Credit Card Abuse

– in the Northern Ireland Assembly at 2:00 pm on 1 October 2002.

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Photo of John Dallat John Dallat Social Democratic and Labour Party 2:00, 1 October 2002

I beg to move

That this Assembly notes the recent abuse of credit cards used in the payment of expenses by personnel in Government agencies, as contained in the reports by the Comptroller and Auditor General, and calls for a comprehensive review of how Government Departments and their agencies settle their accounts.

I tabled this motion because, as Chairperson of the Audit Committee and a member of the Public Accounts Committee, I am concerned that the practice of issuing credit cards in the public sector is becoming a threat to the normal financial controls that must operate when taxpayers’ money is being spent. The threat to financial controls leading to misuse and abuse of credit cards is at two levels. First, there is evidence, which I shall deal with later, that credit cards are being used to subvert accountability to the Assembly for the spending of public money. That is happening because credit cards can be used to circumvent the provision of financial details in invoices and receipts, which are normally used to verify the integrity of transactions.

Secondly, it is also clear that the credit cards are particularly open to abuse in the area of travel and hospitality expenses, which are notoriously difficult to control, even in the best of systems. When there is extensive use of credit cards, there is a correspondingly significant increase in the risk of impropriety. It is important for the Assembly to highlight that problem at as early a stage as possible and to challenge Departments to provide us with assurances that they will tackle it vigorously before more harm is done to the public’s perception of financial integrity in the public sector.

To gain some idea of the usage of such cards, I have submitted written questions to all Departments and the Assembly to seek details of the number of cards issued and the expenditure incurred on them during 2001-02. Some very interesting statistics emerged from my enquiries, many of which raised more questions than answers. For example, throughout the public sector, 201 credit cards have been issued, with expenditure of more than £1·5 million having been incurred on them. In other words, approximately £7,500 was spent on each card. The Department of Agriculture and Rural Development has incurred the most on its cards — almost one third of the total credit card expenditure. In contrast, some of the larger Departments have no expenditure and have not even issued any credit cards.

One surprising finding of the exercise was that the Assembly had issued more cards than any other body. In 2001-02, it had 45 cards in use, which was more than all the main Departments put together. It has also spent vastly more on credit cards than any other Department, excluding the Department of Agriculture and Rural Development — some £230,000. I highlight that because, as everyone in the House will agree, we must be absolutely sure that, when we exercise our scrutiny role over the Civil Service Departments, our own practices and procedures must be beyond reproach and fully transparent. I recognise that, if properly controlled, there are benefits from the use of credit cards. That is worth repeating. Credit cards can have benefits, if they are properly controlled.

The Government Purchasing Agency operates a card system for Departments that is intended to reduce the cost of purchasing transactions. That is eminently sensible, as the scheme is firmly underpinned with careful guidance on how and when the cards can be used, and I fully support that. It is not my intention to try to turn the clock back and stop the use of credit cards; my concern is that they must be properly controlled. Credit cards are open to abuse, therefore the operation of those controls must be subject to careful safeguards and checks. At present, the problem does not receive sufficient priority from some Departments.

Let us review the evidence to date. The first time the abuse of credit cards came to my attention was during the Public Accounts Committee’s review of the Fire Authority. During the evidence session, the Committee heard that a Fire Authority official had used the departmental credit card to cover travel costs incurred by a member of his family — he used the card for personal purposes. To compound the error, the official subsequently forgot to pay the amount due, until it was drawn to his attention. That incident drew my attention to the potential pitfalls of using credit cards.

The next time that I came across misuse of credit cards was during the Public Accounts Committee’s review of the Northern Ireland Tourist Board. Once more, there was evidence that an official in New York was using a card for personal purposes. However, I shall not bore Members with the details, as the Committee will report on the matter later in the session.

The latest case of credit card misuse is in the "Into the West" project. The Department of Enterprise, Trade and Investment is carrying out a review of the matter and will produce a report soon. However, such are the alleged abuses in the scheme that they have already reached the newspaper columns. I shall not comment any further on those cases because the allegations have yet to be formally reported. The Public Accounts Committee will undoubtedly consider any such report.

