The Committee is now in public session to deal the 1997 Annual Report of the Comptroller and Auditor General and Appropriations Accounts - Vote 31 - the Department of Agriculture and Food (resumed) and the Irish Intervention Agency - Annual Financial Statements 1994 (resumed). It was agreed that: (i) the Financial Statements 1994 of the Irish Intervention Agency and (ii) the relevant paragraph (FEOGA Operations) of the Appropriation Accounts 1997 should be concluded; (iii) the remaining paragraphs and accounts should be dealt with and (iv) the Interim Report to the Minister for Finance - Steering Group on Systems Review of the Department of Agriculture and Food - should be discussed. Mr. Paddy Mullarkey, Secretary General of the Department of Finance is present for the discussion on this document. Perhaps Mr. Mullarkey will introduce the officials accompanying him.
Irish Intervention Agency - Annual Financial Statements 1994 (Resumed).
Mr. Mullarkey
I am accompanied by Mr. John Hurley, Mr. Kevin Cardiff and Mr. Niall MacSweeney.
We are also joined by the Secretary General of the Department of Agriculture and Food, who is welcome. Perhaps Mr. Malone will introduce the officials accompanying him.
Mr. Malone
I am accompanied by Mr. Morgan Sheehy, Ms Marion Byrne, Mr. John Fox, Mr. Denis Byrne, Mr. Michael Sheridan and Mr. Richard Healy.
Perhaps Mr. Meade will reintroduce us to this subject.
Mr. Meade
You will recall, Chairman, that at the meeting of 21 January 1999, following your comments at an earlier meeting, it was indicated that the Government had set up a review group to carry out a systems review of the Department of Agriculture and Food because of the many matters which had arisen from my audits over the previous years, especially regarding FEOGA.
The review group was chaired by Mr. Sean Cromien, the former Secretary General of the Department of Finance, and included a partner from a chartered accountancy firm, two assistant secretaries from the Department of Finance and the Department of Agriculture and Food, two principal officers from the Department of Finance and one principal officer from the Department of Agriculture and Food.
In addition, a working group to assist the steering group was also set up, chaired by a Principal Officer in the Department of Finance and including representatives from the Revenue Commissioners, the Department of Finance and the Department of Agriculture and Food. The interim report of the review group was submitted in late April.
I put on record my appreciation of the detailed report produced by the steering group which will be of assistance not only to the Department of Agriculture and Food, but also to all auditors. The report gives an overall review of the current control systems for FEOGA schemes in the Department of Agriculture and Food, the extent and complexity of the large schemes to be administered as well as the approximate £2 billion paid out to 196,000 clients.
As previously stated at this Committee, the Department operates in the full light of public accountability in Ireland, Europe and elsewhere. Paragraph 6 of the summary indicates that major improvements have taken place since the late 1980s in the FEOGA area and major EU disallowances do not now arise. As in any large organisation, it has indicated some matters which need attention, and I will summarise the major ones. The report rightly identifies the risks posed to any organisation being decentralised and where new staff are being engaged as a result. If the decentralisation to Wexford is not handled in a proper manner as regards capable staff and training, it will lead to future trouble.
One of the major matters noted by the group is the delay in implementing the new accounting package for the Department as well as an overall concern about the information technology capability in the Department. In this regard, it has decided to take a special look at this area and to engage consultants to carry out further work in this regard. It expects to report further on this matter in its final report.
The report recognises the problem posed where the political and farming pressure is to get out payments speedily as against the necessary need to have proper controls in place. This can cause problems for any Accounting Officer. As with my reports in former years, it has concentrated on the effectiveness of the inspectorate to ensure compliance with scheme regulations. They have also raised concerns about the effectiveness of this system and have indicated certain improvements in the area, including the need to develop further risk management techniques in the Department overall. They also emphasise that recommendations from auditors should be implemented as soon as possible, and I have urged the Department to develop cross-stream team working arrangements.
The problems with the information technology system must be addressed urgently. In this regard, they are disappointed, as I and the Department are, with the slow progress in developing the new accounts system for the Department of Agriculture and Food. This was proposed as the solution to many of the audit concerns I raised in the past few years.
In summary, the report indicates that matters overall have improved and are improving in the Department of Agriculture and Food, but considering the scope and size of the operation, it is not unusual that certain difficulties will arise. Management must be proactive in this regard. One must also be conscious of the changing CAP environment and the future effects of Agenda 2000. The report refers to the possibility of over-auditing and indicates that auditors seem to be falling over each other. Perhaps I can comment on the various audits carried out and whether there is over-auditing.
Regarding internal audit, the certifying body, the European Union Commission, OLAF, the anti-fraud unit of the EU, the European Court of Auditors and my office are engaged in various aspects of audit. While one can appreciate that co-ordination between audits is necessary and exists between my office and the internal audit unit of the Department - something the report recognises, as it does the close liaison between my office and the European Court of Auditors - nevertheless, the various audit bodies have specific functions.
In this regard, as the constitutional and statutory external auditor of the Department of Agriculture and Food, I must satisfy myself by whatever audit means I deem appropriate as to the correctness of the accounts and the adequacy of the control systems in place and report accordingly to Dáil Éireann. The other audit bodies have their responsibilities to fulfil. Therefore, there will be a certain amount of overlap in the audit, but all the bodies are striving to achieve a better co-ordinated approach.
It will be recalled that, in last year's report, I referred to matters raised by the certifying accountants in their report on the FEOGA accounts. This is an area I intend to develop further because, if I believe matters raised by the certifying accountants are not being pursued or are of a material nature, I will bring them before the Committee of Public Accounts. Our audit plans take account of audit work carried out by other audit bodies. Despite the multiplicity of auditors, the Department co-operates fully with my office and the other audit bodies despite the strains it may be under on occasions. We appreciate that. In the final analysis, the taxpayers of Ireland and Europe must be assured their money is properly accounted for and audit is but one of the systems which gives that assurance.
We did not have any contact with the steering group in the course of its work. I look forward to its final report and, in due course, I will review a follow-up action where it is deemed appropriate that it should be taken. The report must be considered in the context of the possible establishment of a separate agency to administer FEOGA operations in Ireland. I hope that summarises the report in general, but I am sure if I have overlooked anything major, both accounting officers will add further.
Would Mr. Mullarkey like to make a brief opening statement about where we are in the systems review and what progress has been made so far?
Mr. Mullarkey
I will leave it to Mr. Malone to deal with specifics. In general terms, I find the report refreshing in that it is not complacent and obviously sets high standards. Members of the group from the Department of Agriculture and Food subscribe fully to those. It indicates there are limited areas where further improvement can be made. At the same time, it indicates that substantial progress has already been made in most of the relevant areas, and that is to be welcomed. Like the Comptroller and Auditor General's office, we, in the course of this exercise, have met with the full co-operation of the Department of Agriculture and Food.
I have spoken to the chairman of the group who told me he aims to complete his report in late autumn. He also said he found the exercise of preparing the interim report useful in terms of enforcing a stocktaking exercise on the group and forcing it to map out the agenda and the process for completion. The interim report is also useful in that the final report does not have to be awaited for additional action or effort on the part of the Department of Agriculture and Food. There is more than enough in the report for the Department to deal with in the meantime. It sets a high standard for the Department. It points to a way forward and gives a considerable measure of assurance that progress is being made and that the management in the Department of Agriculture and Food is strongly orientated towards meeting those high standards. In that sense, I am happy with the report at this stage and look forward to the final report in late autumn.
Would Mr. Malone like to make a brief opening statement?
