COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 12 Dec 2002

Vol. 1 No. 3

2001 Annual Report of the Comptroller and Auditor General and Appropriation Accounts.

Vote 36 - Defence.

Vote 37 - Army Pensions.

Chairman

I recommend that we deal with chapter 10 in the report of the Comptroller and Auditor General. Witnesses should be aware that they do not enjoy absolute privilege. Members' and witnesses' attention is drawn to the fact that from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997 grants certain rights to persons who are identified in the course of the committee's proceedings. These rights include the right to give evidence, the right to produce or send documents to the committee, the right to appear before the committee either in person or through a representative, the right to make a written and oral submission, the right to request the committee to direct the attendance of witnesses and the production of documents, and the right to cross-examine a witness. For the most part, these rights may only be exercised with the consent of the committee. Persons being invited before the committee are made aware of these rights and any person identified in the course of proceedings who are not present may have to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings if the committee considers it appropriate and in the interest of justice.

Notwithstanding this provision in legislation, I remind members of the long-standing practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions in Standing Order 156 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome everybody to the committee and ask Mr. David O'Callaghan, Secretary General of the Department of Defence, to introduce his officials.

Mr. David O’Callaghan

Thank you, Chairman. I want to introduce Mr. Pat Hogan, head of our corporate services including our finance branch, Mr. Robbie Lyons, principal in charge of our finance branch in Galway, and Mr. Eric Hartman, an official in the Department of Finance.

Chairman

I call on Mr. Purcell to introduce the paragraph.

Mr. Purcell

In regard to what we used to call paragraph 10, I have updated matters and it is now chapter 10 because there is significantly more than a paragraph in it. We broke with tradition. Chapter 10 of my annual report records the results of an examination carried out by my staff on the building maintenance function in the Department of Defence. The maintenance programme is delivered by a combination of outside contractors and over 500 civilian maintenance staff. Generally speaking, big jobs and specialist work are carried out by contractors while the smaller, more routine jobs are undertaken by civilian employees. Overall maintenance costs in 2001 totalled €23 million, with nearly €13 million being accounted for by civilian pay, €9 million going to contractors and about €1 million being expended on materials.

The aim of my audit was to try to establish if the State was getting good value for its expenditure in this area. We found that while the work performed by outside contractors was reasonably well overseen and monitored by management, the same could not be said for the way the work of civilian employees was handled. Specifically, there was no advance scheduling of jobs and no targeted completion times were set. This, allied to the failure to keep records showing labour hours per job and the level of downtime, was not conducive to controlling the cost of maintenance.

The committee might wish to note that, in a value for money report I published a little under four years ago, I drew attention to the lack of information which militated against the monitoring of the efficiency and economy achieved from property maintenance and, in particular, from the work activities and output of the civilian maintenance staff. As far as we could ascertain and on the basis of the audit, not much seems to have changed in the interim.

The committee will note on pages 107 and 108 that one of the aspects of management I examined in particular detail was the control of absenteeism among employees. A high level of absenteeism due to illness has long been a problem in this area. As far back as 1990 an absence control programme was introduced to address the problem, but we found that the programme had lapsed in four of the six functional areas of the Defence Forces. My staff independently checked the incidence of absenteeism by way of a random sample and also examined the situation in two of the locations we visited. These checks established levels and patterns of absenteeism among tradespersons and operatives which, on the face of it, would merit further investigation and action.

While there has been a discernible move over the years to the use of private contractors to carry out maintenance work in military installations, the likelihood that in the foreseeable future there will still be significant dependence on civilian employees to undertake work of a routine nature strongly suggests that a more proactive approach must be taken to managing maintenance work falling into this particular category. This might best be done in the context of a determination of the optimum mix of external contractors and civilian employees required to deliver an effective maintenance programme for what is a reduced property portfolio following the disposal of a number of military barracks in recent years.

Chairman

Does Mr. O'Callaghan wish to make a brief opening statement?

Mr. O’Callaghan

The Department of Defence has a large property portfolio extending to approximately 20,000 acres. The Department is the second largest property holder in the country after the Office of Public Works. We have 28 occupied barracks around the country and several hundred smaller installations such as FCA huts, the maintenance of which is a large operation.

I take on board everything the Comptroller and Auditor General has said. We have reinstituted our absenteeism programme. We have held seminars with the military management who are responsible for this. It is correct to say that it has lapsed in several areas. This is due to the major reorganisation that is currently taking place in the military, including the closure of six major barracks. We are also talking to our unions about the introduction of job cards for specific jobs.

I would not like the committee to get the impression that we are not keeping any records. In his report, the Comptroller and Auditor General states that we have start times, end times and we cost materials. The position is being monitored closely. I note from the Comptroller and Auditor General's figures that we are now spending approximately €5 million less on maintenance than we were in the past. Twenty years ago we had over 2,000 civilian employees in the Department and we also took on seasonal workers. That number of civilian employees has now fallen to approximately 1,000. In respect of maintenance alone, we have halved the numbers employed. Each area in recent years has been critically examined. It is stated policy and is stated in the White Paper that in partnership with our unions we will examine each job on a value for money basis and we will use either external or internal resources to do the job. We are making significant strides in this area. I am happy that we can do more and we will do more in the future.

Chairman

I am concerned about possible shortcomings in the management information system. There appears to be little or no improvement in this area since the Comptroller and Auditor General's value for money report in 1998, which states that the Comptroller and Auditor General's value for money report No. 27 found there was insufficient information to monitor the economy and the efficiency achieved from property maintenance and, in particular, from work activities and outputs of civilian maintenance staff. There was also the SMI report, the objective of which was to ensure the delivery of better government, as a result of which there would have been expectations of improved efficiency.

There appears to be little or no controls in place in respect of the running of a business with a staff of 10,500, some 400 staff in the Department and some 300 staff in terms of military officers. Managing that size of a business with no account of material or labour costs raises many questions. What evidence is there of improvement in this area since the 1998 value for money report? Do we need another report to galvanise effective action to deliver effective service outputs? That is important in terms of a value for money framework. The budget for the Department is very large. I cannot understand the level of lack of control in the Department and the level of absenteeism, given that a survey carried out found that in one location alone in which there is a staff of 18, the average number of absentee days was 68 . How can you stand over that?

Mr. O’Callaghan

I cannot stand over that type of average. As to what improvements have been made since 1998, I would have to give the background and context in which we have been operating since 1998. We have closed six installations, which has meant a major upheaval for the military staff and civilians employed there. For instance, in Clancy Barracks alone there were over 100 civilian staff. These closures had to be tackled in a partnership manner with our trade unions. We had to offer early retirement, transfers and alternate work.

We examine each and every job when it is comes up for renewal or becomes vacant. The numbers are falling every year and every year we are getting better value for money on the maintenance front. We are outsourcing a good deal more. We did not outsource practically anything ten years ago. The people to whom I am referring are a contractor or painter working in a barracks. Such a person is resident and is called upon at short notice to fix a window, erect a door or to do a painting job. We keep records and have time clocks in most barracks, which are supervised by the military. The rate of absenteeism is somewhat high but the nature of the work is mainly outdoors and there is a relatively high age profile among the workers. It is not that we have ignored the 1998 report. We have done a lot and reduced the numbers. We are getting better value for money and the Comptroller and Auditor General's figures show that there has been a decrease in the costs of maintenance of €5.5 million in the last ten years.

We are putting a lot of time and effort into this but we are dealing with our unions on this matter. Obviously, if we had a green field or a clean sheet of paper, we would probably set it up differently. However, we have inherited this and we have to manage it and handle it carefully. The value for money ethos is very much part of the way we do business.

Chairman

Financial systems and human resource management are all part of running a business. I wish to consider the level of staff. I have read the strategy statement for the period up to 2004 which outlines best practice for the Department. There is up to 400 staff. Is a reduction being made in the number of staff within the Department as opposed to the military?

Mr. O’Callaghan

Yes. In the White Paper there is a commitment that the staff numbers will reduce by 10% by the end of 2004. Ours is the only Department that has made that type of commitment. The defence sector is the only sector reducing its numbers. As regards our human resources management, I would put our record on a par with any other Department. We recently won an award for excellence from FÁS for how we train and develop our staff.