However, common themes emerge from each of the cases to which I have referred: the use of credit cards for personal purchases; poor controls in the monitoring of credit card expenditure; and poor backing papers in support of payments.

One of the strengths of the Northern Ireland system is that the average man in the street has confidence in the integrity of public administration — I cannot emphasise that enough. That confidence must not be taken for granted. It is a fragile plant that could wither in the face of repeated failures of financial control and impropriety. Therefore I call on the Minister of Finance and Personnel to give the problem the highest priority before it does more extensive damage to the credibility of our beloved institutions. I would not be surprised to be told by the Minister that a great deal of work is already under way.

Photo of Ms Jane Morrice Ms Jane Morrice NIWC

I call the Deputy Chairperson of the Committee for Finance and Personnel, Mr Conor Murphy.

Photo of Conor Murphy Conor Murphy Sinn Féin

I welcome today’s debate. It is interesting that we are back to debating financial probity and accountability as, earlier today, the Audit and Accountability Bill was given its Second Stage. It appears that Members are back on track with such matters, as measures to ensure that financial probity, accountability and transparency were described as technical distractions yesterday, when we wanted money thrown at projects without any such safeguards.

I support Mr Dallat’s motion, and I echo his sentiments that credit cards when used in the right circumstances can be beneficial. The Public Accounts Committee has already raised the issue, and its concerns are well documented.

During the Public Accounts Committee’s evidence session with the Northern Ireland Tourist Board on 30 May, the Chairperson stated:

"Public bodies issue credit cards without proper control or guidance, and the cards have become a mechanism for bypassing the normal careful treatment of hospitality and expenses. They are given to staff who, for the most part, are not trained to use them; some officials, when they get their hands on a piece of plastic for which they are not personally paying the bills, seem to lose all sense of value for money and, in some cases, all sense of propriety."

Although I was not a member of the Committee at that time, I share those concerns. However, the problem is not unique to us. The trend towards increased use of credit cards is happening everywhere. There have been cases in Britain, which have been dealt with by the Public Accounts Committee at Westminster, in which credit card misuse has featured.

What is interesting about those cases, and cases that have been dealt with locally, is that credit card misuse is almost always associated with other major problems of impropriety — lack of financial control or poor standards of administration. It is generally a symptom of more serious administrative malaise, which is why it is always important that it be fully investigated and vigorously tackled.

The Public Accounts Committee has asked the Comptroller and Auditor General to be especially vigilant in examining credit card expenditure in his audits of all public bodies in the North. I am glad to report that he has undertaken to do that, which is reassuring. However, it is not enough, as audit — by its very nature — is retrospective. That is why the real burden of dealing with the issue falls on those who have responsibility for financial control in the day-to-day operations of Departments and their subsidiary bodies. That applies especially to the Department of Finance and Personnel, which, I am sure, shares the Public Accounts Committee’s concerns.

In the course of its work, the Public Accounts Committee requested the Department of Finance and Personnel to issue further guidance on the control of credit cards. I would like to hear an announcement from the Minister that adequately addresses the Committee’s concerns.

Photo of Ms Jane Morrice Ms Jane Morrice NIWC

I apologise to the Member for calling him as Deputy Chairperson of the Committee for Finance and Personnel, when it is the Public Accounts Committee of which he has recently become Deputy Chairperson.

Photo of Seamus Close Seamus Close Alliance

Like Mr Murphy, I commend Mr Dallat for tabling the motion. It comes at a particularly opportune time, as reports are being prepared that highlight what can only be referred to as "dubious practices". As elected representatives, Members have a duty to taxpayers. At Budget time, Members vote to allocate taxpayers’ money to various Departments, to be spent on legitimate purposes agreed by the Assembly. It is, therefore, incumbent on Members to ensure that taxpayers’ money is properly accounted for in all cases.

