Report on the Estimate of the Northern Ireland Audit Office 2015-16

Session: 2014/2015

Date: 28 April 2015

Reference: NIA 245/11-16

ISBN: 978-0-339-60576-3

Mandate Number: Mandate 2011/16 Fourth Report

Report on the Estimate of the Northern Ireland Audit Office 2015-16.pdf (2.56 mb)


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. Section 66 of the Northern Ireland Act 1998, and Standing Order 58 (1), provide 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. In carrying out this function the Committee has regard to the advice of the Assembly’s Public Accounts Committee (the PAC) and DFP.

3. This report sets out, at Annex A, the agreed estimate for 2015-16.

Background to the estimate

4. Each year, 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. It sets out the NIAO’s key strategic aims for the next three year period; how the NIAO proposes to deliver these aims; the resources that are required by the NIAO to do so; and its key performance measures. 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.

5. At its meeting on 2 December 2014, the Audit Committee considered and approved the NIAO’s draft Corporate Plan for the years 2015-2016 to 2017-2018. Included in this plan was a section on both the proposed resource requirement and the proposed use of resources over the plan period. The plan set out a net resource requirement of £8.2 million for 2015-16, which would have amounted to the same net resource requirement that had previously been made for 2014-15. A net resource requirement of £8.2 million equates to a DFP/Executive budget figure of £8.39 million.

6. The Committee also noted at this meeting, however, that the Executive’s draft budget was out for consultation. The Committee noted that in his statement to the Assembly on 3 November 2014 on the draft budget the Finance Minister had said:

“In line with the independent role that they exercise, savings targets have not been imposed on the Assembly Commission, Audit Office and Assembly Ombudsman. However, I have every expectation that these bodies will have due regard for the overall budget position in 2015-16 and that they would seek to manage their internal pressures from within their overall resource allocations and seek to achieve similar savings, returning any efficiencies to the Executive for re-distribution.”

7. The Committee welcomed the apparent recognition of the NIAO’s independence and the acknowledgement that it would therefore be inappropriate for the Executive to seek to impose savings targets upon it. The Committee informed the Minister of its position that the NIAO should continue to build on the savings it had achieved over the past five years while pointing out, however, that the potential for savings had significantly diminished and the scope of the audit services that the NIAO could provide was likely to be constrained under existing funding provision, unless it restructures.

8. The Executive’s final Budget for 2015-16 was laid before the Assembly on 19 January and approved by it on 27 January 2015. In his statement to the Assembly on the final Budget on 19 January 2015 the Finance Minister said:

“I want to say something about the Assembly Ombudsman, the Northern Ireland Audit Office and the Northern Ireland Assembly, all of which were protected from reductions at Draft Budget stage. At that time it was made clear that in times when the broad public sector was under such pressure, there would be a clear expectation from both the Executive and the general public that these institutions would also provide some degree of savings. Unfortunately, with the exception of the Ombudsman who did at least try to identify some savings, that has not been the case, and, both I and Executive colleagues have been dismayed by the attitude taken by these bodies. I do not believe that these institutions are run so efficiently that they cannot play some part in keeping budgets to a minimal level. Therefore the Executive has agreed to reduce the Northern Ireland Audit Office, Assembly Ombudsman and the Northern Ireland Assembly Commission’s budgets by 5%”.

9. In fact, the Executive’s agreed Final Budget for 2015-16 applied a 5 per cent reduction to the figure of £8.2 million (and not the budget forecast of £8.39 million in the draft Corporate Plan), resulting in a resource budget allocation of £7,875,000, or alternatively a net resource requirement of £7,684,000 for 2015-16. Either way, this would result in a reduction of £516,000 (over 6 per cent) against the 2015-16 forecast in the original NIAO Corporate Plan 2015-16 to 2017-18.

10. The Committee was very disappointed that the Executive’s final Budget included a figure in respect of the NIAO which had not been agreed by the Committee. The Finance Minister has said that DFP and the Executive respect the NIAO’s independence. However, this will continue to be open to question when the Executive publishes budget figures for the NIAO which this Committee has not agreed in advance. The Committee looks forward to this issue being resolved through a protocol with DFP and urges the Minister to agree the proposed Memorandum of Understanding between the Assembly and the Executive on the Budget Process where such a protocol can be included.

