Monitoring Committee
A general purposes monitoring committee comprising representatives of the DoAHGI, the three islands, and when necessary, the ferry companies provides a forum to discuss and attempt to resolve any difficulties with the Aran Island Ferry services. A review of minutes of recent meetings held by the DoAHGI highlighted the following main concerns of the Islanders
· The City of Galway /Islands service does not run as scheduled
· Problems with the transportation of cargo
· Delays associated with the Ros a Mhil bus service
· Dissatisfaction with standard of vessels on occasion.
The DoAHGI endeavours to follow up on the issues raised and bring them to a satisfactory conclusion.
Reports Commissioned
1995
In April 1995, the DoTEC commissioned a consultant to evaluate and report on the passenger ferry service requirements of the Islands to/from Ros a Mhil with a view to establishing the need, the frequency of direct/indirect sailings to the islands, especially the two smaller islands and the cost of the services required. The consultant found that
· it was absolutely clear that the Islands in comparison to other off-shore islands and isolated rural communities were well provided for in terms of state subsidised transport
· it could be argued that the subsidy paid to ferry operators could also be helping to subsidise summer tourist traffic
· there was no need to increase the subsidy to ferry operators
· if the DoTEC wished to guarantee the continued provision of a ferry service to the two small islands, a subsidy in the order of €126,974 would be required.
The Consultant also recommended that the subsidy paid to the ferry operators to operate a winter service out of Ros a Mhil to the two small islands be transferred to the air service operator.
No action was taken by the DoTEC on foot of this study in view of the imminent transfer of responsibility to the Department of the Taoiseach.
2001
The DoAHGI is currently considering a report by consultants in October 2001 on the proposed development and day-to-day management of island airstrips and associated air services. The report provides for wide ranging development of airstrips on a number of inhabited offshore islands.
Údarás own the airstrips on each of the Aran Islands: the air operator was responsible for the maintenance of the air strip on Inis Mór until this responsibility transferred to Údaras on the introduction of the current public service obligation contract, while co-operatives on Inis Meáin and Inis Oirr look after the airstrips on these islands.
Conclusions
· A more strategic co-ordinated approach is needed to managing the delivery of travel services to the Aran Islands if value for money is to be obtained.
· Analysis of information on usage should be an ongoing feature of monitoring the services and form the basis of future decision making on the optimum level and mix of services.
· The need for a subsidised cargo/passenger service out of the City of Galway needs to be re-evaluated in the light of the out of season passenger usage of the service, the significant development of the facilities at Ros A Mhil and the fact that Ros a Mhil appears to be the Islanders port of choice.
· Formal contracts, with enforceable performance clauses should be drawn up to cover all the subsidised travel services to the islands.
Observations of the Department of Community, Rural and Gaeltacht Affairs
The Department is currently actively considering carrying out a study of the type of service and infrastructure and level of subsidy required to provide proper access to all the main islands. This will be the first step aimed at implementing the recommendation regarding a more strategic co-ordinated approach to managing the delivery of the travel services to the Islands.
Sailing logs will be sought from all operators as a condition of any new contracts agreed. In addition, the Department has now employed the services of an IT consultant in order to set up a database suitable for the analysis of information on usage and the monitoring of the services.
The Department points out that while there is no difficulty in relation to formal contracts with enforceable performance clauses for ferry services, there is an issue in relation to road transport which the Department is currently considering how to most effectively address.
Mr. John Purcell
The committee is agreed that it will first deal with chapter 12.1 of my report, which records the results of an examination carried out by my staff, of State support for the provision of transport services to the Aran Islands. There are three distinct subsidies. First, there is an annual subsidy of €603,000 to a shipping company for a passenger and freight service from Galway city to the islands under a seven year contract that terminates next year. An additional payment of €190,000 has also been made to that company. Second, there is an annual subsidy of €241,000 to a different company for a passenger service from Rossaveale to the islands under a three year deal to October 2005. Third, there is a three year deal with an airline operator costing €2,235,000 for the provision of an air service to the islands from Galway. The air service is designated as a public service obligation route under EU regulations. The current cost reflects the fact that only one tender for the provision of the service for the three years to January 2005 was received, and that was from the existing operator. The committee will see that there has been a big increase in the level of subsidy for the air service in recent years.
As well as setting out the financial details of the arrangements, the report also analysed the usage of the various services in so far as the underlying data was available. This indicated that the ship service from Galway city was almost entirely used as a freight service except during the high season in summer. Figures supplied by the Department show that in 2002, just over 1,000 passengers used the service which is a steep reduction on previous years. On the other hand, the passenger service from Rossaveale has been more successful in attracting customers. Departmental figures show that some 120,000 used the service in 2002. Figures supplied by the airline operators for 2001 show usage of more than 35,000 for the year, including islander usage of almost 11,000.
In a nutshell, there are two main findings in the report: the need for a more strategic approach to managing the delivery of the services and the need for better monitoring of the services. It was clear to us that the various Departments which had oversight responsibilities for the services over the years tended to a piecemeal rather than an integrated approach and co-ordination suffered. Moreover, the lack of analysis of information on usage of the services hindered any efforts to establish the optimum level and mix of services. These shortcomings suggest that it was unlikely that best value for money was obtained by the State for its financial input in the area.
The Department reacted positively to the findings and has taken action along the lines recommended in the report. I will leave it to the accounting officer to outline the details of those actions for the committee.
Before we hear from Mr. Kearney, I would like the Department of Finance to introduce its officials.
Mr. David Hurley
I am from the organisation management training division dealing with the administrative budgets for both Departments. My colleague is Mr. Tony Carberry, assistant principal, from the public expenditure division of the Department..
Mr. Kearney
I am pleased to have the opportunity to make this statement in response to the Comptroller and Auditor General's report. I acknowledge his professional and thorough work and believe the full implementation of the key measures recommended in his report will significantly enhance the effectiveness of expenditure and the Department's capability in managing subsidised transport services. The report covers a ten year time span and the transfer of functions across three Departments, and it brings to light a number of shortcomings in approaches adopted in relation to supporting these services to the Aran Islands.
In brief, the report sets out four critical areas of recommendations. These concern more effective management and monitoring of existing services, the need for a strategic and co-ordinated approach generally, the re-evaluation of the service from Galway city and the need for formal contracts with enforceable performance clauses.
Since publication of the report last autumn, the Department has made significant progress towards implementing these key recommendations. I will give a brief outline of some of the measures that have been introduced. By way of context, I mention that the 1996 report on island development identified the improvement of transport services to the offshore islands as critical. This has been a core objective of this Department and its predecessor. Subsidies in respect of the two ferry services and a public service obligation air service to the Aran islands - the subject of this audit report - account for €1.6 million per annum.
The departmental response to the points raised in the report includes more effective management and monitoring of existing services. The three providers of subsidised services to the Aran islands now submit monthly returns to the Department. These are scrutinised, delivery against contracted services is compared and payment is withheld for shortfalls.
The core staff of the islands section has been doubled to four to ensure better scrutiny of returns, monitoring of service and support for the tendering process. New software support has been put in place to enable and support improved monitoring procedures relating to service provision and compliance with legal requirements such as tax, shipping certificates and insurance cover. In addition, increased frequency of spot checks and follow on reviews are being pursued. The data emerging from these activities will support future decision making.
A critical recommendation by the Comptroller and Auditor General related to the need for a more strategic and co-ordinated approach to managing the delivery of travel services to the Aran Islands. We see two outcomes as critical to delivering on this recommendation. There must be an independent assessment of the need for and adequacy of each of the current services, as well as the balance of services required, and a formulation of objective measures by which future decisions on subsidised services can be informed and assessed. The Department has commissioned an independent study to assess the effectiveness of current subsidised arrangements and to advise on appropriate performance indicators. Following a recent tendering competition, consultants will be appointed next month and their report will be available this autumn. The findings of the report will inform critical decisions regarding the optimal allocation of funds across the Aran services from 2004 onwards.
A third area of recommendations by the Comptroller and Auditor General relates to the need to re-evaluate the current cargo and passenger service from Galway city. This issue comes within the scope of the independent review. The adequacy and need for the current service will be critically examined and reported on. The timing is critical as the findings of the review will be well to hand in advance of the expiry of the current contract at the end of 2004.
The Comptroller and Auditor General also made recommendations regarding the need for the introduction of formal contracts with enforceable performance clauses for all subsidised transport services. There are two issues to be addressed here. It must be ensured that providers sign up formally to the requirements and responsibilities attaching to the provision of subsidised services. A legal issue in relation to the jurisdiction of the Minister to require the provision of supporting bus transport for certain services must be addressed. Each of the three providers of subsidised transport services to the Aran Islands has now formally signed up to specified obligations and delivery requirements. As regards the legal issue, the heads of a Bill have been submitted to Government and approved and a draft Bill is being prepared. It has been afforded priority status by Government and is listed for publication this session.
In addition, the Department has introduced further measures in response to the report of the Comptroller and Auditor General. The Department has secured the support of external expert advice to review and validate tendering processes. It has strengthened provisions in contract documents to include the signing of a declaration to ensure disclosure of breaches of any law generally and to ensure contractors' suitability. The Department requires all staff involved in the tendering process to be subject to the Ethics Acts or other appropriate form of disclosure.
The Department is tackling the issues raised by the Comptroller and Auditor General at a number of levels. The Department is addressing its legal and strategic frameworks, strengthening its administrative capabilities and processes, improving the management and monitoring of existing services and improving reporting requirements and contractual obligations on providers. I hope the brief overview I have provided demonstrates progress by the Department towards implementing in full the report's key recommendations. The Department is fully committed to seeing through to completion these recommendations and any further changes which are necessary. I thank the chairman and the committee for the opportunity to make this opening statement.
Is the Department qualified to manage and supervise this type of transport service?
