Statement by Seán Fleming T.D.

Chairman of the Public Accounts Committee at the launch of the report: The Examination of Financial Statements in the Third Level Education Sector

The Public Accounts Committee has carried out an examination of the financial statements of an initial sample of six third-level education institutions. The Committee’s examination also included the Department of Education and Skills and the Higher Education Authority. The focus of the Committee’s examination of these two bodies was their oversight and governance role in regard to the third-level sector.

The Committee undertook the examination because of the significant level of public funding provided to the third-level sector, approximately €1.5 billion per annum.

The Committee’s examination identified recurring issues which were common across the initial sample of six institutions and related to the following topics:

• Intellectual Property and its commercialisation through spin-out companies
• Compliance with Public Procurement Guidelines
• Financial reporting by Third-level institutions
• Use of and Accounting for Foundations and Trusts
• Protected Disclosures
• Gender Breakdown of Academic and Support Staff

The Committee notes that a failure to provide up- to- date accounts is prevalent in the third-level sector. The Committee views this as being unacceptable and is of the opinion that accounts should be presented for certification by the C&AG within 6 months of the end of the financial year to which they relate.

In the case of the following two institutions the Committee considers that the delay in presenting accounts is a major failure of corporate governance and must be regularised immediately. The most recent financial statements of the two institutions are:

• National College of Art and Design 2013 accounts certified 37 months after year end
• NUI Galway 2014 accounts certified 26 months after year end.
This is in sharp contrast to Trinity College Dublin and Maynooth University, both of whom have published their 2016 Accounts within the 6 month time frame.

The Committee recognises that there is a need to encourage research and innovation but there is also a responsibility on third-level institutions to manage and control Intellectual Property effectively.

The Committee recommends that the Higher Education Authority puts a system in place to monitor and quantify research and administration resources by both the Irish and EU taxpayer which are utilised by institutions in developing commercial Intellectual and Property projects. This is necessary in order to eliminate the current lack of financial information and facilitate an assessment with regard to value for money.

The Committee focused on the lack of transparency and accountability in relation to the significant sums of money held in foundations and trusts by certain third-level institutions.

Where full consolidation of foundations and trusts is not possible, it is the opinion of the Committee, that full disclosure of the foundations and trusts’ transactions and balances should be made in the notes or in an appendix to the accounts.

The Committee remains deeply concerned that the infrastructure in place in third-level colleges may not be sufficiently strong or established to support those who make protected disclosures.
It is the view of the Committee that third-level institutions must ensure that all staff are fully aware of the Code of Practice on Protected Disclosures.

The Committee recommends that the Department of Public Expenditure and Reform ensure that adequate and appropriate guidance and training are provided to all public bodies in relation to Protected Disclosures.

The Committee is of the view that there is a social and economic value to promoting gender equality within third level institutions. It can create a more effective and efficient organisation and is a matter where all third level institutions must make further progress.

During questioning by the Committee UCC initially contended that they had paid nothing for the Irish Management Institute. However, following probing by the Committee it emerged that while UCC had acquired the IMI entity or brand in a cashless transaction, it had, in fact, paid €20m to IMI for its 13 acre campus in Sandyford.

Given the key role of the President in the governance of Dundalk Institute of Technology and the difficult financial position faced by the Institute, the Committee recommends that the position of President is filled on a permanent basis without further delay.

The Committee became aware of three protected disclosures in relation to financial matters at UL. These particularly related to the processing, approval and payment of expense claims. The university commissioned a report from Mazars into these matters. The report made 15 recommendations and the Committee was informed that 12 had been implemented.

The Committee is not satisfied that the substantive matters have been dealt with adequately. It is the Committee’s opinion, as a result of correspondence from the protected disclosers, that the treatment of those who have raised these matters in the university has not been appropriate.

During the period covered by a special report (2011 to 2013) the C&AG identified three severance payment cases in the education sector totalling €635,000 with an average value of €212,000 per case.

It is the view of the Committee that members of staff whose employment with a public body has been terminated by means of a severance payment should not be re-engaged on contract or by any other arrangement. In exceptional circumstances where it is being considered, Departmental and/or Higher Education Authority approval should be required.

The Committee notes that the C&AG drew attention to DIT’s loss of €700,000 on the prepayment of its library subscription service. A further loss of €18,000 was incurred in respect of interim arrangements bringing the total loss to €718,000. The Committee also notes that a replacement library service for 2015 was put in place at a cost of €760,000.

DIT has stated that the substantial loss incurred did not lead to cuts in library services to students. The loss was borne by the institution’s reserves. The Committee is not satisfied that a loss of such an amount did not have a material effect on the services provided by the Institute. DIT’s loss resulted from a failure of its payments system by paying up front when an instalment arrangement could have been put in place.

On behalf of the Committee, I would like to express my gratitude to everyone who participated in the hearings and also to those who provided detailed briefing in advance to assist the Committee in its deliberations. I would also like to express my appreciation to the Members of the Committee and the Secretariat for their work in relation to the Committee’s consideration of the issues and preparation of this report.

I believe that this report is an important contribution to ensuring that bodies funded largely from the public purse are publicly accountable to the citizens of this country. I believe that the recommendations made need to be carefully considered and acted upon by the Department of Education and Skills, the Higher Education Authority (HEA) and all third-level institutions in particular.