Public Accounts Committee

End of Session Report 2010 - 2011

Remit and Powers

The Public Accounts Committee (PAC) is a Standing Committee established in accordance with Section 60(3) of the Northern Ireland Act 1998 and under Assembly Standing Order 56.

“to consider accounts, and reports on accounts laid before the Assembly”.

The Committee has the power to:

• consider accounts and reports on accounts laid before the Assembly
• call for persons and papers;
• initiate inquiries and issue reports.

The PAC Process

The Committee’s work focuses primarily on the consideration of reports produced by the Comptroller and Auditor General (C&AG) and his organisation, the Northern Ireland Audit Office. These can be annual financial reports on public accounts or reports on the economy, efficiency and effectiveness of public spending.

The Committee selects and examines Audit Office reports that are material to its remit, and can assist in developing lessons to improve accountability and financial governance mechanisms in the public sector.

It calls the Accounting Officers responsible for expenditure examined in each report to give oral evidence. Members scrutinise the report and the evidence, and produce recommendations for improved financial systems and controls in a Committee report.

The Treasury Officer of Accounts (TOA) attends all evidence sessions on behalf of the Department of Finance and Personnel (DFP), answering Members’ questions and supporting Accounting Officers.

Through the Minister for Finance and Personnel, the Executive member with central authority for financial matters, the relevant Department responds to the Committee’s recommendations two months after publication of the report. This is called a memorandum of reply. The TOA co-ordinates this response and promotes good practice across Departments.

Membership

The Committee has 11 members, including a Chairperson and Deputy Chairperson, with a quorum of 5 members.

The membership of the Committee since 9 May 2007 has been as follows:

¹ With effect from 04 March 2008 Mr Thomas Burns replaced Mr Patsy McGlone.
² With effect from 20 May 2008 Mr Paul Maskey replaced Mr John O'Dowd.
³ With effect from 1 October 2007 Mr Mickey Brady replaced Mr Willie Clarke.
⁴ With effect from 21 January 2008 Mr Ian McCrea replaced Mr Mickey Brady.
⁵ With effect from Tuesday 27 May 08 Mr Jim Wells replaced Mr Ian McCrea.
⁶ With effect from 15 September 2008 Mr George Robinson replaced Mr Simon Hamilton.
⁷ With effect from 15 September 2008 Mr Jim Shannon replaced Mr David Hilditch.
⁸ With effect from 29 June 2009 Mr Patsy McGlone replaced Mr Thomas Burns.
⁹ With effect from 18 September 2009 Rt Hon Jeffrey Donaldson replaced Mr Jim Wells.
¹⁰ With effect from 18 September 2009 Mr David Hilditch replaced Mr George Robinson.
¹¹ On 19 April 2010 The Lord Browne replaced Rt Hon Jeffrey Donaldson.
¹² On 19 April 2010 Mr Stephen Moutray replaced Mr Jonathan Craig.
¹³ With effect from 1st August 2010 Mr Jim Shannon (DUP) resigned from the Public Accounts Committee.
¹⁴ With effect from 13 September 2010 Mr William Irwin replaced Mr David Hilditch.
¹⁵ With effect from 13 September 2010 Mr Adrian McQuillan replaced The Lord Browne.
¹⁶ With effect from 13 September 2010 Mr Gregory Campbell was appointed a member of the Committee.

Committee activities, outputs and achievements

Reports

This report covers the work of the Committee from 1 September 2010 to 24 March 2011 (Assembly year 2009-10). The Committee held thirteen inquiries during this period. In chronological order, they were reported on as follows:

Meetings held

During the year, the Committee met formally 24 times. Four of the meetings were evidence sessions which were conducted in the Senate Chamber, Parliament Buildings. Twenty one meetings were partly closed or closed, which is relatively high for PAC; this is due to the Committee’s prolonged and in-depth consideration of its inquiry into NI Water, which was considered in closed session at 14 of these meetings.