Mr. Kearney
There are a number of issues involved. We are certainly qualified to better manage this service, but there is a question of the indicators which must be put in place to assist our management of it. For that purpose, we need expert outside advice, which is why we are hiring independent consultants to advise us on the appropriateness of the routes and on performance indicators which show how well the money is being spent. When that framework is established with the extra human resources we are providing and the legal framework is addressed, we will be well positioned to better manage the service.
The original contract for the service covered the period December 1992 to August 1997. As an acknowledgement of the considerable investment in the new service required from the operator, the Department agreed to the insertion of a clause to extend the contract for the main shipping service for a further five years from 31 August provided agreement could be reached between the parties. Why was further Government or Department of Finance approval not received for the inclusion of this clause in the contract? Was the proposed arrangement unusual?
Mr. Kearney
I would like to be able to help the committee on this point. This deal was negotiated in late 1992 and early 1993 by another Department. Neither ourselves nor the Comptroller and Auditor General were able to clarify the consultation process around it. We are unable to provide confirmation. The documentation is 13 years old and is with another Department. Our records do not show there was consultation with the Department of Finance and the Comptroller and Auditor General has been unable to go beyond that.
Was not this clause very favourable to the operator?
Mr. Kearney
I would have to confirm for the chair that this clause was favourable to the operator and absolutely critical to the renewal of the contract in 1997.
Léigh mé caibidil 12 den tuairisc seo agus sílim go bhfuil sí uafásach. Níl mé sásta fá sin ar chor agus tá cúpla ceist agam.
I preface my remarks by acknowledging that the Aran Islands Transport Act 1946 makes provision for the promotion and maintenance of an efficient shipping service between Galway city and the Aran Islands as indicated on the first page of the auditor's report. That is a given, but the provision and right should be subject to the proper controls. I am unhappy with the reply Mr. Kearney gave to the chairman's original question. I wish to go through the history of the matter to sort this out. I do not know that I am impressed by Mr. Kearney's references to a more strategic and co-ordinated approach and to objective measures to assess the effectiveness of the service provided. These are fine words, but we have to deal with the report as it is presented to us. Those assurances relate only to the future, not to what we are dealing with today.
A complication in the history of the matter is that two, if not three, Departments have dealt with this during the period of the contract. There are a few things we would like to iron out. The Department of Transport, Energy and Communications was the first Department to deal with this and it agreed to a clause in the original contract which would have permitted a five year extension beyond the 1997 expiry date. In effect, a ten-year contract would have been provided. The Department overstepped that by two years to provide an extension of seven and a half years. The original contract ended in 1997 and was extended for seven years from 1 January 1998. The company received this extension without a tendering process which is where the difficulty in the matter arose.
Why was there no tendering process? Even if the original contract allowed for a five year extension based on investment costs, why was there a seven and a half year extension? Why was there no tendering process even at that stage? It might have avoided some of the difficulties which have arisen.
Mr. Kearney
To clarify, there was no competition in 1997 as legal advice indicated that the clause in the 1992 contract created an obligation on the Department to enter into negotiations with the ferry provider in respect of the continuation of the service. The clause in the 1992 contract——
Mr. Kearney
For five years, that is right. It created the obligation to go back into negotiations with the contractor.
On the second point raised by the Deputy, in the course of negotiations with the contractor it became apparent that the extension by two years would result in a substantial saving to the State. The contractor was willing to take a reduction of €100,000 on the per annum contracted fee. Instead of sticking with the fee which was settled in 1994 and applied in 1997, the contractor is today providing the same service at the same rate it provided it in 1992, which was around €600,000 per annum.
That provides an opening for my second question. What Mr. Kearney said is not factually correct. Originally, the 1992 contract was for £603,126 and that is the figure to which he refers. A little more than a year into that contract, the Department of Transport made a payment of £126,904 and it made an annual increase of £95,230. This was due to there being no clause in regard to inflation in the original contract. My sums tell me that was an increase in the order of 17% on the original contract. When the company came back for the seven year extension that Mr. Kearney just outlined, it did go back to the original contract price of £603,126; however, the same thing happened again within two years. That was £95,000 less than it got the year before. How could it be possible for a company to operate with a tender for five years at £95,000 less than it got in the previous year? How could a Department allow a company to proceed on this basis? What happened was inevitable. It was inevitable that within two years the company came back to the Department with the 'Oliver Twist begging bowl' syndrome. It received £201,000 in contravention of the 1994 agreement; it also got £85,885 and a further £90,461. The Department involved at this stage was that of Arts, Heritage, Gaeltacht and the Islands. That was a further cash injection of £477,357. How could that situation arise? This was a case of the goose that laid the golden egg. One could go back to it at any time and it would lay another golden egg. However, by 2001 the goose was dead because, according to the report, no further payments were made. Those payments were made for the years 2000 and 2001 after which no further payments were made.
It beggars belief that Departments could operate with this kind of contracting basis allowing companies to come back and get money at will, some of which they should not have got at all - the Bank of Scotland should have got it. Was there no liaison between the Department of Transport and the new Department now dealing with these matters? There appears to be a grave lack of consultation between the two Departments about what was in the original contract and what was done subsequently.
Mr. Kearney
I see my role here as being to support the committee in clarifying the events that happened over the period under review. I confirm the point I made earlier, that the fee being paid for this service today is at the same level as it was in 1992. I also confirm the points made by the Deputy that the contract attracted two once-off payments; one in 1994 and another in the year 2000. The Deputy indicated, quite rightly, that 1994 saw an increase in the annual subvention under the contract, but in 1997 that was pared back under the re-negotiated settlement.
My question has not been clearly answered. From a legal point of view, whichever Department was dealing with this contract was entitled after ten years had elapsed to go to tender again - but this was not done. The same company will now be in situ up to 2004. The report of the Comptroller and Auditor General refers to it as well. I have received many complaints from the co-ops and the islands, and various other people using the service, about the inadequate and undependable service that is provided.
Is there any control on the freight rates that the company can charge? Is it free to increase these rates every time it wants to increase its cash flow or income? Is there any control on the people who are bringing freight from Galway to the Aran Islands? These issues, which do not appear to be specified in the contract, are of great concern to the 1,500 or so people living on the Aran Islands.
Mr. Kearney
The Deputy has raised an important point in regard to the extension of the contract and it is important to respond to it. In the course of discussions on the re-negotiation of the contract it became apparent that the Department could secure a saving of €100,000 per annum for the taxpayer by allowing the extension. As a trade-off for the extension the contractor was agreeable to providing the service at the 1992 rate. That was the basis for the decision in 1997.
In regard to the point about freight rates raised by the Deputy, I will clarify for the committee that these are specified in the contract with the party and, if it would be helpful, I am happy to go through the rates for the various products. They are set out explicitly and are subject to the price control as set out in the contract.
Is that happening on the ground? Were there complaints?
Mr. Kearney
The Deputy has raised a good point. We have had a number of complaints to the islands section in regard to those rates. In general, when we followed up on them we found that the rates were consistent with those chargeable under the contract.
I will revert to my other question because I am still——
Are the rates a recent development?
Mr. Kearney
No. The rates have featured in the contract since 1997.
Have they been published?
Mr. Kearney
They have. One of the more interesting outcomes of the processes around 1997 was that the islanders were consulted in advance of the re-negotiation of the 1997 contract. They expressed support for the continuation of the Galway service but they required and requested of the Department to provide copies of the contract to them to ensure its enforceability locally.
Have those rates been published in the national and local press?
Mr. Kearney
They have been sent to the local island managers and are widely available.
I am not happy with the explanation I am getting about the extension beyond the time that was written into the contract. The contract price was originally for £603,000. Within a year of that contract being awarded the company got a once-off payment of £127,000 and an annual subsidy of £95,230 for the remainder of the contract period. How can it be said that it reverted to the £603,000 in the next two and half years when, within two years, it sought further back-up. I am not saying the subsidies are not necessary or that it was possible to provide the service for £603,000. However, the system should be laid down at the beginning of the contract. Everybody would know what it is if it was by contract price.
What happened is most irregular and leaves me open to bad thoughts about what might have gone on between the various Departments and the shipping companies that were supplying this service. I do not want to express such thoughts here. Such a system as existed in this case is open to abuse which can give rise to suspicion. A contract should be clear-cut and one should not come back again with a begging bowl within a year or so of the contract being agreed.
Mr. Kearney
I confirm what the Deputy is saying in terms of the additional payment in 2000. I also indicate agreement with the Deputy that it is important for public bodies that there is transparency and consistency in how they approach tendering generally. For this reason, we have no contracts now that allow for renewal subsequent to their expiry and we have not engaged since that time in any once-off payments to contractors.
A sum of €190,461 was paid because there was expenditure in according and providing special facilities. What were they?
Mr. Kearney
The special facilities that were provided were the purchase and installation of a crane which had substantially greater capacity than that required under the contract. It cost in the order of €260,000. There was also the fitting of fuel tanks, metering, diesel pumps and wiring on board. The total expenditure came to the order of €325,000.
People dispute whether these services were provided. I have no confirmation of that other than what I am told. That is why I asked the question. I accept the answer that has been given.
The report of the Comptroller and Auditor General states that, until recently, the Department of Arts, Heritage, Gaeltacht and the Islands had not conducted a systematic review of the performance of the operator of this service since the contract was renewed. It also states that, although sailing logs were provided, no comparison was made with the terms of the contract. This is contrary to what Mr. Kearney says will happen in future. The report also states that the Department informed the Comptroller and Auditor General that it had initiated a system. During the time under discussion, no check was conducted of the service provided according to the report of the Comptroller and Auditor General.
The report also states that, under the contract, the Department was entitled to reduce the subsidy payment where a number of contracted sailings were not provided and that, in the period under review, there was no instance of a reduction in subsidy payments despite the shortfall in ten months during 2001 as shown in table 52.
Is there a question in that? Does the Deputy seek clarification on that final point?
