Report on the Draft Budgets 2022-25, for the Northern Ireland Assembly Commission, Northern Ireland Audit Office and Northern Ireland Public Services Ombudsman

Audit Committee - Report on the Draft Budgets 2022-25, for the NIAC, NIAO and NIPSO.pdf (361.83 kb)

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Together with budget-setting protocols, briefing papers, other evidence considered by the Committee, Minutes of Proceedings and Minutes of Evidence

This report is the property of the Audit Committee. Neither the report nor its contents should be disclosed to any person unless such disclosure is authorised by the Committee.

Ordered by the Audit Committee to be printed on 30 November 2021

Report: NIA 144/17-22 Audit Committee

Contents

• Powers and Membership
• List of abbreviations
• Introduction
• Northern Ireland Assembly Commission
• Northern Ireland Audit Office
• Northern Ireland Public Services Ombudsman
• Conclusions and Recommendations
• List of Appendices
  • Appendix 1: Budget setting processes – the NIAC, NIAO and NIPSO
  • Appendix 2: Written submissions – the NIAC, NIAO and NIPSO
  • Appendix 3: Minutes of Proceedings relating to the Report
  • Appendix 4: Minutes of Evidence relating to the Report
  • Appendix 5: Other Evidence considered by the Committee

Powers and Membership

Committee Powers

The Audit Committee is a Standing Committee of the Northern Ireland Assembly established in accordance with Section 66 of the Northern Ireland Act 1998 and Assembly Standing Order 58.  The Committee has 5 members including a Chairperson and Deputy Chairperson and a quorum of 2.

The Committee:

• Exercises the functions mentioned in Section 66(1) of the Northern Ireland Act 1998. The Committee therefore agrees, in place of the Department of Finance (DoF), the estimates of the Northern Ireland Audit Office (NIAO) and lays them before the Assembly;
• Is responsible for tabling a motion for a resolution of the Assembly relating to the salary payable under Article 4(1) of the Audit (Northern Ireland) Order 1987 to the holder of the office of the Comptroller and Auditor General;
• Exercises the functions mentioned in sub-paragraphs 18 (2) an (4) of Schedule 1 to the Public Services Ombudsman Act (Northern Ireland) 2016 in respect of the Northern Ireland Public Services Ombudsman (NIPSO); and
• May exercise the power in Section 44 (1) of the Northern Ireland Act 1998.

The Chairperson of the Audit Committee also has a lead role in the recruitment of the Comptroller and Auditor General.

In 2016, the Northern Ireland Assembly Commission (NIAC) and DoF sought to reflect the constitutional independence of the Assembly from the Executive.

This led to the development of a proposed methodology/protocol for setting the Commission’s budget. The methodology sets out an approach that is akin to the approach adopted for the NIAO and the NIPSO, whereby the Audit Committee provides scrutiny and challenge to the Commission’s expenditure plans and reports accordingly, in recognition of the independence of the Commission. The Committee fulfils this role in place of DoF.

Membership

The membership of the Committee is as follows: 

• Mr Daniel McCrossan (Chairperson)
• Mr William Irwin (Deputy Chairperson)[1] 4
• Mr Jim Allister[2]
• Mr Alan Chambers
• Ms Emma Rogan[3]

List of abbreviations and acronyms used in the report

Committee: Audit Committee

DoF: Department of Finance

IFRP: Independent Financial Review Panel

MLAs: Members of the Legislative Assembly

NIAC: Northern Ireland Assembly Commission

NIAO: Northern Ireland Audit Office

NIPSO: Northern Ireland Public Services Ombudsman

NMPB: Non-Ministerial Public Body

PAC: Public Accounts Committee

Introduction

1. At its meeting on 3 November 2021, the Committee began its scrutiny of the draft Budgets 2022-25, as presented by the Northern Ireland Assembly Commission (NIAC), the Northern Ireland Audit Office (NIAO) and the Northern Ireland Public Services Ombudsman (NIPSO).

2. In undertaking this work, the Committee noted that it fulfils this role in place of the Department of Finance (DoF) in recognition of the independence of the three non-Ministerial public bodies (NMPBs). In that regard, the Committee agreed that it would follow the protocols/methodologies (Appendix 1) used by the previous Audit Committee in relation to agreeing the annual budgets and estimates for the three NMPBs.

3. Prior to the meeting on 3 November 2021, the Committee received written submissions from the NIAC, NIAO and NIPSO on their draft budget plans for the period 2022 -25 (Appendix 2). The Committee received initial oral briefings from all 3 NMPBs on their draft budget plans at the meeting on 3 November 2021 (Appendices 3 and 4). During that meeting, the Committee also considered further information/clarification it had requested from the NIAC, NIAO and NIPSO in relation to their respective Annual Report and Accounts 2020-21 (Appendix 5).

