COMMITTEE FOR CULTURE, ARTS AND LEISURE
OFFICIAL REPORT
(Hansard)
Department’s Management of its Arm’s-Length Bodies
3 March 2009
Members present for all or part of the proceedings:
Mr David McNarry (Deputy Chairperson)
Mr Dominic Bradley
Mr Francie Brolly
The Lord Browne
Mr Kieran McCarthy
Mr Raymond McCartney
Mr Nelson McCausland
Mr Pat Ramsey
Mr Ken Robinson
Witnesses:
Ms Deborah Brown ) Department of Culture, Arts and Leisure
Mr Gavin Patrick ) Department of Culture, Arts and Leisure
Mr Paul Sweeney ) Department of Culture, Arts and Leisure
Ms Alison Caldwell ) Department of Finance and Personnel
The Acting Chairperson (Mr K Robinson):
The meeting is now open to the public. I remind members to switch off their mobile telephones, as all Committee meetings held in open session are recorded and mobile telephones, apparently, interfere with the recording system. I advise members that the departmental briefing will be covered by Hansard.
The first stage of the Committee’s review involved the taking of evidence from officials on the Department’s management of the Northern Ireland Events Company. That session took place on 12 February 2009. This is the second stage of the Committee’s review, and is focused on how the Department is managing its other arm’s-length bodies.
The Department has already submitted written answers, which are in members’ papers. Those answers relate to questions based on the following reports: the ‘Department of Finance and Personnel Memorandum on the Thirteenth Report from the Public Accounts Committee Session 2007-2008: Good Governance ― Effective Relationships between Departments and their Arm’s Length Bodies’; a report from the Chartered Institute of Public Finance and Accountancy (CIPFA), dated May 2008, entitled ‘Review of the Sponsorship Arrangements in the Department of Culture, Arts and Leisure’; and the Department’s position paper, a report received on 24 November 2008 and updated on 22 December 2008, on matters relating to the Northern Ireland Events Company. Those reports are included in members’ papers.
The purpose of this session is to scrutinise how the Department is reforming its management of its arm’s-length bodies. There are two overarching issues that members will wish to explore with the officials. First, is the Department taking sufficient action to address the issues of concern identified by the Public Accounts Committee report, and the CIPFA report — which the Department itself commissioned — with regard to changing how it manages its arm’s-length bodies; and, secondly, is the Department moving quickly enough?
I bid the officials good morning; it is nice to see you, and I am sure that we can offer you an interesting session with us, to which we all look forward. I understand that Paul Sweeney, as permanent secretary, will begin with a résumé in order to bring the Committee up to date.
Mr Paul Sweeney (Department of Culture, Arts and Leisure):
Thank you, and good morning. I intended to share the opening remarks with my colleague Alison Caldwell. I am accompanied by Deborah Brown, who is the Department’s director of finance; Alison Caldwell, of the Department of Finance and Personnel (DFP), who is a member of the arm’s-length bodies review team; and Gavin Patrick, who is, perhaps, a new face to members and who is leading the new governance support unit that has been established in the Department. Gavin is a principle officer in the Department of Culture, Arts and Leisure (DCAL).
The Acting Chairperson:
Following Paul’s presentation, members will have an opportunity to ask questions.
Mr Sweeney:
My opening remarks will be in conjunction with those from Alison. I welcome this opportunity to be of further assistance to the Committee in its review of the Department’s performance in its sponsorship role with its arm’s-length bodies.
On 12 February 2009, departmental officials assisted members with matters relating to the KPMG report. Today, we will focus primarily on the two reports prepared by CIPFA. On 31 March, I will again give evidence to the Committee, because by that stage, as I understand, the Committee will have selected an arm’s-length body on which to carry out a case study. I understand that officials from whatever arm’s-length body that the Committee selects, and departmental officials, will appear before the Committee on that date.
The quick background to CIPFA is, of course, that when the issue of the deficit in the Northern Ireland Events Company was brought to the Department’s attention, our immediate reaction was to advise the Executive, the Committee, the Assembly, the Comptroller and Auditor General and the PSNI. We then appointed KPMG to perform two functions: first, to verify the company’s outstanding creditors; and, secondly, to review all the circumstances that gave rise to the deficit.
Importantly for this morning’s exercise, the Department appointed David Nicholl — head of the Chartered Institute of Public Finance and Accountancy in Northern Ireland — to compile two reports. One of them was a high-level review of the governance and accountability arrangements in the Department’s arm’s-length bodies and to recommend improvements. Those did not include the education and library boards or the North/South bodies. The other report is a fundamental review of the way in which the Department discharges its sponsorship role of arm’s-length bodies, again with a view to identifying weaknesses and making recommendations.
In my view, CIPFA produced two excellent reports in a relatively short time. That gave me a degree of assurance that the more obvious weaknesses that had been identified in the Northern Ireland Events Company did not apply to the Department’s other arm’s-length bodies. The reports also highlighted significant shortcomings in how the Department discharged its sponsorship role. As the Committee knows, some 56 core recommendations emerged from those reports.
In my assessment, the appropriate response to the CIPFA reports needed to be robust, thorough and would need to be applied over a prolonged period. In my view, the shortcomings were such that they did not lend themselves to quick-fix solutions.
An important additional report was the Public Accounts Committee’s ‘Good Governance ― Effective Relationships between Departments and their Arm's Length Bodies’, which was published in May 2008. That report produced 17 recommendations, several of which were specific to DCAL.
In light of the CIPFA reports and the Public Accounts Committee’s report, I approached DFP. Senior colleagues in DFP and I came up with the idea of establishing the arm’s-length bodies review team to consider what steps now needed to be taken in order to improve sponsorship arrangements across all Departments. Although the team would have an 18-month work period, for an initial six months it would work intensively in DCAL to help officials in the Department to improve its sponsorship arrangements. Alison will presently outline the role of that arm’s-length bodies review team.
I hope to assure the Committee today that the Department is determined to improve significantly its performance in discharging its sponsorship role of arm’s-length bodies. Indeed, I believe that a good start has been made and that appropriate steps have been taken. Those include establishing the review team; setting up of a governance support unit in the Department, led by Gavin Patrick; we have undertaken an independent review of the internal audit arrangements of our arm’s-length bodies and begun new sponsorship training for staff involved in that role; we have had fairly extensive and intensive engagement with our arm’s-length bodies on sponsorship models and other matters; and we are moving towards what we will call a risk-based approach to sponsorship. However, this is very much a work in progress, and sustained effort and resources are required if we are to achieve the standards to which we aspire.
I must make judgement calls day and daily in discharging the Department’s sponsorship role. The following are some of the themes that the Committee may find helpful in considering some of those judgement calls.
First, there is the judgement call about the appropriate balance between oversight and regulation on the part of the Department, and the degree of autonomy that should be rightly delegated to arm’s-length bodies. In defining that sponsorship relationship, some have used the analogy of a bridge: is an arm’s-length-body relationship a long, narrow bridge or a short, fat bridge? In that regard, we have been looking at how our counterpart Department in Whitehall, the Department for Culture, Media and Sport (DCMS), approaches its sponsorship relationship.
With regard to the intensity and frequency of its engagement with its arm’s-length bodies, DCMS has adopted very much a risk-based approach ― that is, if a body can demonstrate that it has robust control frameworks in place with strong adherence to sound systems and procedures in corporate governance, then the relationship can, perhaps, be more of the long, thin bridge type rather than the short, fat bridge. Likewise, however, if there are areas of concern about an arm’s-length body, and if a risk assessment finds that there are issues that need to be addressed, then the intensity of engagement is, perhaps, one of a short, fat bridge.
How do we avoid micromanaging our arm’s-length bodies? How do we avoid fettering their delegated limits of expenditure, their independence, their spirit, their flexibility and the manner in which they are expected to be responsive to need, while guarding against what some might perceive as the dead hand of bureaucracy killing off initiative? Again, one struggles daily with the issue of micromanaging the arm’s-length bodies, and we have heard some anecdotal evidence of that from soundings of some arm’s-length bodies.
