Official Report (Hansard)

Department's Management of Arm's - Length Bodies

31 March 2009

Members present for all or part of the proceedings:

Mr Barry McElduff (Chairperson)
Mr David McNarry (Deputy Chairperson)
Mr Dominic Bradley
Mr Francie Brolly
Mr Raymond McCartney
Mr Pat Ramsey
Mr Jim Shannon

Witnesses:

Ms Rosemary Kelly ) Arts Council for Northern Ireland
Ms Roisin McDonough )

Mr Paul Sweeney ) Department of Culture, Arts and Leisure
Ms Linda Wilson )

The Chairperson (Mr McElduff):

Good afternoon. I welcome senior officials from the Department and from the Arts Council. There are a lot of meetings taking place in the Building today and as they are happening at the same time, it may be necessary to adjourn this meeting for a period of 10 or 15 minutes. I hope that it will not be necessary to do so, but I understand that at 2.30 pm Shaun Woodward will be addressing another Committee, of which two of our members are also members, and David McNarry, the Deputy Chairperson, will have to nip out also. We will try to maintain our quorum and not disrupt the presentation.

Mr Paul Sweeney (Department of Culture, Arts and Leisure):

I believe that the Committee has already met Rosemary Kelly, Roisin McDonough and my colleague, Linda Wilson. I welcome the opportunity to assist the Committee again with its review of the Department’s sponsorship of its arm’s-length bodies.

As members are aware, we provided evidence to the Committee on 3 March 2009; and we will meet again in this format on 5 May, with Sport NI being the case study in that instance. Today, the focus is on the Arts Council of Northern Ireland, which, as members know, is an executive non-departmental public body, which operates under the Arts Council ( Northern Ireland) Order 1995 and receives its principal funding from the Assembly through the Department of Culture, Arts and Leisure. It is also a National Lottery fund distributor.

In the incoming year, 2009-2010, Assembly funding will be approximately £15·3 million resource, although that will include £2 million for the creative industries fund. There will be a £10·5 million allocation for capital. Additionally, the Arts Council will allocate £6·5 million of lottery funds. The Arts Council is accountable to the Secretary of State for Culture, Media and Sport as regards lottery funding.

Council members are appointed by the Minister of Culture, Arts and Leisure. The council comprises a chairperson, vice-chairperson and 13 members. It has approximately 53 full-time staff and 10 part-time staff. Roisin is the chief executive and accounting officer and has a team of four directors.

As regards the core governance mechanism, the Department and the Arts Council have a management statement and financial memorandum: that is the core control document. The Arts Council operates under a five-year strategy called ‘Creative Connections’ and presents a draft business plan to the Department annually, which we review and approve. Therefore, the council operates within a five-year strategy and an annual business planning process.

The Department and the Arts Council have quarterly accountability meetings, chaired by Linda on the Department’s side, and there is periodic attendance by senior officials at both board level and audit committee meetings. The accounts of the Arts Council of Northern Ireland are prepared in a form as directed by DCAL in accordance with the 1995 Order, and the council’s financial statements are audited by the Comptroller and Auditor General. My remarks are by way of a scene-setting introduction. I understand that Rosemary will take over.

Ms Rosemary Kelly (Arts Council of Northern Ireland):

I welcome the opportunity to assist the Committee in its review of the governance and operation of the Arts Council. I received a briefing paper from the Committee for which I am very grateful, and I will stick to that as closely as I can. I will try to be as succinct as possible and also do justice to your questions.

The board approaches its role with the utmost seriousness and strives for best practice in everything it does. We are keenly aware of the need to fulfil the aims, objectives and priorities set out by DCAL, approved by the Minister, and clearly informed by the work of this Committee. In practical terms, we base our work on the requirements set out in the management statement and financial memorandum that comes to us from the Department.

I was asked to say something about the role of the chair and the board in providing a strategic direction for the Arts Council. It is worth reminding ourselves that best practice in governance points up the need to separate the roles and responsibilities of the governing body from those of the executive as a guiding principle — and we do. It is in that context that we operate, and it is a key part of the chairman’s role to ensure that those principles are followed.

