The Department for Regional Development (DRD) failed to properly investigate whistleblower allegations that contracts were awarded using favouritism, the audit office said.
Its inquiry into Roads Service's arrangements for the supply of road signs took four years to reach a conclusion. Investigators failed to apply professional standards and gave the benefit of the doubt to the government executive agency's officials, auditor Kieran Donnelly said. DRD reported its findings in 2010.
The audit office said: "We are satisfied that, even on the limited forensic work undertaken by the investigation team, there were strong indicators of either favouritism towards a particular firm or bias against the whistleblower."
The whistleblower David Connolly said the audit review did not go far enough, claiming DRD had been given too much sway over it. "This report has been whitewashed. They (the government) have been able to influence the entire language of this to seriously affect some of the areas where they were being criticised," he said.
Mr Donnelly's office discovered significant weaknesses in the conduct of DRD's investigation, which culminated in a 2010 report which found no evidence of impropriety or sharp practice or that staff had deliberately shown favouritism. Mr Donnelly added: "As a result of these weaknesses, the credibility of the 2010 investigation is seriously undermined."
Mr Connolly, is former director of Signs and Equipment Ltd, which lost out on a government contract for road signs. He alleged Roads Service changed tender criteria for the award of road signage contracts (then worth up to £900,000 a year) to ensure its preferred supplier obtained the lion's share of the work. The complainant also claimed Roads Service colluded with other government agencies to delay the award of the contract until another contractor met eligibility criteria.
The DRD's investigation into 29 allegations was completed in 2010 but consideration was not given to recurring themes across the complaints, including favouritism, which would have highlighted the whistleblower's concerns about weaknesses in the administration of signage contracts, the audit office report said.
The auditors added: "As a result of the weaknesses found, the credibility of the 2010 investigation by DRD is, in our opinion seriously undermined. We are therefore unable to agree with DRD's conclusion that the allegations had been investigated thoroughly. Indeed, we are concerned that the investigation team gave the benefit of the doubt to Road Service officials in its analysis of the evidence. In our view, on the basis of the work done by the investigators, we do not consider that the allegations were investigated sufficiently."
DRD does not agree with that conclusion.
Regional Development Minister Danny Kennedy said the complaints and DRD investigation took place before his time as minister. "I strongly support the Audit Office's key recommendation which is to set up a central Northern Ireland Civil Service-wide resource to tackle complex investigations of this nature," he said.