Finally, how much resource should the Department allocate to the sponsorship role in order to ensure proportionality? I am daily very conscious of the Department’s economy of scale. It is a very small Department, and, as such, we are, at times, stretched in discharging all our functions and responsibilities, and there is constantly a judgement call to be made about the appropriate level of resources that need to be allocated to the sponsorship role.
Those are my opening remarks, and if the Acting Chairperson approves, I will invite Alison to outline the role of the arm’s-length bodies review team.
The Acting Chairperson:
Thank you for a comprehensive presentation. I now welcome Alison’s comments in order that members can get a rounded view of the situation.
Ms Alison Caldwell (Department of Finance and Personnel):
As Paul mentioned, the Public Accounts Committee, after its hearing into the Northern Ireland Audit Office report on effective relationships between Departments and their arm’s-length bodies, made a number of recommendations on managing the sponsor relationship between Departments and arm’s-length bodies.
In the memorandum of reply, which was compiled by the Department of Finance and Personnel and brought to the Assembly in July 2008, the Finance Minister, Mr Dodds, set out how his Department would address some issues and would be working closely with Departments to ensure that issues in the Public Accounts Committee report were being appropriately addressed. Recommendation 12 of the report highlighted the need to do more to ensure that effective and robust systems were in place and that good practice was disseminated through the structures, processes and practices that Departments had in place to manage that relationship.
In response to that recommendation, our Department undertook to set up a small team, which became known as the arm’s-length bodies review team. The response advised that the team would be led by a senior civil servant at grade 5 level, who would be responsible for developing the work strands in that area. That decision was reached after discussions between the permanent secretary of the Department of Finance and the Personnel, and Paul, as the permanent secretary of the Department of Culture, Arts and Leisure.
As part of that process, it was agreed that the first strand of work would be concentrated in DCAL, which, at that time, had — and still has — a significant number of arm’s-length bodies. In addition to the Public Accounts Committee report recommendations, the Department commissioned CIPFA to undertake a review, which made further recommendations on improvements to the Department’s sponsorship. I should, perhaps, say at this stage that, although Paul has a couple of North/South bodies in his Department, because of the particular status of North/South bodies, they are outside the scope of the arm’s-length bodies review team.
The team is headed by Jim O’Hagan. Jim is a qualified accountant, and prior to taking up his position in the arm’s-length bodies review team, he was, for five years, the finance director in our Department. Jim, obviously, has a wide range of experience and financial expertise, and he has experience of operating that departmental relationship with arm’s-length bodies and of operating in a number of arm’s-length bodies. I am the second member of the team, and, as a previous internal auditor, I have experience and knowledge of governance, accountability and audit issues.
Our team represents a significant and important part of the DFP response to the Public Accounts Committee report. We report to the DFP permanent secretary, and our review is fully endorsed by the Minister of Finance and Personnel. Indeed, he is content that I am here today to explain to the Committee the work of our review team as it pertains to the DCAL element of the review. We have, initially, concentrated our work in DCAL, but the proposed review has widespread support throughout the Northern Ireland Civil Service (NICS) permanent secretaries’ group. That very much reflects the importance that permanent secretaries attribute to the area of governance, accountability and sponsorship of arm’s-length bodies.
We have, initially, been working with DCAL on implementing the recommendations of the Public Accounts Committee and CIPFA reports. However, that preliminary work will, obviously, have a lot of read across and applicability to the other NICS Departments with which we will be working in due course. Jim was appointed in September 2008 to lead the review team. Although I have quite a bit of detail about the work that we have been undertaking, I will, if the Acting Chairperson approves, provide a quick summary of the key strands of that.
The Acting Chairperson:
If you could, because I am very conscious of time.
Ms Caldwell:
The first part was, obviously, to identify best practice. We have then been working with DCAL to identify what the appropriate governance structure for the Department could be. We will be developing a risk-based assessment tool that can be used by DCAL and other Departments, and a sponsorship manual that will be particular to DCAL. In addition, we have provided and developed a range of training and development events for DCAL staff and for senior NICS staff, and are seeking to roll that out further.
A key part of the process that the team has undertaken is, obviously, that close-working relationship with the DCAL staff and management. Certainly, we have worked very closely with the DCAL board and with Deborah Brown, as the finance director, given that the proposed structure of the governance support unit will be under Deborah’s control. Through working closely and collaboratively with the DCAL staff, we hope that, at the conclusion of our particular piece of work, residual knowledge and experience will remain in DCAL, which will then seek further to improve the sponsorship function that the Department operates.
It is envisaged that the work in DCAL will conclude in about May or June this year, and the overall review project in which we are involved will conclude in summer 2010.
The Acting Chairperson:
Thank you very much, Alison. That was concise, and helpful to the Committee. Two members have indicated that they want to ask questions at this stage, so I ask them to be equally brief in their question, and the witnesses to be quite concise in their replies.
Mr D Bradley:
I begin with the terms of reference for this Committee’s review of the management of the Northern Ireland Events Company. The Committee wrote to you and asked you to answer a number of questions, which you very kindly did. Question three asked whether the Department has a representative on the audit committees of the arm’s-length bodies, and asked you to provide the dates of the last audit committee meetings of each of the arm’s-length bodies. It also asked whether departmental officials attended those meetings.
Your answer stated that of the seven existing arm’s-length bodies for which you have direct responsibility, a departmental official attended only one of those meetings. Many people would say that that is an incredible situation considering the debacle of the Northern Ireland Events Company. People may well ask whether the Department has learned anything from that disaster.
Clearly, one of the ways of ensuring good monitoring of the arm’s-length bodies is to have a departmental official attending not just one audit committee meeting each year, but, I would suggest, attending all arm’s-length bodies’ audit committee meetings. That would ensure that the Department is provided with up-to-date financial information and would be able to identify early any problems that may arise, and thus intervene and prevent the sort of situation that we had with the Northern Ireland Events Company.
Do you agree that in order to fully monitor the arm’s-length bodies, without micromanaging them, it would be sensible for the Department to have an official attend, as an observer, each audit committee meeting of each arm’s-length body?
My second question concerns the Public Accounts Committee’s report. The Department has said that it has undertaken an external quality review of the internal audit function within the arm’s-length bodies. That was to be finalised in February. Has that report been completed, and, if so, what were its findings? Were there any problems associated with the internal audit function of any of the arm’s-length bodies?
The Acting Chairperson:
Thank you, Dominic; you were as concise as ever. Could we have an equally concise reply, Paul? I will allow you to indicate which member of your team will respond.
Mr Sweeney:
In answer to the first question, the primary mechanism for the sponsorship arrangement is quarterly accountability meetings. Those meetings are fronted by a senior civil servant, at grade-5 level, who is accompanied by a qualified accountant. A grade-5 civil servant will attend at least one audit committee meeting for each arm’s-length body. Typically, an arm’s-length body will have around three audit committee meetings a year. If the frequency of attendance must be increased as a result of those quarterly accountability meetings and attendance at, at least, one audit committee meeting, we will increase it.
We are trying to move toward risk assessment. If we believe that the control frameworks are sound and are working well, I think that attending one meeting in three is reasonable. Quite frankly, if there is cause for concern, we may attend all the audit committee meetings. The other issue is that officials from the Northern Ireland Audit Office attend all the audit committee meetings of quite a number of our arm’s-length bodies. However, I take the spirit of the member’s point.
Regarding the Public Accounts Committee’s report, an external review was undertaken of the arm’s-length bodies that the Department sponsors. In this instance, the review included the education and library boards but excluded the North/South bodies. The education and library boards generally showed a high level of compliance with the standards. For the other arm’s-length bodies that were judged against best practice and the 10 Government internal-audit standards, the findings were that although there were areas of compliance, there were areas of significant non-compliance. That report has been very helpful.
In the early part of the new year, as a result of that report, I met the chief executives of each of the bodies that had been reviewed. I looked at the 10 Government internal-audit standards that they had been assessed against. Each of those bodies has prepared a template, identifying what action they plan to take in the areas where there have been shortcomings.
The Acting Chairperson:
I will stop you there. On a personal level, each of us around the table have had membership of district councils and the various bodies that they are responsible for, such as local strategic partnerships and so on. The amount of audit oversight that goes on in those bodies is extraordinary, to say the least. We cannot understand how a Government Department did not have, at least, that sort of format in place. Deep down, that is the puzzle that we all have.