Yes, it is contrary to what Mr. Kearney says when he promises that there will be reviews and checks. The Comptroller and Auditor General's report clearly spells out that, during the time these extra payments were made, no checks were carried out. That is important.
Mr. Kearney
I want to clarify the position. What I said in my opening statement was that, since publication of the Comptroller and Auditor General's report, the monthly logs are compared with contracted requirements and deductions are made for sailings that are not delivered. That is the position from last year on.
However, in relation to the earlier period and the point raised by the Deputy, he is correct in stating that the Department was not comparing the logs on a routine basis with the provision of service requirement. However, I will mention two other control mechanisms at work. One was that the islanders, through their comharchumann, used the service and reported and raised issues of complaint directly with the Department. The other was that the Department's own stiúrthóirí were regular users of the island services.
I have to acknowledge that the Deputy is correct in terms of the central monitoring of the logs. That was not conducted. This is reflected by the Comptroller and Auditor General.
I refer again to the Comptroller and Auditor General's report which states that the Department re-negotiated a seven year extension - a seven and a half year one because it extended from 1 January - to the city of Galway contract, despite being aware of the shortcomings of the service through the monitoring committee and without evaluating the operator's performance or use of the services.
The report goes on to say that, in the ongoing negotiations about the operation and additional funding, the Department indication that it was amenable to set aside the contract raises fundamental questions as to why the contract was extended in 1997. If the Department is now willing to set aside the contract, why did it extend it in 1997 for a seven and a half year period?
Mr. Kearney
Three factors were critical to the re-negotiation of the contract in 1997. The first was the legal requirement arising from the 1992 contract that it went back into a further cycle. The second was a series of meetings with the islander communities that indicated support for the continuation of the Galway service. The third was the relative saving of £100,000 a year if the Department was agreeable to the extension.
Have there been recent meetings with the island communities about their satisfaction with the service or otherwise?
Mr. Kearney
We have not had public meetings. Two mechanisms are in place. There is a monitoring committee that meets periodically and also more informal contacts by the Department directly with managers of the co-operatives on the islands which represent the islanders views.
Why did the Department overrule the conclusions of the accountants it commissioned to investigate the operator's accounts that further State investment would be required and approve a cash injection of €190,000 in December 2000? How much did the Department spend on commissioning the accountants? Has anyone seen that report? Where is it? Has it been published?
Mr. Kearney
The Department accepted the views of the accountants that additional funds might be required. It only agreed to the funding being provided to the contractors on the basis that they would add any additional funds required to ensure the continuation of the service for the duration of the contract. In a nutshell, the Department accepted the advice of its accountants but said it needed written commitments, which were received from the directors of the company, that they would subvent any shortfalls. That was the basis on which the Department was agreeable to advancing the extra money.
Regarding the report, we can certainly find out and come back to the committee on that. In terms of its publication, I would reflect that there might be some issue of commercial sensitivity in relation to aspects of it, but I will certainly follow up on that for the committee.
How much did the Department spend commissioning the accountants?
Mr. Kearney
We will find that out as well.
The bulk of the recommendations were not adhered to and Department of Finance approval was not sought. Will the Department of Finance indicate its level of dissatisfaction that it was not contacted on any issues in this development? Was it happy with the line of communication?
Mr. Tony Carberry
There have been various requests for sanction on this issue over a period and some of the things the Secretary General mentioned would have been taken into account at the time - the savings, the legal advice and the fact that the islanders would have wanted the support of the service. When the Department of Finance gave its most recent sanction, it asked the Department of Arts, Heritage, Gaeltacht and the Islands to be satisfied that the accountants report would verify the veracity of what the service provider said he had provided in relation to updated facilities and that the overall financial position of the service provider was sound. The sanction would have been given on that basis.
The following figures are quite clear from the report of the Comptroller and Auditor General. In respect of the Rossaveale ferry service in 2001 to which the report relates, the subsidy from the taxpayer was €228,000 and 130,000 passengers were carried. That worked out at about €1.25 per passenger, which is great value.
In relation to the air service, the subsidy in 2001 was about €280,000 and 35,000 passengers were carried, as shown at page 122 of the report. That works out at a subsidy of about €8.30 per passenger, which is good value for an air service to a remote island. I now turn to the Galway city ferry service which had a subsidy of €603,000 in respect of 11,000 passengers, equivalent to a subsidy of €55 per passenger each way. For that subsidy of €110 on the round trip on the Galway city ferry service, one could get a cheaper return flight to London. That is a damning indictment of the situation in 2001 and represents a waste of taxpayers' money. It is shocking that these facts were not well known within the Department before they were highlighted by the Comptroller and Auditor General's report. However, I was even more greatly disturbed by Mr. Kearney's presentation this morning where he stated:
A number of outcomes are critical in delivering on the recommendations: First, an independent assessment of the need for and adequacy of each of the current services. The Department has commissioned an independent study to assess the effectiveness of current subsidised arrangements and advise on appropriate performance indicators.
What independent assessment is needed? The figures are self-evident. People should be capable of reading the report and drawing conclusions from such figures as a subsidy of €110 per round trip on the Galway city service. Yet, the Department's response is simply to commission an independent study. Is there nobody in the Department who can draw a conclusion from information written in black and white? That is my basic criticism of the situation as presented to us today. The situation is bad enough in itself but it is not being addressed.
The report also refers to re-evaluating the Galway city and Rossaveale services, including a comment that timing is critical as "it will be well to hand before the expiry of the current contract in 2004." I assume the reference is to the Galway city contract as the Comptroller and Auditor General's report makes it very clear, at page 118, that there is no signed contract in existence since 1997 for the Rossaveale service. I find that extraordinary. Although the issues came to light in 2001, we are now talking of addressing them at the end of 2004 and into 2005. That three-year delay is unacceptable from the taxpayers' point of view. These matters should have been dealt with in 2002. Why does the Department need an independent report to read conclusions which were set out in black and white? I will return to some further questions later.
Mr. Kearney
I broadly concur with the Deputy's comparison of the subsidies in terms of Rossaveale and the air service. His analysis is spot on. In relation to the Galway city service, I should point out that it is, essentially, a cargo service rather than a passenger service. That was reflected in the discussions in 1997. However, although the situations are not strictly comparable because of the cargo aspect, I acknowledge the critical point on the issue of subsidy.
As to the reason for seeking independent evaluation, I will respond on the following basis. We are not just discussing the three services directly concerned but a total of 15 services right across the islands. As is reflected in the report of the Comptroller and Auditor General, there is a mix of services, without it necessarily having been well thought out as to the reasons for having air, freight and passenger services. The committee will be well aware, from correspondence, that there are various allegations and counter allegations in relation to these services. It is in terms of standing and equity - this also relates to Deputy McCormack's point as to how we are handling this issue - that we require expert economic, tourism and marine indicators in place so that there will be transparency as to what we do from here on in.
On the matter of contract, I believe the Comptroller and Auditor General referred to the Rossaveale arrangement. There is now a contract in place for the Galway city service. In terms of delays, I say in all honesty, that since my appointment to the Department last October, no single area has taken as much of my time and effort as getting a Bill to Government, getting consultants together, acquiring technology, establishing a monitoring committee and recruiting staff. The Department remains committed to prioritising this work.
I acknowledge that. I also ask that the comments by members of this committee be taken into account in arriving at conclusions.
The Comptroller and Auditor General's report drew attention to the fact that, in relation to one of the stand-by boats in operation, there was no load-line certificate in existence. In the interests of public safety, I would consider it essential that, in making an agreement with a contractor, the Department should satisfy itself that the contractor meets the necessary legal requirements. In view of financial difficulties reported in relation to some of the contractors, including requests for additional subsidies, has the Department confirmed that each of the contractors had a current tax clearance certificate in each of the years under review?
Mr. Kearney
There is a point at which this situation descends into farce. At page 120 of the Comptroller and Auditor General's report, he refers to passenger usage from Galway to the islands. In November 2001, there were 30 sailings on which not a single passenger was carried. On my calculations, the subsidy to the operator, who was contracted on the basis of about 460 sailings per annum at a subsidy of €600,000, amounts to approximately €1,300 per sailing. Accordingly, in November 2001, the contractor was paid €1,300 per sailing for simply taking the ship out and back 30 times, without any passengers.
In December 2001, I estimate there were at least 19 sailings without passengers. For that month in full, there were 33 sailings involving a total of 14 passengers. I assumed there was at least one passenger on 14 of the 33 sailings, though it may well be that most of those passengers were carried on one sailing in Christmas week. In October 2001, there were 20 sailings, with a total of eight passengers, indicating there were at least 12 sailings without any passenger. For that three month period from October to December, there were at least 61 sailings without any passenger, at €1,300 per sailing, at a cost of approximately €80,000 for that period alone.
I am prompted to ask whether the Department has money to burn or, perhaps I should say, to bury at the bottom of the sea? I really believe conclusions could be drawn on this matter within a week, if there is a determination to reach a conclusion. I particularly request a response on the issue of boats operating without passengers.
Mr. Kearney
The Deputy has raised a matter which it is critical to address. From 1997, it was clear to the Department that the Galway shipping service was essentially a cargo service. What we are speaking of, during the period to which the Deputy has referred, is a shipping service carrying of the order of 8,000 to 10,000 tonnes of cargo per year from the port to the islands. In 1997, the Department made efforts, in the negotiations with the ferry contractor, to have it operate purely as a cargo service. However, it received legal advice that that was not permissible within the terms of the 1992 contract. Accordingly, although it has a label of passenger and cargo service, it was, unlike the other services, purely a cargo service, carrying thousands of tonnes of cargo.
Without wishing to go over ground which has been covered already, it is important to bear in mind that what is under discussion today is the method by which the subsidy was given. We are talking about contact with one of the most remote areas of the country. There are times on the Aran Islands when a snipe cannot stand up, the environment is so harsh. For obvious reasons we have a situation that went terribly wrong in 1992. We must accept there will have to be a social subsidy in ensuring reasonably open communications with the island and in keeping the population base of 1,200 from reducing further.
