Public Accounts Committee
Report on North / South Bodies
Together with the Minutes of Proceedings of the Committee
Relating to the Report and the Minutes of Evidence
Ordered by The Public Accounts Committee to be printed 17 June 2010
Report: NIA 65/09/10R Public Accounts Committee
Session 2009/2010
Nineteenth Report
Membership and Powers
The Public Accounts Committee is a Standing Committee established in accordance with Standing Orders under Section 60(3) of the Northern Ireland Act 1998. It is the statutory function of the Public Accounts Committee to consider the accounts, and reports on accounts laid before the Assembly.
The Public Accounts Committee is appointed under Assembly Standing Order No. 56 of the Standing Orders for the Northern Ireland Assembly. 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 has 11 members including a Chairperson and Deputy Chairperson and a quorum of 5.
The membership of the Committee since 9 May 2007 has been as follows:
Mr Paul Maskey 3 (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
The Lord Browne 9
Mr John Dallat
Mr David Hilditch 7
Mr Trevor Lunn
Mr Patsy McGlone 2,6
Mr Mitchel McLaughlin
Mr Stephen Moutray 10
Ms Dawn Purvis
Mr Jim Shannon 5
1 Mr Mickey Brady replaced Mr Willie Clarke on 1 October 2007
1 Mr Ian McCrea replaced Mr Mickey Brady on 21 January 2008
1 Mr Jim Wells replaced Mr Ian McCrea on 26 May 2008
2 Mr Thomas Burns replaced Mr Patsy McGlone on 4 March 2008
3 Mr Paul Maskey replaced Mr John O'Dowd on 20 May 2008
4 Mr George Robinson replaced Mr Simon Hamilton on 15 September 2008
5 Mr Jim Shannon replaced Mr David Hilditch on 15 September 2008
6 Mr Patsy McGlone replaced Mr Thomas Burns on 29 June 2009
7 Mr David Hilditch replaced Mr George Robinson on 18 September 2009
8 Rt Hon Jeffrey Donaldson replaced Mr Jim Wells on 18 September 2009
9 The Lord Browne replaced Rt Hon Jeffrey Donaldson on 19 April 2010
10 Mr Stephen Moutray replaced Mr Jonathan Craig on 19 April 2010
Table of Contents
List of abbreviations used in the Report iv
Report
Issues of General Application to North/South Bodies
Appendix 1:
Minutes of Proceedings
Appendix 2:
Minutes of Evidence
Appendix 3:
Correspondence
Appendix 4:
List of Witnesses
List of Abbreviations used in the Report
The Committee Public Accounts Committee
C&AG Comptroller and Auditor General
DETI Department for Enterprise, Trade and Investment
DFP Department of Finance and Personnel
EU European Union
OFMDFM Office of the First Minister and deputy First Minister
SEUPB Special EU Programmes Body
Executive Summary
Introduction
1. North/South Bodies are engaged in a range of important areas including tourism, trade and development, food safety, the promotion of Irish and Ulster Scots and the administration of EU funds. Their activities are funded jointly by the Northern Ireland Assembly and Dáil ?ireann in varying proportions.
2. These bodies have unique financial accounting and reporting arrangements arising from the requirements of the two administrations in which they operate. Because they receive part of their funding from monies voted by the Assembly they are subject to scrutiny by this Committee.
3. This was an informative session hosted by InterTradeIreland in its premises in Newry and proved to be a useful first contact with North/South Bodies. The Committee wishes to thank InterTradeIreland and its staff for their hospitality. In this session, the Committee examined issues of general application to all North/South Bodies as well as the work of the two bodies giving evidence and issues specific to them.
Issues of general application to North/South Bodies
4. The accounts and annual reports of publicly funded bodies are of considerable interest to the Assembly and the public. It is an important element of accountability that public bodies make these available for public scrutiny soon after their financial year-ends. The Committee is pleased to note that the accounts of the two Bodies which gave evidence to the Committee are up to date. However, the Committee is concerned that the last accounts audited and presented to the Assembly by the Language Body were the 2004 accounts. The Committee was assured that these outstanding accounts will now be finalised as soon as possible.
5. The Committee was disappointed to learn that there is no requirement for North/South Bodies to include remuneration reports in their annual reports to disclose pay, pension and other benefits for their senior executives. Under current arrangements only limited information is available. Even then it is included in notes to the North/South Bodies’ accounts, instead of in the annual report, and senior officials have the option to withhold their consent to disclose information. Good practice on the disclosure of senior executives’ remuneration has evolved significantly in recent years. The regime that exists for other public bodies in Northern Ireland has not yet been applied to North/South Bodies. The Committee welcomes DFP’s commitment to consult the Department of Finance in Dublin on guidance on remuneration reports with a view to bringing guidance into line with best practice.
6. Some North/South bodies, including InterTradeIreland, have non-executive board members, while others do not. The Committee was told the founding legislation was quite specific and sets out which bodies have boards and which have not. The Committee considers that this issue needs to be re-visited as boards are a fundamental part of good governance.
7. Both DETI and DFP emphasised that their oversight arrangements for their respective North/South Bodies are the same as exist for any other sponsored body, with the additional consideration of their corresponding Department in the Republic of Ireland. This is a sound principle which the Committee endorses.
InterTradeIreland
8. The Committee explored the barriers to trade and how some companies found it difficult to break into the cross-border market. The Committee recognised issues with the infrastructure including road, rail and ferry connections. InterTradeIreland was clear that it cannot get involved directly with infrastructure issues which are outside its remit. Nevertheless, the Committee welcomes the assurance that InterTradeIreland has a very positive role to play and that it will work with those bodies and stakeholders that have influence in these areas.
9. Co-operation and co-ordination between InterTradeIreland and the Industrial Development Agency and Invest Northern Ireland was examined. The Committee recognises the importance of working closely with these bodies to ensure there is no duplicate funding.
10. The Committee endorses the importance of including in DETI’s appraisals of programmes, a specific test of whether there is any duplication with programmes elsewhere. The Committee is concerned to ensure that value for money is maximised. The Committee emphasises that resources should be focused on schemes with the highest payback and endorses this important performance indicator included in the annual report.
11. The Committee noted that InterTradeIreland’s bank balance at its financial year-end had increased by £1.5 million to around £4 million in 2006. The Committee reiterates the long-standing principle of public finance that public bodies should not hold levels of cash in excess of their immediate needs. This applies as much to North/South Bodies as to other bodies. Public money should not be allowed to sit in bank accounts, unused, when so many other funding pressures exist throughout the public sector.
12. A long standing concern of the Committee has been the effective handling of conflicts of interest in public bodies. This applies as much to North/South Bodies and to their managing agents as to other public bodies.
Special EU Programmes Body
13. The Committee acknowledges the inherent complexity of EU accountability arrangements. It welcomes the fact that lessons have been learnt from earlier programmes and that the implementation of PEACE III and INTERREG IVA is taking place using less complex structures. Robust accountability arrangements should be established for Joint Committees administering Peace III monies and every attempt should be made to streamline the structures further without compromising accountability.
14. The Committee noted that there was a high level of unsuccessful applications for PEACE II funding. It was, therefore, pleased to see the support arrangements that are being put in place for the completion of applications under the new programmes, which should help community groups frame good quality proposals. It welcomes the two-part application process with Part A comprising a general description of the proposed project and Part B requiring more detailed information including answers to justify what the applicant is proposing to do.
15. The Committee is concerned about the variable quality of economic appraisals carried out, on SEUPB’s behalf, of applications for EU funding. It therefore recommends that SEUPB should exercise strict quality control over economic appraisals conducted by consultants and frame its contracts with consultants in such a way that rigorous quality standards can be enforced.
16. The Committee acknowledges the challenges of measuring the impact of PEACE programmes. Continued consideration should be given to how the impact of the programmes on the quality of community relations can be measured.
17. The Committee notes the stringent closure procedures used by SEUPB, DFP and the European Commission at the end of programme lives and encourages SEUPB and DFP to achieve a successful closure and pursue, at the appropriate level, the recovery of any irregular expenditure detected. It also recognises the challenge inherent in the time limits for the spending of funds, and welcomes the SEUPB’s efforts to meet the targets without compromising standards.
18. The Committee welcomes the involvement of Western Scottish partners in the INTERREG IVA Programme, and encourages SEUPB to maximise the opportunities created by its participation in the INTERREG IVB and C transnational and inter-regional programmes and the Peace Network.
Summary of Recommendations
Recommendation 1
1. The 2004 accounts were the last accounts of the Language Body to be finalised, and these were presented to the Assembly a short time prior to the evidence session. Finalising its 2005, 2006 and 2007 accounts remains long overdue. DFP should ensure that a clear timetable and action plan is established to finalise these accounts. Furthermore, InterTradeIreland’s 2007 accounts had not been presented to the Assembly at the time of the Committee’s evidence session (March 2009) despite having been certified by the C&AGs eight months earlier. The Committee therefore recommends that accounts for all public bodies should be presented to the Assembly within a maximum of six weeks of the date of certification. This should allow sufficient time for the printing and laying process (see paragraph 13).
Recommendation 2
2. Under current arrangements only limited information on senior executives’ pay is disclosed in the accounts of North/South Bodies. Senior executives’ remuneration is included in notes to the accounts rather than the annual report, and senior officials have the option to withhold their consent to disclose information. DFP should explore how best to bring the disclosure of remuneration in North/South Bodies in line with emerging best practice, including the introduction of a separate remuneration report (see paragraph 18).
Recommendation 3
3. DFP told the Committee that a number of governance matters in relation to North/South bodies were to be looked at afresh, including the question of non-executive members. This review should now be taken forward without delay (see paragraph 20).
Recommendation 4
4. The Committee reiterates the long-standing principle of public finance that public bodies should not hold levels of cash in excess of their immediate needs. This applies as much to North/South Bodies as to other bodies. Public money should not be allowed to sit in bank accounts, unused, when so many other funding pressures exist throughout the public sector. The Committee recommends DETI ensures InterTradeIreland reduces and maintains its cash balances in line with the principle stated (see paragraph 30).
Recommendation 5
5. The Committee reiterates the importance of the effective handling of conflicts of interest. This applies as much to managing agents as to employees and members. The Committee recommends that North/South Bodies should ensure that they have best practice arrangements in place to manage or prevent conflicts of interest occurring, including robust and well-publicised whistle-blowing arrangements (see paragraph 32).
Recommendation 6
6. It is the Committee’s view that robust accountability arrangements should be established for Joint Committees administering Peace III monies. In addition, the Committee recommends that every effort should be made to streamline the structures further without compromising accountability (see paragraph 38).
Recommendation 7
7. The Committee recommends that SEUPB should exercise strict quality control over economic appraisals conducted by consultants, and frame its contracts with the consultants so that rigorous quality standards can be enforced. It refers SEUPB to the wider recommendations contained in its report on the use of consultants in the NI Civil Service[1] (see paragraph 46).
Recommendation 8
8. The Committee acknowledges the challenges of measuring the impact of PEACE programmes. The Committee recommends that continued consideration should be given to how the impact of the programmes on the quality of community relations can be measured. In view of the money being spent it is important that there are measurable outcomes. These might include measures such as “peace walls" coming down and a reduction in incidents in the “marching season" (see paragraph 50).
Introduction
1. The Public Accounts Committee met on 12 March 2009 to consider Section 7 (Accountability of North/South Bodies 1999-2007) of the Comptroller and Auditor General’s (C&AG’s) report ‘Financial Auditing and Reporting: 2006-2007’.
2. The witnesses were:
Mr David Sterling, Deputy Secretary, Department of Enterprise, Trade and Investment;
Mr Liam Nellis, Chief Executive, InterTradeIreland;
Mr Laurence Lord, Director of Corporate Services, InterTradeIreland;
Mr Bill Pauley, Head of European Services, Department of Finance and Personnel;
Mr Pat Colgan, Chief Executive, Special EU Programmes Body;
Ms Gina McIntyre, Director of Corporate Services, Special EU Programmes Body;
Mr David Thomson, Treasury Officer of Accounts; and
Mr Kieran Donnelly, Deputy Comptroller and Auditor General.
3. North/South Bodies are engaged in a range of important areas including tourism, trade and development, food safety, the promotion of Irish and Ulster Scots and the administration of EU funds. Their activities are funded jointly by the Northern Ireland Assembly and Dáil Éireann in varying proportions.
4. These bodies have unique financial accounting and reporting arrangements arising from the requirements of the two administrations in which they operate. Since they receive part of their funding from the Assembly they are subject to scrutiny by this Committee. The Committee examined how these arrangements are working in practice and whether they are supporting high standards of financial management and accountability.
5. None of the six North/South Bodies have been examined by the Committee before. The two which gave evidence to the Committee were InterTradeIreland and the Special EU Programmes Body. Three other North/South Bodies have subsequently given evidence to the Dáil Éireann Committee of Public Accounts, namely Waterways Ireland, the Food Safety Promotion Board, and Tourism Ireland. InterTradeIreland hosted the Committee’s meeting at its premises in Newry. InterTradeIreland is involved in the highly topical field of trade and business development. The Special EU Programmes Body is involved in the administration of, and other functions connected to, EU grant programmes.
6. InterTradeIreland is the trade and business development body for the island of Ireland established under the North/South arrangements in 1999. It is overseen jointly by Department of Enterprise, Trade and Employment in the Republic of Ireland and the Department of Enterprise, Trade and Investment in Northern Ireland. It is based in Newry and its Board is appointed by the North/South Ministerial Council.
7. Two thirds of its funding is provided by the Department of Enterprise, Trade and Employment. The remaining one third is provided by the Department of Enterprise, Trade and Investment. Its objective is to identify, develop and deliver North/South business development and trade opportunities. It does this by promoting business networks intended to build cross-border relationships that will help individual companies and the two economies become more competitive in the global marketplace. InterTradeIreland also runs programmes intended to provide practical advice and support in targeting new cross-border business opportunities, sharing expertise to develop new products and processes, and advising high growth companies on attracting equity investment.
8. The SEUPB is a North/South Implementation Body sponsored by the Department of Finance and Personnel in Northern Ireland and the Department of Finance in the Republic of Ireland. One of the SEUPB’s principal aims is to promote cross-border co-operation through the implementation of the European funding programmes, the EU Programme for Peace and Reconciliation for Northern Ireland and the Border Region of Ireland 2000-2004 (PEACE II), as well as the programme’s extension (2005-2007) and the INTERREG IIIA Programme. These programmes are now beginning a closure process and it is the SEUPB’s responsibility to oversee this closure.
9. The SEUPB is managing and implementing two new EU funding programmes, EU Programme for Peace and Reconciliation for Northern Ireland and the Border Region of Ireland 2007-2013 (PEACE III) and the Cross border Territorial Cooperation Programme 2007-2013 (INTERREG IVA). For both of these programmes, the Body has been designated the role of Managing Authority and Certifying Authority and will have a much more substantial role in the delivery of the funding directly to the projects on the ground. In addition to this, SEUPB will promote North/South participation in transnational and interregional programmes
Issues of General Application to North/South Bodies
Making accounts available quickly
10. The accounts and annual reports of publicly funded bodies are of considerable interest to the Assembly and the public. In the case of North/South Bodies the Dáil will have an equal interest in them. It is an important element of accountability that public bodies make these available for public scrutiny soon after their financial year-ends. Government Departments and major non-departmental public bodies for example aim to present their accounts before the Assembly’s summer recess each year. North/South Bodies should also make their accounts and annual reports available quickly. Although most of the North/South Bodies’ accounts are up to date there are a number of points of concern.
11. InterTradeIreland’s accounts for the year ended 31 December 2007 still had not been presented to the Assembly on the date of the Committee’s evidence session (March 2009) despite having been certified by the C&AGs eight months earlier. Departments were labouring under the misapprehension that annual reports and accounts needed to be considered by the North/South Ministerial Council before they could be presented to the Assembly. The Committee was assured that the 2007 accounts will now be presented as quickly as possible and that, in future, InterTradeIreland’s accounts will be presented as soon as they are prepared and certified by the C&AGs.
12. The Committee noted that the 2004 accounts were the last accounts of the Language Body to be finalised, and these were presented a short time prior to the evidence session. Finalising its 2005, 2006 and 2007 accounts remains long overdue. The Committee was informed that there have been problems with the accounts of the Ulster-Scots Agency and that has had ramifications for the Language Body.
Recommendation 1
13. The 2004 accounts were the last accounts of the Language Body to be finalised, and these were presented to the Assembly a short time prior to the evidence session. Finalising its 2005, 2006 and 2007 accounts remains long overdue. DFP should ensure that a clear timetable and action plan is established to finalise these accounts. Furthermore, InterTradeIreland’s 2007 accounts had not been presented to the Assembly at the time of the Committee’s evidence session (March 2009) despite having been certified by the C&AGs eight months earlier. The Committee therefore recommends that accounts for all public bodies should be presented to the Assembly within a maximum of six weeks of the date of certification. This should allow sufficient time for the printing and laying process.
Remuneration reports
14. The Committee is disappointed to learn that there is no requirement for North/South Bodies to include remuneration reports in their annual reports to disclose pay, pension and other benefits for their senior executives. In the case of InterTradeIreland only one of its four senior executives disclosed his remuneration in the 2006 accounts, though the Committee was told this has now risen to three of the four.
15. Good practice on the disclosure of senior executives’ remuneration has evolved significantly in recent years. Prior to a ruling by the Information Commissioner in Northern Ireland public bodies could only publish remuneration details with the consent of the senior executives concerned. Now, in Northern Ireland, public bodies can disclose this information without consent, except in very limited circumstances. The regime that exists for other public bodies in Northern Ireland has not yet been applied to North/South Bodies.
16. The Committee welcomes DFP’s commitment to consult the Department of Finance on guidance on remuneration reports with a view to bringing it into line with best practice. DFP undertook to inform the Committee of the outcome.
17. The SEUPB told us that one of its senior executives did not disclose her remuneration because she was the equivalent of a Grade 7 civil servant and that civil servants of this rank are not required to report or reveal their salaries. The Committee considers that the relevant test is whether an officer is exercising the functions of a senior executive. It reiterates the principle that senior executives in a public body who are responsible for directing its affairs should be included in the scope of a remuneration report, regardless of their equivalent civil service grade.
Recommendation 2
18. Under current arrangements only limited information on senior executives’ pay is disclosed in the accounts of North/South Bodies. Senior executives’ remuneration is included in notes to the accounts rather than the annual report, and senior officials have the option to withhold their consent to disclose information. DFP should explore how best to bring the disclosure of remuneration in North/South Bodies in line with emerging best practice, including the introduction of a separate remuneration report.
Review of governance matters
19. Most North/South bodies, including InterTradeIreland, have non-executive board members, but SEUPB and Waterways Ireland do not. The Committee can certainly see the benefit of having non-executive directors to scrutinise the work of the executives. The Committee was told the founding legislation was quite specific and set out which bodies have boards and which have not. The Committee considers that this issue needs to be re-visited as boards are a fundamental part of good governance.
Recommendation 3
20. DFP told the Committee that a number of governance matters in relation to North/South bodies were to be looked at afresh, including the question of non-executive members. This review should now be taken forward without delay.
Oversight by sponsoring Departments
21. Both DETI and DFP described their oversight arrangements of North/South Bodies. The main elements are having designated accounting officers in place, financial memoranda, corporate and business planning arrangements and reporting mechanisms to provide feedback to the relevant Department. Both DETI and DFP emphasised that their oversight arrangements for their respective North/South Bodies are the same as exist for any other sponsored body, with the additional consideration of their corresponding Department in the Republic of Ireland. This is a sound principle and the Committee endorses it.
InterTradeIreland
Promoting all-island trade
22. The Committee explored the barriers to trade, including infrastructure constraints such as road, rail and ferry connections, and how some companies found it difficult to break into the cross-border market. One of the perceived barriers was the requirement for extensive duplicate testing of products even when standards are the same on both sides of the border.