Earlier today, the Assembly agreed the Second Stage of the Audit and Accountability Bill, which will help to open up more accounts to the scrutiny of the Comptroller and Auditor General, enable him to better follow taxpayers’ money, and demonstrate transparency and accountability. This debate highlights the potential abuse of credit cards. Today, therefore, the Assembly is sending out a strong message that abuse of taxpayers’ money will not be tolerated. Indeed, zero tolerance will be the benchmark.

Credit cards are, undoubtedly, a convenient and less painful way of spending money — even one’s own money. However, a piece of plastic can make some people feel like millionaires. They can be tempted to dispense largesse as if there is no tomorrow, with the foolish belief that the end of the month is merely a mirage.

As guardians of the public purse, the Assembly must make certain that meaningful controls are in place to ensure, as far as possible, that abuse or careless expenditure cannot take place. It is equally important, should careless or inappropriate expenditure take place, to take strong action against any transgression. Those who have credit cards issued to them by Departments, or by the Assembly, need to remember that it is not their money. They should therefore think at least twice before using such a card. They must be in no doubt that they will be held accountable for its use and, certainly, for any abuse.

Regrettably, my experience on the Public Accounts Committee has shown me that, at times, a distinct lack of control seems to exist in the minds not only of those who have use of a card, but, more alarmingly, in the minds of those who have a financial control function. At times, they appear to have been remiss in exercising control and authority. A crazy situation arose in the Public Accounts Committee where attempts were made to convince the Committee that expenditure on a certain credit card was totally justified even though thousands of pounds worth of receipts were missing.

A credit card can fuel a bad attitude towards taxpayers’ money, and we need to change that. We must put the brakes on and rein in the big spenders by ensuring that proper controls are in place. A duty of care exists not only on those who have a credit card, but on those who issue them. They too are accountable, and they must realise that.

Credit cards can be and, at times, are a temptation. Those entrusted with them should learn the lesson from the Lord’s Prayer:

"Lead us not into temptation".

They should be assured that they will never be delivered from having to account for their expenditure.

I regret that the Minister of Enterprise, Trade and Investment is not in the Chamber. Yesterday, I asked a pretty innocuous question about credit card use for hospitality in New York. I want to make it abundantly clear to all Members that the reason so many questions have been asked of the Northern Ireland Tourist Board (NITB) is, unequivocally, the reluctance of the Department of Enterprise, Trade and Investment to answer fully questions posed by the Public Accounts Committee.

There is a lesson therein. When an accounting officer appears before the Public Accounts Committee, he has a duty to answer questions clearly and unequivocally, and to get directly to the point. There must be no attempt to avoid the issue, because that leads to many questions. That is why many questions have been asked about credit cards, and of the NITB in particular.

Mr McClarty raised the cost of such questions. The cost of those questions pales into total and absolute insignificance when compared to the damage the public’s confidence suffers when they realise that Departments have failed to exercise control over how taxpayers’ money is spent.

Let us examine some of the Public Accounts Committee’s reports. The ‘Report on Internal Fraud in the Local Enterprise Development Unit’ uncovered £200,000 of fraud. The ‘Report on the Brucellosis Outbreak’ at the Agricultural Research Institute found that more than £1 million had been wasted. A report on the community regeneration schemes has found some £8 million of loans. In the ‘Report on The Rural Development Programme’, the sum of money was some £50 million. The common thread that runs through those situations was a lack of control. The motion is about trying to impress "control" as the watchword and about emphasising that there is no moving away from the need to follow clear guidance and controls.

I welcome the Minister’s comment yesterday that credit cards

"are a perfectly legitimate means of dealing with public expenditure provided the procedures are in place to ensure accountability." [Official Report, Bound Volume 18, p283]

The core issue, as the Minister said, is to ensure that the people who use credit cards are accountable.