What you are attempting to do is fine, now that you have found certain things out. However, we are asking why that was not done before. Presumably, you had a template from the education and library board function; why was it not more widespread?
Mr Sweeney:
As I have said on a number of occasions when I have addressed the Committee, the fundamental mechanisms for carrying out our sponsorship role were in place, and, indeed, were in place in the Northern Ireland Events Company — the management statement and financial memorandum, the quarterly accountability meetings, etc, were in place. However, in the case of the Northern Ireland Events Company, we were insufficiently interrogative in the manner in which we discharged our sponsorship role. We placed an undue emphasis on the role of the chief executive, which, with hindsight, we know was misplaced.
The Acting Chairperson:
Dominic, is there anything else that you want to add to your question, or would you like to comment briefly on the reply?
Mr D Bradley:
I will make the point again that, given the background to this, Committee members would have greater confidence if a more robust system of monitoring was to be developed, and if the Department was to have an observer at each audit committee meeting of each arm’s-length body.
If there was a problem in any of the North/South bodies, who would — to use a common phrase — carry the can for that?
Mr Sweeney:
The legislation is clear as regards joint responsibility. I share responsibility with my counterpart from the Department of Community, Rural and Gaeltacht Affairs in Dublin. My permanent-secretary counterpart in Dublin and I, and the North/South Ministerial Council, share responsibility for the oversight of the North/South bodies that fall within DCAL’s remit.
Mr D Bradley:
Given that you have that degree of responsibility, why do you not have more input into the accountability arrangements?
Mr Sweeney:
Again, I differentiate between those bodies for which we are solely responsible — and to which the Minister makes appointments — and the North/South bodies, for which the legislation is different. That is not to say that a range of accountability arrangements is not in place. However, those arrangements are slightly different from those for the bodies for which the Department is directly responsible.
Mr D Bradley:
Would it not be sensible for the Department to consider monitoring those bodies also, given the fact that the Committee received the 2004 accounts for Foras na Gaeilge and the Ulster-Scots Agency only two days ago?
Mr Sweeney:
Yes. The independent review of the internal audit arrangements for our bodies, in this instance, included Waterways Ireland. My counterpart in Dublin will carry forward an independent review, in this instance, of Foras na Gaeilge. Fieldwork for the independent external review of the Ulster-Scots Agency is being undertaken at present. That is an example of how we are improving governance arrangements for North/South bodies that fall within the Department’s remit.
Mr McCausland:
You mentioned a range of accountability arrangements for North/South bodies; can you spell out precisely what those are? With whom, and how frequently, does the Department hold those accountability meetings?
Mr Sweeney:
Earlier, I said that the primary mechanism for accountability was the quarterly accountability meetings with the arm’s-length bodies for which the Department is directly responsible. The sponsorship arrangement for North/South bodies is discharged through the sectoral meetings on both waterways and languages. Typically, the North/South Ministerial Council meetings are held in sectoral form twice a year. There are arrangements over and above that; that is not the only arrangement.
(The Deputy Chairperson [Mr McNarry] in the Chair)
Mr McCausland:
Those are fairly stage-managed events. I would have thought that the accountability arrangements would have been more inquisitorial and interrogatory — if that is the right word.
Mr Sweeney:
The member is entirely right. Over and above the sectoral meetings — and I understand why you characterised those in the way that you did — officials from Dublin and Belfast meet the North/South bodies on a regular basis. We are moving towards a regime that will be more akin to the quarterly accountability meetings that we have with our arm’s-length bodies, because that regime is — to use your words — more interrogative and inquisitorial. Those meetings might not necessarily happen quarterly, but at least two to three times a year. We have adopted that format. Indeed, that would have been the case for Waterways Ireland.
As recently as last Friday, officials from Dublin and Belfast instigated that new arrangement for Foras na Gaeilge and the Ulster-Scots Agency. That new arrangement is now in place for those two agencies in the single body.
Mr D Bradley:
Can the Department provide the Committee with a paper on the accountability and monitoring arrangements for the North/South bodies?
The Deputy Chairperson (Mr McNarry):
OK. That is a formal request. Thank you very much. I apologise for being late.
I want to clear up one thing. The Committee requested information for this meeting on staff qualifications, such as those recommended in the CIPFA document. Will you tell us whether the Department has acted on the recommendation to set up a unit that is headed up by a qualified financial specialist and with specialists in finance, governance and so on? How many people in the Department have recognised financial qualifications? How many would you require to implement that recommendation?
Mr Sweeney:
I want to clarify that it was flagged up to us that you would ask for that information this morning. There has been a misunderstanding if you expected that information to be provided in advance of this meeting. However, we are happy to address the matter now, and I invite our director of finance to assist members in that regard.
Ms Deborah Brown (Department of Culture, Arts and Leisure):
The CIPFA report refers to a “finance specialist”. A finance specialist is a person who is highly skilled or knowledgeable in finance, and that skill and knowledge is acquired through experience, training and, in some cases, formal qualifications. A finance specialist covers a wide range of areas that span beyond the traditional role of finance, including expertise in accounting, budgeting and governance, which is the way in which an organisation is managed and controlled.
The Deputy Chairperson:
I understand that, Deborah. The document says that the unit will be headed up by a qualified —
Ms Brown:
Yes; I am going to cover that now.
The Deputy Chairperson:
We are essentially asking what the qualifications are.
Ms Brown:
The DCAL finance and governance unit has seven qualified accountants, including myself. Four of those are members of the Institute of Chartered Accountants in Ireland, two are members of the Chartered Institute of Management Accountants, and one is a member of the Association of Certified Chartered Accountants.
There are also six part-qualified accountants, four of whom are members of the Institute of Accounting Technicians in Ireland. Four of those six part-qualified accountants are currently continuing their professional qualifications — two in the Chartered Institute of Public Finance and Accountancy, one in the Chartered Institute of Management Accountants, and one in the Association of Certified Chartered Accountants. In addition, two members of staff in that team have finance experience.
The finance branch is headed by a qualified accountant who oversees the accounts function, which has six staff, and manages the budget function, which has four members of staff and one vacancy at present. That accounts function is responsible for the preparation of the monthly management accounts, the nine-month interim accounts and the annual accounts. It is also responsible for managing the transition to the international financial reporting standards and for the Department’s migration to Account Northern Ireland, the new NICS-wide accounting system.
The budget function is responsible for managing the Department’s budgets, including the arm’s-length bodies. That involves monthly forecasting, preparation of the estimates, feeding into the quarterly monitoring rounds and managing the overall budget process across the Department and its arm’s-length bodies. The annual budget is £110 million of resource and £65 million of capital.
There is also a capital programme manager who co-ordinates the management of the capital budget across the Department and its arm’s-length bodies. That individual reports to the capital programme board every two months. The governance unit is headed up by a qualified accountant and supported by a deputy principal qualified accountant. However, we hope to centralise some of that unit’s sponsorship functions, and, at this stage, we are primarily focusing on the drawdown of funds by our arm’s-length bodies.
All of those functions provide support and guidance to our sponsor teams across the Department on all of the sponsorship arrangements. Finance and governance reports are discussed at the finance committee, the departmental board and at the quarterly audit and risk committee. There is a fully qualified accountant in the Public Record Office of Northern Ireland, and that person is a member of the Institute of Chartered Accountants in Ireland. There is also a unit that looks after business planning, risk management and public appointments.
The Deputy Chairperson:
In essence, you have a considerable number of professional people in place. Are most of them grade 5?
Ms Brown:
No. I am the only grade 5. There are two grade 7 accountants; three deputy principal accountants; one staff officer accountant; and four EO1s.
The Deputy Chairperson:
Therefore, their qualifications are not commensurate with their grades?
Ms Brown:
They are. The EO1s are trainee accountants; the staff officer, the deputy principal, the grade 7s and the grade 5 are qualified accountants with varying experience.
The Deputy Chairperson:
That is quite a list.
Is Hansard recording these proceedings? It is. It will be useful to have a record of that list.