However, we are doing a value for money assessment and the taxpayer must be protected. I view very seriously the fact that Mr. Kearney's predecessors and the Comptroller and Auditor General were unable to get hold of the 1992 contract. That is very difficult. If it were only a dog licence one would be able to get a record of whether one had one in 1992. I am not blaming Mr. Kearney in particular, as he has only been there for a few months, but the reason he could not find it is that it was in effect a blank cheque to ensure the operator got the contract continued after the first five years expired. I am not a legal expert but from the Comptroller and Auditor General's report I guarantee one could not but give the contract to that operator again. Whoever could not find the 1992 contract, the reason was that whether drawn up on the back of a matchbox, it was done to ensure the contact would continue for ten to 12 years. That is a central issue. Where did the 1992 file go?
Mr. Kearney
To clarify, I may have misled the Deputy. The 1992 contract is available and to hand and I am happy to provide it to the committee. Take that as read. I agree with the Deputy, there was a provision in the 1992 contract which specifically gave rise to the situation in 1997 which required the Department to enter negotiations on its renewal.
I must have read the brief wrongly because I understood from the Comptroller and Auditor General's report that documents relating to the 1992 contract could not be found. Is that true?
Mr. Kearney
The Deputy is absolutely right. The contract itself is available to the committee. The issue raised by the Comptroller and Auditor General, which we were unable to resolve, dealt with the papers detailing whether the Department of Finance was consulted at the time.
My next question is for the Department of Finance. What were its views on the 1992 contract and what did it have to say in 1997?
Mr. Carberry
Not being too long looking after the Vote, I am not in a position to answer. To my knowledge there was no application to the Department of Finance to agree to the renewability clause in the original contract.
Does the renewable aspect of the contract die out in 2004? Is that beyond legal scrutiny? Can Mr. Kearney tell us we will not be back here in 2005 with the same story?
Mr. Kearney
Yes, I can confirm that for the Deputy. The contract expires at the end of next year. There is no provision for renewal in this or in any other contract relating to ferry services.
It appears the operator seemed in this case to be always losing money - applications were made year in, year out. What sort of evaluation was done by the Department to determine whether the person involved was making money or whether he was a Robinson Crusoe type - there would be no service if he were not there? Has an evaluation been done on that? Are others ganging up to get involved through a tendering process? There may be five or six operators waiting to get involved for all we know.
Mr. Kearney
To give some context, the Deputy may be aware that during the 1980s, before the present contract was awarded, there was a service worth approximately €600,000 provided by CIE which offered two sailings a week but in fact there may have only been 90 sailings annually. Historically, the financial viability of the route was not strong.
Regarding the Department looking into the affairs and basis for these repeat visits, the 2000 situation was investigated by taking on a professional accountant to look at the company's accounts. At present we are also looking at its current financial situation. The Deputy asked what happens from 2004 onwards and the level of interest in the route. The Department, supported by the Comptroller and Auditor General's report and critical independent review, is eager to ensure a level playing field for whatever service or mix of services is used.
Regarding the evaluation of all the services, which in their totality are very important to the people of the Aran Islands, when this contract comes up in 2004 will the overall review be done at that stage so that one service can be compared against another? The transport of merchandise is also very important - a connection to Galway city is vital as that is where people must buy their goods and services. As has been pointed out, the cost per passenger must include cargo but whatever evaluation is done, there is no sense in expecting islanders to hawk materials from Galway to a ship at Rossaveale. That has to be taken into account.
Mr. Kearney
The Deputy has raised an important point. A mix of services seems appropriate for the islands. The capacity of Rossaveale to handle both cargo and passenger services is limited. Rossaveale is the port of choice for passenger transit but Galway has the facilities for cargo traffic. Our information is that substantial development would be necessary to build up Rossaveale for additional cargo capability.
Regarding the Aran Islands air service, why did the subsidy paid to the private operator increase from €279,000 in 2001 to €621,000 during the first year of the public service obligation route? Why will the subsidy increase to €745,000 in year two? Who will monitor the cost of this to the Department? How many departmental officials have qualifications in the area of air transport? Why do we not have independent statistics for the air service usage? Has the level of service to the islands increased as the contract has quadrupled? Are there now three times more flights to the island?
Mr. Kearney
I confirm that the frequency of the air service to the island has improved immeasurably. There are now six return flights daily on weekdays, which is a good service.
Is that three times more than the service when it was €279,000? To what extent has the service increased from the level committed to at that time?
Mr. Kearney
Although there has been a significant increase, the service is not quite three times greater. We can check.
What is considered to be significant?
Mr. Kearney
The fact that there are six return flights per day on weekdays on what was a very thin route - air operators were not willing to operate on the route without a subsidy - is an indication in itself. We can check the data and return to the Chairman on that point.
I am concerned that the figure, which was €279,000, increased to €745,000 in the second year of the contract. It is important that the massive increase in the PSOR contract is reflected in the service.
Mr. Kearney
The Comptroller and Auditor General's report on the PSOR for the air service reflects the fact that there was only one tender. The expertise of accountants was used to evaluate it and to make a judgment on the appropriate amount. As part of the deal, there was a fairly significant increase in the air service. This has been reflected in an increasing usage by the islanders and it is quite popular with them. We will be happy to come back to the committee with details of the comparison with the previous arrangement.
Is there any requirement on the operators to forward logs of flights undertaken or to give details of the numbers of passengers carried?
Mr. Kearney
Yes. We receive full details and logs every month from the air service, the Galway city service and the Rossaveale service for the purposes of performance comparison.
Can we get copies of the recent figures?
Mr. Kearney
We will be happy to provide those to the committee.
Does the Department think lessons can be learnt, in terms of the faults that are apparent in the service and the contract relating to it, when the service is compared to other subsided ferry services operated through the Department, for example, to Cape Clear in County Cork and to Arranmore in County Donegal? Are similar problems apparent? Will a wide-ranging approach be taken when the problems with this contract are being assessed? Does the Department use any international comparisons? I refer to the quality and cost of service and the degree of state subsidisation in other countries, such as Scotland and Denmark. I would also like to ask about joined up thinking, or possibly writing, in Departments. Is it the case that those who are awarded contracts of this nature - those who avail of or benefit from State subsidies - might be debtors of State agencies and Departments? Is there any mechanism to ensure that money is not allocated when other money is owing? I am interested in any responses to my queries.
Mr. Kearney
The Deputy asked if the lessons learned from this arrangement are applicable. The Galway city service seems virtually unique in terms of the level and frequency of complaints associated with it. As this committee has highlighted, the long period of contracts and renewal clauses does not help to build confidence in the discharge of our business or the quality of the service. Our other contracts, bar one, are for three years. This is reflected in the Cork and Donegal services mentioned by the Deputy. The lesson to be learnt from a departmental perspective is that giving others the opportunity to tender has the advantage of keeping them in the marketplace. There are lessons in terms of renewal clauses on contracts and duration. I will qualify the point I made on duration by saying that people have to make a massive investment for very heavy cargo vessels. Some advisers suggest that a reasonable period of stability is needed to get a return on their capital investment. Without pre-judging the issue, our experience has been that three-year contracts seem to work considerably better in terms of supporting the market and responsiveness.
I agree with the Deputy's point that there is a need for international comparisons. One of the reasons we have chosen independent consultants is to bring that to bear. The strategic framework is not sufficiently developed and well-developed indicators or international comparisons are not in place. We are embarking on a project next month to ensure that international comparisons are available, so that we can make judgments about the choice and level of services required.
The final point raised by the Deputy relates to the standing of those who are tendering to other public bodies. Under the new arrangements, the tax status of such people, as well as their standing with the Department of Communications, Marine and Natural Resources, is required to be in order. There is also an obligation on them to disclose if they are in breach of any law that is relevant to the undertaking of the contract - this is a new provision. I am happy to reflect further on the interesting point made by the Deputy in relation to debts owing. Our particular and immediate concerns are to ensure that the tax clearance certificates of such people are in place, that their standing with the Department of Communications, Marine and Natural Resources has been ascertained and that we are notified of any breaches of law that may be material to the contract.
In drawing up future contracts along those lines, a clause might be included that would have the effect of frustrating a contract if such a situation arose in the course of it.
Most of the questions on shipping have been asked, but I have one or two general questions. Is the vessel sailing from Galway at present the same one that has been sailing since 1992?
Mr. Kearney
What is its approximate capacity? What level of cargo tonnage can it accommodate?
Mr. Kearney
The vessel is approximately 400 tonnes and its cargo hold capacity is approximately 130 tonnes. Its passenger capacity is in excess of 200 passengers.
The Department was aware by 1997, when the original contract concluded, that there was a significant change. Passengers were not coming from Galway but the cargo was. The Department entered into negotiations to see if the contract could be extended at a time when it was aware of the change in numbers. Did it try to change the detail of the contract going forward?
Mr. Kearney
The Deputy's comments are correct. The Department's opening position in the negotiations was that a cargo only service from Galway was required. The contractor opposed this and made a legal argument that it was entitled to deal with both a passenger and a cargo service. Our legal advice confirmed that the 1992 contract bound us to the provision of both services.
Mr. Kearney mentioned that the vessel can take 200 passengers and 130 tonnes of cargo.
Mr. Kearney
That seems to be an enormous capacity for what is required. Mr. Kearney said a moment ago that 8,000 to 10,000 tonnes were transported per annum, which indicates that approximately 20 tonnes were carried per sailing, but the vessel had a capacity of 130 tonnes. The same is true of the passenger figures. The Department bought into something that was grossly over scale. It was like flying a jumbo jet to the Aran Islands. I am astounded by the scale. I agree fully that the islands must be serviced, but I am concerned at the sheer volume of what was possible and the cost implications.
