers' behalf. 539. Mr Hamilton: I understand fully what you have just said. The situation was a form of single tender for which the chief executive was held to be the best-placed person to deliver the work. 540. Mr Close: How do we know? That is a judgement that was made without anybody else being asked. 541. Mr Hamilton: I understand. The chief executive was held to be the best-placed person to deliver the work at a rate that was deemed to be about half that of the market rate - [Interruption]. 542. Mr Close: How do we know? 543. Mr Hamilton: I am merely saying - [Interruption]. 544. Mr Close: There was no documentation and no evidence to demonstrate that was the case. 545. Mr Hamilton: That was the basis on which the decision was made. It was made in the taxpayers' interests; it was a question of public interest and value for money. I accept your point about contemporary documentation. 546. Mr Close: I am trying to speak on the taxpayers' behalf, and, believe me, taxpayers will not be convinced. As a simple taxpayer, I am not convinced. It is regrettable that I must say that. 547. We have been told, and it has been re-emphasised, that staff have been stretched to breaking point, and everyone is doing God knows how many jobs. 548. In that scenario, the board paid £60,000 in compensation to the former deputy chief executive and marketing director when one year of his five-year contract remained. The Tourist Board paid an additional £4,000 for employment consultancy. I know that it is described in paragraph 38 of the report as "redundancy consequent upon a re-organisation of management responsibility." 549. However, the expenditure of £64,000 was nugatory. The public would be astonished that a director should be given such generous handouts to end his contract rather than be required to complete the term of his contract and contribute to the organisation. 550. The Tourist Board has told the Committee that it was stretched and that it did not have superfluous labour. It has had to pay salary increases of 15% to some staff members, for example. However, the board paid an individual £60,000 in order to get rid of him. Was his contribution to the Northern Ireland Tourist Board so negative that he warranted a severance payment of £60,000 rather than continued employment so that he could help the board out of its obvious difficulties? 551. Mr Robinson: The individual was recruited to do a specific job, the bulk of the responsibility for which was transferred to Tourism Ireland Ltd. The board considered whether to redeploy him, but the then acting chief executive decided that it was in the Tourist Board's best interests that he should go. 552. Mr Close: Why? Was he so bad in one role that he could do nothing else, although other employees in the organisation were paid more than the acting-up allowance to perform other roles? I am trying to ascertain why it was decided that it was better to pay £60,000 plus £4,000 to get rid of that individual rather than have him carry out any other role. 553. Mr Robinson: The Tourist Board came to the Department, which reviewed the situation and the proposed course of action. I am confident that due process was followed, and the file was provided to the C&AG while extra work was being carried out. If the Committee wishes, the C&AG may review the file to check whether due process was followed. 554. Mr Close: Let us set aside due process. Was reorganisation the only reason that it was considered necessary to pay more than £60,000 to say "bye-bye" to someone? Could the individual not have carried out any other role? 555. Mr Robinson: It was decided that he could not be redeployed within the organisation. 556. Mr Close: He could do nothing else? Were you satisfied with the individual's performance throughout the previous four years? 557. Mr Robinson: The acting chief executive felt that there were some stresses and strains in the management team, which is why he felt that it would be inappropriate to redeploy the individual. 558. Mr Close: Therefore, there had been some stress and strain - some friction in the management team? 559. Mr Robinson: Yes. 560. Mr Close: Was that individual seen to be a cause of that friction? 561. Mr Robinson: The acting chief executive took the view that it was in the best interests of the board that he should not be redeployed. 562. Mr McClelland: That answer has been recorded, and Hansard should be checked. Mr Robinson's response is contrary to the answer that I was given earlier this morning. 563. Mr Close: There was friction in the management team, so it was decided to pay more than £60,000 to get rid of an individual. Innocent people such as myself might conclude that it was decided that the board should get rid of the perceived cause of friction, or the troublemaker, to enable the management team to continue to operate. One might assume that the board was under a good deal of stress and strain; therefore it had to dedicate itself solely to the jobs in hand. One might further conclude that the board decided that it would be better to make redundant an individual who dissatisfied the management team or rendered it dysfunctional, and that the circumstances justified a redundancy payment of more than £60,000. 564. Mr Robinson: The payment was made to the former deputy chief executive on the basis of his contract of employment. 565. Mr Close: I did not introduce the word "friction". You said that there was friction in the management team. I am merely exploring possible reasons, apart from the reorganisation of the board, for the individual's redundancy. In was in the interests of the Tourist Board and the management team that it should employ one less individual "as a consequence of redundancy upon a re-organisation of management responsibilities." 566. Mr Robinson: The establishment of Tourism Ireland Ltd removed the need for the post to which the deputy chief executive was recruited. In those circumstances, the organisation was required to consider its actions. It took legal advice before concluding that a payment should be made according to the terms of the contract. The Department reviewed that decision and agreed that it was the appropriate course of action. 567. Mr Close: Any Department would be content to remove the cause of a management team's friction, because no organisation works well in those circumstances. The evidence that has been given today highlights that there were so many difficulties with the operation of systems and procedures that the board would have wanted to avoid additional problems, such as the poor functioning and co-operation of its management team because of friction. For how long did the friction continue? 568. Mr Robinson: It is difficult to specify. There had been differences of opinion for some time. 569. Mr Close: I presume that that was referred to in the individual's annual performance reports. 570. Mr Robinson: I believe that the matter was discussed with the acting chief executive in the context of his performance progress. 571. Mr Close: May the Committee see copies of those performance reports? 572. Mr Hamilton: The matter was addressed by the organisation. 573. Mr Close: May we have a copy of the reports? 574. Mr Robinson: Absolutely. 575. Mr Close: Who provided the former deputy chief executive's reference? 576. Mr Robinson: We do not know whether a reference was provided; we said that we would find out whether that was the case. 577. Mr Dowdall: The agreed report states that the Tourist Board paid an additional £4,000 for a placement consultancy to assist the individual to find further employment and that it provided a reference. 578. Mr Close: Thank you for that clarification. The Committee needs to see a copy of that evidence, with the appropriate signature. The situation is difficult to comprehend. Did the individual secure employment anywhere else in United Kingdom's public sector? 579. Mr Robinson: I cannot answer that, but we shall provide that information to the Committee later. 580. Mr Close: Are you definitely unaware of what happened to the former deputy chief executive after he left? 581. Mr Robinson: He is employed as a consultant in the hospitality industry. 582. Mr Close: He may do that now, but what job did he take immediately after he left his job at the Tourist Board. Was the expenditure of £4,000 of taxpayers' money to try to get the former deputy chief executive another job successful? 583. Mr Robinson: I cannot answer that. 584. Mr Close: You do not know? 585. Mr Robinson: I do not know. 586. Mr Close: You did not hear that he was employed elsewhere? 587. Mr Robinson: All that I have heard is that he is working as a consultant. 588. The Chairperson: You agreed, Mr Robinson, to provide the Committee with the correct information. 589. Mr Robinson: Yes, I did. 590. Mr Close: He was the deputy chief executive. I would have thought that the people at the top of the Department, and those at the top of the Tourist Board would, at least, have had a modicum of interest in the former deputy chief executive, and would have some idea of where he went immediately after employment with the board - especially since those people used taxpayers' money to try to ensure that he found a new position. 591. Mr Robinson: As I have said, I shall supply that information. I do not have it at present. 592. Mr Close: It is amazing that other people can have that information - simple-minded people like myself, who do not have any great interest, can come across that information. 593. Mr Hamilton: I do not know either. 594. Mr Close: The Committee will look forward to receiving that information. 595. The Chairperson: We shall not, however, pursue the issue any further at present. 596. Mr Close: I am sure that I can hear tummies rumbling. 597. The Chairperson: I shall adjourn the meeting for half an hour. Four people have already asked questions. However, five others also wish to ask questions. The meeting has not progressed very far. Meeting adjourned at 1.11 pm. 598. The Chairperson: Our evidence session is resumed. 599. Ms Morrice: Good afternoon. I want to start with a few simple matters. You talk about a very small team in the Tourist Board, so I would like to know how many people are employed there. 600. Mr Clarke: The current staff complement is approximately 90 people. It was some 125 or 130 before. 601. Ms Morrice: It went from 125 to 90. How many of those are women, please? 602. Mr Clarke: I could find that out. 603. Ms Morrice: You said that there has been a 100% turnover in senior management. Before that took place, how many people were in your senior management, and how many of them were women? 604. Mr Robinson: For the purposes of this report we were referring to seven posts, in one of which was a woman. 605. Ms Morrice: You have now had a 100% change in senior management. How many are there now, and how many are women? 606. Mr Clarke: I am the chief executive, and of the two directors one is male and one is female. 607. Ms Morrice: So there are just three people in senior management now? 608. Mr Clarke: That is correct. 609. Ms Morrice: So it has been reduced from seven positions to three positions. 610. Mr Robinson: That is pending the review that will be undertaken of the structure of the Tourist Board given the responsibilities that have passed to Invest Northern Ireland and Tourism Ireland. The likelihood is that some posts will be confirmed and people appointed. 611. Ms Morrice: I think you know what I am getting at. Before lunch Seamus Close mentioned "jobs for the boys". There seem to be problems with promoting women into management. I would like to get to the bottom of that through a series of questions with regard, first of all, to finance - particularly the roles of the international marketing director and the finance manager. 612. The international marketing director approved the expenses claim of the New York manager after they had been incurred but before they were refunded to him. That might be an appropriate way to do it, but I want to know if the director of international marketing challenges any unusual expenditure. From this report, I have no evidence of that. Is that acceptable? 613. Mr Clarke: The international marketing director approved the "green form" expenses - the standard personal expenses from New York. The credit card has already covered, but, since April 2001, all expenditure on it has been approved in advance by the international marketing director. Also, our New York manager, in line with other managers, has an approval limit of $8,000. 614. Ms Morrice: OK. Paragraph 22 says that in 1996 the finance department carried out checks on New York transactions that showed a failure to comply with key NITB financial procedures. However, in May 1996 those compliance checks were suspended, and in 1998 the then finance manager, who was a woman, formally recorded her continuing concerns about the New York's office's non-compliance with financial procedures by way of a formal note saying that they were not being complied with by the finance manager. It was known for some time that the procedures were not being followed in New York yet absolutely nothing was done about it despite attempts by that woman to draw attention to the matter. Why did the checking stop in May 1996? 615. Mr Clarke: I understand that this was at the instigation of the finance manager. 616. Ms Morrice: Was that the same finance manager who highlighted the fact that something was wrong? 617. Mr Clarke: That is my understanding. 618. Ms Morrice: Do you know why? 619. Mr Clarke: I do not know why. 620. Ms Morrice: What happened in 1998 when she expressed concern again about non-compliance with the financial procedures? 621. Mr Robinson: Paragraph 22 says that the internal auditors carried out the review in 1998, not the finance manager. 622. Ms Morrice: Did she not express concern in 1998 about non-compliance? 623. Mr Robinson: I thought you were referring to the key point that it was the internal auditors who carried out a review that showed what was unsatisfactory. 624. Ms Morrice: I want to know what happened after the finance manager expressed concern about non-compliance with financial procedures. How were her complaints dealt with? 625. Mr Robinson: The Tourist Board sought to implement further checks, which are set out in paragraph 23, and international marketing carried them out. Also, meetings with the New York manager took place in February 1999 and August 2000 and are referenced. 626. Ms Morrice: This resulted from the finance manager's complaining about improper procedures. 627. Mr Robinson: The internal audit report as well. 628. Ms Morrice: So this woman did her job very well. She showed that something was wrong, and it was acted on. 629. Mr Robinson: Yes. 630. Ms Morrice: In the 'Spotlight' programme in February, the BBC produced a memo that says that a former NITB accountant raised concern four years ago about how this public money was spent. Is the same formal record of the finance manager's concern mentioned in paragraph 22 of the report? Can we see a copy of this memo and NITB's official response? 631. Mr Clarke: I am not aware of this memo. 632. Ms Morrice: This memo was produced for me. Have you ever seen this memo from the finance manager about the problems that had arisen? 633. Mr Hamilton: I recall seeing a photocopy of a memo. 634. The Chairperson: It is referred to in the report at number 22. 635. Mr Hamilton: I recall seeing a copy, but I do not know if it was "the" copy. I cannot recall what was said in it, or if there was more than one. 636. Ms Morrice: Was this at the time it was sent? 637. Mr Hamilton: Definitely not at the time it was sent. That sort of thing would not come to the Department. 638. Ms Morrice: What happened when this memo came to your finance manager saying "There are problems, do something about it". Was there an official response, and can we have it? 639. Mr Hamilton: Clearly that would be a matter for the senior management of the Tourist Board. I do not have the memo with me, or the specific response. We would have to check that. 640. Ms Morrice: Is this not a vital link? Someone was alerting you to this, and it was acted on. Was this finance manager not told that it was being acted on; was she not responded to officially? 641. Mr Robinson: The follow-up actions are set out in paragraph 23. A series of checks has been implemented and are carried out both within international marketing and the finance department. 642. Ms Morrice: I assume that some gratitude was shown to the finance manager for noting these things. 643. Mr Robinson: Yes. She was certainly doing her job. 644. Ms Morrice: Did she seem to be doing her job correctly by bringing this to the attention of the Tourist Board? 645. Mr Hamilton: I cannot comment on her overall performance, but that sort of thing was clearly part of her job. 646. Ms Morrice: It is strange, because you said earlier that the Tourist Board has difficulty recruiting and retaining people with specialist financial qualities. Yet this woman did her job very well. 647. Mr Robinson: A distinction must be made between a specific set of issues, as here, and whether a person is, in broad terms, qualified - and I am not saying that that person was not qualified. 648. Ms Morrice: She brought the matter to the Tourist Board's attention, and it seems that she did a good thing. Do you agree? 649. Mr Robinson: Yes. 650. Ms Morrice: It is surprising that there was no official response to her original memo. 651. Mr Robinson: I did not say that there was no response. 652. Ms Morrice: Will you look into that, and if there was an official response, can the Committee have a copy? 653. Mr Robinson: Yes. 654. Ms Morrice: Thank you. 655. I wish to return to the 'Spotlight' programme. Is it so that the former finance manager - I say "former" because I assume that this person is no longer in post - is the individual mentioned in paragraph 42 whose equality case against the Tourist Board was settled for £30,000? 656. Mr Robinson: Yes, that is correct. 657. Ms Morrice: What happened to the woman who brought the financial problems to the Tourist Board's attention? What sort of award did she receive for uncovering financial problems? 658. Mr Robinson: The case concerned the director of finance and personnel, who was due to retire in September 1998. The chief executive decided to separate the two finance and personnel functions. The finance function was the post referred to in the payment to directors. The combination of - 659. Ms Morrice: I am becoming confused. This woman did her job properly by bringing the financial wrongdoings in New York to the attention of the Tourist Board. The next thing that I know is that she received an out-of-court settlement for an equality matter. First, is she still working for the Tourist Board? 660. Mr Robinson: No. 661. Ms Morrice: Why did she leave after doing her job so well by pointing out the irregularities? 662. Mr Robinson: She was ill for 12 months, and at the end of that period, she resigned. 663. Mr Close: Was she off work because of stress? 664. Mr Robinson: I do not know. 665. Mr Close: Were no sick notes provided over that 12-month period? 666. Mr Robinson: I am sure that sick notes were provided. 667. Mr Beggs: Can you find out and advise the Committee? 668. Mr Robinson: Yes. 669. Ms Morrice: The woman was ill for 12 months after she brought this matter to the Tourist Board's attention. She was ill possibly for stress-related reasons, probably due to internal working conditions, and she filed a case against the board on equality grounds. Was she discriminated against? 670. Mr Robinson: A settlement was made out of court. 671. Ms Morrice: It seems very odd that the person who brought this matter to your attention was not promoted. The Tourist Board chief executive and his deputy received money from the Tourist Board, money as consultants, money from NI-CO and payouts of £60,000. Yet this woman, who alerted you to what was going on was told "Bye-bye" and given a £30,000 out-of-court settlement. An equality case must involve discrimination. Can you explain what happened? 672. Mr Robinson: An out-of-court settlement was made on the basis that procedures were not sound. 673. Ms Morrice: What procedures? 674. Mr Robinson: Those in the organisation. 675. Mr McClelland: I am sorry, but that was not an answer. The question was "What procedures?" 676. The Chairperson: I see your frustration; nevertheless - 677. Mr McClelland: Frustration is not the word I would use. 678. Ms Morrice: Can you see that something is very wrong when a woman - I assume a young woman - pulls a plug on something and, as a result, must leave because of stress. Meanwhile, the pay of the top boys who get all the jobs is doubled and tripled. Where does that leave her? It is a disgraceful situation, which I assume will never happen again in any Department under your control. 679. Mr Robinson: The Tourist Board has taken significant steps to train staff in appropriate procedures under the equality legislation. All staff, from middle management upwards, have been trained. I agree that it is not good for the board to find itself in that position. 680. Ms Morrice: The woman did her job correctly. 681. Mr Robinson: Notwithstanding the importance of what she did, it is difficult to extrapolate that - 682. Ms Morrice: Even at this stage, can you not be generous and compliment her? 683. Mr Robinson: You said earlier that it was good work, and I acknowledged that. 684. Ms Morrice: Is it not too late for her to get that? 685. Mr Robinson: We compare a specific set of situations and someone doing her job well against different circumstances which are about - 686. Ms Morrice: Someone not liking that person doing the job that well. 687. Mr Robinson: The senior management in this organisation has changed totally. I made that clear at the outset. 688. Ms Morrice: Good. 689. The Chairperson: The procedures are in place. 690. Mr Robinson: Absolutely. 691. Ms Morrice: I want to see if there are further such problems. Many staff have complained about their treatment in the organisation, and a high proportion of them are women. How many cases have there been? How many were from women members of staff? How many have made formal complaints? 692. Mr Robinson: I confirm that five cases out of eight were from women. I do not know about the other three, which were settled for £500 each. I shall provide the Committee Clerk with that information. 693. Ms Morrice: Were those three out-of-court settlements? 694. Mr Robinson: Yes. I do not know their gender. 695. Ms Morrice: I should be surprised if only £500 was paid in a case of discrimination or inequality. That is very little. I should be interested to know what those three cases were, if I may. 696. Mr Robinson: We shall provide that information. 697. Ms Morrice: In an organisation where only one woman was in senior management, five cases out of eight - more than 60% - came from women. Do you see that something has gone wrong? 698. Mr Robinson: Clearly something went wrong, and we have addressed that with training. We have also created a new organisation with a new structure which will address the issues which give you concern. 