It is good to hear that that level of professionalism is available. Is that level also to be found in the arm’s-length bodies? Do those organisations have similar numbers of professionals in place?
Ms Brown:
There are varying degrees of professionalism. Some of the arm’s-length bodies have qualified accountants, some do not. I do not have details here, but I could get that information, if required.
The Deputy Chairperson:
It would be helpful if you could tell us which organisations on the list of bodies that we deal with have professional accountants. We have seen things go a bit astray in a body that we are not here to talk about. We would like you to supply that information.
Mr McCarthy:
My question follows from Dominic’s. The Department has stated that none of the departmental board members sit on the boards of any of the Department’s arm’s-length bodies. Why has DCAL made that choice when the option to have them sitting on those boards is available? I refer you to recommendation 3 of the Public Accounts Committee’s report.
Ms Caldwell:
I can outline the DFP guidance. The Public Accounts Committee’s report recommended attendance at board meetings. However, the DFP guidance on this topic that was issued in 2005 — although it did not explicitly prevent a departmental representative from attending, either as an observer or a board member — strongly advised against it.
That was a result of some issues that arose with arm’s-length bodies in the Department of Enterprise, Trade and Investment (DETI), where the attendance of departmental officials had almost blurred the lines of responsibility. Over-reliance was placed on the departmental officials, though responsibility for ensuring that the body was run appropriately lay with board members.
DFP has taken account of the Public Accounts Committee’s recommendation. In response to that Committee’s report, it has undertaken to carry out a review of the guidance. Nothing definitive has been issued on that as yet, but, like DCAL, some other Departments are considering board attendance on a risk-based approach, where appropriate. However, there are issues in ensuring that, if a departmental official is attending, the board and the official are well aware of their respective roles.
Mr McCarthy:
You are waiting on DFP’s response to the report?
Ms Caldwell:
As part of the arm’s-length bodies review team, I will report to my Grade 3, David Thomson, and, among other things, we will consider DFP’s guidance and whether there is a need to review it.
Mr McCarthy:
Have you any idea when that information will be to hand?
Ms Caldwell:
I am not sure of the timescale, although we should take an initial view within the next couple of months. Certainly, we will be interested to hear about DCAL’s experiences of having officials attend arm’s-length bodies’ board meetings. We will take account of that when we formulate our opinion.
Mr McCarthy:
OK. Thank you.
Mr K Robinson:
If an official attends one of those meetings, is that person there as an observer — simply to take notes — or does he or she have any authority to intervene if, on the day, he or she sees something that causes concern?
Mr Sweeney:
The official would be there strictly in an observer’s capacity.
Lord Browne:
It is mandatory that board members of arm’s-length bodies receive training on their roles and responsibilities in line with the management statement and financial memorandum. I believe that that training should be completed within six months. Yet, despite that requirement, two of Sport Northern Ireland’s board members have received no training. Do you consider that to be acceptable? Should it not be a condition of appointment that if someone has not attended specified training within a given period, he or she should automatically step down? Is it acceptable that members who have received no training whatsoever continue to sit on those bodies?
Mr Sweeney:
I will ask Gavin to talk you through the training arrangements for arm’s-length bodies. After the situation with the Northern Ireland Events Company, we made it very clear that, when the Minister appoints someone to an arm’s-length body, training within six months is mandatory, unless that board member can give a good reason why he or she does not need to undertake training. A good reason would be, perhaps, that he or she was a member of another board in another Department and had recently undertaken training. If we had evidence that that was the case, I believe that we would not be required to demand that that person undertake what, essentially, might be the same training.
Gavin, can you give the Committee a sense of how many of the 77 members for whom we are responsible have undertaken training? We can get on to the specifics of Sport Northern Ireland.
Mr Gavin Patrick (Department of Culture, Arts and Leisure):
As we stated in our submission, and as the member has noted, the training of two Sport NI board members is still outstanding. One member’s training session is scheduled to take place in June —
The Deputy Chairperson:
I am sorry to interrupt you. Before you go into those details, I remind you that the member asked a specific question. There may be reasons why the two members of Sport NI to whom Lord Browne referred have not received training. What are they?
Mr Patrick:
Specific dates are set for training.
The Deputy Chairperson:
I am talking about the two Sport NI members in particular.
Mr Patrick:
Certainly. The reason that has been given for those two members is that they have been unavailable on the dates that were set for CIPFA board training, which is the training that most board members take.
The Deputy Chairperson:
How much time is left for them to undertake that training before the six-month period is exhausted?
Mr Patrick:
I will check my notes. I believe that the six months have passed. However, the board members are scheduled to undertake training on the next available date.
The Deputy Chairperson:
Therefore, you are saying that you have rules that you do not implement? You have given reasons that may apply. The permanent secretary said that, and we find that perfectly acceptable. The two members to whom Lord Browne referred do not fall into that category. They have been given six months’ leeway to fall in. They have not found that suitable. Now, you have given them an extension on the six months. Perhaps Lord Browne is interested to know when they will undertake that training; will it be in another six months’ time?
Mr Patrick:
The key point is that they are due to undertake that training as soon as they possibly can on those dates. We required them to do that within six months. They were unavailable on the dates that were set by CIPFA.
The Deputy Chairperson:
I am sure that Lord Browne and the permanent secretary can appreciate that we are here to talk about sorting out problems. Already you have given compassionate leave, or whatever, to two people who have not conformed. What confidence do you think that that can bring, given that we have fallen down at almost the first hurdle?
Mr Sweeney:
Sport Northern Ireland is a case in point, and I attended its recent board meeting. To be clear, the critical mass of the members of Sport Northern Ireland has undertaken all the appropriate training. Indeed, over and above that, its audit committee has taken on training. Off the top of my head, I cannot remember the specific number of members on Sport Northern Ireland’s board, but let us assume that there are 12 to 14 members. If there are good reasons why two of that number have not undertaken training, and if I have genuinely satisfied myself that the critical mass of the membership is more than competent to discharge its responsibilities — and I have — there is a level of discretion. Some people are paid to be on bodies; some are there in a non-paid capacity. If people have said that they will undertake training, a level of discretion can come into play.
I am satisfied that Sport Northern Ireland is more than competent to discharge its responsibilities and that it has taken all reasonable steps to do so. If those two members are going to undertake training in the next round of the on-board training schedule — which happens to be in June — I do not consider that to be an unreasonable risk in the circumstances. Unlike, for example, the Northern Ireland Events Company, where training was offered to the board of directors, a very competent cadre of people, many of whom came from the private sector. At that time, in 2005, they indicated that they did not believe that training was required because of their own broad experience and their membership of various other public bodies.
Lord Browne:
If people undertake membership of a board, six months seems a very reasonable period in which to undertake the training. As I suggested, if members cannot undertake the training that is offered to them within six months, they should step down.
The Deputy Chairperson:
Members might share your opinion that that is a reasonable view to take. Perhaps, Paul, you will give us an update when those two members comply.
Ms Caldwell:
I want to highlight some of the work that Gavin and I, and the governance support unit, will be looking at in that area. As Paul mentioned, the sponsor branches have been working individually. Part of the governance support unit’s role is to draw together issues, such as this, in which there are inconsistencies. We want to identify a system to ensure that board members undergo the training when they are appointed. If we deal collectively with all the arm’s-length bodies we might identify a pool of people, and can liaise with the Chief Executives’ Forum, or with the CIPFA provider, to ensure that courses are run on a more timely basis when a critical mass of participants has been established. As part of the arm’s-length bodies review team, we are looking to take a more NICS-wide approach — not just within DCAL — to that issue, rather than the individual sponsor branches or Departments arranging one-off training events.
The Deputy Chairperson:
I do not think that anybody is criticising the effort that has been put in; in fact, we are probably encouraged by it. We are making the point that, at the first hurdle, you have made allowances, which seem to go against the recommendations. Lord Browne has made his position very clear, and it is one that I share: if those people do not or cannot comply within a reasonable six-month period, their position on the board should be considered by the Department and by the body itself. It is one of those things that a Committee would pick up on, and this Committee has picked up on it.
Nobody is criticising what you have been doing. However, here you are at the first hurdle, and what does appear to be the case is that you have no penalties, there are no red cards here. You cannot say “no, hang on a second” so you just say that you will rearrange it, and that would concern the Committee.