At any stage, did anyone mention that a boat with a 200-passenger capacity was sailing while empty for several months? In the case of the cargo, a fraction of what could have been transported was being conveyed. Going forward from the 1997 review, could the Department not have entered a more practical deal involving less frequent sailings or a different vessel? We bought into something which the previous five years should have demonstrated was not efficient, which is what we were paying for. Does Mr. Kearney wish to respond to that?
Mr. Kearney
The Department was clear at the outset that it was preferable to provide a cargo service only from Galway city. However, over the course of the summer months consultations with the three island communities revealed a level of support on the islands for the continuation of the Galway passenger service. We were in negotiations with the shipping company which could not get beyond the legal requirement stemming from the previous arrangement to negotiate for both services.
The Deputy's points about capacity are correct, but the then Department succeeded in negotiating the price for the continuation of the service back to 1992 levels.
That is a point I want to take up and I will conclude on it. In 1997, the Department negotiated the rate of the subsidy from £603,000, or whatever the figure was. Mr.Kearney points out correctly that the figure was the same as the 1992 figure. I am bemused by the fact that this annual subsidy will eventually have had a life span of 12 years. When evaluating the contract or tender a business plan must have been drawn up. From a business point of view, the fact that the subsidy which worked in 1992 was also to work between 2000 and 2004, bearing in mind the additional payments made during the period of the first contract, should have raised questions about the viability of buying into this deal. I find it difficult to see how a contract figure for 1992 could be valid. How could the Department have confidence in that figure going forward? As it transpired, additional payments had to be made. I do not know what cash flow projections were involved in that process.
How was the project measured from a financial point of view? I have questions about its evaluation. Was it the case that the operator said simply that he did it for the last five years, was making money and was happy to continue? How did the Department conclude that the same subsidy could work over that extended period?
Mr. Kearney
I am just clarifying the records at this stage. The Deputy is quite right about the lengthy duration of the contract and the issue of the price. I understand that an evaluation was undertaken by accountants on behalf of the State in the context of the 1997 negotiations. The accountants confirmed the viability of the service. Central to the entire process was the legal framework which compelled the Department into those discussions and the financial benefit——
It made the Department enter negotiations, but if negotiations broke down the Department was free to go to the marketplace. Is that correct?
Mr. Kearney
I am not a lawyer, but the legal advice was that the Department would have had to make reasonable efforts to secure a negotiated deal with the contractor.
If a reasonable deal were not negotiated, what would happen? That is what brought me to my original point. From the first five years of the contract, the Department realised there was gross over capacity on the route. I still do not understand why the capacity was not scaled back in negotiations to meet actual needs. It was possible to transport up to 100,000 tonnes of cargo per annum instead of 8,000 tonnes or 10,000 tonnes and the same is true in the case of passengers.
Deputy Curran's point relates to the suitability of the vessel. It was a real cargo ship when something much smaller would have done at a presumably lower cost.
Mr. Kearney
Just to clarify, the vessel in question was purpose built for the route and had particular features.
I do not dispute that. It was a point that was in the back of my mind and it was the basis of the first question I asked. The vessel may have been an influence, but it should not have been. This was a commercial contract and a commercial decision should have been made. The decision, however, may have been influenced by other matters.
Mr. Kearney
My understanding is that the Department had two concerns at that juncture. The first was to ensure the provider had the capability to deliver the required sailings three times a week and the second was to reflect the significant fall off in passenger numbers in the annual subsidy payable. I take from the records that those were the Department's two concerns.
The Department of the Taoiseach sought to conduct a review of subsidised transport to the Aran Islands in 1997. Was that carried out?
Mr. Kearney
I gather it was not carried out.
Mr. Kearney
I cannot speak for the Department of the Taoiseach. I am being advised that the functions were transferred at that time and it did not happen on foot of that. In the period under review, the functions were transferred across three Departments, but the staffing structure and knowledge did not transfer with them. The review proposed by the Department of the Taoiseach in 1997 was therefore not carried out.
It may be that all of this transferring of functions from Department to Department is causing much of the confusion. It is quite apparent that the muddle is being shifted from one Department to another. Does Mr. Kearney agree one would expect that a review initiated by the Taoiseach would be carried out?
Mr. Kearney
I think we may be venturing into political choices on location of departmental functions here. I had better defer.
Has the Department resolved the conflict over the provision of a bus service between Rossaveal and Galway with its legal powers under the 1998 Act?
Mr. Kearney
This is a critical point. It was brought to light in the Comptroller and Auditor General's report. The Government has approved the heads of a Bill to address that particular legal issue. It is getting priority drafting and it will be published to the Houses of the Oireachtas this session.
Is the hold-up due to that? Is the Department legally obliged under contract to provide the service?
Mr. Kearney
The providers of the services have agreed with us to provide the service even in the absence of the legal framework.
People and tourists have voted with their feet and moved to Rossaveal from Galway. Has a study been carried out to discover why that is? Given the population of Galway, it is amazing how few passengers use the service. I am astonished at that in such a tourist city. Is the service promoted or in any way encouraged from Galway?
Mr. Kearney
The trip can take as little as 45 minutes from Rossaveal whereas it can take two to three hours from Galway. This is the main reason passengers are switching to Rossaveal.
Are you satisfied the bus service will be ready?
Mr. Kearney
This is a fundamental issue, about which we are concerned, and is the reason the legislation has been prioritised for publication this session.
I turn to Deputy Curran's line of questioning on the capacity of the vessel now being used. What were the contract requirements for passenger and freight capacity for the boat?
Mr. Kearney
While we are unearthing the contract, I will give the committee some information on the craft. As I recall, when the contract was being drawn up in 1992, capacity requirements were specified. The evidence here indicates that the cargo capacity was 130 tonnes, while passenger capacity was somewhat less than I indicated to Deputy Curran. The contract specified that the vessel was to be purpose built, for inter-island use, twin engined, etc.
That is not the information I am seeking. I want to know the requirements per the contract.
Mr. Kearney
I am quoting from the second schedule to the contract which specifies the particulars of the vessel.
I do not want to know the particulars of the vessel. I want to know the requirements specified in the contract. There was no vessel at the time. What requirements were specified in the contract in terms of passenger and freight capacity?
Mr. Kearney
In freight capacity, the schedule to the contract specifies a capacity of 130 tonnes at a draught of 7.5 feet and it specifies a capacity of 240 passengers. I should clarify that the contract also lists specialised fuel cargo and other technical matters for the transport of cattle and other items.
The contract required a vessel that would carry 240 passengers.
Mr. Kearney
Despite this requirement, table 53 shows that the vessel has never reached full capacity. The average daily number of passengers is very low and increases during just three months of the year, June, July and August, when the respective figures are 17, 59 and 160. For the rest of the year, the vessel carries an average of just 20 passengers per month, which averages out at less than one per day. I cannot understand the reason the contract specified a capacity of 240 passengers.
I want this figure checked as it differs from the information available to me. This is of crucial significance, given that the Department subsidised the provision of the vessel. From next year onwards, depending on to whom the contract is awarded, the benefits of the vessel may no longer be available to the people of the Aran Islands. Did passenger capacity on this vessel, which was supplied and subsidised by the public, exceed specifications? I question the veracity of the figure cited.
There may or may not be significance in other figures in table 53 which show the vessel transported 6,198 passengers outward from Galway and just 5,507 on the return journey. Either the 600 passengers who failed to return by the same route used a different method of transport to return or the population of the Aran Islands increased substantially during the six months in question. Does this indicate dissatisfaction with the service? If not, what does it indicate?
Mr. Kearney
Perhaps it is a reflection on the duration of the journey from the port of Galway to the islands, which drags on for three hours, as compared to the return journey of five minutes by aeroplane or some 40 minutes using the Rossaveal service.
On the point raised by the Deputy on capacity on the route, it may be more helpful to provide him with a copy of the contract, which fully sets out the data he seeks.
Does the vessel revert to the current owners when the contract ends? In other words, despite subsidies paid by the Department from the public purse, there is no clawback in the event that the vessel is no longer used for the provision of services to the Aran Islands after 2004.
Mr. Kearney
That is correct. The vessel's ownership would in that case remain with the contractor.
Why did the Department reimburse the operator for special equipment which had already been bought? Was this not unusual?
Mr. Kearney
The records in relation to the special equipment in 2000 indicate that what was being provided was an upgraded crane facility over and above what was specified in the original contract, fuel storage and carriage facilities and metering arrangements. Facilities were specified in the 1997 contract, but that which was provided was described as over and above requirements and would enhance safety and the quality of service to customers. The payment for this equipment followed consultations and approval from the Department of Finance.
When considered from a business perspective, the contract has all the indications of a badly managed system. Deputy McCormack indicated that the operator's contract was renewed and extended despite failing to obtain approval from the Department. Do you not agree the approach taken is riddled with examples of what one should not do in terms of best practice?
Mr. Kearney
As of now, there are no renewable contracts or clauses in contracts and no once-off payments. In future, a clear set of benchmarked indicators will apply when we make choices. In the case in question, a number of complaints have been made about the service by non-participants, while the operator has claimed the level of subsidy is unduly harsh. There are, therefore, mixed views on the matter. I wish to reassure the committee that we do not envisage lengthy contracts or renewable contracts or circumstances in the normal course of events in which once-off payments would arise.
Do you agree that in a tourism nation, a service such as this should provide considerable benefits to the islands if it were provided in a business-like manner and properly promoted? The taxpayer is being fleeced and the operator and customers of the service are unhappy. Given the role of tourism here and our potential as a tourism destination, I am astonished that this service is not a profitable concern.
