Report on the Estimate of the Northern Ireland Audit Office 2013-14

Committee: Audit Committee

Session: 2012/2013

Date: Tuesday, 19 February 2013

Reference: NIA 93/11-15

ISBN: 978-0-339-60464-3

Mandate Report Number: 2011/15

Together with the Minutes of Proceedings of the Committee relating to the Report, Minutes of Evidence, and Written Submissions

Powers

1. The Audit Committee is a Standing Committee of the Northern Ireland Assembly established in accordance with paragraph 10 of Strand One of the Belfast Agreement and under Assembly Standing Order No. 58. The Committee has 5 members including a Chairperson and Deputy Chairperson and a quorum of 2.

2. The Committee has the power to:

  • Exercise the functions mentioned in Section 66(1) of the Northern Ireland Act 1998. The Committee therefore agrees in place of the Department of Finance and Personnel, the estimates of the NIAO and lays them before the Assembly; and to
  • Table a motion in respect of the salary of the Comptroller and Auditor General Northern Ireland (C & AG).

3. The Chairperson of the Audit Committee also has a lead role in the recruitment of the C & AG (NI).

Introduction

1. Article 6(2) of the Audit (Northern Ireland) Order 1987 provides for the Comptroller and Auditor General (C&AG) to prepare for each financial year an estimate of the use of resources by the Northern Ireland Audit Office (NIAO).

2. Further to Section 66 of the Northern Ireland Act 1998, and to Standing Order 58 (1), it is for the Assembly's Audit Committee (in place of the Department of Finance and Personnel (DFP)) to lay that estimate before the Assembly. The Committee may agree modifications to the estimate with the C&AG before it is laid before the Assembly.

3. There is an important constitutional principle underpinning the statutory provision for agreeing the estimate of the NIAO. When the Northern Ireland Act 1998 transferred the power to agree the NIAO's estimate with the C&AG from DFP to a committee of the Assembly, it addressed a longstanding fundamental principle of public audit which has since been expressed by the UN General Assembly:
Supreme audit institutions can accomplish their tasks objectively and effectively only if they are independent of the audited entity and protected against outside influence .

4. The Mexico Declaration on Supreme Audit Institution Independence , made by the International Organisation of Supreme Audit Institutions (INTOSAI), addressed the issue of independence in much greater detail. Principle 8 of that declaration underlined the importance of a supreme audit institution's financial independence from the Executive:
Supreme audit institutions should have available necessary and reasonable human, material and monetary resources – the Executive should not control or direct access to these resources.

5. The C&AG is responsible for:
• authorising the issue of money from the Northern Ireland Consolidated Fund to enable Northern Ireland departments to meet their necessary expenditure, and ensuring that there are adequate arrangements for the collection of revenue; and
• the external audit of central government bodies in Northern Ireland, including Northern Ireland departments and their executive agencies and a wide range of other public sector bodies, including executive non-departmental public bodies and health and personal social service bodies.


6. The C&AG undertakes financial audit and value for money audit and the results of this work are reported to the Northern Ireland Assembly. The NIAO supports the C&AG in fulfilling these responsibilities. The C&AG and the NIAO must therefore be wholly independent of the Executive in order to ensure that the Assembly is provided with an effective and truly independent audit assurance in relation to the use of public funds. It would compromise the NIAO's independence if the Executive was to control or direct its access to resources.

Annual process for agreeing the estimate

7. Each year the C&AG prepares an estimate of the use of resources by the NIAO for the next financial year. The Audit Committee considers this estimate and, subject to any modifications agreed between it and the C&AG, lays the estimate before the Assembly. In carrying out this function the Committee has regard to the advice of the Assembly's Public Accounts Committee (PAC) and DFP.

8. In advance of considering the annual estimate, the Audit Committee meets to consider a draft corporate plan for the NIAO. The draft plan is prepared by the C&AG and it sets out the NIAO's key strategic aims for the next three year period; how the NIAO propose to deliver these aims; the resources that are required by the NIAO to do so; and their key performance measures.

9. The draft corporate plan is an important document for the Audit Committee as it provides the necessary background and context to enable the estimate to be agreed subsequently. Given the significance of the corporate plan, the Audit Committee also seeks the views of both the PAC and DFP in relation to it.

Current Financial Context

10. During 2010-11, prior to the Audit Committee's consideration of either the draft corporate plan or the annual estimate for the following year, it was apparent that the level of expenditure available to fund public services in Northern Ireland over the four year budget period would be reduced. The Audit Committee noted the significant reduction in the level of funding available from within the Northern Ireland Executive's Departmental Expenditure Limit over the budget period and concluded that it was important that the NIAO should make a significant contribution to reducing its own expenditure over this period. It was the Committee's view that this was important not only to reduce costs to the public purse, but also to demonstrate that the NIAO was willing and ready to bear its fair share of the savings that need to be made.

11. The Committee also agreed, however, that while it was important that the maximum level of practicable savings should be made it was just as important to ensure that the NIAO had the resources necessary in order to carry out its role effectively. In fact, the role of the NIAO is even more important in the current financial climate. The Audit Committee therefore confirmed that it would not agree a reduction in the funding for the NIAO that would prevent it from fully carrying out its crucial role.

12. The Audit Committee met on 9 December 2010 and received a presentation from the C&AG on the issue of efficiency savings that could be made by the NIAO over the budget period. This presentation set out how the NIAO intended to build on efficiencies already made by, inter alia, reducing significantly its outsourcing requirements, reducing recruitment and implementing a two year pay freeze.