699. Ms Morrice: I should like to know more about your training. I am very interested in gender equality. How do you train staff who are already in place to have a balanced approach to gender issues? 700. Mr Robinson: The key point is that the senior management team has changed entirely. 701. Ms Morrice: It still only has 33% of women. 702. Mr Robinson: You said that cases were brought against the board because its management structure was heavily male-orientated. You asked what training those people had received. My response is that they are no longer there. 703. Ms Morrice: I assume that the finance manager did not rub shoulders with senior management much. If she was suffering from stress because she brought the problem to the attention of middle management, something in the culture of the Tourist Board must have caused that stress. 704. Mr Robinson: As a small organisation, which employed 120 people, it did not have many management layers. 705. Ms Morrice: Does the culture of the organisation lead to gender discrimination? 706. Mr Clarke: I am positive that such a culture does not exist now. All employees at staff officer level and above received equality training in August/September 2001, and all board members received it in January 2002. We are trying to avoid creating a hierarchical structure, and the majority of the wider management team are women. 707. Ms Morrice: Are those women successful in promotion boards? It is pointless just training for gender equality. We want to achieve equality through a 50/50 gender split at all levels. Is there proactive work in the Tourist Board to ensure that that happens? 708. Mr Clarke: There is proactive work to give managers responsibility for managing the organisation. 709. Ms Morrice: Is there proactive work towards the board's achieving a 50/50 gender split? 710. Mr Clarke: The majority of the management team are female. 711. Ms Morrice: We discussed the 100% change in senior management. Why was that? 712. Mr Robinson: Some people retired; several of the Tourist Board's responsibilities were transferred to Invest Northern Ireland, and some staff moved to that agency; and the Committee knows the reasons for the change of chief executive and deputy chief executive. 713. Ms Morrice: I get the impression from the report that senior management in the board refused to accept that the controls for expenses were inadequate and was slow to react to the former finance manager's concerns. Paragraph 10 shows that some sensible audit recommendations were rejected, especially on the need to formulate proper hospitality guidance. The C&AG's memorandum states that months after it submitted its draft report, expenses were still being charged to the credit card. Have you learnt anything from that? Is the change in management the result? 714. Mr Hamilton: There was a major change, in response, to the Tourist Board in 1999. All actions relating to the organisation of the board and its staff were cohesive. In response to the problems, the Department said that it wanted change. As part of that, new procedures for the use of the credit card have been implemented, and new financial procedures will be introduced in the next few weeks. 715. I am not suggesting that you are doing this, but it is wrong to infer that the difficulties of 1998 and 1999 simply continued without intervention. The Department was very concerned to ensure that we had the right management in place because, as you have already acknowledged, tourism is very important to Northern Ireland. 716. Mr McClelland: In the letter that you sent to the Committee in May, you said that the New York manager charged personal expenditure to the card, although that has now been repaid. Was that the first offence? 717. Mr Clarke: There were similar occurrences in 1996. 718. Mr McClelland: Had the Audit Office not brought those instances to your attention, would you have known? 719. Mr Clarke: The incidents in 1996 were brought to the Tourist Board's attention. 720. Ms Morrice: Was that through the finance manager? 721. Mr Clarke: It was brought to our attention by the Audit Office. 722. Mr McClelland: It bothers me that it was not brought to your attention internally. Do you accept that using a corporate credit card use for personal expenditure is a disciplinary offence? 723. Mr Clarke: That would be unacceptable. 724. Mr McClelland: That answer is fancy footwork. I have seen more fancy footwork here than at Riverdance. I asked a question and I want an answer. If you cannot answer "Yes" or "No", you should tell the Chairperson that you cannot answer. Is credit card use for personal items a disciplinary offence? 725. Mr Clarke: We investigated the more recent aspects of the matter that were mentioned in the C&AG's report. Duplicate claims were thoroughly investigated. We concluded that there was no attempt to mislead the organisation in any way because back-up had been provided. However, we found that that was totally unacceptable and gave a written disciplinary warning to the manager. 726. Mr Hamilton: Using a credit card for personal expense, other than in exceptional circumstances, is a matter about which a person can expect to receive a formal warning. 727. Mr McClelland: So it is a disciplinary offence, and you are telling the Committee that that happened. 728. Mr Hamilton: Yes. 729. Ms Morrice: Did the person receive a formal warning? Where is he now? 730. Mr Hamilton: He is in New York. 731. Ms Morrice: The person who alerted you to the credit card use got a formal goodbye. 732. Mr Hamilton: I am not sure who alerted us to it. 733. I return to the payments. There is a problem with the level of administration of the New York manager. There have been deficiencies in credit card use. The amount that was claimed was just over £300, which has been repaid. The Tourist Board, the chief executive and his line manager investigated the matter. We were able trace the money because the person sent the documentation to be checked. There was no attempt to conceal and no evidence of any deliberate intent to do something improper. The New York manager submitted all the documentation that identified the problem, and the board rightly decided that it was carelessness and gave him an official warning. 734. Mr Close: Paragraph 6 says that the Tourist Board's head office received a written statement that the card was not used for personal use. Was that carelessness? Is it a disciplinary offence to state that a card was not used for personal use when it was used for personal use, and not for the first time? 735. Mr Hamilton: I am not sure of the sequence of those events. 736. Mr Close: You mentioned carelessness. 737. Mr Hamilton: The individual used the card incorrectly. I not believe that there was any intent to defraud or to act improperly. It was a mistake, but he did not try to conceal his actions. 738. Mr Close: He said in a letter that he had not used it, but he had. 739. Mr Hamilton: He said that had used it, but he did not mean to. It was not his norm to do that. 740. Mr Close: Was he drunk at the time? He either used it or he did not. Did he not know that he was using it? Paragraph 6 explicitly says that there was a written statement. That was not carelessness; it was deceit. 741. Mr Hamilton: It was exceptional. 742. Mr Close: So it was exceptional carelessness? 743. Mr Hamilton: No. That is not what I am saying. 744. Mr Close: It was exceptional. 745. Mr Hamilton: I am saying that the arrangement was exceptional - 746. The Chairperson: Other members are patiently waiting to ask questions. 747. Ms Morrice: The treatment of women in the organisation has not been discussed sufficiently. Was the applicant for the deputy chief executive's job who received an out-of-court settlement of £24,000, on the grounds of poor treatment in the appointments procedure, male or female? 748. Mr Robinson: That was a woman. 749. Ms Morrice: Was it agreed in the out-of-court settlement that she had not been properly treated during the appointments procedure? 750. Mr Robinson: Our legal advice was to settle the case. 751. Ms Morrice: It seems that there are many problems with the treatment of women in this organisation, and I hope that there will be major change. 752. Mr Robinson: There has been. A significant number of women are in senior positions now. 753. Ms Morrice: We will be watching. Thank you. 754. Mr Close: The report refers constantly to the out-of-court settlement of £24,000. Were there additional legal expenses? 755. Mr Robinson: Yes. We made that point clear to Mr McClelland earlier. 756. Mr Close: Can the Committee have the details of those? 757. Mr Robinson: We have agreed to supply those. 758. Ms Armitage: I hope that we all had a good lunch, because I am going to ask you about eating out in New York. However, I will not mention the word "woman". Paragraph 12 says that in 2000-01 the Tourist Board spent £26,000 on hospitality, which is set out in the accounts for that year. The paragraph also indicates that the board charged entertainment costs to "trade promotions", amounting to £20,000 in New York alone. That does not seem to appear anywhere else in the annual accounts. The public might be concerned that the board is using the term "trade promotion" to disguise excessive hospitality spending. Is that the case? 759. Mr Robinson: All that expenditure is included in the Tourist Board's accounts. The distinction between hospitality and trade promotion is based largely on the type of event rather than the purpose of the expenditure. The goal of all our spending is to get tourists here. Northern Ireland, as a small part of the world, is at a considerable disadvantage to its competitors in the major markets. The approach that has proved successful is targeting individuals who make or influence decisions. There is no widespread advertising or campaigns in the major broadsheet journals, for example. 760. Instead we find the key people who make decisions. They could be tour operators who include Northern Ireland, people who run programmes in the travel media and those who write influential articles for the airline industry. We try to lever a much better return for our money, because we hope that if there is an agreement with Delta Airlines, it will advertise Northern Ireland widely, and once we are aligned with the airline we piggyback and get more value for money. 761. Those people must be interested in, and drawn to, Northern Ireland to be able to start the process. That is what trade promotion events are for. About 40 to 60 people who are known to be influential in particular areas are invited along to get them interested in our product. Follow-up and hospitality - including taking people out for lunch after meetings - help to secure transactions. That process is used across the whole economic development agenda. We have very little clout in internal markets and must work exceptionally hard to get the message across. 762. New York is the hardest market in the world. America is tough, but New York is incredibly tough. Anyone who has been through that process understands it. In a previous job I once flew to New York for a meeting with a senior executive in a corporation, and I waited three hours for a meeting that never took place. No courtesy was extended nor any explanation given. Whatever attraction Northern Ireland had when the meeting was set up quickly evaporated, and by the time I arrived there was no reason to go ahead with it. Spending on hospitality and trade promotion is part of that process. It is a clearly sought through strategy and it has produced results. 763. Mr Clarke: Mr Robinson has outlined the context in which we worked in North America in the 1990s, and it was exceptionally difficult. Research through Tourism Ireland showed that seven out of 10 Americans said that they would not choose Northern Ireland as a holiday destination. Throughout the 1990s the NITB tried to out-think its competitors rather than outspend them. That involved building up relationships with people who had influence in the travel industry such as the travel press, tour operators and travel agents. The bulk of the spending in the Audit Office's report could be classified as trade or media promotion, rather than purely hospitality. In all cases it was geared to an output. We are working in a competitive marketplace. For example, after 11 September last year Mexico had a budget of $34 million the following month to spend in New York to promote its destination. That is what we are up against. 764. We have analysed the events shown in paragraph 12 of the Audit Office report. We have identified tangible outputs from those 10 events of $400,000 as giving leverage on our investment of 40 to one. If we were to use the £20,000 to £25,000 identified in paragraph 12 in other ways it would buy one quarter of a page in one edition of the 'New York Times' travel supplement. Over the whole year that activity has generated a lot for Northern Ireland. 765. There is no attempt to hide hospitality. It is largely trade and press promotion, but since April 2001 additional controls have been put on it. The purpose of each event must be clarified and approved in advance by headquarters. Since April 2001 our new financial procedures have been looked at, and new procedures have been put in place to tighten it up even more. 766. Mr McClelland: You spent five minutes saying how tough the job is, but you sent out a 37-year old without qualifications or experience. It is little wonder that he spent time at the Elixir spa. 767. Ms Armitage: How much of the Tourist Board's entertainment expenditure was recorded as being for trade promotion? How can you judge its success? Can you convince us that it is money well spent? 768. Mr Clarke: Revised controls have been applied to every event that the board has undertaken since April 2001. The board operates a system of zero budgeting; for example, the New York office has had to justify its budget allocation by achieving certain results, which include the amount of press coverage that it generates by comparison to equivalent advertising expenditure and the number of tour operators that the office gets to include Northern Ireland in their programmes. Throughout the 1990s, the number of tour operators in the United States who featured Northern Ireland increased from 13 to 73, and the number of bed nights that they delivered increased by 180%. 769. Ms Armitage: How much did the board spend on trade promotions as opposed to hospitality? 770. Mr Clarke: I do not have the figure here today, but we can provide the Committee with it. 771. Mr Robinson: The overall operation of the New York office costs £1 million a year. In the past six years, the revenue that has been generated by visitors from the United States has doubled to £29 million a year. Those are key points to bear in mind. Any scrutiny of the Tourist Board - and this is a valuable exercise - must also take account of the results achieved as a result of expenditure. 772. Mr Hamilton: Lest there be any confusion, much of that tourism success is down to the New York manager. The Tourist Board receives commendations from United States travel writers and the Association of Tour Operators, and people are visiting Northern Ireland as a result of his inter-personal work with them. The expenditure of £29 million on tourism in Northern Ireland's and the increase in visits here by leading opinion-formers in New York are a direct tribute to that manager. 773. As you said at the outset, the Committee has just held its first evidence session; however, the New York manager is different from the individual described in reports. His work as a salesman is second-to-none. The board accepts that his administration and record of producing receipts have been very poor, and it has had to implement procedures to address that. However, he has carried out a phenomenally successful job for Northern Ireland. 774. Ms Morrice: So did the finance manager, and consider what happened to her. 775. The Chairperson: The Committee has never judged the manager's professional integrity. 776. Mr Hamilton: I understand that. 777. Mr Clarke: The trade promotional element identified in paragraph 12 tends to comprise the building of one-to-one relationships with the trade and the press. In addition, the board organises a wider range of trade workshops, or roadshows, to which we bring buyers from Northern Ireland to meet Northern American travel-trade representatives. That constitutes the larger element of its budget. 778. The Chairperson: Ms Armitage, are you satisfied with the answer that you have been given? 779. Ms Armitage: I am as satisfied as I can be - because the New York manager is doing a wonderful job, he must be a wonderful man. We discussed that individual before lunch. 780. Mr Close: Yes, and just before lunch he was described as relatively junior - it is truly staggering. 781. Mr McClelland: That is all the more remarkable. 782. Mr Armitage: He is certainly remarkable when it comes to hospitality. Mr Robinson, what would you consider a reasonable price for a good meal in a restaurant in New York? 783. Mr Robinson: We did not accept the C&AG's criticism of its approach to establishing a guideline; it accepts that point now. The Tourist Board and tourism industry representatives were concerned that guidelines would be turned into limits. The board was anxious that expenditure limits might damage its prospects of successful business. Our audit committee discussed the matter three times and agreed to set a limit - that answers your core question. The board has not fixed a limit for expenditure on overseas hospitality, but a limit of $75 to $80 a head - that is to say, slightly more than £50 - was discussed as representing a good guideline for staff. Entertaining key individuals for that in New York would be a good use of money, given the high costs there. 784. Ms Armitage: The reports say that staff sometimes spent about £100 a head. They were given a limitless budget. 785. Mr Robinson: Of all the quoted examples of hospitality and trade promotion expenditure since April 2001, only two fall outside a limit of $80. The bulk of expenditure falls within the guideline. When the board considered setting limits, it envisaged problems such as how to respond to a request for another bottle or a glass of wine by a key group of clients. One cannot say that that is not possible because the board is above its expenditure limit. That was considered when setting the guidelines. The bulk of the transactions could be limited to $80; all of them could be limited to $100. 786. Ms Armitage: Are you quite happy with your guidelines? You have referred to guidelines all morning. 787. Mr Robinson: The Department discussed the matter twice with the Tourist Board's audit committee. It was keen to ensure that business was secured, and it was also concerned that a guideline might become a limit. If guidelines resulted in ineffective or inefficient business, they would be a mistake. However, the Department recognises the other side of the argument, so it agreed in principle to establish a limit and asked that comparable bodies be researched to ensure that realistic, but not excessive, guidelines were set. A new guideline will be set. 788. Mr Hamilton: The board had chosen not to set a fixed guideline, so the C&AG, in his report, could compare only with the £35 figure that was set for the United Kingdom. He acknowledged that if a figure had existed, the figure given in the guideline for expenditure on hospitality in New York would have been considerably higher. Had the board maintained a guideline of $80, for example, much of the expenditure would have fallen within it. The board's decision, a policy that others in New York adopt, resulted in seemingly high expenditure, but a £60 dinner might result in an offer from an airline chief executive of $35,000 worth of tickets to bring US travel journalists here. 789. The Chairperson: Did he do that? 790. Mr Clarke: Yes, on several occasions. 791. Mr Hamilton: We supplied that information as part of the addendum on 20 May - 792. Ms Armitage: Was that before alcohol worth £72 was bought for two people? That is unbelievable. Have you received any formal complaints about Tourist Board staff? 793. Mr Hamilton: I think that - 794. Ms Armitage: I am sorry - I am asking the question. Did you hear it? 795. Mr Hamilton: Yes. I was just going to ask you if you were referring to the example of the dinner for two. 796. Ms Armitage: You have changed your mind; it was dinner for three. Have there ever been any formal complaints about Tourist Board staff being under the influence of alcohol at formal occasions. 797. Mr Clarke: I am unaware of any complaints about the New York office. I have tried to define hospitality, but that needs to be linked to clients and outputs. For example, if you were entertaining a food writer and hoping to get good food coverage, your bill might be higher than if your client were a standard tour operator. Since April 2001 we have put additional controls in place that means that any hospitality defined in that sense will not be approved without due explanation. 798. Mr Close: We are talking about inputs, not outputs. 799. Ms Ramsey: I want to return to the letter of 17 May, which states that "Failure to supply further written documentation to back up this expenditure by 21 May will result in a request by the board for full re-imbursement for the amounts outstanding." 800. This morning you said that the New York manager has covered over 77% of what is outstanding. 801. Mr Robinson: He continues to provide us with information. 802. Ms Ramsey: The letter tells us the further documentation is needed by 21May. 803. Mr Robinson: The fact is that he has continued to supply us with information. 804. Ms Ramsey: Is the letter wrong? 805. Mr Robinson: He has continued to produce the information, so as he continues to substantiate that expenditure, it is unfair of us unilaterally to tell him that the deadline had passed. That was our request - 806. Ms Ramsey: You keep telling the Committee about procedures and guidelines. These are being - 807. The Chairperson: That question complements what Ms Armitage said. What is your point, Ms Armitage? 808. Ms Armitage: I want to repeat my question. Have you had any formal complaints about Tourist Board staff being under the influence of alcohol? I ask you, Mr Robinson, because Mr Clarke was unaware of such complaints. You did not say whether there were any. 809. Mr Clarke: I am unaware of any in New York. 810. Mr Robinson: A concern has been raised in the past, but that had nothing to do with New York. 811. Ms Armitage: What type of concern? 812. Mr Robinson: That concern was about a member of staff who had too much alcohol. 813. Ms Armitage: Do you think that £72 worth was quite a lot of alcohol? 814. Mr Robinson: These are two distinct situations. You are referring to the report in the New York office, and we have made it clear that we have no complaints about anything to do with the New York office. 