Mr. Malone
As has been indicated by Mr. Meade, this report was submitted to Minister for Finance at the end of April and was presented to the Government by him on 18 May. The Government noted the report's conclusion and asked the Department of Agriculture and Food to report back within six weeks. We did that on 29 June. We outlined the measures we have already taken or propose to take to give effect to the individual recommendations. As has been indicated earlier, this is an interim report and there will be a final report which will give more detailed analysis and final conclusions.
From the Department's perspective we believe the report is a useful and solid basis to enable us improve our performance, to strengthen our procedures and to avoid a repetition of the difficulties which have occurred and which have been highlighted at meetings of the committee. The report rightly recognises the complexity of the operations we undertake, especially the growth since 1992 in the financial operations and the number of schemes and clients. A figure of 196,000 clients was mentioned. It also recognises that we have made strenuous efforts to improve our standards and procedures and to strengthen our systems. We are especially anxious to promote a culture of control and risk management.
There are a number of specific recommendations in the report. We have identified those and have set out a programme of implementation for them. Rather than going through each one, we have broken them down under a number of broad headings. For example, there are a number of recommendations relating to risk assessment and risk management. We have learned from the experience of 1992 when we had a range of new schemes and when we did not have the time to plan sufficiently in advance. With the new measures under Agenda 2000, we need to work in advance to identify potential difficulties and pitfalls and to have our controls positioned accordingly. We also now have, as a matter of course, a policy of reviewing the outcome of audits and the number of audits has been referred to. We are attempting to upgrade our risk analysis and our targeting of inspections. In all this, the obvious point is that we are required to strike a proper balance between managing risk and delivering a high quality customer service.
The use of information technology comes through very strongly in the report. There is no doubt that the efficient functioning of information technology is critical to the Department and the operation of its schemes. We are undertaking a review of our existing IT strategy and, as has been indicated, consultants have been appointed to carry out that task. In fairness, it should be recognised that we have made considerable progress in developing our IT, particularly in areas such as direct payments, animal traceability and intervention controls. However, we have some distance to go and the critical role of the new accounts project, as it is referred to, is fully understood and fully accepted. I assure the committee that we are as anxious as everyone else to ensure that this system is in place. It has run into some difficulties but we have had recent serious discussions with the suppliers and we hope to be in a position to give the project a new impetus and to have a modern accounts system in place within the first half of next year. We will also be further strengthening our IT capability in terms of resources.
Internal audit was mentioned in the report and we have strengthened this area. We have strengthened the status of the internal audit and put in additional resources. More importantly, we have put in place a system to follow up on the findings of the internal audit unit. We are looking at a further strengthening of the internal audit unit through taking on contract staff. The committee will be aware that we have an external audit committee which is helping us to improve our standards and is providing a useful monitor as to the effectiveness of our internal audit.
The size of the Department, the number of staff and the complexity of the schemes also comes through from the report. Clearly, the area of human resources in highly important. We have set up a special committee to establish priorities for all aspects of human resources with regard to planning and development. We have put a lot of emphasis on training in recent years because it is clear that our control staff have to be adequately trained. We have also put a lot of emphasis on communicating with staff and customers and we want to build on that progress.
There is a specific recommendation about strengthening our management services unit and we are proceeding to act on that recommendation. Again the intention is clear, that the management services unit would examine our structures and work practices and that we would be in a position to adjust our work practices to the changing environment in which we are working. We want to have the best practices and to make the best use of resources. We are anxious to implement the concept of using different staff from different streams in a team approach.
We are also reviewing the operation of our inspection schemes. In particular, we are anxious to have the best possible risk analysis, to make the best use of spot inspections, to have quality control and to make use of the integrated databases now available to us so that we have good management information.
There are other recommendations in the area of our capability with regard to legal issues. The decentralisation to Wexford has been mentioned and this is an issue which has caused much concern to our accreditation auditors. We have attempted to manage the decentralisation to Wexford in an orderly process, and I believe we have been successful. We have done it in stages. Three stages are complete and there is a fourth stage to be completed this autumn. Because there are new staff coming in, we have been anxious to ensure that they are properly integrated into the Department and properly trained and that they have a proper understanding of the schemes they operate. We have a clear decision that a particular segment of decentralisation does not take place until we are satisfied that it is safe to do so. I hope the committee will accept that we are taking the report seriously, that we are taking the recommendations seriously and that we are reacting effectively and urgently. I assure the committee that we will co-operate fully with the remaining work of the Cromien group and that we will work with the Department of Finance in this exercise.
I congratulate Mr. Meade on his very detailed and comprehensive report and the follow up reports of Mr. Mullarkey and Mr. Malone, which mean that we are getting off on the right footing.
I welcome this balanced, unhyped report on operations in the Department of Agriculture and Food. I particularly welcome Mr. Meade's comments on the audit function as it is obvious from a first glance at the recommendations that there appears to be some level of over-audit within the Department. It appears from paragraph 9 of the recommendations that some streamlining could take place in the audit function. Does Mr. Meade think this is the case? How many personnel are involved in the audit function at any one time in the Department? The clear impression from this paragraph is that a large number of personnel seem to be involved in the audit and they are tripping over each other.
Mr. Meade
There are six staff permanently based in the Department of Agriculture and Food carrying out the audit at any one time. There can also be a special audit, such as value for money, which would be carried out by a special team. At any one time there are six people on the audit.
It is normal to have a few audits in a Department. First there will be the normal management controls which, in effect, can be classed as pre-audit. There is an internal audit which is there to give assurance to management and which can be relied upon by the external auditors if it is properly structured and so on. There is co-operation between the internal audit unit and my office.
There is also the European Court of Auditors. Under the Treaty, the European Court of Auditors acts in liaison with the national audit bodies. Each year it notifies my office of the audits it will carry out and we give it notice of the audits we intend to carry out. At local level there is also an exchange of audit plans as to what areas we intend to audit in the Department during the year and what areas the internal audit intends to audit during the year. As far as is possible, we try not to overlap on these.
There are audits from the EU Commission. The certifying audit was introduced in 1996 whereby, under the accreditation process, a special certificate has to be added to the accounts. At any one time there could be five or six people, or more, from the certifying body engaged in the audit. However, I come back to the point that, as far as I am concerned, while there is good liaison which has been recognised in the report and at local level on my own part and on the part of the Department, at the end of the day each body within its own remit has to carry out its functions. While there will be a certain amount of co-ordination and co-operation, and there is a fair degree of this, at the end of the day each audit body has to do particular tasks.
I do not think there is over-auditing from the perspective of what each body has to do. However, this process must develop over time and, as they gain confidence in each other and as relationships build up, as they have done, the bodies will begin to rely on each other more and more. In summary, the report stated that the initial impression was of auditors falling over each other. However, it rightly went on to say that this is necessary because, ultimately, the taxpayers of Ireland and Europe have to be given some assurance. I hope that answers the Deputy's question.
I thank Mr. Meade. I would like to address some questions to Mr. Malone, Secretary General of the Department of Agriculture and Food. There is quite a number of recommendations and I want to know how the Department has responded to them to date. Has the Department set up an implementation programme in regard to the recommendations?
Mr. Malone
As I indicated in my opening remarks, on 29 June we gave a report to the Government regarding what we are doing, have done and intend to do. We have broken down the recommendations into a number of different categories. We then set up a number of implementation groups. For example, in the area of risk assessment we set up a group, drawing from the different areas of expertise which exist in the Department, to look at the experience of the schemes we have been operating, for example, since 1992, and in particular to examine the schemes which will emanate from Agenda 2000 negotiations. It is generally understood that two fairly large and complex schemes will emanate from that process, namely, a new slaughter scheme and a more complicated scheme for paying area aid. In relation to those schemes we have been monitoring the implementation discussions in Brussels as the detailed rules have not yet been finalised and we have established a group to follow the task through.