Making that a reality requires mutual respect, goodwill and transparency, particularly between the chair and the chief executive. In practice, that requires a supporting structure for forward planning and for annual and long-term reporting and monitoring that will deliver for the needs of the three parties concerned — the Department, the board and the executive. Those should ideally all dovetail to create a coherent process that serves all our interests. In summary, our systems, processes and committee structure are evolving, with the objective of enabling well-informed and timely decisions on the strategic direction of the Arts Council and monitoring outcomes. Planning ensures that the board never rubber-stamps — the safeguarding of public money is at the heart of all our work.

I will say something about board delegation to the chief executive. We must not forget that the chief executive of the Arts Council is also the accounting officer, acting on behalf of the permanent secretary, and so has specific responsibilities to him through his staff. The chief executive is, of course, responsible for all the day-to-day operational work of the Arts Council and for using the expertise of the staff to advise the board on strategic direction. In light of that, the development of the Arts Council’s five-year strategy, which we published in 2007, was a truly collaborative effort, with considerable work from both sides and with the board specifically providing constructive challenge in its development. The process involved the widest consultation that the Arts Council has ever undertaken with a full range of stakeholders, including political representatives, district councils, artists and arts organisations.

I will move on to accountability. The board, in all its work, operates in the context of collective responsibility and adherence to the principles of public life contained in the 1994 report of the Committee on Standards in Public Life, which was chaired by Lord Nolan. How do we deliver on that in practice? In the context of the five-year strategy, the board has in place an annual planning cycle of objective-setting and monitoring by the board and delivery and reporting by staff. The performance of the board is measured by way of an annual appraisal system and a reporting mechanism to the Department. As chair, I write an annual review, on which I am interviewed by the deputy secretary of the Department. I understand that this year I will also be required to make a report directly to the Minister. I am happy to expand on any of those matters if members so wish.

As regards conflicts of interest, board members make a declaration on appointment, which is updated formally twice a year. In practice, board members update the declaration on an ongoing basis as things change. There is always a designated point on agendas calling for conflicts of interest to be declared at meetings. Board members also absent themselves if something arises unexpectedly during discussions. Interests are also displayed on our website.

We publish two audited annual reports, which reflect our two income sources — lottery and Exchequer funding. The lottery annual report is laid before Parliament at Westminster, and the Exchequer annual report is laid before the Northern Ireland Assembly. We also publish an annual review that gives an account of the Arts Council’s activities over the previous year. All three documents were widely disseminated and are available on our website.

With regard to our codes of conduct, we have published the aims and values of the Arts Council. We set out our obligations to the different sectors through our policy documents and have consulted on and published the five-year strategy, as I have just said.

We also have clear procedures for handling inquiries and complaints in place, and they are issued with application information and contain guidance for ultimate complaint to the ombudsman. We also have a clear whistle-blowing policy and process in place, which is contained in our staff handbook and was updated recently.

Finally, with regard to accountability, the agendas and minutes of our meetings are posted on the Arts Council’s website. The chief executive and I issue a joint bulletin to staff as soon as possible after each meeting, making them aware of the decisions that have been made, and the board and the Executive have ongoing sectoral meetings with stakeholders throughout the year.

I was also asked to cover value for money. The first thing about value for money is to ensure that we have an effective and efficient organisation. That is referred to in our five-year strategy, under the heading of ‘Improving our Performance’. It is one of the themes in the strategy, and it has one objective, which is specifically aimed at the governing body; that is, the board. It is about strengthening governance and accountability, and I think that I have made members aware of how we are delivering on that. There are other issues around the theme of improving our performance, and they will be delivered by the chief executive and her staff.

When we distribute public money through our programmes, it is vital that it has the best possible impact — it is about getting the biggest bang for your buck. Therefore, the five-year strategy was only the first step: the next step was to oversee its translation into the operational plan. The board believes that it is imperative that we ensure creative value for money in what we fund, and the executive is well down the road to delivering a review of individual art forms, so that we do not simply continue with an historical pattern of funding but ensure that there is real development of artists and arts organisations. That then feeds into community arts, tourism, health, education and the creative industries. The whole aspect of regeneration and of what the arts deliver to society is always in our minds.

It is also essential that we provide motivation and opportunities for arts organisations, particularly fairly small organisations, and that we make it possible for them to develop their governance — strengthening governance locks down into the organisations — and their business potential. We run a chairpersons’ and chief executives’ conference each year, during which we target useful themes that will enable their development in areas such as governance, marketing, widening participation and strengthening business practice. We have put in place a business development officer to give them guidance and support and to work with them on developing that. One of the most difficult things for small arts organisations, which employ part-time staff, is to be strong in governance and to have good business practice in place.