815. Ms Armitage: Does that mean that you would have no problem spending £172 on alcohol? 816. The Chairperson: Mr Robinson is trying to make the point that that did not occur in the New York office. 817. Mr Hamilton: New York office policy is to buy house wine or one above the bottom of the range. 818. Ms Armitage: Is that policy always adhered to, or is it merely a guideline? 819. Mr Hamilton: That is the policy. I asked the question and that is what I was told. I did not ask if it had been adhered to, or if there are exceptional circumstances when it may be appropriate to go slightly beyond that. There is no policy of having a field day at the taxpayers' expense. 820. Mr Clarke: We have reviewed all the cases in the C&AG's report, and, as Mr Hamilton said, almost without exception, they have chosen wines at the lower end of the price list. The exception was a dinner for a gourmet food writer, which required a higher response. 821. The Chairperson: Where did that occur? 822. Mr Robinson: That occurred in the British Isles, although I cannot be specific. 823. Mr Hamilton: A bottle of mineral water tends to cost between $10 and $14 in New York. 824. Ms Armitage: I referred to alcohol. 825. Ms Morrice: Everyone could drink tap water. 826. Mr Hamilton: That would be less of a strain on the restaurant bill. 827. Ms Armitage: Can you give us the maximum cost per head incurred by the Tourist Board in entertaining in New York in the last five years? 828. Mr Robinson: We must come back to you with that specific information. 829. The Chairperson: We do not expect you to give us that information off the top of your head. 830. Ms Armitage: How many times in recent years has the level of spending exceeded $70? 831. Mr Clarke: As Mr Hamilton said earlier, we have reviewed all spending since April 2001, and on only two occasions was that amount exceeded. 832. Ms Armitage: Can the Tourist Board give details of the number of occasions in the last four years on which hospitality in New York exceeded £100 per head? I assume that that information will emerge at the same time as the answer to my earlier question. 833. Mr Robinson: I imagine so. 834. Ms Armitage: For each occasion, can you provide the names and the employment details of those attending; who authorised the events; and the cost of the alcohol provided? 835. Mr Robinson: We shall provide the information. With regard to what is "proportionate" I suggest that work on the management processes now in place is a better way to ensure that this organisation controls its expenditure and costs in New York. I am concerned that we might set about doing a significant amount of work which would divert resources from the job in hand. I am not suggesting that we will not supply information requested by the Committee. That can be done, but as an alternative, I offer to check the systems currently in operation. The energy and resources of the Tourist Board goes into them, and they are designed to continue to sell Northern Ireland. I leave that offer with you. Please take it as read that I should be happy for the C&AG to have a role in this. 836. The Chairperson: That is OK, but we are entitled to the information. It is necessary for the production of our report, to which your Department, in turn, will respond inside a specified time. 837. Mr Robinson: I accept that . 838. The Chairperson: It is perfectly legitimate for Members to ask questions, but I take your point on procedures. 839. Mr Close: How much energy was expended on preparing for your appearance here today? 840. Mr Robinson: A considerable amount. However, I accept that. 841. The Chairperson: We do not want to get bogged down. 842. Ms Armitage: Paragraph 23 describes meetings between senior staff in head office and the New York manager about hospitality. It says that the concerns of Internal Audit and the Audit Office were "made known to the New York Office Manager. The manager was also advised of the opinion of the Audit Committee." 843. On one hand, the manager was told that the auditors were concerned that spending had exceeded guidelines and, on the other hand, that it did not matter very much, because sticking to guidelines could be embarrassing for the Tourist Board and its guests. Doubtless the public would think that of today's disclosures. 844. Mr Robinson: I sought to put that into context in my answer to the earlier question. The Audit Committee recognises the merit of establishing a new guideline, which is now firmly in place and will come into operation in the next few weeks. 845. Ms Armitage: You do not expect staff to have to deal with conflicting guidelines in the future. "Guideline" is a marvellous word. 846. Mr Robinson: I have considered the Audit Committee's work and talked to its chairperson, and I am clear that its concerns were that the guidelines would become limits, thus inhibiting the job to be done. Discussions at the last meeting of the Audit Committee showed that the members recognised that. They said that they would set a limit and asked the directorate of corporate services to do some research to inform the decision on which the guideline will be set. 847. Mr Clarke: The procedure stipulated that there was to be prior approval, so if someone thinks in advance that one of his clients will surpass the guideline, he must seek prior approval from his line manager. On the few occasions that a person is caught out, there is a post-approval process that must be completed within 48 hours. If the line manager does not approve the amount spent, it is the responsibility of that person. 848. Ms Armitage: There seems to have been a great deal of change in the Tourist Board. When did you decide to make the changes and why? Were they too late, or is it better late than never? 849. Mr Robinson: The process of change started late 1999 or early 2000. It has continued for the past two years because it has taken that time to implement some of the changes. It took time to establish Invest Northern Ireland and Tourism Ireland and to transfer responsibilities from the Department. Therefore, the process has gone through a significant phase in the past two years. However, there is a further step to be taken. The Minister has commissioned a tourism review that will produce a report in the next few months and will help to inform the final decisions on the structure of the Tourist Board. I envisage that the final steps of the changes will materialise later in the year. We have pledged today to make further changes to procedures, and it will take some time to ensure that they are fully implemented. Change in the Tourist Board will continue for some time. 850. Ms Armitage: Do you feel confident that the problems will not arise again? 851. Mr Robinson: I assure you that that is my objective. 852. Ms Armitage: Are you telling us that this situation will never happen again? 853. Mr Hilditch: I make no apology for going back to the credit card. It seems ridiculous that in paragraph 2 you claim to have been unaware that the credit card was being used, since the New York office did not tell you. However, paragraph 5 states that your head office understood that the card was being used in accordance with the BTA manual. How do you reconcile those comments? 854. Mr Hamilton: After discussions with the chief executive and the client executive, the card disappeared from view. The chief executive had left by that time, so the NITB assumed that the card had been withdrawn. The NITB had no instructions in place for the card's use, but the understanding was that the BTA had issued such instructions when the card was introduced in 1992. That does not mean that the BTA was in any way responsible or accountable for the situation. The board understood that the card had been around since 1992. 855. Mr Hilditch: Paragraph 4 of the report says that the NITB did not provide any instructions to its staff governing the use of the credit cards. When a credit card is issued in the public sector, there must be clear guidelines on its use - I have personal experience of that in local government. You say that there were BTA guidelines, but had they been issued to the New York manager? 856. Mr Hamilton: The feeling in headquarters was that he would have been aware of them, but I cannot find anything which says that. There was no explicit reference, and stating that is therefore of limited value. In the 1990s little fresh advice about credit cards was issued, and references in Government accounting for Northern Ireland remained the governing guidance. That was very clear. The NITB, along with all other public bodies, would have been bound by that, but no new or specific guidance was issued. 857. Mr Hilditch: Have you a copy of those guidelines? 858. Mr Hamilton: Yes. We have a copy of Government accounting. 859. Mr Hilditch: Could those be forwarded to us? 860. Mr Hamilton: Yes. 861. Mr Hilditch: Was the use of the card in accordance with BTA guidelines? 862. Mr Hamilton: I am sorry, but I have never seen the BTA guidelines. I should expect any guidelines on the use of credit cards to advise that vouchers be required, since a credit card is the same as any other form of public expenditure. Too many transactions in New York were not covered by receipts, which was throroughly bad practice. 863. Mr Hilditch: Annex A on pages 25 and 26 of the report describes an occasion in the Peninsula Bar where four drinks were bought at £74, which is £18 a drink. In the light of the answer given to Mrs Armitage, can you tell me what those present were drinking at £18 a glass? 864. Mr Clarke: Perhaps I might set that in context. The NITB was trying to get more leverage on what had been a successful Irish Tourist Board season of roadshows in North America. The occasion in question was intended to discuss potential hotel venues in New York with the Irish Tourist Board. I do not know if we have information on the precise beverages drunk, but we can scrutinise the bill to see if that information is available. 865. Mr Hilditch: I appreciate that in your previous answer you outlined how you influence those in the trade through hospitality, also giving some figures for that. However, I find it incredible that those drinks were bought for people who were not in the US travel industry. They were two people from the Irish Tourist Board. 866. Mr Clarke: I accept that. 867. Mr Hilditch: I cannot see how that can be justified, but obviously you are going to comment. 868. Mr Clarke: One of the New York manager's tasks was to increase the number of visitors to Northern Ireland from the USA, and we have provided figures to show what he achieved in that respect. Visitor numbers almost doubled in the 1990s, and almost 50% of those coming were pure holiday visitors, which is very unusual in Northern Ireland. He achieved a great deal in the key markets which we targeted. 869. The second aspect of his job was to build up relationships with tour operators, travel agents and writers - and also with other tourist boards. At the time the NITB was trying to gain leverage in its relationship with the BTA and the Irish Tourist Board. The event was partly intended to secure more leverage for Northern Ireland on their successful series of roadshows. 870. Mr Hilditch: I can understand hospitality in the overseas trade, but is it normal for NITB staff in New York to entertain other public officials at the taxpayer's expense? Was it unique, or is it common practice? 871. Mr Clarke: I should not say that it was a common practice, but it happened then in the context of relationship-building. We are trying to clarify that through the new financial procedures. As the Chairperson said this morning, financial procedures are there to protect the organisation, but they are also there to protect staff. It is important that we clarify those aspects for them. The current view of our audit committee is that entertainment for other tourist boards is not covered by those procedures. 872. Mr Hilditch: I understand your point about leverage, but you must appreciate that the figures cause us some concern. 873. Mr Hamilton: We shall check the figure, for it is high. 874. Mr McClelland: Perhaps I might extrapolate that argument: if you got the whole of Long Island roaring drunk, we could have them all in Ireland tomorrow. It is nonsense to say that spending £10,000 on booze has resulted in a £20,000 increase in tourism profits. On the basis of that argument, next year you should spend twice as much on booze and fill twice as many planes. The argument is nonsense. 875. Mr Hilditch: Annex A states that tipping is a common and accepted practice in the US. Is it common to pay over £100 in tips in one day? 876. Mr Clarke: We have provided the Committee with explanations. Some of the money covered expenses such as IT set-up costs, which are part of the US way of life. If IT must be set up for a presentation, you must tip for that service. Part of the figure covered the transport of literature to that trade promotion event. Some of the examples given here were for one day because we organised a St Patrick's Day promotion in conjunction with the Irish Tourist Board. 877. Ms Armitage: What about the tips for check-in staff at airports? That seems strange. 878. Mr Clarke: The New York manager was leading a British interest group. To ensure smooth travel and look after the group well, he wanted to make the check-in as smooth as possible. 879. Mr Hamilton: I understand that it was not a conventional check-in. The tip was for porters at a kerb-side check-in in New York. They were engaged to carry all the luggage and check in the whole party. The tip was not for the sort of check-in which we use, where you simply hand your ticket in. It was a shared arrangement on the part of the BTA and the NITB for events on which they were collaborating. 880. Ms Armitage: Everything must be paid for. I should have thought that it was simply a job which they had to do and that they would have to pay for such things. 881. Mr Hamilton: That is the norm. 882. Mr Clarke: That is the nature of America. 883. Mr Hilditch: We are considering the matter from the point of view of the Northern Ireland taxpayer, who reads that £100 was spent on tips. To some of my constituents, £100 is more than a few weeks' income. It is a pensioner's quarterly fuel costs, yet the NITB spends it in one day in New York. That is hard for the public to understand. 884. Mr Clarke: That is why it is important that we try to relate the money spent to output, something we have been doing better since April 2001. All expenditure must have a defined output. 885. Mr Hilditch: Yes, but without the NIAO there would have been no accountability. No one in the NITB challenged the expenditure, and your response to the report makes no apology. I find it deeply worrying that your organisation is so out of touch with some of the issues which I outlined. Whom are you really serving - is it the Northern Ireland taxpayer? 886. Mr Clarke: The aim of all the expenditure is to generate wealth and jobs in Northern Ireland. You are right. The NITB takes that aspect of its responsibility seriously. We wish to ensure that any taxpayers' money which we receive is used well and has an economic return. The tactics at the time, which were right, were to influence travellers. Some of my earlier examples show our success. 887. I started my job on 24 September last year. I was invited over by the NITB - coincidentally on 11 September - to a United States "grow your business" session at Templepatrick. At the top table were 16 representives from the key US tour operators, including the president of the American Society of Travel Agents (ASTA) and the president of the United States Tour Operators Association. I worked in Scotland for 11 years, and if we had had three such people at one of our events, we should have thought that we were doing very well. That shows both the esteem in which our New York manager is held and the outputs which we achieve as a result. Those outputs can be seen, for example in the 180% increase in bed nights through the travel trade. 888. Ms Armitage: Have you any idea how many tourists come to Northern Ireland without getting fed at £100 per head or plied with drink at £72 per head? 889. Mr Clarke: The idea behind spending the money is to reach out to those with influence. They were not tourists but those who influence them. 890. The Chairperson: Owing to the events of September 11, America no longer has kerb-side check-in facilities, so perhaps that will save money. 891. Mr Robinson: It would remove that issue for us. 892. Mr Hilditch: The report also refers to a farewell reception for the former chief executive, which cost almost £5,000. You said that it was held to inform customers of the new arrangements for marketing Northern Ireland and to announce the chief executive's departure. There must have been a more cost-effective way of doing that. Rather than spending £65 per head, a circular might have sufficed. 893. Mr Clarke: That was not the main purpose of the event. It was one of a series of regular travel-trade promotions which we hold in New York and part of our relationship-building with United States tour operators and travel agents. On that occasion it was in the context of the Belfast Agreement and the forthcoming development of Tourism Ireland Ltd as the new agency to deliver the United States market to Ireland. As Mr Robinson explained, the chief executive was leaving the NITB, so the occasion was taken for him to reassure the United States travel trade of ongoing support from the NITB and, in the longer term, from Tourism Ireland Ltd. 894. Mr Hilditch: How many staff members attended the farewell reception? 895. Mr Clarke: I can find that out. It was termed a cocktail reception and ran from 6 pm to 8 pm, a typical time for New York so that people can attend on their way home. The cost you cite included hiring a restaurant room in the run-up to Christmas as well as food and drink. 896. Mr Hilditch: Sixty-five pounds per head. 897. The Chairperson: Is that the happy hour? 898. Mr Clarke: You will find that people on their way home in New York do not consume much alcohol. 899. Mr Hilditch: Did the chief executive have any other farewell receptions in America? 900. Mr Clarke: As far as I am aware, no. 901. Mr Beggs: It has been a long day for us all. 902. The Chairperson: We were here this morning, and now it is nearly night. 903. Mr Beggs: I have some questions on financial controls - or rather the lack of them. The New York manager made four duplicate claims for expenses amounting to £325, and he also charged items on the corporate credit card which the NITB paid. Why are there not more formal payment arrangements, rather than simply using a credit card all the time? I can understand one duplicate and perhaps a second, but four duplicate claims is extremely sloppy to say the least. How can duplication occur when claiming expenses? Do you not require original receipts? 904. Mr Hamilton: I referred to that earlier, and I entirely agree that duplicate payments or claims are wholly wrong. Indeed, when I first heard of the matter, I enquired exactly what had been going on, asking the chief executive to follow it up himself. The New York manager's direct superior had already done so. I found it extremely strange. Later I found that he had not only claimed twice but sent in both sets of receipts to show that he had done so. 905. The chief executive and the person's line manager had spoken to him and felt absolutely assured that it was a total mistake. He was completely shocked at what he had done, and I do not believe that he is the sort to act dishonestly. I certainly rest assured that it happened in error. It was a serious error, and I should not like to see it recur, because, as you have already - 906. Mr Beggs: My point is this: do you require original receipts? If you do not, failings can occur. Could something similar happen today? 907. Mr Hamilton: That will not happen today. 908. Mr Beggs: Do you require original receipts today? 909. Mr Hamilton: Yes. 910. Mr Beggs: That is reassuring; I am pleased to hear it. 911. We were originally told that there was no personal credit card use, but $33 was identified as having gone on it. Frankly, it is irritating to find that a position agreed in a report has been retreated from. We are now saying that a sum of $3,753 is still unaccounted for. There is doubt in my mind. No one really knows what happened to the money, and there is no proof of what it went on. I am particularly concerned about why payment was made without receipts. 912. Mr Hamilton: There is no doubt that receipts should have been provided. We said all along that they were not, and that the person was careless regarding documentation. I understand that the head office was aware of the general level of the individual's expenditure, including the missing one. They knew about the events and outputs; there was little doubt in their minds that they were genuine events. 913. Mr Beggs: We heard that the finance manager was concerned at certain payments coming through. I assume that a credit card generated a monthly bill which had to be paid, and that would have made the finance department - and subsequently the management - aware that the credit card was not being used in accordance with guidance. Why was the bill paid over an extended period while nothing was done about the problem? Who took the decision to pay it? 914. Mr Hamilton: There was a one-line entry among all the BTA charges. It takes us back to when the problem was discovered and what remedial action was taken. The individual who identified the issue was out of the office for about five months, and it was not adequately pursued in her absence. However, the procedures in place now would, as Mr Clarke said, prevent similar situations. 915. Mr Beggs: I am pleased to hear that, but I am not getting to the bottom of this. Who took the decision to pay something for which there was no credit trail and no proof? The finance manager was off, perhaps because she was suffering from stress. She may have been in an awkward situation, having been told to authorise something. When she was off, who took the decision to make payments for which there were no traceable receipts? 916. Mr Clarke: That was much later, when the American Express charges came through on the BTA account. We hope we have reassured you that the New York manager will reimburse the $3,700 currently outstanding without receipts unless he can prove he incurred the expenditure in line with the NITB's financial procedures. 917. Mr Beggs: By what date? 918. Mr Clarke: Within two weeks. 919. Mr Beggs: That is reassuring. When did he repay the $33 of inappropriate personal expenditure? 920. Mr Clarke: Two or three months ago. 921. Mr Beggs: How long was that after its being originally incurred? 922. Mr Robinson: It was some time after. 923. Mr Beggs: The worry is that it has finally been paid because we are here today. I am passing on my concern. You referred to new procedures coming in. I am unsure if that is to happen next week or in the next few weeks. Are there any other new procedures? 