Official Report: Minutes of Evidence

The Chairperson (Mr Chambers): I welcome Dorinnia Carville, the Comptroller and Auditor General (C&AG); Rodney Allen, chief operating officer; and Brian O'Neill, director of corporate services. Do you want to make any opening comments, or are you happy to move straight to questions?

Ms Dorinnia Carville (Northern Ireland Audit Office): We are happy to move straight to questions, Chair. Thank you.

The Chairperson (Mr Chambers): OK. Thank you very much.

I will ask a couple of questions first. Can you provide more detail on the reasons for the difficulties in recruiting qualified members of staff in the current financial year?

Mr Rodney Allen (Northern Ireland Audit Office): Yes, Chair. I will open the discussion on that. If it is OK, Chair, I will give a wee bit of context. I have been thinking about this since we were last with you four weeks ago. I asked the team to look back a little to give us a bit of research. As we have explained to the Committee and as your question asks pointedly, the pressure is mostly in the financial auditor space, which is the people whom we would like to bring into the organisation who are qualified accountants. We looked back over the last six years, and I am pleased to report that we have been somewhat incrementally increasing the numbers. We have moved by 20% over those six years. I suppose that, simplistically, we are getting there, but it is taking us time.

That brings us to the in-year situation. This year alone, since April, we have run 10 recruitment competitions for a range of posts and a range of opportunities, but, even with our most recent financial auditor opportunity, the applicant numbers were again fairly restricted. However, we have two appointees joining us — one this month and one next month — so we are getting a little bit of traction. Colleagues in other regions indicate that the market is changing for them, so we hope to start getting a bounce from that as well, because we still have vacancies in that space. The market is exceptionally competitive, to be frank, and has been for a number of years. We have been making gains, and we are getting there, but we are not up to the level that the Committee has supported us for. That is the challenge for us, and that has led to in-year underspends.

The Chairperson (Mr Chambers): Thank you. Have you considered any other means by which you could raise further revenues in the future?

Mr Allen: Yes, Chair. I will take that question in the first instance. We bring in income just short of £3 million, and most of our income is from hard-charged audits. Members will probably know this, but, by way of context, the situation is that a proportion of our audits are hard-charged. Most are notionally charged, and that is set out in the legislation. That is quite old legislation: the Audit (Northern Ireland) Order 1987. It provides that the C&AG "may charge", but it also provides circumstances where the C&AG cannot charge. For instance, with central government Departments, we cannot levy a hard-charged fee.

We are somewhat restricted in the income that we can raise. The £2·9 million — it will be £2·7 million next year — breaks down to roughly £1·7 million from central government and the balance of just over £1 million from local government. We hard-charge all our work in the local government sector. That creates some difficulties for our clients, who have to write a cheque or make a bankers' automated clearing services (BACS) transfer or pay us, relative to those who note it for notional purposes. To be absolutely honest, we are as efficient as we can be with every audit, regardless of whether it is hard-charged or notionally charged. The scope is somewhat limited.

The previous Committee, in its legacy report, encouraged us to take a fresh look at the extent to which we could and should hard-charge. We prepared a fairly extensive paper setting out the current position — Brian and his team drafted it — that we brought through our governance structure from the senior leadership team into our board. If we were to charge more, we would need legislative change. If the Committee would like us to look at that, we would be happy to bring something forward. However, I must emphasise the point that, I think, I made to the Committee a few weeks ago: in many respects, it is public money going round in a circle. There is another school of thought that says, "If you funded us gross, we would notionally charge everybody, with no detriment to the public purse". Finances would be balanced. We are looking at that.

As, I think, I have said to the Committee — you will recall our building — we have our tenanted space that we are working hard to fill with tenants on all the floors to maximise our return on that investment. We also provide, at the moment, free use of the training facilities to the wider public sector, so we generate an efficiency for that. Again, we could hard-charge for that, if the Committee wanted us to consider that. It is the thin end of the wedge but would be an income stream nonetheless.

The Chairperson (Mr Chambers): Thank you for that.

Ms Forsythe: Thank you all for coming today. The work that you do — the scrutiny of public-sector spending — is so important, and the Assembly really needs the work of the Audit Office to continue at its high standard to assist us in our scrutiny work.

Going into 2025-26, there is a 7% increase. That looks high in the overall setting of the Northern Ireland finances, compared with other things. You indicated — I asked about this before — that you will be underspent on the budget for this year, 2024-25, yet you have been able to function: you have not missed any deadlines, the accounts have been audited and you have been able to service your commitments to the Assembly. If you are operating at that level this year, why do you need so much more for next year?