I was also asked to talk about the reports. I understand that the Committee has been discussing the two CIPFA reports and the PAC report. The board welcomes any insights that support us in improving our governance. The board discussed the reports on two occasions in private session, and they were discussed again when the deputy secretary, Edgar Jardine, sat in as an observer at our board meeting. We also sent a written response to the Department.

It is also worth noting that the board is in the process of developing a formal scheme of delegation and a schedule of powers reserved to the board in response to the CIPFA report.

We have an excellent working relationship with the Department. However, the difficulties surrounding the Events Company, and the pressure to ensure that that is not repeated, is leading the Department to look very closely at how we do our business. We are working with the Department to arrive at an appropriate level of oversight and regulation on its part while maintaining the degree of autonomy that should be appropriately delegated to us so that we can fulfil our role.

The Arts Council has expressed concern about the risks associated with any micromanaging of an arm’s-length body that causes the blurring of roles and responsibilities. That was noted by the board in its written response to the DFP memorandum. The PAC report entitled: ‘Good Governance ― Effective Relationships between Departments and their Arm’s Length Bodies’ commented on the danger in the potential for over-reliance being placed on the departmental officials though responsibility for ensuring that body was run appropriately still lay with board members.

I know that the Department is considering adopting the Department for Culture, Media and Sport’s risk-based model, so that if an arm’s-length body can demonstrate that it has robust control frameworks in place with strong adherence to appropriate governance and accountability practice, it could be rather more arm’s length, which we welcome.

Ms Roisin McDonough (Arts Council of Northern Ireland):

Like my chairman and the permanent secretary, I welcome the CIPFA reports and their findings. They confirm that the Arts Council, as an arm’s-length body, meets the requirements of the basics of the good-governance checklist and that it performed very strongly — along with others — in that aspect of the review. Overall, the findings also demonstrate that we have appropriate governance arrangements, financial-management systems and controls that provide assurances to the board and DCAL.

Before turning to the specific issues or areas in which improvements can be made and have already been made, I will say a few words about the council. Our raison d’être is to support artists and arts organisations. As our mission statement explains, we want to place the arts at the heart of social, economic and creative life. As a council, we strongly believe in making a direct link between how society encourages and protects the creativity of its people and the importance that that society places on its own future. I know that the Committee shares that view.

The arts give people confidence and skills that contribute to their employment. They also attract investment, boost our profile, give our communities a greater sense of identity and worth, and attract visitors. Ultimately, they broaden and enrich our lives by providing challenges, asking questions and lifting our spirits. That is particularly important in hard economic times. The council has been striving to ensure that everyone in Northern Ireland can fully choose whether to attend, or participate in, an arts event to their own liking. All of that is in the overarching objectives of the Programme for Government.

However, as our chairman said, we are keenly aware of our responsibilities. We have to be risk averse in our stewardship of public funds, systems and processes while, at the same time, encouraging a greater degree of risk in the development and introduction of progressive arts policies and programmes. It is a fine balance. As an arm’s-length body, we are perhaps unique in that we have to juggle those twin elements to best effect to ensure that we safeguard public funds while not stifling creativity and innovation among our most talented. We must also ensure that we remain along with them at the cutting edge of developments.

As accounting officer and chief executive, I am acutely conscious of the fact that my employer is the board of the Arts Council, which is the source of all authority. Of course, in my role as accounting officer, I report to the Department’s permanent secretary, Paul Sweeney. However, the board of the Arts Council takes the decisions on our strategy, plans, policies and programmes, approves our capital and revenue budgets, ensures that we have adequate controls in place to manage risk, and monitors our performance against objectives. The board holds the executive and, in particular, me to account and provides a healthy challenge and scrutiny function as well as an appropriate support role.

As my chairman said, my senior management team and I are responsible for running the day-to-day operations and managing the organisation. I will not list those responsibilities, because they are well understood and appreciated. Essentially, my job is to help inform the council’s decision-making processes by providing the evidence needed in order to take good decisions on topics such as risk assessment, management and mitigation. At an appropriate point in the near future, I want to make a more detailed response to some specific points raised in the CIPFA report in order to place on record how the Arts Council has dealt with — and is dealing with — those matters systematically. However, with the Committee’s agreement, I will leave those remarks until another time.