Given that the Tourist Board did not even know that its New York manager was using the card and that the Minister’s Department did not know whether instructions to stop using it had been issued or whether there had merely been discussion on the matter, I fail to understand how Sir Reg Empey can be satisfied that proper procedures were in place and that the manager was accountable. Control, control, control will lead to accountability. As elected representatives, we should settle for nothing less. I know and trust that the Minister will treat the issue with the importance that it deserves, and will introduce the necessary controls on the use of credit cards and the spending of public money.

Photo of Danny Kennedy Danny Kennedy UUP 2:15, 1 October 2002

I am pleased to contribute to the debate and will not speak for too long. It was unfortunate that Mr Close seemed to pre-empt the Public Accounts Committee’s report. That report will eventually make its way to the House where it will be given due and serious consideration.

Photo of Seamus Close Seamus Close Alliance

On a point of order, Madam Deputy Speaker. The Public Accounts Committee has already dealt with the issues to which I referred. The reports are in the public domain, and if the Member doubts that, I shall gladly provide him with copies.

Photo of Ms Jane Morrice Ms Jane Morrice NIWC

That is not a point of order.

Photo of Danny Kennedy Danny Kennedy UUP

At least Mr Dallat showed some caution when discussing the matter in the absence of the appropriate Minister. It might have been more reasonable for Mr Close to have waited until the Minister at whose Department his criticisms were aimed had the opportunity to respond in the Chamber. However, I understand that Dr Farren is the Minister who takes the lead on those issues, and he is in the Chamber today. I look forward to his response.

On behalf of the Ulster Unionist Party, I stress that the abuse of credit cards is inexcusable and indefensible. It cannot be justified in any circumstance, and any impropriety must be investigated and dealt with appropriately. We should allow the systems and procedures that have been put in place by the House, and by Ministers who are accountable to the House, to be followed before we establish ourselves as judge, jury and, perhaps, executioner. To ensure accountability, staff who are responsible for carrying a credit card should be given appropriate training and should take care to provide receipts for transactions whenever possible. I hope that the Minister will include such measures in any proposed new scheme or approach.

When commenting on this, people have a tendency to make allegations without producing evidence to back them up. There has been much public comment on the matter, and it cheapens the debate when Members resort to making such allegations in public. Members should not use the issue to promote themselves or to start a political vendetta. Unfortunately, the evidence suggests that some Members are intent on doing just that. I hope that such behaviour will be avoided in future. I look forward to the Minister’s response.

Photo of Conor Murphy Conor Murphy Sinn Féin

On a point of order, Madam Deputy Speaker. Mr Kennedy referred to political vendettas and possible motives. Has he ever declared an interest when Northern Ireland Tourist Board issues have been discussed and allegations made in the Assembly? He has frequently attacked some Members and defended others who have questioned those matters; however, I have yet to hear him declare an interest, in that he was a member of the Northern Ireland Tourist Board.

Photo of Ms Jane Morrice Ms Jane Morrice NIWC

The Member knows, as a former Chairperson of the Committee on Procedures, that Members’ interests are declared in advance in the Register of Members’ Interests. I am assuming that Mr Kennedy has done that.

Photo of Danny Kennedy Danny Kennedy UUP

On a point of order, Madam Deputy Speaker. It is important that I establish the fact that, as far as I know, I have registered that interest with the appropriate body.

Photo of Mr Mervyn Carrick Mr Mervyn Carrick DUP

In my circumstances, I can honestly claim not to be publicly or politically profiling myself for any forthcoming elections. Anything I say, therefore, is in the interests of the voter, the general public and — as Mr Close indicated — accountability. That is how it should be when it comes to the use or misuse of public funds.

In some ways, it should not have been necessary to table the motion. The vast majority of Government officials and agency staff observe the highest standards of financial propriety and are fully compliant with the guidelines for the use of credit cards. However, the issue has come to the attention of the Public Accounts Committee, and I want to emphasise to Mr Kennedy that there is ample evidence of credit card misuse in the public sector. It is clear from the Comptroller and Auditor General’s reports that the public sector’s use of credit cards is a growing problem.

