Lee Reynolds: Devolution has somehow made Northern Irish bureaucracy less accountable than ever

Lee Reynolds is a former Special Adviser to Arlene Foster, then First Minister of Northern Ireland, and was previously Director of Policy for the Democratic Unionist Party.

If a publicly listed company with a turnover of over £1bn pounds had just announced their auditors had withdrawn from engagement because of issues with accounting record and questions over asset values, the result would have been turmoil. The chief executive and board would be facing investor and shareholder demands for resignations – and their bankers’ reviewing loans.

Yet a few weeks ago, the public sector equivalent happened to Northern Ireland’s Department of Economy (DfE) when the Northern Ireland Audit Office (NIAO) disclaimed their most recent accounts (the option of really withdrawing is not legally open to the NIAO)

When you read the 2023/24 departmental annual report and accounts, you would find it hard to imagine there was anything wrong. A robust performance summary. Its multiple levels of governance are set out in detail with a range of them playing roles that should be able to identify and resolve issues.

The necessary reporting and accountability mechanisms with partner organisations. It declares confidence in the data it receives. Its internal audits were all considered ‘satisfactory’. All steps taken to ensure the auditors received what they need, all suitable for:

“…maintaining robust governance and risk-management structures, and a sound system of internal control that supports the achievement of Departmental policies and objectives, whilst safeguarding the public funds and Departmental assets for which he is responsible, in accordance with Managing Public Money Northern Ireland.”

The Audit Office disagreed, in its strongest terms. So, what has gone wrong?

At the start of the 2023-24 financial year the department adopted a new model for its group financial statements (theirs and the 21 partner organisations they work with/through). This required the application of the model to the previous financial year, this resulting in 43 adjustments required to a value of just over £1bn (which £320m applied to prior period adjustments). Real money, not small change.

The NIAO took issue with 19 of these 43 adjustments, with an absolute value of £137.4m. The auditor managed to find another two issues/error with the new modelling process for good measure.

A second area of concern was the student loan book. The department holds the student loan debt for Northern Irish students (£4bn). The Department for Education in England had adopted a new model for the real value of the loan book, but NI’s Economy Department kept to the old one (which the English department maintains for them).

This creates a risk of the old model being outdated. The auditor was unable to get the necessary information on the old and new models to assess any potential impact on the accounts. As they account for 96 per cent of the Department’s assets, it is far from immaterial.

Two other issues were identified £18m on a postgraduate award scheme that did not have Department of Finance approval and an unexplained adjustment of over £2m. Therefore, the Auditor would not stand over the regularity of payments with the opinion of disclaim applying to:

• “the financial statements and the parts of the Accountability Report subject to audit are not in agreement with the accounting records;
• adequate accounting records have not been kept; and
• I have not received all of the information and explanations I require for my audit.”

Disturbing conclusions. But equally disturbing was the muted reaction. It was released on a Friday, in West Wing ‘throw out the trash day’ style. However, despite the deep and varied issues it gained little media traction.

In the Assembly an urgent question about the audit concerns was not selected – this despite this being the same department that was at the centre of the Renewable Heat Initiative (‘cash for ash’) scandal, the public inquiry into which was as scathing about its behaviour as any politician. They had failed to provide ministers with comprehensive and timely information, responded slowly and displayed poor risk management.

Perhaps it is because the criticism lies with officialdom not politicians. The accounting officer is the Permanent Secretary (of which there were two during the relevant period), and there was no minister (except for a few months at the period’s end) as the Executive was collapsed.

The day the RHI Inquiry report was published, I was given the task of doing the media spin for the DUP tto the assembled journalists in the Assembly’s Great Hall to. Thankfully, I had not been involved so was a ‘clean’ skin. In the end I had little to do, nor were my spin skills tested. The report did not deliver ministerial or political heads on a spike.

The broad mass of the press almost immediately decided to move on. Was this muted response a repeat of that pattern? No politician, no ink?

The matter will now lie with the Public Accounts Committee (PAC). A crucial question will be what the minister was told and when, and to see if the department has truly learned any lessons from RHI.

Yet the law of low expectations likely applies. How surprised would any of us be to see a chastened selection of officials before the PAC, reciting the standard messages: that personnel have changed; lessons already learned with more to do; and it will not happen again.

Committee members will be appropriately morally indignant on the taxpayers’ behalf. Then a final report that will reiterate the Audit Office criticisms, reinforced with general ‘down with this sort of thing’ conclusions. Then the system carries on much as it always has.

A benefit of devolution was supposed to be greater accountability, and that transparency would lead to better governance and more efficient bureaucracy. Instead of being able to hide far from Westminster’s fleeting looks, an Assembly would keep the spotlight shining where it needed to be.

Amongst the Annual Report, there are five other audit reports mentioned which are relevant to the Department. All of them contain substantive criticisms both of it and the Northern Ireland Civil Service in general. As a body of evidence, it is clear the theory of devolution has not delivered in practice the scale of benefits it promised.

This begs a series of questions. What has the real impact of devolution been – what has it succeeded and failed at? Is the balance of power between the national and devolved governments the right one? Why does the bureaucratic system at national and devolved level both underperform and fail to improve?

The full and frank answers to them would be a good start to a renewal of the United Kingdom. But instead, we always get the same performance, rinsed and repeated – with the key questions left unanswered.