Another unflinching judgment on Ilex

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Last week’s damning report on Ilex by the NI Audit Office (AO) should be seen against the background of the BDO report last year.

Consultants BDO had been asked by the Office of First Minister and Deputy First Minister to assess the performance of Ilex from its establishment in 2003 through to 2010. Their report, published in February 2011, painted a stark picture. If the findings had been taken seriously and acted on at that time, the present debacle might never have arisen.

The Ilex Urban Regeneration Company (URC) was set up in 2003 on the initiative of Northern Ireland Office Minister Ian Pearson “to plan, develop and sustain the economic, physical and social regeneration of the Derry-Londonderry City Council area,” with specific emphasis on the former security bases at Ebrington and Fort George. It was anticipated that development of the two sites would “fuel partnership-led drives to capitalise fully on tourism, the Walled City heritage, education and the revitalisation of the river front”. Ilex would prise away the dead hand of the public sector and harness the dynamism and energy associated with private enterprise to the task of regenerating Derry.

The URC came under the aegis of the Office of First Minister and Deputy First Minister and the Department of Social Development. Like all bodies dependent on public money, it was subject to periodic assessment. BDO’s assessment was that “Ilex has underperformed over the seven-year period reviewed. Stakeholders were unanimous in the need for change.” The organisation, it observed, had spent £21 million of public money but was unable to demonstrate any adequate return.

In a passage which has acquired new resonance since the revelations of last week, BDO reported that, “Sponsoring Departments [OFMDFM and DSD) raised concerns regarding the ability of Ilex URC to deliver accurate and substantive financial information. This view was reflected across a number of areas, including business case preparation, budgetary management (with forecasts viewed as repeatedly being too ‘aspirational’) and risk management.”

BDO compared Ilex unfavourably with regeneration projects in Sheffield, Laganside and Newry. The Newry project did not involve a specially-created body: development was handled by existing agencies, including Mourne Council.

The report continued: “The organisation has been the subject of criticism from a variety of stakeholders since its establishment. This has encompassed project and financial management, the need for more effective corporate governance, and the lack of progress with regard to physical regeneration within the city, etc.

“Our review has tended to support these criticisms, but recognises the positive momentum of the last couple of years.

“We are clear that the current window of opportunity for further improvement must be grasped fully by Ilex URC and that the consequent regeneration outcomes desired by all key stakeholders must be achieved.”

The reference to “positive momentum” was highlighted in the responses of mainstream politicians and commentators, allowing an impression to be created that the report’s dominant tone was of praise for Ilex on having overcome past difficulties. This was misrepresentation. There was little acknowledgement of BDO’s main conclusion - that “Ilex should have a target defined lifespan.”

The consultants recommended that Ilex should continue in operation for the present. The winding-down process should begin in 2014 and be completed by 2016. Thereafter: “The regeneration policy remit predominantly resides within DSD at the regional level, although the emerging preference...is towards local authorities, both nationally and internationally. Derry City Council (or DSD) could therefore ultimately become ‘owners’ of the regeneration planning objective...”

This implicit recommendation has been ignored to the extent of remaining virtually unknown. Now, 13 months on, has come another unflinching judgment on the URC. The window of opportunity espied by the consultants in February last year was obviously slammed shut in the interim without any opportunity having been grasped.

The problems highlighted in the AO report didn’t arise from momentary lapse or individual incompetence. The breakdown in financial control has been “systematic.” The report details unauthorised payments in respect of six separate projects - to the total tune of £404,687. One of the projects was the UK City of Culture bid, on which more than a quarter of a million pounds of public money was spent without proper authorisation.

Standard procedure was likewise ignored in the expenditure of more than £25,000 on design fees for the refurbishment of Ebrington.

No authorisation was obtained before the payment of a £28,836 bonus to former chief executive Bill Kirk - on top of a salary of £110,000 a year.

The report revealed that a director hired in September 2010 for a position bench-marked at £57,000 a year was in fact paid at £80,000, without any record of debate much less approval for the £23,000 a year, 28.75 percent pay rise. Public sector workers subject to effective wage cuts as part of strategy for dealing with the budget deficit must have looked on in astonishment. Or would have if the arrangement hadn’t been kept under wraps until the Audit Office blew the whistle last week.

Part-time chairman Roy McNulty stood down in September last year. He had been hired in October 2007 on £800 a day for 30 days a year - £24,000 pa. But BBC Newsline subsequently revealed that Ilex had actually paid him £103,600 in his first 15 months, or around £80,000 a year. Ilex explained that it had turned out that the job entailed more days a month than had been anticipated. So a 300 percent wage rise was nodded through.

This arrangement was known to OFMDFM. Ministers were also aware that the time McNulty spent travelling to and from his home in the Cotswolds was now being counted as work-time. One civil servant noted in a memo that this was “not normal practice” but that it could be regarded as “appropriate” in McNulty’s case since he was using his time in transit to prepare himself to conduct Ilex business or, on the way back, to ponder the business completed. (Derry workers commuting to Belfast for civil service jobs might consult their local OFMDFM Ministers for advice on how they, too, might avail of these conditions.)

In addition to treating his travel time as working hours, Ilex agreed to pay the costs of McNulty’s Cotswolds-Derry commute. In February last year, the month the BDO report landed on Ilex’s Ebrington desk, Her Majesty’s Revenue and Customs ruled that McNulty should all along have been paying tax on this expenditure. The liability for the three years from 2007/’08 to 2010/’11 came to £30,735. There was nothing in McNulty’s conditions of employment to require Ilex to pay this bill. But the company coughed up anyway.

Eamonn McCann writes in the Derry Journal every Tuesday.