The purpose of most closed sessions was to consider the approach to specific reports, enabling members to explore the facts and increase their understanding of the more complex findings in the reports.

Summary of Inquiries

Report on Campsie Office Accommodation and Synergy e-Business Incubator

The Committee took oral evidence from David Sterling, Accounting Officer of the Department of Enterprise, Trade and Investment (DETI), and other senior officials including representatives from InvestNI on 20 May 2010 in relation to the Comptroller and Auditor General’s report on the ‘Campsie Office Accommodation and Synergy e-Business Incubator’.

The Industrial Development Board (IDB) entered into two separate 25-year leasing agreements for two Office units in Campsie in 1991 and 1992. IDB had an `option to break’ from the leases at the end of the initial four years if it could not find tenants. This would remove IDB from the commitment to pay full rent of £45,000 a year for each unit for the remaining 21 years. Both units remained unoccupied for the first four years, but, due to an oversight, IDB did not exercise its `option to break’, committing it to the full term for the leases.

IDB’s successor, Invest NI, inherited these leases on its creation in April 2002. Invest NI eventually reached agreement with one of the developers. In January 2008 Invest NI paid a `surrender premium’ of £180,000 in return for being released from a lease thereby avoiding £371,000 in future rental commitments. At the time of our report, negotiations with the developer of the remaining unit were ongoing. Agreement had been reached, in principle, for the surrender of the lease for £225,000. This would save around £268,000 on future commitments. . However, the total costs incurred by IDB and Invest NI for renting empty units for almost 18 years amounted to almost £1.8 million. It is clear that these leasing agreements have not delivered value for money.

The last published accounts of Invest NI (2008/09) show the value of unoccupied property at over £1.5 million and unoccupied land of over £27 million at time when acquisitions were increasing and property market values were plummeting. They also show an obligation for Invest NI to pay £2 million in future years for leasing property which is unoccupied.

The Committee accepts that taking risks is necessary in the field of economic development. “If Invest NI never took a risk, it would never have a failure, but it would not be doing its job." However, where it is necessary to take risks there should be effective risk management.

Synergy Centres Limited (SCL), a company jointly owned by Fujitsu Limited and the University of Ulster (UU), established a technology division called Synergy e-Business Incubator (SeBI) in 2000. Its objective was to create an ICT business incubation unit in West Belfast. Between 2000 and 2003, SeBI received government funding of £1.2 million, mainly from DETI, who were also responsible for appraising and monitoring the project. SCL ceased trading in December 2006 and was wound up in February 2008, with debts of around £1 million.

SeBI fell considerably short of delivering the anticipated benefits. It failed to reach targets set for business start-ups, job creation and financial sustainability. Given this under-performance, the Committee considered that that the value for money achieved from this project was very poor.

6 out of 7 of the Committee’s recommendations were accepted in the Government’s memorandum of reply of 30 November 2010.

Report on the Management of Substitution Cover for Teachers: Follow-up Report

The Committee took oral evidence from Paul Sweeney, Accounting Officer of the Department for Education (DE), and other senior officials on 16 September 2010 in relation to the Comptroller and Auditor General’s report on the ‘Management of Substitution Cover for Teachers: Follow-up Report’.

In 2003 the Public Accounts Committee (PAC) at Westminster reported that there was ineffective management of teachers' sickness absence, inadequate control over the re-employment of prematurely retired teachers and a lack of a review of substitute teaching in Northern Ireland. The Department of Education accepted the Committee's conclusions and indicated that a range of actions would be put in place to deal with the weaknesses identified. Given such assurances, the current Committee expected the Department to have delivered measurable progress.

The Committee is disappointed that the Department, employing authorities and schools have still to realise the full benefits of a £1.1 million investment in a new management information system – Resourcelink, the implementation of which had already taken considerably longer than first anticipated. These potential benefits include being able to improve the analysis of trends in teacher absence and substitution cover and general processing of information.