924. Mr Robinson: The procedures for hospitality and charges were introduced in April 2001. 925. Mr Beggs: I wish to turn to a payment made for spa services covered in annex A. Apparently they were not used by NITB staff but by a British Airways representative. What guidance was made available concerning appropriate and inappropriate payments? 926. Mr Robinson: That situation was outlined in the letter of 20 May. The British Airways charge was on behalf of a representative of theirs who had been working closely with the NITB and assisted promotion significantly. That was the basis of the contribution to the NITB's work. The final paragraph of the letter of 20 May says that the joint work led directly to the NITB securing a visit to Northern Ireland from the board of the prestigious American Society of Travel Agents, and that British Airways provided airline tickets valued at $108,000 free of charge to facilitate it. That was the background to the bill being paid. 927. Mr McClelland: What was the British Airways representative's position? 928. Mr Clarke: Sales manager. 929. Mr Beggs: We must welcome the $108,000 worth of free flights. What ensures that flights of such value are put to proper use? Can they all be traced to business authorised by the NITB? 930. Mr Clarke: One event was the Seniors Open; the other was the ASTA trip. We have documentary evidence of who attended those events. 931. Mr McClelland: Can I have that documentary evidence? 932. Mr Beggs: Apart from that instance, are there any other items of hospitality or gifts given to NITB staff overseas? If so, is there a register of receipts? 933. Mr Hamilton: The flights were not gifts. The individual assisting the NITB was in New York. She incurred the charge during her stay and left the next day. The bill was presented to the New York manager, who had to decide whether or not to charge her, despite the work that she had done for the NITB, or pay it. He chose to pay. 934. Mr Beggs: Paragraph 28 of the NIAO report of February 2002 says that the New York office produces monthly reports of actual spending set against budget spending for the head office. It surprises me that hospitality is the only item not included in such reports. If they had included hospitality, the director would have seen that the money which had been spent on hospitality was not approved, since it had been paid by credit card rather than the usual expenses claim. The unauthorised credit card use would have been highlighted much sooner. Why was hospitality spending not included in the monthly reports to head office? 935. Mr Robinson: I cannot answer that point. It is factual reporting. Those procedures are in place now. It was an oversight at the time. 936. Mr Clarke: Since April 2001 all hospitality spending must have approval from the international marketing director a month in advance. 937. Mr Hamilton: Much of the approval for that type of spending was given informally. In 1998, when Euro-based budgeting was introduced, the New York manager would have had to bid for that resource based on his activity and outputs. The sales director would have been aware of what the New York manager was doing. You are right to highlight that there should have been written documentary evidence rather than relying on the manager's activities and outputs. 938. Mr Beggs: It is surprising that there has been no traceable audit. I hope that the procedures which you have put in place will ensure that it does not happen in future. 939. Various contacts have suggested that senior members of your Department have been absorbed in preparing to meet the Committee. They have been wasting your time and, to a certain extent, that of the Committee and the NITB in trying to make the best defence. Rather than acknowledging failings and putting new procedures in place, you have been very defensive. Attempts have been made to pass the buck round the table so that no one is caught with the hot stone. 940. I am frustrated at that. We are almost saying that no one is to blame for what happened. I appreciate how other accounting officers acknowledge that failings have occurred and say what is being done to put matters right in an honest and forthright manner. I regret that I have not heard that today and that problems have not been faced as they ought to be. Nevertheless, you say that more improvements are being made, so I hope that we do not hear of such problems again with the NITB or any other bodies under your control. 941. Mr Robinson: I certainly did not intend to give that impression. The reports clearly show weaknesses, which are accepted. I made that point at the beginning to the Chairperson. I said that systems were not applied as they should have been. They were in place, but they were not operated. 942. Mr Beggs: Who is accountable for those weaknesses? 943. Mr Robinson: I am, since I am the accounting officer. Most of the failures happened over a considerable period. I have made clear that they should not have occurred. In pointing to where there were no systems I have also made it clear that the Department recognises that the task set for the NITB was too broad. My intention in making those points was to make it clear that the mistakes were recognised and to highlight where we have made changes designed to do exactly as you quite properly ask us - to ensure that they do not recur. Moving a substantial part of the work associated with grants to Invest Northern Ireland is designed to ensure that they are dealt with by a larger organisation with the necessary in-depth expertise. I did not intend to deal with the matter in a way likely to create the impression you mention. 944. Mr Dallat: Perhaps at this late stage I should cheer Mr Robinson up by saying that he was not the accounting officer for most of this comedy of errors. Who was the accounting officer, and was he disciplined? 945. Mr Robinson: The accounting officer was my predecessor, Mr Gerry Loughran. 946. Mr Dallat: The same person who has been promoted? I am concerned, as Mr Beggs is, that perhaps not enough has been learnt from the affair. Recently there has been a series of glossy articles in magazines extolling the virtues of the chairman and saying how we must encourage people of that calibre to run NDPBs such as the NITB. Not once today have I heard that the chairman intervened at any stage to correct an NITB ship drifting listlessly on the high seas. The only thing that I have heard he did, according to Ms Morrice, was chuck mermaids overboard. Where was the chairman during this comedy of errors? 947. Mr Robinson: The chairman was convening a board. In the course of the considerable difficulties which the NITB faced he did everything in his power to ensure that the organisation continued to deliver its charter and remit, which is to promote Northern Ireland as a tourist destination, and the results in recent years have been very good. 948. Mr Dallat: Do you sympathise with the glossy articles written by well-wishers, one of whom described members of the Public Accounts Committee as begrudgers, since we dare to seek value for money? 949. Mr Robinson: I am not aware of the articles to which you refer. 950. Mr Dallat: I am surprised, for they were well circulated. However, we shall continue, and I want you to listen carefully to every word in the part of the report dealing with the printing contracts. I wish to consider the C&AG's report on 1999-2000 accounts - the section on failure to follow proper purchasing procedures - and I want to ensure that you properly appreciate the gravity of the points raised. 951. Fact one: from table one, we see that, over an eight-year period between 1992 and 2000, proper tendering procedures were not applied to almost £4 million worth of print contracts. 952. Fact two: from paragraph 2, we see that the NITB clearly breached its rule that all contracts over £15,000 be awarded after open competition. That is a very good rule - the best rules are always the simple ones. You do not need a master's degree in purchasing to understand them. 953. Fact three: compliance with these simple rules is a fundamental requirement for all public bodies. The Treasury has already made this crystal clear, and I am sure you do not disagree. 954. Fact four: compliance with those simple rules was even more important for the NITB because large contracts were being awarded to W & G Baird Ltd, a company connected to the NITB's chairman. What is the explanation? 955. Mr Robinson: The print procurement procedures were not followed properly. That is evident from the C&AG's report. The NITB introduced a new set of systems under the Government Purchasing Agency (GPA) - or Government Procurement Service (GPS) as it is now - in April 2000 and has operated the appropriate procedures since. 956. Mr Dallat: I know that you have tightened up procedures since the C&AG report, but why were the board's rules broken over and over again for a decade? 957. Mr Robinson: They should not have been. Senior staff did not realise the issues involved, and so the system did not operate properly. 958. Mr Dallat: I see from the Department's submission of 20 May that total expenditure on printing in the two years ending March 2002 was £719,000, compared to £971,000 in the previous two years. In other words, there was a fall. Was this because you were doing less printing work, or were you getting better value for money by applying proper tendering procedures? 959. Mr Clarke: Perhaps I might make the general point that all tourist boards are tending to commission less printing work. With the rise of the Internet, people are getting more information from the web than through print, so across the world people are doing less and less printing. 960. Mr Dallat: Our report will not be worth the paper it is written on if we only get general points. You should be specific and tell me if you have done less printing over the last two years or if you are getting better value for money because your house is now in order. 961. Mr Hamilton: We should need to carry out an analysis of the volumes. 962. Mr Dallat: I think so too, for I am disappointed by Mr Clarke's reply. Nevertheless, Mr Robinson, do you agree that the handing out of Government contracts must not only be fair but be seen as such? 963. Mr Robinson: Yes. 964. Mr Dallat: Is it not seen to be fair in the NITB? 965. Mr Robinson: The procedures in place are designed to make it fair. 966. Mr Dallat: Has it not been seen to be fair, and has that caused great anger in Northern Ireland? 967. Mr Hamilton: Transparency has been wanting in the procurement procedures identified by the C&AG in his report. 968. Mr Dallat: Do you not agree that, particularly among a whole range of small contractors, the practices which went on in the NITB for a decade have sapped confidence in the public procurement procedure? 969. Mr Robinson: I cannot comment on particular individuals or situations. I know only that it should not have happened. 970. Mr Dallat: We shall move on. I should like to turn to annex 1 of the C&AG's memorandum to the Committee. There is a quote from an internal minute written by a senior staff member in 1997. It says that changing the contract procedures would have "the "independence" that we can easily stand over with particular relevance to the delicate issue of transactions with W & G Baird and the reporting of those both in the Annual Accounts and the industry awareness of these projects". 971. What does the phrase "delicate issue" mean? 972. Mr Robinson: It is obvious that there has been a recognition that, with Mr Bailie as chairman, conflict of interest must be dealt with. That is why the matter is delicate. 973. Mr Dallat: Given that senior managers recognised that it was a delicate issue - and I also see that they had recognised in 1996 that they needed to be careful in case the Audit Office caught them in their tendering procedures - why was nothing done until a complaint from a Northern Ireland company prompted the internal audit review in February 2000? Why did some poor downtrodden competitor have to trigger off a procedure to change things, when senior management recognised six years ago that things were not right? 974. Mr Robinson: The procedures which they had in place at the time to deal with the issue of having Mr Bailie as chairman were that nothing to do with print would come to the board or be discussed by it. That was the procedure and process on which they were working. That was how they were dealing with the matter. 975. Mr Dallat: Do you think that was wise? Could there have been a Chinese wall between Mr Bailie and the business? 976. Mr Robinson: The indications that we have are that the procedure worked. That was the manner in which it would be dealt with, and it worked that way. 977. Mr Dallat: Mr Robinson, you assured the C&AG in his report that there was no impropriety, but there seems to have been a willingness to continue operating purchasing procedures which senior staff knew were indefensible. I am concerned about a culture where staff want to keep a strong chairman happy, and, without anything being said, poor purchasing procedures are tolerated. Those poor procedures result in unfairness to other companies in the printing sector. They are either not given the opportunity to tender, or their lowest bids are ignored. Why else would the board persist with flawed tendering procedures which it knew to be wrong? Can you give me an explanation? 978. Mr Robinson: As I said, the way in which the tender was managed meant that the board did not see any issues connected with print. It is clear from the C&AG's work that the print procurement aspect of the procedures was defective, and we have accepted that. However, no evidence has emerged to suggest any impropriety on Mr Bailie's part. 979. Mr Hamilton: The standard of procurement operated was more like that of the mid 1980s than the mid 1990s. W & G Baird Ltd sought tenders and did not have select lists; it had processes but did not articulate those properly. The company's practices in the mid 1980s were clearly deficient, and it ought not to have been that way; it ought to have done it better. The C&AG said in his report, 'Northern Ireland Appropriation and Other Accounts', that as a consequence those standards were applied to all businesses, not just W & G Baird Ltd. Everyone benefited, if that is the right term, in the same way, since the same procedures were used for all contracts. It was therefore not a matter of having a process that suited W & G Baird Ltd. 980. Some tenders did not go to the lowest bidder, but in my experience and that of representatives of the GPA, a significant majority of procurements do not go to the lowest tender. It does not automatically mean that the decision is wrong just because something does not go to the lowest tender. Price, among other things, is included in each procurement. Sadly, the C&AG found that the NITB did not have the documentation to support the basis on which the tender was provided. That brings you back to the fact that procedures were entirely deficient and that they should have been better. 981. Mr Dallat: Do you realise that you are running a Government Department? 982. Mr Hamilton: I am talking about an NDPB. 983. Mr Dallat: Exactly, but we should not split hairs - it was a totally Government-funded NDPB, and you are explaining that perhaps it could have been a private enterprise. 984. Mr Robinson: I am giving you the report's explanations, which acknowledged that the procedures were deficient. 985. Mr Hamilton: In 1993, the Department adopted a holding-company model, in which there was a department of the centre and each of the businesses operated as independent units. Those units were not independent in policy terms and did not have independent standards, but they operated outside a centralised structure, similar to a holding-company model. All our businesses discharged that remit then. 986. As the NITB and LEDU are NDPBs with their own board structures, we tried not to "shadow-manage" them - which means we were not managing them directly from the Department. We set up arrangements to do that, such as internal audit reports to the chief executives. There were managements separate from us. As we have seen today, we found that there were serious deficiencies in that process, and as the decade progressed we had to change those dramatically. However, the changes were part of modifications to the organisation of the Department. 987. Mr Dallat: Surely it did not take a decade to observe your own simple house rules? That was something that you did not do. 988. Mr Robinson: The procedures which were applied were incorrect, but as Mr Hamilton said, prime responsibility was with the chief executive of the NITB and its management team, which operated as accounting officers for the NDPB under the rules. 989. Mr Dallat: We shall return to that, but I should like to move on to the C&AG's latest memorandum on the 1997 contract for producing the 'Breakaway' brochure. 990. We were told that W & G Baird Ltd had carried out that work for many years at a total value of £612,000. They did not on this occasion say that "In its present form the project does not have the necessary commercial potential." 991. There was only one tenderer, and the board challenged its suitability on the grounds that it had market intelligence that the company was in a weak financial position. That is critical. The C&AG asked the former NITB official where the information came from. He was told that it had arisen in discussions with the NITB chairman. You told me a few minutes ago that the chairman had no involvement in print tenders, but now we are being told that he is up to his neck in them. 992. Mr Robinson: The chairman had no involvement in print contracts. It was the first time that the NITB had considered outsourcing a contract - for publication rather than printing. In that case, a publication contract involved responsibility for raising advertising revenue for the document over three years. It was a very different approach by the NITB, and the board noted that. The executive informed the board that they were intending to go in that direction as a significant change. That is how the chairman was aware that the publication contract was being dealt with. 993. The process that the NITB carried out with the GPA produced one tenderer. Anyone faced with those circumstances would stop and think, and a variety of issues would come into their minds. One concern would be whether the process had worked properly, for one always wants to have some choice in such a situation. The deputy chief executive of the day mentioned his concerns about a single tenderer. The chairman made a very obvious and important point which was that the contract would last three years, and you should ensure that whoever you are signing up with can do that. That was the basis on which there was a financial review of the tenderer. That proved to be satisfactory, and the tender was placed. W & G Baird Ltd was never in for the contract and never likely to be in for the contract and had not tendered. 994. Mr Dallat: That is true, but if the single tenderer had not existed, the whole thing would have been out for contract again. Why did the chairman of the NITB, who had massive financial interests in the publishing industry, question the creditworthiness of a competitor when he apparently played no role on the board? 995. Mr Robinson: It was not a competitor, because it was not engaged in the same contract. The chairman's role was a strategic step taken by the NITB. Taking that different approach was very important to the job in hand. He quite properly said that we must ensure that the contract lasted three years and that the business which won it could sustain that. It stood the test of external examination. The GPA was entirely happy for that to happen. It was perfectly within procedures, and it was a sensible move which produced an outcome which said that the tenderer would have the financial strength to undertake the work. 996. Mr Dallat: The Committee's concern is that the public will not believe a single syllable of that. 997. Mr Robinson: The C&AG's report makes it clear that he has not found any evidence of impropriety. 998. Mr Dallat: I did not suggest that. I asked why the chairman was involved directly in a contract relating to the printing industry when a letter from your Department regarding printing matters, dated 7 March 2001, signed by none other than the Minister and lodged in the Assembly Library, states "I have made it clear that the Chairman of the NITB has acted entirely properly in his dealings on these matters. This is acknowledged in the C and AG report. The fact is that W & G Baird had a business relationship with the NITB prior to Mr Bailie's appointment as Chairman of NITB, and the Department of Economic Development was well aware of that at the time of his appointment." 999. Would you write that letter now? 1000. Mr Robinson: We were well aware of his involvement. Guidance on the matter has changed in today's examination. The guidance from the Cabinet Office, which applied at the time of the appointment, was followed. 1001. You touched on several issues in the current guidance with regard to a potential conflict of interest. In contemplating the appointment of someone with a potential conflict of interest, the guidance makes it clear that that interest should be fully discussed at the time of the appointment and that procedures should be developed and put in place at that time. Clear procedures can be subject to test at any future time, and that is their purpose. 1002. Guidance has moved on. It makes it clear that, if the proper procedures are in place, people who have a real or perceived conflict of interest with the organisation can serve. The guidance recognises the necessary contribution of such people as Mr Bailie to running NDPBs. As I said, throughout that difficult time the organisation managed to produce very good results and focus on the task. I am in no doubt that Mr Bailie deserves much credit for that. 1003. Mr Dallat: The chairman of the NITB has a massive conflict of interest. At the very least you, as accounting officer, should have made absolutely sure that he was completely insulated from any formal or informal contact with the tender process for a board publication. 1004. You agree that in this case the chairman's company had previously undertaken substantial work on the brochure, and might be asked to bid again if the single bid from the 1997 competition were deemed ineligible. It was improper for an official to raise any aspect of that competition with the chairman. We are told that, when approached, the chairman decided to give the officer advice. You see nothing wrong with that. 1005. Mr Robinson: It is important to be clear that the contract now under discussion was a three-year publication contract. The two significant differences were that the previous contract was not a publication contract and that it was not for that duration. 