13. The Committee considered carefully the proposed savings that the C&AG outlined. The Committee also gave consideration to the overall reduction to the Northern Ireland Executive's Departmental Expenditure Limit and to the planned reductions to the budgets of other audit bodies in the UK. Having considered all of this, the Audit Committee agreed that it would expect to see the NIAO reduce its requirement by at least 10% in cash terms by 2014-15 from its 2010-11 net resource requirement of £9,397,000.

14. The Audit Committee subsequently agreed an annual estimate for the use resources by the NIAO during 2011-12 which represented a decrease in cash terms of 9% from the estimate the previous year. The Committee then agreed for 2012-13 a reduction of 1.5% in the net resource requirement from the 2011-12 provision.

The estimate for 2013-14

15. The C&AG prepared a draft corporate plan for the period 2013-14 to 2015-16 and presented this plan to the Audit Committee at its meeting on 4 December 2012. The plan set out the NIAO's key strategic aims along with the activities and associated targets that will be used to measure performance.

16. The plan also set out the resources that would be required by the NIAO over this period and how those resources would be used. These details are set out in the tables below:

Proposed Resource Requirement:

 

Plan Period

 

2010-11
Main
Estimate*
£’000

2011-12
Main
Estimate
£’000

2012-13
Main
Estimate
£’000

2013-14
Forecast
£’000

2014-15
Forecast
£’000

2015-16
Forecast
£’000

Net Resource Requirement

9,397

8,542

8,414

8,327

8,248

8,654

Increase/ (Decrease) in cash terms

 

-9.1

-1.5%

-1.0%

-0.9%

4.9%

GDP deflator

 

-2.34

-2.7

-2.5

-2.5

-2.5

Increase/ (Decrease) in real terms

 

-11.2

-4.1

-3.4

-3.4

2.4

* This amount is based on the NIAO's 2010-11 Main Estimate (that is, before the 2010-11 Spring Supplementary Estimate). In order to aid comparability the figure has been amended to include £388,000 of budget which was transferred from the National Audit Office in respect of the financial audit of policing and justice bodies, effective from 2011-12.

Proposed Use of Resources:

 

2012-13
Estimate
£’000

2013-14
Forecast
£’000

2014-15
Forecast
£’000

2015-16
Forecast
£,000

Staff

7,525

7,511

7,584

7,736

Staff (temporary)

97

90

90

90

Consultancy

60

45

45

45

Contracted out audit

1,377

1,317

1,272

1,272

General expenditure

1,814

1,484

1,695

1,569

Gross resource requirement

10,873

10,477

10,686

10,712

Income

(2,459)

(2,120)

(2,483)

(2,058)

Net resource requirement

8,414

8,327

8,248

8,654

17. The Audit Committee considered the draft corporate plan and questioned the C&AG and NIAO staff on it. The Committee was satisfied that the draft plan provided for the NIAO to continue to hold the public sector to account for its spending through its core activities of the financial audit of central and local government bodies and the provision of value for money reports for the consideration of the Assembly.

18. The Committee also considered the proposed resource requirement in the draft plan and was satisfied that the reduced net resource requirement of 1% in 2013-14 and a further 0.9% in 2014-15, on top of the other efficiencies already made by the NIAO since 2011-12, was consistent with the overall direction it had given in December 2010. The Committee noted that the NIAO's net resource requirement for 2013-14 in the draft plan represented a cash terms reduction of 11.39% from its 2010-11 net resource requirement of £9,397,000.

19. The Committee sought reassurance from the C&AG that the proposed savings represented the maximum reduction that could be made by the NIAO whilst still maintaining the same quality and breadth of service to the Assembly that has been offered in recent years.

20. Having received this reassurance, the Committee agreed that it was content with the draft corporate plan. The agreed plan is being published separately by the NIAO, with a foreword from the Chairperson of the Audit Committee endorsing the plan on behalf of the Committee.

21. Further to the corporate plan being agreed, the C&AG has prepared his estimate of the use of resources by the NIAO for 2013-14. The estimate is attached at Annex A and is consistent with the figures set out in the agreed corporate plan. The 2013-14 estimate therefore provides for a decrease in the net resource requirement of 1% in cash terms from the estimate for 2012-13 (£8.327 million compared to £8.414 million).

22. The estimate provides for expenditure by the NIAO "on providing objective information, advice and assurance on the use of public funds; encouraging beneficial change in the provision of public services, the highest standards in financial management and reporting and propriety in the conduct of public business; and conducting data matching exercises for the purpose of assisting in the prevention and detection of fraud." This covers the full scope of the work set out in the NIAO's Corporate Plan.

23. As usual, advice was sought from both the PAC and DFP on the estimate. Their responses are included at Appendix 1. PAC informed the Committee in its advice that it was content with the estimate. DFP noted in its advice that:
"...a difference remains between the Estimate position and that of the Budget, which can be addressed during the in-year monitoring process."

24. The Audit Committee met on 18th February 2013 when it considered the estimate prepared by the C&AG, the advice of the PAC and the advice of DFP. The Committee noted that the estimate produced by the C&AG was consistent with the figures set out in the NIAO's corporate plan. After having questioned the C&AG and NIAO staff about the estimate, and after having had regard to the advice of both the PAC and DFP, the Committee agreed the estimate at Annex A without modification.


25. The publication of this report gives effect to the Committee's function of laying the estimate before the Assembly. The Audit Committee will forward the estimate to DFP so that it can be included with the main estimates, together with the budget no 2 bill, which is generally introduced to the Assembly before the summer recess.

The full report can be downloaded here

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