Mr P Ramsey:
Paul, you and your team are all very welcome. Just following on from Wallace’s questions, I would have thought that mandatory training should have taken place before any public appointments are now made. Is that going to happen, because one thought that it would be appropriate for that to happen? Alison talked about appropriate governance. I would have thought that it would be best governance to have such training in place. Paul talked about achieving standards of excellence.
That reminds me of when we talked about the Department’s level of capacity, which Deborah went to some length to explain. Yet, a major feeling that emerged in our previous discussions on the Events Company was that the so-called approved accounts that went through were not approved at all. The accounts went through to someone who was not qualified to accept them on behalf of the Department. What is the training, and what is the quality of training, that takes place for Department staff who oversee arm’s-length bodies? What is the end product? What does someone get from participating in that training? Who carries out the training ― is it, for example, a separate body that has tendered for the training work? Will the witnesses enlighten me on that?
Considering that the Events Company issue ― or debacle, as we sometimes call it ― occurred in September 2007, and we are now in 2009. DCAL has said that during 2009, all staff participating in overseeing the arm’s-length bodies will be trained. How many staff have been trained? How many are awaiting training?
Paul was right in saying that some people appointed to arm’s-length bodies may not be paid, but we have full-time staff members in Departments; if they have not received that training, why not? When will all staff involved in arm’s-length bodies have adequate and the most up-to-date training to deal with issues that arise from day to day?
Mr Sweeney:
The member has raised quite a number of points.
The Deputy Chairperson:
There always are where Pat is concerned.
Mr Sweeney:
Important points. In the spirit of being concise, I will respond to a few and my colleagues will be specific on others.
There is a conundrum about appointments to public bodies. What we are all desperately trying to do is to get a diversity of spread in respect of gender, community background, young people, people of different ages, people of mixed abilities, and geographical spread. If we make training mandatory in advance of appointment, that might be a deterrent to achieving other aspects that are involved in getting diverse boards.
Without getting into specifics, the Department is in the process of appointing some boards and it is disappointing that we are, at times, struggling to achieve a gender mix and a geographical spread. The idea of making training mandatory in advance of appointment gives cause for pause. Certainly, training as a condition of appointment, and to be delivered within at least six months of appointment, is not unreasonable.
We spent a lot of time at the Committee meeting of 12 February discussing the issue of the accounts. When a set of accounts came in, an officer in the Department failed to notice that the external auditors had not signed that particular page. I have to say to the Committee that I used the term that that was an oversight. We spent a lot of time looking into the forensics of that. As a result, there is now no circumstance whereby a non-qualified person would review a set of accounts coming into the Department. A qualified accountant must now review the accounts, and it must be evidenced that the qualified accountant has done so. The Department has a template against which accountants review the accounts, and they must physically sign and date that they have reviewed the accounts.
I invite Alison to talk members through some of the steps that the Department has taken on training for staff.
The Deputy Chairperson:
On the validity of what Pat said, your Department ― and we can talk about only this Department ― has come through hell in relation to work practice, best practice, values and so on. You now have those recommendations, so I take it that there is a warm welcome from you personally on adopting them. Do they indicate to you that anything else was wrong in your Department? Has your sense of professionalism caused any alarm bells to ring in your head? Could other measures be implemented in your Department that might add value to those recommendations?
Mr Sweeney:
Bear in mind that I commissioned the work, and I have already said that the CIPFA reports are excellent. In the spirit of that question, for example, David Nicholl was very frank in his criticisms of the shortcomings that he identified in the Department’s sponsorship role.
I shall focus on two elements of that role: the sponsorship branch and the finance branch. David Nicholl dwelt considerably on the disjointed relationship between those two parts of the Department, and I believe that there was nowhere near the required level of synergy between them. I used the term oversight when the sponsorship branch did not pick up that Finegan Gibson had not signed the set of accounts because, with hindsight, was it unreasonable to expect that particular officer to have picked that up, given the disjointed nature of relations between the sponsor and finance branches at that time?
David Nicholl dwelt very considerably on that point, and we have spent a lot of time considering how to achieve the required level of synergy between the sponsor and finance branches. That gave rise to the governance support unit, which is a small, specialist team in the Department that is responsible for ensuring synergy between the finance and sponsor branches.
Nicholl mentioned the complexity of the issues being dealt with by sponsor branches. I forget the exact words that he used, but he inferred that there was insufficient capacity in the sponsor branches to deal with some of the complexities that were likely to be encountered. He was very frank about that. The combination of making sure that the finance and sponsor branches are working in harmony with that synergy, with the role that the governance support unit now provides, addresses those shortcomings.
The Deputy Chairperson:
Pat, before we ask questions of Alison, are you comfortable with what you have heard so far?
Mr P Ramsey:
Yes, as long as we know that existing DCAL staff have now been trained, when they will be trained, and whether there are delays in training. What is the rationale behind not having full-time employees trained, when those events happened in 2007?
Mr Sweeney:
I was going to ask Alison to deal with training matters.
Ms Caldwell:
I shall deal with the training of staff who are involved with the arm’s-length bodies. Through the arm’s-length bodies review team, we have been developing training at two levels.
First, an effective sponsorship course for senior staff has been rolled out, or is at least open, to the entire Northern Ireland Civil Service (NICS). We ran two events at the end of February, which were supported by the Comptroller and Auditor General and had representation and speakers from DFP, DETI, and Invest NI, which is a sponsor and a sponsored body. The events were attended by grade-5 and grade-7 level staff, and provided an opportunity for those staff to become well versed in issues surrounding governance, accountability and the sponsorship of arm’s-length bodies. In addition, the events allowed staff to share experiences and to identify best practice in that area. That course will continue to be offered to senior staff on a rolling basis, and it will form part of the centre for applied learning, which is now the NICS-wide training provider for all Departments.
Secondly, we have developed a training course with DCAL that is aimed at staff who are involved in hands-on sponsorship activities. At the end of January, we ran three events for DCAL staff who are directly involved in such activities, as well as for staff who have a role to play in the sponsorship of arm’s-length bodies from, for example, the central management unit and the internal audit department.
The training that was held for DCAL was carried out jointly between the finance branch, the governance support unit and the arm’s-length bodies review team, and was endorsed by Paul, as permanent secretary, and the deputy secretary.
The sort of issues that we covered ranged from the landscape of Government to the different forms of delivery for Government services, such as Departments, agencies and arm’s-length bodies. We also covered governance and accountability principles of regularity, propriety and value for money, but concentrated on the sources of assurance to which sponsor teams should be looking in order to assure themselves that arm’s-length bodies were being run appropriately. In that respect, the finance branch covered financial planning and monitoring.
We also covered the business-planning process, the role of risk management, internal audit, external audit, and culture and ethics in the organisation. Specifically for DCAL, more detailed training was provided through the governance support unit on how verification visits should be conducted, how accountability meetings should be held, and outlined the roles and responsibilities of the sponsor team in relation to sponsoring an arm’s-length body. That training was DCAL-based, but we are intending to roll that out, too, and to make it available as an NICS course.
Mr P Ramsey:
Is that the same training that is undertaken by those who are appointed members of outside bodies?
Ms Caldwell:
The training is similar in many of the principles and concepts behind it, such as the governance and accountability principles of regularity, value for money and risk management. The training that is undertaken by board members usually takes a number of forms; it can be through the National School of Government or the Chief Executives’ Forum, or through other board training. That training highlights to board members the accountability mechanisms that exist, as well as their roles and responsibilities as board members and as board chairpersons.
Mr P Ramsey:
Therefore, to go back to the original question: have all members of staff in DCAL now received that training, and does the permanent secretary have confidence that they have the competencies and capacities necessary to deal with outside bodies?
Mr Sweeney:
I have described the process in which we are involved as work in progress. I am impressed by the training that was organised in January that involved 37 members. My colleague Edgar Jardine and I opened each of those sessions in order to emphasise their importance. What has come out of that is that areas where additional specialist training will be required have been identified. I do not think that we will have to put 37 people through that specialist training, but training will have to be an ongoing process.