1006. Mr Hamilton: It was reported to the board because the executive decided that too much staff time was devoted to it and that they wanted others to do the work. That was a major departure in the board's workflow, and the decision was reported to the board to keep them informed. The board and Mr Bailie were aware of it only because of the unique nature of that contract. That allowed the deputy chief executive to mention his concerns to him subsequently. 1007. Mr Dallat: I should not have to tell the accounting officer that the use of advice emanating from the chairman on any publishing contract is not consistent with the degree of separation of interest essential for public confidence in the integrity of the board's purchasing procedures. It is simply not on. 1008. The Chairperson: You said that it was a publishing contract and not a printing contract. What is the difference? 1009. Mr Clarke: As Mr Robinson said, it was an all-encompassing publishing service. It involved all aspects of publication such as design, layout, the editorial aspect - writing the copy for the brochure - selecting photographs, printing and, importantly, soliciting advertising. Soliciting advertising, from accommodation providers in particular, was a key issue. 1010. After the ceasefire, accommodation entries to be printed increased by 25% per annum. More tourists were coming to Northern Ireland, and that put pressure on internal staff resources. The brochure was the key publication which the NITB used in the home market - the Northern Ireland market - and in the Republic of Ireland market. Great importance was put on getting the publication right, since many small businesses - 400 in Northern Ireland - depended on the publication as a prime source of trade. An inaccurate entry or a delay in publishing would therefore have a detrimental effect on them. That was why it was reported to the NITB on two occasions. It was a key strategic step for the NITB at the time. 1011. There was also a requirement in the contract that the brochure be produced at no net cost. In other words, the publishing company had to achieve the publication to its tender document and at no cost to the NITB. That was an aspect of the viability of the project. It was, as Mr Robinson said, a three-year contract. My reading of the files - and I have gone through them in depth since I joined - was that the GPA advised that the one tender received was likely to be in order but that it would be prudent on behalf of the NITB to check its viability. As that tender was not up to the required financial standard, the GPA advised that it would be prudent for the NITB to prepare to re-tender on a publishing contract - not a printing contract. 1012. Mr Dallat: Do you think it right for the chairman of the NITB and an official to be doing business at such a level involving another company? Is splitting hairs between publishing and printing sufficient justification for allowing that? I know the company which published the brochure. It is not a back-street affair. A good business went on to publish the brochures - as I understand it, without complaint. Are you still insisting that it was right for the chairman and an official to be involved at such a level of interaction involving what could be a rival printing company? 1013. Mr Robinson: There was a significant difference between the two contracts, and I believe that the chairman acted appropriately in the situation. He gave general advice on an issue in which he had no interest. His company was not involved, and it was a significantly different contract. It was therefore in accordance with the arrangements in place. 1014. Mr Dallat: In your response to the Committee on 10 May 2001 you rejected its proposition that it was undesirable to make an appointment to the board of a public body in circumstances where the prospective appointee's company is carrying out substantial commercial business with the public body. The views of the Committee were dismissed as pious nonsense and clever sophistry. Do you now accept that it was unwise of you and others to dismiss such a simple and sensible proposition from the Committee? 1015. Mr Robinson: I do not understand the reference to pious nonsense. It certainly formed no part of my response. 1016. Mr Dallat: I have said you and others. Remember - 1017. Mr Robinson: Sorry, but I did not hear that distinction come through. 1018. Mr Dallat: I am surprised that you have not closely followed the public warfare which has broken out as a result of criticism of how the NITB conducted its affairs. Seemingly limitless numbers of allies have rushed to the defence of the NITB chairman, and glossy articles have been printed, which you must have seen. 1019. Mr Robinson: The response which I gave the Committee on that point was based on Cabinet Office guidelines, which, even as modified for the Office of the First Minister and the Deputy First Minister, state that there is no reason in principle why someone running a business with potential for direct connections with a public body is excluded from serving on it. 1020. The Committee recognised, for example, that someone working in the hotel or catering industry could appropriately be a director of the NITB. There are issues as complex for someone in the hotel and catering industry regarding conflict of interest as for someone supplying in Northern Ireland. The NITB pays grants to companies in the hotel and catering industry and, of course, receives business plans and applications from many companies competing with - or potentially competing with - the business a board member might have. 1021. Mr Dallat: Even if one accepted that as correct - and I disagree with the parallels you have drawn - why did you not protect your chairman against the potential conflict of interest, and why did he find himself in such difficulty, not least in the last example I gave, where he advised on the creditworthiness of another printing firm? 1022. Mr Robinson: The chairman was protected by the procedures put in place. Print contracts did not come to the board in any form. Mr Dallat, you continue to suggest that the distinction between print and publication is quite minor - in fact the opposite is true, as is clear from what Mr Clarke said. Issues regarding conflict of interest are of great importance, particularly in Northern Ireland, which is a very small society in which it is exceptionally difficult to find situations where there is absolutely no conflict of interest or perception thereof. We must develop rules and guidelines to deal with that. We have done that with Invest Northern Ireland, recognising the issues which have arisen. With the board of Invest Northern Ireland we have developed the protocols and situations which apply in considerable detail. We continue to do so. 1023. It is very difficult if extensive and proper procedures are not put in place, and that is what we are doing. We have learnt from the situation which has arisen. I am quite clear that the chairman has done nothing in any way wrong. 1024. Mr Dallat: I have no doubt that Mr Bailie's talents could have been used in a thousand different ways in other areas where this mess would not have happened. I also believe that there are many people with the talents and ability to serve this country without becoming involved in such dangerous conflicts of interest. Perhaps I have a higher opinion of people than do others. I do not know, but I am quite convinced of that. I accept that expertise is required in certain bodies, as you have outlined. However, there is absolutely no need for the outrageous potential conflict of interest which existed for more than a decade in the NITB. What I have heard today suggests no admission that anything went wrong, despite the fact that time and time again printing firms were not awarded contracts when they had made the lowest tender. 1025. Mr Hamilton: The GPA has said to me quite expressly that the lowest tender does not win the significant majority of procurements across the board. That is fact. 1026. Mr Dallat: I shall have the last word. One of the companies done down time and time again has won awards right across Britain for its work. 1027. Mr Hamilton: I do not doubt that. Mr Dallat is quite right to draw attention to the perception of conflict of interest, which has a significantly higher profile now than under previous guidance. It is written into the April 2002 guidelines, and any future appointments which we make will reflect that. 1028. Mr Close: One or two points in your evidence need further explanation. Reference has been made to new guidance on conflicts of interest or perceived conflicts of interest. The accounting officer specifically referred to proper procedures being in place. You can appreciate the difficulty of the Committee - and taxpayers - in believing that the new procedures will be observed, since today has clearly demonstrated how various procedures have not been followed. 1029. The problem with the Malone Lodge Hotel, about which I questioned you this morning, was a breakdown in procedures and systems. The payments to staff were a breakdown in procedures. When we fly the world with the NITB, it always comes down to a breakdown in procedures and systems, so I cannot accept that the new guidelines, which are based on procedures being in place, will be acted upon. I am sure many taxpayers will share my frustration and difficulty in accepting that everything will suddenly be put right. Assurances were given in 1995 and 1996, and nothing happened. Matters seem to have deteriorated further. 1030. The 'Breakaway' contracts in 1997 were handled through the GPA. 1031. Mr Clarke: GPA handled the outsourcing and publishing contract. 1032. Mr Close: When was it next used? 1033. Mr Clarke: To award an NITB printing and publishing contract. 1034. Mr Robinson: We know for sure that the GPA came in with the new procedures in April 2000; everything since has been managed by it. 1035. Mr Close: So there is a gap from 1997 to 2000. 1036. Mr Robinson: I can confirm that it was definitely used from April 2000, though I cannot state categorically that it was not used in the period which you mention. We can research that for you. 1037. Mr Close: It is staggering, given all the homework which you must have done for today, that you are unsure whether it was used in the interim. 1038. Mr Hamilton: The NITB did not follow suit when the Department moved into a service-level agreement with the GPA. It chose to use the GPA selectively for certain contracts. We do not have specific details, as Mr Robinson said, but I imagine that it used it selectively between then and April 2001. 1039. Mr Close: That says a great deal about procedures if we do not even know when were using the GPA, which we were supposed to have been using. It poses a question. 1040. Mr Hamilton: Sorry, but several Government Departments did not use the GPA throughout the 1990s because they decided to do their own purchasing. Clearly the NITB decided that it had procurement expertise. The decision made by the Department was that it did not. 1041. Mr Close: The GPA insisted that proper procedures be followed in 1997 but used them in a "picky-choosy" way in the interim. It insisted on procedures being followed, yet the record shows that they were not. The organisation was too insistent that proper rules and procedures be followed. 1042. Mr Hamilton: The GPS has also had to be completely reorganised since then. 1043. Mr Close: Is that a justification for not following the proper procedures? I should not like to think so. 1044. Mr Hamilton: No, absolutely not. 1045. Mr Close: I shall not follow through on that. We are told that in July 2000 an allegation was made by a member of your staff that the questioning of the financial standing of the successful bidder for the 1997 'Breakaway' contracts had come from W & G Baird Ltd. That was about the time you were assuring us, through the C&AG's report, that NITB board members had no involvement in awarding such contracts. That has been touched upon, but I want to come from a different angle. Do you accept that the allegation was a very serious matter? We are told that the acting chief executive considered it and concluded that the actions of his senior colleagues and the comments of the chairman were perfectly reasonable in the circumstances. Do you not agree that the member of staff who made those allegations perceived, like us, that there were grounds for concern about propriety and that there was a Chinese wall between the chairman and the board's publication contracts? With whom did the acting chief executive discuss the matter before reaching the conclusion that everything was all right? 1046. Mr Robinson: The acting chief executive indicated that he had considered it himself. 1047. Mr Close: So he took the decision himself? Is there any record of his discussion with himself? 1048. Mr Robinson: There are no contemporary records. 1049. Mr Close: As I see it, he was considering a serious formal allegation of impropriety, so he simply went off into some corner and talked to himself about it. Is that what you are telling me? 1050. Mr Robinson: That is what he said. 1051. Mr Hamilton: I understand that he examined the records. He considered the situation and came to the conclusion that there had been a conversation between the chairman and the deputy chief executive in 1997 and that the conversation was appropriate for the chairman. He also concluded that the remark was appropriate. 1052. Mr Close: Was the member of staff who made the allegation informed of the outcome of the acting chief executive's conversation with himself? 1053. Mr Robinson: I do not know. 1054. Mr Close: You do not know? You are the accounting officer for this Department, and you do not know about a very serious allegation. The individual has a chat with himself, and you do not know whether he has informed the person who made the serious complaint. Surely the NITB would not allow a serious complaint such as this to go unanswered and presumably fester away in the mind, body and soul of the individual who made it. Am I exaggerating? That would not merely be bad practice but maladministration. 1055. Mr Robinson: I do not think so. The acting chief executive reviewed the papers and dealt with it. 1056. Mr Close: How do you know that, when there is no record? There is no documentation on a serious allegation made by a member of staff which suggests - or could be construed as suggesting - impropriety. They speak to themselves, and do not inform the person who makes the complaint, yet you do not consider that maladministration. What is maladministration then? 1057. Mr Robinson: As I understand it, maladministration is when someone fails to discharge his responsibilities properly. 1058. Mr Close: In this case, has someone failed to discharge his responsibilities properly? 1059. Mr Robinson: The acting chief executive undertook the appropriate steps. 1060. Mr Close: The appropriate steps are not to talk to yourself about a serious allegation. 1061. Mr McClelland: If the acting chief executive were being interviewed for the post of chief executive, who would form the panel which would decide whether he was a proper person for the post? Would the chairman of the board be on it? 1062. Mr Robinson: If you are asking who was on the panel which appointed the current chief executive - the chairman was on it. 1063. Mr McClelland: The chairman would be on the board. Might that have influenced the way the acting chief executive handled the complaint from a senior member of staff? 1064. Mr Robinson: The acting chief executive was on secondment from the Department to the NITB. 1065. Mr McClelland: Would he have sought or been considering the chief executive's post? 1066. Mr Robinson: I do not believe so. 1067. Mr Close: I understand a case of maladministration against the NITB recently appeared in the press, which does not surprise me, since it seems that some people do not know what is maladministration and what is not. The ombudsman was critical on all counts. A lack of thoroughness and a degree of defensiveness were referred to - is that the case here? 1068. In conclusion, I must say that nothing I have heard today deflects me from where you started - with reference to a newspaper editorial. We are surveying an absolute shambles, where it seems anything goes except procedures and systems, which went out the window long ago. The Department of Enterprise, Trade and Investment might more appropriately be called the Department of Excuses for its absolutely Terrible Inadequacies in dealing with the NITB. Of course, reference was also made to another "arm's length" organisation. We have already seen how a previous accounting officer for the Department, who was responsible during most of this pantomime of errors, got promotion. I shudder to think what the outcome of this hearing will be. 1069. The Chairperson: That brings proceedings to an end. We have been here since 10.15 am - a very long session. 1070. In brief, we have had to address a disturbing range of failures. It is not simply a case of poor control of a credit card; that case is not the most blatant which we have encountered, very disturbing as it is. The failure to operate proper procedures, which has dominated today's meeting, is probably the key to everything, especially in relation to purchasing, which, as the C&AG's report says, has not left you well-placed to defend yourselves against the allegations. 1071. Public purchasing must not only be fair but be seen as such. We have seen the board appointing very senior staff, who are then bought out of their contracts at great expense to the taxpayer. We also see an unhealthy level of litigation on fair employment issues. We have had to deal with what I can only describe as a slipshod error in your core business of awarding grants to hotels. Not only did the board's own control procedures fail to detect the planning deficiencies, but it also failed to heed repeated warnings from the residents' association. As a result, almost £450,000 of taxpayers' money was paid out on a project which did not meet the conditions of the original offer. The board's failure to enforce the terms of its offer properly sends out the wrong message to developers - namely, that offer conditions can be ignored. That undermines the integrity of the scheme and places taxpayers' money at great risk. 1072. Finally, there is your Department's inability to give an accurate response to the C&AG's draft report on the matters which led to the additional memorandum. That greatly concerns the Public Accounts Committee, since we feel that we cannot operate properly without agreed reports. 1073. I cannot remember a more serious catalogue of concerns at the end of an evidence session, and we shall have to consider how we take matters forward very carefully. I made it clear at the start that we are all concerned about the business of tourism. I support tourism, and I support your Department and the NITB in promoting the programme to bring tourists to Northern Ireland and contribute to the country's economy. I genuinely support you in that, but I feel that it is absolutely necessary to get the right procedures and systems in place to enable you to do so. I am repeating myself, but it is in your interest and that of the NITB staff that it be done. 1074. Thank you for coming to the Committee today and for batting all the questions which we bowled at you. You have set a record, and let us hope that it is not too long until you are back. 1075. Mr Robinson: Thank you. COMMITTEE CLERK'S LETTER OF 25 APRIL 2002 TO MR BRUCE ROBINSON ACCOUNTING OFFICER, DEPARTMENT OF ENTERPRISE TRADE AND INVESTMENT, REQUESTING INFORMATION ON DISCIPLINARY ACTION AND CVS At our meeting on the 24th April, the subject of the Committee's forthcoming Evidence Session on Northern Ireland Tourist Board (NITB) matters was raised by a number of members. Given that the Committee will have a lot of ground to cover during the NITB session, the members have requested me to write to you seeking the following information prior to the hearing:
I would be grateful if you would provide this information by Friday 17th May 2002. You should also be aware that the Committee has requested the Comptroller and Auditor General:
I would appreciate the co-operation of your department and NITB in facilitating this exercise. I am copying this letter to both the Treasury Officer of Accounts and the Comptroller and Auditor General. CORRESPONDENCE OF 14 MAY 2002 FROM MR BRUCE ROBINSON, ACCOUNTING OFFICER OF THE DEPARTMENT OF ENTERPRISE, TRADE AND INVESTMENT RE: NORTHERN IRELAND TOURIST BOARD: PURCHASING PROCEDURES The NI Comptroller and Auditor General in auditing the NI Appropriation Accounts 1999:2000 Volume reported on the failure of the Northern Ireland Tourist Board to follow proper purchasing procedures, in particular print contracts awarded to WG Baird Ltd. The Public Accounts Committee subsequently on 18 June 2001 asked the Department to report back to them in June 2002 on all contracts awarded between April 2000 and June 2002, subsequently amended to March 2002. I attach for the Committee's information a background note relating to the contracts tendered for and awarded in the period 1 April 2000 to 31 March 2002. 88% of the contracts were awarded through the Government Procurement Service (GPS) with a further 6% competitively tendered by NITB using the "GPS Framework" of authorised print suppliers. Tenders were submitted and assessed using a range of weighted evaluation criteria and the Committee will wish to note that in 40% of the cases tendered the contract was awarded to the lowest tender. 6% of contracts were awarded to firms on the GPS framework by single or telephone quotation. In December 2000 the WG Baird Group acquired Corporate Document Services Ltd (CDS), a UK based print management company. The latter was successful in tendering for a number of contracts in the post December 2000 period, which were awarded to WG Baird Ltd and other print companies. In total the Baird Group were awarded 10 contracts with a tender value of £209,551, representing 34% of all tenders, which resulted in payments totalling £239,471, 33% of total payments made. These figures include contracts awarded to CDS, following the company's acquisition by the Baird Group in December 2000. These include payments of £93,431 awarded to print companies other than WG Baird in the post acquisition period. I trust this is helpful for the Committee. On a separate matter, as you are aware Graham and Heslip Limited have initiated legal proceedings against NITB in relation to comments made in the C&AG's report on the 1999-2000 Audit of NITB Financial Statements-Failure to follow Proper Purchasing Procedures. In this regard I am attaching a copy of a letter from Johns Elliott, legal advisors to NITB. This clearly has implications for any discussion on print procurement at the hearing on 30 May. Perhaps we should discuss how this should be handled. I am copying this letter and attachments to the Comptroller and Auditor General for information.