23. InterTradeIreland was clear that it cannot get involved directly with infrastructure issues which are outside its remit. Nevertheless, the Committee welcomes the assurance that InterTradeIreland has a very positive influencing role with those bodies and stakeholders that have influence in these areas. For example, InterTradeIreland pointed to improved air links where it had made a contribution to easing the barriers to trade.
The importance of working with other agencies
24. Co-operation and co-ordination between InterTradeIreland and the Industrial Development Agency and Invest Northern Ireland was examined. Key features of the relationships were identified, including the uniquely all-island nature of InterTradeIreland’s programmes.
25. It is important that these Bodies work closely to ensure there is no duplicate funding. There is a clear expectation that DETI should consider the risks of displacement and overlap to ensure that there is no question of, for instance, InterTradeIreland double-funding a project or adding to a grant that has already been paid by Invest Northern Ireland or the Industrial Development Agency.
26. The Committee endorses the importance of including in DETI’s appraisals of programmes, a specific test of whether there is any duplication with programmes elsewhere. The evaluation of programmes also involves checking to ensure that there has been no duplication.
Maximising impact
27. The Committee is concerned to ensure that value for money is maximised. It was told about the ‘Go to Tender’ programme, which involves taking companies from one economy and training them to compete for public procurement contracts in the other economy. The training does not cost much and examples were provided of Northern Ireland companies that secured contracts as a result of participation in the programme. The Committee emphasises that resources should be focused on schemes with the highest payback and endorses the inclusion of this important performance indicator in InterTradeIreland’s annual report.
The management of bank balances
28. The Committee noted that InterTradeIreland’s bank balance at its financial year-end had increased by £1.5 million to around £4 million in 2006. The Committee raised concerns as to why the money was just sitting in the bank account, why it was not used and whether it was there for a long time. It was told the money corresponded with the amount of provisions and accruals not paid out at the year-end.
29. The Committee in fact found that InterTradeIreland was holding cash in excess of its immediate requirements. The accounts showed £1.5 million of creditors and provisions of £1.7 million, leaving a considerable balance of cash to increase reserves. The Committee also noted that InterTradeIreland had to take action in subsequent years to reduce its reserves from the excessive levels it had accumulated.
Recommendation 4
30. The Committee reiterates the long-standing principle of public finance that public bodies should not hold levels of cash in excess of their immediate needs. This applies as much to North/South Bodies as to other bodies. Public money should not be allowed to sit in bank accounts, unused, when so many other funding pressures exist throughout the public sector. The Committee recommends DETI ensures InterTradeIreland reduces and maintains its cash balances in line with the principle stated.
Avoiding conflicts of interest
31. A long standing concern of the Committee has been the avoidance of conflicts of interest in public bodies. The Committee was concerned to hear that in 2006 managing agents engaged by InterTradeIreland to manage a programme had interests in some of the participating companies. The Committee endorses the Westminster PAC’s view[2] that public bodies should ensure that it is a requirement of funding that consultants acting as managers of funds (or programmes) should not hold shares, directorships or other interests in companies supported by the funds or programmes. There should also be a bar on managers undertaking any consultancy work or providing financial services in client companies.
Recommendation 5
32. The Committee reiterates the importance of the effective handling of conflicts of interest. This applies as much to managing agents as to employees and members. The Committee recommends that North/South Bodies should ensure that they have best practice arrangements in place to manage or prevent conflicts of interest occurring, including robust and well-publicised whistle-blowing arrangements.
Special EU Programmes Body
Complexity of EU programmes
33. The Special EU Programmes Body (SEUPB) receives money from several sources: the European Commission, the Department of Finance and Personnel in Northern Ireland, the Department of Finance in the Republic of Ireland, and each accountable Department. Each of those Departments has its own accountability requirements.
34. A balance has to be struck between the demands of accountability, particularly in view of the control weaknesses identified in the PEACE I Programme in the 1990s, and the need for clear and understandable requirements that applicants can satisfy.
35. The large number of implementing bodies and measures in the PEACE II Programme made it difficult for potential applicants to know to which body to apply and the different selection criteria for each.
36. The Committee was told that steps had been taken to simplify the administration of EU programmes with significant reductions in the numbers of accountable Departments, implementing bodies and measures within programmes. An administrative saving of £1.4 million has been projected over the seven year life of the new Programmes as a result of the simplified structures.
37. The Committee examined SEUPB’s decision to deliver the new Programmes through a smaller number of local authority ‘clusters’ in place of the earlier Local Strategic Partnerships which had largely coincided with district council areas. SEUPB told the Committee the ‘clusters’ approach had emerged out of the consultation process which was part of the Programme preparation. There were some initial difficulties with the legal status of Joint Committees which make up the clusters but the Committee was told that these have been addressed.
Recommendation 6
38. It is the Committee’s view that robust accountability arrangements should be established for Joint Committees administering Peace III monies. In addition, the Committee recommends that every effort should be made to streamline the structures further without compromising accountability.
SEUPB support for community sector applications
39. The Committee noted that that only 52% of PEACE II applications had been successful. This indicates much fruitless effort on the part of community groups and others.
40. The Committee was told this was due to a high level of expectation and over-subscription of many of the programme measures, in some cases by as much as 5:1. It has taken time to build up the level of professional competence in preparing applications, which has been stronger in some communities than in others. The Committee regrets that in some cases worthwhile projects were rejected for a variety of reasons.
41. SEUPB has met community groups and public representatives to consider how they could make the most of the measures within the programmes. It has adopted a more developmental approach, offering direct help to applicants and making available to them some sources of technical competence. The Committee was also interested to hear about a two-part application process to the new programmes with part A comprising a general description of the project, which forms a basis for discussions about how it may be developed, and Part B requiring much more detailed information and justification.
42. The Committee notes the support arrangements that are being put in place for the completion of applications under the new programmes; this should help community groups frame good quality proposals. It welcomes the two stage application process. SEUPB should monitor the outcomes of the new arrangements.
Economic appraisals by Consultants
43. The Committee has observed that in the past some community groups were disadvantaged because the consultants who assessed their applications had a poor grasp of the complex requirements of EU funding.
44. Under the new programmes SEUPB still engages consultants to carry out some of the appraisals. SEUPB agreed that the quality of the consultants’ economic appraisals was variable, in spite of its having provided guidelines and having supervised and monitored the consultants’ work.
45. Project applicants who feel disadvantaged by a faulty appraisal are encouraged to use the appeals mechanism in the programme. SEUPB is in discussion with DFP’s Central Procurement Directorate about how to build a quality assurance indicator into the procurement of consultancy services.
Recommendation 7
46. The Committee recommends that SEUPB should exercise strict quality control over economic appraisals conducted by consultants, and frame its contracts with the consultants so that rigorous quality standards can be enforced. It refers SEUPB to the wider recommendations contained in its report on the use of consultants in the NI Civil Service.[3]
Measuring the impact of PEACE programmes
47. Building positive relationships at local level is the focus of €140 million of the total €333 million available under PEACE III. SEUPB must ensure that funded projects contribute to the improvement of community relations.
48. SEUPB noted that over the years it had developed a deeper understanding of what is meant by reconciliation, and good relations within and between communities. PEACE II had seen the development of ‘distinctiveness’ criteria for projects, with the aid of academic research. But SEUPB had come to realise the difficulty of isolating the contribution of a single project.
49. Whilst there is no internationally recognised best practice in how to improve community relations and how to measure improvement, SEUPB has engaged with the European Commission and Canadian academics, and integrated into its programme evaluation and monitoring mechanisms the outcomes of recent international research. It has also contracted the Northern Ireland Statistics and Research Agency to help it set baseline data on such factors as levels of engagement with the other community.
Recommendation 8
50. The Committee acknowledges the challenges of measuring the impact of PEACE programmes. The Committee recommends that continued consideration should be given to how the impact of the programmes on the quality of community relations can be measured. In view of the money being spent it is important that there are measurable outcomes. These might include measures such as “peace walls" coming down and a reduction in incidents in the “marching season".
European Commission requirements: formal closure of programmes; and time limits
51. SEUPB and DFP explained that whilst PEACE I is closed as far as SEUPB is concerned, DFP is still in correspondence with the European Commission about final amounts due. DFP noted that 2010 was the final date for submission of claims under PEACE II to the European Commission.
52. The Committee explored with SEUPB and DFP the mechanisms for identification and reporting of irregularities. If the error relates to a systems error in the closure report, the liability may rest with the member state. If an irregularity arises on a specific project, then every effort is made to recover the funds at the local level from the project.
53. The Committee also noted the existence of the ‘n+2’ rule under which monies committed under a programme must be spent within two years of being committed. Within this requirement there is flexibility for SEUPB to substitute spend on ‘faster’ projects for those which, for whatever reason, have not been able to spend enough funds. The Committee challenged SEUPB over the possibility that large projects might be rushed to fruition simply in order to keep within n+2 targets.
54. SEUPB told us that the assessment process and programme admission criteria were robust and stringent. Moreover, decisions are taken by the programme monitoring committees, which contain representation from a number of other bodies and hence are independent of SEUPB.
55. The Committee notes the ongoing work on the closure of PEACE I and II, acknowledges the risk that funds may be lost in the event of certain irregularities, and encourages DFP and SEUPB to continue their efforts to achieve final closure, and pursue, at the appropriate levels, the recovery of any irregular expenditure.
56. The Committee notes the challenge inherent in the n+2 time limits for the spending of funds, and welcomes the SEUPB’s efforts to meet the targets without compromising standards.
Western Scottish involvement
57. The Committee noted with interest the participation in the Cross border Territorial Cooperation Programme 2007-13 ( INTERREG IVA) of parts of Western Scotland in tripartite projects with partners in Northern Ireland and the border counties of the Republic of Ireland, and the special accountability considerations this introduces.
58. The Committee welcomes this innovative development, and also encourages SEUPB to maximise the opportunities created by involvement in the INTERREG IVB and C transnational and inter-regional programmes and the Peace Network which is sharing the experience of the PEACE programmes with other regions throughout Europe.
[1] Use of Consultants, Session 2007-08, (NIA 16/07/08r)
[2] Governance issues in the Department of Enterprise, Trade and Investment’s former Local Enterprise Development Unit, Westminster PAC, Session 2005-06 (HC 918)
[3] Use of Consultants, Session 2007-08, (NIA 16/07/08r)
Appendix 1
Minutes of Proceedings
of the Committee
Relating to the Report
Thursday, 5 March 2009
Room 144, Parliament Buildings
Present: Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Thomas Burns
Mr Jonathan Craig
Mr John Dallat
Mr Trevor Lunn
Mr Mitchel McLaughlin
Ms Dawn Purvis
Mr George Robinson
Mr Jim Shannon
In Attendance: Ms Alison Ross (Assembly Clerk)
Mrs Gillian Lewis (Assistant Assembly Clerk)
Mr Darren Weir (Clerical Officer)
Apologies: Mr Jim Wells
2.00pm The meeting opened in public session.
6. Briefing on NIAO Report ‘Financial Auditing and Reporting: Accountability of the North/South Bodies 1999-2007’.
Mr Kieran Donnelly, Deputy C&AG; Ms Louise Mason, Assistant Auditor General; Mr Lindsay Green, Audit Manager and Mr Gary Christie, Audit Manager, briefed the Committee on the NIAO Report, ‘Financial Auditing and Reporting: Accountability of the North/South Bodies 1999-2007’.
2.35pm The meeting went into closed session.
There were declarations of interest from members as follows:
Mr Beggs: Treasurer of Carrickfergus Neighbourhood Development Group and former member of Carrickfergus Local Strategic Partnership.
Mr Burns: Member of Antrim Local Strategic Partnership Board in relation to PEACE I and II.
Mr Craig: Member of Lisburn and Castlereagh PEACE III Partnership.
Mr Maskey: Member of Belfast City Council; Director of Belfast Visitor Convention Bureau; Director of Upper Andersonstown Community Forum; Director of Féile an Phobail; Fáilte Feirste Thiar; and West Belfast Partnership Economic Development Committee.
Ms Purvis: Vice-Chair, Management Committee of Ex-Prisoners Interpretive Centre (EPIC).
The witnesses answered a number of questions put by members.
[EXTRACT]
Thursday, 12 March 2009
Conference Room, Intertradeireland, Newry
Present: Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Jonathan Craig
Mr John Dallat
Mr Trevor Lunn
Mr Mitchel McLaughlin
Mr Jim Shannon
Mr Jim Wells
In Attendance: Ms Alison Ross (Assembly Clerk)
Mrs Gillian Lewis (Assistant Assembly Clerk)
Mr John Lunny (Clerical Supervisor)
Mr Darren Weir (Clerical Officer)
Apologies: Mr Thomas Burns
Ms Dawn Purvis
Mr George Robinson
2.00pm The meeting opened in public session.
3. Evidence on the NIAO Report ‘Financial Auditing and Reporting: Accountability of North/South Bodies 1999-2007’.
The Committee took oral evidence on the NIAO report ‘Financial Auditing and Reporting: Accountability of North/South Bodies 1999-2007’ from Mr David Sterling, Deputy Secretary, Department of Enterprise, Trade and Investment, Mr Liam Nellis, Chief Executive, InterTradeIreland, Mr Laurence Lord, Corporate Services Director, InterTradeIreland, MrBill Pauley, Head of European Division, Department of Finance and Personnel, Mr Pat Colgan, Chief Executive, Special EU Programmes Body, and Ms Gina McIntyre, Director of Corporate Services, Special EU Programmes Body.
2.25pm Mr Dallat joined the meeting.
The witnesses answered a number of questions put by the Committee.
3.18pm Mr Shannon left the meeting.
3.19pm Mr Wells left the meeting.
The following members declared an interest before the witnesses from the Special EU Programmes Body were questioned:
Mr Beggs: Treasurer of Carrickfergus Neighbourhood Development Group and former member of Carrickfergus Local Strategic Partnership.
Mr Craig: Member of Lisburn and Castlereagh PEACE III Partnership.
Mr Maskey: Member of Belfast City Council; Director of Belfast Visitor Convention Bureau; Director of Upper Andersonstown Community Forum; Director of Féile an Phobail; Fáilte Feirste Thiar; and West Belfast Partnership Economic Development Committee.
Members requested that the witnesses should provide additional information to the Clerk on some issues raised as a result of the evidence session.
[EXTRACT]
Thursday, 19 March 2009
Room 144, Parliament Buildings
Present: Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Thomas Burns
Mr Jonathan Craig
Mr John Dallat
Mr Trevor Lunn
Mr Mitchel McLaughlin
Mr Jim Shannon
In Attendance: Ms Alison Ross (Assembly Clerk)
Mrs Gillian Lewis (Assistant Assembly Clerk)
Mr John Lunny (Clerical Supervisor)
Mr Darren Weir (Clerical Officer)
Apologies: Ms Dawn Purvis
Mr George Robinson
2.00pm The meeting opened in public session.
5. Issues from the oral evidence session on NIAO report ‘Financial Auditing and Reporting: Accountability of the North/South Bodies 1999-2007’.
Members considered and agreed the issues paper.
Members discussed whether the main issues arising from the evidence session should be forwarded to the Oireachtas Committee of Public Accounts to inform the evidence session which they will hold on 2 April 2009.
Agreed: Members agreed that the Chairperson should write to the Chairperson of the Oireachtas Committee of Public Accounts with details of the issues arising from this Committee’s evidence session and highlighting recommendations from the previous Public Accounts Committee’s report into the Northern Ireland Tourist Board.
Members also considered whether the publication of the report would be delayed to coincide with the publication of the report on the same issue by the Oireachtas Committee of Public Accounts.
Agreed: Members agreed that the Clerk should enquire the date when the Oireachtas Committee would be publishing their report and then reconsider this issue.
[EXTRACT]
Thursday, 11 June 2009
Room 144, Parliament Buildings
Present: Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Jonathan Craig
Mr John Dallat
Mr Mitchel McLaughlin
Ms Dawn Purvis
Mr George Robinson
Mr Jim Shannon
Mr Jim Wells
In Attendance: Ms Aoibhinn Treanor (Assembly Clerk)
Mrs Gillian Lewis (Assistant Assembly Clerk)
Miss Danielle Best (Clerical Supervisor)
Mr Darren Weir (Clerical Officer)
Apologies: Mr Thomas Burns
Mr Trevor Lunn
2.00pm The meeting opened in public session.
6. Consideration of the draft Committee Report on Accountability of North/South Bodies 1999-2007.
Members congratulated Mr Kieran Donnelly on his nomination, by the Northern Ireland Assembly, as Comptroller and Auditor General. Mr Donnelly will take up his new position in September 2009.
3.50pm Mr Craig left the meeting.
Members considered the draft report paragraph by paragraph.
There were declarations of interest from members as follows:
Mr Beggs: Treasurer of Carrickfergus Neighbourhood Development Group and former member of Carrickfergus Local Strategic Partnership.
Ms Purvis: Vice-Chair, Management Committee of Ex-Prisoners Interpretive Centre (EPIC).
Mr Maskey: Member of Belfast City Council; Director of Belfast Visitor Convention Bureau; Director of Upper Andersonstown Community Forum; Director of Féile an Phobail; Fáilte Feirste Thiar; and West Belfast Partnership Economic Development Committee.
The Committee considered the main body of the report.
Paragraphs 1 – 13 read and agreed.
Paragraph 14 read, amended and agreed.
Paragraphs 15 read and agreed.
Paragraph 16 read, amended and agreed.
Paragraphs 17 – 19 read and agreed.
Paragraph 20 read, amended and agreed.
Paragraphs 21 – 30 read and agreed.
Paragraphs 31 and 32 read, amended and agreed.
Paragraphs 33 – 37 read and agreed.
Paragraph 38 read, amended and agreed.
Paragraph 39 read and agreed.
Paragraph 40 read, amended and agreed.
Paragraphs 41 – 49 read and agreed.
Paragraph 50 read, amended and agreed.
Paragraphs 51 – 54 read and agreed.
4.07pm Mr Beggs left the meeting.
Paragraphs 55 – 58 read and agreed.
The Committee considered the Executive Summary.
Paragraphs 1 – 4 read and agreed.
Paragraph 5 read, amended and agreed.
Paragraphs 6 – 18 read and agreed.
Agreed: Members agreed that the amendments would be made to the report [...]
[EXTRACT]
Thursday, 17 June 2010
Room 144, Parliament Buildings
Present: Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
The Lord Browne
Mr Trevor Lunn
Mr Mitchel McLaughlin
Mr Patsy McGlone
Mr Stephen Moutray
Ms Dawn Purvis
Mr Jim Shannon
In Attendance: Ms Aoibhinn Treanor (Assembly Clerk)
Mr Phil Pateman (Assistant Assembly Clerk)
Miss Danielle Best (Clerical Supervisor)
Mr Darren Weir (Clerical Officer)
Apologies: Mr John Dallat
Mr David Hilditch
2:08 pm The meeting opened in public session.
8. Report on North/South Bodies’.
The Committee agreed that agenda item 9 would be considered next.
Agreed: Members ordered the report to be printed.
Agreed: Members agreed that the report would be embargoed until 00.01 am on Wednesday, 30 June 2010.
Agreed: Members agreed to launch the report with a press release to be agreed at a later meeting and subject to press interest to participate in a media pre-brief.
[EXTRACT]
Appendix 2
Minutes of Evidence
12 March 2009
Members present for all or part of the proceedings:
Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Jonathan Craig
Mr John Dallat
Mr Trevor Lunn
Mr Mitchel McLaughlin
Mr Jim Shannon
Mr Jim Wells
Witnesses:
Mr Laurence Lord
Mr Liam Nellis
InterTradeIreland
Mr David Sterling
Department of Enterprise, Trade and Investment
Mr Pat Colgan
Ms Gina McIntyre
Special EU Programmes Body
Mr Bill Pauley
Department of Finance and Personnel
Also in attendance:
Mr Kieran Donnelly
Deputy Comptroller and Auditor General
Mr David Thomson
Treasury Officer of Accounts
1. The Chairperson (Mr P Maskey): We now move to the evidence session on the section of the Audit Office’s Report ‘Financial Auditing and Reporting 2006-2007’ that deals with the accountability of the North/South bodies from 1999 to 2007. It is a pleasure to be in Newry, and I particularly thank InterTradeIreland for hosting the Committee’s meeting here today.
