SESSION 2000/2001

FIRST REPORT

AUDIT COMMITTEE

Report on the
2000-2001 Session

Ordered by the Audit Committee to be printed 29 March 2001

Report: 1/00/R (Audit Committee)

REPORT AND PROCEEDINGS OF THE COMMITTEE

COMMITTEE'S FUNCTION AND MEMBERSHIP

1. The Audit Committee is a Standing Committee of the Northern Ireland Assembly established in accordance with paragraph 10 of Strand One of the Belfast Agreement and under Assembly Standing Order Nos. 49 and 58. The Committee has 5 members including a Chairperson and Deputy Chairperson and a quorum of 2.

2. The Committee's function is to agree, with the Comptroller and Auditor General for Northern Ireland, the estimate of the expenses of the Northern Ireland Audit Office and to lay these estimates before the Assembly.

3. The Committee is appointed at the start of every Assembly. The Committee does not have power to call for persons and papers.

4. The membership of the Committee since its establishment, on 15 December 1999, has been as follows:

• Mr John Dallat, Chairperson;
• Mr Billy Hutchinson **, Deputy Chairperson;
• Mr Derek Hussey;
• Mr Alban Maginness *;
• Mr Gerry McHugh; and
• Mr Mark Robinson.

5. The Report and Proceedings of the Committee are published by the Stationary Office by order of the Committee. All publications of the Committee are posted on the Assembly's website at http://www.ni-assembly.gov.uk/

* Mr Alban Maginness resigned from the Committee on 14 January 2000.

** Mr Billy Hutchinson was appointed to the Committee on 24 January 2000.

TABLE OF CONTENTS

Introduction

Meetings of the Committee

Remit of the Committee

Proceedings of the Committee

NIAO's Estimate of Expenses: 2001/02

NIAO's Corporate Plan: 2001/02 - 2002/03

Salary of the Comptroller & Auditor General (NI)

Government Resource and Accounting Bill

Future Work of the Committee

Appendix 1

Minutes of Proceedings

Friday, 22 September 2000

Tuesday, 5 December 2000

Wednesday, 17 January 2001

Thursday, 29 March 2001

Appendix 2

NIAO's Estimate of Expenses: 2001/02

Memorandum by the Comptroller and Auditor General

INTRODUCTION

1. This is the First Report made to the Assembly by the Audit Committee. The Report describes the work of the Committee during the 2000/01 session of the Assembly.
2. The current membership of the Committee is as follows -

• Mr John Dallat;
• Mr Derek Hussey;
• Mr Billy Hutchinson;
• Mr Gerry McHugh; and
• Mr Mark Robinson.

3. In accordance with section 66(3) on the Northern Ireland Act 1998 ("the 1998 Act"), not more than one member of the Committee currently is a member of the Assembly's Public Accounts Committee ("the PAC").

4. Mr John Dallat has been Chairperson of the Committee since it was established on 15 December 1999.
5. The Clerk to the Committee is Mr Tony Logue, to whom all official correspondence should be addressed.

Meetings of the Committee

6. The Committee has held 4 meetings during the period covered by this Report: 22 September and 5 December 2000; and 17 January and 29 March 2001.

7. The Minutes of Proceedings for these meetings are included at Appendix 1.

Remit of the Committee

8. Under section 66 of the 1998 Act the Committee has the following function -

   To lay before the Assembly, for each financial year, an estimate of the expenses of the Northern Ireland Audit Office ("the NIAO"), prepared by the Comptroller and Auditor General for Northern Ireland ("the C&AG (NI)"), with such modifications, if any, as the Committee may agree with the C&AG (NI).

Proceedings of the Committee

9. During the period covered by this Report, the Committee has examined a number of areas in additional to fulfilling its duty under section 66 of the 1998 Act.
10. These items of business were -

• The NIAO's Corporate Plan: 2001/02 - 2002/03;
• The Salary of the C&AG(NI); and
• The Government Resource and Accounting Bill.