Mr Shannon:

Thank you for your presentation. I want to ask a couple of questions about distribution of funding. That issue has arisen in the past and it is, therefore, important to ask questions and receive answers about that matter. How does the board decide how to allocate Arts Council funding to different organisations? How are the priorities set? How are decisions taken about who receives funding and who does not?

Ms McDonough:

The Chairperson and the member will, perhaps, recollect that I visited the Committee to make a submission on the Inquiry into the Arts. On that occasion, I provided an overview of the pattern of geographical distribution, including areas covered by the targeting social need policy. That information is now on record.

As our chairman said, we are reviewing all our art form policy areas, which has led to an appreciation and understanding of the specific needs of particular areas, such as drama and dance. I reported that to the Committee previously. Indeed, we recently completed reviews of visual arts and opera, and we have plans to review other areas. Moreover, we are analysing the spatial distribution of our grants in order to ensure equity and fairness of treatment.

Our processes and applications forms are on the website, and we encourage people to make applications. Our criteria are transparent, and we have refined them during the past 18 months. In the main — but not exclusively, because decisions are made at other points in the year — the board takes its decisions at its core annual funding round, during which it is advised by expert officers who assess clients who have applied. That advice informs the board’s decisions on grants, because those are set in the context of our five-year plan for the arts and our overall strategic direction. Those are all elements of the board’s decision-making processes.

Mr Shannon:

I have a second question, which, again, I hope will clarify the issue for me. The Committee noted that you instigated a review into the distribution of arts funding on 10 September 2008.

Can you give us some indication as to why that review took place? Did it result from something that happened in the inquiry that this Committee is holding, or were you going to hold a review anyway?

Ms R Kelly:

No, no. It was nothing to do with this Committee, and I would be quite upfront about saying the reverse, if it were true. However, in every walk of life, every form of business and every organisation there is a moment when you look at some aspect of the operation, and say: “It has been a while since we really looked at that in depth, tested outside opinion, examined the very best models and looked to see whether we could improve them.” That is why the review was undertaken.

I believe in change management. In a modern society, every organisation must try to constantly renew and update itself and do things better. I am glad to say that the chief executive of the Arts Council agrees with that view. So, we do not just sit doing the same thing year to year: we are constantly trying to improve, and that is what that review was about.

Mr Shannon:

Does that happen every couple of years?

Ms R Kelly:

Yes.

Mr P Ramsey:

What steps has the Arts Council taken to ensure greater compliance with internal audit procedures and governance? Since the demise of the Events Company ― and I direct this question at Paul ― has there been any clear and relevant instruction to arm’s-length bodies, including the Arts Council, on changes in accounting practices? The bottom line, I suppose, is: what have you done since the unfortunate debacle of the Events Company to make things clearer and more accountable?

Ms McDonough:

As I hope that we have managed to convey, there has never been any compromise on governance and accountability issues in the Arts Council. We are always trying to raise our game to the standards of best practice. In addition, not only must we identify and mitigate risks on a proportionate scale ― and that is important ― we must balance carefully the ratio of money that is spent on administration versus programme expenditure. In small organisations such as ours, there is an economy of scale.

Notwithstanding that, in response to Pat’s questions, since the receipt of the report ― which, as members know, was based on reporting by exception rather than describing all the activities that are undertaken with regard to audit and accountability issues ― we have implemented a number of improvements. We no longer share a joint auditor with Sport NI. Since September 2008, A S M Horwath has been externally and independently procured to act as our internal audit provider. It has provided us with a strategic internal audit plan, which was approved by our audit committee and which is fully compliant with Government internal audit standards, including peer review of the quality of that company’s work. Therefore, each point raised in DCAL’s review of the internal audit provision in arm’s-length bodies has been responded to.

The permanent secretary and I met on 21 January to discuss those matters, and I have assured him in writing that we are comprehensively addressing all the issues. We have revised the audit committee terms of reference, and those are now in operation in accordance with Treasury best practice guidelines. We have a framework for analysing the core competencies of our council and committee members, which is based on self-assessment. That is being received, and, in the course of the current year, we will be undertaking a review and training programme, which will be implemented where necessary.