In order to limit the potentially negative impact that the disruption an absent teacher can have on pupil learning, the Committee calls for specific action on two fronts – ensuring that avoidable and preventable teacher absences are minimised and ensuring that high quality substitution cover is provided when necessary. This will require a more effective analysis and benchmarking of teacher absence data to provide evidence about what initiatives are most effective in curbing teacher absence patterns. It should also involve enhancing the process of accountability for the quality of substitute teaching through more periodic inspection by the Department's Education and Training Inspectorate and closer support and supervision of those providing substitution cover in schools.

The Committee believes that fundamental changes will be required in regulating the circumstances under which prematurely retired teachers can be re-engaged by schools if the Department is to finally get to grips with this issue. Moreover, with nearly two and a half thousand newly qualified teachers desperately seeking teaching opportunities, re-employing retired teachers for substitution cover is not only a tragedy for young teachers but has implications, too, for the wider debate on teacher supply and demand and the future of our teacher training institutions.

9 out of 11 of the Committee’s recommendations were accepted in the Government’s memorandum of reply of 25 January 2011.

Report on the Management of the Disability Living Allowance Reconsideration and Appeals Process

The Committee took oral evidence from Will Haire, Accounting Officer of the Department for Social Development, and other senior officials on 14 October 2010 and from Conall MacLynn, President of the Appeals Tribunal for Northern Ireland on 21 October 2011 in relation to the Comptroller and Auditor General’s report on the ‘Management of the Disability Living Allowance Reconsideration and Appeals Process’.

The rules governing Disability Living Allowance (DLA) are particularly complex, and decisions on entitlement involve a high degree of judgement and interpretation of detailed medical evidence by staff in the Social Security Agency (the Agency).

The DLA reconsideration and appeals process provides an important mechanism through which claimants who are dissatisfied with the Agency's decisions are able to challenge them. Although significant progress has been made to improve this process, it is still time-consuming and can be a stressful experience for appellants.

The key to this is the need for all the parties involved in the process to work better together through adopting a more constructive, partnership approach. For example, the Agency must continue to look at ways of reducing the complexity of the DLA claim form and improving the extent and quality of the medical evidence available to those making the decisions. Claimants and those who advise them must also ensure that they provide the Agency with all relevant information to support their claims, including, where appropriate, medical evidence.

More also needs to be done to help those with autism to access DLA and where necessary the appeals system.

If services are to be improved it is important that those using them have an opportunity to provide feedback on their experience of the entire process. Linked to this is the need to give adequate consideration to where appeal hearings take place and the facilities available to appellants and their representatives.

In 2009-2010, 3,561 appeal hearings were either postponed or adjourned. This represents an increasing number in percentage terms. Such cases lead to delays in the completion of the appeals process and can add to the stress felt by appellants. It is therefore important that postponements and adjournments are kept to a minimum.

6 out of 9 of the Committee’s recommendations were accepted in the Government’s memorandum of reply of 16 February 2011.

Report on Arrangements for Ensuring the Quality of Care in Homes for Older People

The Committee took oral evidence from Andrew McCormick, Accounting Officer of the Department of Health, Social Services and Public Safety (DHSSPS), and other senior officials on 16 December 2010 in relation to the Comptroller and Auditor General’s report on the ‘Arrangements for Ensuring the Quality of Care in Homes for Older People’.

The Department of Health, Social Services and Public Safety (the Department) has responsibility for ensuring that the care received by older people in residential care and nursing homes is of an acceptable standard. In 2005, the Regulation and Quality Improvement Authority (RQIA) was created to regulate and inspect care homes and report the results back to the Department.

In Northern Ireland, around 9,500 older people have been placed in 490 registered residential care and nursing homes by Health and Social Care Trusts (Trusts) at a cost of around £265 million a year. Many of these individuals have complex care needs and are among the most vulnerable in our society.

Effective care services will only be provided where they are based on a detailed assessment of need. To ensure consistency in assessment across the sector, the Department has developed a Single Assessment Tool. Given the value of this tool, it is important that the Department sets a clear timetable for its introduction.