Chairman

Can you confirm that you are giving an effective service and effective output?

Mr. O’Callaghan

Yes, by and large. Obviously, improvements can be made all the time. It is a dynamic situation and there is always room for improvement in every facet of the office. However, as regards our human resource management, the way we are re-organising the Defence Forces and the major work that has been carried out under the White Paper in the civilian, military and Civil Defence areas is very good.

Chairman

However, any building or construction company would have a quantity surveyor to quantify the labour costs. Why is that not the case within the Department? Having one would allow for quantity and labour costs of a building project to be available.

Mr. O’Callaghan

We do that, as the Comptroller and Auditor General says in his report, with all our external work. There was no criticism of that. With regard to our internal work, maybe we should do more. We quantify the materials and cost them and we have a start time and an end time for most of the jobs. We can do more in that regard, as I have said.

Chairman

How can you stand over the fact that the cost of labour is way beyond the normal trade costs? It is at a ratio of at least 10:1 whereas in some Departments in can be 2:1.

Mr. O’Callaghan

The set up in the Department of Defence is probably different from other Departments. Is the Office of Public Works the comparator?

Chairman

That would be one of them.

Mr. O’Callaghan

I do not know what its system is. Are you talking about the cost of materials?

Chairman

I am talking about the labour costs compared to the input of materials. There is such a vast difference between them. If it occurred in a business in the commercial sector, it would have been closed down long ago.

Mr. O’Callaghan

We have been working on this aspect. It is a priority. There is always room for improvements but the figures speak for themselves. The costs of maintenance have been coming down and the numbers employed on it have been coming down. The external out-sourcing of maintenance has been a success but we know there is more work to be done.

Chairman

Will more outside consultants be needed to galvanise effective action within the Department so that when you come before the committee again there will have been a huge improvement?

Mr. O’Callaghan

We always welcome outside validation of what we are doing. We do not mind that. That is really a matter for the committee and the Comptroller and Auditor General. When I come here again there will be improvements.

Chairman

Is that within the Department or within the military?

Mr. O’Callaghan

In all areas. I am Accounting Officer for the entire Department.

Chairman

Is there much duplication between the military and civilian sections? There could be an overlap that is costing huge money which could be eliminated if there was better co-operation.

Mr. O’Callaghan

No, that has been tackled. I cannot say it is 100% but we have delegated most of the budget out to the military. There is little or no duplication.

Chairman

Will the report substantiate that?

Mr. O’Callaghan

Yes.

Deputy Dennehy

Can I clarity that we will complete chapter 10 and revert to the Vote?

Chairman

That is correct.

Deputy Dennehy

Obviously there will be some overlapping issues. I welcome Mr. O'Callaghan. I was Acting Chairman the last time he was before the committee and some of the same issues arose. I do not wish to sound critical of the Defence Forces in general but the situation regarding the property portfolio and maintenance appears to be chaotic, to put it mildly. They have up to 20,000 acres, the naval base, the aerodrome, 28 permanent barracks and a range of other facilities and buildings. There appears to be no capital asset costing. No value has been put on the property portfolio, as far as I know, on the capital side.

There is no estimate available of the total area of the buildings. That is fascinating. It is a simple matter of arithmetic. There is a plan of each building available and somebody could have done that exercise. The reason I referred to the Vote is that issues such as depreciation are involved. How is that worked out? If we do not know the capital value, how is it calculated? The barracks re-investment programme is tied into it and it appears that many of the difficulties stem from the fact that no assessment has been done of the overall picture.

In that regard, I asked about the land and its ownership four or five years ago. I referred to the example of the naval base in Haulbowline to show the difficulties that were arising. The rainbow Government sold the Irish Steel site for £1 and there is now a lot of legal difficulty about the actual ownership of that site. The maps of the islands are the most complex things I had ever seen. There were parts leased to the Naval Service and parts that carried over from the British establishment. Some of them were cleared up 20 or 30 years ago. It was very complex and difficult to understand. No attempts appear to have been made to rectify the situation or clearly lay out ownership and deal with the legal issues. That is just one area at Haulbowline. I accept there are multiple uses of the site but most of that should have been sorted out after 50 years.

I do not know about the aerodrome but if the rest of the properties are as difficult, complicated and badly dealt with as Haulbowline, I shudder to think of how they can be valued. Do you envisage the Defence Forces carrying out an audit of the value of the property portfolio? I am not as concerned about the buildings, although if they are being sold we should know their value beforehand rather than waiting for the market value.

Mr. O’Callaghan

I disagree with the word "chaotic" in describing the way we manage our property portfolio.

Deputy Dennehy

The word jumped out at me when I read the report.

Mr. O’Callaghan

We have a detailed register of all our property. We do not have a current valuation of existing plots of land, whether a barracks or something else. We have estimates of the value, but it can change depending on when one sells the property. When we sell a property - we sold a lot of property in recent years - the first thing we do is to get the Valuation Office to value it before we put it on the open market. That can vary from year to year. As it is costly to do it, there is not much point in getting a valuer to value a piece of land unless one is going to sell it. Some of our property was valued three or four years ago and there is a big difference in the value of it today.

As regards Ispat, we are not the lead Department as it was demised to Ispat by the Department of Enterprise, Trade and Employment at the time. The current difficulties with the lease are being handled by the Department of Communications, Marine and Natural Resources and the Department of Finance. It is not our property. We are interested in Ispat for two reasons. The first relates to health and safety. We are conscious of our Navy personnel and the fact that there could be health and safety issues. The second relates to the fact that we are interested in getting additional berthage for the Navy if and when the lease can be sorted out. As the Deputy is probably aware, that is currently before the courts. The next hearing is on 16 December.

We are managing our property portfolio well. We have examined every property, closed six barracks and put them up for sale. We have invested the money in the Defence Forces. In addition, we are in the business of selling many plots of land and houses, including the ones in Crosshaven which were mentioned at the last meeting, and 100 married quarters around the country. We have also come to the rescue of other Departments when they were short of land, such as the land we gave for the additional prison in the Curragh. We have given land for refugees throughout the country, including Kildare, Clare and Kerry. We have an efficient property management branch in the Department of Defence. Perhaps it does not know the value of each property at a particular time, but it has a good idea. We have been pro-active with other Departments in this area.

As regards leases and maps, I agree with the Deputy. Although we have been in continuous occupation of properties for 80 years since we took them over from the British who were probably there for a couple of hundred years before us, when we sell property, the leases and the maps are tremendously complex.

Deputy Dennehy

I do not want to resolve the Ispat problem here. I am only making the point that the issue should have been straightened out. When I saw the maps, I realised what had been tolerated over the years. It is still a State asset, regardless of the lead Department. I was worried that the way the issue was handled might be indicative of the approach adopted in other areas. Some €77.5 million was spent on capital works up to 2000-01, of which €22.9 million was spent on maintenance. That is a lot of money and it does not read well.

As regards the ratio of 10:1, anyone doing an assessment of building works automatically gives 60:40 for labour costs and materials. My local city council recently complained about the ratio of 10:1 for a maintenance section, which horrified everyone.

Mr. O’Callaghan

The Deputy may be confusing two things.

Deputy Dennehy

Perhaps I am. The report states that the ratio for labour costs and materials was 10:1.

Mr. O’Callaghan

I agree with the ratios mentioned for capital projects. However, we are talking about a carpenter, electrician or plasterer who is based in a barracks and who will do some repairs without using a lot of materials. A pane of glass, for example, might be used. A lot of our work is small maintenance work.

Deputy Dennehy

I was responsible for running a department for 20 years and if I had come up with such a figure, I would have been let go. I was a neighbour in Haulbowline. The call was made for a change in 1997. There were several issues. The Department's internal audit section in 1997 recommended that a strategic policy decision should be taken by the secretariat in relation to the recruitment or retention of civilian employees. Mr. O'Callaghan does not seem to have that policy statement. There is no guidance. That is unfair to everyone, including the employees because the person who produces results will not get recognition if proper records are not kept. The Comptroller and Auditor General referred to that in his conclusions. There is a need to improve the ways and means by which the work is managed and measured. It is demoralising for employees. The system is not fair to good employees who only take an hour to hang a door compared to someone else who needs a day to do it. It is also not fair to those of us who want value for money.