A draft scheme of delegation, to which our chairperson referred earlier, has been devised for approval, and that sets out clearly what the Arts Council’s board and executive can do. We have a very robust risk-management strategy and a risk register that we review quarterly. Risk has been incorporated into our annual business plan for this year.

I assure members that, through the Northern Ireland Audit Office, a representative of the Comptroller and Auditor General sits on our audit committee; that committee also contains an external person from the Assets Recovery Agency. For a long time, the author of the dear accounting officer letters from the Department of Finance and Personnel sat on the audit committee. That was a board initiative that was aimed at strengthening the audit committee.

We have two fully-qualified accountants in our staff team. Our director of corporate services is attending the University of Ulster to train to become a company secretary. I obtained my CIPFA diploma in company direction two years ago, and I am a member of the Institute of Directors (IOD). The chair of the audit committee meets chairs of other arm’s-length-body committees and has attended the Committee for Culture, Arts and Leisure on invitation.

Risk management is at the heart of everything that we do. The report stated that the board did not adequately review risk, but that is wrong. At every meeting, the board assesses all the major policy, financial and audit risks. Risk is not a separate agenda item, because it is hard-wired into our DNA and reporting. All the options on decision-making processes that we give to the council include an element of risk assessment in order to inform its decision-making. That concludes my statement on what we have been doing to address the issues that are raised in the report.

Mr P Ramsey:

Chairperson, I am sorry, but I have to go.

The Chairperson:

If members agree, I will adjourn the meeting until 3.10 pm.

The Committee suspended.

On resuming —

The Chairperson:

I express my thanks to the witnesses for their patience while the Committee adjourned.

The CIPFA report noted that finances were not referred to in over half of the board meetings in 2007. Given that the Arts Council had a budget of more than £12 million for 2008-09, why is the budget, including an update on spend to date, not discussed at every meeting?

Ms R Kelly:

It is now. We have a strong finance committee, with a really good chairman who is well versed in all finance matters. In addition, of course, we now have a strong audit committee. In the past, we discussed budgets quarterly at board meetings. However, as a result of the CIPFA report, we have a financial report from the Arts Council’s accountant at every board meeting.

Ms McDonough:

As a footnote, I would add that a significant portion of the business conducted at our annual performance review, which is a dedicated day-and-a-half- or two-day-long meeting, is devoted to hearing about the organisation’s financial affairs, financial outturn, and budget planning and monitoring. Those meetings with the council are routine, although they are outwith normal business, and finances are discussed.

The Chairperson:

In light of Roisin McDonough’s earlier remarks, why was a scheme of delegation not always in place? Why is it only happening now?

Ms R Kelly:

All the governance mechanisms that I described earlier are covered in the written scheme of delegation, so one could say that it has been there, but just not formally. It is a relatively new mechanism for ensuring that all aspects of corporate governance are written down and adhered to. It is now well drafted, and it will be in place soon. Members will have heard me describing what we do, and that is incorporated in the scheme of delegation.

Ms McDonough:

It is simply an exercise of pulling together the relevant documents into a short and succinct summary. It is not the case that the components do not exist; it is simply a question of co-ordinating them into a short two-page summary.

Mr McNarry:

I am glad to be back. I apologise, but I had to be elsewhere.

The CIPFA report raises concerns that an organisation as large as the Arts Council does not have a qualified accountant on its senior management team. How many qualified accountants do you employ, and are there any qualified accountants on your board?

If there is no qualified accountant in the senior management team — and I find that quite appalling — what actions are you taking? Are you aware of anything that the Department or the board are doing to remedy that situation?

Ms McDonough:

There are now two qualified accountants in the Arts Council. There was always one qualified accountant, and, during the past couple of years, another employee was training to achieve full qualification, which she has now achieved.

Mr McNarry:

What do they do?

Ms McDonough:

They are employed in the finance department.

Mr McNarry:

They are not on the management team?

Ms McDonough:

I was about to come to that. The head of finance is part of the senior management team. We meet monthly as a group of chief and directors — that is what the meetings are called — and the agenda always includes a standing item on the finances of the organisation. Monthly management accounts are produced for me and my directors. There is a lot of other business on that agenda, as you might appreciate, so the person who attends those meetings and provides that monthly management account information is exempt from other aspects of the work relating to art-form issues, grant distribution and other routine matters, but that person does regularly furnish that information.