11. A detailed examination of the work carried out during the period this Report covers is set out below.

NIAO's Estimate of Expenses: 2001/02

12. At its meeting on 17 January 2001, the Committee considered the estimate of the expenses of the NIAO for the 2001/02 financial year.
13. At that meeting the C&AG (NI), along with two other senior officials of the NIAO, gave written and oral evidence to the Committee.
14. In accordance with the Committee's duty to have regard to the advice of the Department of Finance & Personnel ("the Department") and of the PAC, under section 66 of the 1998 Act, the Committee sought views from these bodies on the estimates. The Committee took note that both the Department and the PAC were content with the estimates as they stood.
15. Having regard to the above the Committee resolved -

    "That the Audit Committee approves the Northern Ireland Audit Office's bid for the net amount of £4.609 million for inclusion in its overall estimate for 2001/02."

16. A memorandum setting out the estimates is included at Appendix 2.

NIAO's Corporate Plan: 2001/02 - 2002/03

17. The Committee agreed that it should meet and consider the NIAO's Corporate Plan, as had been the practice with the Public Accounts Commission during direct rule.
18. On 22 September 2000 the Committee heard evidence from the C&AG (NI) along with two other senior officials of the NIAO and considered these plans.
19. At that meeting the Committee agreed that it was content with the NIAO's Corporate Plan: 2001/02 - 2002/03.

Salary of the Comptroller & Auditor General (NI)

20. On 7 September 2000 the Department, wrote to the Committee seeking its views on its role in determining the salary of the C&AG (NI).
21. At its meeting on 22 September 2000 the Committee discussed this matter and agreed that it should have a role in this determination and that it shall communicate this resolution to the Department.
22. Following advice from the Department, the Committee met again on 5 December 2000 and agreed that it was content with the proposed salary and terms for the post of the C&AG (NI).
23. On 19 December 2000 the Chairperson of the Committee moved a motion on the salary of the C&AG (NI) in the Assembly. This motion was carried.
24. Following further correspondence with the Department the Committee has agreed to take forward arrangements that will strengthen the procedure by which, the salary of the C&AG (NI) is determined. This matter is on going.

Government Resource and Accounting Bill

25. In the autumn of 2000 the Government Resources and Accounts Bill ("the Bill") started its progress through the Assembly. The primary purpose of this Bill is to implement resource accounting.
26. On 24 October 2000, the Finance & Personnel Committee took the Committee Stage of the Bill and in accordance with Assembly Standing Order 48, Overlap of Statutory Committee Business, the Finance & Personnel Committee sought the views of the Committee and the PAC.
27. At its meeting on 5 December 2000 the Committee considered the provisions of the Bill that would, if enacted, impact upon the work of the C&AG (NI) and the NIAO.
28. At that meeting it was agreed that the Deputy Chairperson, Mr Hutchinson, would appear before the Finance & Personnel Committee and present the views of the Committee. On 7 December 2000 the Finance & Personnel Committee met and heard evidence on the Bill from the Deputy Chairperson.

Future work of the Committee

29. In the coming session the Committee will continue to examine the NIAO's estimate of expenses and lay these before the Assembly. It will also consider the NIAO's Corporate Plans.
30. The Committee will also review its remit and incorporate into this, its role in relation to the salary of the C&AG (NI) and the appointment of any future C&AG (NI).

APPENDIX 1

MINUTES OF PROCEEDINGS

Friday, 22 September 2000

Present: Mr John Dallat (Chairman)

Mr Billy Hutchinson (Deputy Chairman)

Mr Mark Robinson

In Attendance: Mrs E Sung

Mr C Jones.

1. Apologies

1.1 Derek Hussey and Gerry McHugh.

Draft minutes of meeting on 27 June 2000

1.2 Agreed. Proposed: Billy Hutchinson. Seconded: John Dallat.

Matters Arising

1.3 Scope of the Audit Committee

1.4 Noted. Although the Audit Committee has a similar role to the Public Accounts Commission at Westminster, its powers are more limited. Members had briefly considered previously, whether they could increase their remit, and the ramifications.

