Kieran Donnelly profile

Posted on March 23, 2018 · Posted in Accounting & Business

Kieran Donnelly became involved in public audit because a job “came up”.  But, perhaps to his surprise, he enjoyed the work.  “It was exciting in the early days,” he recalls.  “I was fortunate to be involved in some value for money reports in my early career and I saw the value added from those and that got me excited.”  Around that time, the 1980s, public sector auditing was becoming a lot more important.  A scandal over the UK’s Crown Agents – which in the 1970s had placed colonial governments’ funds in dubious investments – led both to a growing recognition of the need for professional accountants in the public sector and for the reform of the auditing of public bodies.  In Britain, the National Audit Office was formed and in Northern Ireland the Exchequer and Audit Department became the Northern Ireland Audit Office.  Since 2009 the NIAO has been headed by Kieran Donnelly, as the Comptroller and Auditor General.

 

“My purview covers both financial audit and value for money and I enjoy all of it,” explains Donnelly.  “If there are no issues I am quite hands off, but if there are serious issues I am pretty hands on.  For example, when I qualified my audit report on the Department for Economy accounts in relation to RHI [the Renewable Heat Incentive], I was hands on in terms of how we reported it and the key points we wanted to bring out.”  RHI has been one of Northern Ireland’s most expensive public sector mistakes of recent years, leading to potentially hundreds of millions of pounds in liabilities through promised inducements for owners of commercial properties to switch to wood burning stoves in place of other, more heavily carbon emitting, heating systems.  But the lack of controls produced the ‘cash for ash’ scandal, high costs and the collapse of the Northern Ireland Executive.  The affair was – and still is, with a public inquiry ongoing – politically explosive.  Donnelly was forthright in his criticisms in an audit report in 2016 of how the scheme worked, qualifying his audit opinion on the basis that some expenditure had not been approved by the Department of Finance and Personnel and that he was not satisfied that systems controls were adequate.  “If there are serious issues, I have to call it as it is,” says Donnelly.  “I will not shy away from making the strong points that need to be made.”

 

Deciding how to deal with politically contentious issues can be challenging for public sector auditors, who have to make careful judgements between making honest conclusions and avoiding saying things that could be regarded as politically partisan.  “The one restriction on my work is that I am precluded from questioning the merits of policy objectives,” Donnelly explains.  “It is important that we do our value for money reports in the real world, so we can’t suggest solutions that are not politically feasible.  We have a close relationship with the Public Accounts Committee of the Assembly, so we don’t operate in a bubble, but in a political context.  It is important that if reports go to the Public Accounts Committee then the committee doesn’t break down on party political lines on ideological issues, so the committee can then focus on implementation.  We stay completely clear, completely neutral, of party political ideology.  But if a policy isn’t working we would certainly draw public attention to implementation.  That might lead to a policy review.  There is a very fine line.  If there is a lack of clarity around policy, it is perfectly within my remit, or if there is a conflict of objectives – and a policy might have multi objectives and the priorities between them not properly teased out.  Or if there is a policy that is constructed on the hoof, without any proper evidence base, that is perfectly within my purview.  So there are lots of things around policy that are perfectly legitimate for me as auditor to look at.”

 

The absence of a functioning Northern Ireland Executive is at present an impediment to the efficient management of public finances, particularly with regard to the NHS, which is in serious need of reform.  “We did a report in 2016 on health service reforms,” points out Donnelly.  “I think there is consensus that across the system that we need radical transformation.  Without an Executive there is a little bit of momentum lost there.  That, in any event, is a long term project and it will take a number of years to really reform health the way it needs to be reformed.”  Despite Stormont’s suspension, the Audit Office continues to audit departmental accounts and produce value for money reports, but there are concerns that these will have less bite than if the Assembly were still functioning.  “The Assembly has been excellent in giving my reports traction,” says Donnelly. “I was around under direct rule, when my reports went onto the shelf and were not very successfully rolled-out, with recommendations implemented. That situation significantly improved under devolution.”

 

Northern Ireland’s public sector also needs continued political momentum for other reforms to be pursued that assist departments and other public bodies to work in a joined-up way.  “This was starkly illustrated in an OECD report a few years ago,” explains Donnelly.  “The civil service has now really begun to work as one, not in the separate silos.  I think that is hugely important, particularly in dealing with deep-seated social issues that straddle the functions of government, for example as shown in our recent report on homelessness.  That is about much more than bricks and mortar: it is about how government is working in a unified way to deal with the needs of vulnerable people in our society – whether it is people with a mental illness, or an alcohol problem.  Another issue is skills and capability.  We see so often the public sector getting its eye wiped by quite savvy private sector operators, particularly when we are dealing with complex constructs, as we were with PPP [public private partnerships]: either the public sector skills-up to deal with those complexities, or else we deal with the private sector in simpler ways.  If you are going to construct complicated delivery mechanisms, you need to back that up with a very sophisticated skills base.”

 

The good news is that the professionalization of public sector accountancy is having a positive effect on the quality of reporting.  “Technically, public sector accounts are of much better quality now than in the past,” says Donnelly.   “Where there are problems, they tend not to be on the accounts proper and more perhaps in governance issues.  Sometimes if the reader goes through the governance statement that is more telling than the core accounts – things like handling conflicts of interest and compliance with procurement rules.  There will always be problems, but I think what is important is that where there are problems, other parts of the system learn from it and the learning is shared across the public sector.”

 

One of the NIAO’s most recent reports was a good practice guide on corruption.  “The main driver was to send a message that there is a danger of complacency and there is a need to counter the perception that we are all clean, that we don’t have any fraud and then a problem comes to bite,” explains Donnelly.  “It can get into the system without anyone noticing.  Once it is in, it is very difficult to eradicate.  By international standards, we are pretty corrupt-free.  But almost every year or 18 months I will come across a serious example of unethical behaviour somewhere in the public sector.  There are common themes: basic controls not being followed, the tone from the top, the culture of organisations, conflicts of interest not being acknowledged or managed.  A background factor [to producing the guide] is the transfer of planning responsibilities from central to local government.  We want to make sure that with regard to planning that controls are in tip-top condition in local government.  There is always a particular vulnerability in planning to bribery and corruption, hence the needs for controls to be particularly watertight.”  And the role of public sector auditors, is not just to respond to problems, but also to anticipate and prevent them.  It is a role that Kieran Donnelly clearly enjoys.

 

 

Kieran Donnelly’s career

 

Kieran Donnelly joined the Exchequer and Audit Department of Northern Ireland in 1983 as a graduate trainee, with a degree in social and economic history.  He qualified while working for the department, which

became the Northern Ireland Audit Office in 1987.  A series of promotions led to Donnelly becoming the NIAO’s head of value for money audit and then head of financial audit.  He became Comptroller and Audit General of Northern Ireland in 2009.  Away from work, Donnelly is a keen hillwalker, mostly in the Mourne mountains, and cyclist – last summer he cycled the Great Western Greenway from Westport to Achill Island.

 

 

 

The Northern Ireland Audit Office

 

The Northern Ireland Audit Office was formed in 1987, as part of the strengthening of public audit across the UK.  It has an annual budget of around £8m and a staff of ??, of which 60 are qualified accountants.  The Comptroller and Auditor General is responsible for authorising the issue of money from central government funds to Northern Ireland government departments and for the financial and value for money auditing of central government bodies, including health and social care trusts, and for the auditing of district councils.  Donnelly is supported by a senior management team of a chief operating officer, two assistant auditors general and six directors.