Mr McNarry:

Is that a new development since the publication of the CIPFA report, or was it always the case? If it was always the case, why did CIPFA raise concerns?

Ms McDonough:

I do not know. There were five directors, but one has now retired and there are currently four. I, as chief executive, and my directors meet as a senior management group, and there is an agenda that has an item relating to finance on it. The head of finance attends that section of the meeting to discuss management accounts — and has always done so.

Mr McNarry:

Is the head of finance a director?

Ms McDonough:

No, she is at deputy-principal level, but she is a qualified accountant.

Mr McNarry:

There is no qualified expertise at director level?

Ms McDonough:

As I said, there is a head of finance — who is an accountant — at a deputy-principal level, and a second accountant —

Mr McNarry:

But not a director?

Ms McDonough:

Not at director level. There is a director of corporate services, who is not a fully-qualified accountant, but who is adept and knowledgeable about human resources, finance and other corporate-services matters. However, the technical expertise resides with the head of finance.

Mr McNarry:

Are there decisions that are not delegated to the chief executive; and if so, what kind of decisions are those?

Ms McDonough:

There is a whole raft of decisions that are not delegated to me, as we described earlier.

Mr McNarry:

I am sorry; I probably missed that.

Ms McDonough:

As we described, there is a whole list of things that are not delegated to me, as chief executive. It includes our strategy, our business plan and corporate plan; the approval of our budgets for the year and our risk-management strategy. I have to provide the guidance, the information and the support that the Arts Council requires in order to be able to discharge all its duties. However, the authority to make those decisions rests with the council. It then, in turn, delegates the operationalisation of those decisions and, indeed, their implementation to me. I am held to account for performance and delivery against the council’s core objectives. That includes all of the main grants, programmes, and so on.

Mr McNarry:

Therefore, the buck stops with you, effectively.

Ms McDonough:

Indeed.

Mr McNarry:

That is good to know. Thank you.

Mr Brolly:

Have any board members still not been given the mandatory board training?

Ms R Kelly:

No. All of our board members have had the mandatory board training. All of them have done board training at some point in their lives. One of the first things that we did when the new board came together last year was to take a day away for refresher training with CIPFA. In fact, we do that every year. We take one day to do refresher training with a CIPFA facilitator. We have always done that while I have been chairperson. Not only is it good for focusing our minds on corporate-governance issues, but it is a good team-building mechanism.

Our last awayday took place in 2008, just after the CIPFA report was published. We were able to discuss that report and address the issues that it raised. We must remember that most of the board members work in organisations in which they are well placed; they are in high-powered, senior-management positions. They have a great deal of that kind of experience. Nevertheless, we place a lot of emphasis on ensuring that we keep that training at the forefront of our minds.

The Chairperson:

Roisin, you mentioned that the board deals with risk. However, the CIPFA report says that risk was discussed only once at board level in 2007. What exactly is the board’s role in risk management?

Ms R Kelly:

As regards risk management, the chief executive pointed out that that part of the report was inaccurate. Risk is at the heart of all our decision-making, although, as Roisin said, it is not necessarily described as risk on the agenda. For example, every options paper that comes from the Arts Council’s executive contains a risk assessment. The audit committee has a risk register in place that is constantly being updated. It looks at that risk register regularly. The board looks at it formally twice each year, and may look at it at other times as well. Therefore, there is quite an elaborate system to address risk. Most importantly, the whole aspect of risk is now embedded in the executive’s process and procedures. Therefore, it is part and parcel of how we think. Again, as Roisin said, we put risk assessment against each objective in this year’s annual plan. It is present all of the time.

I am not sure how CIPFA came to that conclusion. It was probably arrived at through one of those computer programmes that look for risk. Risk management is there and is an important part of our work.

The Chairperson:

On a separate matter, it appears that there is a lack of understanding between the board and the Department on roles and responsibilities. Do you agree? What is the explanation for that? What is being done to resolve the matter? Perhaps, that question could be directed to the Department as much as to the Arts Council. One only has to read the minutes of the board meeting of 28 January 2009 to get a strong impression of a lack of understanding between the board and the Department on roles and responsibilities.

Ms R Kelly:

I am not saying anything that the permanent secretary is not aware of. As a board, we have had that conversation with the deputy secretary. I, together with some of my colleagues from the board, have met with the permanent secretary.