4. Further oral evidence sessions took place with the NIAC, NIAO and NIPSO at the Committee meeting on 24 November 2021. (Appendices 3 and 4). During that meeting, the Committee considered correspondence from the Public Accounts Committee (PAC) and DoF, together with a response providing further information/clarification requested from the NIAC (Appendix 5).

5. On 30 November 2021, the Committee agreed its report on the draft Budget 2022-25, positions for the NIAC, NIAO and NIPSO. The Committee agreed to lay a copy of its report in the Assembly Business Office and send a copy of the report to the DoF.

Northern Ireland Assembly Commission

6. In undertaking its consideration of the NIAC draft Budget plans for the period 2022-25, the Committee noted the statutory functions of the Assembly Commission, in particular the legal requirement to meet all costs associated with Members by way of salaries, allowances, expenses, members’ staffing costs, pension contributions etc. The Committee is mindful that these costs are determined by the Independent Financial Review Panel (IFRP) and that the current arrangements for payments to Members are set out in the Assembly Members’ (Salaries and Expenses) Determination (Northern Ireland) 2016. The Committee, therefore, recognises that these costs cannot be withheld or altered either upwards or downwards by the Commission and as such, the costs are not under the control of the Commission.

7. At the outset, the Committee noted that the Assembly Commission has agreed that an amending Determination in respect of Members’ allowances will not be published until legislation to alter the functions and remit of the IFRP is introduced in the Assembly in the next mandate, however budget provision has been made for possible changes that are likely to come about in the next mandate.

8. The Committee also noted that the NIAC’s draft budget for the three-year period and in particular for 2022-23, reflects the costs that are likely to be incurred at the start of the new Assembly mandate and is based on an assumption of a “near to normal” operating environment, with public engagement and committee stakeholder visits and events taking place.

9. In relation to its capital budget, the Committee was advised that a number of projects were carried forward from 2021-22: replacement of the existing Security Management System; investment in broadcasting infrastructure; and installation of a partial Electronic Access Control system. Progress was slower than expected due to a range of factors such as problems in securing the services of external specialists in Parliament Buildings. The projects will now be completed in 2022-23 and the majority of the capital expenditure will be incurred in 2022-23. The Committee noted that any surplus capital funds were not retained in 2021-22, but were returned via early monitoring rounds to enable their re-allocation across the NI Block.

10. In the next three financial years, it is anticipated that a number of planned capital projects will be delivered with a total cost of £3897k in 2022-23, £3160k in 2023-24 and £1.005k in 2024-25. The Committee would wish to see tight controls over their timetables to minimise the potential for slippage.

11. In relation to entitlements for an Official Opposition at the Assembly, the Committee noted that an amount of £100k per annum is included to provide additional payments to a party that enters Opposition following the next Assembly election. This figure is calculated on a party of 10 MLAs entering Opposition in 2022-23. However, the amount will be adjusted proportionately according to size.

12. During its oral evidence sessions with NIAC officials on 3 November 2021 and 24 November 2021, the Committee explored a range of issues including: Members’ salaries; arrangements for the Speaker’s salary and relevant legislation; Members’ travel expenses, including over-night accommodation costs; resource and capital costs associated with translation provisions; the position in relation to the roof project for Parliament Buildings; the level of catering subsidy; the controls over timetables for capital projects to help minimise slippage; the reasons for slippage in capital projects already budgeted for in 2021-22; the extent to which efficiencies are and can be delivered; management of the Stormont Estate; and, access to Parliament Buildings for Members.

13. While appreciating that the NIAC’s budget proposal does not attempt to predict how a future IFRP or Remuneration Board might deal with Members’ salaries, the Committee noted the disparity in salaries currently payable to elected representatives in comparable legislatures (i.e. legislatures with multi-member constituencies). In Scotland, the basic salary for an MSP is £64,470; in Wales, the basic salary for an MS is £67,649; and, in the Republic of Ireland, the basic salary for a TD is €100,191.

14. It was noted that, under the salary arrangements that were determined by the IFRP, the Speaker's full salary is paid until there is a replacement Speaker, even if the Assembly is not meeting as was the case during 2017-20. Relevant to the discussion, the Committee noted that the Assembly Members (Remuneration Board) Bill [5], which was introduced in December 2020, but will not be progressed by the Assembly Commission in this mandate, would amend the role and function of the IFRP.

15. Health and safety issues around Members travelling home at night following very late Assembly sittings and then back to Parliament Buildings early the next day were raised. The Committee was informed that the Members’ travel allowance could be used for payment for accommodation following late-night sittings of the Assembly. However, it was noted that there had been no increase in the travel allowance since 2016. While recognising that any increase would be subject to a Determination of the Commission, the Committee supported the notional 3% year-on-year increase for travel costs included in the NIAC draft budget.