Mr. O’Callaghan

Our policy is stated in chapter 8.3.12 of the White Paper. It states, "In a partnership approach with staff interests, efforts will be made to ensure that appropriate opportunities to maximise value for money, including contracting out of services, are utilised". I assume the committee is aware that we must deal with our trade unions on this matter and negotiate any changes in work practices.

Deputy Dennehy

I thought that would be achieved in four years.

Mr. O’Callaghan

There have been improvements.

Chairman

They have been small.

Mr. O’Callaghan

The numbers have dropped considerably.

Deputy Dennehy

How are decisions made about contracting out work? I understand the figure is upwards of €75,000. It sounds like a complicated procedure. At present, only contracts of €75,000 for maintenance work and more than €25,000 for materials are administered by the Department. Values below those are administered by the Defence Forces. Contracts are drawn up by the corps of engineers who evaluate the tenders received. An assessment of the price must be done if it is sent out to tender. At what point are decisions made about supervision and completion of the work? It seems there are two different sections involved. If the price is assessed, does the Department still receive tenders?

Mr. O’Callaghan

Yes.

Deputy Dennehy

It seems that a cut-off price of €75,000 is a guesstimate rather than an estimate, with a plus or minus factor of 10% or 15%. How could people could arrive at that €75,000 figure? Is it a mandatory cut-off figure, or could the tender for the job come out afterwards at €56,000 or something else?

Mr. O’Callaghan

It is possible, Deputy, but we have a corps of qualified engineers in the army who would be able to make a pretty good estimate of the cost of a job.

Deputy Dennehy

Yes. This highlights the aspect of historical expenditure going back ten or 15 years. It has happened that the fine details of work may not have been properly costed. It is bad practice that probably crept in over many years but I did not think it could still occur. The whole matter sounds convoluted and I am concerned about it. I appreciate the point made by Mr. O'Callaghan that since this matter more improvements have been made, but more are needed. A commercial approach should be taken towards the management and costing of buildings. I have always argued that we should know the value of State property, whether it belongs to health boards or the railways, including spare land capacity. Departments have been lazy in this regard, and it is not just the Defence Forces that are to blame. In the public transport sector, people never bothered to examine land that could be used otherwise. One of the reasons for that is that the value of such land was never ascertained. I am not saying that every metre of State land should be valued but as much as possible should be so that we have an idea of the property portfolio.

Mr. O’Callaghan

I accept what the Deputy says about valuations but we have examined every unit of property we own in the State. We have put umpteen properties up for sale in the last four or five years and it has been a very successful campaign. We have done a deal with the Department of Finance so that the proceeds of the sales are ploughed back into the Defence Forces. Consequently, there has been no nominal increase in our Vote over the last few years because we self-financed the major reinvestment programme.

Deputy Dennehy

When we discuss the Vote, Chairman, I may have a few questions on the reinvestment programme and depreciation.

Deputy Rabbitte

I apologise to you, Chairman, and to the committee for not being in my place when I ought to have been. I was receiving a delegation from Northern Ireland that arrived early. I also regret my enforced absence on the last occasion because I wished to join with you and colleagues in paying tribute to our former Chairman, the late Jim Mitchell. I have since had the opportunity in the House to do that.

If you have addressed Army deafness claims, Chairman, I do not wish to go back over it.

Chairman

We are sticking to the chapter 10 initiative, but if the Deputy wishes to discuss other matters he may do so.

Deputy Rabbitte

Perhaps we could take all the matters together and then vote on them individually, if that is agreed. I wish to refer to the footnote on page 335, which states, "No provision is made in this account for the settlement of 5,161 claims in respect of alleged loss of hearing, and 846 other claims outstanding at 31 December 2001". Will Mr. O'Callaghan clarify that footnote?

Mr. O’Callaghan

Will I respond to that, Chairman?

Chairman

Okay.

Deputy Dennehy

Deputy Rabbitte can come back in but could we finish chapter 10 concerning buildings? I do not know if Deputy Curran wants to come back in on that question.

Chairman

We will conclude our discussion of chapter 10 and we can then open up the discussion.

Deputy Rabbitte

Go ahead.

Deputy Curran

On chapter 10 specifically, Mr. O'Callaghan made reference to the fact that when we do an analysis between the 1990 figures and those for 2001, and index link the 1990 figures, there is a saving of €5.5 million. It is very hard to quantify if that actually represents value for money, however, because Mr. O'Callaghan also mentioned that the number of properties has probably diminished. From that point of view it is hard to quantify the figures. Table 40 might in some way be missing another column. We do not necessarily need to know the capital value of all the properties but at least we need a column to show what the maintenance programme is working against. I suspect we have less property and that is probably why there is a saving, but I do not have anything against which to quantify it.

Table 40 contains a figure for 2001 of €9.3 million that was paid to contractors. It would be useful to have a breakdown of that figure. I suspect the division between labour and materials would be quite different to the previous two lines, which are 12 or 13 to one in favour of labour over materials. I would be interested to see how €9.3 million compares to the work that is done internally and externally.

Is there a specific type of work that, regardless of the financial element, is more suited to the staff who are permanently employed? These issues arise from the figures. When one reads through the report, it is clear that the number of civilian employees is being reduced. While I well understand that bringing in contractors for specific projects is probably ideal, are there any other implications for the security of barracks or other property? Is it easier to use permanent employees rather than contractors? Are there any other issues that we should be examining?

I also wish to raise absenteeism. At one location where 18 employees were surveyed, eight of the trades operatives were absent for over 40 days, which is unbelievable. I appreciate the sample was relatively small, but the absenteeism affected 62% of the group surveyed, if I have read the figures correctly. No matter what area one examines, the total figures for absenteeism seem to be quite high. The statistics for locations 1 and 2 vary significantly. What steps have been taken to address absenteeism?

Mr. O’Callaghan

To answer the last point first, the absenteeism control programme did lapse in a number of areas but it has now been reinstituted. Seminars have been held with the relevant military management. The control programme has been reinstituted so that we can monitor it more carefully in future.

The figure of €9.3 million for contractors is from the Comptroller and Auditor General. Unfortunately, I do not have a breakdown between materials and manpower costs, and I do not know if the C&AG does either. I agree, however, that it would be an interesting figure to have. The type of maintenance in which our people are involved comprises small jobs, such as mending broken windows or painting. Little materials would be used in proportion to the labour costs.

As regards security, it is not really a question of security in that we can clear the resident civilian employees. We would do a security clearance of the people coming into barracks anyway through outside contractors, so that is really not an issue.

Chairman

As regards absenteeism, have records been introduced at all locations? I know they had only been introduced in two of the six areas. How recent is that?

Mr. O’Callaghan

About four or six weeks ago.

Chairman

Why has it taken so long since 1998?

It is worth taking stock of the Comptroller and Audit General's conclusions. Mr. Purcell stated that contracting out maintenance work would appear to be generally well managed and supervised and that the increased emphasis in latter years of basing budgets on the amounts of work perceived as being necessary has given rise to increased funding. Is that being addressed? There is a need to improve the way and the means in which the work of civilian employees is managed. I will be disappointed if that is not done when you appear before the committee again.

The relative cost of undertaking the different elements of maintenance programmes by contract or by using direct employees should be assessed, but that is not happening. In business, they say turnover is vanity and profit is sanity. In terms of this Department, there is little sanity when it comes to the management of costs and its operation. I come from a business background and I know that if the business was operated in such a way, it would not function.

Deputy Rabbitte

In whom is the Garda helicopter vested?

Mr. O’Callaghan

The Department of Justice, Equality and Law Reform.

Chairman

Are there any other comments on chapter 10?

I have read all the documentation pertaining to this Department, including the White Paper, the value for money report, etc. As the new Chairman of this Committee, I am concerned given the large number of staff in the Department and of military staff - some 10,500. I am also concerned about duplication and overlap and cost management and controls. You have a considerable job to do to reassure me there is efficient management here. I strongly suggest you carry out an efficiency audit in a business like manner to ensure action.

Mr. Purcell

There is not much more I can say but I would like to comment on one or two points made by Deputy Curran and Deputy Dennehy. It would be virtually impossible for us to break down that €9 million as regards the contracted amounts - the total amount of work carried out by contractors as between materials and labour - because that would be very much a factor of their tendering procedure and so on. One would have to access their work records and so on to do that.