Other Members referred to specific cases that have come to the Public Accounts Committee’s attention. Those cases reveal two weaknesses about the way in which some public bodies have handled the growing number of credit cards in use. First, cards appear to be issued without proper guidance for staff on their use. That is surprising. In those circumstances, it is little wonder that some staff have abused cards and attempted to circumvent the public sector’s normally strong controls for ensuring that payments and refunds of expenses are incurred properly and accounted for fully. That is strange. The evidence suggests, however, that in some cases there was a lack of knowledge about policy. It might be thought unnecessary to spell out to public servants that office credit cards should not be used for cash withdrawals or for personal expenses. However, as Mr Dallat said, experience shows that that does happen.

Moreover, credit cards are often issued to senior management, and it is especially regrettable that people in management positions were responsible for several of the recent lapses — not the tea maker or the canteen lady. They have no excuse for their actions. Their personal standards should have told them that they should not misuse or abuse public funds. Senior management should set an example in how to account for expenditure.

I am concerned about a second issue. Departments must realise that it is not good enough merely to issue guidance on the use of cards. It seems that, although comprehensive guidance was issued, procedures were not in place to ensure that staff were familiar with it and that they followed it. To monitor guidance and policy is insufficient. Action would have ensured that problems were identified earlier. Indeed, it might have prevented problems from escalating to a point at which they were so worrying as to threaten to discredit the use of credit cards altogether.

I do not want it to become necessary to ban or severely restrict the use of credit cards in the public sector. There is a good case for using credit cards for some transactions, so long as the normal trail of accountability for public money is not undermined. That must be emphasised.

Sustaining accountability is a challenge for Departments, and, by drawing attention to the problem today, it is to be hoped that Members will ensure that the Minister acts promptly to put the use of credit cards in the public sector on a sound footing and so prevent the escalation of the worrying problems that we have seen in the past two years.

It should not have been necessary to have this debate. However, the Public Accounts Committee has accumulated sufficient evidence on credit card abuse to support its call for a comprehensive review of how Departments and their agencies settle their accounts.

Photo of Sean Farren Sean Farren Social Democratic and Labour Party 2:30, 1 October 2002

On behalf of the Executive, I welcome the opportunity to respond to the motion. I listened carefully to the Members who spoke. In the past few months, I have noted the concerns of the Northern Ireland Audit Office (NIAO) and the Public Accounts Committee about the use of credit cards by public bodies.

I emphasise that propriety and proper standards in public life are vital for those who are involved in the work of Government. The Audit and Accountability Bill, which Members discussed this morning, demonstrates clearly the Executive’s intent to strengthen mechanisms for effective and stringent forms of accountability. The general welcome that the Bill received confirms that that intent is widely shared in the House.

The integrity of the processes of the institutions in Northern Ireland must be supported by the proper control by officials of the handling of public money, and that applies equally to the use of credit cards.

Several Members acknowledged that there are certain significant benefits in using credit cards for some types of transaction. Their use can be more cost-effective and efficient than other methods of payment, and it is important to remind Members of that. Therefore, in principle, I have no objection to their use, and I am not necessarily concerned about the number in circulation. However, the controls that are associated with their use are key, whatever their number.

There are potential problems with credit cards if they are used inappropriately or if there are inadequate internal controls. I agree with Mr Dallat’s comments about the need to properly control the use of the credit cards. It is important to have rigorous safeguards, because the nature of credit cards means that those controls must be watertight. The Department of Finance and Personnel has issued guidance that makes that abundantly clear.

Mr Dallat referred to the procurement card scheme that my Department’s Procurement Service operates; I encourage its use. The Government procurement card provides all the benefits and facilities of the more traditional corporate credit card, but, importantly, it can provide more security and more controls. Those include enhanced indemnities and restrictions on the monthly accounts and categories of spend. It is for those reasons that the use of the Government procurement card is recommended for all public bodies.