Deciding to admit a relative to a residential care or nursing home is one of the most difficult decisions a family can face. To assist in the process, RQIA must improve the provision of relevant information on the quality of homes available to potential users and their families.

RQIA has the power to impose sanctions on care providers in cases where performance is not satisfactory. This is an essential tool if RQIA is to minimise the risks to residents and improve quality within the sector. It is important that RQIA remains committed to imposing sanctions on any care home which consistently fails to meet the Minimum Standards.

The predictability of the current inspection programme could lead to complacency among care providers. The Committee has strong reservations about the effectiveness of announced inspections in providing a sound basis for evaluating standards of care in homes for older people. Notifying a care home of an imminent inspection does not necessarily show inspectors what a home is really like.

All complaints, no matter how minor, shed light on the quality of care provided in care homes. RQIA has the authority to request annual complaints returns from care homes but has not done so. In order to more fully assess the overall quality of the care homes sector, the HSC Board and RQIA need to make more use of available information on complaints.

The report was launched on 24 February 2011, the Department is considering the recommendations made in the report and will respond to the Committee at a later date.

Report on Measuring the Performance of NI Water

The Committee took oral evidence from Paul Priestly, Accounting Officer of the Department for Regional Development (DRD), and other senior officials on 24 June 2010 in relation to the Comptroller and Auditor General’s report on ‘Measuring the Performance of NI Water’.

Under the Water Reform process, responsibility for water and sewerage services transferred from the Department for Regional Development's Water Service to Northern Ireland Water (NI Water), a government owned company (GoCo), in April 2007. A system of economic regulation similar to the rest of the UK was also put in place. This process was intended to improve both quality and efficiency of service provision and has major implications for public expenditure in Northern Ireland.

It is not clear if there is a need for further improvements to drinking water quality, which is better than ever and is less than one percent below GB compliance levels. The Department believes that further marginal improvements would not be of benefit to public health and would be too expensive.

It is difficult to reconcile these views with those of the Drinking Water Inspectorate, which has stated that further projects are needed to improve compliance with EU standards and to address localised issues relating to trihalomethanes, iron, aluminium and lead. It is also difficult to justify a further investment of £100 million under the Regulator's price control when the associated target of 99.7 per cent compliance by 2013 has already been exceeded.

Waste water has been the "Cinderella service" in comparison with drinking water, and although there have been improvements in recent years, standards are not as good as in England and Wales where there is virtually 100 per cent compliance. Some works operate to relaxed standards, and if these works were assessed against current environmental standards this would further reduce compliance.

Despite its very poor performance, NI Water has no target to reduce serious pollution incidents. The Committee believes that NI Water is too complacent about the polluting effect of its discharges both in terms of the number of pollution incidents and its effect on bathing water quality.

In response to criticism from the Regulator, NI Water improved the accuracy of its leakage measurement. This resulted in an increase from the previously reported 157 million litres a day to 181 million litres a day.

The Committee previously queried the accuracy of leakage measures in a 2002 report and considers NI Water to have been negligent in ignoring the obvious problems for so long. This also underlines the wider problems of poor quality management information and the difficulties this causes in setting targets and priorities across many service areas.

Too many customers are experiencing difficulties with core services and in getting adequate responses when problems are reported. The former Chief Executive acknowledged that it was often difficult for customers to contact the right people in NI Water and indicated that improvements to customer service are at the top of the agenda. The issue of poor customer service also came to the fore in the Christmas 2010 freeze and needs to be addressed urgently.

Benchmarking is a widely used process to determine the scope for improvement by comparing company performance with industry best. The Department argued strongly that both the Audit Office's and the Regulator's comparisons with GB performance were not valid because of a legacy of underinvestment in Northern Ireland. The Committee requested evidence to support this position but found a considerable disconnect between the oral and written evidence. The Committee does not accept the Department's objections and believes that it needs to show a greater level of maturity in actively pursuing improvements rather than trying to justify existing poor levels of performance.