Mr Allen: I will respond initially on the underspend, perhaps, and then hand over to Dorinnia.

Thank you, Diane. When I previously came to the Committee, I explained that the 2024-25 October monitoring round had just commenced. We have surrendered £629,000 of our budget as part of that monitoring return. We said at an early stage last year that we would be prudent in our handling of the finances that we received and would, of course, surrender any underspend to the Consolidated Fund for wider use across public services at the earliest opportunity. We have done that, and the reasons for that surrender are predominantly, to go back to the earlier part of our conversation, to do with staff vacancies. There is another part to it, however.

Diane, your comments about servicing the Committees are interesting, because, last year, your Committee gave us additional funding to improve what we do with the Committees. Maybe Dorinnia will speak about that in a second. To be frank, we have only scratched the surface of that. You gave us in the region of £0·5 million extra for this year to spend on audit quality and servicing other Committees. We have used very little of that money and have ended up handing most of it back because we cannot get staffing up to the level that we would like. For instance — I will shut up in a second — we published a report yesterday about education. Unsurprisingly, we think that the Public Accounts Committee (PAC), which has primacy, would be keen to be first to consider that, but, if not, I suspect that the Education Committee would be keen to hold some kind of inquiry on it. I am sorry for being so presumptuous; it is a topical issue. That being the case, of course, we need to stand ready to have a team to work with the Education Committee. I use that as an example only because it is very recent.

Ms Carville: I think that I outlined to the Committee when we were in front of you most recently that approximately 70% of our staff resource was occupied with our financial audit work. That is a statutory responsibility. Quite a lot of the deadlines for that work are defined in statute. That means that we have certain pressure points in the year, the biggest one being before the Assembly's summer recess. We have missed some deadlines in the past two years, which is really unfortunate, because we simply have not had the staff complement to fulfil all of that work. During the past two years, we have had to write to Departments to say, "We do not have the staff complement to submit to the deadline". That is not a position that I want to be in, and I certainly do not want it to get worse.

Our other big work stream is our public reporting work, and we report primarily to the Public Accounts Committee. As Rodney said, if it does not wish to hold an inquiry, we then report it to other Committees. The Public Accounts Committee stood back up in March this year. It has had a rich back catalogue, because the Assembly was down. Therefore, a lot of its inquiries to date have been from a back catalogue of work that we were able to continue when the Assembly was not functioning. Obviously, that is not the case now. You will be well aware that we have a Public Accounts Committee that is hungry and is holding lots of inquiries. I certainly need to keep that work stream going to enable it to have a full programme of work.

As Rodney said, when the Assembly came back, a lot of Committees came to us outside of PAC and asked us to come. I had to say no in the early part of restoration to those Committees because I simply did not have the staffing complement to go to them. Again, that is not something that I would like to do in the long term. This Committee gave us the money to do that, but, as Rodney said, we simply did not have the staffing complement to carry that out. We were trying to service PAC primarily. That is something that we would like to do. I know that the Public Accounts Committee has now released a number of reports. We anticipate that we will be called on to make sure that, as you suggested, that scrutiny role is fulfilled across this institution. If we were in a position to service those Committees, that would certainly be to the benefit of governance and accountability. It comes back to staff and the ability to have a pipeline of products — if I can be so crass — to service those Committees.

Mr Brian O'Neill (Northern Ireland Audit Office): I will add a point about the products that Dorinnia mentioned. One of the excellent products that we produce every year is our good practice guides. They are well received by the public sector. If there were reduced funding, those might be one of the first things that we would have to not progress with.

Mr Allen: I will finish out your question by circling back to 2025-26 and your reference to 7% or, as we have presented it, the 6·4%. About 2% of that is on contracted increases to partner firms, which are firms in the private sector that we work with. Audit fees have been increasing significantly. Higher standards, more scrutiny and audit quality are driving those up. When we strip that out of our ask to the Committee, it probably leaves us in the region of a 4% year-on-year increase, which, arguably, is more in keeping with what you might expect.

Ms Forsythe: For clarity, you say that you are at a stretch to meet your statutory requirements on financial audit. You are already stretched and at risk, and you are being prevented from taking on the extra work with the Statutory Committees on top of that, so the pressure is real.

I have a further question about the work that is contracted out, which you mentioned. When you look at the increase across the board, you see the increase in your direct staff cost, but, as you said, a significant increase is projected for work that is contracted out. Could the volume of private-sector work that you engage in be reduced in order to reduce costs? It brings us back to the same question: if you cannot get the staff in-house to do it, how does the work get done?

