Belfast Telegraph

'The new RHI' - Social Investment Fund dished out millions despite conflicts of interest and shoddy records

Significant failings in Stormont social fund that doled out millions: watchdog

By Victoria Leonard

A critical report by the Northern Ireland Audit Office has slammed "significant failings" in a £93m fund set up to support projects tackling deprivation.

The report, published today by Comptroller and Auditor General Kieran Donnelly, identifies "a number of serious concerns" in the initial stages of the Social Investment Fund (SIF) - including "conflicts of interest which were not always appropriately dealt with".

It also highlights "significant failings in the governance framework" underpinning the initiative.

And it has revealed that the Executive Office "does not hold a clear audit trail in relation to the award of public funding".

Agreed by in March 2011, the multi-million-pound scheme administered by the Office of the First and Deputy First Minister (now the Executive Office) aimed to make life better for those living in targeted areas by reducing poverty, unemployment and physical deterioration.

But critics at the time described the money as a "tribal carve-up" of public money into "slush funds" for DUP and Sinn Fein pet projects.

Its original £80m budget, designed to deliver projects between 2012 and 2015, was increased to £93m in 2016 and was extended to run until 2019-20. As of March 31, 2018, SIF had spent £48m.

So far over £79m has been allocated to 68 projects.

Some 49 of these were capital projects that will make improvements to 115 buildings, and 19 were revenue projects.

A total of 31 projects have been completed.

The SIF initiative divided Northern Ireland into nine investment zones, each with a steering group of volunteers who selected the projects to be allocated funding.

In a statement the NIAO raised concerns over poor documentation in relation to project selection and prioritisation, claiming that the scheme "did not operate transparently".

While the NIAO acknowledged that governance improved once projects became established, it deemed it "critical that lessons are learnt and improvements are made when similar public spending schemes are being developed".

Mr Donnelly said: "The importance of good administration and ensuring conflicts of interest are adequately handled should be well understood in the public sector.

"But in the case of SIF, the guidance produced by the department was inadequate, there was little evidence that procedures were followed, and a number of conflicts weren't declared. This is very concerning.

"Evidence from my audit work across the public sector suggests there is a role for additional expertise to support good governance and maintain high standards.

"Whilst audit plays a valuable role in identifying lessons to be learnt once schemes are operational, issues of propriety and conflicts of interest must be fully and properly explored when schemes such as SIF are being designed."

Among the cases flagged by the NIAO report is the £1m of public money paid by SIF towards the redevelopment of a building for which another public body, the Health and Social Care Board, is now paying £90,000 in annual rent.

With rental payments due to hit £2.25m over the 25-year lease period, the report says that the funding decision "does not represent value for money".

In another case, documentation did not exist to justify the decision to award funding to a project that received £870,000.

The NIAO report says that it is "too early to conclude whether the programme is achieving value for money" and says it is "important that robust arrangements are put in place for the department to assess value for money at a programme level".

The NIAO determined that the processes used to select and prioritise projects "lacked transparency and were inconsistent".

Focusing on governance arrangements, the report highlighted that final guidance was only issued to steering groups in December 2012, when they were prioritising projects for area plans. This led to steering groups largely deciding on their own means of operation, creating "inconsistencies in decision-making".

The report said that "conflicts of interest were inevitable" due to the design of the SIF, and these were "not adequately handled". However, it said that these "should have been a key consideration" in the scheme's design.

Furthermore, it found that the guidance the department produced for steering group members on dealing with conflicts of interest was "inadequate", and revealed that it had uncovered three instances in which steering group members did not declare conflicts of interest.

The report detailed how 18 voluntary and community groups which received capital funding from a steering group had a director, trustee or employee who was a member of that group. In total, these bodies received more than £12m of SIF funding.

The department is to pay more than £6m in management fees to lead partners, who are responsible for the development, management and administration of 45 of the 68 SIF projects. However, the report highlighted that it is "not possible to confirm that value for money has been achieved" over these fees, as lead partners were appointed by steering groups without an open tender process.

It added: "Fees of this nature and magnitude should have been subject to competition."

Over £4m in management fees will be paid to 18 voluntary and community groups who have been appointed as lead partners - all of which have a representative on the steering group which appointed them.

The NIAO also revealed that it had identified one case in which there was a "potential conflict involving a departmental representative", but said it had been told by the department that its representatives were "not formal members of a steering group and had no role in decision making".

Auditors said that the department's failure to require its own staff who attended steering group meetings or who worked on SIF to declare any potential conflicts of interest was an "important omission".

Each steering group was supported by a consultant and an observer from the department. The department spent £478,000 on external consultants as part of the area planning process.

The report says that the department acknowledged that the initial three-year period in which all SIF expenditure was first intended to be incurred was "extremely ambitious".

Nearly half of SIF-funded projects are now operational and the majority have commenced, but five projects have not yet moved to delivery stage.

The area to receive the most funding out of the nine SIF zones was west Belfast, where £11.8m was awarded to seven projects. The area to receive the least was east Belfast, where £7.5m was awarded to 11 projects.

In the report, the NIAO said that "despite the extensive review and revision of economic appraisals, we have concerns around some projects and the extent to which they represent value for money".

It said there was no formal application process for the submission of projects to SIF, and expressed "concerns over the robustness and transparency of project selection and prioritisation".

And since the department did not require steering groups to submit scoring matrices alongside area plans, the report revealed that it does not hold a "clear audit trail in relation to the award of public funding".

In its recommendations, the NIAO report highlighted that the department is "ultimately accountable for the decisions taken in awarding public funding to projects".

It added that project selection decisions should be "clearly documented and the department should ensure that it holds an audit trail of the process" in order to show that assessments were applied "fairly, consistently and transparently".

They advocated that "comprehensive guidance" to deal with conflicts of interest should be included in the design of any new funding scheme.

The NIAO report added that the department had "limited experience in delivering a programme" of SIF's nature and scale, meaning staff "did not have a sufficient understanding of the complexities involved".

This led to the department underestimating the length of time and extent of work required to develop projects into robust proposals that were ready for approval.

On one occasion, a claim for £336,000 was processed twice by the department, with the amount offset against future claims rather than being recouped from the lead partner. The report said it was "concerning that the department's internal controls did not prevent duplicate payments and that the £336,000 was not recovered when the error was discovered".

The Executive Office said it accepted the NIAO report's recommendations.

It said: "The Executive Office accepts all the recommendations in the NIAO report on the Social Investment Fund, in particular those relating to documentation and management of conflicts of interest and a detailed response will be published in due course.

"The Executive Office recognises that there were shortcomings in the early stages of SIF and welcomes the acknowledgement by NIAO that once projects became established, governance improved.

"The report also identifies completed projects where outcomes to date are promising and value for money is likely to be achieved."

It said that SIF had "improved the lives of almost 24,000 participants through employment, early intervention and education initiatives" to date.

It added that 22 capital projects had been completed and a further 27 are in progress. It said: "These capital projects will deliver improvements to 115 premises, providing enhanced community facilities in the most deprived neighbourhoods across Northern Ireland."

The Social Investment Fund previously hit the headlines in 2016 in a row over an alleged UDA boss's role as a chief executive of a charity awarded a contract to manage £1.7m from the fund.

Convicted armed robber Dee Stitt, who denies being a UDA chief, faced down calls for his resignation after a newspaper interview in which he launched a foul-mouthed tirade against the Government and claimed his flute band in north Down provided "homeland security".

Stitt stood down as chief executive of Charter NI in September.

He said his decision was due to the impact on his family of "negative media attention".

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