2. During the evidence session, we will examine section 7 of the Comptroller and Auditor General’s general report. This is the first time that this Committee has examined North/South bodies, and therefore we wish to gain some insight into what they do, how they work, what their achievements are, and the type of problems that they have encountered since their establishment in the late 1990s. It is also important to note that we take the same interest in the North/South bodies that we do in other public bodies.
3. For this session, the Committee has decided to concentrate on two North/South bodies — InterTradeIreland and the Special EU Programmes Body (SEUPB). To manage that effectively, there will be two separate sections to the evidence session and two sets of witnesses. We will hear from InterTradeIreland first, then the SEUPB.
4. The Committee wants to cover a lot of ground today, so I ask witnesses to ensure that their responses are to the point but without compromising any information that we are asking for.
5. We are joined by David Sterling, deputy secretary of the Department of Enterprise, Trade and Investment, Liam Nellis, chief executive of InterTradeIreland — you are very welcome to your own building today. [Laughter.] We are also joined by Laurence Lord, corporate service director of InterTradeIreland. You are all very welcome. I also welcome David Thomson, the Treasury Officer of Accounts.
6. In addition to the Audit Office report, we have the InterTradeIreland annual accounts for 2006. Those two documents will form the basis of our session today. I understand that the Comptroller and Auditor Generals in both Belfast and Dublin have given InterTradeIreland’s accounts clear certificates, not only for the year under scrutiny, but for every year since InterTradeIreland was established. As usual, as the Committee Chairperson, I will ask the first few questions.
7. A key theme in this Committee’s work has been how Government Departments oversee the activities of arm’s-length bodies. Mr Sterling, your Department, along with the Department of Enterprise, Trade and Employment (DETE) in Dublin, is responsible for the oversight of InterTradeIreland. Will you explain to the Committee how you discharge that oversight function? The Committee has had some dealings with arm’s-length bodies in the past, and there have been some issues with those bodies.
8. Mr David Sterling (Department of Enterprise, Trade and Investment): Thank you. The Department, through the accounting officer, takes the same approach to ensuring accountability and governance in InterTradeIreland as it does to any other of its satellite organisations, that is, the non-departmental public bodies. What makes InterTradeIreland unique is that it is a body with two masters. It is sponsored from two jurisdictions, so in a sense it has to comply not just with the accountability requirements of my Department, but with those of DETE in the South.
9. From our perspective, operationally that compliance flows from the accounting officer. As with any arm’s-length body, the accounting officer is required to ensure that there is an adequate internal control system in the body. For example, it must have corporate and business plans and a corporate governance framework that is fit for purpose. If those elements are in place, the accounting officer can satisfy himself of those systems.
10. The main means by which he would seek to do that is through the financial memorandum, which has been agreed between the two Departments and applied to the body. The financial memorandum sets out quite comprehensive governance requirements for the body. We in the Department work with our counterparts in DETE to ensure that those requirements are complied with. The main way in which that is done is through a series of quarterly oversight and liaison meetings at which both Departments are represented. The body would attend those meetings, and we would have a fairly standard agenda under which we would review the body’s performance.
11. We look at a variety of reports. For example, we would see reports on performance and financial information. We would review corporate governance issues and various other human resource (HR) and staffing issues. The minutes of those meetings are presented to DETI’s departmental board, meaning that the board has an opportunity to see that the oversight arrangements are working well.
12. On top of that, the body has a clear, strong system of internal control, and through our observer status at the body’s audit committee, which meets three or four times a year, we satisfy ourselves that it is working. One or more of our officials will attend that committee as an observer, and they will have an opportunity to see how the body’s internal control arrangements are working.
13. That is a broad overview of the process, but to sum up, as far as is possible, we treat InterTradeIreland in the same way that we treat other arm’s-length bodies.
14. The Chairperson: Is there a connection between the Committee that scrutinises DETI and the Committee that scrutinises its Dublin counterpart? Do issues to do with InterTradeIreland, for example, often come up in scrutiny Committees in Belfast or in Dublin? Do scrutiny Committees often have to deal with such issues?
15. Mr Sterling: Which scrutiny Committee do you mean?
16. The Chairperson: The Assembly’s scrutiny Committee.
17. Mr Sterling: I have not personally addressed the Committee for Enterprise, Trade and Investment on any InterTradeIreland issues.
18. Mr Liam Nellis (InterTradeIreland): In early December, we played host in a similar fashion to this meeting to the Committee for Enterprise, Trade and Investment. We had a very detailed discussion about InterTradeIreland’s work, and by all accounts, the Committee was very satisfied with our work.
19. The Chairperson: In July 2008, the Comptroller and Auditor General reported that the last certified accounts and annual review of activities were for 2006. When were your 2007 accounts certified, and when will they be available on your website?
20. Mr Nellis: There is a detailed timetable for the completion and approval of such reports. First, the Comptroller and Auditor General’s office must provide us with an audited set of accounts — which it did — in the form of an unqualified set of accounts in June for the year in question. We then put the narrative to that and submit it as our annual report and accounts. Ostensibly, annual report and accounts had to be approved or taken to a meeting of the North/South Ministerial Council (NSMC) in sectoral format. That was the understanding of some people on our side and in the Department.
21. An NSMC meeting in sectoral format took place towards the end of last year, and, in the run-up to that, there was no time to get the draft annual report taken through the various stages in the Executive before it could go to the Committee. The report is now ready to go to the next meeting, which I understand is scheduled for June, but, in the interim, the NSMC has provided clarification on the instructions regarding papers such as those, which are in between meetings. It has now been determined that we can go ahead and have the report completed and laid before the House and then taken to the Committee for noting. Therefore, the report is more or less ready, and the draft ministerial foreword is in place. I do not have a final date for its release, but I believe that it will be available to the public within the next week.
22. The Chairperson: There is obviously public interest in InterTradeIreland’s work in the current economic environment, and people would like to see those reports published as early as possible. Is that the main reason that you think that it has not been published? There has certainly been a delay in its publication, including on the website.
23. Mr Sterling: Liam is correct. The Departments were labouring under the misapprehension that the annual report and accounts needed to be considered at an NSMC sectoral meeting before they could be laid. That was corrected just before Christmas, and we are now moving as quickly as possible to lay those accounts. That should happen quickly, and in future we will lay our accounts as soon as they are prepared and certified.
24. The Chairperson: I have another question to ask, this time about current economic conditions. Matters have become much tougher for us all recently. Can you tell us what InterTradeIreland is doing now that it was not doing a year ago to get businesses through these rough times?
25. Mr Nellis: Towards the end of last year, we surveyed client businesses of ours in both parts of the island. Almost 1,000 companies were surveyed. The feedback from that analysis showed that companies were suffering significantly because of current economic conditions. Cash flow and loss of customers were among the problems that were reported. Normally, we would not intervene directly in many of those areas. However, we can have influence.
26. We have tried to be more responsive in this climate. We are doing a number of things to offer opportunities to companies that are experiencing difficulties. We can help company managers to find new markets, which are very important to companies. It is also important not only to get through current difficulties, but to be prepared for the inevitable upturn, when it comes. Many of our programmes are geared towards making companies more innovative and getting them more involved in R&D.
27. We have set ambitious targets for ourselves between now and June. We are going to six locations across the island to bring what we offer directly into localities. Our programmes are in every city and county on the island of Ireland, but coverage is patchy. Some areas have more companies involved than others. We analysed that, and, over the next six weeks, we will take a roadshow to six areas: Cork; Galway; Waterford; Letterkenny; Enniskillen; and Ballymena. The purpose of that roadshow is to make companies in those locations aware of the benefits that we offer.
28. At the present time, when the private sector is tight for business, one of our main messages is that there is still a massive public-procurement market on this island that is worth €16 billion. Many companies in the North are trying to gain access to the Southern system, and vice versa. We are working closely with our colleagues in the Department of Finance and Personnel (DFP) and in the Department of Finance in the South to open up those opportunities in public procurement. We also work closely with the Central Procurement Directorate in the North and the Office of Public Works in the South. We are running a number of programmes in that sector.
29. We are speeding up our payment processes, in line with the guidelines that have been produced. Ours were not quite as ambitious as those laid out by the Minister of Finance. We had moved our target from 30 days to 20 days, and we are now trying to align with the 10-day target, which is extremely ambitious. However, that is our goal.
30. We want to increase our business. We held a major equity conference last Thursday in Dublin that quite a number of small, potentially high-growth companies and venture capitalists attended. The big message coming through from small businesses at present — and this message has been consistent but is becoming ever more acute — is that they need access to seed capital at a very early stage. It is relatively easy to get a venture capital deal that is worth millions, but it is more difficult to get £100,000, £200,000 or £250,000 to keep one’s company going. We are now looking at that area to try to encourage the investment community to be more responsive at this time.
31. We are also tailoring our programmes to meet regional needs. We work closely with the chamber of commerce movement, particularly in the north-west, where we work with the Letterkenny Chamber and the Londonderry Chamber of Commerce. We work closely with them to take our offering directly into that area. We are now involved in an event that will be held next week in Dundalk and that is being led by Castlereagh Enterprises. We will bring in keynote speakers from across the island to get our message out at that event.
32. Most of our programmes require a minimum of 50% matched funding. At present, companies are cutting back on any discretionary spend that they have. Therefore, we are looking at ways through which we might alleviate the pressure that that puts on them. It may be possible to increase the level of contribution. We have yet to make a decision on that, because we need to understand the implications first. Through our various Innova projects, we are trying to encourage companies to avail themselves of the cost advantage of sharing investments in R&D.
33. At the moment, there is a meeting going on in another part of this building about a first-stop-shop resource and advisory centre that we will set up here. Through a lot of publicity, we aim to get companies that are looking for new markets or new opportunities for technology transfer to talk to us, because many companies seek advice from us in various different ways. However, we want to be much more responsive by having a telephone number that those companies can use to talk to us if they have a difficulty in the North/South arena. Those are some of the things that we are doing to tackle the current economic challenge.
34. The Chairperson: Thank you. I will now invite other members to ask questions. Approximately 10 minutes have been set aside for each member to ask a question. Members will also have an opportunity at the end to ask further questions. I reiterate that you should keep your answers succinct without losing any vital information.
35. Mr Wells: When we met in December, I promised you the prospect of a knighthood if you could solve the roaming telephone charges problem. I hope that you are well on your way to the palace. That struck me as the most obvious North/South issue that can be sorted out to the benefit of everyone, including the business community.
36. From your accounts — and I know that this issue is the subject of a question for written answer — I notice that you seem to have the Midas touch, because you get every penny that you ask for. Many Departments are very keen to find out how you do that. None of the North/South bodies has had their funding cut or has had to make any efficiency savings, which is quite interesting. You all got that you asked for. Of course, as taxpayers we pay a third of that funding. Taxpayers in Northern Ireland paid a third of the total amount of about £10 million in 2006. Therefore, it important that we, as an Assembly, find out whether we are getting good value for money. Can you provide any examples of how that funding has a made a difference to InterTradeIreland since 2000?
37. Mr Nellis: In respect of your first point, when our summary and detailed business plan for 2009 was first crafted, we asked for £12·5 million. However, that was cut back to £11·1 million. Therefore, although on the face of the documents it appears that there have not been cutbacks, we do not always get what we want. We are put under considerable scrutiny through our summary and detailed business planning process. Given the current economic climate, I am expecting a request in the next week for additional savings of at least 5% to be made, with more such savings probably coming down the track.
38. Your second question was about the value that we get from what we do. The first couple of years of InterTradeIreland were very much in the set-up phase. When I started this job in December 1999, I did not have an office or any staff and so forth. Therefore, we had to build the absorption capacity and the capability to get out to people. From 2003 to 2007, we tracked carefully what we did during that period. We have interacted with almost 15,000 companies across the island, more than 1,500 of which have been involved actively in our programmes.
39. We have also created several hundred jobs during that period. We have built added-value into companies through our evaluation process, and we have delivered about £150 million so far. Many projects are still active, and we seek to deliver another £250 million. Therefore, the total added-value return on investment will be £400 million.
40. Almost 200 first-time exporters who have never been involved in the export market before are coming through our programmes, and there are more than 200 first-time innovators who have never been involved with a third-level institution in the field of innovation.
41. A lot of value has been determined, and we work to Treasury efficiency guidelines. Under that methodology, we are showing an efficiency ratio of almost 1:3 in the relationship between our operating costs and our business programme expenditure. At the moment, the added value that we offer gives a return investment of around 1:4·6. In the current corporate plan, the return investment is 6:1, and the new board is introducing a new target of an 8:1 return on investment. That covers all areas, including increased productivity, increased turnover, increased jobs, new processes, and new products. That is all calculated within an agreed methodology.
42. Mr Wells: In case staff from Hansard picked it up wrong, my comment about the knighthood was humorous. [Laughter.] Liam may go off to the palace looking for someone to blame, but I have no role whatever in the allocation of knighthoods. I saw a few shocked faces when I made that comment. [Laughter.] Hopefully, he knows the spirit in which it was made.
43. Mr Nellis: I am disappointed. [Laughter.]
44. Mr Wells: I get annoyed when I am driving from Newry to Kilkeel and get text messages welcoming me to the Irish Republic.
45. Mr Nellis: The roaming charges still exist; however, the cost of roaming has gone down.
46. Mr Wells: Twenty-five pence a minute is still far too much to pay.
47. You outlined some of the successes of InterTradeIreland. Of course, it could be argued that the two economies are coming closer together and that there are far more companies trading across the border than there were 20 or 30 years ago. Some of that could have happened anyhow. Although you are talking about an increase in trade, can you point to a specific example of where that is happening as a result of your work and of where it would not have happened without your work? We are trying to identify InterTradeIreland’s added value.
48. Mr Nellis: I can give one specific example of when a big improvement was made to some people in both parts of the island. When we started the organisation, there were no air connections between Northern Ireland — Belfast — and any other part of the island. We produced a report on air access within the island, and, from that report, we encouraged Aer Arann to add a flight between Belfast and Cork. That is something that Aer Arann would not have considered otherwise. Despite a very sceptical approach from quite a lot of people, that route was added. The company took a risk, and that route is now one of their busiest with, on average, a 75% load factor.
49. We encouraged flights between Belfast and Dublin, but at that time, the new road opened. Our idea was not specifically to have flights between Belfast and Dublin, but that Dublin would become a hub for the rest of the island, so that people could get from Belfast to any part of the island and back again within one day. That did not work. Not all that we do works: some things work, some things do not work. There is now a flight between Belfast and Galway that did not exist previously. That is another example of our added value.
50. In your own constituency, there is a company called Crossgar Meats that, naturally, had never done any business in the South. We put in a programme called Acumen to encourage companies from each jurisdiction to look at the market and to do their research. That programme gives companies some support to move into the other market. Within one year of coming on to the Acumen programme, Crossgar Meats increased its turnover from €600,000 to €1·4 million. There are many other such examples.
51. You would think that that would happen naturally, but it does not. The further that companies are from the land border, the more incentivisation is needed. There was a history of people in the Newry area trading across the border; however, the further north companies were, or the further below the Dublin to Galway line they were, the less was the North/South activity. That is what we are stimulating.
52. Mr Sterling: The Department takes that particular point seriously. One of the controls in place means that all InterTradeIreland’s programmes are subject to investment appraisal to green book standards. One of the tests applied is the additionality test, and the value-for-money test is also applied. All programmes are evaluated, and those evaluations seek to ensure that there has not been any duplication of other programmes and that additional benefit has been gained from the investment.
53. Mr Wells: You are sandwiched between the two giants — Invest Northern Ireland and the Industrial Development Agency (IDA Ireland). How do you relate to those two big industrial investment promotion organisations?
54. Mr Nellis: We see our role as complementary rather than contradictory. Enterprise Ireland in the South deals with mainly local companies and IDA Ireland has a mainly external role. However, InterTradeIreland is the only organisation with a mandate to work at the island level, whereby we can have money flowing across the island. Enterprise Ireland has a remit within Ireland, and Invest Northern Ireland has, obviously, a remit within Northern Ireland. They do a little bit in the margins bilaterally, but for the real added value, our programmes are genuinely all-island. We do not do anything unless it has an all-island dimension.
55. We work very closely with those organisations to make sure that there is no duplication. Most of our spend goes towards our three or four main programmes. We have a representative of Invest Northern Ireland and Enterprise Ireland on each of those programmes, such as Acumen, Fusion or Innova. Those representatives are working, collaborating or co-operating with us, and they are even putting funding into some of the programmes because they recognise their value.
56. We work very hard to make sure that there is no duplication; in fact, we are currently coming towards the end of a strategic review of the organisation, undertaken by the new board that came in last year. One of the big issues coming out of that review is the need for not only more co-ordination but more communication between the organisations at the highest level, to ensure that the danger of overlap does not arise.
57. Mr Wells: You have pre-empted my next question, which is about displacement and overlap. Mr Sterling, does the Department keep an eye on that, too, to see that there is no question of, for instance, InterTradeIreland double-funding a project or adding to a grant that has already been paid by Invest NI or IDA Ireland? Do you keep a check on that issue?
58. Mr Sterling: We do; as I said earlier, all InterTradeIreland programmes are subject to appraisal. Those appraisals include a specific test of whether there is any duplication with programmes elsewhere. The evaluation of programmes also involves checking to ensure that there has been no duplication. Liam is right; members of Invest NI sit on the steering groups of the key programmes that InterTradeIreland runs, again in order to ensure that there is proper co-ordination. Therefore, we are satisfied that there are procedures in place to prevent duplication.
59. Mr Wells: If you were to spot what you perceived to be duplication or displacement, do you have powers to intervene to advise the board of InterTradeIreland, or to stop it from happening?
60. Mr Sterling: We would not approve an appraisal that identified duplication. If a programme was found not to be delivering against its objectives, that would emerge at the time or through evaluation. I think that I am right in saying that InterTradeIreland has changed programmes on the basis of evaluation results, not necessarily because of duplication but for a variety of reasons.
61. Mr Wells: If there is a dispute, however, who gives way?
62. Mr Sterling: Ultimately, we and DETE have the power of approval for programmes, so the power of the purse rests with the Departments.
63. Mr Wells: Is there a similar situation with Invest Northern Ireland and with IDA Ireland in the Republic?
64. Mr Sterling: Invest NI and IDA Ireland could not say no; they would not have the power to stop a programme. Perhaps Liam could explain how the steering groups work. The steering groups have influence. However, the main power would be that if a programme was proposed and the investment appraisal showed that there was going to be duplication, that programme would not be approved.
65. Mr Nellis: That is absolutely right. Just to give you an indication of the role that we play in that process, it is written into the joint legislation that one of the prime responsibilities of InterTradeIreland is to:
“co-ordinate work on trade, business development and related matters, in areas where the two administrations specifically agree it would be in their mutual interest."
We take that very seriously. We have taken the initiative to set up what we call a funders’ forum, where we bring together representatives from INTERREG, the Peace programme, the International Fund for Ireland and various others to make sure that people are not shopping around to find the right place to get money. I also sit as an adviser on the INTERREG and Peace programmes, and we quite often challenge programmes that are coming through when we see evidence of duplication, for example, to try to ensure that projects coming through such programmes have a clear North/South remit or balance.
66. Mr Beggs: My question is for Mr Sterling. On page 57 of the 2006 annual report we read about anonymous written allegations that were made against InterTradeIreland in 2006, and it states that the recommendations that followed the investigation were being implemented. What were those recommendations?