Ms Carville: We have been looking at that internally, because there are a lot of things at play here. The sheer number of private-sector audit firms that are now in the audit space locally is reducing, so that gives us challenges for that work as well. For those that are in the market, their costs are increasing. We have been looking at this from a number of angles, including value for money to the public purse, because we saw quite a significant rise in costs. To enable me to think about bringing more work in-house, I need more staff to service it, so it is a somewhat circular position that we are in until we get our staffing complement up. We think that there is scope to provide more value for money on the audit function, if we can get our staffing complement up.

I digress a little, but we are seeing — Rodney alluded to our sister audit agencies maybe seeing this ahead of us — the market potentially starting to change. We have had two recent recruitment rounds, and we are in application stage. Our applicant numbers are double what they were in previous rounds of recruitment. There are probably a lot of factors at play, which we can talk you through in due course. The ability to get staff in is certainly looking positive at this stage.

Mr Mathison: I have a question from a slightly different angle on this. In your corporate plan, you are very focused on improving outcomes and accountability. Is the budget increase that you are asking for likely to contribute to that? Would you be able to deliver more on that ambition with the increased budget?

Mr Allen: Yes, 100%.

Ms Carville: Absolutely.

Mr Allen: It is difficult for us to come to you to ask for more next year when we are underspending. We realise that. However, if we can bring our recruitment levels up to where we want them to be, we will make full impact.

Ms Carville: We are already starting to put changes into the system with regard to governance and accountability. I have been in post for two years, and you look at things with fresh eyes, if you like. One of the things that I realised is that there has not been a process whereby we keep track of Audit Office recommendations on public reports in the way that we do on financial audits. We have now put in place a system where they will be monitored and progressed through audit committees and so on going forward. That should help with improving governance and accountability and keeping track of outcomes. We have further work that we wish to do with the Public Accounts Committee on revisiting its recommendations, similar to how other jurisdictions do that. That is in the early stages of consideration. That is what we are driving to do. It is to really improve outcomes and, ultimately, improve public services.

Mr Mathison: Do you anticipate doing that not just with PAC but with all the Committees, so that, as a matter of course, you will update Committees on the tracking of outcomes on those reports? Is that something that you would like to see happen?

Ms Carville: Yes, absolutely. We issued some departmental guides to each of the Statutory Committees in September for the House rising again after the summer recess. That has a summary position of all of our work relevant to that Committee. It allows the Committee to see what we are doing relevant to it. We expect Committees to be briefed on any reports going forward, and, as I said, we would love to be in a position to go and give evidence to Committees if called.

Ms Ferguson: Staffing seems to be critical for you to progress the strategic plan and the key actions. Staff is the issue. You mentioned the rounds of recruitment that you do. Hopefully, the two additional staff members who have been brought in recently will be involved. Are there any other measures that you are taking to ensure that you can move forward with a full complement of staff?

Mr Allen: Thank you, Ciara. I probably undersold it a little in my earlier comments, but the past four or five months have been really encouraging and really exciting in many respects. I think that I have talked to you about it before. We have brought in brand-new trainees and apprentices. The two members of staff whom I talked about are purely on the financial audit — the accountants. We also have two new members of staff joining us on performance audit, and they effectively come from a non-accountancy background.

I am also delighted that, in the Public Gallery behind me, we have a new head of people and organisational development, who joined us just last month. Jill has already shared with us some excellent ideas about how we can improve our offering and improve things such as employment flexibility. I like to think that we offer excellent terms and conditions, but, looking at it with fresh eyes, she has given ideas to us at senior level about how we might use data analytics to enhance a more targeted and diverse range of applicants that we might reach out to, potential developments in our brand and how we might reach out better to schools and universities. Again, we thought that we had been doing well there, but there is probably much more that we can do.

There is a range of things. I have a list in front of me, and, if that all comes together, I am optimistic. Again, it is just about that lead time, because every recruitment process takes time to get the talent into the organisation.

Ms Carville: We have been doing quite a lot around our brand and around corporate videos targeted at different demographics of staff. We are going out to the universities. The last time that I was here, I mentioned that we were recently at the recruitment fairs at Ulster University — at the Magee and Belfast campuses — and at Queen's University. We are also working with the accountancy professions in both of those universities. We are about to offer a three-month placement in the office to two of their master's in accountancy students, which ties in to the programme that Queen's offers.