NI Water has the potential to reduce its operating costs by around 40 per cent and additional scope for capital savings. The Regulator has set a target to close about 65 per cent of this efficiency gap by 2013, but the Department has not signed up to the second and third years of this plan because of an uncertain funding position. The Committee believes that there is an urgent need to address this issue.

The report was launched on 3 March 2011, the Department is considering the recommendations made in the report and will respond to the Committee at a later date.

Report on Procurement and Governance in NI Water

The Committee took oral evidence from Paul Priestly, Accounting Officer of the Department for Regional Development (DRD), and other senior officials on 1 July 2010 in relation to the Comptroller and Auditor General’s memorandum on ‘Procurement and Governance’.

This is a landmark report that exposes serious failings in procurement, inappropriate and ineffective governance arrangements over an important arm's-length body, and a failure to observe the high standards expected of senior public officials.

In January 2010, an independent review team was commissioned to investigate governance arrangements at Northern Ireland Water (NI Water) in light of procurement problems identified in a number of internal audit reports. Four NI Water non-executive directors were dismissed in March 2010.

At the evidence session on 1 July 2010, the Committee focused on the assessment of the nature and cause of procurement failures, the governance arrangements at Northern Ireland Water and the oversight role by the Department for Regional Development. Concerns also emerged over the quality of the evidence provided by witnesses; the proper conduct and actions of the Department's and NI Water's Accounting Officers; and also over the independence of those appointed to carry out the review.

Following the evidence session, the Committee received correspondence from a member of the review team criticising the Committee's "disgraceful line of questioning". It emerged that Mr Paul Priestly, the Permanent Secretary and the Committee's main witness, had a role in drafting this letter. Mr Priestly was subsequently suspended from his position by the Head of the Northern Ireland Civil Service (NICS), who has assured the Committee that progress is being made with an internal management process under NICS disciplinary policy.

The Committee obtained extensive additional documentation from a variety of sources, and it was on the basis of this information that this report was prepared.

The actions of a number of senior officials in this case has undoubtedly undermined confidence in the integrity of the public sector, but it is important to remember that there are good and honourable people at all levels in public bodies. For confidence to be regained, the highest standards in public life must be applied, but those at the top must lead by example.

There are concerns over the independence of the investigation of NI Water's procurement problems. There were three potential conflicts of interest, involving two of the three review team members. There were also clear indications that the Department inappropriately influenced a small number of key findings in what was supposed to be an independent review.

The review team's report failed to provide, as requested, a detailed and considered assignment of individual responsibility for the governance failures. The review team was unable to fulfil its terms of reference because of the undue haste with which Mr Priestly pressed for the report to be completed.

The failure of NI Water to adhere to the basic principles of procurement is inexcusable. Between December 2005 and August 2010, there were 75 procurement failures totalling £45.9 million, of which 41 (£14.8 million) originated in the Water Service. These failures resulted from widespread abuse of single tender awards (STAs), unapproved contract extensions, and circumvention of financial controls.

There was a deeply embedded culture at all levels that made it acceptable to bypass rules to get the job done. In addition to weak financial controls and wholly deficient management information systems, there was no clear set of ground rules setting out who was responsible for authorising expenditure, something which any well run organisation should have.

Many of the procurement problems arose in 2006-07, the final year of Water Service, when 273 staff (14% of the workforce) opted to remain in the NI Civil Service rather than move to NI Water. While the Committee recognised that this was necessary to manage the short term staffing problems, it was, nevertheless, astonished to learn that in the three years up to 2009-2010, NI Water spent over £42 million on consultants and temporary staff.

Despite the procurement failings, the most recent CoPE accreditation exercise, which was carried out in 2009, found that all CoPEs, including NI Water, achieved the highest possible rating - that is "exemplar" status.