1.5 Agreed. Clerk to prepare a paper for consideration at the next meeting in January detailing:

• the areas into which the Committee could extend their remit
• the effects of increasing their scope and
• the legal mechanisms needed to implement any change i.e. any legislative changes required and how these may be carried out.

Chairman's Business

1.6 Comptroller & Auditor General's Salary

1.7 Noted.

• Following Devolution, the Comptroller and Auditor General's (C&AG) salary is to be set by Resolution of the Assembly. Under Direct Rule, the Department of Finance and Personnel (DFP) had agreed that the C&AG should be paid broadly in line (plus or minus 5%), with the salary of a Permanent Secretary in Northern Ireland. However, the Public Accounts Commission at Westminster had been concerned that the salary of the C&AG should not be related to performance, as Permanent Secretaries' salaries are. Accordingly, the salary of the C&AG (NI) is also linked to the spot rate (not a scale) for a Judicial Grade 5.
• An increase in salary was due from 1 April 2000, and DFP had written to the Clerk on 7 September 2000 to determine the Audit Committee's role in the process. If Members were content to assume a role in this area, DFP will draft a Resolution to increase the salary of the C&AG. The Audit Committee will contribute to the debate in plenary.
• The Northern Ireland Act Part VI Section 65 Paragraph 6 specifies that "the Assembly shall not have power under Article 4(1) of the Audit (Northern Ireland) Order 1987 to pass at any time a resolution which reduces the salary payable to a person holding the office of Comptroller and Auditor General for Northern Ireland at that time".
• Legislation provides no powers of retrospection to the Assembly, in setting the C&AG's salary.

1.8 Agreed.

• In view of the Committee's function of overseeing the expenses of the NIAO, and of the importance of assuring the independence of the C&AG, it was appropriate for the Committee to advise the Assembly in its determination of the C&AG's salary and the legal requirements, taking into account the approach advocated by DFP.
• Members were content with the current linkages on which the C&AG's salary is based. DFP's advice would be taken annually, as to whether the current linkages continued to be appropriate.
• The Deputy Chairman noted that the Assembly has no role in relation to arrears due for the period 1 April - 30 May 2000, during which Devolution had been suspended.
• The Chair and Deputy Chair will provide advice on behalf of the Audit Committee, taking account of the Assembly Legal Adviser's views on the C&AG's salary increase for this year, and how to deal with arrears from 1 April 2000, including those due under Direct Rule. DFP will lay the Resolution.

Presentation by NIAO (Open Session)

1.9 Noted. A letter from DFP was tabled confirming that the Department had considered the NIAO's Corporate Plan for 2000/01 - 2002/03 and were satisfied with the objectives, work programme and forward plans, contained within it.

1.10 The following officials from the Northern Ireland Audit Office attended the meeting:

• John Dowdall - Comptroller and Auditor General
• John Savage - Director of Personnel
• Janet Sides - Strategy and Business Planning

1.11 Mr Dowdall gave a brief presentation on the NIAO's strategic objectives and its Corporate plan for 2001 - 2003. Officials then fielded questions from Members until 1.40pm.

1.12 Agreed. The Committee noted and approved the NIAO's Corporate Plan for 2000/01 - 2002/03.

Any other business

1.13 Draft Press Notice. Agreed.

1.14 Date of Next Meeting. Agreed, the Committee would meet in early January to examine and, if content, approve the NIAO estimates for 2001/02. These are to be laid before the Assembly by March 2001.

Meeting closed at 1.50pm.

JOHN DALLAT MLA
Chairperson, Audit Committee

5 December 2000

Tuesday, 5 December 2000

Present: Mr John Dallat (Chairman)

Mr Billy Hutchinson (Deputy Chairman)

Mr Derek Hussey

Mr Gerry McHugh

In Attendance: Mrs E Sung (Clerk)

Mr C Jones (Deputy Clerk)

John Savage, Director of Personnel, NIAO.