67. Mr Sterling: The Department took that matter very seriously and, with the agreement of DETE, the internal audit units of the two Departments were sent in to look at the allegations of financial improprieties. InterTradeIreland appointed a firm of external consultants to look at the allegations in respect of management competence and so on. InterTradeIreland also appointed the Equality Commission to look at the allegations that were made in relation to fair employment practices. All three of those reviews concluded that there was no substance to the allegations and that, in each case —
68. Mr Beggs: I believe that the wording used was “no significance weaknesses". What were the weaknesses?
69. Mr Sterling: Recommendations were made in each area, which is, in any case, to be expected. I understand that all those recommendations have been implemented. I am not privy to all the detail of the recommendations, but I will ask —
70. Mr Beggs: Can you, or someone, tell us what the recommendations were?
71. Mr Nellis: The Equality Commission did not make any recommendations. It said that InterTradeIreland had not only complied with its statutory responsibility but that it was an example of best practice with regard to affirmative action. We work very closely with the Equality Commission, and it is satisfied with our work in that area.
72. There was an inquiry into the allegations of management incompetence. Those allegations were found to be unsubstantiated, and no recommendations were made. There were some very minor problems in the financial report from the two audit units, but no issue of substance. I do not remember the detail, but I think that I would have remembered the detail had there been anything of any substance. However, I can certainly provide you with a full report. We were required by our sponsor Departments to report to them within six months of those reports coming through in order to satisfy them that all three levels of the allegations had been satisfactorily addressed. Those reports are with the Departments, and the Departments are satisfied.
73. Mr Beggs: We would be appreciative if the Department forwarded to the Committee the recommendations that did emerge, if that were possible.
74. Mr Nellis: Yes, of course.
75. Mr Beggs: On pages 56 and 57 of the 2006 annual report, we read about conflicts of interest that occurred. A particular section stated that:
“consultants involved in rolling out the programme had minor interests in investments made through the programme."
One has an interest or not, and, in fact, the perception of conflicts of interest can be as damaging as genuine conflicts of interest. Mr Nellis, who were those consultants, and what were the conflicts of interest?
76. Mr Nellis: I will ask my colleague to come in if I am not spot on, but my recollection is that we run a business angels programme in the North and the South separately because financial regulations do not allow us to have an all-island network, as there are different requirements. The matter to which you refer concerned the business angels network in the South, which was handled on our behalf by a managing agent in Dublin, the Dublin Business Innovation Centre. That organisation nominated people to manage a satellite network in Cork and in some of the regions.
77. Some of the people who were managing that business angels network had interests in some of the companies that were involved. We put in evaluators for the programme, and we put a stop to that as soon it was identified and ensured that it could not happen again, and that they recognised their conflict of interest. Therefore, it was people advising companies who had, perhaps, some financial interest in some areas. However, that did not last long, and we very quickly put a stop to it. I believe that that is the incident about which the report was referring.
78. Mr Laurence Lord (InterTradeIreland): The paragraph in the statement on internal control refers to the finding that came to light as a result of an evaluation that InterTradeIreland conducted into the broader Business Innovation Centre roll-out of the business angels programme. We were funding only the Dublin programme at the time, but took it upon ourselves to review the totality of the ‘Halo’ programme in the South. That incident, as Liam has correctly reported, occurred in one of the cases in south Dublin. We took that as a learning point and applied the controls outlined to ensure that it did not occur in any area in which we were funding or partially funding.
79. Mr Beggs: Why did it take six years to implement procedures to prevent such conflicts of interests?
80. Mr Nellis: We do have procedures —
81. Mr Beggs: Why did it take six years?
82. Mr Nellis: That specific programme was not up and running for six years. That programme was about only a year old when that happened. In the generality of what we do in respect of board members and companies, we have very clear guidelines regarding conflicts of interest.
83. Mr Beggs: That programme may have been up and running for only one year, but presumably your organisation should have policies and procedures to prevent conflicts of interest from arising in any programme that you establish.
84. Mr Nellis: We do, and that is why it was picked up so quickly. We sent evaluators in to make sure. We were operating through a managing agent that had sub-contracted some of the work. When we followed that trail, and found that there was a conflict of interest, we put a stop to it immediately.
85. Mr Beggs: Through the work of this Committee, we find that when there is an extension beyond the normal procedures or into other organisations that the degree of control can lessen. That will, perhaps, a lesson for yourselves, too.
86. Mr Nellis: Thank you very much.
87. Mr Beggs: In relation to one of your earlier comments regarding potential barriers to North/South trade, 10 years ago I was a production manager in a company called Simms and Young Ltd, which had a contract with Irish Rail. The company manufactured road traffic signs, and many other signs, in Northern Ireland, and we found it incredibly difficult to break into the Southern Irish roads market. One of the barriers perceived as preventing that were unnecessary requirements for extensive testing of products that, essentially, replicated British standards, and a failure to recognise that the products that we were using were exactly the same 3M products being used South of the border. Do such unnecessary barriers still exist in business, and in public procurement in particular?
88. Mr Nellis: We would, occasionally, receive requests from companies to investigate certain practices. For example, I remember someone telling us that they could not access one of the major supermarket chains in the South unless they registered in the South. That was despite the fact that it was a Northern company and that the supermarket chain had a presence in the North and in the South. We raised that issue and got it resolved.
89. Over time, issues do arise, but public procurement is one area in which we do a lot of work. We have a couple of programmes, one of which is called ‘Go-2-Tender’, and the next phase of that is being rolled out. The programme involves taking 14 or 15 companies from one jurisdiction and training them to pitch for public procurement contracts in the other jurisdiction.
90. The processes by which public procurement contracts are awarded are very different. In the North — as the Committee will know — public procurement is centralised through the Central Procurement Directorate and organised around European competitive guidelines. In the South, each individual organisation or utility still carries out its own procurement.
91. We advise companies how to address issues such as those raised by Mr Beggs, and that is giving us the best return on investment. It is very easy to measure, because a company that has done no business in the other jurisdiction has a starting point of zero. We measure how companies have done after coming through those programmes, and we are getting a 26:1 return on the investment. The training does not cost much, and if a company gets, for example, a €1 million contract, it is easy to say that that was a direct result of its participation in the programme. We are getting very good results, and ‘Go-2-Tender’ is one of the programmes on which we are really upping the ante with regard to throughput this year and as a response to the current economic climate.
92. Mr Beggs: Do companies that want to trade in Northern Ireland face any barriers? Is the Northern Ireland market perceived as being open or restricted, or are the difficulties more for Northern Ireland companies that want to trade in the South?
93. Mr Nellis: I take the earlier point that Mr Wells made: things move on, and the perceived barriers are, certainly, dissipating. In the very early days in 2000, we performed some analysis and identified what might be called chill factors went both ways for different reasons. Although those are now lessening, there are still some issues. In the past couple of years, for example, we intervened with the revenue authorities in the South because Northern companies, particularly in the construction sector, were suffering great difficulties, because if they put people into work on a Southern contract, they got into double taxation for their employees after 60 days because of the tax regulations.
94. We brought the two revenue systems together in this room and talked them through the difficulties. A few months later, the approach had significantly softened. It moved from 60 days to six months, which almost removed the problem altogether. Therefore, we take our work seriously, and when we see something that needs to be tackled, we tackle it.
95. Mr Beggs: My question was whether there are any restrictions in the Northern Ireland market that you perceive to stifle fair competition for companies from the South wanting to operate there; what barriers remain in the South; and is there a sense that one market is more open than the other?
96. Mr Nellis: It depends on the area that one considers. In areas such as licensing, patenting, personal taxation, insurance, the cost of telephones and postage there is still a lot of what I would call irritants. In themselves, they do not deter companies, but they make life quite difficult on occasion when aggregated. We address those matters as we come across them, but there is no single big issue.
97. Mr Beggs: I am talking about public-policy issues rather than costing issues.
98. Mr Nellis: I am not aware of any public-policy issues. The Central Procurement Directorate insists at all times that we follow European competitiveness guidelines, and we work on that basis.
99. Mr Craig: I have no intention of embarrassing you, Mr Nellis, but I refer you to table (d) on page 67 of the 2006 accounts. I personally commend you for what you did, but I notice that you were the only person from the senior management team who disclosed their remunerations at that time. In addition, the discussions that you have had with the Committee Chairperson about the accounts — we were talking about the 2007 accounts, which have not yet been published. Do you accept that the public perception is that that is not a high enough standard of transparency for the whole body?
100. Mr Nellis: The senior staff were not required to disclose that information at that time. That was the first year that that was even raised as an issue. At that time, the senior management team chose not to disclose their remuneration. The 2007 accounts, when they are published, will show that two of the three members of the senior management team now disclose that information.
101. In the table above, that information is not that well hidden anyway with regard to transparency in that the senior people are listed in bands, so we know within a band of £10,000 what various members of staff are earning. The simple answer is that it is not a compulsory requirement to disclose remuneration, but we are aware of the situation, and of the four people in the senior management team, three are now disclosing that information.
102. Mr Craig: That is interesting. The fact that one could almost work out according to that table what someone’s salary is anyway, do you not think that that makes it all the more pointless that you do not disclose it?
103. Mr Nellis: I think that that is a matter of personal choice, unless there is a requirement. If it were a requirement, I have no doubt that all senior staff would disclose their remuneration.
104. Mr Craig: You also touched on a point about which I will ask Mr Thomson. Page 91 of the Comptroller and Auditor General’s report tells us that there is no requirement on North/South bodies to publish remuneration reports. However, my understanding is that there is such a requirement on Departments and senior managers in Northern Ireland. Do you have any idea why that was not made part of the requirements for North/South bodies?
105. Mr David Thomson (Treasury Officer of Accounts): The guidance to which the North/South bodies have to adhere must be agreed by the Department of Finance in the South and the Department of Finance and Personnel. Most of the guidance picks up best practice in both jurisdictions, but there are one or two areas in which they differ, and this is one of them.
106. They differ because the Information Commissioner in Northern Ireland made a ruling a couple of years ago that public bodies in Northern Ireland could go ahead and publish remuneration figures anyway. Previously, members had to give permission to have their salaries disclosed, but now the situation in Northern Ireland is such that the public body can disclose those details anyway, unless the individual can give a particular reason why that should not happen — and it is very defined as to what that reason can be. That regime that has been introduced in Northern Ireland in the past couple of years does not apply to the North/South bodies because, to date, there has not been agreement between the two Finance Departments on the matter.
107. Mr Craig: You have the luxury of not disclosing your salaries. We do not have that luxury. [Laughter.] The public knows about every penny.
108. Mr Thomson: Certainly, DFP’s objective is that the salaries of senior managers be disclosed — and we are talking about senior managers who are running organisations, not everyone.
109. Mr Shannon: I have a couple of questions for you, Liam, and then one for Mr Thomson, if I may.
110. Liam, as the accounting officer, you have to answer to the InterTradeIreland board, the North/South Ministerial Council, the Government Departments in Northern Ireland and Dublin, and, very importantly, the business community, with its expectations. It is on the expectations of the business community that I really want to focus. Can you tell the Committee how you balance the different expectations of Government Departments and business interests — and your figures show the work that you do with companies.
111. Mr Nellis: As far as our interaction with companies is concerned, the Departments would not be involved at that level. When working on any major programme, we agree a programme and provide a detailed economic appraisal of the expected value of that programme to green book standards. That would be signed off by Departments, including the Finance Departments, but the Departments would not be looking over our shoulder at the involvement of companies. Many of the responses that we receive from the company base tell us that we are very responsive, reactive and quick to make decisions, and we pride ourselves on that. I could mention any number of examples to illustrate that point.
112. Therefore, I do not think that there is any conflict between the two sectors. We recognise that we are using money from the public purse of both Exchequers, and we take that very seriously. We agree all the rules and guidelines and report in accordance with them, and we take account of value for money and efficiency. However, in our interface with companies, we try to be very responsive, open, transparent and quick, because the worse thing to do to a company is to deliver a slow “no". We get a lot of very favourable feedback from our client group.
113. Mr Shannon: Have you experienced any difficulties with the business sector in the course of your work? Perhaps you are saying “no" to it. How does the system work? Have any difficulties arisen in your interaction with companies?
114. Mr Nellis: In the current climate, we are noticing a problem that is coming down the track at us that was not there a year ago. Most of our programme activity is carried out through letters of offer on the basis of matched funding. That can involve sales support or technology-transfer work with universities. When a company is in immediate difficulty, the first things to go are the longer-term things such as innovation and research and development, but also the discretionary spend: if they can cut costs, they cut costs. Therefore, we have to move very quickly and work even harder to make ourselves relevant, and be very proactive to company needs at this time. That is exactly what we are planning over the next while with those roadshows.
115. We do not have any significant problems with companies. I think that all our evaluations with companies, the information that is coming in to us that we are aggregating and giving to you today and through our reports, is coming from companies that report to us the value that they get from InterTradeIreland.
116. We follow up our programmes. Just last week, in fact, we followed up a programme that we stopped two years ago because we did not think that we were getting the right return on it. That was an all-island marketing programme called ‘Focus’, and at the time we calibrated the return from the programme over a couple of years at about £2·1 million. We went back in the past six months to revisit the programme, and there was another £1·5 million of additional benefits coming into those companies, even in the two years in which we were not interacting with them, because of the disciplines that they got from working with us two years ago.
117. Mr Shannon: Page 61 of the 2006 annual accounts report refers to InterTradeIreland’s cash balance increasing by £1·5 million to slightly over £4 million. What the Committee, and, perhaps, others, need to know is why that money was just sitting in your bank account. Why was it not used, and was it there for a long time? I have looked at your performance highlights, and they are very good about what you can do, and what has happened. That is commendable, but could you have done more had you used all that money?
118. Mr Nellis: I will ask my corporate services director to come in, but my initial response is that a lot of that is a feature of the dual jurisdiction. We are working in two different fiscal years: in the South, we work on the calendar year, and in the North, we work on the fiscal year. There are different approaches to accounting: in the South, there is cash accounting, and in the North, it is resources accounting. We have to keep in our account, at all times, but particularly at the year end, a level of cash to meet our liabilities, which are inescapable. That is the reason for that. However, Laurence can explain in a bit more detail.
119. Mr Lord: To address the direct question of whether the money was used; yes, it was used. Expanding on what Liam was saying about the accounting treatment, the corresponding figure that I would ask the Committee to consider with regard to that money is the amount of provisions and accruals at the year end. Effectively, that money was there to discharge the amount that we had owed and accrued for our programmes and suppliers, but which we had not paid out by 31 December.
120. Mr Shannon: Those were, presumably, paid out by the end of March, is that what you are saying? Am I right in thinking that it was it held over until the end of the next financial year?
121. Mr Lord: No. We work, effectively, on the calendar year. At 31 December, we would have liabilities — in other words, amounts that we owe to companies that are participating in our programmes for which claims might not have been fully processed, or amounts that we would owe to suppliers who may or not have submitted invoices, but if they had, such invoices had not been paid. The bank-balance amounts on the balance sheet are the amounts that we require to discharge those liabilities in the subsequent year. If we were not to do that, we would end up discharging those liabilities from the next year’s vote. That is why we try, at the year end, to make sure that assets, mostly cash, are equivalent to liabilities at that date.
122. Mr Shannon: Thank you. It is obvious that you have accounting and reporting requirements for North/South bodies. One is mentioned on page 93 of the Comptroller and Auditor General’s report, which is the North/South language body. It is important that accounts are returned on time, and that there is transparency and accountability in the system. Clearly, the North/South language body did not have its accounts certified; the last time was in 2003. I understand, through enquiries that I have made, that something might have happened to them, and that, perhaps, they were more up to date.
123. The fact is that those accounts were left for a long time. What are you doing to ensure that there is timely reporting in future? In other words, given that the North/South Language Body’s account books have not been certified since 2003, what are you doing to ensure that that delay does not happen again?
124. Mr Thomson: You will find that most of the North/South bodies’ accounts are up to do date and filed. There have been problems with the Ulster-Scots Agency, and that in turn has had ramifications for the language body. The Minister of Agriculture and Rural Development delivered a statement to the Assembly on behalf of the Minister of Culture, Arts and Leisure on 3 February 2009. In that statement she said: “At the North/South Ministerial Council meeting on 16 January, both Ministers noted the assurances given by the chief executive officers of the agencies who worked to clear the backlog that annual reports and accounts will be given the utmost priority." — [Official Report, Bound Volume 37, p198, col 1].
125. Therefore, the assurance was given to the Assembly in February 2009 that the backlogs that have been created, largely in the Ulster-Scots Agency, are being tackled and that the accounts will be forthcoming.
126. Mr Shannon: My colleague Nelson McCausland informed me that the accounts are more up to date. However, it is unusual that we happen to be discussing this report today, after Mr McCausland told me last week that the accounts for 2004-05 are in. Is that correct?
127. Mr Thomson: You have more up-to-date information than I have.
128. Mr Shannon: I am simply asking —
129. The Chairperson: That is information that David could find out for us.
130. Mr Thomson: The accounts up to 2004 have been audited and published. The 2005 draft accounts are with the Comptroller and Auditor General. The fieldwork for the 2006 accounts has been completed. However, one or two things are holding up their finalisation. I understand that the 2007 draft accounts have now been submitted to the Northern Ireland Audit Office. I suggest that when we get the transcript of the Hansard report, we will check it, and if it is incorrect, we can amend the record for you.
131. Mr Shannon: That perhaps underlines the power of this Committee; we scheduled this inquiry, and then all of a sudden you gave us that very fulsome answer about the accounts. I am sure that we will not have to meet every year to get the accounts. However, this year has shown that we can get them.
132. Mr Wells: There is one point that I should have mentioned. Obviously, you are here to oil the wheels of cross-border trade. Do you support — or can you at least advocate support for — infrastructure projects that help that work? I mentioned the minor issue of roaming charges, which I rabbit on about because I am fed up with them. However, more fundamental issues, such as the southern relief road or the ferry service from Magilligan and Donegal, which John Dallat tabled as a topic for an Adjournment debate on 17 February 2009 in the Assembly, clearly have big implications for cross-border trade. Can you support those directly through projects, or do you at least have the power to urge the relevant Departments, North and South, to invest in them?
133. Mr Nellis: InterTradeIreland was one of the first organisations to recognise the value of an all-island approach to spatial planning. We put in some early money to help fund the setting up of the International Centre for Local and Regional Development (ICLRD), which is based in Athlone. It now receives more centralised funding and brings together planners from the North and South. Through that, we commissioned a major study on spatial planning on the island of Ireland. That study was published a year or two ago to considerable acclaim, and many recommendations were made in it.
134. Although we do not have any direct remit in transport generally, the fact that transportation is critical to North/South trade means that we have a persuasive influence. In fact, some of my staff work closely on the Newry to Dundalk axis and on the north-west axis on local and regional planning and strategic issues. In fact, the current work between Newry and Dundalk has shown how the benefits of joint infrastructure planning can flow. One of my staff members is involved closely in that process. Therefore, although we do not have any direct sanction, we have a strong persuasive remit, which we use when required.
135. Mr Beggs: To pursue Jim’s question about the £4 million that you have available in cash balances, the notes that accompanied your accounts indicate that you have around £1·5 million of creditors’ cash and provisions of about £1·7 million for grants and so on that you think will be coming due. However, your reserves — which I assume make up the remainder of your cash element — have increased from £500,000 last year to over £900,000. What is a sensible level of reserves to have?
136. I know that every organisation needs some cash flow to pay wages if there are any delays and so on, but do you accept that your reserves have almost doubled? What is the optimum level of reserves to have? If your organisation were a normal public body in Northern Ireland, at some point you would not be able to accrue greater amounts of reserves.
137. Mr Nellis: Again, I will defer to Laurence, who will give you details on that point.
138. Mr Lord: You are quite correct about the reserves. May I refer to the out-turn for the accounts for subsequent years?
139. The Chairperson: Yes.
140. Mr Lord: The reserves at 31 December 2006 were particularly high. In many respects that is a function of having cash that is in excess of immediate requirements, because the only assets that we hold are in cash. We ran a surplus in 2006; in other words, we overestimated the amount of activity that we were going to have. We had a surplus of £400,000, meaning that we overestimated the amount — effectively, we got it wrong.