Mr. Kearney
By way of context, we are talking about subsidies across the three services of the order of €1.6 million per annum. Historically, specifically in the 1980s, this has not been a rich route in terms of attracting commercial activity or investment to support enterprise on the three islands. The lapse of the contract - there are a number of contracts which come up for renewal next year across the services generally - provides an opportunity, particularly where we have reached what was referred to as a critical economic review of the issues and of the opportunities. It should give us a good opportunity to put in place new improved arrangements from 2004 onwards.
Will the next contract be advertised in the European journal?
Mr. Kearney
I understand that because it is a water-based service directive there is not a strict requirement to do so. However, if the committee reflects the view that it should be we would be happy to take it into account.
What is the normal procedure for departmental contracts? What is the opinion of the Department of Finance on the necessity of this going into the EU journal?
Mr. Carberry
I am not an expert on public procurement rules as I have not had any involvement in that area. The guidelines are clearly laid down and the Department just has to make contact with the section to find out that information.
Why is there no signed contract for the Rossaveale service? I am aware this was raised previously in respect of services up to 2002. It is unbelievable that this is going on for so long. I have only received a copy of the 1999-2002 service agreement. There was no signed contract.
Mr. Kearney
If I can clarify the position for the Chairman, in the context of renewing the contract last year, the contractor has now signed up to specified obligations and delivery requirements and is providing logs to us every month. So take that as read. I also reassure the Chairman, because I may not have been clear enough on the earlier point. The Department is complying and will continue to comply with all requirements in regard to best procurement practices. We routinely involve the forum for public procurement and independent assessors to check our processes.
When will the Department publish its study on the type of service, infrastructure and level of subsidy required to provide proper access to the islands?
Mr. Kearney
The study will commence next month and should be completed in the autumn. Subject to commercial sensitivity issues it should be published late this year.
Have the consultants been appointed?
Mr. Kearney
The short-listing is under way and the consultants will be appointed next month.
What is their job specification?
Mr. Kearney
If it would be helpful, I can go through the terms of reference for the consultancy. We should have them here. In brief, it is to look at, first, the need for an adequacy of existing services and the mix across them; second, to advise on appropriate indicators by which effectiveness and value for money can be assessed for the future and; in addition, to advise on the optimal duration of contracts having regard to the investment required; third, the socio-economic and linguistic impact of subsidised services for the development of the islands.
The consultants will also look at infrastructural issues and the advisability of operating cargo and passenger services using same or similar vessels.
Will the suitability of the fleet that is currently providing the service be incorporated into the study as well?
Mr. Kearney
What is included, which might be of help, is the adequacy of a need for each of the existing subsidised ferry services, both cargo and passenger, to the islands.
The State paid an accountant to do a due diligence audit on the operation. It is somewhat surprising that the Department did not implement the bulk of its recommendations.
Mr. Kearney
The accountant served the Department well by highlighting a shortfall in the finances of the company. This enabled the Department to go back to the directors of the company and say that, in the light of the shortfall, we were not willing to subvent them any further unless they gave written guarantees that any shortfalls would be made up from their own resources. They duly signed up to this. The accountant's advice, in terms of the exposure to the State, was acted upon and resulted in specific undertakings that the directors would make up the shortfall.
Why was the Department of Finance not kept up to speed with all of the transactions? There was a cash advancement, special loans, special deals and once-off payments. There was a catalogue of payments going back over that ten-year period. Emergency payments were made on foot of demands and payment was made on equipment that was already purchased. I am amazed the Department of Finance would sign off on that method of doing business.
Mr. Kearney
I will respond on that point and then move forward. In relation to the once-off payment which we made, the Department of Finance was involved and imposed two specific requirements in these payments; first, in relation to the Department being satisfied that the expenditure was incurred and verifying all the details and; second, satisfying itself as to the future viability of the company, particularly for the duration of the contract. The Department is committed to observing all the procedures in tendering from here on in, in regard to far more formalised contracts and addressing the statutory framework. That is the basis on which we will build going forward.
I wish Mr. Kearney well in his appointment as Secretary General. He is taking over a difficult job. What was the total budget for the islands section of the Department in 2001?
Mr. Kearney
The budget for the islands was €6.945 million. That was the Estimate while the actual expenditure came in close to that at €6.957 million. Roughly €1.9 million of that was spent on current expenditure and in excess of €5 million was spent on capital expenditure.
How much of that was spent on subsidising the city of Galway passenger and goods service?
Mr. Kearney
For 2001, €603,000 would have been consistent for that period.
Some 10% of the total State expenditure on the islands in 2001 was used for 11,000 passengers one way. I accept that Mr. Kearney said the bulk of that is cargo, but it is a heavily subsidised service if 10% of the total budget is going on the Galway route.
Mr. Kearney
The bulk of the expenditure goes to the Aran Islands because they have the largest population. Within that, the Chairman is quite correct in that a very substantial portion of the subvention goes to the city of Galway service.
Everybody agrees this is an essential service. However, one would also have to agree that it has not been managed up to now in many ways.
Mr. Kearney
The Comptroller and Auditor General's report pointed out a number of areas where the Department has to improve. I submit to the Chairman and the committee that in our current activities on the management and monitoring of the services and the changes we have already introduced, we are well on our way to significantly enhancing the management of these services.
This bad management would not have been detected but for the offices of the Comptroller and Auditor General. He has done an extraordinary job to bring this to the surface to the extent that clear guidelines have been put in place for the way forward. I congratulate Mr. Purcell and his team on a very detailed report. Many issues have emerged that have been ongoing for many years and without his audit would have continued.
Mr. Kearney
At the outset I readily acknowledged the thorough work of the office of the Comptroller and Auditor General. I reiterate my belief that the full implementation of his recommendations will significantly enhance the effectiveness of expenditure and our ability in managing the subsidised transport services.
I would like some information to be forwarded to the committee. The report before us dealt almost exclusively with the passenger services. However, it has emerged to some extent that an amount of freight has been involved, which was not clear to us from the report. Will Mr. Kearney forward details of the cargo carried, perhaps on a monthly basis in the year under review? That figure has not come to the committee and we would be happy to get it.
Does Mr. Purcell have anything to add?
Mr. Purcell
I do not have much to add to what has been said already. I do not want to say much on the issue because the matter has been dealt with comprehensively by the committee. On Deputy Fleming's last point, we tried to get the cargo statistics but they were not available. They have now been made available to the Department and I have been updated on the current figures. Part of the problem in trying to put together a comprehensive report was that no figures were available in respect of the cargo being carried at the time. That is acknowledged and is one of the shortcomings in the overall management of that service.
I would like an indication.
Mr. Kearney
We will be able to provide the Deputy with monthly statistics on cargo from 1999 onwards.
Mr. Carbery
When sanction is given to a Department to enter into a contract for goods or services, one of the key conditions is that the Department has complied with the public procurement rules.
Is it agreed that we dispose of this matter? Agreed. I thank Mr. Kearney and his officials and Mr. Purcell for his very detailed report.
We will now consider Vote 42, which concerns Dúchas.
I tried to raise the issue of Dúchas at a previous meeting. Maybe the Department operated under a different heading at that time, but I am anxious to refer to the brief given in 1997 to PricewaterhouseCoopers on a report which was submitted to the Department in 1998. It made extensive recommendations on the structure of the Department and how it should operate and it is as relevant today as it was then. It stated the vast bulk of the processes in operation are also impacted upon by the lack of computerised systems support and by a relatively archaic financial regime. It seems that this could be said about the last topic we discussed.
How much was the report, what aspects of it were acted upon and how will it impact upon the new arrangements within the Department? I was not able to obtain a reply at the last meeting we had.
Mr. Furlong
I am somewhat removed from this matter so I beg forgiveness if my powers of recall are not as good as they ought to be. One of the major issues with which we were trying to deal while I was Secretary General of the Department was the restructuring of Dúchas as an integral part of the Department. It was to be the heritage services division of the Department. I do not have the cost of the PricewaterhouseCoopers report but Mr. Canny will endeavour to obtain it for the Deputy.
Over a period of about two years, we engaged in extensive consultations with staff with a view to addressing the structural faults that were clearly identified in the PricewaterhouseCoopers report. One objective was to achieve greater regionalisation of Dúchas and also greater integration of the built heritage and the natural heritage. We had very extensive and difficult negotiations with the staff associations and did not reach agreement with them. We had parallel discussions with the Department of Finance on the additional staff required to make the reform proposals attainable and deliverable. If I remember correctly, the proposals entailed the creation of 80 to 90 additional posts. We had not got approval from the Department of Finance for this and we were compelled to act according to its desire to manage more tightly the staffing of Departments generally because of the slowdown in the economy and the less favourable budgetary provisions with which we had to deal.
The Deputy is correct in saying the previous discussion before this committee highlighted some of the inadequacies in the financial information systems in the Department. Certainly, the Comptroller and Auditor General will remember that, in my last appearance before the committee in respect of the 2000 accounts, I had to acknowledge very serious failings in our financial structures. From then until the last general election, when I transferred out of the area, the main focus of management in the Department was to make sure it produced systems more in line with the requirements of modern management. We were way behind most other Departments in respect of the management information framework systems. We were given priority by the Department of Finance in the allocation of resources. We engaged consultants, who produced a Framework Document, and management was about to sign off on that when the break-up of the Department took place in June 2002.
Mr. Kearney can confirm that some of the changes that the new management information framework systems, which were being put in place gradually, had begun and will continue during his tenure of office. I do not know if I am addressing——
The PricewaterhouseCoopers report was quite extensive and covered many areas besides the ones outlined. It dealt in detail with the fact that the Department was not as accountable, in the context of IT systems, as every other Department. It seems that nothing much has changed.
It was extremely difficult to get information from the Department during the five year period in respect of the various sites and depots it operates, and this remains the case. The report outlines that the expenditure on particular projects——
That report was published.
It was paid for so I presume it was published and laid before the House. I am taken aback by the amount of comment in the report condemning the structures within Dúchas. I am deeply concerned, now that the Department's remit has changed, that certain changes have not taken place and that the inefficiencies of the system are still in evidence.
