Auditors have discovered irregularities in the accounts of five Stormont departments, including salary hikes which were awarded without proper approval, it has emerged.
The concerns are flagged up in a new report by the Audit Office, which raises concerns over a growing number of cases where bodies have failed to follow the correct procedures.
In some instances, millions of pounds were spent without the approval of finance officials.
Today’s report reveals how five out of 19 departmental resource accounts received qualified audit opinions.
When qualifications arise, it can indicate a weakness in financial control that can compromise the ability of departments to provide sound accountability to the Assembly.
The key issues raised in the report include:
- Health trusts and education boards are failing to pay half their bills on time.
- £1.1m paid to staff at five education boards relating to work for which fees weren’t legally required.
- A controversial land deal which saw a site bought for £9.7m by a housing association — on the same day it was sold for £6.5m.
- £400,000 spent by Ilex on projects without proper approval.
- Stormont’s top department, OFMDFM, spent £1.6m on the Maze/Long Kesh project despite approval being rescinded.
- Benefit fraud and error costing almost £54m, with customer fraud soaring by 45% to £22m in 2011.
Auditor General Kieran Donnelly said that while standards of financial reporting continue to remain high, in more and more cases the rules are being bypassed.
In the past two years Mr Donnelly said there had been an increasing failure to comply with instructions from governing authorities, including not obtaining Department of Finance and Personnel (DFP) expenditure approvals.
“In particular, a number of audited bodies have taken decisions to award salary increases without the appropriate approvals from DFP or their sponsoring department,” he said. The departments whose accounts were qualified were OFMDFM; Education; Social Development; Culture, Arts and Leisure and Agriculture.
In terms of DSD, Mr Donnelly said he had “significant concerns” over governance arrangements within the Housing Association sector.
It included the controversial sale of a site at Great George’s Street in Belfast. The owner sold it to a third party — understood to be a property group in the Isle of Man — for £6.5m and he then immediately flipped it to Helm Housing Association for £9.7m.
The report also reviews the prompt payment performance of a range of public sector bodies though highlights the need for improvement. Departments are increasingly meeting the 10-day prompt payment target.
Although social care trusts’ performance improved by 7%, they are still significantly behind central Government departments.
Mr Donnelly concluded: “Although prompt payment performance has improved, there are still areas where performance is far from satisfactory.”
Office of First Minister & Deputy First Minister
The audit opinion on the department’s accounts was qualified on two matters, including expenditure of £1,566,090 which was incurred on phase II of the Maze/Long Kesh remediation project for which approval was rescinded.
The second matter related to expenditure of £4,593,260 on the Ebrington Parade Ground project, managed by Ilex on behalf of OFMDFM, where there was a change in the scope of the project which did not receive Department of Finance and Personnel approval.
An Ilex overspend of £400,000 unapproved
Ilex was criticised for spending over £400,000 without approval and paying unauthorised bonuses to a former chief executive. The unapproved spending included £254,595 on activities relating to Derry’s designation as UK City of Culture. Retrospective approval was not granted. It also criticises bonus payments of £29,000 to former CEO Bill Kirk. Mr Kirk was appointed in June 2006 on a £110,000 salary and resigned in March 2009, with bonuses of £28,836. Approval was rejected.
Education and Library Boards
Accounts of the five Education and Library Boards were qualified for 2009/10 and 2010/11 as they paid honoraria — fees not legally required — to teaching and non-teaching staff totalling £1.1m across both years without proper approval from the Department of Education.
The five board accounts for 2010/11 were also qualified because a £2.8m pay increase was paid to non-teaching staff without formal approval. Approval for the increase was received from the DFP in December 2011.
Department of Agriculture
During 2011/12 the department included an amount of £12.1m in its accounts which is due to be paid to the EU in respect of financial corrections.
This amount has been included in the department’s resource accounts to make good the shortfall in EU funding and therefore represents a loss to public funds which falls outside the Assembly’s intentions in relation to the proper administration of EU funding.
The Audit Office deemed the losses were irregular as the funds had not been applied for the purposes for which they were intended.
Department of Culture, Arts & Leisure
The department’s accounts received a qualified audit opinion due to its failure to provide adequate legal ownership of certain non-current assets.
These included land and buildings worth £2.8m, along with sporting and fishing rights valued at £281,000.
Around 50 more land and building assets, and another nine sporting and fishing rights, have been identified which may belong to the department. The value of these assets is not known.
Department of Education
Incremental pay awards of £3.6m, which did not have the required approval from the Department of Finance and Personnel, were paid to non-teaching staff in arm’s-length bodies.
While approvals for the 2010/11 and 2011/12 pay remits were received from November 2011 to February 2012 inclusive, these were not retrospective. Therefore rises which were paid before these dates are considered irregular.
In another case, pay rises totalling £7.2m were awarded to teaching staff without the required approval.
Department for Social Development
Auditors found “significant levels” of fraud and error in benefit expenditure. Around £3.3bn was paid out in benefits in 2011/12, with fraud and error costing almost £54m. Customer fraud rose by 45%, costing £22.1m in 2011 — an increase of £7m from 2008.
The Audit Office said it was “particularly concerned” at high levels of estimated customer fraud for both Income Support (£4.6m in 2011) and Incapacity Benefit (£6.1m in 2011).
The report also raised concerns over housing associations, highlighted how Helm Housing Association was given an £8.1m grant to buy a site at Great George’s Street, Belfast. On the day the site was to be bought by Helm, a third party bought it for £6.5m — and immediately sold it to Helm for £9.75m. Despite a probe, no explanation was found.