Regarding IT, we are reviewing our existing IT strategy as has been indicated. Our IT strategy dates to the early 1990s. We feel we have made much progress, but it is an open secret that we have had many difficulties in the IT area. We are anxious to move forward and leave those difficulties behind us. We have a group examining our IT strategy. In particular we are focusing very strongly on the accounts project and we are determined to get it up and running.
There are clear and specific recommendations in terms of internal audit and we have strengthened our internal audit unit. The head of the unit presents an annual work programme to our management committee. Progress on that programme is reviewed with the management committee on a quarterly basis and we have put in place a programme for implementation of findings from the internal audit process.
We have set up an implementation group concerned with human resources as obviously it is an important area. We have many staff who have much knowledge and many different skills. There are changing schemes and changing requirements. Over the past couple of years we have put much effort into communicating with our staff. We have organised a whole range of regional seminars and have undergone much staff training.
The next step is to move forward from that process and have a more integrated approach, which is possible given our databases, particularly the animal registration system and the client register. This gives us an opportunity to integrate our own resources and make better use of them and to use a team approach whereby help is given in setting up specific teams using a mix of different disciplines.
We set up a group in the context of the management services unit as it is clear that we must have the best work practices and make the best use of resources. The structure of the Department is changing. As was indicated, 82 per cent of the Department is decentralised, something we must come to terms with. Many of the schemes we operate are different from those we were accustomed to operating in the early 1990s. Many of the schemes are area based as distinct from animal based. There are opportunities in terms of new technology and we want to bring all this together and have the best possible use of resources.
The inspection procedures are reviewed on an ongoing basis, particularly against the criterion of risk assessment, which is very important. Clearly, the more targeted inspections are, the better value and protection they provide. We are also looking at our legal capability.
There are, therefore, about six different projects related to this report which we are in the process of following through.
I thank Mr. Malone for his response and will return to a few of the points he raised in relation to IT, decentralisation and the legal capability. The audit report gave the impression that operations in the Department of Agriculture and Food had become extremely complex since 1992. I know that to be the case and it has been made clear at other committee meetings. However, despite the increased complexity, disallowances by the EU Commission have diminished in recent years and I would like an explanation for this. Is it a reflection of improved administrative practices in the Department or is there some other explanation?
Mr. Malone
It is clear that our operations have become more complex. We operate 11 different premia schemes. As has been indicated, we have 196,000 clients. We process financial transactions in the order of £2 billion and we make over one million individual payments. We are responsible for over 50 per cent of farm income and in some cases we are probably responsible for almost 100 per cent of individual farmers' incomes. We must manage these schemes effectively, protect the rights of Irish and European taxpayers and deliver a fair and efficient service to farmers.
It is true that the level of disallowances has decreased. I hope this is a reflection that we have learned lessons from the past, a point I have made at previous discussions. We have put much effort into strengthening our processes and procedures, something which comes through in the report. That work and that effort is beginning to bear results.
Does Mr. Malone think it is realistic to expect that disallowances can be eliminated completely? While there has been a significant improvement, it looks like we will be subjected to disallowances in the future. Will we ever reach a situation where there will be zero disallowances, given the wide range of payments the Department must make totalling approximately £1 billion per year?
Mr. Malone
Our objective is to have zero disallowances, but while I do not condone any disallowance and we must do everything humanly possible to ensure we avoid them, it would be a very big achievement to reach a position of zero disallowance.
Reference was made to the number of audits carried out in the Department. We understand the reason for the audits. In any particular year we could have as many as 25 different audits. From our point of view we co-operate fully with the auditing process, something which is understood and accepted. The only thing we would like is that there would not be too much of an overlap and that auditors from different groups would not be in the Department at the same time.
While zero disallowance is very much an objective, I think it will be difficult to achieve.
We heard Mr. Meade's response to the question of over-auditing. Does the Secretary General agree with this response? Does he think the Department is over-audited? He referred to two sets of auditors being in the Department at the one time. How does this work?
Mr. Malone
We must be realistic. Earlier there was reference to the amount of money and the number of schemes we process. In fairness, I think there is much pressure on the Commission within the EU to protect the rights of taxpayers. There is also much pressure, which we accept, in terms of value for money.
I am not sure if I am the right person to answer the question. We try to avoid overlapping in the auditing process and have learned a lot from the accreditation process in particular. One of the big changes in recent years is that systems as much as individual schemes are looked at. We do not and cannot object to audits. We are anxious that they are properly targeted and result in added value. We have learned a lot from the auditing process initiated in the Department in recent years.
While I accept that audits are necessary, you seem to think that there is significant overlapping. Given that departmental officials provide the same information to audit teams, you are in a better position to know this than some of the audit teams whose activities are not as well co-ordinated as they would like. Everybody accepts that the Minister for Agriculture and Food and his officials were very successful in the Agenda 2000 negotiations in Brussels. What impact will those negotiations have on payments to farmers?
Mr. Malone
It is generally accepted that the proportion of farm income dependent on direct payments will increase post-Agenda 2000. While existing schemes will continue, there will be some new ones, in particular a new slaughter scheme and a scheme under which every animal will be counted for area aid purposes. Both will be administratively complex and will place a greater burden on farmers. This is an issue about which they are concerned. The schemes will have to be properly regulated. It will be our job to ensure the rules are properly understood and inspections are made fairly and efficiently.
You mentioned that sections of the Department have been decentralised. The Department has offices in 88 locations throughout the country. Does this have a negative impact on the efficiency of the service? Direct payments account for 50 per cent of farm income. For this reason, timing is vital.
Mr. Malone
At one level, it gives us an advantage in that we have a presence in every county. We have a good local office network and individuals with good local knowledge. This is important in operating schemes and providing feedback. Difficulties can arise in implementation and administration. One has to ensure consistency between the different locations. It is easier to operate schemes which are IT driven or require large databases centrally. What we have been trying to do is operate particular schemes from particular offices. It is well known that one of our largest schemes, the special beef premium scheme, is operated from Portlaoise. We have attempted to operate the headage schemes from Castlebar. At one level, it presents a difficulty in day-to-day operations in terms of communications and the availability of staff for meetings; at another, it presents an opportunity. With modern technology, however, it is easier to communicate with local offices than it was five or ten years ago.
On information technology, the audit team indicated in its report that it was disappointed at the level of progress in the Department on information technology and that a second inquiry was required. Are the Department's systems year 2000 compliant?
Mr. Malone
Our systems are year 2000 compliant. Like all other Departments, we put a team in place to review our systems. The target date was 1 July. As required, we have reported to Government that our systems are year 2000 compliant. The IT issue has been a difficult one for the Department. This is partly explained by the fact that we had a lot of ground to make up and have been caught with some big and complex schemes. We have not had much time to implement the new systems. There has been a lot of progress, however, in the delivery of direct payments, which is IT driven. Our record and performance stand up to the best in Europe. We have also moved forward significantly in animal traceability, to the point where, to all intents and purposes, there is now an animal traceability system. All animals are registered at birth on computer. The intervention system has also been computerised.