The Department needs to consider rebalancing the executive role as regards accountability. As you know, the Department holds accountability meetings. That needs to be rebalanced, and a stronger relationship should be established with the board as the governing body.

Mr Sweeney:

Be assured that on the fundamentals of governance and accountability, there is no lack of clarity between the Department and the Arts Council. However, there is no doubt that in approaches to programmes, there will always be a creative tension between any arm’s-length body and a Department. That is not an unhealthy state.

It is important that we point out those matters and address them — for example, I recently met Rosemary and two of her colleagues to discuss the specifics of a capital programme. So, there is no lack of clarity on the fundamentals of governance and accountability, but there will always be a creative tension in and around programmes and priorities. At the moment, in the context of the particular minute that you referred to, the Department was having a fairly animated discussion with the Arts Council about the capital programme. The Arts Council has made some very valid points about where the primacy lies in decision-making on the capital programme. Inherent within that would be an inference that the Department is constantly second-guessing the Arts Council. If so, is that the best use of resources? I consider that to be a healthy and robust debate, and long may it continue. However, let there be no ambiguity about roles and responsibilities with regard to governance and accountability, which take complete priority.

Mr McNarry:

I have a couple of points. Is it normal practice for the chairperson of the board to appraise the work of his or her chief executive? Has the chief executive ever received a bonus that was based on those appraisals?

Ms R Kelly:

Yes, to both questions. I appraise the chief executive each year in light of the year’s work. The chief executive makes available to me her appraisals of her directors, which I also take into consideration. I then share that information with the remuneration committee, and we arrive at a decision. We are asked certain questions about increment and bonus. In the past year the remuneration committee recommended a bonus for the chief executive.

Mr McNarry:

In the past year?

Ms R Kelly:

After the last appraisal, which was in June 2008.

Mr McNarry:

No disrespect to anybody, but bonuses are now a bone of contention in the public’s mind. Is the bonus to the chief executive seen by the board as a reward or as an add-on to a salary?

Ms R Kelly:

The bonus was very clearly a reward. Bonuses are awarded for work that is above and beyond what one would expect a person at a particular grade to deliver. The bonus to our chief executive was for leadership and for the tremendous body of work that the Arts Council put into the comprehensive spending review. That was outside anything that the Arts Council had ever done, and it brought the sector together in a way that I do not ever remember happening, and I have been in the arts for a long time. In the end, the draft budget was revised upwards, so the Arts Council campaign brought in better funding for the arts. From my experience in the Arts Council and in many other organisations that I know and have worked with, that was unprecedented.

The remuneration committee agreed that that was an appropriate reason for awarding a bonus, which is specifically why we recommended it.

Mr McNarry:

Thank you for being frank. In order to finally clear up one point, the timely comparison that I am making is with civil servants, who appear to get their bonuses on the basis of performance. Is that the case here? Are you saying that this award was on the basis of performance?

Ms R Kelly:

Yes, and I believe that increments should also be performance based. However, bonuses are above and beyond that again, and I do not think that they should be awarded lightly. I believe that this was a very special piece of work in a particular year, which culminated in a very special outcome for arts in Northern Ireland, and that is why the bonus was recommended.

Mr McNarry:

Were the resources involved found from within the budget?

Ms R Kelly:

Yes.

Mr McNarry:

Finally, the report is bound to contain lessons for the Arts Council; will you say what they are?

Ms R Kelly:

Are you referring to the two CIPFA reports?

Mr McNarry:

Yes.

Ms R Kelly:

The chief executive detailed quite a number of those lessons earlier. The main issue for the board was to put in place a scheme of delegation and schedule of powers reserved to the board in response to that report. As we said, that process is already well underway in draft form.

Mr McNarry:

I have not heard any line of questioning about the criticisms that were made, but may I take it that the Arts Council will think about those criticisms?

Ms R Kelly:

Not only will we think about them; steps have already been taken. I said earlier that we welcomed those reports. It is helpful to have a cold outside eye looking at what one is doing, because hard work and taking advice from all sorts of places does not prevent things being missed. Therefore, it is very helpful to have such reviews of our work, and we do not take them lightly. The Arts Council has already begun to implement different aspects of the recommendations.

The Chairperson:

Again, I thank Paul, Linda, Rosemary and Roisin for their attendance and participation in the meeting, and especially for accommodating the adjournment.