16. Members questioned NIAC officials on the costs associated with the provision of translation services that would allow any person to conduct their business before the Assembly or an Assembly Committee through Irish or Ulster Scots, and the provision of a simultaneous translation system. The Committee was advised that the cost for 6 interpreters, 3 each for Irish and Ulster Scots, would amount to £344k per annum. In relation to the capital costs, approximately £43k has been identified for the works including the upgrade of translator booths and works on the Press Gallery and the Public Gallery.

17. The Committee noted that the Commission would consider demand for the translation services and review after six months. It is not clear at this stage whether the demand will be reviewed before the recruitment of translators is progressed; any decisions around implementation rest with the Assembly Commission. However, the Committee was advised by officials that it was prudent to include the estimated associated expenditure in the draft budget figures.

18. The Committee expressed concern about the costs associated with staffing to support the implementation of simultaneous interpretation of Assembly business in Irish and Ulster Scots (£1.032m for the budget period), and is unconvinced of the need for six interpreters.

19. During the 3 November 2021 evidence session, it was noted that the draft budget proposals did not include expenditure for the Parliament Buildings roof project. Officials informed the Committee that the matter is not yet resolved but is being progressed in consultation with legal advisers. Given the commercially sensitive and legal issues involved, the Committee agreed to consider the matter further in closed session at its meeting on 24 November 2021. However, in advance of that meeting, a response to the Committee’s request for an update on the roof project was received from the NIAC. The Committee was advised that no further information beyond what was included in the written update could be provided at this time, whether in open or closed session. The Committee finds the refusal of this information unacceptable.

20. The NIAC budget-setting protocol requires that, in considering the Commission’s draft budget, the Audit Committee should have due regard to the evidence provided by the DoF.

21. The Committee noted that the DoF, having examined the NIAC’s draft budget, is content to incorporate it into the Executive’s Draft Budget 2022-25 which is due to go out to consultation in early December 2021. The DoF has asked that the Committee considers the extent to which efficiencies can be delivered by the NIAC to offset the pressures it faces; the Committee will pursue this issue during the consultation period.

22. The NIAC’s draft budget plan detailed the following requirements:

2022-23 - Resource budget of £50,757k and a Capital budget of £3897k

(The Resource DEL broken down as follows: £47,614k of Non Ring-Fenced DEL and £3,143k of Ring-fenced DEL)

2023-24 - Resource budget of £51,189k and a Capital budget of £3,160k

(The Resource DEL broken down as follows: £47,593k of Non Ring-Fenced DEL and £3,596K of Ring-fenced DEL)

2024-25 - Resource budget of £52,350k and a Capital budget of £1,005k

(The Resource DEL broken down as follows: £48,402K of Non Ring-Fenced DEL and £3,948k of Ring-fenced DEL).

23. Following scrutiny of the NIAC’s draft budget for the period 2022-25, and having regard to the advice of the DoF, the Audit Committee agreed that it was broadly content with the NIAC draft budget, with the exception of the costs associated with staffing to support the implementation of simultaneous interpretation of Assembly business in Irish and Ulster Scots (£344k per annum equating to £1.032m for the budget period).

24. The Audit Committee will write to the DoF asking that its position in relation to the NIAC’s budget is reflected in the Executive’s Draft Budget 2022-25 document.

25. The Audit Committee will also write to the NIAC outlining its concerns in relation to the costs associated with staffing to support the implementation of simultaneous interpretation of Assembly business in Irish and Ulster Scots, ahead of the NIAC tabling its budget motion in the Assembly.

Northern Ireland Audit Office

26. In undertaking its consideration of the NIAO draft Budget plans for the period 2022-25, the Committee noted the important role and function of the NIAO in relation to financial audit, public reporting and reviewing the economy and the effectiveness and efficiency of government. Members are aware of the Audit Office’s critical work in relation to governance and counter fraud as well as the key support it gives to the Northern Ireland Assembly and citizens of Northern Ireland.

27. The Committee noted that the proposed 2022-23 and 2023-24 resource budgets included an additional £100k and £165k for 2022-23 and 2023-24 respectively, for the new employer’s national insurance rate increase, updated staff cost projections; and additional depreciation cover for the annual charge that will be required for the NIAO newly refurbished building and associated fixtures and fittings. In particular, it noted a £45k increase in the Comptroller and Auditor General (C&AG) salary costs based on the assumption that the new C&AG will be part of a public sector pension scheme (the current post-holder has opted out of the public sector pension scheme); and a £110k increase in forecast audit income based on more up to date estimates.

28. The Committee further noted that the 2024-25resource budget included an overall net £475k increase (5.1%) in resource funding from the previous year, mainly relating to an anticipated end to £300k of income received from the National Audit Office for European Agricultural Fund work. The Committee was informed that the staffing resources currently required for the European Agricultural Fund work would be redirected to further supplement and increase the NIAO’s review and scrutiny of increased public sector expenditure to provide assurances to the NI Assembly.