141. In 2007, we took action to remedy that situation, and we had a deficit that had the effect of bringing down those reserves that were particularly high in 2006. The deficit in 2007 was about £500,000, and we made a conscious decision to allow that because we knew that our reserves were too high. We made the decision to go for a deficit in 2007 in order to bring the reserves down.
142. To answer your question about the ideal level of reserves, theoretically, they should be zero. If we could match income and expenditure exactly in any given year, our reserves would be zero. That is unlikely to happen, because it would presume that every assumption that we made about every letter of offer and about every item of expenditure was exactly correct and that the moneys would arrive exactly on time.
143. In 2007, we reduced the general reserve to £300,000. Unfortunately, however, we do not have figures on that to hand. The general reserve was down from £936,000 to £324,000. At 2008, we think that that figure may be down again, but I am probably straying into an area that I should not go into. However, there may be an exception in 2008 due to currency revaluation, but we have been working very hard to bring those reserves down. In an ideal world, the reserves would be zero.
144. Mr Beggs: That answer illustrates another issue. This is 2009, and the most up-to-date accounts that we are discussing are from 2006. When will we see the accounts for 2007 and 2008? I assume that your books are closed for 2008. They ought to be finalised, as they would be in most organisations by this stage. Why is there such a delay in getting the accounts published?
145. Mr Sterling: I explained earlier the reason that there was a delay in laying the 2007 accounts. They will be available, hopefully, in no more than a matter of days. Hopefully, the 2008 accounts will be certified in June, and they will be laid as soon as is practicable after that.
146. The Chairperson: Your accounting year 2008 did not finish until the last day in 2008; it is different from —
147. Mr Sterling: That is correct; the body works to the calendar year.
148. Mr Nellis: The audit programme is calendarised every year, and we are running to schedule on that. We hope to have another set of unqualified accounts ready.
149. Mr Sterling: The requirement on the body is that its accounts are certified by the end of June every year, and they have been certified within that time frame.
150. Mr McLaughlin: I was particularly interested in the line of questioning that Jonathan Craig was developing about the anomalous position in the disclosure of remuneration. It seems to me that it is more than just an anomaly; it is a quite significant equality issue and one where there would be rotation or change of personnel in the future, despite Liam’s description of the progress that has been made on there having been more disclosure in the past two years. Depending on the personalities of the new appointees, matters could quite easily revert back to how they were previously.
151. Mr Thomson indicated that the present situation exists because no agreement has been reached. Can we have some information on the process that is used for resolving the issue? How far up the food chain has it gone? Has it been dealt with at ministerial level? Will it be resolved in the future?
152. Mr Thomson: We are prepared to look at that again. In fairness, we revise the accounting guidance for the North/South bodies at periodic intervals. The previous time that we revised the guidance was in 2006, and it has not been amended since. Broadly, the guidance on accounting is absolutely in line with everything that we do for arm’s-length bodies generally, apart from in two areas — remunerations and pensions.
153. In the South, the system for the disclosure of pensions is different to ours. We have a separate set of accounts for the North/South element of pensions, meaning that we disclose, effectively, the same information as you would normally get on pensions. I am happy to ask our colleagues in the Department of Finance again whether they will consider revising the remuneration report and issuing further guidance on it.
154. Mr McLaughlin: I accept that at face value. Will you inform the Committee of the outcomes of any additional review?
155. Mr Thomson: Yes, we will.
156. Mr Dallat: Thank you for giving us the opportunity to be here. In addition to monitoring finances, one of the Committee’s functions is to see how the different Departments and bodies can operate better. I do not want to pinch Jim Wells’s ideas, but the Magilligan to Greencastle ferry is one example of that, although it may be better addressed in the next evidence session. Adjournment debates on the issue took place in the Dáil and in Stormont, but the ferry service has been left high and dry, because neither Government have made any financial commitment to it. Trying to get the North/South bodies involved in the matter has been an absolute nightmare — we do not know where to start. I have met someone about the matter, and, indeed, they will be giving evidence in the next session.
157. Given that the North/South bodies exist to encourage trade, which includes tourism, there must be scope for better co-ordination. I am not talking just about co-ordination on issues such as roaming charges for mobile phones or the wee ferry that goes across the Foyle — railways are another issue that are very important in developing trade between North and South.
158. To give my personal opinion, the reports on meetings of North/South bodies that come to Stormont are very woolly — they usually just say that it was a nice day, there was a meeting in a hotel and everyone had a nice lunch. In those circumstances, Members end up searching for suitable questions to ask the relevant Minister. To avoid the confusion that Roy Beggs discussed, are there any clear lines of input, or are they just cosy little bodies that do wee things?
159. Mr Nellis: I take it that you are addressing that question to me?
160. Mr Dallat: Yes, unfortunately for you. [Laughter.]
161. Mr Nellis: The two Governments have given me the remit of trade and business development. There are a number of other implementation bodies and areas of co-operation that come under the NSMC umbrella. Cross-cutting issues such as those that you mentioned will be handled under that overall umbrella. We will influence, persuade or lobby where we can. However, we cannot get involved directly in issues that affect tourism, as there is an existing body to deal with those matters. We also cannot get involved directly in infrastructure issues, which are addressed by the Department for Regional Development and its counterparts in the South. We work closely with those bodies and consult with their officials, as we did for our research report, ‘Spatial Strategies on the Island of Ireland’, and we will continue to do so. I work within the remit that I have been given by the two Governments. That is my job, and that is what I concentrate on.
162. Mr Dallat: I understand that answer.
163. Mr Sterling: From a departmental perspective, we clearly want the body to deliver as much as possible. Earlier, Liam mentioned that the chairperson and the new board have conducted a strategic review. They are due to meet with representatives of DETI, DETE, Invest Northern Ireland and Enterprise Ireland with a view to identifying ways in which the body could help to generate more cross-border trade, economic activity, technology transfer and innovation, and to encourage companies to develop new products and processes, and basically to help create more jobs and investment.
164. The body has a very positive role to play. It has achieved an enormous amount, and we very much welcome the fact that it wants to demonstrate to us how it can do more. We will work with the body and the various stakeholders to assess how that can be done and how it can be demonstrated that that is being done.
165. The Chairperson: OK; you will be glad to hear that there are no other questions. This has been a good opportunity for us because, as I said earlier, this is the first time that we, as a Committee, have examined North/South bodies. We considered a number of issues today, including trade and developing accounting and reporting issues. I suppose that we will meet again at some stage in the future to discuss a report, which we look forward to publishing.
166. Roy asked for other information and for the report to be sent. We look forward to studying that as a Committee. Thank you very much for attending today and for answering our questions.
167. Mr Nellis: Thank you for honouring InterTradeIreland with your presence today. [Laughter.]
168. The Chairperson: We now turn our attention to the Special EU Programmes Body (SEUPB). We have the Special EU Programmes body annual accounts for 2007, and we will base this evidence session on those accounts.
169. I note that since its establishment, the Special EU Programmes Body accounts have been given clear certificates by the Comptroller and Auditor General in Belfast and Dublin every year, and we welcome that. We are joined by: Mr Bill Pauley, who is the head of the European division in the central finance group of the Department of Finance and Personnel (DFP); Mr Pat Colgan, who is the chief executive of the Special EU Programmes Body; and Ms Gina McIntyre, who is the SEUPB’s director of corporate services. You are very welcome to the Public Accounts Committee today.
170. Mr Craig: Before we start, I had better declare an interest as a member of the Lisburn Castlereagh Peace III partnership, which will hand out that funding. However, there is nothing pecuniary in that, I must add.
171. The Chairperson: I will finish welcoming the Special EU Programmes Body staff to this meeting, and I will then ask members to declare any interests. I know that those interests were declared last week, but they must be reiterated.
172. Mr Beggs: I declare an interest in that I have been involved in organisations that received Peace II funding, for example, the Carrickfergus local strategy partnership and the Carrickfergus neighbourhood development group. I think that the Glynn community development association may also have received some Peace II funding.
173. The Chairperson: All my interests are registered, but I am a member of Belfast City Council, which received some funding. I was also on the Belfast local strategy partnership, as well as on the committee of Féile an Phobail, which is a festival in West Belfast.
174. Mr Pauley, Mr Colgan and Ms McIntyre, you are all very welcome today. I will begin by asking a few questions. Mr Pauley, can you explain the role of your Department in overseeing the work of the SEUPB, which is a cross-border body?
175. Mr Bill Pauley (Department of Finance and Personnel): The Department of Finance and Personnel has only one sponsored body, but in the management of SEUPB it adopts exactly the same approach as would be expected by any other Department when managing a sponsored body. As Mr Sterling mentioned, DFP carries out those functions in conjunction with the Department of Finance.
176. A financial memorandum is in place with SEUPB, and that specifies the requirements for the administration expenditure of that body. Furthermore, as our body also spends European money that is not covered by our financial memorandum, a series of terms and conditions of grant documents exist between DFP, SEUPB and other accountable Departments through which money flows to the body. Those agreements specify the control framework.
177. The reporting mechanisms that we adopt were set up to report back to the Department in line with the requirements of the different people that it reports to. For example, each meeting of the NSMC invariably begins with the delivery of a progress report against the business plan of the SEUPB. We prepare those reports in line with the requirements of the NSMC. DFP also has a specific role as a sponsor Department in agreeing the corporate and business plans and the annual reporting accounts of the SEUPB. The Department also has formal roles to play in the reporting for EU programmes, and it acts in all the functions that are specified in the European regulations, which have been described as the member state function of SEUPB.
178. The European programmes have established systems of reporting, the most significant of which is the requirement for a programme-monitoring committee that comprises social partners and local government representatives. The legislation for SEUPB requires that the member state, DFP as the sponsor Department, and my colleague in the Department of Finance sit on that monitoring committee. Through that, the Department also holds a seat on all the subgroups of that committee. Principal among those are the steering committees that select the projects for the European programmes, which are the responsibility of SEUPB. Through those memberships, the Department effectively sees every project that is being approved.
179. DFP is also responsible for the budget management of SEUPB. The financial memorandum contains delegations that apply to the administrative budget of SEUPB. A system exists whereby the terms and conditions of grant documents specify the way in which projects are approved, and the role that Departments play in that project approval process is also specified. That means that every project, their appraisal documentation and scoring and analysis are seen. Thus control is maintained through observation and participation in those committees.
180. Through our system of delegations, SEUPB is required to send the European division of DFP a copy of every project that has been approved and the conditions that are attached to that project by its steering committee. From that the Department draws sample projects, and through its central finance group role, it ensures that all the necessary controls have been applied and approvals given in line with the EU programme.
181. The Chairperson: OK. Thank you.
182. Mr Colgan, figure 5 on page 93 of the Comptroller and Auditor General’s report, shows that your organisation — the SEUPB — is the largest cross-border body in terms of expenditure, having spent some £116 million in 2006. Given that amount, what have been your greatest achievements and best returns on that expenditure over the past nine years?
183. Mr Pat Colgan (Special EU Programmes Body): The body’s most important financial achievement has been to ensure that all the EU funds that have been made available to Northern Ireland and the border region have been spent for the purposes intended. For Peace II, that includes over €900 million of expenditure and €186 million for INTERREG III. To date, not one penny has been decommitted, so nothing has been lost. That in itself involves a significant degree of management, oversight, control, monitoring, evaluation, and implementation of the structures. Therefore, I would say that that is our headline achievement.
184. Each of our programmes contains a detailed series of targets and indicators under each of the measures in the programme, all of which have been agreed with the two member states. They are monitored and evaluated regularly. That is done formally in the programme through the monitoring committee, and, in particular, in the monitoring and evaluation subgroup of the monitoring committee. It is also done by external valuators through a process of mid-term evaluation and ex-post evaluation of all the programmes. A detailed analysis is carried out of each of the indicators of the targets to see whether the programmes are achieving what they set out to achieve. To date, we have a full record of achieving all our outputs. Where targets have not been met, there are good reasons. The programmes contain mechanisms and structures that drive our value-for-money delivery of results. I could read out a long series of specific outputs that involve many thousands of numbers, but that would take more time than we have available.
185. Under Peace II, we have funded well over 8,000 projects, and under INTERREG III, we funded over 300 projects. Those projects have achieved a level of reach in communities in Northern Ireland and the border counties; I do not think that any other programme has achieved that. That level of reach and contact with civic, economic and public society in the region is unique and specific to what we do.
186. The Chairperson: Thank you. I will ask about a couple of small points that you may have touched on already. Are there areas in which the SEUPB and its programmes could have achieved more? If so, why did they not achieve more? Were there barriers to further achievement?
187. Mr Colgan: The SEUPB works in a very programmed way. Our two bibles are the operational programmes — one for Peace funding and the other for INTERREG funding. Those bibles drive everything that we do. We have a seven-year roll-out strategy in place for every programme. That drives everything we do in each year. That is the measure of what we do and what we do not do.
188. I have no sense of anything that we could or could not have done. Certainly, there are things that we could have done better, and we have learned lessons from those. For example, where Peace II funding is concerned, we learned from the complexity of the implementation structures. We had 56 implementing bodies in Peace II and 22 in INTERREG III. There were good reasons for that — it brought inclusiveness, and it meant that there was a significant bottom-up involvement in the delivery of the programme. However, it was very expensive, complex and bureaucratic. We learned from that. We are bringing those lessons into how we deal with Peace III and INTERREG IVA, and we have adapted and adjusted what we are doing to take account of those lessons.
189. Therefore, we have learned to do some things better. One of the other things that we learned from Peace II was to have a deeper understanding of what is meant by reconciliation, or good relations in and between communities. With hindsight, there were things that we might have done better, but the accumulated experience over the period of the programmes has given us the capacity to be able to reflect on those things and bring them into our new programmes.
190. The Chairperson: Thank you. Turning to the annual report, on page 11 it is stated that 52% of applications to the Peace II programme that were received by the end of 2007 were successful. That is good news.
191. However, that means that a very large number were not successful. I have a community background from some years ago, and I know that a lot of time, effort and, sometimes, expenditure are involved in preparing applications. What assistance has your organisation offered to groups that have found it difficult to build up the necessary mechanisms in order to access the process? Some 52% of applications were successful, but that means that a hell of a lot were not successful. Did you offer assistance to groups that could not get into the right stage of the application process?
192. Mr Colgan: It is fair to say that there was a very high level of expectation about what might be achieved, particularly in the Peace II extension 2006-07. A lot of our measures were over-subscribed on ratios of 3:1, 4:1 or 5:1. There was a very high level of interest in the programmes and a very high level of applications. That was bound to result in disappointment among people whose projects were not approved.
193. We took stock of that and embarked on a programme of communication with any groups that came to us, and with elected representatives who made representations to us on behalf of groups, to go out and meet with them and to help them to see how they could do better to take advantage of the opportunities presented by the programme.
194. We also learned from that approach by introducing a more developmental approach to Peace III and INTERREG IV whereby we will more directly help project applicants to build up their applications. We have provided some technical competence in the programme that applicants can access in order to help them to do that.
195. The Chairperson: In the past, I have heard people from different sectors saying that hiring a consultancy firm leads to an application form being filled in really well but that that organisation might not be able to deliver as effectively as the application states. I am not necessarily saying that that is still the case, and, indeed, some of your answers indicate that the situation has improved.
196. There may have been groups that could not afford to hire a consultancy firm, and perhaps fell short in some areas because they did not take a professional approach to their application form, yet delivered much more professionally on a day-and-daily basis ? they just did not have the expertise to put that in writing on the form. Is that problem being addressed?
197. Mr Colgan: I accept that point, and it is true that that element of professional competence in applications has built up, and some communities are better than others at taking advantage of that. Some Protestant communities in particular have, perhaps, not taken full advantage of the opportunities and might have suffered as a result of the issue of which you spoke.
198. We have put mechanisms in place to try to improve that situation. We have reached out to those communities and talked to elected representatives and to a number of others. I would make the point that, in Peace II, it was the responsibility of local-strategy partnerships and other implementing bodies to reach out and produce the project pipeline. We had varying degrees of success in working under that system. The system in Peace III is different, and we are trying to do things differently. Your points are well made, and we have reflected long and hard on the issue.
199. The Chairperson: Thank you; I appreciate that. I will now open the discussion to other members. You have had the misfortune of sitting through two evidence sessions, and fair play to you for doing that. Mr Trevor Lunn will be the first to ask a question.
200. Mr Lunn: My first question is for Mr Pauley. Mr Colgan has spent some time answering it, but Mr Pauley may have something further to add. Page 3 of the Special EU Programmes Body annual report and accounts 2007 refers to the lessons that were learnt from the 2000-06 Peace II and INTERREG IIIA programmes. What were those lessons, and how did they influence the design of the new programmes?
201. Mr Pauley: The primary lessons for the Department concerned the complexity and efficiency of the delivery structures. There was a large number of implementing bodies, and measures in the programme for which they were usually given responsibility to run and measure were too complex for the sums involved. That made it difficult for potential applicants to know to which implementing body to apply and the different selection criteria for each. In the PEACE II extension, we took steps to simplify that process by reducing the number of measures to 13. In PEACE III, we have gone much further to, effectively, two implementing bodies, or three on a North/South basis. The complexity and cost of those structures, and their impact on potential applicants, was the big learning point from a public-service delivery perspective.
202. I would add that the European Commission learnt a lot as well, and not in relation to just our programme. The PEACE programme comprised 56 measures, across five priorities. European regulations now require programmes to be drafted only at that priority level. Consequently, the PEACE II programme has only two operational priorities — three, if one includes the technical assistance administration priority. Previous programmes were delivered with five priority levels. Of course, the new arrangement means less money, but we believe that it is appropriate to the quantum involved, and, hopefully, those who apply to the programme will be better able to see where they might fit.
203. Mr Lunn: I am glad to hear about something being simplified, which is not a trend in governments, so it is quite refreshing. The phrase I encountered was “complex assessment documentation". Has that documentation been simplified at ground level?
204. Mr Colgan: Just before I arrived in 2004, a comprehensive exercise — the 60-day action plan — was conducted in order to address the question of complexity. Several points were identified, and recommendations were implemented in an attempt to simplify things. I have been working on the programmes for a long time, and I must say that accessing EU money is a complicated process due to the amount of oversight, audit and accountability that is required. It is not easy money.
205. Are the application and assessment forms too complex for what we are trying to do? We constantly struggle with that question. On the one hand, information must be collected as the basis for making a proper assessment, and that puts the onus on the applicant. However, on the other hand, the process must be proportionate, so that an undue burden is not placed on the applicant. Therefore, there is that tension in collecting just enough information to make a judgement.
206. This time, we have introduced a two-part application process. Part A comprises a general description of the proposed project, which can then be used as the basis for discussions with SEUPB about how it might be developed. Part B requires much more detailed information, including answers to challenging questions in order to justify what the applicant is proposing to do. That forms the basis for the assessment by people in our joint technical secretariat, who consider all applications and, when appropriate, send them for economic appraisal in the course of normal value-for-money procedures. Nevertheless, complexity is a problem with which we struggle all the time, and I am not sure whether we have it totally right yet.
207. Mr Lunn: But you are getting there. Page 7 of the SEUPB annual report and accounts, under ‘highlights of the year’, states that you hade successful closure of PEACE I. We know that, as well as the two Comptroller and Auditor Generals, the European Court of Auditors conducts audits. Do you have any concerns about PEACE II?
208. Mr Colgan: Do you mean about the closure of PEACE II?
209. Mr Lunn: I mean with respect to its audit.
210. Mr Colgan: As we move towards the final closure of PEACE II, I am satisfied that we have learnt a lot of lessons, and a team dedicated to the closure process has been in place for the past 18 months. That team has gone through each project that was funded through the programme — all 7,000 or 8,000 of them — and we are down to looking at the last 150 projects, which are the more complex ones that would present difficulties. I am satisfied that we will have a very clean book to present to the auditors at the end of PEACE II.
