Health and social care retained £135m that would otherwise have been re-distributed: Auditor Kieran Donnelly

Mr. Kieran Donnelly CB, Comptroller and Auditor General (C&AG), today published a report on the results of his audit of the annual report and accounts of the Department of Health for 2020/21.

The report highlights the C&AG’s disagreement with how the Department has accounted for £135 million of spending.

Mr. Donnelly said: “I am concerned by the number of examples of the Department of Health and the wider HSC sector applying an accounting treatment for liabilities that does not meet the Department of Finance’s budgetary guidance or International Accounting Standards.

"The Department contends that this does not represent an attempt to circumvent DoF budgetary guidance in order to retain funds and I have no evidence that this is the case.

"Nevertheless, the effect is to retain a significant amount of funding, more than £135 million, within the HSC sector that would otherwise have been re-distributed within the Northern Ireland funding bloc or returned to the Treasury.”

The report focuses on the classification of expenditure items as 'accruals' rather than 'provisions' which has the effect. from an accounting point of view, of 'securing funds from existing budgets for future payments'.

In his report Mr. Donnelly states that the DoH and the Trusts have 'recognised liabilities in their financial statements of more than £135 million. I consider there to be sufficient uncertainty regarding the timing and amount of these liabilities for them to be classified as provisions under the definitions in International Accounting Standard (IAS) 37, 'Provisions, Contingent Liabilities and Contingent Assets'."

He points out that IAS 37 states that a 'provision' should be recognised when there is 'a present obligation resulting from a past event, payment is expected and there is uncertainty over its timing or amount'.

He adds that while there is no specific definition of an 'accrual' in International Financial Reporting Standards 'accruals' are recorded in the accounts as 'a current liability as there is little, or no, uncertainty over the timing or amount of the transaction creating the obligation'.

"I have not qualified my audit opinions on the financial statements of DoH or the Trusts, except for the Northern Ireland Ambulance Service, as otherwise the matter is beneath the levels of materiality for the accounts. Nevertheless, I believe it to be of sufficient importance to be drawn to the attention of the NI Assembly.

"By applying this accounting treatment, DoH was able to utilise funds in the current financial year within its budget that would otherwise have been redistributed to other departments or returned to the Treasury," he states.

The Auditor General said the Department has assured him that should these liabilities remain outstanding at March 31, 2022 it will 'revisit the accounting treatment applied to ensure that it remains content that it is appropriate'.

"I intend to monitor the situation in the coming months and I expect to see a payment of these retained funds before March 31, 2022," he said.