Public Accounts Committee Releases Report into NI Water

Session: 2011/2012

Date: 03 March 2011

Reference: PAC 08/10/11

The Northern Ireland Assembly Public Accounts Committee (PAC) has today published its report into Measuring Performance, Procurement and Governance in NI Water.

Speaking about the Report, Committee Chairperson Paul Maskey MLA, said: “This is a landmark report that exposes serious failings in procurement, inappropriate and ineffective governance arrangements in an important arm’s-length body, and a failure to observe the high standards expected of senior public officials. It also identifies significant scope to improve performance.”

Examining NI Water’s procurement procedures, the Committee found that there was a culture, evident at all levels in the organisation, which allowed it to ignore established procurement rules. The Report also makes clear that there were ill-defined procedures governing the authorising of expenditure.

Mr Maskey said: “Failure to follow the basic procurement rules is inexcusable. The extent to which this happened in NI Water was incredible. The rules are there to ensure that contracts are awarded fairly and that they provide value for money and minimise the potential risk of fraud and corruption.

“Between December 2005 and August 2010, procurement failures totalled £46 million. Abuse of single tender awards (STAs) was widespread; a large number of contract extensions went unapproved; and financial controls were not adhered to. £15 million of this originated when the then Water Service was part of the Department, before it became the government owned company—Northern Ireland Water.”

In referring to standards in public life, Mr Maskey said: “ This case has undoubtedly undermined confidence in the integrity of the public sector, but it is important to remember that there are good and honourable people at all levels in public bodies. For confidence to be regained, the highest standards in public life must be applied, but those at the top must lead by example.” 

The way that the Department for Regional Development undertook its oversight responsibilities was heavily criticised by the Committee. It found that DRD’s oversight of NI Water’s internal audit was inadequate, with the Department not having timely access to company internal audit reports. The Report also makes clear that DRD approved the appointment of the NI Water Chairman as interim Chief Executive in direct contravention of established good practice; and that the Board failed to identify weaknesses in the procurement control framework.

The Report also concluded that the Board of NI Water was badly let down by senior executives, but these serious defects do not absolve the Board from its own responsibilities. The Board is required to hold management to account.

Mr Maskey said “The governance arrangements established by DRD for NI Water represented the worst of all worlds.

“The governance model was devised for a self-financing commercial company and was inadequate for a body whose income derived mainly from public funds. We were concerned that the Department appeared not to understand the way NI Water worked and that monitoring was not rigorous.”

Other issues that the Committee looked at included the way performance was managed, monitored and improved with particular questions over sewage leaks and supply interruptions, which were worse than in the rest of the United Kingdom.

The issue of supply interruptions was highlighted by those experienced over the recent Christmas freeze which emphasised the importance of good leakage management to conserve and maintain supplies. The Committee also recommended that NI Water should consider the benefits of free or subsidised repair of customer supply pipes as a means of reducing the amount of water lost through leaks in the system.

Mr Maskey concluded: “Throughout this report, the Committee makes a number of significant recommendations. These must be implemented with urgency and vigour if NI Water, and the wider public sector, is to prevent recurrence of the unprecedented failings of this case."

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