The big piece of the jigzaw that is missing is a modern accounts system which we are seeking to develop. Such a system is of importance to the operation of the Department. We have, however, run into difficulties. When a system was deliverable towards the end of last year it did not have the functionality sought. There was a clear decision to be made. We had to decide whether we should accept what was on offer or whether the project should be delayed. The right decision was that the project should be delayed. There was no point in introducing a system which would not provide the same level of protection and security as the current one.
We have ground to make up on information technology which has been a difficult issue for the Department. We are not surprised that the Cromien review group focused on it. It was a good idea to review our IT strategy. We are determined to move forward and to make the best possible use of modern technology.
Is there too much red tape for farmers in applying for payments from the Department? I accept the need for checks and controls, but there is much paperwork connected with making an application for money from the Department.
Mr. Malone
It is a frequent complaint that many farmers, understandably, are intimidated by the bureaucracy involved. The consequences can be serious. The loss of payments can have a dramatic impact on income. The other side of the equation is that very considerable amounts of money are now paid out to farmers - as I said earlier, over 50 per cent of their income. The point has to be accepted that for the individuals concerned, since they are paid 50 per cent of their income, compliance and completion of forms deserve their full attention. We have put a lot of effort into simplifying forms. It is accepted that our forms are among the simplest in Europe. We have put a lot of effort into communications and there have been regional forums throughout the country. The farm organisations organised large meetings of farmers and we sent people out to talk to those people.
The requirements are set out in detail. These are not rules or penalties invented by the Department, they are set out in the regulations. We are obliged to implement the system. During negotiations we have tried to have a system that is fair and equitable and to ensure that penalties are not totally out of proportion with the misdemeanour involved. The vast bulk of payments reach farmers with no difficulty. There is a difficulty, however, with about 3 per cent of the payments and that can be a difficult and sensitive problem for the individuals involved.
Are there copies of completed forms available?
Mr. Malone
Yes, we can make those available.
I have been astounded by some of the forms the Department of Social, Family and Community Affairs expects people to complete for schemes such as the free fuel allowance etc. A person would need to have a degree to complete them.
Farmers feel the same.
Mr. Malone
We have help sheets. Every year we meet the farm organisations in advance of a new campaign of forms. We have to strike a balance but there will always be an argument as to where the exact balance is between having proper compliance and not having a form that intimidates people.
The penalty imposed upon a farmer for making a genuine mistake on a form can sometimes result in the loss of a payment for one or two years. Does Mr. Malone think the penalty far outweighs the crime committed?
Mr. Malone
It depends on what is called an obvious error. For example, a farmer might forget to fill in his name or may make an obvious error when he writes down a herd number. We allow those types of errors to be corrected. Many penalties arise in the context of late applications and for each day a person is late he or she suffers a percentage reduction. In the other extreme, there is fraud and no-one can dispute that. The general penalty in that case is two years. Perhaps the difficulty arises with the situation between the two extremes. Only a couple of hundred cases are involved. There is a view that if there is an area to be looked at it is that area between what is termed an obvious error or someone sending in a late application and the other extreme where someone claims for animals they do not have. I agree with the Deputy that this area should be looked at.
A farmer could write down a card number incorrectly on a form and then be faced with a two year penalty. Sometimes officials jump to the conclusion that an incorrect number constitutes fraud. The value for money report stated that 95 per cent of inspections carried out on farmers find there is no error. That statistic indicates that Irish farmers are genuine people. I accept Mr. Malone's point about the need for checks and balances. I presume the paperwork is necessary or it would not be done.
The audit team referred to staff complaints in its report. It said that there was a number of complaints where staff felt they were not being consulted. What consultation is carried out with staff? Was Mr. Malone surprised to see reference to staff complaints in the report?
Mr. Malone
Yes, but it is the usual dilemma that exists between policy and implementation. The argument is that schemes are negotiated in Brussels. The criteria and objectives we work towards are the schemes that will give the best value to the country and the best added value to the industry. There can be difficulties in implementing those schemes. There are model schemes. The ideal model from an implementation point of view would be an area based scheme but that does not give the same advantage or value as some of the more complex schemes that pay out on animals at different ages. It is a dilemma between negotiating a strategic objective and then coming home and having to implement the operation.
We have taken the point on board. It is an issue we were anxious to avoid in the context of Agenda 2000 where we set up a number of sectoral teams. The practical implementation of various options were taken into account. If, however, we were confronted with a particular option at a very late stage in the negotiations - we were confronted with this problem - that would bring an advantage to the country and to the agricultural sector, it would be difficult to start arguing about implementation at that point.
It is one of the recommendations in the report that I disagreed with. When the Department is negotiating with the Commission in Brussels Irish officials must make the officials in Brussels aware of the difficulties faced by staff here. Any negotiations that have taken place in Brussels between the Department and the Commission are at the last minute and no one knows what will happen. If we asked the officials in Brussels to hang on a minute to consider what type of impact a scheme would have on staff here, the Department might lose the deal. Therefore, that recommendation is not a practical one.
I want to ask the Secretary General about the amount of litigation within the Department referred to in the report. Does Mr. Malone see a need for the establishment of a legal unit within the Department?
Mr. Malone
Yes. The situation is clear. We are involved in a lot of litigation. It goes with the territory we are involved in. With regard to the recommendation, we are not suggesting that we would usurp the functions of the Attorney General's office or the Chief State Solicitor's office. At present, we have a number of people with legal qualifications. We inherited some of them from the Land Commission and other people acquired qualifications in their own right. We propose to build up a legal unit. There are two advantages of a legal unit, first, it would give us a more rapid initial response on legal issues and, second, it would enable us to check certain issues and areas from a legal point of view without going through the full process with the Attorney General's office. I emphasise again that we are not trying to usurp the functions of the Attorney General's office. I feel - I think this is the point that comes through the Cromien report - that a unit within the Departmentto supplement the work of the AttorneyGeneral's office would bring us an important advantage.
In relation to co-operation between the Revenue Commissioners and the Department of Agriculture and Food, the report acknowledges that that co-operation is quite good now but it states that it is surprising it did not happen earlier. What is the reason for that?
Mr. Malone
We are a little unclear on that point. We had thought the co-operation with the Revenue Commissioners was quite good because we have a lot of regular contact with the customs. That unit is critical from our point of view in the implementation of many of the requirements on export refunds etc. A problem arose; it was not created, it just arose. There was a requirement in the process of accreditation that we would have a clearcut arrangement with customs whereby it would act on our behalf. That created a legal problem for customs because the Revenue Commissioners operate in their own right but it was resolved. We have not put in place a process of liaison with the customs authorities at a senior level.
I thank the Secretary General. The report is fair from the Department's point of view and it shows up well. Much improvement has taken place since the early 1990s and that must be acknowledged. The Department got a great deal of negative publicity as a result of Committee of Public Accounts meetings in the past. That was not altogether fair. The audit committee felt that officials in the Department of Agriculture and Food were co-operative in carrying out the report. It is great that there is something more balanced before us today.
I am happy to wait for the Cromien report. I welcome the report before us and the remarks by Mr. Malone to the effect that difficulties of the past are behind us and improvements have been made. In paragraph 12 of the report there is a specific reference to the Cromien report which takes into account the memorandum circulated by the Minister for Agriculture and Food on the future administration of FEOGA. What is the position on that? We were told in December or January that the memorandum would be circulated. It took longer than that. The Government still has not made a decision. What is the position now? Mr. Cromien envisages that he will be able to take this into account in his final report, which Mr. Malone or Mr. Mullarkey said would be available in late autumn.