Our most recent rounds of applications, which I referred to, show that the additional brand presence that we have is starting to take effect. As with all of these things, it takes time. I agree with what Rodney said on the work that Jill has been doing: we can always improve. We can always do more and always adapt. Certainly, we are open to change and to trying new things, and we are certainly starting to see some of that come back.

One of the things for our work — I have to say this to members — is that having the institution back up and running is a positive for the work that we do and how that is attractive to potential members of staff. That is a positive for us as well.

Mr O'Neill: Five years ago, the Audit Office had a full-time equivalent of 100 members of staff. We have been gradually growing that over the past number of years. Rodney alluded to 33 separate recruitment competitions in the past three years. We are sitting at around 120, and it is our aim to get beyond 130.

Mr Allen: We are passionate — sorry, folks, we can all talk about this for a long time. I have just been looking at the statistics, because Dorinnia gave me a bit of time to glance at them: 33 recruitment competitions in three years for a small organisation is significant. We have introduced 49 new people into the organisation in that period. We have also lost 32, with people moving on to other opportunities or retiring, so there has been a fair bit of change. We have increased by 17 in two years, and that is quite a machinery for a small organisation, relatively speaking, compared with other audit institutions.

Our colleagues in the South have around 200 members of staff. Wales has approximately 280; Scotland has about 330. The National Audit Office (NAO) is on a completely different level, in London, at 950. We are, proportionately, very small. If we could get to a better position, we might want to talk to the Committee a bit more about that in the years ahead, but I had better walk before I run.

Ms Ferguson: Thank you.

The Chairperson (Mr Chambers): John, would you like to come in now, please?

Mr Blair: Yes. We have covered quite a bit of ground there. Staying on the theme of recruitment, the only additional question that I can ask is this: if there is evidence that the numbers of applications are increasing, can you give us a timeline for when you expect to have the vacant posts or required posts filled in relation to next year's budget?

Mr Allen: Thank you, John. That is a really good question. I do not have a timeline to hand, but we have plans in the next four or five months of this financial year to recruit people to enable us to get up to that magical 130 full-time equivalent (FTE) figure. I have to be absolutely honest with the Committee: I am sceptical about whether we can do that. Whilst we have just surrendered £629,000, I can see there being a bit more of an underspend between now and the end of the year solely for the same reasons. Sorry, this is a long-winded response, but I am doubtful that we can get on the front foot by 1 April, but we will do our best to fill the positions. That is why we ask you to support us in the budget in order to give us the opportunity to incur those costs in the future.

Mr Blair: Yes, for the following year. I totally understand that. Thank you.

The Chairperson (Mr Chambers): John, are you content?

Mr Blair: Yes, thank you.

The Chairperson (Mr Chambers): Thank you very much for that, members.

Dorinnia, the Committee received a letter from the Department of Finance this morning. We have not had much of a chance to consider it, but I understand that you may have had sight of it. I invite you to comment on the elements of the letter that concern your organisation.

Ms Carville: Yes, sure. I received a copy of the letter directly just after 9.00 am as well. From the comments that have been made, you will appreciate that the letter lays out analysis about our ask with which we concur. As the independent auditor, I did not expect to receive comments around the operational running of the organisation, but, that said, I respect the Minister's comments, and I wish to speak to them.

There is reference to an expected increase in income from outside sources. However, at this stage, we are a wee bit perplexed about what that refers to, because our income is due to go down next year. Perhaps it is about an expectation based on what we discussed with you, but, certainly, no expected increased income has been factored into those figures.

The consideration of a vacancy management plan gets into the operational management of the organisation. Hopefully, we have outlined to you that our plan, if you like, is to fill those vacancies as soon as possible to enable us to service all the work. In regard to:

my understanding at this point is that I have statutory audit work that I must do. The PAC, as I understand it, has plans for us to service it, as we have been doing, to give it quite a rich and fulsome pipeline of products. Similarly, we have outlined before that we believe that Committees want us to service them as well. I am trying to fill vacancies for that level of planned activity. That said, as has always been the case, should the Audit Committee or the Public Accounts Committee want us to do less in that regard, I will absolutely respect that decision and work within the staff resources that I have.

The Chairperson (Mr Chambers): Thank you very much for making those comments at such short notice.

Is there anything else that the delegation wants to bring to our attention before we conclude the session?

Mr Allen: We could talk for ages, Chair.

The Chairperson (Mr Chambers): I see smiling faces and hear silence; that is good.

Ms Carville: I am sure that you probably have other things to do. Thank you.

The Chairperson (Mr Chambers): Thank you very much or coming along this morning. It has been useful, and we appreciate your time.

Ms Carville: Thank you very much, everyone.