Financial Auditing and Reporting 2005-2006

06 July 2007

Financial Auditing and Reporting 2005-2006

John Dowdall, the Comptroller and Auditor General for Northern Ireland and Head of the Northern Ireland Audit Office, today reported the results of financial audit work in the past twelve months.

Northern Ireland Child Support Agency

The audit of the Agency was once again qualified due to an unacceptable level of error in receipts, payments and maintenance balances.

Mr Dowdall expresses concern at the rising levels of debt in the Agency. The level of collectable debt in the Agency increased from £14 million at 31 March 2005 to £26 million at 31 March 2006. In addition there is a further £32.3 million debt due at 31 March 2006 that is deemed probably and possibly uncollectable. Mr Dowdall notes that the annual report of the Agency does not include a debt reduction target for 2006-07.

Department for Social Development

The level of losses through fraud and error in Social Security benefits in 2005-06 is estimated at over £150 million (2004-05 £143 million). This is 4 per cent of total benefit expenditure indicating a small increase from the 3.9 per cent of total benefit expenditure reported in 2004-05. The audit opinion on the 2005-06 accounts was qualified because of these concerns.

Mr Dowdall says “I remain concerned with the overall levels of fraud and error. I recognise the considerable efforts and resources committed by the Department to address fraud and error but it is my view that these levels continue to be unacceptably high and can be reduced”.

As in previous years the audit opinion was also qualified because of weaknesses in financial control and monitoring of over £69 million of expenditure on Urban Regeneration and Community Development grants.

Department of Agriculture and Rural Development

The report reveals that the Department of Agriculture and Rural Development employed the services of a contractor to dispose of clinical waste without following proper procurement procedures. A charge of £411,000 is included in the Department’s 2005-06 accounts for provision of waste disposal services by the supplier, of which 90 per cent relates to clinical waste. Mr Dowdall says that “procurement procedures such as public advertisement are an important control in the prevention of fraud and ensuring value for money. Services for clinical waste disposal had not been awarded using these procedures”. In addition, the Department was unable to provide copies of contracts for either clinical waste or general waste disposal. The report states that “the absence of a formal contract creates the risk that the terms and conditions have not been clearly defined or communicated to the contractor. This is critical in ensuring that the disposal of this waste complies with the relevant legislation”.

Education and Library Boards

The report notes that Belfast Education and Library Board has made significant progress in reducing its deficit. Although the South Eastern Education and Library Board (SEELB) has also made progress in repaying what was a significantly larger deficit it seems most unlikely that the deficit will be cleared when the Board is subsumed into the proposed new Education and Skills Authority. The Department of Education has indicated that any outstanding deficit remaining unpaid by SEELB at the date when the Education and Skills Authority becomes operational will not be written off. The Authority will therefore inherit that liability. The amount owing to the Department by SEELB was £12.3 million at 31 March 2006. This is projected to reduce to £7.9 million at 31 March 2007 and to £5.7 million by 31 March 2008.

The report also reveals that SEELB has a higher proportion of pupils with statements of special educational needs than any of the other Boards in Northern Ireland and most, if not all Local Education Authorities in England. Between 1999-2000 and 2006-07 SEELB expenditure on Special Education Provision was £204.3 million. In 2006-07 expenditure in this area accounted for 42 per cent of the Board’s central budget. Mr Dowdall says that the continued high levels of expenditure on special educational needs has meant that the Board was unable to reduce its deficit in 2005-06. In addition, the sustained level of special education provision continues to be subsidised by underspend in other areas. The report emphasises the importance of an independent annual review of a statemented childs needs to ensure that “the effectiveness of agreed remedial action is assessed and that the need for continued support is fully appraised so that it is not supplied longer than required”.

Rates Arrears

The level of rate arrears at 31 March 2006 was £48 million compared to £35 million at 31 March 2005. The most recent indication of arrears at 31 March 2007 is £95 million. Of the £48 million in arrears at 31 March 2006, approximately £33 million relates to non-domestic rates, £14 milllion to domestic rates, and surprisingly, £1 million relates to public bodies. Mr Dowdall says “the growing increase in the value of arrears and the adequacy of debt recovery procedures are a serious cause of concern”. The increasing levels of rate arrears has been exacerbated during the 2006-07 financial year primarily due to problems arising from the introduction of a new rate collection IT system.

Combined General Report on the Health Sector 2003-04 and 2004-05

The Comptroller and Auditor General has also published a General Report arising out of his audit of the accounts of 29 Health and Personal Social Services bodies for the first two years after taking over responsibility for the audit. This covers 2003-04 and 2004-05 and it will be followed up later in the year with a report arising out of subsequent audits. The report covers the performance of Health Boards, Trusts and Agencies, indicating which bodies have met the various financial targets set down by the Department of Health, Social Services and Public Safety. It notes the encouraging developments in governance in health bodies, but sets out where good governance has been compromised, for example clinical governance in Sperrin Lakeland Trust and financial management in the Central Services Agency, of which the accounts were disclaimed in both 2003-04 and 2004-05.

The C&AG also reports on developments in the investigation of fraud within the health services. All Health Board accounts were qualified in each year because of the level of fraudulent and incorrect claims by patients of exemption from having to pay prescription charges. However, the Department’s action to counter fraud has resulted in a decreasing level of fraud from this source, with losses of between £8.2 million and £10.3 million in 2004-05.

Both reports covered by this Press Release are available on the NIAO website: www.niauditoffice.gov.uk.

Notes for editors

  1. The Comptroller and Auditor General is Head of the Northern Ireland Audit Office (the Audit Office). He, and the NIAO, are totally independent of Government. He certifies the accounts of Government Departments and a range of other public sector bodies. He has statutory authority to report to the Assembly on the economy, efficiency and effectiveness with which departments and public bodies use their resources.
  2. The Comptroller and Auditor General’s report on “Financial Auditing and Reporting: 2005-06” is published as NIA 65, Session 2006-07 and is available from the Stationery Office throughout the United Kingdom. The report is embargoed until 00.01 hrs on Friday, 6 July 2007.
  3. Background briefing can be obtained from the Audit Office by contacting: Kieran Donnelly (028 9025 1107).