Deputy Curran is right not to take it at face value because at the end of that table, the Department believes the volume of work done pro rata has increased in the ten years, and I have no reason to question its good faith in this regard. I would add a caveat to that by saying that information which would underpin this view is not maintained and, I suppose, that links into the Chairman’s point about the lack of management information systems which would enable one to try to put some kind of value on the quantum of work and so on which must be done.

I wish to refer to something Deputy Dennehy said. One of the things noted as an exception in the accounts is military equipment and buildings. No estimate of the value of military equipment, buildings and so on is included in the statement of capital assets. Therefore, if one tries to come up with a value of operating the Department of Defence, including the military side which is the bulk of the activity, one does not have that information. As is explained on page 328 of the accounts, the Department is doing work in that area. I am not suggesting it is an easy area given the vastness of the stocks but we have had this exception to the general accounting polices for a number of years and it is something I will take up with the Department in relation to its 2002 accounts. In the light of movement on the management information framework under the SMI and a move to accrual accounting, we are not exactly prepared for that if we take these accounts as an example.

Deputy Dennehy

I appreciate valuation may be a moveable feast depending on what one is buying or selling. Nine or ten years ago, Coillte was pushed into valuing its stock. It turned out that it was about one fifth the book value because the policy had been to plant in land which could not be used for other purposes. That meant when people tried to recover the timber, they could not access the land. It had so many millions of euro worth of timber which was not recoverable and worth only one fifth of its book value. Part of our job is to know what the State owns. I appreciate there is work involved. If one argues the point that it is worth much more, so be it but at least we have a datum line from which to work. That should be the case in every Department.

Chairman

Mr. Purcell referred to stock control. In the 21st century, stock can be scanned. Given the amount of stock in warehouses and barracks, I am astonished there is no control system whereby one can get the exact value of stock, the shelf life of stock, dead stock and obsolete stock. I am concerned that there is obsolete stock which is valueless. I expect a report on that as well because it is amazing how one can accelerate the value of stock from book value. The level of stock, parts and equipment which can no longer be used should be quantified. That is something at which I will look in the future because it is amazing how a figure can be fabricated when in reality stock may be of no use. Given that it is possible to scan stock, I am astonished there is no such system of stock control in every warehouse and barracks.

Mr. O’Callaghan

We have been working on this for a number of years and each year we dispose of surplus and obsolete stock. To date this year we have disposed of a book value of €1.5 million worth of obsolete stock. Last year, we disposed of €5.2 million and in 2000 we disposed of €3.9 million. We have an ongoing stock control system. Many of our stock items in many of our stores would be 20 to 25 years old but they would still be items we would need and keep. We have a huge inventory but, again, we are a huge, complex organisation. However, I would not wish any member of the committee to be under the impression that we manage our human resources, stock or property in an amateur or slipshod fashion. We spend a lot of our human resources on managing our stock and our property folio, as I indicated earlier.

Chairman

How can you reassure people that there is no leakage in stock when there is not an automated system of control? What systems have you in place to ensure stock is not waylaid or taken without authorisation?

Mr. O’Callaghan

We keep detailed records of our stock. More than 90% of it is computerised.

Chairman

When do you expect it to be 100% computerised?

Mr. O’Callaghan

Next year.

Chairman

Is chapter 10 agreed? Agreed. We will proceed to examine the Vote.

Deputy Rabbitte

What is the up to date position on the Government jet?

Mr. O’Callaghan

We have one Government jet, which was purchased in 1991. The State now owns it. The final payment was made in 2001. It is now our property.

Deputy Rabbitte

What is its estimated life span?

Mr. O’Callaghan

It is a current model Gulfstream IV. It is very well maintained because it has to be. There could be another ten years of life in it.

Deputy Rabbitte

Are further purchases in that area contemplated?

Mr. O’Callaghan

There would appear to be a good business case to supplement it for the duration of the EU Presidency. In that context we have been in the market place looking at the lease of a jet, something similar in capacity to the Gulfstream IV, for the tail end of next year.

Deputy Rabbitte

Is that only for the period of the EU Presidency?

Mr. O’Callaghan

That is the intention at present. It will probably occur in the lead up to the presidency, in the last three months of next year.

Deputy Rabbitte

What role does your Department and the Air Corps at Baldonnel play regarding the reported difficulties with the operation of the badly needed helicopter facilities for the Garda Síochána?

Mr. O’Callaghan

We supply the Garda air support unit with pilots and maintenance to the existing helicopter and the fixed wing defender aircraft. The Department of Justice, Equality and Law Reform secured a Government decision to supplement that service with an additional helicopter, which was to be piloted and maintained by the Garda. That was the original plan. However, there was a change in that in April and May of this year when the advantages of using the Air Corps were seen. For example, having a Garda helicopter on the civil aircraft register rather than the military register meant it could not operate out of Baldonnel. There were also certain advantages in having Air Corps piloting.

We became involved in the middle of this year. There have been delays in getting the helicopter operational in Dublin as the sophisticated surveillance equipment the Garda was putting on board had to be certified in a very elaborate and complex fashion because it was changing the dynamics of the aircraft. For safety and certification reasons a long and complex operation had to be undertaken.

Deputy Rabbitte

It has been ongoing for two years.

Mr. O’Callaghan

We only became involved in the last six months. It was originally ordered and delivered to a site in the United Kingdom - you are probably right - two years ago.

Deputy Rabbitte

It would be an invaluable aid to the Garda Síochána in combating a seriously worsening crime problem. Yet, it is not possible to ascertain why it cannot proceed. Is it to do with purchasing?

Mr. O’Callaghan

No, it is mainly certification. It was delivered to Baldonnel on 4 December and is undergoing tests which will take three or four weeks. It will be operational early in the new year.

Deputy Rabbitte

After two years it has arrived at Baldonnel. How long will it be before it is in the air?

Mr. O’Callaghan

In January.

Deputy Rabbitte

It will be operational in January. Who will pilot it?

Mr. O’Callaghan

The Air Corps, from Baldonnel.

Deputy Rabbitte

Was it the view of the Air Corps that it should have piloted it ab initio?

Mr. O’Callaghan

I think so.

Deputy Rabbitte

The Air Corps finally got its way. Is the committee to draw the conclusion that valuable investment in necessary technology has been delayed because of internal differences between the Air Corps and the Garda Síochána, or is there another explanation?

Mr. O’Callaghan

There is no denying that earlier on there were possibly some inter-service difficulties. The current operation of the helicopter and defender is very successful. It is a smooth operation. There is a service level agreement between the Garda Síochána, which is responsible for the operations as such, and the policy, including such matters as destination and missions, and the Air Corps, which is to fly the aircraft. It is working very smoothly. The fact that the second helicopter will join the programme on the same basis indicates that matters have improved.

I am not sure what happened before our involvement, but it seems to have been a very slow process. Every piece of equipment handed to the Air Corps had to be certified for air worthiness. It is very complex, especially when sophisticated machinery had to be added. I cannot justify the six months——

Deputy Rabbitte

We are told the additions were unrealistic and made the operation unsafe and that some had to be jettisoned. Perhaps the original specifications commissioning and purchase of the helicopter was not handled as it should.

Mr. O’Callaghan

I would not have the same detail as the Deputy on that matter.

Deputy Rabbitte

Are you suggesting that is not an appropriate question to you and that it should be directed to the Department of Justice, Equality and Law Reform?

Mr. O’Callaghan

The Department of Justice, Equality and Law Reform is the lead Department in the purchase and sanctioning of this, including the specification of the equipment that was to be added. The Air Corps became involved in April and May of this year and then had to proceed with certification.

Deputy Rabbitte

Do any of your colleagues know if it is the case that some of the expensive additional technology has had to be jettisoned to make it airborne?

Mr. O’Callaghan

I have not heard that story. We would not know.

Deputy Rabbitte

What is the reference in page 332 to the hire of air taxis?

Mr. O’Callaghan

From time to time if the Government jet is in service or unavailable we have to hire a jet.

Deputy Rabbitte

Is that within the jurisdiction?

Mr. O’Callaghan

No. It is all European business or further afield if it is the President.