I am now satisfied that the Department is in a stronger position to discharge its sponsorship role than it has been for some considerable time, but there is no room for complacency, and there will not be complacency. There will be a requirement to look continually at up-skilling people. The Department is small — at the moment it has 16 bodies to look after, and a new body is coming on course in the Northern Ireland Library Authority, which will conflate the boards. That, too, will bring new challenges.
The landscape changes constantly, and we need to consider whether there are areas in which specialist training is required. We must also keep an open mind to training as a process that needs to be ongoing. However, we are in a much stronger position than we have been for some time, and a good start has been made. There is good work in progress, but there is some considerable way to go yet.
Mr K Robinson:
I have a quick question that perhaps Alison could answer. You said that verification visits should be conducted — could you give me a pen portrait of what such a visit would consist? What will it look like? What will the person involved do? Will it be an unannounced visit?
Ms Caldwell:
If I may pass that question to some of my finance colleagues in DCAL who developed and implemented the verification process in DCAL long before the establishment of the arm’s-length bodies review team.
Mr Patrick:
We looked at a number of areas in respect of verification visits. Those included a review of the backup documentation that the arm’s-length body should have, such as the letter of offer, and any recent financial or economic appraisals in order to ensure that delegated limits have been met. The most recent financial statements should be available, so that they can be checked and compared with those that the Department holds to ensure that everything is right, as should correspondence with other funders of the non-departmental public body (NDPB), because in many cases our arm’s-length bodies are funded by sources other than the Department. Copies of recent bank statements should also be available. The visit will also include what might be described as a mini-audit, with random sampling of invoices to ensure that there is an audit trail.
Mr K Robinson:
Therefore, the body would be aware that you were coming and that it had to be prepared to present certain documents to you.
Mr Patrick:
Yes, they are aware.
Mr K Robinson:
So, it cannot be an unannounced visit, or a spot check, as it were.
Mr Patrick:
No, it is not a spot check: that is not how verification visits are set up. It is a matter of working with the arm’s-length body. It will not know which invoice that the official carrying out the mini-audit will pick, but it will know that we are coming on a certain date.
Mr K Robinson:
What about the frequency of visits? Is it, for example, every March or every April, or are they infrequent?
Mr Patrick:
It will be based on the risk-assessment approach towards which the Department is moving. Visits will take place at least once a year. At present, we are looking to move to twice a year until the risk assessment of the arm’s-length bodies has been carried out.
The Deputy Chairperson:
You said earlier that you did not really ― and we appreciate and understand ― envisage or foresee what was happening in the Events Company. That is, basically, why we are here. Would it be fair to ask whether you are nervous about any other people with whom you are dealing?
Mr Sweeney:
Constant vigilance is required. I am not answering your question directly, but what I will say is that even if one had reached a high level of confidence in a particular body, that is not to say that that will be the case for ever and a day. This is a dynamic and changing environment. Personnel change. It would be a cause for concern if, for example, a senior auditor or a senior qualified accountant left an arm’s-length body, or a chief executive or a senior official, or if there were changes in board membership, or, particularly, if an audit committee changed. The situation has, therefore, to be constantly monitored. It is a challenging portfolio.
The Deputy Chairperson:
I accept that.
Mr Brolly:
The Committee asked for details of the level of risk assigned to each of the arm’s-length bodies. The Department has stated that a risk methodology is being developed. Does that mean that, at present, a specific level of risk has not been assigned to each and every arm’s-length body?
Mr Sweeney:
There are two aspects to the question. There is the current risk regime that operates with arm’s-length bodies, and the model towards that we are trying to move. Alison could talk about the model that we are trying to move towards, but if Deborah could begin with the risk assessment that is in place at the moment.
Ms Brown:
The Department has its risk-management framework in place, and it has a risk register that is monitored officially by the board quarterly, but looked at by each of the sponsor teams in their branches on an ongoing basis. It is the responsibility of sponsor teams to ensure that any risks associated with their arm’s-length bodies is elevated onto the departmental risk register. At present, there is no official way of assessing the risk of each individual arm’s-length body. Alison is developing that work, and that will help to inform the process. Perhaps Alison might like to give some detail about what the risk assessment will examine.
Ms Caldwell:
‘Managing Public Money Northern Ireland’ sets out the guidance for sponsoring arm’s-length bodies. It states that sponsor teams should carry out a risk assessment, but it probably does not provide much information about how that should be done. Therefore, one of the tools and one of the products that we will be delivering is a risk-assessment model, which will give sponsor teams something much more evidence-based and a methodology for assessing the level of oversight required for individual arm’s-length bodies.
We very much see that tool focusing on a number of key areas, including corporate and business planning, the arm’s-length bodies’ risk management, the processes, the board structure and the audit coverage. We also see the sponsor team and the arm’s-length bodies using that tool. However, for each of those areas there will be almost like a governance profile developed to allow the organisations to rate bodies as high, medium or low risk. The idea is that the better a body’s internal governance arrangements, the less departmental oversight will be required.
In addition to identifying a governance profile, the tool will also highlight areas of weakness, where improvements need to be made, and who is responsible for taking those actions forward. Although the methodology will be quantifiable, judgement will still need to be applied. Sometimes one’s gut feeling about an individual arm’s-length body is as important as anything else, so the question is how we build that into the process.
Certainly, we see that as being a key tool for DCAL and the other NICS Departments. One can risk-assess a body, and that will help to inform one’s judgement at that point in time, but, as Paul said, risk changes and so do people. Therefore, this will have to be an ongoing process. It will not be a case of risk-assess a body once, set it on the shelf, and do not look at it again. We will have to do this in the same way that risk management is done at present, which is to review it on an ongoing basis.
Mr Brolly:
Now that we are much more aware of risk than we might have been, that is a plus in itself.
Ms Caldwell:
Absolutely, and I believe that this tool will help to ensure that the scarce resources that Departments have are targeted at the bodies with the highest risk, which might not always be in respect of their level of expenditure; that is only one risk area.
Mr Brolly:
Of course.
The Deputy Chairperson:
Before we move to another line of questioning — which Dominic will start — I want to finalise the issue about the qualified people about whom you spoke earlier. Were those qualified people in post when the problems arose within the Events Company? Were all those qualified people in post when the issue about the Events Company came to light?
Ms Brown:
Not all those individuals would have been in post at that time.
The Deputy Chairperson:
How many were in post?
Mr Sweeney:
Perhaps we should double check the numbers, rather than speculate now.
The Deputy Chairperson:
Is it fair to say that, perhaps in response to that affair, you have now put people with those qualifications in post? I do not know what happened to the person who was under-qualified, if one may put it that way, who did not notice something that you say that a qualified person would, perhaps, have noticed. Was he in that position basically because there were no qualified people to do what he was doing? To be honest, I do not know whether that person was a he or a she.
Mr Sweeney:
Sparing Deborah’s blushes, one of the important responses was the appointment of a director of finance to the Department; prior to that we had a director of corporate services. The deliberate step to appoint a qualified director of finance was an important one, and additional qualified people have been brought into the Department. However, the key point is that the officer who failed to notice that the set of accounts had not been signed by the external auditor was based in the sponsorship branch.
The key shortcoming that David Nicholl draws out is the disjointedness between the role of the finance branch and that of the sponsorship branch. Undue delegation was given to the sponsorship branch at that stage, when there should have been greater involvement by the finance branch in looking at the accounts. That is why an unqualified officer would not now assess a set of accounts that came into the Department. As I said earlier, it is now a requirement for arm’s-length bodies’ accounts to be reviewed by a qualified accountant and evidenced as such so that they can be audited.
The Deputy Chairperson:
I cannot help but think that we have learnt a £1 million-plus lesson and that the Events Company has done us a favour. If this had not happened, there would be people in a position who might fail to notice problems because they were not qualified. You have remedied that, you tell us, by appointing qualified people. It is difficult to comprehend that, but the manner in which you and your Department are responding to the matter is fair. That is clear, and the Committee is grateful for that.