211. We have been audited all our life, and I am not saying that the auditors are not going to find any issues — of course they are. However, I am very happy that we have learnt a lot, that we can present a very clean book, and that the process should be much more efficient than it has been.
212. Mr Lunn: Did the European Court of Auditors have any concerns with Peace II? In particular, are there any outstanding issues relating to the possible repayment of funding?
213. Mr Colgan: No, there are no substantive issues in relation to Peace II.
214. Ms Gina McIntyre (Special EU Programmes Body): There was the recent audit.
215. Mr Colgan: There was the recent audit. Would you like to talk about that?
216. Ms McIntyre: The European Court of Auditors was with us recently and made a report, but it is on the Southern Irish side of Peace II. There is a potential liability there for, I think, probably £50,000 in Northern Ireland, and a similar figure in the South. However, we are still waiting for the outcome of that. We have been dealing and meeting with them, and we have spoken to them.
217. Mr Lunn: If there is an obligation to repay the European Commission, on who does that fall? Is it the end recipient?
218. Mr Pauley: That depends on the irregularity and at what stage we would be in the closure process with the European Commission. For your information, the Peace I programme is not yet closed with the European Commission, and, indeed, we are in correspondence with the Commission about the final payments and the amount that would be involved. The Peace II programme will have to have a full closure report written, and every penny of that will have to be reclaimed from the European Commission in that closure report. It is a detailed document on which Pat has had a team working for a year. The closure date is March 2010, by which time we have to submit that report to the European Commission, and we will be working to submit all the documentation.
219. If, during the process of Pat’s closure, he finds an irregularity or discrepancy in a claim or project, he will work with that project to resolve that irregularity, and, between them, to identify whether there has been an overpayment or underpayment, and to correct it so that the file is, so to speak, clean for the presentation and closure report.
220. Some months after we submit our closure report, the European Commission will complete a closure audit. If, at that point, it finds discrepancies, we may, depending on their nature, be required to go back to the project if it was found to be deficient in some way. If it is a systems error that relates to the presentation of the closure report, or an issue such as that, we would look at it to see whether that would fall under member states, by which I mean DFP and DOF would, collectively, look at where the responsibility for that should fall.
221. At the moment, European regulations are different from our own regulations for clawback and closure. Europe will not pay us for any project if it finds the slightest discrepancy in it. We would not get paid by Europe for a project in which it identified an irregularity. However, what could be defined as an irregularity in the European system, would be regular in our own system of expenditure, and the project would have been substantially delivered in line with all our own requirements. The service would, effectively, have been delivered, but, for some reason, there would be a technical breach in EU regulations. In such circumstances, we would look at the amount that may or may not be clawed back from the project, and see whether Northern Ireland’s own systems and procedures made it appropriate that the amount from Europe was replaced with additional expenditure to claim the money somewhere else, or written off through the books.
222. As I said, the Peace I closure is still ongoing as we are in 2009. I hope that that will be done by the end of the year. I would not expect the Peace II closure to be completed until 2013.
223. Mr Lunn: Thank you for that. In simple terms [Laughter.] — I am a very simple person — if money is released to what I would call an end recipient, but it comes to light, in simple terms, that that recipient should not have received it — whether through fraud, a mistake or misinterpretation of the rules or whatever the reason — but he cannot pay it back, who bears the cost?
224. Mr Colgan: We have a procedure for dealing with irregularities. When an irregularity is identified, we report it to the member state, and, where appropriate, also to the European Commission. We investigate the irregularity and if, for any reason, fraud is suspected, we have a service-level agreement with the forensic accounting division of DARD to investigate it on our behalf. Any suspected fraud is always immediately reported to the PSNI and the gardaí. To date, we have had one successful prosecution in relation to fraud.
225. Once an irregularity is identified and confirmed, we pursue the money with the project or the implementing body involved. If the money cannot be recovered, we go back to the accountable parent Department in each case. SEUPB is a bit different from other North/South bodies; we receive money from almost all Departments in Northern Ireland and in the South. Each one has an accountability remit in a particular acceptor of policy, and that is the Department to which we would go back in the event of any irregularity. It is important to point out that an irregularity can be something as simple as a logo in the wrong place or a mistake in the procurement process, or it can be as serious as fraud. What constitutes an irregularity can be found across a wide spectrum.
226. If the money is not recoverable from the project, we would go back to the accountable Department and a decision made as to whether it should be written off. The money is not recoverable from the European Commission; we cannot make a claim in respect of that.
227. Mr Pauley: The requirement to pursue the money from projects, or from whoever is responsible for the irregularity, is precisely the same as it would be for any national moneys. The slight difference is whether we, as a member state, would be able to claim that money from Europe. That is a separate decision that would happen afterwards — after the full weight of the investigation into what happened, or who was responsible, or whether a calculation was right or wrong. It would happen in exactly the same way as for all other money, and decisions would be taken in line with guidance on managing public money and all the other guidance that is available to us.
228. Whether Europe will pay us as a member state and not just as a project, or whether they will share the cost of the irregularity, is a slightly different question. The regulations cover detailed circumstances in which each would apply, and on what we would seek to claim.
229. Mr Lunn: I take your point about minor irregularities such as a logo in the wrong place. When I was a financial adviser I was told off by the Financial Services Authority for giving out pencils that did not carry the legend “Investments can go down as well as up". [Laughter.] The red light went up.
230. The SEUPB annual report says that the programmes have quite rigid time limits in which funds may be spent, according to the N+2 rule. Perhaps you could explain what N+2 means. However, if the funds are not spent within the timeframe, the funding is lost. Do you accept that that creates a risk that poorly considered projects might be rushed through towards the end of the timescale?
231. Mr Colgan: The N+2 rule applies to all structural fund moneys throughout the EU. The decision to impose the rule was taken by all 27 member states. It was introduced in the previous programming period because too much money was left sitting on the table for too long and was not being spent. The member states took the decision that that was an inefficient use of money, and determined that it should be spent within two years. If not, it is decommitted.
232. Mr Lunn: What is N?
233. Mr Colgan: N is year one — the year in which the money is committed. It means that when an application for a project is submitted, the project has two years in which to spend the money that it receives. However, there are spend profiles in the overall programme as well, which means that a certain amount of money has to be spent in each year of the programme’s life cycle.
234. Mr Lunn: Do you think that that creates a risk that big projects might be rushed through to allow the money to be used?
235. Mr Colgan: Every project that is approved under the programme has to go through a well-defined assessment process and meet programme criteria and value-for-money considerations. The programme has a robust mechanism for making decisions about to whom the money goes. That is not a decision in which I am personally involved; it is given to steering committees, which are subsets of our monitoring committees. Therefore, a strong system is in place for making those decisions. One cannot say that there is a project going on which has not gone through that rigorous assessment.
236. The question as to whether every project is capable of spending its money in the allocated time will depend on what is happening in the rest of the programme — N+2 is a programme target, it is not related to individual projects. As a project, you might not be able to spend your money within two years, but the programme may have cover for you elsewhere. Other projects are spending, and that happened with local strategy partnerships for a good number of years under Peace II: they found it very difficult to get the money out, and we gave them a lot of room.
237. As you move towards the end of the programme, you have nowhere to hide them any more, and the money then becomes exposed. That money then has to be spent, or it will be decommitted. To avoid the risk of decommitment, it would be our responsibility, as the managing authority, to make a recommendation to the monitoring committee for that money to be moved elsewhere in the programme where it has the capacity to spend it. That would be in an area of activity where there is significant capacity to absorb.
238. We are very conscious about the value of every single project that is funded, and that it has to meet the strict criteria in the programme to make sure that it is not, as you say, a case of money chasing projects. We are very conscious about that.
239. Mr McLaughlin: I believe that the witnesses and I already know each other as a result of other responsibilities. The report contains examples of projects that can, quite obviously, appeal to both of the main communities. How do you ensure that the overall balance of projects contributes to the improvement of community relations, and how is that measured?
240. Mr Colgan: Are you referring to the capacity of each community to absorb the distribution of moneys, between the Protestant and the Catholic communities?
241. Mr McLaughlin: No, I believe that you dealt in an earlier answer with that issue of differing capacity. I am trying to deal with a central motivating reason for the EU becoming involved, which was to improve community relations. How is that measured?
242. Mr Colgan: That was one of the big things that we tried to tackle in Peace II, with the introduction of the distinctiveness criteria, which we refined going into the Peace II extension. We engaged with specialists — Brendan Hamber and Gráinne Kelly — to do research on that area, and to give us recommendations and suggestions as to how we might measure whether we are achieving progress in the area of reconciliation.
243. They came up with a number of indicators which, they felt, would be evidence that that was happening. We used those indicators as the basis for assessing projects that came in. We discovered in the process, though, that that was a bit of a ham-fisted way of going about it, and that it is very difficult to measure what contribution each individual project is making to the specific challenge of reconciliation.
244. Therefore, in moving towards Peace III, we have lifted those indicators to a higher level in the programme, and we require each project to provide us with indicators of evidence to show what they are doing. The vast bulk of the Peace III programme is going towards that specific challenge: £140 million of the £333 million available under Peace III will be given over to the issue of building positive relationships at a local level. We are engaging with local authorities to work with them to build up their emerging role in community welfare, community planning and good-relationships building.
245. We have learnt a lot over the years about how to go about improving community relations. Furthermore, we conducted international research with the European Commission to find out what is best practice and how it is measured. The truth is that there is no real international best practice in that area. The Peace programme has been forging new ground and has been a pioneer in that whole area.
246. We have engaged with people in Canada, including Kenneth Bush, who has introduced an ‘Aid for Peace’ measurement initiative. Again, that involved international research, which is the closest thing that we can see to what we are trying to do. We have integrated that into our monitoring and evaluating mechanisms in the programme, and we are getting better at it. For the Peace III programme, we will be able to produce more considered, reflective material around what we do and how we measure it than we could have done hitherto.
247. Mr McLaughlin: The clear indications are that we are virtually at the end of the road with regard to Peace funding, and I am sure that both Governments have considered the remaining challenges, and the development of an evaluation mechanism would be significant. Arising out of the dark and tragic events of the weekend, there was positive evidence that the political process is maturing. However, the continued existence of peace walls, and the continuing tensions around the marching season, may well be issues that would provide the evidence that the money is being invested for a purpose, and that there are outcomes. Indeed, it might give the two Governments the type of arguments or leverage that would allow them to engage with the Commission and the European Parliament.
248. It is not a matter of going back to the milch cow; it is a question of dealing with the complexity of the divisions and conflicts in our society, and our efforts across all political classes to bring those to a closure.
249. Mr Colgan: It is a complex area, but, on a practical level, we have engaged with the Northern Ireland Statistics and Research Agency to go round each of the projects that we are funding under the Peace III programme and to agree with them, in the first instance, a baseline measurement in relation to programmes such as Peace I, or issues such as potential engagement with the other community or other indicators or measures of good relationships, and to set targets as to where we might have moved during the lifetime of the project. That will generate a lot of data, and it will relate to the difficult times in the summer, too, as well as to the levels of activity, violence or unrest that might exist in specific communities.
250. All the local authorities’ ‘Building positive relationships’ programmes are working on the whole area of baseline indicators, against which we can measure progress over the lifetime of a project, to provide us with the kind of evidence that you are talking about. We are building up a sort of piecemeal approach, based on the experience that we learnt in the Peace II programme and in the Peace II extension programme, and the whole question of how to measure it. We will be able to provide more information and documentation on progress and on the benefits for communities of an investment of that kind.
251. Mr McLaughlin: Does the business plan that you are developing for Peace III include those outcomes?
252. Mr Colgan: They are specified and written into our operational programme. Each area of intervention has a specific number of outputs.
253. Mr McLaughlin: I am talking about a specific issue, which is the measurement of the extent to which you have affected community relations.
254. Mr Colgan: Provision for that practical measurement is written into the programme.
255. Mr Pauley: Programme level measures with regard to attitudinal change are measured by surveys of population. Below the programme level, each priority has a slightly different change. However, through statistically valid surveys, we can measure whether the attitudes of participants in the Peace programme funding are different from the attitudes of people who have not participated in a Peace programme project.
256. It is not up to departmental officials or MLAs, as representatives of the Government, to raise that matter in discussions with the European Commission.
257. Mr McLaughlin: I know that.
258. Mr Pauley: We acknowledge that Peace III may be the final funding package. However, we have not begun to discuss the post-2013 funding period with the European Commission.
259. Mr McLaughlin: No surrender, in other words.
260. Mr Pauley: That is the case at present. Given that there has been EU enlargement, we felt fortunate to have received Peace III funding. Although funding levels have been reduced, early experiences of Peace III show that it is still valuable money. The fact that it is EU money and that it is targeted specifically as a special programme makes a difference. It is not big money in the context of Northern Ireland’s wider annual public expenditure, but it is important money nonetheless. Europe recognises that the money is important in order to achieve what it wants to achieve. Therefore, further discussions are under way about what will happen at the end of the programme.
261. Mr McLaughlin: Page 12 of the annual report and accounts indicates that you undertook a community-uptake analysis in 2007 that concluded:
“there is no residual direct effect from the religious composition of an area to the amount of funding received, clearly showing that there is no bias in the distribution of funds."
That sentence is convoluted, and I would be reassured if it said that there is no residual direct effect from the religious composition of an area to the amount of funding received — full stop. That would make some sense. Bias is mentioned. Was there an allegation of bias? Was there concern about bias? If so, what was the evidence for that? It is a short paragraph, which I know is backed up by a substantial report. Can the Committee have a copy of the report?
262. Mr Colgan: We are fortunate in that we have the emergence of trend data in programmes over the lifetime of several Governments. Bill mentioned the attitudes survey that we conducted in 2005, since when some trends have emerged on the impact that the programmes will have.
263. The first community-uptake analysis was conducted at the end of Peace I, and it showed, broadly speaking, a back-of-the-envelope distribution of 58% Protestant and 42% Catholic between the two principal communities in Northern Ireland. One reason for that was the use of the new targeting social need criteria and areas of deprivation, the majority of which was in Catholic areas.
264. Throughout the period of the programme, some allegations were made of bias in the programme’s decision-making mechanisms. That matter was examined and monitored, and we took it seriously. The community-uptake analysis that was conducted in 2007 showed that the figures had changed to 52% Protestant and 48% Catholic. That is not better or worse but simply a matter of fact. I am sorry, but what was the question again?
265. Mr McLaughlin: How does that demonstrate that there was no bias?
266. Mr Colgan: I will make the two community-uptake-analysis reports available to the Committee. A very complex methodology was used by an eminent statistician and researcher to determine how to break it down. If one uses simple considerations, such as the addresses or postcodes of project applicants, the data can be awfully biased. Some compensations and adjustments were made in order to take account of the complexity of the issues and of the distribution and patterns that we were examining.
267. Mr Pauley: At that time, the Department accepted that both communities were participating significantly in the programme. Numbers were not quite 50:50 but were around that level. We acknowledge that that is not exactly the same percentage split as is the case with the population.
268. The targeting of New TSN areas is one feature of that, but the other feature that was identified was the different propensity of the two communities to apply to the programme. Ministers discussed that at the NSMC meeting of November 2007, and SEUPB was asked to work on outreach measures that would help to redress that imbalance and to take initiatives to try to encourage as many applications as possible from the Protestant community. SEUPB has been doing that, and it will no doubt report on it.
269. Mr McLaughlin: We will get the reports, and I thank you for that response. Is it possible to give us a brief indication of what is happening? We talked earlier about the lessons learned from the two reports. Has a developing series of recommendations allowed us to adopt a more equitable or targeted approach?
270. Mr Colgan: We took very seriously the point about the propensity to apply. We embarked on a series of meetings as a result.
271. Mr McLaughlin: I remember — they were effective.
272. Mr Colgan: We went into the communities and met many community groups and elected representatives. Through them, we gained access to communities that we probably would not have been able to access otherwise. We engaged with them and helped them with the application process, and we invited people to bring to our attention any sectors of the community and any individuals who might not feel confident about making applications. We made a good deal of progress as a result of those efforts.
273. Mr McLaughlin: I was a supporter of that work throughout, and I continue to support it now.
274. Page 28 of the ‘Special EU Programmes Body Annual Report and Accounts 2007’ report says that INTERREG IVA covers part of western Scotland. Do you think that that is an example of good strategic and creative thinking? What kinds of projects will be funded under the western Scottish element of INTERREG IVA?
275. Mr Colgan: We are very happy with the Scottish involvement, and we have worked very hard at integrating Scotland fully into the programme. To date, a total of more than £10 million has been agreed and allocated for Scottish partners and projects. I have a list of them, which I am happy to read out to the Committee. Some projects involve renewable energy, and innovation and technology, and there are partnerships between universities and institutes of technology.
276. Quite a lot is happening in the tourism sector as well. One significant project is called Sail West, which has 33 partners. The lead partner is Donegal, but a significant number of the partners are Scottish. The project takes advantage of the tourism opportunities around the coastline of the whole of Northern Ireland and of western Scotland and the isles. There are some SME-oriented projects, such as Success Through Succession. Other projects are Causeway Connections, the national cycle network, A Shared Heritage and the business improvement districts. Quite a wide range of projects has been funded, but there has been a great deal of interest in tourism and energy.
277. Mr McLaughlin: That is a unique arrangement, so are special accountability measures required, and, if so, how do they work? Do you now report to the Scottish Government?
278. Mr Colgan: They are fully integrated into the programme.
279. Mr Pauley: The Scottish Government work their EU programmes slightly differently to us. Without going into all the detail, the principal feature is that the project organisers themselves must provide the match funding. For us, it is the match funding that shows in the accounts and in the budget documents that the Assembly approves. The people who apply to the programme bring the match funding themselves and receive only a letter of offer for the European regional development fund element. Therefore, there is no Scottish money flowing through our books. Scottish Government officials report to their Ministers on the programme’s progress.
280. Mr McLaughlin: You have explained that, and I understand it now.
281. Mr Pauley: There are Scottish members on our monitoring and steering committees, and the monitoring committee held a meeting in Scotland.
282. Mr McLaughlin: They are responsible for the Scottish end of affairs.
283. Mr Pauley: Tax legislation would not allow an applicant to receive a grant from the Scottish Executive in the same way in which he or she received a grant from the North and the South.
284. Mr Dallat: On the vexed question of people from the South’s being paid more than people from the North, does that differential create staffing problems for cross-border bodies such as yours? If so, how do you deal with that?
285. Mr Colgan: The straight answer to that is that people who work in Northern Ireland are employed in line with Northern Ireland Civil Service salary scales. Their contracts specify that, and people who work in our Monaghan office, and who pay tax in the Republic of Ireland, are paid according to Irish Civil Service pay scales. That is simply the way that it is.
286. Mr Dallat: Therefore, there are no problems?
287. Mr Colgan: I am not saying that there are no problems.
288. Mr Dallat: That was my question. [Laughter.]
289. Mr Colgan: The situation is managed as a matter of contract, but it sometimes cannot prevent a line manager form earning less from someone whom he or she manages. That is a matter of fact.
290. Mr Dallat: You probably heard the question of directors’ emoluments raised during the previous evidence session on InterTradeIreland. I notice from the accounts that not all directors consented to their emoluments being published. Why would a director not want public money to be mentioned in the report?
291. Mr Colgan: My understanding of the provisions of the Northern Ireland Civil Service is that the Senior Civil Service does reveal its remuneration. Grade 7 civil servants, who act as directors in North/South bodies are not part of the Senior Civil Service grades. They are a grade below the Senior Civil Service, and they are not required to report, or reveal, their salaries. Whether that is desirable or not is a separate issue — it is a matter of fact that they are not required to do so.
292. Mr Dallat: On page 56 of the annual report and accounts 2007, it states that £941,834 in income tax was deducted from bank interest. I understand that the bank should not have deducted that tax. How did that occur?