29. In relation to the NIAO’s capital budget requirements, the Committee was reminded that, since 2018-19, the NIAO has incurred additional capital costs associated with the refurbishment of its premises at University Street, Belfast, and preparation to lease an area of the building which is not fully utilised at present, generating additional annual income (forecast to be £145k from 2023-24). Members noted that costs incurred on the project up to 31 March 2021 were £447k. The overall cost of the project is forecast to be £5.6m.

30. NIAO officials informed the Committee that there is a possibility that work on the project, which is on track for completion by July 2022, and within the capital budget previously agreed by the Audit Committee, may progress quicker than planned. As a result, £920k anticipated spend in April/May 2022 may be incurred before 31 March 2021; therefore, the anticipated £920k is required to be included in both budgets for 2021-22 and 2022-23.  

31. The Committee questioned NIAO officials on a number of key issues including: staffing and recruitment activity; increasing the talent pool within the NIAO; the level of contracted-out audits and value for money; funding required for the work of the local government auditor; inconsistent charging regimes across non-departmental public bodies for audits carried out; the extent to which efficiencies are delivered; and, the impact of Covid and how associated pressures have been managed through efficiencies. 

32. NIAO officials outlined that nearly 85% of the budget is committed to staff costs and the expenditure associated with contractual arrangements with private sector partners in the delivery of audits.

33. NIAO officials were questioned on the costs incurred in respect of contracted-out costs, which involves sub-contracting out audits during work peaks. Members were advised that despite the actual and anticipated increase in staffing numbers, the level of contracting-out and associated expenditure (14%) has not been reduced and will not be reduced during the period under consideration.

34. Members noted that costs will contractually increase by 2% in 2022-23 to £1.6 million. However, there is some uncertainty around future projections as a procurement process is ongoing in relation to 15 audits following the withdrawal of one of the contractors.

35. Officials clarified that the spend on contracting-out costs for 2021-22, is currently estimated at 15.4% of total operating expenditure because of the shortfall in staffing levels. However, when the optimum staffing level is reached (125 full-time equivalents), contracted-out audits will represent 14% of the total operating expenditure.

36. In noting the current level of spend on contracting-out audits, and the projection that it will reduce to 14% when the Audit Office is fully staffed, the Committee would encourage the Audit Office to keep this cost under review and ensure that value for money is provided in return.

37. While recognising that the Audit (Northern Ireland) Order 1997[6] provides for the circumstances in which the C&AG may charge a fee for auditing the accounts of any person or body, the Committee would encourage the NIAO to begin discussions around addressing the inconsistency that exists whereby some non-departmental public bodies are charged for audits and others are not.

38. The Committee welcomed that the NIAO continues to invest in the digitalisation of its audits alongside the learning and development of its staff, including enhanced capability and capacity in its value for money auditing and public reporting.

39. The Committee encourages the NIAO to ensure that its work takes account of the cross‑cutting nature of government priorities, as well as the performance of individual departments and that its programme of work addresses the issues and challenges from increased expenditure arising from the COVID-19 pandemic.

40. The Committee is of the view that receiving the necessary funding will ensure the NIAO continues to invest in the delivery of a strong independent public audit function that provides effective support and assurance to the Assembly in scrutinising public sector performance across central and local government.

41. The NIAO budget-setting protocol requires that, in considering the Audit Office’s draft budget, the Audit Committee should have regard to the evidence provided by the DoF and PAC.

42. The Committee noted that the DoF, having examined the NIAO’s draft budget, is content to incorporate it into the Executive’s Draft Budget 2022-25 which is due to go out to consultation in early December 2021. The DoF has asked that the Committee considers the extent to which efficiencies can be delivered by the NIAO to offset the pressures it faces; the Committee will pursue this issue during the consultation period. The PAC noted the NIAO’s budget plans for the period 2022-25.

43. Arising from its scrutiny of the NIAO’s draft budget for the period 2022-25, and having regard to the advice of the DoF and PAC, the Audit Committee agreed that the Executive's draft Budget document should make the following provision for the NIAO:

2022  -23 - Resource budget of £9070k and a Capital budget of £2290k

(The Resource DEL broken down as follows: £8795k of Non Ring-Fenced DEL and £275k of Ring-fenced DEL)

2023-24 - Resource budget of £9235k and a Capital budget of £45k

(The Resource DEL broken down as follows: £8960k of Non Ring-Fenced DEL and £275k of Ring-fenced DEL)

2024-25 - Resource budget of £9710k and a Capital budget of £40k

(The Resource DEL broken down as follows: £9435k of Non Ring-Fenced DEL and £275k of Ring-fenced DEL).