Like some other members, I am from a commercial background, and I do not know how the hell you would have survived in that background with being able to put things right all of a sudden by appointing people and forgetting about — well, not forgetting about the £1 million. We must be absolutely sure that the fault lines have been repaired as best as possible, and that the likelihood of a similar situation arising is minimal and that any escape hatches have been closed. Therefore, it is important for the Committee to know how many of those qualified board members that you have detailed to us are now in post only as a result of the report. Will you outline those figures for us?
Mr Sweeney:
Importantly, although quite a number of them would have been in post at the time of the Events Company affair, the issue that Nicholl clearly draws out is that their deployment in the sponsorship role was not as proactive as it could have been.
The Deputy Chairperson:
I appreciate that. However, given that you had so many qualified people, it is difficult to understand — and members express the same opinion — how an unqualified person was put in a position to make a qualified judgement, which they failed to do.
Mr Sweeney:
Just to move on, let us always dwell on the fact that that set of accounts that came in to the Department — and I am choosing my words carefully — we know were doctored. The company inspectorate might, perhaps, shed more light on that matter.
The Deputy Chairperson:
There is a long way to go to get to that stage. I hear what you say about the accounts being doctored. That is one of the few times that we want to hear that word used, because it does not sit well on anyone’s shoulders, but we have to await the outcome of that. We will now move on.
Mr D Bradley:
Part 2 of the CIPFA report recommends that the Department undertakes a skills audit across the boards of arm’s-length bodies. The Department has, apparently, said that that has not happened. Why has that recommendation been ignored?
Mr Sweeney:
Just to be clear: no aspect of the CIPFA report will be ignored.
Mr D Bradley:
Then why has it not been implemented?
Mr Sweeney:
It is a work in progress and that will take time. I have not deluded members that there is a quick-fix solution. I do not live comfortably with the idea that aspects of the CIPFA report will be ignored. I will ask Gavin to outline the skills profile of our board membership.
Mr Patrick:
That recommendation has certainly not been ignored, and my unit and Alison’s team are working together on that matter. We plan to develop the board skills and experience assessment process this side of the summer before the arm’s-length bodies move on from DCAL. That will address the recommendations in the report.
Ms Caldwell:
We have spoken to colleagues in Scotland and DCMS in some of our benchmarking work. They have developed a system to identify a board’s skills, so that skills in HR, law, finance and so on can be supplemented when new board members are appointed. It can then be decided, for example, whether a qualified accountant or someone with a lot of financial experience needs to be appointed. Carrying out a skills audit ahead of any appointment process makes it easier to ensure that the board’s requisite skills are balanced.
Mr D Bradley:
The board of the Armagh Observatory and Planetarium, which is an arm’s-length body, has not met for almost a year; it last met on 13 March 2008. The observatory and planetarium had funding difficulties last year, but I am not suggesting that those funding difficulties were a result of any type of malpractice. However, how can the chair of that board be sure that the chief executive and his officers are fulfilling their functions properly if meetings are so infrequent? If I was in that position, I would want to know what was happening with the arm’s-length body more regularly. At the end of the day, the chair of the board will bear a significant degree of responsibility if anything goes wrong.
Mr Sweeney:
Armagh Observatory and Planetarium is a very interesting case in point in terms of —
Mr D Bradley:
Does the management statement and financial memorandum not set out the number of meetings that there has been? If so, how frequent are those meetings?
Mr Sweeney:
I was going to make the point that that body is a combination of the board, which meets very infrequently, and the management committee, which is a mechanism that the Department has put in place and to which we make six appointments. Armagh Observatory and Planetarium is an historic body. It is something of an anomaly, and, indeed, David Nicholl stated that the Department should, perhaps, redefine its relationship with it.
However, accountability is not necessarily discharged through the board. Ultimately, the board has primary responsibility, but the management committee that we have put in place is also involved. Some of those six recent appointments —
Mr D Bradley:
How frequently does the management committee meet?
Ms Brown:
It meets four times a year.
Mr Sweeney:
Those four meetings occur over and above the board meetings, which take place approximately once a year. David Nicholl dwells on the fact that Armagh Observatory and Planetarium is a unique and historic organisation. Arguably, it does not fall into the category of typical non-departmental public bodies. However, the management committee — to which we make six appointments — gives it a degree of accountability that an annual board meeting simply could not.
Mr D Bradley:
What is the board’s role if it does not exercise accountability? Is there any point in having a board?
Mr Sweeney:
I need to check the details, and I could bore members to death on this matter. However, part of the board —
Mr D Bradley:
Will you provide those details in writing?
Mr Sweeney:
I am happy to do that, because it is a unique relationship.
The Deputy Chairperson:
Have they all been trained?
Mr Sweeney:
The new members were appointed fairly recently.
The Deputy Chairperson:
Were they appointed within the past six months?
Mr Sweeney:
Yes, I think that they were.
The Deputy Chairperson:
How much of their six-month period has passed?
Mr Sweeney:
We will need to double check that.
Mr D Bradley:
What is the nature of the relationship between the management committee and the board? How is accountability shared, and how does each group bear responsibility?
Mr Sweeney:
The member has asked that we provide that information in writing. Last week, the deputy secretary attended the management committee as an observer, as part of the officials’ role to attend meetings.
Mr Patrick:
The members were appointed in November 2008.
The Deputy Chairperson:
How many of them have been trained?
Mr Patrick:
They have not yet received their training.
The Deputy Chairperson:
At the risk of repeating a question that I asked earlier, what are you doing about that?
Mr Patrick:
They are scheduled to receive training. As Alison mentioned, with the training that the review team will roll out, we will also be able to train —
The Deputy Chairperson:
Maybe you would be kind enough to keep us updated on the training. That is only two instances out of two that we have pointed out and on which we need information.
Mr McCausland:
On page four of the CIPFA report, there is a sentence that relates to knowledge and expertise about the business areas of the various bodies. It states:
“There is a general lack of knowledge and expertise within DCAL of ALB business areas. This means that DCAL lacks the capability to add value to, or challenge the Corporate Plans of its ALBs.”
On page 19, there is a slightly longer paragraph that states:
“This was highlighted by Chief Executives in the ALBs as a major problem. This weakness is most evident when it comes to developing robust policies in respect of museums, sport, events and the arts.”
The nature of the Civil Service means that people get shifted, perhaps, from waterways to opera and then to road management. No single person will have expertise in every area.
The Deputy Chairperson:
Are waterways and road management not the same thing these days? [Laughter.]
Mr McCausland:
They could be, if you are referring to the Westlink underpass. [Laughter.]
How can that matter be addressed? It is not just an issue for the arm’s-length bodies. It could also be an issue for people who have an interest in a particular sector and are perhaps relating to civil servants who have only just started their job. It will take those civil servants a while to become acclimatised and informed about that area.
Mr Sweeney:
That is a very insightful observation. Earlier, we referred to a study in which a person met the arm’s-length bodies and asked them for their opinions of DCAL. One of the big criticisms was that DCAL was trying to micromanage the bodies. Bodies, such as the Arts Council, Sport Northern Ireland and National Museums Northern Ireland, pre-date the Department — in some instances, by decades. Those bodies have a tremendous corpus of institutional memory banks, and they have a great deal of expertise.
In many areas — particularly in relation to detailed policy areas — for the reasons that Nelson stated, those bodies have to be ahead of the Department. That is one of the conundrums: how should the sponsorship role be discharged? We are putting a considerable amount of resource into governance and accountability, but are we becoming classic bean counters?
How much effort do we put into the vision of where the arts, sport or indigenous languages might go in relation to the Department’s policy competency? Day and daily, I struggle with issues of where to proportionately put resources. When the arm’s-length bodies have a great deal more experience than the Department, we show great respect to those bodies. The trick is to acknowledge that expertise, to get behind it, to support it and to hold it accountable.
I agree entirely with the member in that regard. The Committee has seen evidence of that in relation to the way in which it undertook the museums policy review process.
Mr McCausland:
When people are brought in to work in a certain area, is there a way, as part of the recruitment process, to ensure that they have knowledge of that area? I find it difficult to understand how someone can begin to work in a certain area when it will perhaps take them a year, but certainly six months, before they are really on top of the issues and get a grasp of them.
