A probe into the circumstances that risked an unauthorised overspend by NI Water concluded that the current regulation, funding and governance regime is primarily responsible for the public-owned utility’s financial uncertainty.
The as-yet unpublished report by former senior civil servant Leo O’Reilly, which was completed in April last year, notes “it quickly became apparent that the context to the issues arising here extended beyond the immediate management of the NI Water’s in-year budgetary position”.
The forecast £31.8m capital overspend in the 2023-2024 financial year was ultimately avoided, however, Department for Infrastructure (DfI) permanent secretary Denis McMahon commissioned Mr O’Reilly to glean “lessons to be learned to avoid a similar recurrence in future years”.
Mr O’Reilly’s report is unrelated to the recent investigation conducted by PWC, which saw forensic accountants appointed in March to probe a potential overspend in last year’s resource budget of up to £3m.
Ordered by Infrastructure Minister Liz Kimmins, the PWC report is expected to be published this week.
The department said it would “highlight options for NI Water to consider to avoid breaching its budget in future years”.
NI Water continues to face significant funding challenges
The publicly-owned utility, which is financed through non-domestic water charges and a government subsidy, continues to face significant funding challenges but the executive has ruled out the introduction of domestic water charges.
In February, The Irish News reported that NI Water had been forced to stall the modernisation of Belfast’s ageing drainage and wastewater system due to a lack of funding.
The company said the £1.4bn Living With Water programme for Greater Belfast was “no longer achievable” within its original 12-year timetable.
The O’Reilly report notes that the potential overspend was forecast at a time when there as no Stormont executive, due to the DUP’s boycott over the post-Brexit trading arrangements, and at a juncture when NI Water’s capital investment programme had been due to increase significantly.
“The sudden (from NI Water’s perspective) curtailment of this investment programme was a significant event with implications for its supply chains, its regulatory and statutory obligations, and potentially for its individual directors,” the report states.
Notably, any criticism of management and spending practices is absent from the report, whereas the regulatory, funding and governance regime is regularly cited as the context for the unauthorised overspend.
It concludes that the matters “can only be addressed through political engagement and decision-making”.
“It is also essential to maintain public and political awareness of the wider social, economic and political impacts if the issues of sustainable investment in water and sewerage infrastructure are not addressed on the coming years,” the report says.
“NI Water has a key role here and their recent work to raise awareness on these issues at political level and in the media should be maintained.”
The Irish News asked DfI why the report had not been published or distributed more widely, including to members of the assembly scrutiny committee, but the department declined to answer.
SDLP MLA Mark H Durkan, a member of the assembly’s infrastructure committee, said Mr O’Reilly’s report was “further evidence of the precariousness of NI Water’s funding position”.
He said underfunding the utility impacted negatively on the region’s “ability to carry out long overdue work to protect our environment and help our economy develop”.
“Last week Finance Minister John O’Dowd waxed lyrical about the need for ministers and departments to explore ways to do things differently, achieving better value and better results yet, that new thinking needn’t apply where water is concerned,” the Foyle representative said.
“Our health system is collapsing because the executive have ignored recommendations from report after expert report – the same appears to be happening with water.”