Statement by Sean Fleming T.D., Chairman of the Public Accounts Committee at the Public Affairs Ireland Conference on Corporate Governance.

Ladies and Gentlemen, I want to thank the organisers of this event for the invitation to speak here today in connection with State Boards’ relationships with the Oireachtas, as part of this conference on Corporate Governance.

I want to especially thank all of you who have attended here to listen and pick up some information and agree or disagree as the case may be with what we say from the podium.  

Everybody here and all those who think about it agree on the need for good Corporate Governance.

When dealing with public bodies; be they Government Departments, State Bodies in the commercial sector or in the non-commercial sector our citizens are entitled to know their interests are being looked after and protected.  

First of all I want to draw on one key lesson from the private sector that informs everything we are talking about today.

The lesson I speak about is the one recited by many liquidators and receivers to companies in the private sector.

In almost all cases they say that there was poor Corporate Governance in the majority of companies that went into liquidation or receivership.  There may be other problems as well but very few companies with good Corporate Governance find themselves in those situations.

This should highlight to everybody both in the public and private sector the need for good Corporate Governance.

Code of Practice

This updated document on Corporate Governance is indeed a good document.  I think we can all sign up to it.   Nobody can criticize it.

We all know that any document is only as good as its implementation.  It is very easy to agree a document, publish a document and issue the circulars but the acid test is whether or not it is being implemented and how this is verified.

First of all I would like to refer to specific items in the document in relation to dealings with the Oireachtas, relevant Ministers and Departments.  After that I would like to highlight some specific issues directly relating to these points which are clear to me as Chairman of the Public Accounts Committee.

The updated Code for the Corporate Governance of State Bodies states many things including:

The oversight role in relation to a State body by a Department should not be carried out by the person who has been nominated to the Board of that body by the relevant Minister.

All Public bodies should have monitoring systems in place to flag non-competitive procurement.

Purchase of land or property should be conducted in a transparent manner as possible without compromising the negotiating position of the State body concerned.

Ministerial approval is required for any diversification proposals by State bodies which involve carrying out activities which were not originally part of their core business.

A report on each State body’s compliance with tax laws should be furnished each year to the relevant Department and this should confirm that the State body has complied with its obligations under tax law.

Financial Statements

From my perspective as Chairman of the Public Accounts Committee one of the most important elements of Corporate Governance is to ensure that all State bodies produce their financial statements in a timely manner.

Government Departments are very good at this as they must comply with the timeline set by the Comptroller and Auditor General who has to receive the accounts within 3 months of their year-end so he can conduct his audit.  

There are sectors in the public service who have been exceptionally late in producing their financial statements.  A number of the Third Level Education establishments have been the worst offenders in this regard.  I include the Education and Training Boards, the Institutes of Technology and Universities, many of whom do not present audited financial statements covering their full activities for a long period after their year-end.

Recently, Waterford Institute of Technology and the National University of Ireland Galway were before the Public Accounts Committee and the most up to date financial statements they had available to our Committee were 2½ years old.  That is not acceptable.

The Public Accounts Committee suspended that meeting and went into private session and considered whether or not we should send these institutions home because it was a waste of our time and the public’s time having a discussion on these out of date financial statements.

In the event we decided that much critical questions had to be put to these organisations and we did this at the meeting after a very stern warning.  

We notice across the board, that there are many instances of non-adherence to procurement requirements referred to in the financial statements and in the statements of internal control.  In each of these cases we now write directly to these organisations asking for a specific explanation as to why this occurred and to ensure it does not reoccur.  This new initiative will help send a clear message across the public service.

Whistleblowers

A relatively new issue with a lot of teething problems is the question of whistleblowers.

Many organisations in both the public and private sector are not yet sure how to deal properly with whistleblowers. Many organisations are learning by trial and error and I believe there is a clear onus on the Department of Public Expenditure to assist public bodies in this area.

I look at 2 whistleblowers who came before the Public Accounts Committee in recent years.  Only by going public in the Oireachtas where their cases dealt with.  Their efforts to have the issues dealt with properly by their organisations through the whistleblower mechanism utterly failed.  Their organisations failed the whistleblowers.  Their organisations failed themselves and the public, whom they exist to serve.

The first case I refer to is Sergeant Maurice McCabe who highlighted the issue of speeding fines being cancelled and the financial loss to the exchequer.  We all have read extensively on this issue and because it was not properly dealt with by the Garda Síochana there is now a Commission of Investigation examining the matter.

The second case I refer to is the whistleblower that came forward who is the social worker dealing with the lady called Grace who was in a foster home in the south east of the country and under the care of the HSE.  Again the HSE absolutely failed Grace and the whistleblower and again the outcome is another Commission of Investigation.

Public bodies must learn how to deal with whistleblowers.

Board Membership

An issue that can create a lot of confusion in the public mind is when Ministers appoint one of their senior civil servants to the Board of a State body.  This can be a complicated situation because the person as a member of the board has a fiduciary duty to the organisation first and foremost and not specifically to report back to the Minister.  To do so would be in many cases breach their duty to the board.  The public do not understand this.  In some situations where there are problems in a State body and because there is a senior official from the Department on the board the public may believe therefore that the Minister is fully informed.  This may not be the case.  This is counter intuitive to many people and this dilemma has to be explained more fully.  