Mr Sweeney:
I remain open-minded as regards the idea of exchanges. On 29 January 2009, we brought together the chief executives and the chairpersons of all of the arm’s-length bodies — including the North/South bodies, but excluding the education and library boards. We made the point that they were well ahead of us as regards policy development in a whole range of areas. We asked what we needed to do to make sure that the Department and the arm’s-length bodies add value to the relationship.
DCMS in Whitehall has a model called the strategic partnership forum where the chief executives of the arm’s-length bodies meet with senior officials from the Department twice a year to address the sorts of questions that you are talking about. Our chief executives, chairpersons, and senior officials from the Department will meet in June, specifically to discuss moving toward that model. Within that model there would be a strategic partnership forum, where issues of policy and governance could be addressed at a strategic level and in partnership between the Department and the arm’s-length bodies. I am sorry for using clichés, but that will create synergy and add greater added value to the process. In a very small Department, I am finding it difficult to spread the resources in a way that gives me the full level of competencies.
The Deputy Chairperson:
That was a very interesting point that Nelson raised, as was your answer. It appears to me that perhaps we will have to come back to this, as it deserves more time. Members are indicating that it is getting to close to lunchtime and that they have to go. Do members agree that we will come back to the issue of relationships?
We are confronted with the arrogance of the Department, and we are then confronted with the arrogance of, for example, the Arts Council. We are never too sure who is who or who is in charge. We think that the Department should be in charge. You were developing a very interesting line of conversation, Mr Sweeney. Do you agree that we should come back to this? Does the Committee agree that we should find time in our heavy work schedule for Mr Sweeney to do that?
Mr McCarthy:
I was going to ask a question, but you have answered it. However, you said that they were well ahead, can you elaborate on that?
Mr Sweeney:
I would like to say that the Department’s officials discharge their responsibilities to the Committee with decorum and professionalism. If there was ever any arrogance in our approach, that was never our intent.
The Deputy Chairperson:
My interpretation of arrogance is that, naturally, we do not think that you like coming in front of the Committee.
Mr P Ramsey:
He is speaking for himself, not for all of us.
Mr Sweeney:
Nothing brings greater joy to my life than the prospect of attending the Committee. [Laughter.]
In all sincerity, the Committee’s review is to be highly complimented. The Committee is going to select — it may already have done so — at least one case study. I think that that will be a wonderful opportunity to tell unashamedly the arm’s-length bodies what you have heard from the Department and to ask them what the reality is. If it still meets with your approval, I will be part of that meeting in March.
The real trick is making sure that the Department does not end up constantly second guessing organisations and inappropriately suppressing them. I think that a number of our bodies are excellent. The Department’s role is to get behind those bodies and empower them; if bodies are underperforming, the Department should step in. It is about getting the balance right. We must recognise the excellence that exists in some of our arm’s-length bodies and the fact that they have a great deal more expertise than the Department. I see that expertise as a strength.
The Deputy Chairperson:
Are members agreed that we will come back and look at that aspect?
Members indicated assent.
Mr P Ramsey:
Are we continuing with our questioning?
The Deputy Chairperson:
Yes.
Mr P Ramsey:
We have difficult meetings, but I do not think that the Department or the Arts Council have been arrogant.
Previously, the Committee asked about bank accounts belonging to the arm’s-length bodies. At that time, no significant or serious concerns had arisen that would result in any of those bank accounts being closed. Is that still the case?
Mr Sweeney:
That is a sore point; as we now know, the Department was not aware of all the bank accounts belonging to the Northern Ireland Events Company. In the light of that, we undertook a review of all the arm’s-length bodies’ bank accounts. Perhaps Gavin could say a few words about that.
Mr Patrick:
The Department carried out a review of the arm’s-length bodies’ bank accounts and made a list of them. At the end of January, Deborah sent out a memo, instructing our arm’s-length bodies to move to the Northern Bank — which has a NICS-wide banking arrangement — and to move to one bank account, unless there was a clear business reason not to do so. That process is ongoing, because some of the bodies have contracts with banks that they cannot cease immediately. The key issue with the Northern Ireland Events Company was the number of bank accounts and whether the Department was aware of them. We now have a list of those bank accounts.
Mr Brolly:
My question is about complaints that are received about arm’s-length bodies. A complaint was received about a Sport NI-funded programme, and there was also one about the Fisheries Conservancy Board. Is there a written procedure for investigating and dealing with complaints about arm’s-length bodies?
Mr Sweeney:
Yes; there is process for a member of the public to make a complaint, examples of which were seen in the case of the NI Events Company. That is the first point of call. There is a formal whistle-blowing policy in the Department for members of arm’s-length bodies and the public to draw material to its attention. Therefore, we have a formal whistle-blowing policy in place in the Department and in each of our arm’s-length bodies.
Mr Brolly:
How does that work?
Ms Caldwell:
DFP developed a template after comments were made by the Public Accounts Committee, which judged whistle-blowing to be a very important mechanism that Departments could use as an early warning for when things might not be going right.
We worked with Public Concern at Work to develop a template that highlights to staff and members of the public the various levels in the organisation at which concerns can be raised, starting from direct line management, going up to head of branch and right up to the permanent secretary and the Minister. The template also highlights channels outside the organisation, such as the Northern Ireland Audit Office and some of the regulatory bodies with whom it might also be appropriate to raise concerns.
The key issue for the Civil Service is that all Departments are keen to hear about concerns as soon as possible. It is important to send the message that genuine concerns will be dealt with and treated seriously. Hopefully, that will help to ensure that appropriate action is taken as soon as possible in such matters.
At the end of January, DFP ran a workshop during which that policy and an implementation pack were issued to Departments. Departments are now working with their arm’s-length bodies in the same way as DCAL to ensure that those arrangements are in place and that they are widely available and publicised.
Lord Browne:
It is slightly disturbing that only education and library boards have achieved substantial compliance with Government internal audit standards. One can understand that, because education and library boards have a turnover of over £300 million, yet some of the smaller arm’s-length bodies may have financial difficulties.
The CIPFA review suggested that substantial compliance could be achieved through meetings between the permanent secretary and the chief executives of the arm’s-length bodies. Surely, we need to go a bit further than just having meetings between the Department and the chief executives. Have you had any such meetings? When do you intend to have them? I would like to see action, rather than meetings. Do you think that your strategy can address the problem that some smaller arm’s-length bodies experience with internal auditing?
Mr Sweeney:
Yes, and I would like to think that the Department deserves some credit. Due to the internal audit weakness in the NI Events Company, one of the first things that we did was to instigate an independent audit of the audit arrangements in all the arm’s-length bodies. It is not surprising that education and library boards come out strong — with turnovers of £300 million a year, they can put in place very robust governance architecture.
In contrast, the Northern Ireland Museums Council, for example, has an annual turnover of £300,000. However, the same 10 standards were used to assess all the arm’s-length bodies. A degree of proportionality is, therefore, required.
There is some good news. The overall finding was of some compliance, but also significant non-compliance, with the 10 standards. As a result of that, I met each of the chief executives to discuss performance against each of the 10 standards. The arm’s-length bodies have already been able to take some steps that have enabled them to achieve a higher level of compliance, and where that is not the case, they are taking steps towards doing so. In a way, the independent audit has, perversely, been most helpful; it has brought genuine discipline to the way in which the Department assesses the internal audit arrangements of an arm’s-length body.
The Department will revisit the process regularly — at least every five years. We now have an important benchmark against which we can strive continuously to improve the internal audit arrangements of our arm’s-length bodies. Even my meetings with each of the chief executives were important. It is significant when the chief executive and permanent secretary meet to go through the template in great detail and, as a result, each arm’s-length body sends the Department an action plan. Those meetings took place in January, and I have not yet received all the action plans. However, we view the exercise extremely positively. Although it discovered shortcomings, it also identified the actions that must be taken to address them.
Lord Browne:
I am pleased that action has been taken, and I would like that to be developed and to see evidence of improvements being made. I fully accept that it is difficult for some of the smaller bodies to match the performance of an education and library board, but I am glad that a process has now been adopted.
The Deputy Chairperson:
Mr Sweeney, I thank you and your team. Your contribution has been most useful to the Committee. We look forward to seeing you again in the near future.