2. Apologies

2.1 Mark Robinson.

Draft minutes of meeting on 22 September 2000

2.2 Agreed. Proposed: Billy Hutchinson. Seconded: John Dallat.

Matters Arising

2.3 Scope of the Audit Committee

2.4 Noted and agreed. Members had briefly considered at a previous meeting, whether the Committee could increase their remit, and the ramifications of doing so. As requested, the Clerk will prepare a paper for the next meeting in January detailing:

• the areas into which the Committee could extend their remit, including their future role in determining the C&AG's salary;
• the effects of increasing their scope and
• the legal mechanisms needed to implement any change i.e. any legislative changes required and how these may be carried out.

2.5 Comptroller & Auditor General's Salary

Noted.

• The Chairman had submitted a motion for consideration by the Business Office today. This had not been taken and would be reconsidered on Tuesday 12 December 2000. It would be scheduled for Monday 18 December, at the earliest.
• Minister Durkan had written to the Chairman, indicating that for this year, his Department would calculate and pay any arrears due to the C&AG separately, as an ex-gratia payment, to overcome the problem of retrospection.

Noted and agreed.

• Members had previously decided that Westminster should pay for the salary arrears due for the period prior to devolution and that this should not come from the Consolidated Fund. Mr Savage informed the Committee that the amount of money involved was not material (under £1000). As the DFP Minister had indicated that an ex gratia payment was proper procedure, the NIAO would deem this as being sufficient authority for the payment to be made.
• Chairman to write to the Minister, indicating that the Committee is content to proceed along the lines which he has proposed.

Chairman's Business

2.6 Government Resources and Accounts Bill

Noted. Following the joint meeting with the Public Accounts Committee on 7 November, which Minister Durkan attended, the Chairman wrote to the Minister setting out the Committee's concerns on the scope of the C&AG. Whilst the Minister is in broad agreement with the issues raised, he is concerned that amendments proposed to the Bill may delay the introduction of the Resource Accounting procedures.

Agreed. The Deputy Chair will appear before the Finance and Personnel Committee on Thursday 7 December to reflect the Audit Committee's views on GRAB.

Any other business

2.7 Role of the Audit Committee

Agreed. Clerk to contact the appropriate bodies in both Westminster and the Dáil, to determine the most appropriate way for Members to learn more of how the equivalent bodies there operate.

Date of Next Meeting

2.8 Agreed. The fifth meeting was set for Wednesday 17 January 2001 at 2.00pm, to consider the NIAO's Estimates for the financial year 2001/02. In considering the Estimates, the Committee had to take account of the views of both the Public Accounts Committee and the Department of Finance and Personnel. Mr Savage informed the Committee that the NIAO would arrange the appropriate meetings in advance, to ensure that the views of both parties were forwarded to the Audit Committee in advance of their meeting.

Meeting closed at 3.55pm.

JOHN DALLAT MLA
Chairperson, Audit Committee

17 January 2001

Wednesday, 17 January 2001

Present: Mr John Dallat, MLA (Chairman)

Mr Billy Hutchinson, MLA (Deputy Chairman)

Mr Derek Hussey, MLA

Mr Mark Robinson, MLA

In Attendance: Mrs Eileen Sung, Committee Clerk

Mr Colin Jones

Dr Andrew Peoples

Apologies: Mr Gerry McHugh MLA

9.40am meeting opened in public session - Mr Dallat in the Chair.

3. Apologies

3.1 Apologies are listed above.

Draft Minutes of Meeting on 5 December 2000

3.2 The minutes were agreed and signed.

Examination of the Northern Ireland Audit Office's Annual Estimates 2001/02

3.3 As part of the Audit Committee's statutory duty to examine the expenses of the Northern Ireland Audit Office (NIAO), senior officials from the NIAO attended to brief members on their Estimates for expenditure in 2001/02. The following officials attended: John Dowdall, Comptroller and Auditor General; John Savage, Director of Personnel; and Caldwell Steele, Personnel Officer.

10.25am Mr Robinson joined the meeting.
11.00am Mr Hussey joined the meeting.