293. Mr Colgan: The Bank of Ireland alerted us to that amount. It should not have deducted tax from money over a period of six years. It occurred because the bank statements showed gross interest, and those statements did not show any elements of tax, whereas some other banks’ do. Our accounts for each of the six years in question were reviewed by the Northern Ireland Audit Office (NIAO), and no issue was raised.
294. It begs the question of how that should be managed in future. Interest is accrued daily over a wide range of bank accounts that we hold. It is impossible to track that. We would need dedicated staff and software to do so, and we simply could not do it. We have learnt from what happened, and we have discussed it with the NIAO. We have had discussions with our bank about how the figures are shown.
295. Ms McIntyre: The bank and the NIAO were discussing whether the bank would change its process and make it clear on the statement whether tax on the interest that is paid to an organisation is deducted.
296. Mr Dallat: That explains why you could not challenge the deduction. Has it been refunded and surrendered to DFP?
297. Ms McIntyre: Yes.
298. Mr Colgan: The money has gone back.
299. Mr Dallat: Could that happen anywhere else, Mr Thomson?
300. Mr Thomson: I do not think so. As I said in the previous evidence session, the idea is that a public body should not have reserves and that it should not have big balances. SEUPB is unique in that sense, because it deals with programme moneys coming in from Europe. Most other public bodies apply for funding from their sponsoring Department, and, therefore, I do not expect public bodies to have large sums of money on deposit.
301. Mr Dallat: While we are discussing accounts, and this may illustrate how old-fashioned I am, but the report seems very expensive and elaborate. Is that the way in which such matters are conducted these days, and how much did it cost?
302. Ms McIntyre: It costs approximately £3,000, excluding printing costs, to produce the annual reports; however, we do not print that many now. We print only 100 bound copies, because we publish the report on our website. Moreover, reports are printed on recycled paper.
303. Mr Dallat: The audit fees add up to £61,562. Under procurement, was the audit put out to tender?
304. Mr Colgan: The Northern Ireland Audit Office conducted the audit.
305. Mr Dallat: We cannot criticise them, can we? [Laughter.]
306. Mr Colgan: We have two auditors: an external auditor, which is the Northern Ireland Audit Office; and an internal auditor, which is DFP internal audit. We have a service-level agreement with DFP and pay it a stipend for each year for the service that it provides.
307. Mr Dallat: An interesting aspect of SEUPB is that it works with a number of other funding partners, such as Departments, local strategic partnerships, local authorities, voluntary bodies and private-sector training providers. All those must fulfil their separate accounting-officer responsibilities. The structures and relationships are complex. Could more be done to simplify those structures? I am sure that you would love to see that happen.
308. Mr Colgan: As I said, a number of factors exists. First, we get money from many different Departments and sources. We get money from the European Commission, the Department of Finance and Personnel in Northern Ireland, the Department of Finance in the Republic of Ireland, and each accountable Department, depending on the area of activity involved in the programme. Each one of those Departments has its own accountability requirements in the round. We disperse moneys to a wide range of organisations. Again, issues concerning relationships and accountability exist of which we need to take account.
309. I talked already about the simplification that we introduced from Peace II into Peace III — we reduced the number of implementing bodies from 56 in Peace II to two and from 22 to one in INTERREG. That has resulted in savings of £1·4 million per annum over the seven years of the project. Therefore, through that one act alone, we achieved savings of approximately £10 million. That figure was arrived at by an external assessment of the efficiencies that were produced. Therefore, significant simplifications and efficiencies have been introduced as a result of those considerations.
310. Mr Pauley: Another programme has been designed that has reduced the number of accountable Departments in Peace III to three. In Peace II, seven Northern Ireland Departments had money flowing through them to SEUPB. There is now less money, which is partly a factor, and fewer Departments are involved in the process. Therefore, we have made a significant effort in the design of the programmes to simplify the processes for Departments, as well as for SEUPB, which is on the receiving end.
311. Mr Colgan: In effect, in Northern Ireland, the Department of Finance and Personnel, as well as being an accountable Department, represents the member state. In addition to that, the Office of the First Minister and deputy First Minister, the Department of Enterprise, Trade and Investment and the Department for Social Development are all accountable Departments for various projects.
312. Mr Dallat: I have one more question. There are some interesting programmes that encourage people to come together on a cross-border basis. I am sure that you know about the embarrassment of the Magilligan to Greencastle ferry service, which was mentioned earlier today. It brings people, particularly those from the Protestant community who live along the Causeway Coast, who might still be reluctant to drive through Derry city — not that there is anything wrong with the city — into County Donegal.
313. The Chairperson: I have not even mentioned my constituency, yet you have been mentioning yours all day. [Laughter.]
314. Mr Dallat: Surely that is not right. You have a commitment to encourage people to come together on a cross-border basis. In two recent debates in Dublin and Belfast, two different Departments said that they are not responsible for the Magilligan to Greencastle ferry service. What can happen in such a case?
315. Mr Colgan: As you know, I met some of the individuals who are responsible for promoting that project as a good idea. I have listened to them, and we have discussed what opportunities might exist. That is a sign of the robustness of the decision-making procedures in SEUPB. However, it is not in my gift to do address that. The Magilligan to Greencastle ferry service is a policy issue for the applicable accountable Departments. They are the ones that can take a policy decision on that issue.
316. However, there is, as you know, the serious issue of long-term sustainability of any individual project. The economic, long-term, sustainable, independent viability of any project will be looked at rigorously in order to determine what will happen to it and how long it would survive if European money were taken away. As meritorious as any individual project may be, I have no authority to overturn a decision on how much value for money it represents or to make a decision based on a cost-benefit analysis.
317. As you know, I am happy to facilitate engagement between partners and potential stakeholders, and to bring them together. SEUPB has quite frequently brought together two Departments and a number of statutory agencies to take a hard look at a particular issue or individual project, consider it on its merits and determine whether something can be done. If we can continue to facilitate or help in that way, we are happy to do so.
318. Mr Dallat: Thank you very much for that clear and concise answer. I conclude by wishing you all the best for the future and express my appreciation for what you have done to make this island a bit more united.
319. The Chairperson: OK. Those are glowing reports.
320. Mr Beggs: I have a question for Mr Thomson. At figure 3 on page 90 of the Comptroller and Auditor General’s report ‘Financial Auditing and Reporting: 2006-2007’, it states that some North/South bodies, including InterTradeIreland, which gave evidence earlier, have non-executive board members, while others, including SEUPB, do not. Waterways Ireland does not, for example. Why do some bodies not have non-executive directors? Are there any plans to harmonise that? I can certainly see the benefit of having non-executive directors to scrutinise with fresh eyes the work of the Executive. Why is there that variation?
321. Mr Thomson: The basic reason why there is variation is because that is what was decided when the legislation was put in place. The legislation is quite specific and states which bodies can have boards and which cannot. Therefore, that is the reason for that position.
322. I agree that boards are a fundamental part of governance. I cannot say what was in the minds of the people who approved the legislation. SEUPB, for example, has not only the various Departments that we have talked about but a monitoring committee. I suspect that, at the time, politicians may have taken the view that, because there was already so much governance, to include another layer would be overkill.
323. The fundamental answer to your question is that that is what the legislation states.
324. Mr Beggs: That may be what legislation says, but that does not mean that it cannot be changed. I understand what you say about SEUPB, particularly when there are so many different layers of bureaucracy in the system. However, Waterways Ireland, in particular, was left in a situation in which it had those complications, yet it has no non-executive board members. Presumably, in order to provide good governance, that could be changed. Has that possibility been examined?
325. Mr Thomson: I understand that following the St Andrews Agreement, a number of matters were to be looked at in connection with North/South bodies. I believe that that was one of them. However, I do not know to where the review that came about after the St Andrews Agreement has got. I am unsighted on that.
326. Mr Craig: I am sort of a poacher turned gamekeeper. Your organisation has a much more hands-on approach to Peace III. You are much more involved with it than you were with any of the previous programmes. I listened carefully to what you said about there being less bureaucracy in Peace III. I went to the bother of making notes on what you said about the simplified process and about two-part applications. I accept what you said about how you will ultimately implement the process. How difficult do you think the process has been? How much has the process been complicated by the fact that you have moved to population clusters as opposed to the previous 22 organisations that almost tied in with the existing local government arrangements? I got the feeling that the process almost pre-empted the reform of local government. Unfortunately, that reform has not yet happened.
327. Your name, and your organisation’s name, has come up at every single meeting at which the legal difficulties of combining local government areas to deliver the simplified process have been raised. It has turned into quite a complex approach. Do you agree that that may have led to the level of complication that now exists and, with hindsight, that it may not have been the wisest move?
328. Have consultants been used during the process? If so, to what level have they been used, and how much money has been spent?
329. Mr Colgan: The decision to work with local-authority clusters emerged as part of the programme-preparation process. In preparing the programme, a detailed consultation process took place with a wide range of stakeholders. It emerged from that consultation process that it made sense to examine what was coming down the line from the reform of public administration. At the time, the intention was that, as part of their remit, local authorities would receive money directly for the type of work that we are discussing.
330. The strong suggestion that emerged was that we should anticipate developments by encouraging local authorities to form clusters themselves, and member states were very supportive of that suggestion. Those clusters were not ones that we imposed; rather, they emerged voluntarily.
331. Are there problems, difficulties and complexities in getting that done? Yes, there are. There are eight different unities. One is Belfast City Council, and the other seven are the seven clusters around Northern Ireland. We have had some legal difficulties with two of them in relation owing to their understanding of the legalities of the situation. As well as our own legal advice, I have taken advice from the Northern Ireland Audit Office, the Department of the Environment, the Office of the First Minister and deputy First Minister, the Department of Finance and Personnel and whoever else will talk to me.
332. Section 19 of the Local Government Act (Northern Ireland) 1972 allows for the provision of local authorities to co-operate and work together, and that mechanism is called a joint committee. The joint committee has two potential forms — an unincorporated form or an incorporated form. For the purposes of the governance of our programme, it is sufficient for me that an unincorporated joint committee be set up among the participating councils, and that they agree between themselves who deals with issues of indemnity, and so on.
333. One of the clusters feels strongly that it would like to go down incorporation road. We have held detailed meetings with it, and we are making progress in addressing the legal issues. Another one of the clusters is uncertain about the whole remit of delivering the Peace III programme. We are meeting with that cluster next week to address that situation.
334. It has been difficult to get 26 local authorities first to define voluntary clusters; secondly, to establish mechanisms for those clusters to work; and, thirdly, to do so in a manner that also incorporates social partners and other external stakeholders. It was always going to be a difficult and challenging thing to do. However, we are making a great deal of progress, and we have received much co-operation and support from the chief executive and elected representatives in each of the councils involved.
335. There are two instances in which we are dealing with remaining concerns, and I believe that we are making a breakthrough with them. We are getting there.
336. Mr Craig: I do not disagree that progress is being made. However, I wondered whether it was an over-complication, given this N+2 and the process involved. My greatest concern is over what would happen if the programme cannot be delivered in a two-year period.
337. Are consultants being used, and, if so, what resources are involved?
338. Mr Colgan: No consultants are specifically involved in the setting-up, management or development of the clusters. The only bodies that have any role to play, or an active part to play, are the Community Relations Council and, on the Southern side, Border Action. Border Action plays a developmental role in oversight and quality assurance. We have not spent any money on consultants.
339. Mr Craig: I am glad to hear that, because one of the community’s biggest concerns is the use of consultants when it comes to assessing applications. It is almost as if a third party is being introduced into the whole process, and, frankly, some of those third parties that have been involved were not up to speed with the complexity of applications for European funding. Many community groups felt that they lost out purely because of the third-party consultants that were used. Will that be replicated, or will SEUPB take a much more direct and hands-on approach?
340. Mr Colgan: Projects over a certain value are required to undergo an economic appraisal. We do not have the resources to conduct those economic appraisals, so they are put out to tender. Private consultants conduct those economic appraisals for us.
341. Those appraisals are conducted in line with guidelines that we provide, and the consultants are supervised and monitored by our staff, who have been trained in that work. Not all the consultants were good — we were disappointed with some of them. We fed back into the system our disappointment with some of those economic appraisals, but there are some very good ones. There is some good competence out there.
342. When problems occur, we encourage project applicants who feel that they were disadvantaged to make appeals via our appeals mechanism in the programme. We will then reassess those projects. On a number of occasions, projects have been reviewed to give project applicants an opportunity to make their case more vigorously, and to return to the steering committee with a reassessed application.
343. Mr Pauley: The economic appraisal is an independent objective that SEUPB commissioned for use in its selection process. Some project applicants have used consultants to write their application. That is not something —
344. Mr Colgan: They have not.
345. Mr Craig: That is up to whoever makes the application. I am glad to hear your honesty about the fact that some consultants proved to be poor. Have you built up a database of those who followed good practice? I take it that the majority of those will be used in the new process, as far as is possible?
346. Mr Colgan: Yes, within the limitations of procurement. We are talking to the Central Procurement Directorate about how that should be addressed, because the question of quality assurance arises when prices are being considered as an indicator. Another indicator is needed.
347. The Chairperson: OK. Thank you. I do not think that there are any more questions.
348. Very briefly, what are the big challenges for the year ahead?
349. Mr Colgan: Some big challenges lie ahead for us. The closure of Peace III is a big challenge. We must do that in a manner that ensures that we maximise returns to Northern Ireland and the border community. Another challenge concerns the commitments of the moneys in the programme. We have made a huge amount of progress in that regard, but we must meet demanding targets.
350. Spend and the N+2 issue is a big challenge, especially in Peace funding but less so in INTERREG. We have some big projects in INTERREG that will absorb a great deal of funding and provide us with some cover throughout the programme. Peace funding is difficult because of the nature of what we are trying to do. However, those are achievable targets if we monitor the situations very carefully.
351. Another challenge concerns our corporate governance, including the maximisation of efficiencies. We take the issue of efficiencies very seriously. We introduced efficiencies into all of our business plans, and we know that we will have to do more. We regard maximising efficiencies as being important.
352. Furthermore, we will have to maximise opportunities under the INTERREG IVB transnational programmes and the INTERREG IVC inter-regional programme. Those are potential linkages between Northern Ireland and other regions throughout Europe. In that context, the Peace network, which is sharing the experiences of the Peace programmes with other regions throughout Europe, will be a further development.
353. The Chairperson: I thank Gina, Pat and Bill for their attendance. We really appreciate it. It has been a good evidence session, and it is the first time that the Committee has examined North/South bodies. It is an issue in which all the Committee members have a great interest. Thank you very much for being open and frank with us today.
Appendix 3
Correspondence
Chairperson’s Letter of 16 March 2009 to Mr Pat Colgan
Public Accounts Committee
Parliament Buildings
Room 371
Stormont Estate
BELFAST
BT4 3XX
Tel: (028) 9052 1208
Fax: (028) 9052 0366
Mr Pat Colgan
Special EU Programmes Body
6 Cromac Place
Belfast
BT7 2JB 16 March 2009
Dear Pat
Re: Evidence Session on 12 March 2009
Further to the evidence session of the Public Accounts Committee on 12 March, members requested that you should provide copies of the most recent two Community Update Analysis reports. Perhaps you would also let me have a short briefing paper indicating lessons learned as a result of the reports, and include any recommendations and outcomes.
I would appreciate a reply by 27 March 2009.
Yours sincerely
Paul Maskey
Chairperson
Public Accounts Committee
Cc Mr Leo O’Reilly, Accounting Officer, DFP
Mr Bill Pauley, Head of European Division, DFP
Chairperson’s Letter of 16 March 2009 to Mr David Sterling
Public Accounts Committee
Room 371
Parliament Buildings
BELFAST
BT4 3XX
Tel: (028) 9052 1208
Fax: (028) 9052 0366
Email: Jim.Beatty@niassembly.gov.uk
Mr David Sterling
Deputy Secretary
Department of Enterprise, Trade and Investment
Netherleigh
Massey Avenue
Belfast
BT4 2JP Date: 16 March 2009
Dear David
Re: Evidence Session on 12 March 2009
Further to the evidence session of the Public Accounts Committee on 12 March, members asked that you provide a full report on the written allegations relating to InterTradeIreland, including any recommendations which came with the report and whether the recommendations have been implemented.
I would appreciate a response by 27 March 2009.
Yours sincerely
Paul Maskey
Chairperson
Public Accounts Committee
cc. Mr Stephen Quinn, Accounting Officer, DETI
Mr Liam Nellis, Chief Executive, InterTradeIreland
Chairperson’s Letter of 16 March 2009 to Mr David Thomson
Public Accounts Committee
Parliament Buildings
Room 371
Stormont Estate
BELFAST
BT4 3XX
Tel: (028) 9052 1208
Fax: (028) 9052 0366
Mr David Thomson
Treasury Officer of Accounts
Department of Finance and Personnel
Room P4, 3rd Floor
New Building
Rathgael House
Balloo Road
BANGOR
BT19 7NA 16 March 2009
Dear David
Re: Evidence Session on 12 March 2009
Further to the evidence session of the Public Accounts Committee on 12 March, members requested that they be informed of the outcome of any review of the arrangements for North/South Bodies relating to disclosure of remuneration and pensions.
I would appreciate a reply by 27 March 2009.
Yours sincerely
Paul Maskey
Chairperson
Public Accounts Committee
Chairperson’s Letter of 19 March 2009 to Mr Liam Nellis
Public Accounts Committee
Parliament Buildings
Room 371
Stormont Estate
BELFAST
BT4 3XX
Tel :(028) 9052 1208
Fax: (028) 9052 0366
Mr Liam Nellis
Chief Executive
InterTradeIreland
The Old Gasworks Business Park
Kilmorey Street
Newry Date: 19 March 2009
Dear
On behalf of the Public Accounts Committee I would like to thank you for the use of the Conference Room for our meeting on 12 March 2009.
Members were most impressed with the professional way in which everything had been prepared for the meeting.
Would you please pass on the Committee’s thanks to all involved in the arrangements, and who helped in any way last Thursday.
Yours sincerely
Paul Maskey
Chairperson
Public Accounts Committee
Correspondence of 24 March 2009 from David Thomson
Treasury Officer of Accounts
David Thomson
Central Finance Group
Rathgael House
Balloo Road
BANGOR BT19 7NA
Tel No: 028 9185 8150 (x 68150)
Fax No: 028 9185 8262
email: david.thomson@dfpni.gov.uk
and jill.downie@dfpni.gov.uk
Paul Maskey
Chairperson
Public Accounts Committee
Parliament Buildings
Room 371
Stormont Estate
BELFAST BT4 3XX 24 March 2009
Dear Paul
North South Bodies: Evidence Session on 12 March 2009
Thank you for your letter of 16 March in which you asked to be informed of the outcome of any review of the arrangements for North/South Bodies relating to disclosure of remuneration and pensions.
In 2006, DFP and the Department of Finance (DoF) in Dublin issued comprehensive accounting guidance for North/South bodies. The general aim is for the accounts to be on a commercial accounting basis and to comply with Generally Accepted Accounting Practice in the United Kingdom and Ireland. However because there is a difference between the DOF and DFP on how FRS 17 (the accounting standard dealing with pensions) will apply to the N/S bodies, interim guidance for pensions was introduced. DFP has produced a scheme account for the Northern share of the scheme assets and liabilities using FReM reporting requirements, but DoF has agreed to exempt North/South bodies from applying FRS17 in respect of the Southern share of pension liabilities.
It has been agreed, in principle, that the accounting treatment will be amended so that appropriate disclosure will be made which will lead to an increase in transparency and accountability for the pension schemes. Once we have received and considered any final comments, which we expect within the next few weeks, we will issue revised guidance on pension disclosures for the North/South bodies.
In relation to the disclosure of salary details the accounting guidance states that, subject to the body obtaining the prior consent of the individual concerned, the accounts should contain a note giving details, by named individuals, of the aggregate of the emoluments and the pension entitlements of the Chief Executive and the other most senior managers and any advisory board members or non-executive board members, if they are remunerated. The guidance further states that, should an individual withhold consent to the disclosure of the information, this fact should be noted.