Correspondence of 17 May 2002 from Mr Bruce Robinson, Accounting Officer of the Department of Enterprise, Trade and Investment re: Northern Ireland Tourist Board: Disciplinary action taken against NITB's New York Manager; and CV's of the New York Manager and the former Deputy Chief Executive. I refer to your letter of 25 April 2002. You specifically requested information on two issues;
I will deal with each of these in turn. Disciplinary Action When considering disciplinary action due process requires the employer to set out unambiguously any charges against the individual. The individual must be given the opportunity to respond and only when all information is available can a decision be taken on an appropriate penalty. In this case the issues are not all clear-cut. As far as the NITB New York manager is concerned, further investigation in to the matter has revealed that the credit card was not unauthorised and had not been formally withdrawn by NITB. There is also recognition of systems failures but these cannot be all attributed to the officer concerned. NITB is however, disappointed that tardiness in responding to information requests has resulted in certain difficulties. While NITB now accepts the credit card was not withdrawn, it would have been expected that the New York manager inform NITB headquarters that use of the card had recommenced and that supporting documentation would have been retained. Failure to supply further written documentation to back up expenditure by 21 May will result in a request by the Board for full reimbursement of the amounts outstanding. The Board has issued a verbal reprimand to the New York manager on these issues as well as on the need for prompt supply of back-up information. In addition, the Board has issued a written reprimand on tardiness in providing requested information promptly and comprehensively. The Board has also written to the New York manager regarding duplicate and personal expense claims. These have now been repaid in full. The Board will take a final view once due process is complete and disciplinary action considered when the relevant information is available. Curriculum Vitae Neither the Department nor NITB hold CV's for these two individuals. However, both of them completed standard application forms prior to their appointment. These contain personal information and are clearly imbued with confidentiality. NITB have written to the two individuals concerned information them that the Committee have requested this information and both have expressed reservations. We do however, attach personal profiles and trust the Committee will find them helpful. As this information is personal in nature I would ask the Committee to treat it with confidentiality and only for the purpose of the current investigation. These summaries are attached at Annex1. I trust this information is helpful to the committee. Correspondence of 20 May 2002 from Mr Bruce Robinson, Accounting Officer of the Department of Enterprise, Trade and Investment re: NORTHERN IRELAND TOURIST BOARD ACCOUNTS 2000-01 I am writing to provide the Committee with new information that has come to light following publication of the C&AG's report on NITB's 2000-01 accounts on 26 February 2002. This follows an extensive review of documentation and systems by a dedicated team in NITB. A significant problem in clearing the report in the Autumn of 2001 was the relatively recent departures of the Acting Chief Executive and Deputy Chief Executive and the absence of other key personnel which meant that NITB had limited contemporary knowledge of many of the issues raised. I regret that this additional step in the clearance process is necessary. However, the further information is significant and in line with DAO 1/96 I am now seeking to update the Committee as a matter of urgency. I have detailed the new information in Annex A which is cross referred to the C&AG's report. I have discussed this information with the C&AG and he is content that I forward it to you. He intends to discuss this with you prior to the hearing. I am also attaching at Annex B, as agreed with the Committee Chairman, a note of the context in which tourism is marketed together with a collation of the outputs achieved from the examples of promotion and hospitality cited in the C&AG's report. This highlights the linkage between expenditure and outputs. I have attached at Annex C an updated table in relation to print procurement showing the percentage of contracts awarded to W & G Baird Group over the period April 1992 to March 2002. I trust this information is helpful to the Committee.
First Memorandum from the Comptroller and Auditor General submitted to the Public Accounts Committee prior to the briefing session of 22nd May 2002 At the Committee's meeting on the 24 April, members asked me to carry out the following audit work:
This memorandum has been seen by the Department and reflects many of its comments. However, in the time available it was not possible to go through the full clearance process that is normal with an agreed report. The results of my examination are as follows: 1. The New York Manager's Expenses My report on the 2000-01 accounts showed that the New York Manager had charged $35,257 (£24,300) to a corporate credit card which senior management considered not to be in use. Between April and November 2001 the Manager charged a further $18,347 (£15,500) to the card. The card was formally withdrawn at the end of November 2001. The first draft of my report highlighting my concerns about the use of the credit card was formally issued to NITB on 21 August 2001. The Manager charged £4,400 to the card after this date. My staff found that NITB have conducted a check of all the New York Manager's monthly expenses claims against credit card expenditure to identify any duplicate payments. While these were largely in order, NITB found that in the two year review period during which the card was being reused there were four duplicate payments totalling £325. This duplication arose due to items being claimed on the credit card and also on the New York Manager's expenses. NITB have written to New York Manager in this regard and have received full reimbursement. NITB has informed me that a one hundred per cent check on all claims is now carried out. 2. Print Contracts In my report on the 1999-2000 Accounts I recorded that NITB had informed me that it was a matter of record that the Chairman had no involvement in the award of print contracts, and that the Department was content that NITB's Chairman had acted entirely properly in all matters in relation to NITB procurement decisions. I accepted these assurances. I reviewed a number of contracts in order to ascertain if I could give the Committee greater assurance that there had been no impropriety in awarding contracts. However, given that tendering procedures were deficient, the problem is that the normal evidence available to provide absolute assurance, is not available. However, the Department and NITB have repeated their assurance that impropriety had not occurred. 2.1 Results of My Further Review of Print Contracts It is clear from my review, that there was considerable involvement by senior staff in the award of major print contracts. It appears that this was always the case. However, this had not come to my attention in my earlier report. Senior staff in NITB were aware that the procurement process was deficient (see Annex 1) but did not take sufficient action to bring it up to acceptable public standards. 2.2 Results of my Audit of NITB's 2000-2001 Accounts - Print Contracts My audit of the NITB's 2000-2001 Accounts found that, apart from one case, print contracts had been properly tendered. In this case, proper procedures were not followed in a £57,000 contract for the 'Vacation Planner' publication. NITB's Service Level Agreement (SLA) with GPA and NITB's own revised financial procedures, now require all contracts, including print contracts, greater than £10,000 in value to be arranged through GPA. In this case NITB did not use GPA. The contract was awarded by the New York Office, who are explicitly included in the agreement with GPA. The New York Office obtained a number of telephone quotations before awarding the contract to a company, who are, we understand, BTA's printers in the USA. NITB accepts that this isolated case was not in line with revised procedures and has stated that it will not happen again. 3. The New York Manager's Appointment and Remuneration The New York Manager was appointed in July 1992, following an open competition, on a three year contract. Starting salary was the top of the BTA Mobile Grade III scale plus a 15 per cent enhancement due to the short-term nature of the contract. Basic salary on appointment was £24,983 (rising to £31,200 by 2001). In addition, rent and other allowances were payable (detailed at Table 1). Table1: New York Manager - Pay and Allowances
Note: NITB has pointed out that the terms and conditions associated with the New York Manager's employment are in line with the BTA's "Overseas Conditions of Service". These are intended to reflect the special circumstances in which mobile staff posted abroad work. 4. The Former Deputy Chief Executive's Appointment and Remuneration The Group Marketing Director of NITB was appointed, following an open competition, for a five year term beginning 1 December 1996. The appointment was subject to the satisfactory completion of a probationary period of one year. On completion of the probationary period the position was re-designated "Deputy Chief Executive". Salary on appointment was £52,000 rising to £57,000 by 1 April 1999. NITB agreed relocation expenses of up to £10,000 as the appointment involved relocation from GB to Northern Ireland. The relocation package was towards the upper limit of what would be available for appointments to the Senior Civil Service. In January 1998 the Deputy Chief Executive asked for an increase in the relocation package because of a delay in relocating to Northern Ireland. In total £12,504 was paid in relocation expenses between January 1997 and November 1998. Guidance from DFP on relocation expenses was set out in "DFP DEO 20/93." The guidance states: "We would not expect departments and agencies to offer recruits full reimbursement in the same way as it is offered to existing staff. The assistance should instead normally comprise a contribution to relocation costs." The guidance goes on to say: "Relocation expenses should normally only be offered when the [availability of] such expenses has been advertised beforehand. Departments and agencies should satisfy themselves that the shortage of recruits for a post .justifies the offer of relocation expenses." The Department has informed me that in NITB's view "the relocation expenses reimbursed are considered appropriate for the particular circumstances in this case". It also pointed out that the post had been advertised previously but no appointment was made. 5. Internal Audit Report In the course of investigating the above points at the request of PAC, my staff were passed anonymously a confidential draft Internal Audit report entitled "Audit of Marketing Head Office, dated 29 July 1997." The report dealt with a case where Internal Audit had serious concerns regarding departures from internal procedure and accepted good practice. Because this case was exceptional Internal Audit were raising it "off report." The effect of this unorthodox procedure was that this case was not included in the final report which I received. I am pleased to say that the Accounting Officer has reiterated the assurances given by his Department in 1998 and that he recognises that full disclosure of internal audit work is crucial to my ability to form a sound opinion on the Departmental Accounts. I note that DFP is also considering the need for fresh guidance on this matter. ANNEX 5.1 EXTRACT FROM INTERNAL NITB MEMOS INDICATING SENIOR MANAGEMENT AWARENESS OF PURCHASING PROCEDURE DEFICIENCIES EXTRACT 1 This comment relates to the award of the Breakaways Contract in 1996/97. The contract was subsequently awarded to W&G Baird without going through a proper tendering process. "If we are about to send out a tender for £127k we must go either to a press advertisement or approved supplier lists. it is not sufficient for us just to send it out to three or four of the normal people in the printing business.Tendering is an area that I know the Audit Office through the auditors are looking at and therefore we need to be as careful as possible especially in a job this size as to how we treat the tendering process..I appreciate that advertising may well lengthen the process but it is important that we carry out our tendering procedures as tightly as possible." Memo of 7 June 1996 The Department has supplied the following comments setting out the context to this quotation: Background The tender for pre-press work, print and delivery of the 1996/1997 Winter Breakaways and 1997 Holiday Breakaways to which this memo refers, needs to be considered in the following context:
An options paper prepared on 29 April 96 for the Marketing Services Manager, copied to the Director of Marketing, made the following key recommendations:
As a result of that options paper it was agreed to:
Tender process A memo dated 5 June 1996 was sent to the NITB Finance Manager, as usual, requesting that the specification be checked before issue. This highlighted the changes being made, namely tender the two pieces of work jointly. In the memo dated 7 June 1996, i.e. as quoted in part of your report, the then Finance Director raised some queries for consideration, in particular as to whether the tender should be advertised in the press or approved supplier lists, as a ballpark cost for print was estimated to be £127k. These concerns were responded to in a memo dated 10 June 1997. The crux was that the tender did not involve a significant amount of design as was thought by the Finance Director but did require additional typesetting work. This necessitated that the printer appointed should be capable of delivering quality pre-press work. This was stressed in the tender specification and approved for issue. The tender was issued to four printers in line with the standard process in place at that time. A detailed file note, dated 28 June 1996, was made, recording the reasons for appointing W&G Baird. In the memo the then Director of Marketing endorsed the tendering process, stating: " The tendering process, I believe, has been conducted in a consistent and fair fashion with the active involvement of the Board's Director of Finance and Personnel, and Finance Manager." In August 1997, with reference to publications undertaken by the Marketing Department, the internal IAS report did not make any comment on the actual tender process or the amount involved. In the response provided by Management reference is made to the intention of NITB to outsource brochures through the GPA. In relation to this it is noted by IAS that NITB should ensure compliance with EU purchasing procedures. EXTRACT 2 This comment relates to the outsourcing of the 1998 Breakaways Contract Unlike previous Breakaways contracts this one was handled by GPA. "Allowing GPA to handle the project [would] obviously free up the staff time, but it also has the "independence" that we can easily stand over with particular relevance to the delicate issue of transactions with W&G Baird and the reporting of those both in the Annual Accounts and the industry awareness of these projects." Memo of 26 June 1997 The Department has supplied the following comments, setting out the context to this quotation: Background This was the first time NITB had outsourced a major publication contract; and was also the first publishing service contract - so NITB was establishing a new process. The context in which this memo was written is that NITB was exploring the basis on which it could outsource the Breakaways brochures and establishing the process for doing so:
The process to outsource the Breakaways brochures began in April 1997. It was envisaged that the outsourcing process was likely to take some time and would coincide with on-going production of the brochures. Issues One of the issues to emerge at that time was the cost of using GPA. The Tourist Board had a Service Level Agreement in place for IT supplies at a cost of £1K to £2K: in contrast the costs of outsourcing using GPA were £5K to £8K. The Finance Director's memo of 26 June explored, inter alia, other benefits to NITB of using GPA in this way. Subsequently an Internal Memo from Finance Director of 29 July 1997 confirmed approval to proceed with GPA and acknowledged that extending the GPA service contract may be something that would have to be considered in the future.
SECOND MEMORANDUM FROM THE COMPTROLLER AND AUDITOR GENERAL SUBMITTED TO THE PUBLIC ACCOUNTS COMMITTEE PRIOR TO THE BRIEFING SESSION OF 22ND MAY 2002 In following up the Committee's request of 24 April 2002 to review the casework surrounding print contracts, I noted a potential concern relating to one major contract in 1997. In December 1997 NITB tendered a publishing contract for both "Holiday and Winter Breakaways" booklets. This contract was different. It was the first occasion when these publications were outsourced, and it was handled by the Government Purchasing Agency (GPA). The outsourcing requirement was for a comprehensive service, namely to provide an all encompassing publishing service, incorporating advertising, editorial, design, lay-out, printing and associated services for selling advertising space and over a three year period. Previously only the printing of these booklets had been contracted out. Pre-print work had been all carried out in-house. Between 1992-93 and 1997-98 the printing of "Holiday Breakaways" had been contracted to W&G Baird Limited and from 1996-97 - the printing of "Winter Breakaways" was also contracted to this firm. The total value of the work awarded was £611,817. The Committee has already referred to deficiencies in the award of these contracts in its Composite Report on the Northern Ireland Appropriation Accounts 1999-2000 (30/01/R) W&G Baird Limited (footnote 1) did not submit a bid for the wider publishing contract. W&G Baird Limited wrote to GPA indicating that "in its present form, the project does not have the necessary commercial potential". Only one company tendered and NITB expressed strong concern at a senior level about the response to the tender and the need to be sure about company viability, especially as the contract was to cover a three year period. GPA was of the view that the bid from this company fully satisfied the specification and, in accordance with proper purchasing procedures, recommended that they should be awarded the contract. The GPA records show that NITB challenged this on the grounds that they had "market intelligence" that the company concerned was in a weak financial position. NITB pressed to have the contract re-specified and the competition reopened to other bidders. GPA resisted this. However GPA did state that "we are at liberty to engage the tenderer in discussion, with a view to establishing that the company is viable i.e. by asking for financial details for the last three years. It is also acceptable and perhaps prudent to make enquiries in the marketplace about the company." GPA's view, therefore, was that it would be a perfectly legitimate step in the evaluation process to request evidence of financial stability and offered to obtain this information on NITB's behalf. GPA commissioned a report from Dun & Bradstreet on the tenderer. The information provided was assessed by NITB and the conclusion was that there were no compelling grounds on which to reject the company as a potential provider of publishing services for NITB. The contract was therefore awarded to the single tenderer. Subsequently, in July 2000, an allegation was made by a member of NITB staff, as part of a formal complaints procedure that the market intelligence questioning the financial standing of the successful bidder had come from Bairds. I asked DETI if this allegation had been investigated before assurances were given to us (in November 2000), in the context of our report to the Assembly on print contracts, that NITB Board members had no involvement in the award of these contracts. The Department told us that, having been made aware of the allegation, the Acting Chief Executive considered the matter and concluded that the actions of his senior colleagues and comments of the Chairman were perfectly reasonable and appropriate in the circumstances of what was to be a major long-term commitment by NITB. The Department told me that there were no contemporary papers relating specifically to this judgement. As a further check, NIAO contacted the Senior NITB Executive involved in these negotiations who is no longer with the Board. We asked him for the source of the market intelligence on the successful tenderer. He confirmed that it had arisen in a discussion with the NITB Chairman. The former NITB executive told us that:
Notes 1. W&G Baird Limited is one of six wholly owned subsidiaries in the W&G Baird Group. COMMITTEE CLERK'S LETTER OF 13TH JUNE 2002 TO THE COMPTROLLER AND AUDITOR GENERAL SEEKING FURTHER INFORMATION ON THE BREAKAWAYS CONTRACT 1997 RE: NORTHERN IRELAND TOURIST BOARD - 1997 BREAKAWAY CONTRACT As you know the Committee has received from Tudor Press, a copy of the letter of the 18th December 1997 from W&G Baird concerning the "Breakaway" contract. This seems to indicate that at that stage, Bairds might have intended to tender directly for this contract. The Committee would like to see a timetable and copies of original documentation showing how this letter fits into the stages of the tender process. They would also like to see any documentation relating to the Tourist Board's discussions with the Government Purchasing Agency alleging that Tudor Press was in a weak financial situation. I would be grateful if you would provide this as soon as possible. I am copying this letter to Mr Robinson. CORRESPONDENCE OF 17TH JUNE 2002 FROM THE COMPTROLLER AND AUDITOR GENERAL IN RESPONSE TO COMMITTEE CORRESPONDENCE OF 13TH JUNE RE: BREAKAWAYS CONTRACT 1997 I attach a timetable and copies of papers relating to consideration of this contract as requested in your letter of 13th June 2002. The key papers in this are from the Government Purchasing Agency's files on which there is a commendably detailed record of the consideration of this contract. It would be unusual for internal papers relating to the consideration of a tender to be made public. I recommend that the Committee treat them as confidential until they have considered what, if any, use they wish to make of them in their report. I am copying this to Bruce Robinson, John McMillen and the Treasury Officer of Accounts.