3.4 Members' questions covered the following areas:

• the effects of devolution and the forthcoming Government Resources and Accounts Bill on the NIAO's workload;
• ways in which the NIAO could be more proactive;
• potential improvements in asset management by departments resulting from Resource Accounting and Budgeting;
• the NIAO's annual target for publishing reports on departmental performance;
• mechanisms for bringing NIAO's concerns to the Assembly's attention;
• the costs of NIAO staff training;
• expenditure on IT software for electronic audits and future savings to be generated from these;
• revenue generated from work done for the National Audit Office;
• the costs of auditing cross-border implementation bodies;
• identification of topics for inclusion on future work programmes;
• follow-up arrangements to ensure the implementation of agreed recommendations by departments;
• liaison with Internal Audit Units in government departments; and
• the validation of departmental performance against Public Service Agreements.

3.5 Members noted correspondence from the Public Accounts Committee, stating that they were content with the NIAO's Estimates. Additionally, members considered correspondence from Department of Finance & Personnel (DFP). The NIAO Memorandum examined by the Committee outlined the Estimate in cash terms and noted the non-cash elements at Paragraph 5. The final NIAO Resource Estimate will include non-cash costs under Annually Managed Expenditure, and although the presentation of the Resource Estimates has still to be decided, DFP was content for the Audit Committee to examine the Estimate Memorandum subject to the AME costs and presentation of the printed Estimates being agreed at a later date.

3.6 It was unanimously agreed that "the Audit Committee approves the Northern Ireland Audit Office's bid for the net amount of £4.609 million for inclusion in its overall estimate for 2001/02." Additionally, the Committee approved the additional funding of £50,000 detailed in the Memorandum, to be submitted as a supplementary estimate during the year.

3.7 Members agreed that, as the additional funding of £50,000 had been approved, there was no need for an additional meeting in the autumn, when the supplementary estimate was to be submitted. However, it was agreed that the Chair should write to DFP asking why they had chosen to proceed in this way and indicating that, in future years, the Committee would prefer not to approve and submit separate Estimates to the Assembly.

Action: Clerk

3.8 The C&AG expressed concerns that the new resource accounts may not be readily accessible to MLAs, unless DFP ensured that they were presented carefully. It was agreed that the Chair would write to the Department to ask whether they could offer training to MLAs on the interpretation of the new structure of accounts and to obtain further detail on the presentation of the Estimates. The C&AG's view was that the Estimates needed to be annotated with explanatory notes to assist MLAs.

3.9 The C&AG undertook to inform the Chair as to whether DFP intended to publish a Public Expenditure White Paper for the forthcoming financial year.

Matters Arising

3.10 The Chair updated members on the recent passage of the Government Resources and Accounts Bill through the Assembly. Mr Dowdall informed members of the Minister for Finance and Personnel's new proposals to grant the C&AG inspection rights beyond the accounts of all public sector bodies, to bodies "undertaking functions of a public nature" or "substantially funded from public money." In respect of bodies in receipt of "significant" public funds, his Department would facilitate inspection by making an Order when necessary.

11.40am Mr Dallat left the meeting and Mr Hutchinson took the Chair.

3.11 Members agreed that, whilst these proposals still gave DFP some discretion on the C&AG's access, the new powers of inspection envisaged were probably as far as the legislation could go without the need for further public consultation and were beyond the access currently available to the C&AG at Westminster.

3.12 Members noted the Minister's commitment to re-examine this area in the Audit Reorganisation Bill, having taken account of the forthcoming Sharman Report. It was agreed that the Committee's ultimate objective was to attain access for the C&AG as stipulated in the Chair's letter of 10 November 2000, to the Chair of the Finance and Personnel Committee. Mr Hussey informed members that, as the Finance and Personnel Committee had not yet seen the Minister's revised proposals, their original amendment to Clause 18 would be included in their published Report on the Bill.