Deputy Rabbitte

With regard to Army deafness claims, how is the note on page 335 to be interpreted?

Mr. O’Callaghan

It deals with a number of cases that were outstanding at the end of the year.

Deputy Rabbitte

Subhead T refers to expenditure of €44 million.

Mr. O’Callaghan

That refers to the cases that were settled in 2001.

Deputy Rabbitte

Therefore €43 million has been paid out in the 2001 accounting year.

Mr. O’Callaghan

Exactly.

Deputy Rabbitte

Are you saying that at the end of that year a further 5,161 claims are outstanding?

Mr. O’Callaghan

Yes.

Deputy Rabbitte

Roughly how many of them would have been dealt with this year?

Mr. O’Callaghan

I can update the committee on the figures. We have settled 12,972 claims to date and there would be approximately 3,500 outstanding.

Deputy Rabbitte

How long is the period over which they were settled?

Mr. O’Callaghan

Basically since 1997.

Deputy Rabbitte

There are about 16,500 claims. How many men would have been in the forces? What proportion is 16,500?

Mr. O’Callaghan

If the Deputy recalls, I was in front of the Committee of Public Accounts for three long days on this matter and at one stage we estimated that there was a potential claimant population of 150,000 people who had either FCA or military service prior to 1987 and since the 1950s.

Deputy Rabbitte

So 16,000 plus have been disposed of.

Mr. O’Callaghan

About 13,000 have been disposed of.

Deputy Rabbitte

I beg your pardon, 12,972 have been disposed of and there are 3,500 remaining to be settled. Is the book closed?

Mr. O’Callaghan

We would hope to settle the majority of them next year, and basically the book has been closed.

Deputy Rabbitte

Is that in the sense that these are cases from the past?

Mr. O’Callaghan

Yes.

Deputy Rabbitte

That is not to say there will not be the occasional personal injury claim. In terms of this historical deafness, is the book closed at that number?

Mr. O’Callaghan

We are still getting claims. The Minister, as a matter of policy, made a statement that he will challenge any new cases received since July on legal advice that these should be statute barred. The Committee of Public Accounts brought this matter very much to the forefront over three years ago. Therefore anyone who had a problem should have known and should have claimed.

Deputy Rabbitte

From the figure for expenditure of €44 million, which is the footnote to subhead T here, what has been the approximate expenditure in 2002?

Mr. O’Callaghan

To the end of November, it is only €26 million, bringing a grand total of €256 million spent on this problem to date.

Deputy Rabbitte

Do you have a breakdown of the figure? How much of that went on legal fees?

Mr. O’Callaghan

That is broken down as follows: €173 in awards and €83 million in costs, most of which would be legal costs.

Deputy Rabbitte

Where did we all go wrong? We should have togged out in fancy headgear.

What has been the pattern of settlements over 2001-02, in terms of the amounts?

Mr. O’Callaghan

The average award is about €10,000. In comparison, when this was at its height we were paying about €35,000 per case.

Deputy Rabbitte

Are you satisfied today that, with whatever safety systems we apply in the Defence Forces, we are not exposed to this kind of thing in the future?

Mr. O’Callaghan

Absolutely.

Deputy Rabbitte

Is the Department fairly up to date as regards the moneys to be recouped from the UN?

Mr. O’Callaghan

We are, yes.

Deputy Rabbitte

Is this due over a period?

Mr. O’Callaghan

This is due over a long period, yes. There was a time - the first time I was here before the Committee of Public Accounts - when we were owed about €16 million. The figure has fallen. At the end of 2001, it was €8.4 million. As of the end of November 2002, the figure was €10.5 million.

Deputy Rabbitte

Are there any plans at present to make part of Baldonnel available to civil aviation?

Mr. O’Callaghan

No. This would be mainly a matter for the Department of Transport. We have that problem, that you cannot use it - as mentioned earlier in the context of the Garda air support unit - for non-military purposes by law unless that Act is changed.

Deputy Rabbitte

Are there no interdepartmental discussions going on about a possible change and possible permission being given for civilian aircraft of whatever size or order?

Mr. O’Callaghan

No, there is nothing active at present.

Deputy Rabbitte

Thank you, Mr. O'Callaghan.

Chairman

We expect to raise the matter of the helicopter here again with the Department of Justice, Equality and Law Reform to fully investigate it. Is the Department disappointed that it has taken over two years to take delivery of one helicopter? There are a huge number of questions regarding who is to blame. It would not inspire confidence.

There is a huge repair bill for the existing Government jet. Has the Department put a valuation on that jet? There is a recommendation to lease one on an interim basis. Has a cost-benefit analysis been done on the value of the jet and the purchase price due to the fact that there is so much money being spent on the repair of it currently?

Mr. O’Callaghan

I do not think there is an undue amount of money being spent on the maintenance of the GIV. Chairman, are you referring to a specific figure?

Chairman

What was spent on its repair?

Mr. O’Callaghan

I do not have the figure for maintenance on the GIV, but it is not a problem. The capital costs of a new jet would be in the region of €40 million to €50 million. We own the existing jet. We would possibly get €20 million to €25 million on the open market for it. You must pay maintenance for this type of machine. The figure for that is in the region of about €0.5 million per annum.

Chairman

What about the viability of keeping two at one time? Is there a need for it during the Irish Presidency of the EU?

Mr. O’Callaghan

There is a very good case for it during the Irish Presidency.

Chairman

When is the security service to banks being reviewed? I notice that the payment has remained the same since 1995. Has the cost of the service been calculated? Are the banks paying for the real cost of this service? With the level of profits the banks are making at present, it is something which we should certainly look at.

Mr. O’Callaghan

We do recoup our costs from the banks for the cash escorts. They cover our additional costs. Soldiers get what are known as security duty allowances when they are out on a cash escort. It also covers the cost of our transport. They are covered by the subvention on banks.

It has not been reviewed for some time. It used to be a matter for the Minister for Finance. It used to be announced in the budget that there was an additional subvention on banks for this cash escort. I think it is being reviewed. I think the Department of Justice, Equality and Law Reform is looking at its costs because they are not covered adequately. I think that this particular subvention is about to be looked at again.

Chairman

Is it not the case that the cost is four times what the Department receives in subvention from banks, that it receives only €2.25 million while the cost can be in excess of €10 million? Why is the Department subsidising banks?

Mr. O’Callaghan

It depends on what we mean by "costs". The full cost means soldiers' pay and salaries are added in. The subvention covers our additional marginal cost. It covers allowances and the cost of diesel.

Chairman

Is it not a fact that the cost was £4.2 million in 1998, £4.5 million in 1999 and £4.7 million in 2000? These figures were provided in a reply to a question to the Minister for Defence.

Mr. O’Callaghan

Did that include payroll costs?

Chairman

The total cost in respect of the provision by the Defence Forces of assistance to the Garda Síochána in protecting movement of cash for the years 1995 to 2000 is as follows: 1995 - £3.4 million; 1996 - £3.6 million; 1997 - £4.3 million; 1998 - £4.2 million; 1999 - £4.5 million; and 2000 - £4.7 million.

Mr. O’Callaghan

That includes pay. The subvention from banks covers our additional costs which are the allowances, the diesel and the marginal extras. It does not cover the cost of the pay of the soldiers or the depreciation on the transport.

Chairman

Why not?

Mr. O’Callaghan

On the basis, first and foremost, that it was a Government decision that this money would and must be protected because there was the danger that it would get into the hands of subversives. This was the subvention at the time.

Chairman

How much was the subvention? You must remember that banks make €1 million a day. I do not understand why the State subsidises that. How much was being paid in the form of a subvention?

Mr. O’Callaghan

The total subvention was €4 million. We got €2.25 million or €2.86 million each year which covered our costs.

Chairman

That did not cover your full costs.

Mr. O’Callaghan

It did not cover the pay.

Chairman

No, but is pay not the real cost?

Mr. O’Callaghan

It is, yes.

Chairman

Have you any plans to put a recommendation to the Minister for Finance and to state the facts on this? It must be dealt with.

Mr. O’Callaghan

I think it is coming up for examination again. I have communicated with the Secretary General of the Department of Justice, Equality and Law Reform and it is coming up for re-examination.