COMMITTEE CLERK'S LETTER OF 19 JUNE 2002 TO MR BRUCE ROBINSON, ACCOUNTING OFFICER OF THE DEPARTMENT OF ENTERPRISE, TRADE AND INVESTMENT RE: NORTHERN IRELAND TOURIST BOARD 1997 BREAKAWAY CONTRACT As you know the Chairman intends to write to you detailing a range of concerns which the Committee has about the quality of your evidence at the 30th May session. However, the Committee considered the C&AG's letter of 17th June at their session today and have identified a number of specific points relating to the Breakaway contract, which they have asked me to put to you straight away. These are set out in the attached annex. The Committee has indicated that they would like a reply by Friday 28th June. I am copying this to the C&AG, Mr O'Reilly (Treasury Officer of Accounts) and Mr McMillan. NITB - QUESTIONS FOR THE ACCOUNTING OFFICER 1. The Public Accounts Committee has now received all of the papers relating to the 1997 Breakaway Contract from the Comptroller and Auditor General. These show that Bairds requested tender documents for this contract on 28th November and that they said in writing as late as the 16th December that they may be bidding for the contract themselves. In the event they did not tender because "in its present form the project does not have the necessary commercial potential". However, given that they had previously printed this brochure and that these papers now show the degree of interest which they had shown in the tender, does the Accounting Officer still maintain that NITB's procedures to insulate the Chairman from contracts in which Baird's had an interest were working perfectly? 2. Which of these papers was the Department aware of before giving evidence to the Committee? In particular was it aware of papers Ref. Numbers 2,3 & 7 ? 3. It is clear from the Government Purchasing Agency (GPA) minute of 9th January that NITB were not simply suggesting , as the Accounting Officer told PAC, that the financial standing of Tudor Journals should be checked. GPA believed that NITB was suggesting that a fresh specification should be produced, which was softer and the contract re-tendered. How does the Accounting Officer square this with the account which he gave to the Committee? 4. It is clear from the documents that the discussion between the Chairman and the Senior NITB officer must have taken place sometime between the 18th December, when Bairds indicated that they were not going to bid and the 8th January 1998 when the NITB official challenged the status of the publishing company which had bid and tried to insist that the contract should be re-tendered. Is it not the case that if the contract was modified and re-advertised Bairds would have been a potential bidder? Shouldn't that potential interest have precluded the Chairman from entering into any discussion about this contract with NITB Officials and suggesting a course of action which could have led to the re-tendering of the contract? 5. In explaining to PAC why the Department felt that Mr Bailie had acted entirely properly in these discussions on the contract, the Accounting Officer pointed out that this was a publishing contract rather than a printing contract. He placed considerable emphasis on the importance of this distinction between publishing and printing. These papers do not support the suggestion that this contract was outside Baird's interest or capacity as printer, or even in partnership with a publishing house. Moreover, we now also know that Baird's Memorandum of Association describes the company as "Publishers and Printers". Was the Accounting Officer aware of this at the time of his evidence that Bairds described themselves as both a publisher and a printer and, if so, why did he think that emphasising a distinction between printing and publishing absolved the Tourist Board from keeping a rigid Chinese wall between Mr Bailie and this contract? COMMITTEE CHAIRMAN'S LETTER OF 26 JUNE 2002 TO MR BRUCE ROBINSON ACCOUNTING OFFICER, DEPARTMENT OF ENTERPRISE TRADE AND INVESTMENT, RE: THE QUALITY OF EVIDENCE AND POINTS FOR CLARIFICATION In my summing up at the end of the 30th May session, I said that the Committee would have to consider carefully how to take matters forward. The Committee has now had a chance to consider the draft transcript of the session. I am writing because we were very concerned at the quality of your evidence and the unsatisfactory nature of many of your answers to our questions. We have already written to you separately about your evidence on the Breakaways contract. However, on a more general level we are concerned that there are a considerable number of instances of what we regard as inconsistent, evasive and even misleading answers. The examples in Annex A illustrate our concerns. As Accounting Officer, you have a constitutional obligation to account to us for the use of resources which have been voted to your Department and which were under your stewardship. On matters of fact, we have a right to a straight answer to a straight question. In this session, despite the length of time involved, we did not get the factual answers which we need to report on issues of considerable public interest. Such lack of transparency in accounting for Departmental action, if left unchallenged, would be deeply damaging to the public's perception of good government. I am therefore giving you the opportunity to revisit your evidence and answer the questions attached at Annex A in direct and clear terms. Also attached as Annexes B and C are complete lists of additional information which the Committee requires. I regret that the list of additional information is so long but this, in itself, is also partly due to the unsatisfactory nature of the oral evidence. The Committee would like a reply by 5 July 2002. I am sure you recognise that it is unprecedented for a Public Accounts Committee to have to write to a Departmental Accounting Officer in these terms following a session. I hope you will make good use of this opportunity to provide clarification. I am copying this letter to your Minister and the Treasury Officer of Accounts. ANNEX 10.A PAC Questions
ANNEX B PAC SESSION OF 30 MAY 2002 - MALONE LODGE HOTEL
Annex C PAC SESSION OF 30 MAY 2002 - USE OF CREDIT CARDS ETC
CORRESPONDENCE OF 28 JUNE 2002 FROM MR BRUCE ROBINSON, ACCOUNTING OFFICER OF THE DEPARTMENT OF ENTERPRISE, TRADE AND INVESTMENT RE: BREAKAWAYS CONTRACT This letter responds to the questions posed in your letter of 19 June. Could I add that having belatedly received a copy of the transcript of the minutes of evidence I was also at the point of providing clarification on aspects of my evidence - including my references to Baird's interest in the Breakaways contract. My intention was to include that material in this reply. However, having now received the further request from your Chairman I consider it best to attempt a consolidated response next week. Whether all the material can be provided in the time available remains to be seen, but I will do my best. RESPONSE TO QUESTIONS Q1 Prior to 1998 the various "Breakaway" brochures were handled in-house, with all tasks relating to collection of material, database management and advertising sales being performed by NITB staff, only the printing was sourced externally. In September 1997 as part of the Marketing Division report, the Board was informed that it had been decided to outsource the production of the brochure and make it self funding. The aim was that this would also free NITB marketing staff for other tasks. Subsequently GPA invited tenders for a publishing service. Although a sales executive from W&G Baird Limited requested tender documents in response to the advertisement, it would be wrong to construe that a tender proposal would necessarily follow. Indeed it appears that some 30 companies requested the tender documents but only one tendered. Also, we understand that the letter of 16 December 1997 from Bryan McCabe of W&G Baird Ltd to Tudor Journals was simply the company wishing to keep its options open. Two days later he wrote to GPA to confirm that W&G Baird Ltd would not be submitting a tender. As we have said before, the Chairman did not play a role in print contracts. The Board was only made aware of this decision to outsource a publishing service because of its importance. Also, the NITB Chairman has assured me that as Chairman of the Baird Group he played no part in the tender actions at the Baird's end. Indeed such was his remoteness from the decisions that he was totally unaware of the December 1997 correspondence. I am content that the Chairman was sufficiently insulated by NITB's procedures in relation to conflict of interest. I fully accept the point the Committee has made about perception, and will come back to this later. Q2 The Department was aware of documents 1,6, 8 and 13. We were also aware of document 4 which was highlighted by the C&AG and, therefore, by implication document 2. We were unaware of document 3. While we were aware of the nature of the debate between GPA and NITB we had never seen documents 5, 9, 10,11 or 12 until the C&AG's further work was made known to us on 17 June. Although we never saw document 7 we knew something of its existence because in a meeting just prior to the hearing NIAO staff did mention to us issues which we now know to be recorded in para 2 of that document. Q3 Although the DCE obviously expressed his views very vigorously, it is clear from the 9 January GPA file note that the key concern of NITB was the financial standing of the company in a single tender situation and that GPA willingly undertook to seek the supporting financial details. The reference to the possible production of a fresh specification is noted but this would only have arisen if the original tender process had been declared a failure and a reissued tender was considered to have little prospect of success. NITB remained committed to the concept of an outsourced publishing service and at no time was an alternative option pursued or a fresh specification drawn up. The subsequent GPA credit checks proved satisfactory and NITB was content to proceed with the single tenderer. The key concern throughout was that only one tender had been received and this underscored the importance of financial checks. Q4 Using your rationale the likelihood is that the discussion between the DCE and his Chairman took place between 23 December 1997 (the closing date for the competition having been 22 December) and 29 December (when GPA offered to seek financial details from the tenderer). With the Christmas break this almost certainly places the discussion in the day or so pre-Christmas and lends weight to the Chairman's recollection of this as a casual conversation and off the cuff advice. Also, as my answers to questions 1 and 3 make clear, the priority here was for a publishing service and a modified tender would have been for a similar service. Without knowing the nature of the modifications it is impossible to say whether or not W&G Baird Ltd, having previously declined to tender, would have reconsidered. We consider that the advice offered by the Chairman to the DCE who had expressed unease about the way in which the tender had shaped up was consistent with his role as Chairman of NITB. The action taken thereafter by NITB officials and GPA dealt with the key concern and resulted in the contract being awarded. Q5. The Memoranda & Articles of Association of limited liability companies are generally framed as widely as possible to ensure that at no time is there a risk of them acting 'ultra vires'. I was not aware of the specific references in the Memoranda & Articles of any of the companies in the Baird Group. I was aware that Blackstaff Press (a Baird Group company) is a book publisher with a specialised remit. As the GPA advertisement makes clear the tender was for a publishing service requiring inter alia design and copy writing for the brochure and most importantly selling advertising space. The Chairman of NITB has confirmed to me that the Breakaways contract was not within the remit of any of the companies in the Baird Group. The fact that only one company responded to the tender lends weight to there being a distinction between this type of publishing service and print contracts. POTENTIAL FOR CONFLICTS OF INTEREST As I noted earlier, I am fully aware of the Committee's concern in relation to perception of conflict of interest. As I mentioned in my evidence, the Department is committed to best practice in this area and we will be implementing the new guidelines fully. The Committee may wish to know that the post of the NITB Chairman was advertised this week and that the issue of conflict of interest has been given prominence in the information pack and material to be provided to applicants and will feature in the interview process. This development flows from discussions with the Committee. I am enclosing a copy of the information pack for the Committee's information. CORRESPONDENCE OF 9 JULY 2002 FROM MR BRUCE ROBINSON, ACCOUNTING OFFICER OF THE DEPARTMENT OF ENTERPRISE, TRADE AND INVESTMENT IN RESPONSE TO COMMITTEE CORRESPONDENCE OF 26 JUNE 2002. Thank you for your letter of 26 June. While I fully understand the frustration felt and accept that the Committee found aspects of my evidence to be unsatisfactory, I can assure you that this was through no lack of will or commitment on my part. I readily acknowledge and fully support the role and work of PAC and have made every effort to support both the C&AG in his investigations and PAC deliberations. However, just as the Committee found itself in an unprecedented situation in these reviews, I found myself similarly placed. In effect I was preparing to cover 3 reports, often dealing with sensitive issues dating back over a number of years, in an NDPB where, we had little contemporary knowledge of the issues under review. And while I accepted the rationale behind a single PAC sitting and readily participated, I found maintaining the required level of concentration across such a wide range of issues during the lengthy hearing very challenging. Unfortunately this resulted in some parts of my evidence, being less clear than I would have wished but none of this was wilful or out of any disrespect for the work of the Committee. The particular difficulties of the Department in preparing for this hearing were evident for some time and contributed to creating this unprecedented situation. During the extensive preparations a number of inaccuracies were identified in the original agreed report: the need to revise the report was unavoidable, and understandably caused you as Chairman, considerable concern. Also, the Committee's requests to the C&AG and the Department for further work to clarify aspects of the matters under consideration led to 4 further submissions in May; two each from the C&AG and the Department. So the hearing was based upon 3 original reports and 5 further submissions: with information on key areas of interest such as New York hospitality and credit card usage and print procurement being contained in 5 different documents. I sought to ensure that there were no inaccuracies in the Department's submissions however some mistakes were likely in these circumstances - even the C&AG's work contained an error - such were the pressures to complete the additional work in the run up to the hearing While I sought at all times through the very lengthy hearing to ensure that my responses were appropriate it is clear that on occasions my evidence was inconsistent and confusing. After the hearing and bearing in mind the normal convention of having an opportunity to clarify evidence it was my intention to make good any deficiencies as quickly as possible. Unfortunately we were well into the third week after the hearing before the draft transcript became available and then your further requests arrived. I have therefore, in this response, sought to consolidate my suggestions for clarification, your further requests and the additional information sought. I enclose a list of answers to the queries raised in your letter, a schedule of additional information and a copy of the draft transcript on which I have marked my suggested revisions - these include incorrect transcription, other inaccuracies and my clarification. In an effort to provide greater clarity in key areas we have also made contact with former employees of both the Department and NITB. Thank you for the extension to your deadline to allow me time to pull things together. Could I make clear that I readily acknowledge serious shortcomings in the administration of the NITB in the 1990's, as I sought to make clear from the outset in my evidence. This was in part due to the overly ambitious remit given to NITB at inception and the extremely demanding environment for tourism in Northern Ireland, but also because of substantial deficiencies in management and in the control regime. Work to improve this situation was undertaken in 1997 with the new financial procedures in NITB. The next stage in the major change process was initiated during 1999 with the transfer of NITB's overseas marketing responsibilities to Tourism Ireland Ltd and the decision not to renew the Chief Executive's contract. Since assuming my responsibility for NITB I have pressed ahead with the restructuring of the NITB remit; I have implemented a new management structure and recruited all but one of the four key positions; I have seconded Departmental staff to NITB to assist the transition - including in the last fortnight a member of the Senior Civil Service; I have insisted on further strengthening of the financial procedures, use of the Government Procurement Service and new corporate governance arrangements which see the Department represented on the NITB Audit Committee. I have also placed the new guidelines on conflict of interest at the forefront of our process for appointing the new Board Chairman and Members. In the coming months the Tourism Strategy Review commissioned by the Minister and the ETI Committee's Review of Tourism report will provide further opportunity to review the progress being made to redress these serious shortcomings. I can assure you and your Committee that I am totally committed to effecting the necessary improvements. That said, I think it would do a disservice to the many fine, dedicated NITB staff who have worked extremely hard over the years not to acknowledge some excellent results and achievements in the tourism sector in the face of all the difficulties. The Department has sought to answer the Committee's questions as fully as it can in the time available to it. It will be noted that some answers have, however, been drafted in terms which seek a balance between respect for legal privilege and personal privacy and the Committee's duty thoroughly to investigate this matter. Others have been retained because they raise significant issues which have a bearing on the wider system and where further advice is needed. The Treasury Officer of Accounts has been informed and further correspondence will follow. We are of course happy to discuss these retentions with the Committee, and to consider options for protection of the privacy and confidentiality of the documents and the information they contain, should the Committee consider that its investigation is impeded by the Department's wish to respect that privacy and confidentiality. I, alongside the new NITB senior management team, am committed to delivering this reform programme and while it no doubt will be painful, look forward to your report to assist us in this process. I trust this information meets your requirements. NORTHERN IRELAND TOURIST BOARD PAC HEARING 30 MAY 2002: The responses below follow the ordering of the points in Annex A to Mr Bell's letter of 26 June 2002. 1. USE OF CREDIT CARDS IN NITB The NIAO report covered the 2000-2001 NITB accounts: it was not a value for money report. When NITB was preparing its response to the report in the Autumn its focus was on the period of the report - 2000-2001 - and made reference to current NITB policy. BTA credit cards had been made available to other NITB staff overseas in the 1980s. Apart from New York these cards ceased to be used by 1992. Apart from a Headquarters card used to book low cost air carriers over the internet there were no other credit cards in use in NITB in the 2000-2001 year. However, we should have made clear that Rural Cottage Holidays Ltd, a limited company set up by NITB, also had a company credit card, but like the New York card, its use has now been suspended pending review. 2. STATUS OF CREDIT CARD IN NEW YORK OFFICE The answer is as stated in our letter of 20 May 2002 and mentioned in my reply to Ms Ramsey on page 14 of the draft transcript. Although discussions took place between the former Chief Executive and the New York manager in 1997 about the use of the card at no time was the New York manager required to cease using the card. The fact that the New York manager did not use the card for a 2-year period October 1997 to November 1999 was originally interpreted by NITB management in its response to the NIAO report as following a request from the former Chief Executive to the New York manager to stop using the card. This was incorrect. In fact the former Chief Executive stressed the importance of control when using the card and as a result the New York manager simply refrained from using it and charged necessary expenditure to his own credit card and reclaimed. The New York manager started to re-use the card in December 1999 as the credit limit on his own personal card was insufficient to meet the level of job related expenditure he was incurring at that time. I regret any confusion caused and was grateful to have the opportunity to clarify the situation before the end of the hearing. 3. NITB SENIOR MANAGEMENT INVOLVEMENT IN PRINT CONTRACTS I have suggested a clarification in the draft transcript to indicate I meant "all the issues". I apologise if my answer caused confusion. I would also see a distinction between awareness of detailed procedures and knowledge of best procurement practice. The procedures in place fell short of best practice and it is evident that by at least 1996, when the Finance Director put his memo to colleagues, senior management in NITB would have been aware of the debate around the reform of the Government Purchasing Agency and ways in which their tendering process could be made more effective and formal. So I agree with the Committee's view on this matter and it is regrettable that the senior management did not act on the information available in 1996. 4. CONSULTANCY WORK FOR FORMER CHIEF EXECUTIVE I regret the confusion in our evidence in this regard. The decision to engage the former Chief Executive in follow up work for NITB was taken by the Chairman of NITB following consultation with the Department's PEFO and Permanent Secretary. I attach a copy of the Chairman's letter to the former Chief Executive outlining the arrangement. 5. INFORMATION CONCERNING THE COMPENSATION PAID TO THE FORMER DEPUTY CHIEF EXECUTIVE In my answers I made clear that the key reason for the Deputy Chief Executive's departure was that his responsibilities had been transferred to TIL. I went on to indicate that redeployment was considered but that even if it had been possible, and it may not because of the nature of his appointment to a specific post, there were stresses and strains around the senior management team involving the management style of the Deputy Chief Executive which also militated against redeployment. My hesitation was not in anyway a form of disrespect to the Committee but rather one of having to deal with sensitive personnel information. It was for this reason I had earlier invited the C&AG to review the file in relation to these matters. 6. COMPLAINTS ABOUT NITB STAFF There was no question of evasion on this matter. As the draft transcript shows, this question was first posed by Ms Armitage as part of a series of questions on hospitality costs in New York: Mr Clarke assumed the question related to New York though he was not sure if it referred to one of the dinners listed in the Annex to the original C&AG report. Mr Clarke made clear there had been no complaints about the New York office. At this point the evidence was all about the New York office and we thought that Mr Clarke had answered the question. There then followed some questions from other members. When Ms Armitage repeated the question directed at me I concluded that she was speaking more generally and it was then I made my reference to recalling an issue which occurred in the British Isles. However it is evident that there remained some uncertainty and as the draft transcript shows the Chairman sought to clarify my response with Ms Armitage. 