3.13 Members noted that the Clerk had contacted the Clerk of the Public Accounts Commission at Westminster. A one-day visit to Westminster, at which members can learn more of the remit of the Commission, which has a similar role to that of the Audit Committee, would be arranged for spring. Following the visit, the Clerk would prepare a paper outlining the areas into which the Committee could extend their remit and the legal mechanisms for doing so.

3.14 It was agreed that, as the Chairman would be visiting the Dáil shortly as a member of the Public Accounts Committee, he could update members on the workings of the Public Accounts Committee in the Dáil, at the next meeting.

3.15 Members noted that the Motion to increase the C&AG's salary for the current financial year had been approved in the Assembly and that DFP had calculated and paid arrears as an ex gratia payment, as approved by the Committee. Members agreed the wording of a draft motion to be laid by the Chairman to enable the Committee to approve salary increases in future years, having regard to advice from the Department of Finance and Personnel. However, it was agreed that this may require an amendment to Standing Orders to allow the Audit Committee to approve this without annual referral to the Assembly. The Clerk will write to both the Clerk of the Committee on Procedures and the Legal Adviser for advice on how a possible change in Standing Orders could be affected.

Action: Clerk

Chairman's Business

3.16 Members noted that, as discussed at the last meeting, the Chairman had written to the Minister for Finance and Personnel to clarify the arrangements for any future appointment of a new C&AG and the legal position re the salary of any future incumbent. However, it may take some time for a response to be received.

3.17 Members agreed that whilst the Audit Committee had a role to play as a filter for MLAs to approach the NIAO, the Public Accounts Committee was the best vehicle to ensure an interface between the NIAO and MLAs, and members should be encouraged to go through the PAC with any concerns, to ensure a consultative mechanism. This would not however preclude MLAs from contacting the NIAO directly.

Any other business

3.18 The Deputy Chair asked the Clerk to take forward the issue of MLAs missing Committee meetings as they were on Assembly related business elsewhere.

3.19 Members agreed that the Chair should discuss the issue of adult literacy and numeracy further with the C&AG, with a view to having a value for money study carried out in a particular area such as adult basic education.

3.20 Members asked for the regularity of future meetings to be established to enable members to plan ahead and therefore ensure attendance.

Action: Clerk

3.21 Members noted a Press Notice issued by the Chairman prior to today's meeting.

12.20pm the Deputy Chairman adjourned the meeting.

JOHN DALLAT MLA
Chairperson, Audit Committee

29 March 2001

Thursday, 29 March 2001

Present: Mr John Dallat MLA, Chairperson

Mr Billy Hutchinson MLA, Deputy Chairperson

Attendees: Mr Tony Logue, Committee Clerk

Mr Damien McVeigh

Apologies: Mr Derek Hussey MLA

Mr Gerry McHugh MLA

Mr Mark Robinson MLA

10.40am the meeting opened in public session - Mr Dallat in the Chair.

4. Apologies

4.1 The apologies were noted.

Chairperson's business

4.2 The Chairperson introduced the new Committee Clerk and his support team. Members noted that contact details had been included with their briefing papers.

Draft Minutes of Proceedings

4.3 The Committee noted and considered the draft Minutes of Proceedings for Wednesday, 17 January 2001.

Resolved: that the Committee approves the draft Minutes of Proceedings for Wednesday, 17 January 2001

Matters arising

4.4 The Chairperson informed members that he had a number of items he wished to raise from previous proceedings of the Committee.

4.5 These were -

(a) the Committee's Terms of Reference;
(b) the draft Report on the proceedings of the Committee to date.

4.6 The Committee's Terms of Reference -

Members noted a paper from the Committee Clerk detailing the options available to the Committee and a letter from the Minister of Finance and Personnel on the current procedures with respect to the salary and appointment of the Comptroller and Auditor General for Northern Ireland.

Members debated the various options presented and agreed to the conclusion of the paper.

Resolved: that the Chairperson would table a motion for consideration by the Committee on Procedures to amend Standing Order 58 as set out below:

Motion: that under Standing Order 58 delete all from 'The Assembly, by resolution' and insert:

(1) There shall be a Standing Committee known as the Audit Committee, to exercise the functions laid upon the Assembly by section 66 of the Northern Ireland Act 1998 and on any other related matters determined by the Assembly.