Mr. Malone
I indicated at our last meeting that we would circulate a memorandum to other Departments with a view to bringing a proposal to Government. That memorandum was circulated in April. We have not received the observations of all Departments yet. When we receive those observations, the Minister will bring the proposal to Government.
What do the witnesses make of Mr. Cromien's expectations in paragraph 12? Will he be able to publish a final report which takes into account the structure of that memorandum?
Mr. Malone
It is an important issue which we discussed before. The structure of the Department is critical. I cannot speak for the Cromien committee because I was not involved in it, but I understand it was of the view that many of the issues which came to the fore would have come to the fore regardless of the structure. Regardless of whether there was a separate FEOGA structure, issues such as risk assessment, IT and human resources would have arisen. The Department has circulated proposals and we are waiting for comments from the other Departments. When we have those the Minister will bring the proposal to Government.
The decision was made by Government on 12 March 1996. Will it be published in legislation in 1999?
Mr. Malone
We would like a decision as early as possible for a variety of reasons. To have this proposal without clarification does not make life any easier for the Department. I cannot give a definite date for a Government decision. That is beyond my remit. When we discussed this before, I said that implementation in 2000 of whatever the Government agrees would be a worthy objective and that is still my position.
At the end of the report there is reference to the advertisement in the newspaper which records submissions made by a number of organisations and two individuals. Who were the two individuals?
Mr. Hurley
We do not have their names. The Department provides the secretariat but it is independent. The information is held in the secretariat.
Will the names be supplied to the committee?
Mr. Hurley
We will ask the secretariat if it will give us the information.
Did any other individuals seek to make submissions?
Mr. Hurley
Representations on the nature of the committee were received. A representation was made which suggested that the group involved did not wish to make a submission to the committee but it was informed that if it had information it should do so, or if it had information about wrongdoing, it should be brought to the attention of the appropriate authorities.
The submissions in appendix 6 are those of persons or organisations which went out of their way to make written statements about the terms of reference.
Mr. Hurley
Yes, I think so. I will ask the secretariat if we can have that information and if we get it we will supply it to the committee.
Can the problem beingencountered with the accounting package be explained in layman's terms?
Mr. Malone
We want to develop a modern accounts system which will give us the ability to handle the range of requirements for departmental transactions. The Department of Agriculture and Food has some unusual accounting requirements. We operate two Votes - the normal national Vote and FEOGA expenditure. There are different year ends, one on 15 October and the other on 31 December. All Departments also have a requirement relating to the cash and accruals system. What we want within the system is changeability. For example if the end of year was changed to another date the system could accommodate it. We want to have a client registration system built into the account system as well as a debtors ledger and to become year 2K compliant. Towards the second half of last year we were well advanced with the project in putting a modern system in place but we were not satisfied that it gave us exactly what we wanted particularly in relation to the cash base system. We took the view that it would not be a sensible decision to proceed with what was being offered. Since then we have been involved in intense discussions with the suppliers. There is an element of relaunching with more modern options involved but effectively we want to get the project finished and have it up and running for the second half of next year.
Are we paying much money to suppliers, consultants and advisors in respect of the project?
Mr. Malone
We are paying suppliers. It is generally accepted and understood that computer projects tend to be expensive. We have not paid anything since we were not satisfied with what we were offered last year.
Are there technical advisers?
Mr. Malone
We have a dedicated team working on this project. We have received technical advice from a firm of consultants and are also working very closely with the computer expertise of the Department of Finance. Much of our discussion has focused on the fact that we want to be absolutely satisfied that the technical option that is being offered gives us exactly what we want, the timeframe involved and the cost. A good deal of discussion and time has been devoted to this.
Are you satisfied the Inspectorate operates without fear or favour in the industry?
Mr. Malone
Yes. We have less reliance on the permanent supervision. We have more spot checking, built in quality control and a policy whereby we use information from different schemes. As our IT expertise improves, we compare information from different data bases. It is a mixture of targeting our inspections, making the best use of resources, doing quite a bit of risk analysis, having spot and surprise inspections and using data. For example, for the past two years, each animal is identified at birth on a computer system. That has given us many advantages that we did not have previously.
Mr. Mullarkey, do I understand from your letter that all of the treasury management functions are now performed by the NTMA?
Mr. Mullarkey
Half of them are being handled by the NTMA. We thought we could have transferred the other half earlier but we had to seek adequate legal provision under the Finance Act. A ministerial order is being drafted on foot of that Act in consultation with us and the NTMA. We are confident that the full operation will be handled by the NTMA by the end of the year.
The specific reference to the balance i.e. subsidy related borrowing stood at £470 million in 1998 ——
Mr. Mullarkey
There is a peak at the end of the year.
Is that amount borrowed?
Mr. Mullarkey
That is an amount which would have been borrowed by the intervention agency.
Does it come in on the other side of the balance sheet?
Mr. Mullarkey
That would have been working capital for the intervention agency during the course of the year. It would be redeemed as moneys come in from the EU. There were a number of differences between the initial element which was transferred and the subsequent element. For technical reasons they were managed differently in terms how they reckon for GDP and for national debt purposes. There were a few different characteristics which made them quite dissimilar in terms of how they could be mananged. We have overcome all the difficulties now and it is just a question of working through the process.
Deputy Cooper-Flynn referred to a paragraph in the report relating to Revenue Commissioners and relations with same, what do you understand the paragraph to mean in the report?.
Mr. Malone
We were slightly surprised, because we had a good day to day working relationship with the Revenue Commissions and I would have thought that was the view of the Revenue Commissioners as well. What I take from it is that we need to set up more clear-cut liaison at a senior level. There is much day to day contact on operational issues. We have an arrangement with the Revenue Commissioners as part of the accreditation process, but maybe we need to take that a step further.
What is the protocol in terms of all the data on your system in respect of the Revenue Commissioners? What can you tell them or not tell them?
Mr. Malone
I assume the Deputy is talking about exports and the area in which we work with Revenue Commissioners. We tell them everything. They are the people responsible for the ultimate documentation, so clearly they have to have all the information. There is a freeflow of information between the Department and the Revenue Commissioners. The system would not work if it was otherwise.
Paragraph 4 of the report refers to the Department's involvement in a series of very large and complex operations comparable with those of a bank or other financial institution. The staff of the Department totals 4,000 and it administers sums amounting to £2 billion which are currently paid out to no fewer than 196,000 clients. Was Mr. Malone satisfied with the overall report? The reason I ask is that for the first time the report highlights the involvement of the Department dealing with 196,000 clients. That is a major achievement in itself.
Mr. Malone
In general terms, yes. It set the whole issue in a fair context in regard to the number of schemes, the financial transactions, the complexity and the amount of change that has taken place. The issues identified were fair issues and the comment that has been made is a fair comment. Regarding the agenda of items that has been identified, were we to make progress on those, we would bring genuine, added value.
Mr. Malone mentioned Agenda 2000 and referred to a new slaughter scheme and the area aid scheme in which every animal would be accounted for. With regard to a new slaughter seceme and area aid scheme, will it mean extra work in the Department?
Mr. Malone
It will depend on the precise detailed requirements and they are under negotiation at the moment. A critical issue in regard to the slaughter scheme will be if there is a requirement for a retention period because that, effectively, will probably mean that the slaughter premium will go to the individual that owns the animal during the relevant retention period, which may not necessarily be the same person that presents the animal for slaughter.
We are trying to argue against the requirement for a retention period because we do not feel it brings much advantage. However, there is a strong view in the European Commission and in many other member states that there should be a retention period, the idea being that the payment goes to the farmer rather than to a dealer or somebody that may not keep animals for long. That will have a major bearing on the issue.