7. INVESTIGATION BY ACTING CHIEF EXECUTIVE The allegation referred to was made as one of a number of allegations against the management approach and style of the Deputy Chief Executive. These allegations were the subject of a personnel review conducted by the Department's Head of Personnel at the request of the Acting Chief Executive. The review was fully documented and communicated to the Acting Chief Executive who concluded that a charge of misconduct was not warranted. He subsequently wrote to the Deputy Chief Executive confirming this finding and stressing the need for appropriate behaviour. The documentation in relation to this review has been made available to the C&AG. Although he decided against formally writing to those who had taken part in the review the Acting Chief Executive did discuss the outcome with the complainants. It was awareness of this process which led me to suggest that appropriate steps had been taken. In addition to this formal review the Acting Chief Executive discussed the specific point about the Breakaways contract with his Chairman and concluded that no further action was required. I certainly would not wish to imply that non-documentation was acceptable. 8. BENEFICIARIES OF NITB PROCUREMENT PRACTICES In making this point Mr Hamilton was essentially repeating the point made by the C&AG in his report "that W&G Baird Limited was not the only company to benefit from the poor procedures implemented by NITB." It was for this reason he qualified the use of the work benefited. There was certainly no intention to imply anything other than this. Certainly only those companies who actually received contracts benefited. 9. FAILURE TO OBSERVE PROCEDURES In my evidence I accepted that there were both failures in implementing existing procedures and in devising new or appropriate procedures. Both these deficiencies are highlighted in the C&AG's report on the 1999-2000 account, at paras 4 and 22 and I would wish to make clear that by making reference to new procedures I was in no way glossing over the failure to observe existing procedures. It is the responsibility of senior management to ensure proper implementation of procedures and that where new processes are necessary that these are introduced. 10. BTA CREDIT CARDS BTA credit cards were also supplied to other overseas NITB employees as set out in the answer to question 1 and in item 4 of the further information attached. 11. AUTHORISATION OF ALLOWANCES FOR DIRECTORS The increase to the Director of Finance and Investment in December 1999 was made by the former Chief Executive; however the allowance was renewed by the Acting Chief Executive the following year. The Acting Chief Executive also approved the allowance to the Director of International Marketing that same year. It was this which led me to make reference to the Acting Chief Executive. I should have made the involvement of the former Chief Executive clear during the evidence session. 12. REQUIREMENTS OF THE FINANCIAL MEMORANDUM The persons who authorised the allowances ought to have been aware of the requirements of the Financial Memorandum. I believe the fact that they did not meet the requirements of the financial memorandum was an oversight. 13. ENSURING GOOD FINANCIAL MANAGEMENT IN NITB I relied on the system of internal financial control, which operated within the Department at the time, to ensure that the controls which we had established were operating satisfactorily. My review of the effectiveness of the system of internal financial control was informed by the work of the internal auditors and the executive managers within the Department who have responsibility for the development and maintenance of the financial control framework and comments made by the external auditors in their management letter and other reports. In the new Corporate Governance arrangements which I have introduced recently the control regime is much stronger, with the Department formally represented on the NITB Audit Committee and an overall Departmental Audit Committee. 14. ADDITIONAL PAYMENTS TO THE DIRECTOR OF INTERNATIONAL MARKETING The additional payment to the Director of International Marketing was agreed in November 2000 and backdated to February 1999. This was not a permanent increase. It was agreed that the payment would continue until there had been a formal evaluation of all the Grade 7 level posts in NITB. This review has been approved by the Board and is planned to commence after the summer break. 15. BASIS OF 15% ALLOWANCE The draft transcript makes reference to why the Directors received a 15% increase and the explanation given was that they had taken on additional responsibilities to cover unfilled posts: this was distinct from temporary promotion situations. It appears that in the circumstances the former Chief Executive considered that 15% was an appropriate remuneration, especially when considered against the weight of additional responsibility and the cost benefit analysis referred to in paragraph 35 of the C&AG's report. As I made clear in my responses to Mr Carrick these proposals should have been put to the Department and possibly DFP for resolution and, if appropriate, approval. 16. FINANCE AND MARKETING POSTS Clarification is needed on this point as my evidence should have made clear that I was referring to general difficulties around marketing and finance specialists. As paragraphs 33 and 34 of the C&AG's report make clear, these posts were not filled because it was felt inappropriate to appoint new Directors at a time when it had become apparent that there would need to be significant changes in the senior management structure of NITB. We have no reason to believe that the Board made other than sound business decisions when taking the view it did. I regret that this comment may have caused confusion. 17. TENDERING PROCEDURES AND CONTRACTS TO FORMER EMPLOYEES OF NDPBS In his evidence Mr O'Reilly covered two distinct areas, one normal tendering procedures and the other a Principal Establishment and Finance Officer letter of 9 March 1994 covering severance arrangements for staff of NDPBs. In our answers we sought to make clear that the PEFO letter did make provision for the redeployment of staff leaving NDPBs where in terms of value for money it was in the public interest to do so. I have been assured that the value for money criteria had been checked by reference to the cost of external consultants but this was not documented. Also the reasons for the departure from DFP guidelines on tendering procedures, in this case to proceed with a single tender action, was not evidenced in documentation. I fully accept that documentation in support of any departure from normal guidelines and value for money considerations should be complete and in this respect our procedures were deficient. 18. DEPARTMENTAL GUIDANCE ON THE USE OF CONSULTANTS The Department's guidance on the use of consultants sets out conditions for the employment of consultants and outlines the methodology for their engagement. In normal circumstances this would include the preparation of a business case, the seeking of advice from the GPA, public advertising and a tendering process. The contract for the consultancy work was awarded by NITB in accordance with its own procedures. However the Department's "guidance" also stipulates that the overriding objective in deciding to use consultants must always be best value for money. This includes efficiency, effectiveness and economy. The guidance also sets out a range of criteria, at least one of which must be met when consultants are to be engaged. These include:
These objectives and criteria were applied by NITB when the former Chief Executive was engaged as a consultant, but this must be read in conjunction with the answer to Q.17 above - notably the references to single tender action and articulation of requirement and documentation. 19. FINANCE OFFICER'S MEMORANDUM The Memorandum was written on 31 March 1998. Mr Hamilton's recollection of seeing the memo was based on him having seen it during the preparations for the hearing. However, following a discussion with the former PEFO in the Department who attended NITB Board meetings, it became apparent that the Chief Executive had brought the memo to the former PEFO's attention in April 1998. The former Chief Executive and former PEFO agreed that IAS should consider the issues raised - certain of which were to do with the relationships between the Finance Manager and Director - and form a view on the appropriate action to take. This work formed the basis of the Chief Executive's subsequent response to the former Finance Manager. The former PEFO also stressed to the former Chief Executive the debilitating effect such circumstances could have on the Finance Manager and the responsibility on him to, if possible, restore relationships, to address matters of non-compliance, and to ensure that financial systems and controls that were critical to NITB's and the Department's standing should be wholly effective. 20. FINANCE MANAGER EQUALITY CASE The former Finance Manager took her equality case on the grounds of sex discrimination, contrary to Sex Discrimination (NI) Order 1976 and relevant European law, in particular the Equal Treatment Directive. The case was settled on 6 April 2001 with no admission of discrimination being accepted by NITB. 21. PROCEDURES RELATING TO THE POST OF GROUP MARKETING DIRECTOR There were deficiencies in the procedures relating to the appointment of the Group Marketing Director. Counsel advised that deficiencies in procedures primarily relating to the keeping of a proper record of the interview process in June 1996 might give rise to difficulty before a Tribunal. There was no admission of discrimination on the part of NITB in relation to the unsuccessful applicant for the post of Group Marketing Director who received an out of court settlement of £22,500. 22. HOSPITALITY SPENDING IN NEW YORK EXCEEDING $70 PER PERSON NITB has carried out a full analysis of spending on hospitality in New York for the years 1999-2000 and 2000-2001 - including, for completeness, hospitality items classified as trade promotions. However this information has also been requested at items 24 and 26 of the further information schedule over longer timeframes. As the response requires a considerable amount of manual searching we have suggested to the C&AG that the full set of information be provided over 3 years - to 31 March 2002. The 1999-2000 and 2000-01 are available this week if you require them but we are proceeding on the basis of supplying all 3 years next week. Please let me know if either this timing or the period covered will not meet the needs of the Committee. 23. RESPONSIBILITIES OF ACCOUNTING OFFICER As departmental Accounting Officer for the Vote in question, I acknowledge my responsibility for ensuring that an effective system of internal financial control is maintained and operated in connection with the resources concerned. Against this background, Government Accounting Northern Ireland (paragraphs 8.1.26-8.1.28) states that the NDPB Accounting Officer is responsible to Parliament for all resources under his or her control and is responsible for signing the Body's accounts. The NDPB Accounting Officer is also responsible for ensuring, among other things, that the NDPB has in place sound systems for financial management; that the body is conforming with the terms of its financial memorandum or equivalent document; and that the body's accounts are drawn up in accordance with any conditions set out in the legislation, accounts directions and relevant DFP guidance. More generally, the NDPB Accounting Officer has responsibility for propriety in the broad sense, including conduct and discipline. This stems from the Accounting Officer's responsibility for the overall organisation, management and staffing of the NDPB and for its procedures in financial and other matters. Sponsor departments have a duty to ensure that the financial and other management controls to be applied by their NDPBs are appropriate and sufficient to safeguard public funds and comply with the requirements of regularity and propriety; and that these bodies conduct their operations as economically, efficiently and effectively as possible. The Departmental Accounting Officer must ensure that:
While I accept that as Departmental Accounting Officer overall responsibility is mine there is a clear responsibility on the NDPB Accounting Officer in relation to financial systems and propriety. 24. TERMS OF BREAKAWAYS CONTRACT While it was a clear requirement of NITB to have a 3-year service outsourced the contract did include a break point at the end of years 1 and 2 to allow reconsideration if things had not worked out. GPA considers that such arrangements are properly regarded as a 3-year contract. In the event the contract operated satisfactorily and the required 3-year service was achieved. In our evidence and in the additional material provided last week we sought to make clear that this project was sufficiently novel and important to bring it to the attention of the Board. We also pointed out our understanding that the discussion with the Chairman took place in an informal setting That said, we fully understand the Committee's concerns about conflict of interests, and particularly about perceived conflict of interests, and this being so regret and accept that the conversation, however casual, should not have taken place. 25. NITB'S NON-USE OF GPA We do not consider that NITB's decision not to use GPA was reasonable and correct. The situation was that throughout the 90s there was considerable change in the arrangements around Government procurement with DFP pursuing different approaches to make the overall arrangements more effective. GPA was established in April 1996 and the first formal service-level agreement between the Department and GPA was signed on 1 April 1997. As we said in our evidence the Department operated a holding company model at that time and within an overall agreed operational framework each of the businesses and notably the NDPBs operated at arm's length from the Department and had certain freedoms in deciding on operational choices. Having at that time transferred all its permanent procurement staff to GPA the Department considered that it had no option other than to seek a GPA service. However as NITB did have significant in-house expertise in print procurement they made the choice to not use GPA for print procurement at that time. We regret that we did not insist, then as we do now, on each of our businesses using GPA. CORRESPONDENCE OF 26 JULY 2002 FROM MR BRUCE ROBINSON, ACCOUNTING OFFICER OF THE DEPARTMENT OF ENTERPRISE, TRADE AND INVESTMENT RE: CREDIT CARD STATEMENTS I refer to our recent telephone conversation in which you raised a number of concerns about the appropriateness of using a credit card for certain purchases. Can I assure you that all the expenditure is appropriate and that the use of a credit card to effect purchases is really due to this being a feature of North American business practice. I am providing information in relation to the specific items of expenditure you raised under the following headings. I am aware that you have had a further conversation with Terry Coyne on these matters. Purchase of Computer Equipment The purchase of this equipment is shown on the March 2001 credit card statement. It was authorised by the NITB Personnel Manager in advance. The New York office was able to avail of the contracted rate available to the British Tourist Authority from their suppliers in New York. The supplier would only accept the order if payment was at the point of purchase. Purchase of Airline Ticket This purchase related to a journey on official business which was arranged at short notice. The ticket was purchased on the credit card to avail of a discount for tourist board employees travelling on official business. If the ticket had been purchased through normal channels by Head Office, the discount would have been unavailable as payment could not have been made prior to travelling. The amount charged in the February 2001 statement was $5,168.33. The April 2001 statement discloses a refund of $2,522.88. Payment to Kinko's Kinko's is a stationery and office supplies company which operates throughout the United States. The payment of $1,159.63 which appears in the August 2000 statement relates to the production of a presentation on compact disc to be distributed to delegates at a "Grow Your Business" seminar. The reason a credit card was used was that Kinko's would not accept an unsupported business cheque for this amount of money. Accommodation at Bellagio Hotel, Las Vagas This appears on the October 2000 statement; in addition, a related deposit of $146.06 appeared on the August 2000 statement. This related to accommodation charges for five nights during attendance at the American Society of Travel Agents' annual conference in Las Vagas. NITB would attend this event on an annual basis in order to promote the island of Ireland in conjunction with the Irish Tourist Board. You referred to a meal at the Bellagio Steakhouse which also appeared on the October statement at which Doug Todd and Robert Elliott were present. Doug Todd is a member of the US Tour Operators Association, the American Society of Travel Agents and the founder of Todd Travel Promotions. Robert Elliott is a Member of the American Society of Travel Agents, a member of the US Travel Trade and an ex BTA employee with a vast knowledge of the US Market. Both individuals are opinion formers who NITB wish to influence. Grand Lux Café, Las Vagas This relates to a dinner on 25 September 2000 with Dennis Savage of CIE international during the conference referred to above. Accommodation Paid in Northern Ireland You noted that a number of payments had been made by credit card for accommodation in Northern Ireland. The New York Manager does not have a residence in Northern Ireland and as a consequence when he visits on official business he must stay in commercial accommodation. These visits would be of a corporate nature and I am satisfied that the expenditure is wholly appropriate. On reflection, however, it may have been more appropriate for this expenditure to have been incurred by the New York manager personally and reimbursed through normal expenditure channels. I will raise this issue directly with Mr Clarke. I trust that you find this information helpful. CORRESPONDENCE OF 26 JULY 2002 FROM MR BRUCE ROBINSON, ACCOUNTING OFFICER OF THE DEPARTMENT OF ENTERPRISE, TRADE AND INVESTMENT RE: HOSPITALITY Further to my letter of 9 July I am pleased to enclose the additional information on hospitality expenditure referred to in paragraph 22 of the attachment to my letter. As I acknowledged in my evidence there have been system deficiencies within NITB. I sought to provide assurance to the Committee that my Department has asked both NITB and Tourism Ireland Limited to address these issues, with new and robust processes in place, to ensure that these deficiencies are eradicated. In particular, in relation to the New York Manager's expenditure, new control systems have been in place since April 2001 with regard to hospitality expenditure and the credit card has been formally withdrawn. I can assure you that any introduction or reintroduction of cards will be in keeping with DFP guidance and Departmental standards. I have also written to the Chief Executive of Tourism Ireland Limited to emphasise the importance I attach to the operation of robust systems of control in relation to overseas offices and to ensure proper value for money for the public purse. I trust that the Committee will find this further information satisfactory and accept my assurance as to the new processes and control systems that the Department has now put in place with regard to NITB. ITEM 24 New York Expenditure on Food and Drink classified as Trade Promotions rather than Hospitality
ITEM 26 Number of times in which expenditure in New York exceeded $70 per head
ITEM 24 Details of number of times in which the cost of entertainment in New York exceeded £100 per head. Names and employment details of those attending CORRESPONDENCE OF 26 SEPTEMBER 2002 FROM MR BRUCE ROBINSON, ACCOUNTING OFFICER OF THE DEPARTMENT OF ENTERPRISE, TRADE AND INVESTMENT RE: PROVISION OF ADDITIONAL INFORMATION NORTHERN IRELAND TOURIST BOARD: PAC HEARING 30 MAY 2002 In my letter to Mr Bell of 9 July, in response to his 26 June letter requesting additional information, I referred to the need to consult more widely in respect of some of the specific items requested because of the significant issues which provision of this information raised. I have now received further advice from the Treasury Officer of Accounts in the Department of Finance and Personnel. In providing his advice he has informed me that he has discussed the issues raised with you. From that discussion it is clear that the Committee recognises that major issues arise with certain personnel information relating directly to staff and is not therefore seeking the reasons for the former finance manager's absence on sick leave and performance appraisal reports relating to the former Deputy Chief Executive. The request for copies of formal written warnings, memos recording verbal warnings and legal advice in respect of the two out of court settlements also falls within this category of personnel information. I am pleased to supply the Committee with the remaining information which is set out in the following paragraphs. The references follow those in Annexes B and C of Mr Bell's letter to me of 26 June. Malone Lodge Hotel Item Number 5 I attach, at Annex A, a copy of NITB's submission to its legal advisers which contains details of the documentation supplied in support of its submission and a copy of the legal advice received in relation to rights and obligations under the contract entered into between NITB and Mr and Mrs B Macklin, the owners of the Malone Lodge Hotel. Use of Credit Cards etc Item Number 11 A copy of the reference given to the former Deputy Chief Executive is attached at Annex B. While this reference could also be viewed as covered by the conventions on the release of personnel information referred to above, the general and rather more open nature of the reference, ie addressed "To Whom it may concern" puts it outside the terms of the conventions. Notwithstanding this, the information is personal in nature and I would, as in my previous letter to you of 17 May enclosing personal profiles of the New York Manager and former Deputy Chief Executive, ask the Committee to treat it with confidentiality and only for the purpose of the current investigation. I trust the Committee finds this information helpful. CORRESPONDENCE OF 1 OCTOBER 2002 FROM MR DAVID THOMSON, TREASURY OFFICER OF ACCOUNTS RE: PROVISION OF INFORMATION 1. I have just received a copy of Mr Robinson's minute of 26 September to you, in which he refers to correspondence which he has had with me regarding the disclosure of certain pieces of information sought by the Committee. 2. In Mr Robinson's earlier letter of 9 July to the Chairman, he drew attention to a number of concerns which he had about the disclosure of certain documents, because he considered they raised wider issues. DETI subsequently raised these issues with me, and I have discussed these with you over the summer period. Following our discussions, I wrote to DETI, as Mr Robinson points out, suggesting how we deal with this. 3. I can understand DETI's caution especially in relation to information relating to personnel issues. The concerns are not restricted to DETI and apply to all departments and public bodies, and it was for this reason that DETI sought advice from the Centre, including DFP. 4. Firstly, there are concerns about the impact of Human Rights legislation and, in particular, Article 8 (2), drawn up to stop a state interfering unreasonably with private life and correspondence. It is not clear that this would cover the disclosure of personal information, but there is a risk to departments of a challenge. 5. Secondly, also in relation to personal information, employees expect this to be kept on a confidential basis in personnel files. Staff would not expect personal information, including their performance reports, to be circulated by their employer. I am aware that the Trade Unions have expressed severe concerns at the prospects of such disclosure. 6. In the light of these concerns, I was grateful for your recognition of the potential problems of disclosing personal information of the type referred to above and we agreed that, on this occasion, you might be able to get sufficient information, from other sources, to enable the Committee to finalise its considerations, without explicit disclosure of the personal documents. 7. I note however, from Mr Robinson's minute, that DETI continues to have concerns about disclosure of the copies of formal written warnings, memos recording verbal warnings and legal advice in respect of the two out of court settlements, as it consider that these also fall within the category of personal information and therefore raise the sorts of issue I have outlined above. 8. I accept that this goes beyond the broad agreement on handling we had reached. I have not seen the content of these documents, but I understand that they contain personal information. 9. I am aware that the Committee is keen to finalise its report on the NITB and as Treasury Officer of Accounts, I want to ensure full accountability and that the NIAO and the PAC obtains all the information they need, for the purposes of their examination. Against this background, I would welcome an urgent discussion with you and the C&AG about these issues and to agree how to deal with them in the future. 10. I am copying this letter to John Dowdall and Bruce Robinson. |
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