(2) Subject to paragraph (3), the Committee shall have membership of five and a quorum of two.

(3) In accordance with section 66(2) of the Act, no more than one Member of the Committee shall at the same time be a member of the Public Accounts Committee.

4.7 Draft Report of the Committee's proceedings

Members noted and considered the draft Report prepared by the Committee Clerk.

Resolved: that the draft Report be printed and laid before the Assembly as a Report of the Audit Committee

Forward work programme

4.8 Members noted and considered the draft work programme as prepared by the Committee Clerk.

4.9 The Committee agreed the resolution as set out below -

Resolved: that the Committee agrees the draft work programme and directs the Clerk to take forward the necessary arrangements on behalf of the Committees.

4.10 The possibility of a visit to the Public Accounts Commission at Westminster was raised. It was agreed that this would be taken forward, subject to the pending elections, for Thursday, 10 May 2001.

Action: Clerk to take forward arrangements for the suggested visit.

Any other business

4.11 The Chairperson requested leave of the Committee to approve the draft minutes of these proceedings so that they could be included in the Committee's Report.

4.12 The Committee agreed the resolution as set out below -

Resolved: that the Chairperson shall have leave of the Committee to approve the draft Minutes of Proceedings for the Committee meeting on Thursday, 29 March 2001.

4.13 The Chairperson informed members that he would issue a copy of these minutes to each member of the Committee and provide an opportunity at the next meeting for members to make any amendments to the minutes.

Action: Clerk to circulate the approved Minutes of Proceedings to members.

Date and time of next meeting

4.14 The agreed that it would next meet in May to consider the salary of the Comptroller & Auditor General for Northern Ireland.

11.25am the Chairperson adjourned the meeting

JOHN DALLAT MLA
Chairperson, Audit Committee

30 March 2001

APPENDIX 2

NIAO's ESTIMATE OF EXPENSES: 2001/02

MEMORANDUM BY THE COMPTROLLER AND AUDITOR GENERAL

Introduction

31. Article 6(2) of the Audit (Northern Ireland) Order 1987, as amended by Section 66(1) of the Northern Ireland Act 1998, requires the Audit Committee to lay the Estimate of the Northern Ireland Audit Office (NIAO) before the Assembly. In considering the Estimate, the Audit Committee should have regard to the advice of the Assembly's Public Accounts Committee and of the Department of Finance and Personnel (DFP) have therefore forwarded a copy of this Memorandum to both so that their views can be, sent to the Audit Committee direct.

32. The Estimate for 2001-02 is in line with the Office's Corporate Plan, which was approved by the Audit Committee on 22 September 2000. However the need for an additional £50,000 has been identified and is referred to in more detail in Paragraph 4. The main features of the Corporate Plan, insofar as they affect resources for 2001-02, are summarised in the following paragraph.

Main Features of NIAO's Work Plan for 2001-02

33. The main outputs of the Office are the audit of some 165 accounts and the publication of up to 10 reports on the performance of departments. The Office is facing an increasing trend in workload arising mainly from

• devolution;
• the drive by departments to improve the delivery of public services;
• developments in government accounting; and
• restructuring of central government departments.

The Corporate Plan reflected these developments and indicated a need for funding of £4.609 million for 2001-02, an increase of 7.2 per cent on the provision for 2000-01.

Additional Funding

34. This is the first time that it has been possible to prepare an Estimate of the resource requirements of the Office, based on actual experience of the Assembly in operation and of working with the PAC. At its December stocktaking session the PAC indicated that it was content to continue operating on the lines of its programme of work over the past six months i.e. one evidence session a month, with other meetings arranged as necessary. This was the level anticipated in the Corporate Plan. However, experience of the detail of the work necessary for PAC sessions shows that it would be desirable to increase the capacity of the Office for a period by one further unit of staff. The post would be for one year initially and the need for its continuation would be reviewed when the next Corporate Plan is being prepared. It is envisaged that this post would have a particular remit to help to ensure that the Office's output is closely tuned to MLA's requirements. This bid would increase the NIAO's bid for 2001-02 by a further 1 per cent to £4.659 million. If the Audit Committee agree, the bid would be processed in a Supplementary Estimate during the year. In the meantime the Estimate is exactly the same as in the Corporate Plan and as shown in the Budget Statement presented to the Assembly in December 2000.