Has the report been published and circulated?
Mr. Furlong
Was it circulated to anybody?
Mr. Furlong
No. I understand the report made proposals for the reform of Dúchas, without increasing the overall number in the organisation. I may be wrong——
I do not accept this. I do not understand the publication of the report either, which perhaps should be explained. I have an interest in this area and I read through it. It broadly deals with the activities of Dúchas and makes various recommendations. The economic downturn will not have affected many of the recommendations made. Have the recommendations been taken on board? Will changes take place? Are we about to experience efficiencies arising from the report or was it a waste of money?
In trying to obtain information from Dúchas by way of parliamentary questions, one is led on a merry dance. Regarding moneys spent on various sites, they refer to work that was undertaken yet when visiting the sites one can see the work has not been undertaken. I have been told in response to parliamentary questions that the work is completed and the money is spent. Sometimes the money is spent on outside contracts. I would like to know the systems in place that monitor spending and give specific reports on sites. Has Dúchas adopted a more efficient system? Is there tangible evidence of a new structure being put in place? Once when I asked a parliamentary question I was told it was a detailed question and Dúchas was not in a position to gather the information, which I found extraordinary.
We have not seen the report. Perhaps Mr. Furlong could address the broader issue and Deputy McGuinness's final point in particular.
Mr. Furlong
Let me correct one statement. There is no bar on making the report available to the committee; it was not formally published and laid before the House. If members of the committee want it, it will be made available to them.
The report was produced six years ago. As I have said, one of the major objectives for the Department of Arts, Heritage, Gaeltacht and the Islands, up to the point when its functions were reallocated, was the installation of a modern management information system. We invested significant resources in this. Work was going ahead and was intended to meet the needs of all three divisions of the Department - and not just the heritage service, Dúchas. Mr. Canny can take up the story from there.
Mr. Michael Canny
There were many things in the PricewaterhouseCoopers report, such as regionalisation, job costing, project management planning and some things that required additional staff. We introduced the project planning system last year for all heritage projects. We planned to introduce issues like job costing and cost centres under the management information framework. Because of the break-up of the Department, that went back a stage. The new management information framework will be introduced in the Department of the Environment and Local Government next year. We have made considerable progress.
I want to press the issue of expenditure. I have no option but to give a few examples. I questioned the expenditure on Gartan Lodge and was told it cost £25,000. I mention that as there were no plans or specifications in this case. I was told that £25,000 covered the materials. I could not get an answer on the number of outside contractors that were involved. I am now informed that quite a number of outside contractors were involved. While I asked a simple question in order to determine the costs involved, I was only given the cost of materials. While I understand that a tendering process should have been undertaken, my information tells me that this did not happen and the money was spent as the project rolled out.
Does the Deputy want clarification on this?
I want to give another example that may sound trivial. Regarding Grangefertagh Tower, I was told the contract was given and no tendering process had been entered into. I was told that 4 metres of pigeon droppings was removed from the tower. While this might sound trivial, the droppings were not removed yet we still managed to pay €8,085. We spent almost €3,000 on a door that could not open at Reginald's Tower. In answer to a parliamentary question I was told it could not open because of a rogue stone. I fail to understand how these projects can be planned yet end in a mess. Dúchas is supposed to be expert in looking after monuments. The monuments I am referring to are of national and European significance.
While I was told a project at Kells, County Kilkenny, was to be completed in 2003, it is not finished. There are monuments throughout the country that have scaffolding erected around them that should be listed such is the length of time it has been there. I fail to understand how this can go on and the cost to the State can increase. I am not convinced that steps have been taken within Dúchas that will increase cost effectiveness and give specific information about the costs on every site.
Perhaps the break-up of Dúchas will have an impact on the way forward.
Mr. Furlong
The break-up of Dúchas per se, will probably lead to a more rational distribution of functions. Without the support systems to provide information, the break-up in itself will not improve matters. A great deal of work was done in the old Department and I understand this is continuing in the new Department.
We will have some difficulty in dealing with the projects the Deputy mentioned on a case by case basis. I am advised that extensive replies have been given in response to parliamentary questions and otherwise. I recall that shortly before the break-up of the Department I had an opportunity, with Mr. Canny, to meet the Deputy and we discussed these matters. I undertook to have them pursued and followed up. I am not entirely clear about what happened at that point. I think there was a response to the Deputy from the former Minister. I may be wrong, as my recollection is not as good as it ought to be. On the specific issues the Deputy raised, would it help the Deputy if we produced factual notes on each?
Deputy McCormack has one question to ask before he leaves. I will come back to Deputy McGuinness after it.
I have a question regarding Vote 42 relating to office equipment that cost €2.739 million. This is equivalent to €2.8 million for essential housing grant repairs in subhead D. In one year, how can there be as much spent on office equipment as on housing repairs?
I also have a question for Mr. Canny concerning SACs. When will landowners be compensated and who will pay this compensation? He might also refer to the vexed question of bogs and turf-cutting. Has a solution been found yet for this problem?
Mr. Kearney
I am not sure whether I fully understood the Deputy's point, so I will give him the figures we have.
It is very simple. Under Vote 42, €2.7 million was spent on office equipment and machinery, but in the same year €2.8 million was spent on housing repair grants. I was wondering how the same amount could be spent on office machinery as on housing grants.
Mr. Kearney
A total of €940,000 was spent on new house grants in the year in question, while €2.868 million was spent on improvement grants in Gaeltacht areas. These grants are based on legislation from 1929. They are based on demand. The number of grant applications in the year in question for new houses was 237. In relation to improvement grants, 1,115 applications were received. These schemes are demand-led, so it is an honest reflection of the level of demand in the Gaeltacht areas for these grants.
That does not answer the question at all. Why was as much spent on office machinery as on housing repair grants? I know from my own experience - the largest Gaeltacht in the country is in my constituency - that people are finding it very hard to get those grants in the year in which they apply. How is it that only €2.8 million was spent on housing repair grants while €2.7 million was spent on office equipment?
Mr. Kearney
I am not sure whether the two are comparable. The actual spend on office equipment was €2.2 million. The eligibility criteria for the new house grants and home improvement grants are a matter of Government policy. They are demand-led schemes and, as I have reflected, the level is fairly consistent from 2000 to the end of 2002 in respect of both grants. There were 237 applications for new house grants and home improvement grants.
I never asked about new house grants. I wish I had the time to stay here and argue about this, but I cannot. The question is very simple: what was the €2.7 million spent on in terms of office equipment? Then I will know how it compares to the spending on grants.
Does the Deputy want a breakdown of the amount spent?
Yes, that will do. I will get that later.
Does the Deputy want Mr. Canny to answer the question on SACs?
Mr. Canny
Compensation has already been paid for such things as taking sheep off mountains in the west and reduction in sheep numbers. It has also been paid for cessation of turf cutting in various areas. We have an application in Brussels for a more comprehensive compensation scheme to cover other matters and we are in the hands of Brussels as we wait for approval. It is expected in——
What about the areas that are designated as SACs, in which ordinary farming practices were available to the farmer up to the designation but are no longer available? This includes building a house for a son or daughter on the land. What kind of compensation will be paid there?
Mr. Canny
Building a house is not an ordinary farming activity. It is something which comes under the Planning Acts.
Before the SAC scheme farmers were able to get permission for their sons or daughters to build a house, but since the areas have been designated they have not been able to do so. This means they are seriously compromised financially.
Mr. Canny
I do not accept that designation as an SAC prevents the building of a house.
That is happening in Galway.
Mr. Canny
I cannot answer for the Galway planning authority, but it would not be the norm. The agreement we have in relation to compensation is that any restriction put on the land by the Minister may result in compensation liability. We do not pay for potential losses but for actual losses that have been incurred. We are already paying for cessation of turf cutting.
Mr. Canny
I have forgotten the figure. It was £1,300 per acre but I do not remember what it is in euro.
It might be helpful to the committee if the report was made available to all the members, so that we could debate it on another date. Perhaps the exact position on each of the sites could also be communicated to members. There were queries about how the tendering process actually works and what happens when it does not work. When is it put into practice? It seems that it was not in practice when it came to Gartan Gate Lodge or Grangefertagh Tower. In fact, in answer to one parliamentary question I was told the cost in relation to Grangefertagh Tower was €6,080, while another one said it was more than €8,000. One said the job was completed, although I know from visiting the site that it was not. I must say, therefore, that the information in the answers to parliamentary questions is simply not accurate in many cases. I am disappointed by that. In order that I can pursue this matter, I ask that the information be made available.
Arising from the number of parliamentary questions I tabled, I had a meeting with departmental representatives to clarify the issues. The places with which I was concerned were not just in Kilkenny - I also asked about places in Clonmel, Wexford, Waterford and elsewhere. The information I received was less than impressive. Mr. Furlong spoke about writing back to me with information. I did write to the Minister on 27 August 2002 in reply to a letter I received from the Department and I have still not received a reply. I intend to pursue that further.
This is an issue of concern to Dúchas. Perhaps Mr. Canny could arrange a meeting with Deputy McGuinness to clarify these issues - that would also be of benefit to this committee. There are many concerns about Dúchas property and we should discuss this at a future date. Would Deputy McGuinness be happy with that?
Mr. Furlong
This is indicative, I am afraid, of the rather confused situation which resulted from the shifting around of responsibilities. Mr. Canny is the Assistant Secretary for corporate affairs in the Department of the Environment and Local Government, so he no longer deals directly with Dúchas or with the implementation of the new Government strategy. However, we can certainly give an undertaking to the committee to provide the report to which Deputy McGuinness referred. We will also provide notes on the specific projects to which he referred and if there are any other things he would like covered he can let us know. If misleading information was given to the Deputy in parliamentary questions, and I absolutely accept his word on that, I can only apologise. I would be as disappointed and dissatisfied as the Deputy that this should have happened.