However, also in 2006, just as this guidance was being agreed, the UK Information Commissioner made a ruling on the disclosure of salary details for senior managers. Consequently, rather than a department or body having to get prior permission to disclose (as reflected in the N/S accounting guidance and in UK public sector guidance up until then), departments and public bodies have the right to publish this information unless an individual formally objects. Non disclosure in the UK is acceptable only where publication would
prejudice the rights, freedom or legitimate interests of the individual; or
cause or be likely to cause substantial damage or substantial distress to the individual or another, and that damage or distress would be unwarranted (such as national security concerns)
This ruling applies only in the UK and therefore has not been incorporated into the accounting guidance for the N/S bodies, but is contained in the FReM. However, whenever the accounting guidance is reviewed again, we will discuss this issue with DoF colleagues.
Yours sincerely
David Thomson
Correspondence of 27 March 2009 from Mr Pat Colgan
Paul Maskey
Chairperson
Public Accounts Committee
Parliament Buildings
Room 371
Stormont Estate
BELFAST
BT4 3XX 27 March 2009
Dear Paul
Re: Evidence Session on 12 March 2009
Please find enclosed copies of the most recent Community Uptake Analysis Reports, and a short briefing paper as requested.
If you require any further information please do not hesitate to contact me.
Yours sincerely
Pat Colgan
Chief Executive
Encs
Community Uptake Analyses of the PEACE Programmes
1.0 Introduction
The Community Uptake Analyses of the PEACE Programmes report on the allocation of funding in Northern Ireland. The purpose of the reports is to estimate the extent to which the two main communities in Northern Ireland have engaged with and benefited from the PEACE Programmes and to identify factors likely to have influenced programme accessibility and uptake.
They primarily address the issue of religious community uptake of available funding and the complex relationship between religious community background, deprivation, funding applications and approvals as well as their aggregate value, before looking at the religious community and the relative deprivation profiles of the Census Output Areas (COAs) (or Electoral Divisions (EDs) for the first two reports) in which the projects originated. The studies conclude by presenting the results of a thorough statistical analysis of the effects of factors such as population size, religious community background, deprivation and propensity to apply on the distribution of funding.
2.0 Background
The PEACE Programmes in Northern Ireland and the Border Region are now in their third phase of funding. The first phase started with The Special Support Programme for Peace and Reconciliation 1995-1999 (PEACE I) and continued with the European Union Programme for Peace and Reconciliation in Northern Ireland and the Border Region 2000-2006 (PEACE II). The current PEACE III Programme will operate in the period of 2007-2013.
Over this period of time four Community Uptake Analyses have been conducted, namely:
Haase, T. & Pratschke J. (1999) European Union Special Support Programme for Peace and Reconciliation, Analysis of Community Uptake, Belfast: NISRA Occasional Paper No. 11, April 1999.
Haase, T. & Pratschke J. (2003) European Union Special Support Programme for Peace and Reconciliation, An Estimate of Community Uptake, Belfast: NISRA Research Paper No. 1, June 2003.
Helm in association with Haase & Pratschke (2005) Community Uptake Analysis of PEACE II, Belfast: SEUPB.
Haase, T. & Pratschke J. (2007) Community Uptake Analysis of PEACE II, Belfast: SEUPB.
3.0 Methodology
The basis of the methodology used in the Community Uptake Analyses reports was consistent across the four studies in that they used “proxies" in order to apportion project funding between the two main communities in Northern Ireland. The projects themselves are not explicitly associated with a specific religious community. However, the postal address of the project or project applicant allows the project to be associated with a particular postcode area and postcode areas, in turn, may be linked to COAs (or EDs for the Peace I reports). Census data at COA level can then be used to estimate community uptake and to investigate the role of a range of factors that may have influenced the distribution of funding.
For the two reports on Peace II (2005 and 2007), the methodology was adapted slightly to take account of the larger value of a number of projects funded. For those projects receiving funding of £250,000 or more, an assessment was made of the most appropriate geographic catchment area to allocate them to, i.e. COA, ward, local government district or Northern Ireland. The project funding was then apportioned between the two communities in proportion to the each community’s population share within the catchment area.
4.0 Findings
The main findings of the four reports in relation to estimated community share of funding can be summarised in the table below:
Estimated Catholic Share % Estimated Protestant Share % Northern Ireland Population Catholic % Northern Ireland Population Protestant %
PEACE I 1994-1999 55.8 44.2 43.2 56.8
PEACE II 2000-2004 52.5 47.5 45.2 54.8
PEACE II Extension 2005-2006 53.6 46.4 45.2 54.8
Total PEACE II
2000-2006 52.6 47.4 45.2 54.8
5.0 Lessons from these studies
A number of lessons were identified from these studies, namely:
The importance of the Programme to both the Protestant and Catholic communities in Northern Ireland.·
The authors of the reports consistently concluded that the greater estimated uptake of funding by the Catholic community reflects both the higher number of catholic areas suffering the highest levels of deprivation (taken with the Programme objective of targeting social need) and a higher propensity for people from predominately Catholic areas to apply for funding.
Action needed to be taken to encourage applications from the protestant community and the Managing Authority has pursued a number of actions in relation to this.
In addition, the reports found that PEACE II Programme appears to have achieved greater cross-community take up than PEACE I. This is reflected in both a larger share of applications originating within the Protestant community and an increase in the Protestant community’s share of funding, from 44.2% at the conclusion of PEACE I to 47.4% by the end of the PEACE II Programme in 2007. These figures should be viewed against a rise in the Catholic population of two percentage points between 1991 and 2001.
Correspondence of 1 April 2009 from Mr David Sterling
FROM THE DEPUTY SECRETARY
David Sterling
Netherleigh
Massey Avenue
BELFAST BT4 2JP
Telephone: (028) 9052 9441
Facsimile: (028) 9052 9545
Email: david.sterling@detini.gov.uk
janice.davison@detini.gov.uk
Our reference: DPSDETI 025/09
Mr Paul Maskey
Chairperson
Public Accounts Committee
Parliament Buildings
BELFAST
BT4 3XX 1 April 2009
Dear Mr Maskey
PAC Evidence Session on 12 March 2009
1. Thank you for your letter of 16 March. I apologise for not meeting your 27 March deadline.
2. Anonymous written allegations relating to InterTradeIreland were made in 2006. As stated in the evidence session, the allegations concerned financial improprieties, management competence and fair employment practices. Following receipt of the allegations, the Department and the Department of Enterprise, Trade and Employment in the Republic of Ireland, commissioned their internal audit units to investigate the substance of the allegations of financial impropriety. The allegations relating to management competence were investigated by a firm of external consultants and the fair employment allegations were investigated by the Equality Commission.
3. No recommendations were made in the report prepared by the firm of external consultants on the allegations relating to management competence, which were found to be without foundation.
4. The report prepared in connection with the investigation carried out by the Equality Commission concluded that formal employment and procedures were in operation in InterTradeIreland and that the body was making “good faith" efforts in operating its recruitment and selection procedure. Following the review of a number of recruitment campaigns some additional measures were recommended by the Equality Commission in order to further develop the body’s recruitment and selection procedures. During the evidence session, Mr Nellis had stated that no recommendations were made in this report. Mr Nellis will be writing to the PAC Secretariat to inform them that there were a number of recommendations and asking for an appropriate amendment to be made to the transcript.
5. The report prepared in connection with the investigation carried out by the internal audit units concluded that, overall InterTradeIreland was complying with its financial procedures and the system of internal financial controls was found to be effective. A number of improvements to the financial procedures were recommended in order to enhance the control environment.
6. The attached Annex contains details of the recommendations made in the reports referred to in paragraphs 4 and 5 and the status of their implementation.
7. I trust that the information provided is satisfactory to the Committee. I am happy to provide any further information, if required.
[signed]
David Sterling
ANNEX
Recommendations Made in Relation to Anonymous Allegations Made Against Intertradeireland
A. Recommendations Arising from the Equality Commission Review
1. The reasons for shortlisting or not shortlisting candidates should be clearly recorded so that all decisions are transparent.
2. The rationale for any changes to shortlisting decisions and interview scores should be clearly documented.
3. The recruitment and selection procedure should be updated to clearly state the rationale for when second interviews will be conducted. The reasons for holding second interviews should be recorded on the recruitment file in each exercise where this is used.
4. Updated equality training should be provided for all staff involved in recruitment and selection techniques. This training should particularly address fair employment and other equality legislation and its implications.
5. Refresher training should be provided for those staff who have received previous recruitment and selection training.
6. Assessment sheets, decisions of shortlisting, interviewing and selection panels should be signed by individual panel members and these should also be dated. Total scores on panel member’s assessment sheets should be tallied.
7. Regular audits of recruitment practices and procedures should be undertaken to ensure that they comply with the systematic and objective methods outlined in the Equality Codes of Practice.
8. Where it is not possible to ensure that a recruitment panel is representative of both communities, or of males and females, consideration should continue to be given, where practicable, to seeking such representation from other employers/agencies.
Implementation Status
All of the above recommendations have been implemented.
B. Recommendations Arising from the Internal Audit Review of Financial Procedures
1. The Review Team recommends that (a) authorisation of all purchase orders (POs) should be documented in advance of the PO number being issued and (b) the same person who has authorised POs should not be involved in processing invoices and payments.
Implementation Status
(a) Implemented
(b) Not Implemented – InterTradeIreland’s management considered that, given the small staffing complement of the Body, such a process would be unduly cumbersome and would prevent the Body meeting its prompt payment targets. Additionally, such a recommendation would not address any recognised risk.
2. To facilitate improved monitoring of payments, a copy of the preliminary payments report recording payments to suppliers and managing agents should be retained on file, signed off and approved at an appropriate level.
Implementation Status
Implemented
3. The Finance Unit should update the procedures in respect of invoice processing and credit notes, to reduce the instance of errors in the accounting system requiring corrections on an ongoing basis. Correction postings and credit notes should be separately identifiable in the accounts system. Procedures for invoice, payments and credit notes related to programmes should be reviewed and updated where appropriate to assist in maintaining reliable accrual balances.
Implementation Status
Implemented
4. InterTradeIreland should consider introducing the following changes to its payroll procedure:
(a) The Human Resources Manager should date all documents when authorising them;
(b) The actual payment of salaries should be controlled by the Finance Unit;
(c) The payment of salaries should be subject to the same authorisation procedures as cheque payments; and
(d) Financial Procedures should include payroll procedures.
Implementation Status
(a) and (b)
Implemented. (c) Not implemented - Implementation of this recommendation would have involved either a board member having to sign off on the payroll run each month or salary of each staff member being signed by two managers. It would also raise issues regarding the confidentiality of staff salaries. (d) Not Implemented – No value would be added by making payroll procedures available to all staff and additional risks may be posed by widespread dissemination of such procedures.
5. The rational for estimates and calculations of related figures should be recorded on file for programme costs to facilitate closer monitoring. These should be reviewed regularly and amended where appropriate for any changes in circumstances.
Implementation Status
Implemented
6. InterTradeIreland should review the procedures for estimating actual cash requirements to ensure that funds are not drawn down from Sponsoring Departments and held in its bank accounts for longer than necessary to meet the organisation’s ongoing needs. Guidance should be sought from Sponsoring Departments on holding bank balances and carry-over arrangements at year end.
Implementation Status
This area is kept under review and cash balances are being reduced.
7. Supporting documentation for accruals and prepayments should be forwarded to the Finance Unit before the year-end audit, by sections who prepare the calculations. These should be reviewed in Finance Unit to ensure that the calculations are accurate and in agreement with supporting paperwork.
Implementation Status
Implemented
8. Management should review the accounting policy in respect of programme (capital) related accruals. The application of InterTradeIreland’s accounting policy in respect of programme related accruals should be monitored by Finance Unit to ensure that costs are recognised in the accounts and related funds drawn down from Sponsoring Departments to coincide with eligible claims being received in respect of programmes.
Implementation Status
Implemented
9. The note in the Asset Register in respect of “The Orange Tree" should be expanded to state that the tapestry is on long-term loan to InterTradeIreland.
Implementation Status
Implemented
10. InterTradeIreland’s post-in book and gifts register should contain greater detail (description and value, whether InterTradeIreland has paid for tickets etc) to enable management to monitor the effectiveness of its hospitality and gift policy. The post-in book should be compared to the gifts register on a monthly basis to ensure that the gifts register is kept up-to-date.
Implementation Status
Not Implemented – InterTradeIreland’s management does not consider that it is the function of the post-in book or hospitality register to mirror financial records. To do so would be unduly cumbersome. However, the post-in book and hospitality register are being adjusted one month in arrears to identify tickets for which the Body has paid.
11. The Review Team would ask that management provide details of the decision to second a venture capital consultant to InterTradeIreland.
Implementation Status
Not Implemented – Documentation relating to the approval of the decision to second a venture capital consultant could not be located.
12. The Review Team would recommend that a greater focus should be given to the qualitative aspects of the Focus programme i.e. is the graduate a good fit, are the sales targets realistic etc, reflecting some of the concerns raised in the draft evaluation. The Review Team would also recommend that InterTradeIreland staff should initiate a structured programme of monitoring over the quality of the work of the managing agent and the information provided to it and to the Steering Group. This may include a formal programme of visits to companies, regular visits to the managing agent to check the source of the information being provided and also to confirm that the managing agent is adhering to its contractual requirements.
Implementation Status
Implemented
13. The Review Team recommends that (a) InterTradeIreland should implement a formal programme of verification visits over the operations of the managing agent including a review of the supporting information held for claims and (b) InterTradeIreland staff should also visit a sample of companies and graduates to ensure that the information being reported is accurate.
Implementation Status
Implemented
14. The Review Team recommends that the InterTradeIreland project team reconciles the Plato outcomes presented by the Network Co-ordinator with those of the independent evaluator. This should assist the Board to challenge, where appropriate, the Network Co-ordinator when the annual report is presented along with the funding request for the following year.
Implementation Status
Not applicable – InterTradeIreland ceased to run the Plato programme after the recommendation was made.
15. The Review Team recommends that (a) InterTradeIreland, as the sole funder of the Network Co-ordinator post, should be kept informed of and retain evidence of the appointment process and (b) ideally, InterTradeIreland should have been involved in the appointment process to ensure that its interests were protected (as in the BDM for the Business Angels project).
Implementation Status
Not implemented – Advice received from Human Resources indicated that staff should not be involved in the recruitment processes of third party staff as to do so would imply a contractual relationship between the postholder and InterTradeIreland.
16. The Review Team recommends that staff should not act as cheque signatories for projects in receipt of funding from InterTradeIreland.
Implementation Status
Implemented
17. The Review Team recommends that, in line with good practice in the development of any new policy or programme, InterTradeIreland’s new Research Strategy should also include details of how its performance in relation to research will be measured, what critical success factors have been established and how its research programme will be assessed in terms of value for money.
Implementation Status
Implemented
18. The Review Team recommends that InterTradeIreland develops usage targets for the Information Resource Centre e.g. response times to queries, website hits and/or overall positive response to customer satisfaction sheets. Performance against these usage targets should be monitored and reported as part of its normal performance report system.
Implementation Status
Not implemented – The Information Resource Centre is primarily an internal resource.
19. The Review Team recommends that management should commission an independent review into the performance and cost effectiveness of the networks currently operated by InterTradeIreland.
Implementation Status
Implemented
20. The Review Team recommends InterTradeIreland should develop guidance for staff on the operation of its programmes and, in particular, on the monitoring of budgets, the payment of claims and the oversight of the managing agents.
Implementation Status
Not implemented – InterTradeIreland staff already go through a thorough induction process and guidance is always available. Additionally, all procedures relating to financial issues are set out in the financial procedures manual.
21. The Review Team recommends management should ensure that the Steering Panels are made aware of any projects being put forward for consideration that have previously or are currently receiving support from an InterTradeIreland programme. The Steering Panel should consider any potential for duplication in such applications and their conclusion should be formally recorded in the minutes.
Implementation Status
Implemented
22. InterTradeIreland should consider establishing a central database of all companies in receipt of grant funding. InterTradeIreland could use this database both as an information resource on the number and nature of companies with which it interacts but more importantly as part of a control check to identify whether or not an applicant has received funding or is currently receiving funding. This database could also be expanded to hold details of companies from which it has procured services.
Implementation Status
Implemented
23. In addition to the terms of reference, drawn up at the start of the tendering process, the Review Team recommends (given the role of the managing agents in utilising their contacts and knowledge to identify suitable companies, receive applications and make recommendations for funding for programmes) that they be provided with specific guidance in relation to:
- Managing potential conflicts of interest in respect of client companies; and
- Responsibilities in relation to the sub-contracting of work.
Implementation Status
Implemented – This issue is covered in Central Procurement Directorate guidance and undertakings are given by managing agents to comply with these recommendations.
24. The Review Team recommends that DETI guidance on Third Party Organisations is considered by InterTradeIreland with particular relevance to the appointment and monitoring of managing agents.
Implementation Status
Implemented
25. The Review Team recommends that InterTradeIreland should review the current arrangements for the Fusion and Focus programmes whereby the advertising costs for Graduate recruitment are invoiced directly to InterTradeIreland by an external consultancy firm. Management should consider either placing these advertisements directly themselves using their existing contract with an advertising agency or should consider having the managing agent pay these costs directly.
Implementation Status
Implemented
26. The Review Team recommends that management ensures that any evaluations undertaken are independent to avoid any possible conflicts of interest.
Implementation Status
Implemented
27. The Review Team recommends that management ensure compliance with Financial Procedures/guidelines at all times. Management checks should be performed and evidenced to help ensure this.
Implementation Status
Implemented
28. The Review Team recommends that the conditions stipulated in the Letter of Offer are complied with. Where, in exceptional circumstances, changed conditions are agreed, these should be appropriately approved, documented and filed.
Implementation Status
Implemented
29. In those cases where Central Procurement Directorate is not used to manage the procurement process and to promote a uniform approach to internal tendering, the Review Team would recommend:
- Establishing a control sheet to record the entire process for each contract including the allocation of a unique contract identification number ;
- A specification and pre-printed tender return label, providing the identification number and closing date/time, should be issued in all cases. The label will readily identify returned quotations/tenders which should be passed unopened to a designated officer;
- On receipt by the designated officer, envelopes should be annotated with time and date received and placed in safe custody until the due opening date. Ideally all such documents should be kept in a locked cabinet prior to scheduled opening;
- Two officers should undertake opening of quotations, one being independent of the procurement process. On opening, each quotation should be date stamped and details of the company and price quoted recorded on the control sheet. Both officers should sign the control sheet as evidence that the information is complete and accurate;
- The Review Team recommends that evidence of a formal evaluation, by at least two members of staff, should occur on every occasion, although the level of detail required should be determined by the overall value of the contract. The evaluation should be recorded on or attached to the control sheet;
- The control sheet, including the final recommendation, should be authorised by the appropriate level of management; and
- An evaluation of the overall performance of the supplier should be undertaken at the end of each project. This will assist in the assessment of suitability for future work.
Implementation Status
Implemented
Appendix 4
List of Witnesses
Who Gave Oral Evidence
to the Committee
List of Witnesses Who Gave Oral Evidence
to the Committee
1. Mr David Sterling, Deputy Secretary, Department of Enterprise, Trade and Investment;
2. Mr Liam Nellis, Chief Executive, InterTradeIreland;
3. Mr Laurence Lord, Director of Corporate Services, InterTradeIreland;
4. Mr Bill Pauley, Head of European Services, Department of Finance and Personnel;
5. Mr Pat Colgan, Chief Executive, Special EU Programmes Body;
6. Ms Gina McIntyre, Director of Corporate Services, Special EU Programmes Body;
7. Mr David Thomson, Treasury Officer of Accounts; and
8. Mr Kieran Donnelly, Deputy Comptroller and Auditor General.