Into the West (Tyrone and Fermanagh) Ltd: Use of Agents

02 March 2006

Into the West (Tyrone and Fermanagh) Ltd: Use of Agents

The Comptroller and Auditor General for Northern Ireland, Mr John Dowdall, today published his report on ‘Into the West: Use of Agents’. The report examines shortcomings in the appointment of overseas agents and their contractual arrangements, the way they were managed and paid and how they performed. The report also looks at the circumstances surrounding a cancelled visit to Australia in September 2000.

Background

‘Into the West’ (ITW) was established in 1997 to promote local economic development as a partnership between the former Local Enterprise Development Unit (LEDU) and five local Councils – Cookstown, Dungannon, Fermanagh, Omagh and Strabane. LEDU, the International Fund for Ireland and the five Councils provided joint funding of some £1.2 million.

The Audit Office previously published a report in 2004*following a joint investigation into ITW by the Department of Enterprise, Trade and Investment and the Local Government Auditor. That review concluded that there were very poor standards of administration within ITW and an over-reliance by the Board on the LEDU Regional Manager. ITW entered voluntary liquidation in June 2004.

One of the areas of concern noted in 2004, but which had not yet been investigated, was the amount of ITW expenditure on ‘agents’. ITW operated a network of overseas agents in Australasia and North America, initially focused on encouraging ex-patriates to return home to set up businesses and latterly to establish links with overseas companies interested in investing in Northern Ireland. Agents were involved in business development visits, a major element of ITW’s work costing some £490,000. Fees and expenses paid to agents amounted to a further £277,000.

Main Findings and Recommendations

It is clear that there were serious failings in the management and control of ITW, at both a Board and an operational level and also within LEDU. The report concludes that the Board failed to exercise the level of challenge and control required, but notes that non-executive members of a Board are generally entitled to rely on a company’s executive officers to perform their duties properly. The principal executive officer within ITW was the LEDU Regional Manager – he was founding Company Secretary and played the primary role in the operation, servicing and administration of the company.

At an organisational level, LEDU failed to ensure that it had adequate contractual arrangements in place with ITW when the company was established. It did not strengthen the arrangements over time and it failed to adequately monitor and evaluate the ITW projects and activities which it was funding. In addition, it did not exercise adequate supervisory and management control over its Western Office Regional Manager, which meant that his negligence and poor practice were allowed to continue unchecked (Executive Summary, paragraphs 4 and 5).

On the standard of documentation at ITW (Part 1 of the Report)

The Audit Office encountered considerable difficulties in the course of its investigation, due to the poor standard of documentation at ITW and the former LEDU. There was a lack of formality in ITW’s operation, - policies and procedures often were not formally developed or adopted by the Board, documentation was frequently incomplete and generally disorganised and Board minutes did not provide sufficient detail on many of the issues discussed and decisions taken (paragraph 1.13).

On the appointment of agents and contractual arrangements (Part 2)

There was a marked lack of control over the identification, appointment and contracting of agents, together with a failure to conform to accepted good practice. Only 2 of the 18 agents engaged were identified through competitive means and only 4 were interviewed; the Managing Agent was appointed without competition and operated without a contract; there were only 11 contracts with agents, where the Audit Office expected around 33 and only 2 of these had been signed by both parties; and three-quarters of payments to agents were not covered by contracts (paragraphs 2.22 and 2.23).

On the management and control of agents (Part 3)

ITW’s ability to properly manage and control the activities of agents was substantially undermined by the absence of contracts for most of the time during which agents operated. Even where there were contracts, ITW failed to properly apply a control framework. The absence of performance assessment, combined with a dearth of information reported to the Board, resulted in ITW’s failure to manage its agents effectively. Control was further undermined by a system of remuneration based on retainer fees, without reference to performance (paragraph 3.17).

On payments to agents and performance (Part 4)

There was a clear lack of control over payments to agents, the vast majority being made automatically, without any assessment of performance or the fact that conditions of contract had not been fully satisfied. Generally, agent performance was poor - only two bonuses, amounting to £850, were paid in five years and little was achieved in return for the considerable sums of public funds paid out (paragraphs 4.8 and 4.13).

On a postponed visit to Australia in 2000 (Part 5)

ITW was invited to attend an event, the ‘Australian Technology Showcase’ in Sydney, coinciding with the Olympic Games in September 2000. The Audit Office found that ITW’s poor planning of the visit resulted in an avoidable loss of £15,500, caused principally by a ‘book first, recruit later’ approach.

The report also questions the relative value for money of the proposed visit - the principal purpose was to generate publicity for anticipated agreements, rather than the creation of new business. In addition, the majority of the planned participants were not industry representatives, but ITW officials and Board Members, District Council representatives and Northern Ireland local dignitaries (paragraphs 5.4 to 5.7).