Chairman

How confident are you that you can recoup the real cost, including the labour cost? Can you make a case for that?

Mr. O’Callaghan

I suppose we can in the context that you said the banks are making so much money, but it is really a matter for the Department of Finance.

Chairman

I am anxious that the committee is kept fully informed. This is an issue I intend to pursue because, when so many people are in need, it is outrageous that we subsidise banks through the provision of security.

Deputy Dennehy

On that final point, there is a danger of the impression being given that banks receive public finance or something along those lines. This is an issue we need to discuss in greater depth. It is obvious that, if soldiers were not on escort duty, they would be in barracks and would be paid in any event.

Chairman

Yes.

Deputy Dennehy

An element of public security is involved. There was the issue of subversives and there were very bad examples of civilians being badly treated, to put it mildly, when escorting cash. This is a national issue and needs a wider discussion than the purely commercial approach. Soldiers are paid regardless of what duties they perform. I prefer to see them training in real duties.

We need to discuss this issue. While I take the point the Chairman made about the amount of money banks make, nonetheless they will simply pass on any additional cost to us, the paying public. We need to examine this area and have a good discussion on it which would include the Departments of Justice, Equality and Law Reform and the Department of Defence.

I have passed a number of convoys in my time but one which appeared to be on escort duty had ten vehicles. Who decides the level of security? The number of people involved is a key issue. Two gardaí might be involved in an escort and they might have a second car as back-up. Sometimes to an onlooker, it appears that too many are involved. Who decides on the security level?

Mr. O’Callaghan

That is an operational matter between the Garda and the local commanding officer, be it the south-west or east or whatever. If I may offer a personal opinion, I doubt very much that there would be ten vehicles in an escort no matter how much cash was involved.

Deputy Dennehy

This convoy was on the Cork side of Kildare and a Garda motorcycle was involved which made me suspect it was an escort. There was a vehicle in the centre. I am not sure of the exact number but there were up to ten vehicles.

Mr. O’Callaghan

Was there cash?

Deputy Dennehy

I am not sure. There was an ordinary van in the centre of the convoy. Generally speaking, this is a critically important issue from the point of view of public perception outside of anything else.

Mr. O’Callaghan

I agree with the Deputy.

Deputy Dennehy

It is essential and there is a public service aspect to it. I differ with the Chairman slightly when he emphasises that we should obtain the full cost of it, but that is something we can debate later. We will not decide it today.

There was very bad publicity about the grounding of the helicopter, and we are getting some of the background on it now. I was glad to hear the Department of Defence only became involved last June. Mr. O'Callaghan described the matter as an inter-services issue. Others would call it a turf war which might not be appropriate in the context of the debate. What caused the grounding of the helicopter for a year and a half?

Mr. O’Callaghan

As I said to Deputy Rabbitte, we were not really involved. That is a matter for the Department of Justice, Equality and Law Reform.

Deputy Dennehy

I am sure Mr. O'Callaghan read the file when his Department became involved in June. Why was it delayed up to then? Was it an issue of who should fly the helicopter?

Mr. O’Callaghan

No, the Government decision was straightforward that the second helicopter was approved, sanctioned and that it would be piloted by someone from outside, presumably the Garda.

Deputy Dennehy

I am glad to hear that. The Department only became involved at a later stage but we need to find out what caused the delay.

We nearly panicked a few years ago on the deafness issue because the compensation awards appeared to be escalating at a crazy rate. Under subhead T the outturn came out within €500,000 of the Estimate. It was very close to being 100% accurate. Was that the result of the work of the commission or the new approach?

Mr. O’Callaghan

Was that the early settlement scheme?

Deputy Dennehy

Yes.

Mr. O’Callaghan

That played a big part in bringing this on budget, in settling cases and in cutting down on costs.

Deputy Dennehy

What value would that be? Up to then it seemed to be total guesswork and nobody seemed to know what would happen year on year, as Mr. O'Callaghan will know. What was the value of this?

Mr. O’Callaghan

There have been 4,796 cases cleared under the settlement scheme and we value the saving at approximately €5,000 per case, so €20 million has been saved there.

Deputy Dennehy

I am glad there is agreement on the reinvestment programme, which was estimated as costing €17 million under this subhead but the outturn was €30 million. I agree with the concept of reinvesting the assets but why did that Estimate go so out of kilter?

Mr. O’Callaghan

We diverted money from one subhead into another - from normal maintenance into what we call the barracks reinvestment fund. There is a compensating saving under subhead L.

Deputy Dennehy

Is this a new procedure? The reinvestment programme was mentioned earlier. Is that related to the agreement on selling lands and use of finance?

Mr. O’Callaghan

Exactly.

Deputy Dennehy

Is there a policy on the reinvestment aspect?

Mr. O’Callaghan

It is still ongoing but the bulk of the contracts will be completed by the end of this year.

Deputy Ardagh

Regarding the Partnership for Peace and the European involvement of the Army, the amount involved is not very significant. It is approximately €1 million in the miscellaneous section. There is also the Organisation for Security and Co-operation in Europe, where €840,000 is involved. What has been the expenditure in relation to Partnership for Peace? How has our participation in the scheme affected the Army generally in relation to the improvement in equipment, uniforms and in physical aspects? Has participation in Partnership in Peace helped with morale in the Army? Has it aided recruitment?

Mr. O’Callaghan

The costs mentioned by the Deputy relate to staff costs of those based in Brussels and Vienna for OSCE. Regarding the bigger question of the additional costs and benefits of PfP, as is laid down in Government policy and the White Paper, the Defence Forces have been reorganised on the basis of staying within the cost envelope that was there in 2000. We have financed additional expenditure on new equipment and infrastructure by selling property and other savings. There have been no additional costs associated with PfP as such, other than the costs of a small number of staff.

The major investment in military equipment would be done in any event, whether or not we were members of PfP or the EU Rapid Reaction Force. The White Paper lays down the policy on all these matters and the Government decided we would have an Army of 10,500 - a lightly armed conventional army. That is what we are building and we are practically there. It is then up to the military to provide resources as called upon by the EU or the UN from within the Army. That is what we are committed to; we are not committing to anything extra. The 850 soldiers who are part of what is known as the Helsinki catalogue or EU Rapid Reaction Force are from the existing resources we have. They are the same 850 which we have volunteered to the UN under the UNSAS arrangement.

To answer the question, there have been no real additional costs because we joined PfP or from being in the EU Rapid Reaction Force other than some liaison staff based in Brussels and Vienna.

Regarding recruitment, I am not sure if school leavers would be terribly interested in what PfP is all about but the new equipment, uniforms, APCs and the improvements in the infrastructure, as well as other changes in the last few years, have all helped show off our professionalism. The advertisements have also helped and we have been able to show ours is an organisation worth joining. There have been some difficulties with the Naval Service but the numbers applying for recruitment for all services have gone up. There is a dynamism there and it is seen as a modern organisation with a good approach to dealing with its problems.

Deputy Ardagh

I compliment Mr. O'Callaghan on the television advertising for the recruitment programme, which was superb. There was an excess spend on that but I am not complaining as it gave value for money. Why is it there and is it within the envelope?

Mr. O’Callaghan

We did go slightly over budget but it was made up with savings from other subheads. The campaign was launched in March 2001 and we spent €300,000 that year, but we got 827 general recruits from it. We spent another €1.3 million in 2001 in preparing a cross-media campaign for 2002 and those are the advertisements people see now. It was a big investment but it has paid off.

Deputy Ardagh

Is the recruitment in 2002 on the same scale as 2001?

Mr. O’Callaghan

It is even better.

Deputy Ardagh

Good.

Deputy Fleming

Mr. O'Callaghan raised the issue of cash escorts. I understand where Deputy Dennehy is coming from but this issue must be looked at again. The banks are getting off scot-free and it is not the job of the Defence Forces to spend a lot of time looking after cash escorts. Years ago, when there was much more subversive activity, the Army provided escorts in the interests of security so that these large volumes of cash would not fall into the hands of subversives. Things have changed quite a lot since the Good Friday Agreement. The political climate whereby the Government was willing to subsidise these cash movements has changed dramatically for the better. On that basis, this issue needs to be reconsidered from a political point of view.