The circumstances of this case made the Committee question again, what one would have to be guilty of to lose accreditation as a centre of procurement expertise.

DRD failed to ensure that NI Water complied with some of the most basic principles of good corporate governance. It did not ensure that NI Water had a full complement of non-executive board members until July 2008. In June 2008, the DRD Accounting Officer approved the appointment of the NI Water Chair as interim Chief Executive in direct contravention of established good practice. The separation of roles and responsibilities at the top of an organisation is fundamental to good governance. It is astonishing that the Accounting Officer failed to adhere to this key principle.

The Board is required to hold management to account and should call for any information necessary. It also has a responsibility for directing and reviewing the work of internal audit. In failing to provide an appropriate level of audit coverage NI Water management and its Board had demonstrated a poor understanding of the significant risks the organisation faced.

The responsibilities of a non-executive director of a public body are demanding, but the role is crucial in ensuring such bodies properly manage public funds. What has happened in NI Water must not be allowed to deflect from the ability of public bodies to attract high calibre candidates to such important positions.

The report was launched on 3 March 2011, the Department is considering the recommendations made in the report and will respond to the Committee at a later date.

Report on Improving Adult Literacy and Numeracy

The Committee took oral evidence from Alan Shannon, Accounting Officer of the Department for Employment and Learning (DEL), and other senior officials on 10 February 2011 in relation to the Comptroller and Auditor General’s report on ‘Improving Adult Literacy and Numeracy’.

Research carried out in 1996 highlighted that around one in four (or 250,000) people of working age in Northern Ireland had very low literacy and numeracy skills. A further 30% (some 313,000) were considered “able to deal only with simple material”. The impact on both the individuals concerned and on the wider community can be profound, as literacy and numeracy underpin virtually all of the other skills required in everyday life. Research has also shown a significant relationship between poor literacy and numeracy skills and the risk of offending.

Literacy and numeracy learning can boost self-esteem, help the unemployed into work and increase the chances of those with jobs stay in employment and gain promotion. For employers, it can mean increased productivity, competitiveness and a more motivated workforce. Higher standards of adult literacy and numeracy can also have strong, positive impacts on Northern Ireland’s social, political, and cultural wellbeing. Over the nine years to 2010-11, the Department spent some £70 million on ‘Essential Skills’, its adult literacy and numeracy education programme. By July 2010, just over 83,000 people had enrolled on courses, of whom some 51,000 gained an Essential Skills qualification.

Over the past 15 years, the Department’s only means of assessing standards of adult literacy and numeracy in Northern Ireland has been through the ‘NI Omnibus Survey’, which includes an Essential Skills component on a bi-annual basis. The Committee notes, however, that this survey is based upon self-perception. Interestingly, the international survey identified that, among those who performed in the lowest literacy band, almost one in ten self-assessed their reading skills as excellent and nearly a quarter said they were good.

The statistics show that 70% of enrolments were by 16 to 25 year-olds even though the results of the 1996 international survey showed that older age groups tended to perform worse in both literacy and numeracy skills. In the Committee’s view, a lot more needs to be done in the future with older age groups, including a change in the thrust of the engagement strategy to increase the emphasis on attracting participants over 25 years of age.

The report was launched on 24 March 2011. The Department is considering the recommendations made in the report and will respond to the Committee at a later date.

Recommendations

In total this year, the Committee has made 27 recommendations to improve financial accountability to the taxpayer. It continues to monitor departmental progress in implementing them. Of these recommendations, 21 (77.8%) have been accepted by the Government to date.

A further 61 recommendations were made to improve financial accountability to the taxpayer, which are currently being considered by the Government who will formally respond to the Committee in an MOR from the Minister for Finance and Personnel in the next mandate.

Where its recommendations were noted rather than accepted outright, the Committee sought clarification from the relevant Department via the Treasury Officer of Accounts of the reasons for this. Where it deemed necessary the Committee referred noted recommendations to the relevant statutory committee for continued scrutiny of implementation.