Audit Office and Stormont department clash over ‘irregular’ Covid expenditure

Auditor General Kieran Donnelly has raised concerns over Covid scheme expenditure being wrongly recorded in Invest NI accounts.

A man walks down a quiet street in Belfast city centre at the height of a Covid lockdown (PA) (PA Archive)

Northern Ireland’s Audit Office has clashed with a Stormont department over “irregular” Covid relief scheme expenditure.

Auditor General Kieran Donnelly examined the accounts of the Department for the Economy and Invest NI.

The department’s net expenditure totalled £1.6 billion in 2020-21, a substantial increase on the net expenditure of £1.1 billion recorded in the 2019-20 accounts.

Invest NI net expenditure also rose significantly to £422 million, an increase of £38.6 million from 2019-20.

This was due to the implementation of emergency grant schemes in response to the Covid-19 pandemic.

It is completely unacceptable that a department fails to comply with the requirements of primary legislation it is relying on to make payments

Kieran Donnelly

Mr Donnelly’s report highlights four schemes, totalling £140 million in expenditure, which, although recorded in Invest NI’s accounts, were controlled and administered by the department.

These include the Small Business Grant Scheme and the Tourism and Retail Sectors Grant.

Mr Donnelly’s office said Invest NI was instructed by the department to include the expenditure within its accounts as it had the correct legal powers to make the payments, whereas the department did not.

He concluded that Invest NI had no role in the schemes’ design or delivery and that the schemes were actually administered by the department, and the expenditure should have been recorded in the department’s accounts.

He also found that the expenditure was incurred by the department without the appropriate legal authority.

Consequently he qualified both sets of accounts on the basis that this expenditure is irregular, and further concluded that Invest NI’s financial statements do not provide a true and fair view of the substance of the transactions.

The Audit Office said both the department and Invest NI were provided with an opportunity to adjust their accounts to resolve the issues identified by the audit, but both declined to do so.

Mr Donnelly said his report acknowledged the speed with which the schemes were designed and delivered, but said the issues he identified are “fundamental principles and standards of accounting with which all public bodies should comply”.

“It is completely unacceptable that a department fails to comply with the requirements of primary legislation it is relying on to make payments,” he said.

“This is a basic requirement, and it is extremely disappointing to see that the department has failed to learn lessons from its past failure on obtaining approvals required for the Renewable Heating Incentive scheme.”

However, the Department for the Economy has disputed the comments.

A spokesperson said it and arms length bodies responded to the Covid crisis immediately with 30 schemes delivered at a cost of £951m.

“These schemes helped tens of thousands of local businesses at a time when no-one knew what lay ahead. It is therefore disappointing, and not for the first time, that the department is forced to clarify its position following an NIAO report,” they said.

“The department’s accounts were presented to the NIAO in May 2021, as agreed. A delay arose because of the NIAO’s interpretation of an accounting issue it had not raised the previous year when the same schemes were delivered.

“Despite obtaining extensive and robust legal advice supporting its approach, the department was unable to persuade the NIAO of its position; a position that was universally accepted and supported across Government.

“The department’s Accounting Officer shared his legal opinion and wider supporting documentation with the NIAO in an attempt to agree a consensus.

“Unfortunately, a resolution to what was, and remains, a subjective issue in accounting terms, prevented the accounts from being laid on time as anticipated.”