Outsourcing

The biggest area and gaps in Corporate Governance is where public bodies outsource much of their work to third parties.  The single largest case of this is the HSE.  They have an annual budget in the order of €15 billion but they outsource approximately €4 billion of this under Section 38 and 39 Agreements to voluntary hospitals and organisations to provide services on our behalf.

It is essential these organisations that in many cases are very substantially funded by the State meet the full Corporate Governance rules as applies to the State organisations.

Sale of Assets

The sale of State assets is an issue that everybody has to be very careful on.  The recent example whereby the Chairman and Chief Executive of NAMA met with one bidder the day before the close of bids for the sale of its Northern Ireland loan folio known as Project Eagle raises a lot of questions.  The amount involved was approximately €1.3 billion.  I would ask each of you here present today to think about how appropriate it would be for the Chairman and Chief Executive of your organisation to have a meeting with one bidder on the eve of the close of bids for the largest sale of assets ever by your organisation.  That bidder was awarded the contract a few days later.  This matter will be examined by the Commission of Investigation into Project Eagle.

How can anybody call this good Corporate Governance!

Some Failures of Corporate Governance

The follow through to ensure all property acquired by State bodies is registered with the Property Registration Authority is important but unfortunately this does not happen in all cases.

Recently I came across the situation where land acquired by Compulsory Purchase Order for a motorway project approximately 15 years ago and amazingly some of the land is not yet registered with the Property Registration Authority.

The State can face massive bills where there are failures of corporate governance. The State Claims Agency has well over €1 billion of medical negligence cases on its hands and rightly so.

The majority of these are tragic cases but the ultimate cost escalates because of the denial of the HSE at an early stage in the process, the lack of communication with the injured party, the willingness to apologise at an early date and the delay in bringing matters to a conclusion.  These failures of Corporate Governance add to the costs that ultimately have to be borne by the Irish taxpayer.

I have observed in many organisations that at lower or middle management level there can be good record keeping of how decisions are arrived at.  Some State Boards believe they are only required to record decisions and that all notes of discussions at their meetings in relation to how and why decisions are arrived at should be destroyed shortly thereafter.

This inconsistent approach to record keeping within an organisation does not represent good Corporate Governance.

Oireachtas Oversight

We come to the question of who ensures that proper governance applies in public bodies.  In a democratic country this responsibility ultimately rests with the National Parliament.  Added to this we can ask the question who regulates the regulators? Again it is the function of the National Parliament.  The question arises: how effective is Dáil Eireann in carrying out its responsibility in relation to these matters.?

A key element in dealing with Government Departments each year is the discussion on the Estimates for a Department with the Oireachtas Select Committee.  A survey carried out a number of years ago found that on average the Oireachtas Committees spent less than 2 hours discussing the annual Estimates for each Department.  In some cases like Social Protection, Education and Health we are dealing with multi-billion euro estimates.  I for one do not believe that a 2 hour debate is adequate in these situations and I do not think anybody could disagree with that.

The Public Accounts Committee at our weekly meetings can properly examine only a fraction of bodies under our remit each year.  Again nobody could say this is a satisfactory situation.

The Oireachtas itself needs to provide a substantially greater level of research facilities to the Oireachtas Committees to carry out their functions.  We saw that at the recent Banking Inquiry each member of the committee was provided with a dedicated researcher to assist in that Inquiry.  Such a facility should be more widely available if the Members of Dáil Eireann are to carry out their functions properly.  Before you say it I do agree with you it is up to us as TD’s to ensure this happens.  My speaking here today is to add to that call for adequate research facilities so that Dáil Eireann can adequately carry out its work on behalf of the public.

A large number of organisations are required to report to the Oireachtas Select Committees or the Public Accounts Committee.  However, we are all aware that arising from the Abbeylara judgement we cannot make any adverse findings against an individual.  This puts the Oireachtas in an unusual situation as an organisation can report to a committee but the committee cannot make the appropriate findings, even where they are patently obvious.  

We did have a referendum to extend the power of the Oireachtas Committees and the public wisely made a decision not to do so.  Partly as a result of this, the Oireachtas cannot exercise adequate oversight that many expect would be normal in a National Parliament.  I have already given 3 examples of issues that could not be fully investigated by the Public Accounts Committee that have had to be referred to Commissions of Investigation.

I want to thank you for your patience in listening to my presentation.  I am sure there is much you can agree with and much you disagree with.  If that is the case and it provokes a discussion then it has been a good morning’s work.

Thank you.

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Committee Membership:

Bobby Aylward        Fianna Fáil
Peter Burke        Fine Gael
Shane Cassells        Fianna Fáil
Catherine Connolly    Independent
David Cullinane        Sinn Féin
Alan Farrell        Fine Gael
Séan Fleming        Fianna Fáil
Alan Kelly        Labour
Marc MacSharry        Fianna Fáil
Josepha Madigan    Fine Gael
Mary Lou McDonald    Sinn Féin
Noel Rock        Fine Gael
Catherine Murphy    Social Democrats-Green Party Group