Regarding area aid, there is a proposal for a census of animals five times a year. If that happens it will bring a significant amount of administrative burden. We are arguing against that provision. We are trying to put forward different options and the exact resource requirement will be determined by what comes through from the detailed discussions on the implementation. They will take place in the period ahead. The intention is that negotiations will be finished by the end of this month. I will have a better idea at the end of the month.
Is the Department fully computerised?
Mr. Malone
We are heavily computerised. If we could get the accounts project totally integrated it would be a large piece of our IT strategy and would be very important.
Did I understand from you earlier on, that the Department has 85 units around the country?
Mr. Malone
Yes. We are heavily decentralised. The report says 88 different locations.
Are they all linked by way of computer?
Mr. Malone
They are. All local offices are linked to us by computer but we are anxious to complete computerisation in the TB and brucellosis eradication schemes, a project on which we are working at the moment in the disease eradication area. This area is partly computerised but the project under way would totally computerise it.
Mr. Malone accepts that all the problems of the past are behind us. Even in the past few years, since you have taken over as accounting officer a great deal of progress has been made with regard to accountability. Is that right? You have introduced an internal audit?
Mr. Malone
We see the Cromien report as a basis for moving forward, for avoiding a repetition of the difficulties we have encountered in the past. I have made the point at previous meetings of the committee that we have learned many lessons and we have strengthened and improved our procedures. We are anxious to move forward, to deliver a better service and to avoid problems similar to the ones that have occurred.
Do you have a management team?
Mr. Malone
Yes. Similar to other Departments we have a management committee. We meet on a regular basis and have a programme and a statement of strategy. We attempt to work to that statement of strategy and to have clear objectives and clear goals.
Mr. Malone referred to the internal audit and the Department has a system in place to follow-up on points of issue, is that right?
Mr. Malone
Yes. We have strengthened our internal audit and have put a system in place so that, where the internal audit makes recommendations these are followed-up. What happens is that the head of our internal audit unit presents an annual programme of what he proposes to do for the year ahead. We have a meeting with the head of the internal audit unit on a quarterly basis and we have a system of reviewing progress and checking on the follow-up on findings and recommendations. There is also an arrangement with the head of the internal audit unit that he reviews the findings of previous audit programmes on a systematic basis.
Mr. Malone referred to inspection schemes and the best use of resources. Is that advanced all the time?
Mr. Malone
It is. We are anxious to learn from the schemes, as we have operated them, to target our inspections and have good risk analysis and as a matter of course, we try to identify and look at problems that emanated from the operation of schemes in previous years. What we also attempt to do is to compare data from different schemes because farmers can apply under a number of different headings and a number of different schemes. We consider applicants who have been involved significant problems, and consider where there has been a significant increase in animals or where there would be very large applications. There is a combination of different issues and we dealing with them on an on-going basis.
Is Mr. Malone, as accounting officer, now satisfied with the systems in place within the Department?
Mr. Malone
It would be a brave assertion to say that any system is perfect but we have improved the systems significantly. The Cromien report has identified clear issues and it is our job to act on its recommendations and achieve the progress and the benefits that implementing them will bring us.
Paragraph 21 of the report states "It is noted that in the Department's statement of strategy the Department visualises a restructuring of its operations to comprise three broad pillars focusing on FEOGA payments, food safety and production, and policy development.". That restructuring is now taking place?
Mr. Malone
That is the logical structure the Department would break into but, as I indicated earlier, there is the issue of the payments agency and the structure and the format of that agency. The Department as it currently exists, naturally breaks into three areas and those are the three areas you identified.
As regards staffing requirements, are you now satisfied with the staffing of the Department?
Mr. Malone
That depends on the schemes and the pressures that come on a particular Department. We have to look at what emanates from the discussions on Agenda 2000 and the detailed discussions on the schemes. As a Department, we have to ensure we make the best use of our resources, of which we have a considerable number. We have 4,000 staff and we must make the best use of them and of technology. Good use of information technology can bring us advantage and added value. It is a combination of different things - using existing resources, reviewing pressures on new schemes coming on-stream and the use of information technology.
Thank you, Mr. Malone.
In general I feel we are not making enough progress. There is not the sense of urgency that I expect. I am astonished at how far behind we are in information technology. I want to go seriatim through the summary of interim recommendations to get a brief comment from the Secretary General, or perhaps Mr. Mullarkey where appropriate. In regard to the accounting systems, the Department should take all necessary steps, including deploying information technology and other resources, to bring the new accounts system for agriculture - NASA - into early operation. What is the position with regard to that?
Mr. Malone
As I explained, this project ran into problems last year. We had a choice, we could have gone ahead and implemented it, but what was being offered technically did not give us what we wanted. We have been involved in intense discussions with the suppliers. The target is to have that project completed by the end of April. We have a clear target on that project.
That is April 2000.
Mr. Malone
By its very nature it is quite a big project, one that could not be implemented in a few months. It is a project that would take the best part of a year given that we want to use the most modern accounts system available and given the requirements and the functionality. I said earlier that we are quite unusual in having two Votes, different accounting years and a whole range of requirements within those systems, and the problem is that there was no information technology package available off the shelf.
Does the Department not have its own information technology capabilities?
Mr. Malone
We have quite a large information technology unit but what is involved here is obviously new systems expertise. What we were confronted with and the approach we took would be similar to the approach taken by any Department confronted by a project of that size. The Department and I personally are very anxious to have this project implemented and we are very conscious of the consequences of not doing so.
In regard to information technology, urgent priority should be given to advancing a study initiated by the steering group for the development of an information technology strategy. Has that been constituted?
Mr. Malone
Yes, that has been constituted.
When is it expected to report?
Mr. Malone
It is under the auspices of the Cromien group. We have had an information technology strategy going back to 1993-94. It was deemed appropriate to review that information technology strategy and I assume that will take a few months. It has been started and the steering group has been established.
In regard to auditors, the Department should implement the recommendations of all auditors as soon as possible. Has that been done?
Mr. Malone
Yes, that has been done.
The Department should continue to monitor the progress achieved by its various divisions in response to the recommendations of this unit. How is that done?
Mr. Malone
A number of recommendations come from the different audit groups. We have an accreditation review group which I chair and it meets roughly on a monthly basis. We go through the various recommendations and we have a checklist.
So you preside over a committee that checks on whether these recommendations are implemented?
Mr. Malone
Yes.
Mr. Mullarkey
The Department is well represented on that committee.
In consultation with the audit committee, adequate resources should be made available to the internal audit unit to ensure that it has the capacity to undertake audits of computer systems etc. Has that been done?
Mr. Malone
We have strengthened our internal audit unit and we have appointed a new head of internal audit in the past year. We have given extra resources to the audit unit. We are training people in computer systems and are taking some extra people on contract. We also have the benefit - I labour this point - of an external audit committee which reviews effectiveness.
As regards risk management, on the basis of advice and guidance from its audit committee, a programme for identifying and managing risk should be incorporated urgently by the Department into its operations and throughout its management structures and systems. What have you done about that?
Mr. Malone
We have done that. We set up a group, in particular for recommendation No. 6 which follows from the implementation of the Agenda 2000 reforms, specifically to look at the risk element of the schemes coming from Agenda 2000. We also have groups that meet on a very regular basis and monitor the operation of the current schemes, results of inspections and where the problems are arising. It is an ongoing process.
On inspection procedures, the Department should examine its inspection procedures at plant and farm level with a view to achieving a more widespread use of unannounced inspections, based on the identification and prioritisation of areas of high risk. What is being done about that?
