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Boss of defunct quango NIEC 'covered up losses with misleading records'

Published 29/09/2015

Auditor general Kieran Donnelly was scathing in his assessment of former chief executive Janice McAleese
Auditor general Kieran Donnelly was scathing in his assessment of former chief executive Janice McAleese

A chief executive of a defunct quango set up to bring headline events to Northern Ireland covered up losses with misleading and sometimes fabricated records while racking up debts of almost £1.5 million, the NI Audit Office has found.

A damning report on the final operating years of Northern Ireland Events Company (NIEC) said there was a "complete breakdown of financial control" within the publicly-funded body.

Auditor general Kieran Donnelly was scathing in his assessment of former chief executive Janice McAleese, who resigned from the company in 2007, just prior to its overseeing Stormont department stepping in to wind it up.

Mr Donnelly contrasted her actions with seven established tenets of conduct in public life - selflessness, integrity, objectivity, accountability, openness, honesty and leadership - the so-called Nolan principles.

"I am not aware of any other accounting officer failing so comprehensively to uphold the Nolan principles of conduct in public life," he said.

The NIEC was set up in 1997 as a by-product of the peace process and in its early years was instrumental in bringing star names to perform in the grounds of the Stormont Assembly, such as Elton John and Luciano Pavarotti.

But its success was short-lived and just over a decade later, having received a total of £18 million in public funds, it effectively folded amid a financial scandal. The company still exists as a shell, but only to enable the pay off of its creditors.

The Police Service of Northern Ireland (PSNI) is currently investigating what happened within the NIEC - a probe focusing on the period 2004-2006. Mr Donnelly said the police investigation was in its "final stages".

The report by the Northern Ireland Audit Office was also heavily critical of oversight failures by NIEC's board and the Department of Culture, Arts and Leisure (DCAL) to identify and prevent what happened under Ms McAleese's stewardship.

But the heaviest criticism fell on Ms McAleese, who performed the role of chief executive and accounting officer between 2003 and 2007.

"In our opinion the standard of leadership provided by Janice McAleese fell well short of what is expected from an accounting officer," said the report.

"This included conflicts of interest which were poorly handled and covering up escalating financial losses with misleading and, on occasion, fabricated documentation which was provided to the board and to DCAL."

Stormont inspectors who stepped in to examine the company's records in the wake of its demise found a deficit of almost £1.5 million - £1.3 million of which was run up overspending on events it promoted between 2005 and 2007.

The majority of the overspend (£1.1 million) was accumulated promoting five Motocross and Supermoto motorbike events during this two-year period.

The accounts of the NIEC had been outside the remit of the NI Audit Office until legislation changed in 2008.

The NIAO's hard-hitting findings into the company's time of operations include:

:: There was no evidence Ms McAleese was sufficiently qualified or had enough management experience to be given the job of chief executive.

:: In 2005 Ms McAleese oversaw a change in strategic direction that saw the company go from offering grant funding to private sector promoters to promoting its own events. Auditors said this shift, which was not formally endorsed by the board or approved by DCAL, exposed the NIEC to far greater financial risks.

:: Ms McAleese failed to declare two significant conflicts of interest. The first when NIEC awarded a contract for building a Motocross track, without documentary evidence of a competitive tender process, to a man she was in a relationship with. In all, that contractor was paid £120,000 by NIEC. She also employed a relative, through marriage, to a senior managerial role without declaring a conflict of interest.

:: Ms McAleese and another senior official, Jasper Perry, loaned thousands of pounds of their own money into the company's coffers to cover mounting cash flow problems.

:: An additional £200,000 overdraft facility was set up without the apparent knowledge of the board or DCAL.

:: The NIEC board, and in particular chairman Mervyn Elder, placed undue reliance on information provided by Ms McAleese and failed to sufficiently challenge her actions. Auditors said a lack of financial skills among board members and their low attendance at meetings contributed to this oversight shortfall.

:: The company had reached the point of technical insolvency in 2005 - but neither the board or external private sector auditors detected this.

:: DCAL officials failed to properly scrutinise information they received from NIEC and instead relied on their "complete trust" of Ms McAleese.

:: Both the board and DCAL failed to act upon concerns raised by whistleblowers working under Ms McAleese.

Mr Donnelly acknowledged that since the company's operations were halted DCAL has moved to cover the debts racked up and also improve governance structures within its other arm's length bodies.

Current Culture, Arts and Leisure Minister Caral Ni Chuilin responded to the report's publication.

"I am satisfied that subsequent improvements in governance and sponsorship arrangements which have been made are recognised in the report and I note that the report itself makes no additional recommendations," she said.

"The Assembly's Public Accounts Committee has indicated that it will consider this NIAO report by way of evidence session. It is therefore important that any comments should not pre-empt or pre-judge any evidence that might be given."

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