11. The Committee wrote to the Finance Minister and pointed out that that the Executive’s Budget does not and cannot pre-empt the Committee’s role of agreeing the estimate for the Audit Office. However, as outlined below, in agreeing the estimate for the NIAO for 2015-16, the agreed final Budget has been a significant factor in the Committee’s consideration.

The estimate prepared by the C&AG

12. The C&AG prepared his estimate of the use of resources by the NIAO for 2015-16 for consideration by the Committee at its meeting on 14 April. He also submitted to the Committee a revised draft Corporate Plan for the years 2015-2016 to 2017-2018. The estimate provides for expenditure by the NIAO on “Providing audit and other assurance services and promoting economy, efficiency and effectiveness in the use of public funds and resources (audit and assurance services; promoting economy, efficiency and effectiveness in the use of public funds and resources; conducting exercises to assist in fraud)”. This ostensibly covers the full scope of the work set out in the NIAO’s initial and revised Corporate Plan.

13. The key figures in the estimate are not consistent with the figures set out in the NIAO’s initial draft Corporate Plan. Instead they are consistent with the figures contained within the Executive’s final budget. The estimate therefore provides for a net resource requirement of £7,686,000. This is a 6.3% reduction from the agreed net resource requirement of £8,200,000 for 2014-15. Further detail, drawing on the figures contained within the revised Corporate Plan, is set out in the tables below:

Comparison of previous annual financial provision with Executive Budget 2015-16





2015-16 Executive Budget (converted to NRR)

Net Resource Requirement





Increase/(Decrease) in cash terms





GDP deflator





Increase/(Decrease) in real terms





Proposed use of resources


Main Estimate














 Staff (temporary)










 Contracted out audit





General expenditure*





Gross resource requirement










Net resource requirement










Net resource requirement based on Executive Budget





*           General Expenditure in 2014-15 includes costs incurred in the National Fraud Initiative. This is carried out biennially and leads to some fluctuation in General Expenditure between years.

**         2015-16 forecasts have been rolled forward to these years

14. In a memorandum to the Committee accompanying the estimate, the NIAO warns that this estimate may potentially impact on the quality and scope of service and support the NIAO can provide to the Assembly (particularly to the PAC). It also highlights the risk of the NIAO not being able to deliver its statutory obligations.

15. The revisions in the corporate plan were made to reflect the net resource requirement in the prepared estimate. In fact, the revised corporate plan forecasts a net resource requirement for 2015-16 of £7,986,000, based on current staffing levels. The plan points out that this is £300,000 more than is available to the NIAO in the Executive’s budget (and £300,000 more than is set out in the estimate). The NIAO say that it is proceeding with the voluntary exit scheme to help bridge this gap.

16. The Plan also warns that should the NIAO not realise the extent of savings it requires from this scheme or other projected savings do not fully mature, it will be at risk of exceeding the Executive’s budget. It also warns that if the voluntary exit scheme does not provide the savings required, a reduction of contracted out audits may commence in the second half of 2015-16, impacting on upwards of 25 audits, including the majority of health service accounts.

Advice of the Public Accounts Committee

17. In its advice to the Committee (which is included at Appendix 1), the PAC expresses “grave concern” at the estimate, noting that it presents “very significant challenges to the Audit Office’s ability to maintain the current level and quality of services to PAC and the wider Assembly”. The PAC also describes the proposed reduction “as completely unacceptable” saying that “it seriously compromises the independence of the Audit Office, its ability to fulfil its statutory obligations and deliver it services fully to the Assembly”.

18. The question of independence arises in particular in circumstances where the NIAO is reliant upon the Executive to make up any shortfall during monitoring rounds.

19. The PAC asks the Audit Committee to review the draft estimate in light of its concerns.

Advice of the Department of Finance and Personnel

20. In its advice to the Committee (which is included at Appendix 1), DFP notes that the NIAO achieving a net resource requirement of £7,686,000 is predicated on the securing of in-year funding for and successfully implementing a voluntary exit scheme. The advice from DFP cautions that (at the time of the advice being prepared) the availability of funding for public sector voluntary exit schemes is not yet formally confirmed and that it cannot be certain that NIAO would receive funding in year one of the scheme.