Mr. Malone
We have implemented that.
So there are surprise inspections?
Mr. Malone
Yes.
The Department should re-examine the system of staff rotation at plant level. What is the position in that regard?
Mr. Malone
We have had a system for some time now of rotating staff at plant level. There is a difficulty though - I do not want to mislead the committee - with staff rotation costs. If one is moving people on a regular basis one has to give them removal expenses. What we have been doing is rotating staff on a temporary basis. The staff in our meat plants have one day a month in a different plant. Speaking from memory, we have put about 60 or 70 new staff into meat plants, effectively to replace staff that were already there. We will have to look at this matter further, which is not without its difficulties or cost.
I know of course there are difficulties, but if you do not tackle them you will have the problem of familiarisation. Staff will become cosy with each other and they will not do the job they are there to do.
Mr. Malone
We certainly want to avoid that. Part of the answer is the system of surprise inspections. We have set up at head office what are called control units which visit plants and review the system. We have tried to get away from this arrangement of permanent supervision. We are determined to push staff rotation to the very limit but there is a cost involved under the arrangements if an individual is transferred from one location to another - in terms of family and all the normal things that go with them expense is generated. We are conscious of the point behind this recommendation which is that the inspection staff should not get too cosy or become part of the furniture wherever they are located.
There should be more extensive development of cross-stream team working arrangements. What has happened about that?
Mr. Malone
We have implemented that in one area, it relates to the management services unit. We have strengthened our management services unit. We have set up a group to progress this issue. Recommendation No. 10 relates to the integrated human resource management which effectively means having people properly trained and developing their skills so that they have a proper understanding of the requirements of the job.
The Department should develop an integrated human resource strategy. Are you saying that has been introduced?
Mr. Malone
Yes.
The Department's management services unit should be strengthened and given the necessary skills to assess the staffing implications of changing work demands and priorities.
Mr. Malone
Yes, we are implementing that.
It is being implemented. Senior management in the Department should redouble their efforts to ensure that changes at EU level take account of the characteristics of the Irish system of agriculture and administration. "Management, when taking on new schemes should identify and quantify the associated risks".
Mr. Malone
We have considered that point with regard to what emerged from Agenda 2000. We are making efforts to ensure that the detailed implementation rules are the kind that suit Irish agriculture. It must be understood that this recommendation is a negotiating objective and we must take account of what the European Commission proposes and the views of other member states.
No. 13. "Managers in the FEOGA divisions should have greater input in the negotiation and development of scheme regulations and formal co-ordination mechanisms should be strengthened to this end". What has happened with that?
Mr. Malone
We have done that and set up sectoral groups in the context of what we faced in Agenda 2000. The focus was on the implementation. We have the policy on one hand and the implementation on the other.
No. 14. "The close working relationship between the Department and the customs authorities should be maintained, and, where possible, further developed through formal arrangements". Have formal arrangements been made?
Mr. Malone
We have a formal arrangement with the customs authorities as part of the accreditation. I indicated a proposal to strengthen that by setting up a high level liaison group.
The high level liaison group has been or is to be set up?
Mr. Malone
It already exists.
No.15. "Priority should be given by the Department and the Paymaster General's office of the Department of Finance to developing alternative and more efficient methods of payment". What has happened about that?
Mr. Mullarkey
The Department of Agriculture and Food is the biggest client of the Paymaster General's office, and the problem, which can only be limited to some extent, is that payments from the Department come in significant surges, owing to the nature of the schemes. The pattern is dictated by EU regulations, partly by a desire to maintain a high level of customer service. The Department of Agriculture and Food does what it can to modify these surges. Both the Department and the office of the Paymaster General are viewing alternatives such as electronic funds transfer and the possibility of contracting out a certain amount of payable order clearance to commercial banks. They are both under investigation.
You say "under investigation". Will there be progress to report in a few months?
Mr. Mullarkey
I like to think we would complete a final report on that.
No. 16 "The Department should establish its own legal service as a means of providing timely, legal advice".
Mr. Malone
We have the bones of a legal unit and we have proposals to strengthen it.
Is there a case where a number of staff in the office of the Attorney General are to be seconded to your Department?
Mr. Malone
The difficulty with the AGs office relates to the legal advisers, and we do not wish to usurp that function. If we had our own within-house legal advice section to advise us promptly on certain issues it would help greatly.
——or obviate some issues.
Mr. Malone
We use the level expertise we have but wish to strengthen it.
What is Mr. Mullarkey's opinion of this?
Mr. Mullarkey
Mr. Hurley has been involved in this.
Mr. Hurley
We are disposed to this and had a meeting with the Department of Agriculture and Food, the consequence of which was that further information would be supplied to us on how this unit might function and what kind of relationship we would have with the office of the Attorney General.
I hope it will be quicker than the parliamentary legal assistant. We will return to that question in a few months. No. 17 " The Department should maintain close liaison with the Civil Service Commission to ensure that its recruitment needs are signalled well in advance". Are there discussions with the Civil Service Commission?
Mr. Malone
Yes, I spoke to the commission with particular emphasis on the move to County Wexford. We had a problem to which the commission responded quickly. That is a recommendation that does not present any difficulty.
No. 18 "Management should ensure that there is no loss of control or co-operation as a result of the decentralisation of key FEOGA operations to Johnstown Castle, County Wexford. They should pay particular attention to the associated risks for control systems and service delivery".
Mr. Malone
We implemented that. The decentralisation to County Wexford is an issue that was highlighted by the accreditation auditors and which we divided into segments. Three transfers have been effected. We devote particular attention to ensure the integration and the training of staff. It is a policy decision that the transfer does not take place without our satisfaction and that there is no risk involved.
When will the transfer to County Wexford be completed?
Mr. Malone
It will be completed this autumn.
In a few months?
Mr. Malone
Yes.
How many staff will be in County Wexford and how many will be in Dublin.
Mr. Malone
Roughly 200 to 230 people, and forestry staff will be based in County Wexford. About 800 to 900 people will remain in Dublin.
Is a further transfer contemplated?
Mr. Malone
No. Bear in mind that we have 4,000 staff and are quite heavily decentralised.
Go back to the question of your memorandum to other Departments about the independent FEOGA agency. It is four months since the memorandum was circulated on a decision made some years ago. Are you making efforts to speed up the responsible Departments?
Mr. Malone
Yes. This is a ministerial issue. I will abide by the Government's decision but I cannot pre-empt it. We circulated the memorandum but need final observations before producing it.
Has any Department a difficulty with the proposal?
Mr. Malone
I do not think so. Time has passed since the Government decision of March 1996 when we discussed this issue. There are different models of approaching the payment agency and, depending on which model one pursues, there are certain staff and resource consequences. The issue must be resolved and the Government must make a decision.
Does Mr. Mullarkey's Department look at the alternative options and implications?
Mr. Mullarkey
We are one of the Departments involved. A number of models are being examined; it is essentially a ministerial matter. There are significant consequences depending on the model.
You are not certain that it is the correct course of action?
Mr. Mullarkey
They are clear about a different agency being required. There are different models that could be used.
Are you not absolutely certain that that is the right course of action?
Mr. Hurley
It is clear that a different agency is required. There are different models that could be used. A political judgment would have to be made as to how the different models stand up as against levels of independence.
To sum up, Mr. Mullarkey, do you think adequate progress has been made?