I am very concerned about the additional costs for people who are away from base for an afternoon or a day. These people get extra allowances but their wages are not covered. Diesel was mentioned but it is not just the diesel for trucks which is the issue. I suggest to Deputy Dennehy, who referred to an escort he saw south of Kildare town, that the convoy he spoke about was taking prisoners to and from Portlaoise. It happens all day every day and we could probably look at the cost to the Defence Forces, prison authorities and the Garda Síochána. A lot of money is being spent moving people from A to B and there should be a better way of doing things.

In regard to cash escorts from the Army's point of view, I would like more information on the aeroplane that flies with these cash escorts. That aeroplane has circled over my house every Thursday morning at approximately 9.30 a.m. for the past 17 years. It travels from Dublin to Limerick, Dublin to Kerry and so on. When I moved into my house 17 years ago I did not know why it was circling overhead. This continued week after week and I realised that it had to circle to allow the convoy on the ground to catch up. The point I am making in the anecdote is that much of the time of the staff working with these convoys, including the plane, is spent on convoys. It is not sufficient to talk about paying for diesel because it is an integral part of the work. There should be full costings, not just additional incremental costs. The complement of people required in the Defence Forces is decided by taking into consideration the work which must be carried out and the number of cash escorts that must be provided. The complement of staff required, including the cash escorts, and the costs to those who are benefiting from the service, must be looked at on a full costing basis. I agree with the Chairman in this regard.

Will the figure for the Red Cross change because of the extra workload from Office of Public Works as a result of flood relief projects? Is the cost of this humanitarian work reimbursed by Office of Public Works or is it borne by the Department of Defence?

I am disappointed to read in the report that much of the military equipment and stocks have been accounted for in manual ledgers and carding systems for a number of years, which are now being computerised. Is this work on schedule for completion at the end of this year, as stated in page 328, and are civilians involved in this work? Deputy Ardagh referred to the wonderful advertisements inviting people to join the Defence Forces. I hope we are not running advertisements to keep carding systems in place in the stores stock. I hope some of the work is being done by civilians.

I am intrigued by the last sentence on page 328 relating to land and buildings which states that systems are not yet sufficiently developed to provide valuations of these properties. I am exasperated to read that there is no system in place in this regard. A good firm of auctioneers could do that work in a week. There must be a limited number of buildings and lands held by the Department. Whether the Valuation Office or a firm of valuers carry out the valuations, I cannot understand how the Department can say systems are not sufficiently developed. All one has to do is engage someone to value the property. These valuations should be carried out. I would welcome if a lot of assets with a high value - I have no hidden agenda here - could be utilised for additional purposes. I do not accept the statement that systems are not sufficiently developed. It would be more appropriate to say that no one has put a system in place. A system should be put in place to carry out valuations of lands and buildings, which would be a simple job.

Chairman

We already had a major discussion on that issue and dealt extensively with the chapter.

Mr. O’Callaghan

I have noted what the committee said about the cash escorts.

Chairman

Perhaps the Comptroller and Auditor General would like to comment on the cash escorts. When the delegation from the Department of Justice, Equality and Law Reform comes here perhaps we will be able to work with them on getting agreement on the actual cost.

Mr. O’Callaghan

I think this is an active matter in the Department of Justice, Equality and Law Reform. There may be an announcement sooner rather than later.

Chairman

Will it be on the agenda?

Mr. O’Callaghan

I think so. I know the matter is being discussed in the Department of Justice, Equality and Law Reform.

Chairman

It is reassuring to hear that.

Mr. O’Callaghan

I note what Deputy Fleming and the Chairman said in relation to this cost. Perhaps we should reconsider the matter to see if we should recoup our pay costs. We must remember this cover was imposed on the banks. They did not ask for the cover, therefore, they could say they could get Group 4 to do the work. As a matter of interest, Deputy Fleming, was it a helicopter or a fixed wing aircraft that was used?

Deputy Fleming

It was a fixed wing aircraft which travelled every morning from Dublin to Limerick or Dublin to Kerry.

Mr. O’Callaghan

In recent years we have been examining all our activities, including cash escorts. There have been inefficiencies in regard to prisoners being escorted. We have also reduced the number of soldiers based in Portlaoise.

The cost of the Red Cross is borne by the Office of Public Works. Mainly civilians work in our stores. There are more than 100 people there. In regard to the property portfolio, it would take a super auctioneer to evaluate the land and buildings in a week. If the Deputy gives me his name and address I will be glad to have it.

Deputy Fleming

It is a firm of auctioneers.

Mr. O’Callaghan

We have over 20,000 acres in several hundred locations. There is currently a huge state of flux in property. Sales amounting to €81 million have been agreed in recent years, including total possible sales of €36 million, and more have come on stream in the last week. I have a huge brief on the property portfolio.

Deputy McGuinness

Some of the questions have been dealt with. I would like to go back to the helicopter and the time lapse. A question must be asked in regard to the purchase of the helicopter, even though it may not come within the remit of the Department of Defence - it may be the responsibility of the Department of Justice, Equality and Law Reform. The question was raised about the extra equipment and technology being put on board over the last 18 months and the fact that this had to be certified. Surely, in the purchase of the equipment some Department would set out the specification for what is required and the equipment would be purchased fully at that point. One would not purchase a helicopter and make add-ons later. Surely someone in the Departments of Justice, Equality and Law Reform or Defence would have gone through what was required and specified this to the supplier so that a single unit fully equipped with the necessary technology would be delivered.

In setting out to buy a car, a truck or computer equipment, for example, one sets out a specification and the item is delivered as specified. Doing things the way the Department did this purchase cannot lead to efficiency. It is not efficient to waste two years buying a helicopter in one place and two pieces of technology some place else and trying to get the balance on the machine itself before it is put into the air. Someone has made the wrong call.

Whoever is supplying the information in the follow-up to this meeting should cover the initial purchase arrangement for the helicopter itself and the equipment to be added on and explain why this was not all achieved in one purchase with all guarantees coming from one supplier. Could this question be answered?

It is not because the banks are making money that we should ask them to cover the full cost of the escorts. We want the full cost of escorts covered in the first place. I accept that if we provide the manpower and equipment to protect the money a security issue arises for the State. Costs could be reduced because of the security issue or it could be factored into the rationale behind arriving at the charge. Even bearing that in mind, when was the figure last revisited and the last new demand made from the banks in relation to cost? In any normal business a revised cost is sent to customers each year rather than letting a charge run for a number of years, then imposing an enormous increase and having a row with the customer. Was this not done over the years? The issue is not how much profit the banks are making but how much this service is costing taxpayers. Even if an announcement on this matter is imminent I would still like to know why the Department does not function in the way I have outlined and revisit its costs every year. The banks did not begin to make money in recent days and this matter should have been examined over a long period. If that did not happen why did it not? When are we going to call in the banks and apply an appropriate increase which reflects the real cost in terms of wages, diesel, wear and tear on vehicles and so on? When the boot is on the other foot, as it is on a daily basis, the banks tell their customers their costs and they pay up. That is how they treat their customers and if we are providing a service, particularly in changed economic circumstances, we should demand the real cost from the banks.

The provision for the barracks re-investment programme was €17 million and the outturn was €30.5 million. The explanation given is that the excess is due to the expenditure on the barracks re-investment programme being greater than anticipated. I would have thought that was pretty obvious. Who estimated €17 million and what happened to cause it to rise to €30 million? If one budgets for something to happen and the cost almost doubles one asks the person who made the estimate for an explanation. The explanation given on page 333 is not good enough in accountancy terms. I would like to know the explanation.

A temporary property section may be needed to deal with what the Department is going through at the moment, to decide what is best for each individual property and to get real value for money in disposing of properties. What is the thinking behind the disposal of properties and by what method are they disposed of? Is there an overall plan for every property in which the Department intends to re-invest and is a part of this overall plan funded each year or is the Department engaged in fire fighting exercises where buildings are dealt with one by one as the need arises? Does the Department have an expenditure plan which is fulfilled over a number of years in barracks all over the country? I ask this because I have seen the investment in the barracks in Kilkenny. It is a listed property and the investment made there has been reasonable. Given its status in the layout of the Defence Forces I would have expected the buildings in Kilkenny and the services to the men there to be greater than they are. They deserve better than I see them getting. The Department has a particular responsibility to maintain listed buildings, in Kilkenny and elsewhere, and to get value for money in terms of an annual investment within an overall plan for each property.