Mr Dallat mentioned the case of credit card misuse in the Fire Authority for Northern Ireland. In that case, the Chief Fire Officer incurred personal expenses. That was wrong, which he has acknowledged. Subsequent to the publication of the Public Accounts Committee’s report, my Department wrote to all Departments and advised them that personal expenses must not be charged to credit cards.

More recently, concerns about the use of a credit card by the Northern Ireland Tourist Board’s New York office manager were highlighted in a Public Accounts Committee evidence session. The report on that case will be published shortly, and I await it with interest. I trust that it will be a further spur to addressing issues that are in the public domain, and my Department will follow up on relevant matters.

During the Tourist Board evidence session, my Department gave a commitment that it would revisit the guidance on the use of credit cards to ascertain whether it could be further strengthened and developed. My Department has now prepared revised guidelines on the use of credit cards, and those will be issued shortly to all Departments and public bodies.

Training courses already exist in matters regarding financial recording and control, and those will also be reviewed to ensure that they meet the needs of proper accountability for, and the recording of, all public expenditure.

I assure Mr Dallat and other Members that the Executive are committed to high standards in the handling of public money in Northern Ireland. Important lessons have been drawn from the cases to which I referred, and those are being taken on board in Departments by accounting officers. My Department is supporting the Public Accounts Committee in its work on the matter. Problems have been identified, action has been taken, and there will be other follow-up measures.

Let me make it clear that I welcome the work and the reports of the Public Accounts Committee in that area, and I commend the Committee for drawing our attention to several important issues.

Photo of John Dallat John Dallat Social Democratic and Labour Party

I thank everyone who participated in the debate, and I especially thank the Minister for his positive response. The misuse of credit cards to date, together with the potential for further abuse, must be dealt with head-on — we have received that assurance. The incidences of credit card abuse that were described have been extremely embarrassing to the Departments involved and have greatly undermined public confidence in the Administration.

Key questions were raised today, which the Minister addressed. Are the cards required? A question that has been emphasised repeatedly is: are adequate controls in place? More importantly, have the controls been implemented? Are the cards being used only when appropriate? Where cards have been misused, have lessons been learnt? Have controls been introduced to prevent further abuse? The Minister has taken appropriate action to ensure that.

The only downside to the debate was Mr Kennedy’s negative attitude — I am extremely disappointed that he has not stayed for the summing-up — and his use of words and phrases like "vendetta" and "judge, jury and, perhaps, executioner", although the language is more moderate than that used yesterday. I am sure that I speak for every member of the Public Accounts Committee and for every Member of the Assembly when I say — and if Billy Bell were present today, I am sure he, too, would agree — that we do not want these issues to become a political or sectarian football. Accountability to the taxpayer is too great an issue to become embroiled in petty point-scoring and name-calling. I thought that the Assembly was mature enough to deal with such matters in a reasonable and pragmatic manner. Unfortunately, some Members still have to climb out of entrenched positions. They fail to recognise that the Assembly has a prime responsibility to safeguard the taxpayers’ money.

It may surprise Mr Kennedy to know that I listened carefully to Sir Reg Empey’s response to questions yesterday on the credit card issued to the Tourist Board’s New York manager, and, believe it or not, I agree with most of what he said. I welcome particularly the Minister’s comment on credit cards that

"the core issue is to ensure that the people who use them are accountable and answerable." — [Official Report, Bound Volume 18, p283]

Words must be matched by deeds, and the evidence suggests that the Department of Enterprise, Trade and Investment was perhaps the most guilty in its failure to properly control credit card expenditure.

I do not, however, want to end on a negative note. I thank again those Members who made a valuable and positive contribution to the debate, and I welcome the Minister’s response, which clearly demonstrated that the Assembly is mature enough to ensure that every single penny of public money is accounted for and well spent.

Question put and agreed to.


That this Assembly notes the recent abuse of credit cards used in the payment of expenses by personnel in Government agencies, as contained in the reports by the Comptroller and Auditor General, and calls for a comprehensive review of how Government Departments and their agencies settle their accounts.