Analysis of Resource Requirements

35. The format of departmental Estimates will be changed for 2001-02 to reflect the requirements of resource budgeting and accounting. Accordingly, figures will be shown for non-cash items such as depreciation and cost of capital. The final format has not yet been determined by DFP but the NIAO will comply with the disclosure requirements of the new structure. In the meantime the Audit Committee is invited to note that, in relation to the NIAO's resource budget:

• the effects of pre-payments and accruals are expected to be negligible;
• depreciation charges for 2001-02 are estimated at £336,000; and
• cost of capital is estimated at £228,000.

36. A breakdown of the bid, together with a comparison with the 2000-01 Estimate, is set out in the Table below:

	2000-01 £000	2001-02 £000
Human Resources	4,216	4,574
Other Running Costs	594	616
	4,810	5,190
Capital Expenditure	65	67
Gross Expenditure	4,875	5,257
Less Receipts	577	648
Net Expenditure	4,298	4,609

Human Resources

37. The provision for human resources is by far the largest element in the Estimate at £4,574,000. This includes provision for salaries, superannuation and National Insurance costs of 113 permanent staff (compared with 108 in 2000-01), temporary short term appointments, contracting-in staff to meet peaks of work, costs of consultants and payments for work contracted-out to the private sector.

Other Running Costs

38. This heading covers general office expenses. The estimated expenditure for 2001-02 is detailed below:

	2000-01 £000	2001-02 £000
General Travel and Subsistence	63	65
Staff Training	116	100
Accommodation Running costs (including rates)	217	222
Other expenses, including stationery, postage and telephones, computing services, et	198	229
	594	616

Capital Expenditure

39. The Estimate includes a total of £67,000 for capital expenditure comprising £10,000 for minor items of furniture and fittings and £57,000 for IT equipment. The current Corporate Plan referred to the possible need for additional funds to meet the costs of new computer audit applications. It is planned to introduce a new computer based audit package over the next two to three years and the Estimate includes the costs of licences and new computers for the first stage of this project.

Receipts of Audit Services

40. The estimated receipts for the provision of audit services total £648,000. This is money earned by the Office and comprises £480,000 for work carried out on an agency basis on behalf of the Comptroller and Auditor General (GB) - the audit of the NI Court Service and the Northern Ireland Office (including prisons and police) - and £168,000 in respect of fees charged for the audit of certain other accounts. The latter figure includes an amount of £50,000 in respect of the costs of auditing six new North-South implementation bodies. This is the best estimate of the Office costs at this time. However, the bodies are in the very early stages of development and the actual costs of auditing them may need to be adjusted when more is known about the range, scale and nature of their activities.

41. The NIAO does not charge fees for the audit of central departments and Executive Agencies, nor for Value for Money work.

Audit Re-organisation Bill

42. The legislative programme presented to the Assembly in early September 2000 included. a proposal to introduce an Audit Re-organisation Bill. This would provide for the transfer of the staff of Local Government Audit and of Health Service Audit to the Northern Ireland Audit Office. It is intended that the Department of the Environment and the Department of Health and Social Services and Public Safety will reimburse the NIAO with the cost of these services. There should therefore be no effect in overall net expenditure. The timing of the transfer and the details of the costs have not been determined and therefore the NIAO Estimate for 2001-02 does not reflect the impact of the transfer.

Conclusion

43. The Audit Committee is invited to approve the Northern Ireland Audit Office's bid for the net amount of £4,609,000 for inclusion in its overall Estimate for 2001-02.

JOHN DOWDALL
Comptroller and Auditor General

8 January 2001