Mr. O’Callaghan

We have a major plan for barrack refurbishment based on certain priorities laid down by the military. Over the last number of years the priorities have been barracks such as Collins Barracks in Cork, which was in an atrocious condition compared, for example, to Kilkenny. Collins Barracks was also receiving people from barracks which had closed in Fermoy and Ballincollig and had to be refurbished to accommodate additional troops. Much work was done in Baldonnel and the Curragh, which was receiving people from Naas and Kildare. There are detailed plans, jobs are costed very carefully and priorities are laid down in agreement with the military.

All the work is put through our contracts branch and goes out to tender in the normal way. We get the best possible value for money in the open market. We have a property branch which looks after the maintenance and control of our properties. It has identified many properties throughout the State which are surplus to requirement and we are in the process of selling them.

I have noted that the committee is anxious that we get the full costs in regard to cash escorts. The Deputy asked when the costs were last reviewed. The subvention has not been increased since 1995. We update our costs every year and send a report to the Department of Finance. It was in the budget speech in 1995 that the subvention from the banks was last increased. It was imposed on the banks. They did not ask for this particular service. We will examine the issue to see if we should look for our full costs.

Chairman

We will have a comment from Mr. Purcell. He might address the helicopter aspect also in regard to the point made by Deputy McGuinness.

Mr. Purcell

I share the concern of Deputy McGuinness. I included a section in my 2000 report published in September last year looking into this question and analysing the cost and usage of air support. A large part of that section dealt with the purchase of the second helicopter. I too was mystified as to how this purchase was organised. The Government approved the acquisition in November 1998 and the contract was signed on 6 August 1999 in order to ensure delivery in March 2000. As we head towards 2003 it is interesting to note that the problems in relation to the delivery of the helicopter centred around the specification of equipment. There was a difference of opinion at the time between the Department of Defence, or the Air Corps to be specific, and the Garda on the need to include certain features, including an autopilot, on this helicopter. Those matters were resolved. I note in the report that at a meeting in February 2000 most of the issues relating to the fitting of flight equipment to the helicopter were resolved. The Department then sought a new delivery date from the supplier. The helicopter was delivered to a fitting out contractor in December 2000. It was expected then that it would be delivered and ready for operations around September of last year.

The point in regard to the specification of the equipment is valid and I had the same concern. There are also issues concerning training for night flying. The purpose of having a second helicopter was to have 24 hour capability of Garda air support. I suggest that this was not dealt with by the previous committee because of pressures of other work. It is scheduled for discussion with the Department of Justice, Equality and Law Reform when its accounting officer is before the committee early next year. It would be sensible to bring in the Department of Defence then also and to consider the matter jointly. I hope that clarifies some of the area around the helicopter issue.

Chairman

That would be a help.

Mr. Purcell

I will make a brief comment on the excess in regard to subhead V. What is done has to be approved by the Department of Finance. It is a system, virement, which switches funds between particular subheads of the Vote. This must be exercised carefully and I do not doubt that the Department asks questions when this is sought. If it is done to some extent, as in this case where an excess of €13.5 million is switched on a particular Vote, the question would be asked whether it was in line. We would ask whether money was being used by the Department for the purposes for which it was granted by the Dáil. While on a legal basis money is appropriated to the whole Vote, on a financial management basis it is important that there is real adherence to the rigours of the limits in the subheads. It is right that Members should expect that when they vote money. I suspect a different view would be sought for extensive virement in the current financial environment. Perhaps the Department of Finance representative can help on this.

Mr. O’Callaghan

May I say something on this? Subhead V was a new subhead and as people are probably aware, it has gone from next year. It was a new subhead put in for what was known as the barracks reinvestment programme. Money which came from barracks sales was going into this subhead. We also had a subhead L which was for barracks refurbishment. It was for new works, alterations and additions. There was little or no difference between the two subheads. Subhead V, the new subhead, was the savings from sales. It was created with the Department of Finance to get the money back into the Vote to invest in barracks. It is not as if we saved €13 million on the payroll and put it into barracks. Both subheads were similar so it was more of a bookkeeping convenience than anything else.

Chairman

Are you quite happy to stand over it as a bookkeeping exercise?

Mr. O’Callaghan

That is all it was.

Chairman

I would like to thank Mr. Purcell for his clarification.

Deputy Curran

I listened attentively to the reply to Deputy Ardagh on advertising and promotion where it was said it had been successful and that the military and Defence Forces would be reflected in a professional and well equipped manner. At the same time the outturn of spending on defensive equipment was 25% below the Estimate. In regard to military vehicles spending was €5 million lower. On page 332 it says the 25% saving on military equipment is due to delays in the delivery of certain ammunition and equipment. That prompts me to ask whether, if there are delays in delivery of equipment, our equipment is of a standard with other European countries. Why should we experience delays in delivery of that type of equipment?

I also read that the saving is due to the fact that the procurement of vehicles did not proceed as anticipated. It is a substantial amount of money. If it was estimated in the first instance why was it not proceeded with? The defensive equipment Estimate was down 25%. I am particularly concerned about how that reflects on the type of equipment we have. Were we not able to go to the marketplace because our equipment is older or not compatible with that used throughout other European countries? May I have a direct answer on that?

Mr. O’Callaghan

The equipment we are getting at present is state of the art and is on a par with that of our EU partners. Military equipment of the type we buy is modern. As the Deputy will appreciate, it is not available off the shelf. An order was placed last week for additional armoured personnel carriers for the military and they cost about €1.25 million each. They will not get a place on the manufacturing assembly line for some time, perhaps at the beginning of 2004. With those delivery times it is very difficult to estimate exact costings for the following year. The equipment is coming on stream and the standard communications equipment which the Irish military uses is the best we have ever had and is on a par with any European country. It is standard equipment, not non-standard. We are not going for overly sophisticated equipment or anything like that.

Deputy Curran

I appreciate that it is not purchased off the shelf and there is a lead time involved. I thought there would be a rolling programme of purchases, that a level of expertise would prevail and that you would know the lead times so when the estimates are being done there would be a greater degree of accuracy. I find 25% in the outturn to be quite a variation.

Mr. O’Callaghan

We would love to have a rolling programme, Deputy, but we cannot be guaranteed the finance and we do not have multi-annual budgets. We cannot——

Chairman

Can I get an agreement from the committee that the Comptroller and Auditor General can get a report from your Department on the cost with regard to the cash transfer and to work in partnership with the Department of Justice, Equality and Law Reform? The professional programme development for doctors within the Defence Forces has been brought to my attention and that there are only six doctors employed. Is that correct?

Mr. O’Callaghan

We have 31 medical officers at the moment. There are about five dentists so there are about 26 doctors. We have a difficulty with recruiting and employing doctors.

Chairman

Is there a problem with the professional development programme which the Department cannot provide?

Mr. O’Callaghan

That is certainly a part of it. We are not on a par with the training element of the non-consultant hospital doctors.

Chairman

My information is that it is a problem that you cannot provide that.

Mr. O’Callaghan

It is a definite problem that we cannot provide it. We cannot compete with the pay rates.

Chairman

Could you come back to me with a recommendation on that because it would clearly indicate that there is a problem there?

Mr. O’Callaghan

There is definitely a problem which is being addressed at a very senior level within the Department at present. The director of the medical corps has made some proposals on how we can approach that.

Chairman

Finally I wish to raise the communications and IT sector with regard to the SMI report on knowledge management. Is that being integrated right across the Defence Forces from top to bottom? Is IT training being provided?

Mr. O’Callaghan

Absolutely, yes.

Chairman

Is that embraced in every area?

Mr. O’Callaghan

It is, yes.

Chairman

Are you embracing the management concept of the SMI report of March 2002?

Mr. O’Callaghan

Yes, absolutely.

Chairman

I would be very anxious that you would keep the committee briefed on the matters which we have discussed today.

Mr. O’Callaghan

Okay.

Chairman

Next week the committee will deal with Vote 34, Enterprise and Trade.

The committee adjourned at 1.35 p.m. until 4.30 p.m. on Wednesday, 18 December 2002.