Stormont finance chiefs 'did not understand' RHI funding as budget spiralled upwards
Stormont's Department of Finance had "a complete misunderstanding" of the funding arrangements for the Renewable Heat Incentive (RHI), it has been claimed.
A senior official yesterday told the RHI Inquiry of the moment she realised it was "red-button panic time" after hearing how the budget for the scheme had spiralled out of control.
RHI was introduced by the Executive in 2012 to encourage businesses to switch from fossil fuels to renewable heating sources.
But costs soared due to flaws in cost controls, including the fact that claimants could earn more money the more fuel they burned.
When she first appeared before the inquiry in June, senior departmental official Emer Morelli admitted that staff had taken what they were told by the Department of Trade, Enterprise and Investment (Deti) "at face value".
Ms Morelli, who was involved in RHI approvals, said that she should have done more to establish the true budgetary position.
Returning yesterday, Ms Morelli was grilled on the department's role from the middle of 2015, when it was becoming apparent that the scheme was being abused and businesses were burning fuel to take advantage of the over-generous subsidies on offer.
At this point the cost of the scheme had doubled from £11.5m to £23m.
A change to tiered cost controls was due to be introduced that autumn.
Ms Morelli said her officials were still "not entirely sure" about the scheme when a budget increase was requested by Deti.
Junior counsel Joseph Aiken asked Ms Morelli if the doubling of the budget had set "alarm bells ringing" that something improper had caused this rise.
She responded by saying there was no indication at the time that RHI was "out of financial control", but conceded that the department should have engaged more and asked questions earlier.
The inquiry heard that when asked by Deti to sign off a further business case, staff had effectively been "backed into a corner" to approve additional funding for RHI.
In September 2015 the then Enterprise Minister Jonathan Bell announced plans to cap subsidies for applicants, without finance officials having viewed the plan.
Mr Aiken suggested to Ms Morelli that things had been done the "wrong way round", adding that it seemed "very odd" for the ship to have sailed without approval.
Ms Morelli replied that the ship had "very firmly sailed" by the time the plans were brought to the department, which she described as "very unusual". She added: "There is a process there to allow people to see a business case before it becomes the real thing. Once it's in the public domain, it's hard to revoke and come back from."
Ms Morelli also referred to a meeting with Deti officials a few weeks later when she was told that the scheme was so successful the Executive was prepared to cover any overspend.
She said this left her feeling "very unsettled".
"I can't say that I came away from that meeting with a clear idea of what was happening. I couldn't make sense of the information that I was being given. It was surprise after surprise and I wasn't actively challenging back. I had lots of questions and I should have put my concerns in writing," she said.
There was a surge in applications for the scheme before the cost-cutting tariffs took effect in November. Almost 1,000 boilers were accredited between August and November.
In December 2015 Ms Morelli received a letter from Deti informing her of the spike in applications, which she said indicated that "the actual response had far exceeded expectation". The forecasted expenditure on RHI in 2015/16 was listed as over £30m, but the actual spend was almost £45m. She said her reaction to this news was "disbelief" and she realised that it was "now red-button panic time".
She also described the total unapproved expenditure over the planned 20-year lifetime of the scheme, which amounted to some £370m, as "unheard of" and "highly unusual".
When asked by the panel what lessons could be learned, Ms Morelli said there should be "greater clarity of communication, more trust and less of a 'them and us' culture" between government departments, with "all working towards the one goal".
Meanwhile, Deti's former permanent secretary Dr Andrew McCormick returns to the inquiry today for two days of questioning.