21. The DFP advice also raises some accounting and technical issues. Subject to these comments DFP was otherwise content with the draft estimate provided.

Evidence Session with the C&AG and NIAO officials

22. At its meeting on 14 April the Committee took evidence from the C&AG and NIAO officials on the prepared estimate. The Committee took this opportunity to seek clarification in relation to the risks associated with it. The Committee also sought the C&AG’s comments on the advice of PAC and DFP. The transcript of this evidence session is included at Appendix 3.

23. During this session the CA&G explained that an extra £200,000 in the net resource requirement would significantly reduce the NIAO’s risk exposure. £200,000 is calculated by taking the £300,000 deficit identified in the revised Corporate Plan and offsetting this by £100,000 (which is to be made available from a central fund to cover additional superannuation costs). The C&AG said that in such a scenario he would be fully committed to handing back any savings arising as a result of the voluntary exit scheme.

The Committee’s consideration and conclusions.

24. The Committee can agree with the C&AG modifications to the estimate that he has prepared. In light of the evidence it received the Committee gave careful consideration to a proposal that the estimate should be modified by increasing the net resource requirement by £200,000. Ultimately, however, the Committee was not persuaded that such a modification could be justified.

25. In coming to this conclusion the Committee has noted the reductions that have been made right across the public sector as a result of the Executive’s final Budget for 2015-16. The Committee has also noted a research paper in relation to the cost reductions made by the NIAO since 2010 in comparison to the reductions made by ministerial and non-ministerial departments in Northern Ireland. This paper is included at Appendix 1.

26. The Committee has therefore agreed, without modification, the estimate prepared by the C&AG. In doing so, it shares his unease. The Committee would much prefer to be in a position where it could agree an estimate that provided for additional resources. The Committee recognises, and the Assembly should be aware, that the reduction to the NIAO’s budget has the potential to impact upon the services that it delivers.

27. The Committee does not want to see a situation where the NIAO lacks the necessary resources to provide effective support to the Assembly in its task of holding departments, executive agencies and other public bodies to account for their use of public money. This would not be in the public interest. However, the reality of the current financial position, as acknowledged by the Assembly when approving the Executive’s final budget, cannot be overlooked. Cuts are being made right across the public sector and the NIAO needs to accept its fair share of these.

28. The Committee wants to see the NIAO sustain, as far as possible, a similar service to that provided at present through continued efficiencies in its audit methodologies. However, given the risks that the C&AG has identified, and the relatively small sums of money involved relative to the overall budget, it is vital that the NIAO receives, at the earliest opportunity, sufficient funding from the Executive’s transformation fund to allow it to both reduce its permanent staff numbers by 10% and making the savings required by this estimate.

29. It may be the case that either the timing of, or uptake in relation to, the voluntary exit scheme does not allow the NIAO to make the savings necessary to live within this estimate. If so, there will be a funding deficit between the work that the Committee wants to see the NIAO carry out and the resources that it has to make this happen. Understandably the C&AG prioritises avoiding a situation where the NIAO has an Excess Vote. The Committee respects this position. However, the Committee also recognises, particularly in light of the significant savings the NIAO identifies across the public sector every year, that our public finances would be worse off if the NIAO had to scale back on its value for money work.

30. The Finance Minister has told the Committee that he respects the independence of the NIAO. He has assured the Committee that it is neither his intention, nor that of the Executive, to under-fund the NIAO. The Committee welcomes this assurance. In order to give effect to this assurance the Committee expects that the Finance Minister and the Executive will ensure that, should a funding shortfall arise as a result of insufficient savings being made from the NIAO’s voluntary exit scheme, this would be addressed during monitoring rounds. The funds required to do this would be relatively minimal but could have a significant impact.


31. The NIAO has made significant savings in recent years. It must continue to pursue efficiencies and cost reductions wherever possible. This includes through restructuring and through reducing its permanent staff numbers. The estimate that the Audit Committee has agreed with the C&AG reflects this. However, there remains uncertainty in relation to the savings that the NIAO can make during 2015-16 as a result of a voluntary exit scheme. Should it not prove possible to make sufficient savings from this scheme then it is crucial that the NIAO receives the shortfall at monitoring rounds. The Committee believes that we must not lose sight of what could be lost if the NIAO was not provided with adequate resources to properly serve the Assembly.


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