Mr. Mullarkey
The report is not complacent. It points out a number of areas where action is needed now on foot of the interim report, and that action should not await the final report. It sets higher standards in certain areas than normally prevail in the public service generally, in terms of controls and IT standards and strategies and so on. In that sense it will accelerate what has been very respectable progress by the Department of Agriculture and Food in recent years. I hope this, together with the final report in the autumn, will bring us to a satisfactory state of interim control and financial control generally in the Department.
Mr. Malone, do you have a final word on this?
Mr. Malone
The point I would make is the point I made at the beginning, that this report gives us a good basis to improve our performance. I can assure the committee that we take the recommendations seriously, that there is a sense of urgency. We believe that if we implement those recommendations we will be a better Department overall, that we will have better controls, that we will deliver better service and that we will avoid a repetition of the problems that occurred in the past.
I propose to the committee that we note the 1997 report of the Comptroller and Auditor General and Appropriation Accounts, Votes 31, Department of Agriculture and Food, and also the Irish Intervention Agency Annual International Statements, 1994, so that we can include an interim report ourselves in our annual report on the subject. It provides that in next year's report, which will be put forward in a couple of months, we will come back to this issue when Mr. Cromien's committee's final report is available. I suggest that we take that in November under the report of 1998.
That being the case, if the committee agrees, we can discharge the Department of Finance. Thank you very much.
We are turning now to the value-for-money report. I ask Mr. Meade to introduce that.
Mr. Meade
Chairman, some of the matter has already been aired this afternoon, but I will recap briefly.
Premium headage payments are an extremely important part of cash flow in farming businesses, representing more than half of the total farm income from agriculture each year. The total amount paid out to farmers under the 1998 schemes this year will be around £800 million and, as has already been indicated this afternoon, the Department of Agriculture and Food administers the scheme under regulations set up by the European Union. This VFM examination focused primarily on the efficiency of the administration process involved in handling grant applications and of the inspection process within the integrated controls group of the Department of Agriculture Inspectorate. We have previously discussed financial problems which had arisen in the course of our financial audit.
As stated previously - and it is no harm to state it again - the Department has a difficult job in trying to satisfy the sometimes conflicting requirements of all the scheme stakeholders On the one hand time limits for payments and quality of service are of key concern to the farming community. At the same time EU taxpayers and the Committee of Public Accounts need an assurance that correct grant payments are made to eligible applicants. Because the Irish Exchequer pays all the costs of administration, amounting to around £18 million a year, the taxpayer is also concerned that the costs of administration are minimised.
As we already indicated, the reform of CAP in 1993 resulted in major changes in the level of grant expenditure, the number of grant applicants and the volume of grant payments made. The administrative procedures also become much more complex. As a result, initially there were some long delays in payments to many applicants. However, the Department has committed itself to extremely challenging target payment dates, and the examination found that considerable progress has been achieved in bringing forward payment dates, particularly in relation to sheep and tillage payments.
There were and are still some delays in payments under the cattle schemes. Much is due to administrative difficulties, but these are being resolved. However, the Department feels that errors by applicants in completing application forms, which was raised this afternoon, are another significant cause of payment delays. There may be a case for the Department developing more information campaigns targeted at some farmers who have difficulties with their applications. Sometimes farmers do not listen to the information campaigns, no matter what they are told.
On-farm inspection is a vital part of the verification of claims. In recent years the Department has made changes to the inspection process to make it more effective at uncovering frauds and irregularities. More cases are now selected for inspection on the basis of risk criteria, and many more are carried out without notice to the applicant. However, because management information systems in the Department were underdeveloped at the time of the examination, it was difficult for us to assess the impact these measures have had.
It is also important both from a customer service and a control viewpoint to ensure that inspections are carried out everywhere to the same standard. In this regard the considerable variation from county to county in the level of irregularity uncovered by inspections may indicate that uniformity was not being achieved. However, the Department has introduced measures to ensure standardisation, including documentation checks, an inspection file, and re-inspection of a sample of cases.
The Department has not set any targets for improving the level of economy achieved in administering grant applications, but the cost of administering applications has remained relatively stable since 1994, so perhaps there is some scope for improvement there. For example, a reduction in inspection costs could be brought about through changes in work practices, such as better matching of staffing levels to workloads or substitution of temporary field staff for permanent staff. However, both of these can have a cost and have to be assessed.
The Department has made progress over all in improving the efficiency of the administration of livestock and headage payments. However, as the report indicated - and it was confined to the 1996-97 schemes - there was still some room for improvement. As was indicated earlier today, those improvements are taking place and are being worked on constantly.
This is part and parcel of the general review and management of the Department. Are there any more questions?
We have covered most of it in the previous report. In relation to the cost of administering the schemes at £18 million, who pays that? Could the Secretary General finally dispel the myth that the administration costs are deducted by the Department out of farm repayments?
Mr. Malone
The Exchequer carries the costs of the administration. I can give a categoric assurance that they are not deducted from the payments. It is an interesting question because I saw an article this morning in one of the farming papers which contained an implication that the administration costs were being deducted from the moneys recouped from Brussels. That is not the case.
How are we perceived by the EU Commission in terms of how we administer these payments?
Mr. Malone
Obviously we have our difficulties and problems but, overall, we are perceived as being fairly good. In the context of another committee, officials from the European Commission came to Ireland and they indicated, first, that our delivery of payments is among the best in Europe and, second, that the progress we had made in regard to the simplification of forms was also among the best in Europe. However, we cannot be complacent. There is much money involved. These schemes are complex. Generally, the value-for-money report is a useful document. It has shown us some things we need to look at, and we are looking at those.
So long as a commitment is given that all the Mayo payments are made first, I have no further questions.
That table towards the end of the report relates to Tipperary. Does the fact that you are a Tipperary man explain this aberration here? What table is it?
Mr. Malone
It is on page 27.
Is there an explanation as to why the figures for Tipperary and Offaly followed by Wicklow and Dublin should be so high, or are there particularly effective officials in those areas?
Mr. Malone
We have been looking at this and find it difficult to draw any real implication from it. It is difficult to look at it in the context of one year. For example, Tipperary was in first position in 1996 but in 1997 it had fallen way down the league. There is a broad point that can be taken on board. One has to look at the size of herds, the numbers of animals. There is a particular concentration of animals in this county whereas some other counties have a low density of animals. Lessons are learned from one year to the next. If an individual farmer encounters a difficulty in one year and his payment is reduced or deducted, we expect he will have learned his lesson and that we will not have a problem with the same individual the following year. In summary, it can be dangerous to look at a single year and draw a conclusion.
We note the report. I hope significant progress is being made in the Department. That is the objective and intention of the committee. I hope when we return to this matter in November there will be even more progress to report.
I thank Mr. Malone and his officials.
The witnesses withdrew.
Contrary to what was said at the beginning of the meeting, there will be a further meeting of the full Committee of Public Accounts on Thursday, 15 July 1999, at 11 a.m. to deal with the report on social welfare and the unemployment figures which we decided to defer today. It is as well to dispose of that, otherwise it will be delayed for months. It will be only a half hour meeting. We will also deal on that day with the outstanding Departments not dealt with under the 1997 report, the Department of the Taoiseach, the Office of the Tánaiste, the Office of the Comptroller and Auditor General, the State Laboratory, the Valuation Office, the Ordnance Survey Office, Charitable Donations and Bequests and the National Treasury Management Agency, paragraphs 44, 45 and 49 of the 1997 annual report of the Comptroller and Auditor General, Volume 1. The accounts of other bodies not yet noted are University College Galway, Dublin Institute of Technology and the North Eastern Health Board.