We can all only speak from our own experience. A large amount of funding has been provided in the NDP for the conservation of various national monuments, including €1.93 million for works to conserve, consolidate and stabilise the Rock of Dunamaise in County Laois. I have tabled parliamentary questions on this issue and have received correspondence from the Minister. Earlier this year I inspected the works that had been carried out at the Rock of Dunamaise, which amounts to an access path for construction work. Scaffolding was erected about two years ago, ivy and weeds have been killed, and minor repair work has been carried out to the stone work. The amount of work done is not the size of a park bench. According to the responses to my parliamentary questions the cost of these works to date is €356,650. That is an outrage in terms of value for money.
I share Deputy McGuinness's concern that if another €1.6 million is to be spent on conserving the Rock of Dunamaise there is no possibility of the State getting value for money. There is no value for money in this type of work or these Dúchas projects. The consultant architect got €92,000 and the main contractor got up to €250,000. I appreciate the specialised nature of the work, and that is why we are discussing these issues because we have an interest in these historic monuments and we know that it is not possible to let just anyone carry out work on these sites. We have discussed this at length at local level and with the local heritage society but nobody in their wildest dreams could understand how the work so far could have cost even 25% of that sum. As a layman in these matters, and taking full account of the special skills that are required to do these works, I cannot comprehend how that type of money has been spent so far.
I would like to see a detailed report. In my correspondence I received only a list of the cheques issued and I do not know anything about the tendering process. Maybe too few people are tendering and the old joke is being repeated about the scaffolding being listed because it has been there so long. Dúchas must be getting a reputation around the country. Is the scaffolding rented on a weekly basis and is somebody making money? I do not know. Dúchas can reply by way of correspondence. If the officials check the file they will see the information I have received by way of listed payments but that is not the issue. I am talking about value for money and I would like Dúchas to examine this project for value for money.
Do you want that correspondence to come through the committee?
I am happy for it to come to the committee. It is the same point that Deputy McGuinness made. I do not expect an answer today. I could not expect that Dúchas would have details of these projects but I would like a response.
How much would the break up of Dúchas cost the taxpayer directly in terms of organisational change, invoicing, vehicles and rebranding?
Mr. Canny
I do not have a figure but it will involve repainting our vehicles, changing our stationery and signage. At a guess it may be €1 million but I do not know. It is a Government decision to change the organisation and it follows that we must do it.
How many listed monuments has Dúchas purchased since its foundation? Am I correct in saying it was formed and launched in 1997?
Mr. Canny
Dúchas was never a separate organisation. It was merely a brand name that we adopted to try to market the properties.
Under that umbrella what type of cash expenditure would it have recommended?
Mr. Canny
Is the Chairman talking about the purchase of properties?
Mr. Canny
I would have to return to the committee on that. I would not be able to give that off the top of my head.
Mr. Canny
Is the Chairman asking about the number of properties we have purchased since 1997?
The Chairman has raised a very relevant point, namely the efficiency of spend. This committee has to find some mechanism for examining this because the last time we met here, with respect, our discussion was limited because it was the remit of another Department. Today, with respect to the officials present, it is moving to a different Department, different people and so on. There has to be a way for the committee to examine the overall issue of how we manage our heritage sites and the management structures within Dúchas. Most of this is not about the staff on the ground but about management, as is most of this report. The report asks for the appointment of a management accountant. What are the qualifications for the accounts and human resource sections? As the Department of Finance is present I would like a note on circular 1182, saying to whom it applies and if the people to whom it applies in Dúchas or the Office of Public Works are being paid according to it. I have had complaints about Kilkenny Castle, Gartan Lodge, Glenveigh, Wexford, Clonmel and that is not the case.
That is the term allowance.
Regarding the cost of rebranding and the notional figure of €1 million, while I do not expect the officials here to know the actual cost, we can look back at what happened when this brand was introduced. My information is that most of the vehicles were resprayed at a particular location and that there was a query about the standard of the job and the quotation with vehicles being ferried from Kilkenny, Cork and other places to Clonmel to be sprayed. It did not make sense.
My background is in transport and if I was asking for a tender I would also ask that it factor in the cost of ferrying the vehicles from one location to another. It is fine to look at the tender when one is based in Kilkenny and see that there is a cheaper tender in Dublin but getting the trucks from Kilkenny to Dublin to have them sprayed, and back again, is another issue. The follow-up in terms of the guarantee given for the spray is now proving to be quite significant in the context of that job. The Chairman's question as to the cost of the break up of Dúchas or its remarketing, rebranding or whatever is to be done, is serious. We have to re-visit that report in some structured way and consider the impending actions to be taken in the context of the rebranding and signage.
These are all questions that I had identified or that were identified to me by people outside the Kilkenny depot in terms of the cost effectiveness of Dúchas's action on foot of the tendering process. Members of the committee have had experience of Dúchas in the past, and as officials from the Department of Finance are here I ask the Chairman that as well as getting the report, the correspondence that we asked for and the information from the Department of Finance on Circular 1182, that we find some mechanism to examine what happened back then and how we are going to proceed. If we did not learn from what was a less than cost-effective way of dealing with the changeover at that time we are going to encounter the same problem and queries in relation to the changeover now. I have serious reservations about the management of the sites, so rather than go through those detail by detail at the end of a long meeting can we please find a way of dealing with it?
That is a very broad issue. We can raise those very good questions in private session and we will certainly look at the rebranding of Dúchas, based on the past and looking forward. Lessons should be learned from 1997.
I would prefer if the promised meeting between me and the officials, whoever they will be, about specific sites was opened to include the entire committee because the information has to do with the effective spend within the Department not with satisfying me as a single member.
Mr. Canny
One of the reasons we adopted the brand of Dúchas was that we had changed Departments three times in a relatively short period and incurred a lot of costs in changing signage and vans. Thus, we thought the clever way to approach the future was to have a brand name that would remain if the Government moved us around Departments. That was a reasonable response. We did not expect that elements of Dúchas would then be broken into separate areas. One of the measures we took was to break some signage, particularly site signage, into three elements, with the name of the site, the name Dúchas and the name of the Department written on separate boards.
So the entire sign had to be changed.
Mr. Canny
Only in some cases. If we changed the vans the whole lot would probably have to be re-sprayed. The Office of Public Works will take over the majority of the visitor centre sites.
What is the timescale for that?
Mr. Canny
There is a transfer of functions order to be made. The Attorney General's office is working on it at the moment. We are talking months rather than——
Is it most likely to be in 2004?
Mr. Canny
No, it will be done in the middle of this year, on a timescale of one or two months.
Do the officials from the Department of Finance wish to reply to the point raised by Deputy McGuinness?
Mr. Hurley
I am somewhat confused about what particular circular the Deputy is referring to but we will certainly get somebody to follow up on it. I gather from what the Deputy said that it is one of the pay circulars, with which I would not be totally familiar.
I am referring to Circular 1182, 5 July 1982, regarding travelling and subsistence regulations.
Mr. Hurley
I beg the Deputy's pardon.
I tabled a parliamentary question in relation to the matter and got an answer which left me even more confused. I am anxious that within the Office of Public Works and Dúchas, the employees to which the circular refers are receiving everything stated in the circular in a uniform manner throughout the country. That is all I am asking, and it is reasonable. Is every employee referred to getting the allowance?
Mr. Hurley
The application of the regulations set out in that type of circular would be for the Department itself to comply with. The Department of Finance will set the regulations generally and it is for the Departments to apply that.
That is a clearer answer than I received in response to my parliamentary question. Can we find out whether, for those Departments to which the circular refers, the relevant employees are being paid in a uniform manner across the country?
The Deputy's point is about equality of treatment. Deputy McGuinness has been following this issue for some time and it is a very valid point.
If possible, I would be very anxious that the committee be furnished with a detailed reply to Deputy McGuinness's query. On the Vote, it has been reported that RTE is contemplating putting its contract for collection of broadcasting licence fees up for tender. If so, why is that?
Mr. Ciaran Ó hObain
There have been media reports in relation to the licence fee collection. The Minister for Communications, Marine and Natural Resources is responsible for licence fee collection, and under 1983 legislation, An Post is the Minister's agent for collection of it.
Is it going out to tender? Are changes planned?
Mr. Ó hObain
There is no proposal to put the contract out to tender. Significant consideration is being devoted to the efficiency of the collection system. Some changes in regulation have been made to improve the capacity of An Post to collect licences. A group chaired by the Department and involving both RTE and An Post is meeting monthly to look at how the efficiency of the system can be improved and also at the performance of An Post and at specific actions to be taken where targets have not been met.
Is this review being conducted because of non-payment by a lot of people? Is the possible increase in the fee due to the fact that a considerable number of people are not paying licence fees?
Mr. Ó hObain
There is a concern about the level of evasion. There are different measures of what the level of evasion is. It is complicated by the fact that every premises that has a television set must have a licence. What we are doing at the moment is getting a measure based on the total population. It is straightforward in relation to households, and reasonable assumptions can be made as to how many households have television sets. Where it becomes complex is in the case of businesses or other institutions which have a television set. There is a concern about the level of evasion. Regardless of whether one's performance is good or bad by international norms, the overall objective has to be to reduce the level of evasion whatever point one is at.
Mr. Purcell's office is carrying out a special report.
Mr. Purcell
I can confirm that my office is carrying out a value for money examination of the collection of TV licence money. It is in progress at the moment and I would expect the report to come before the committee later this year.
Very good. The Department of Communications, Marine and Natural Resources spent €1.5 million on consultants to advise it on the starting up of the digital broadcasting network. What is the current status of this project and what is its projected cost?
Mr. Ó hObain
That project has ended. It was quite a long, drawn out process. The consultancy commenced in February 1999 and concluded in October 2002. The project ended when the single applicant for the licence withdrew from the process.
Was any real value got for the money spent?
Mr. Ó hObain
In hindsight, if one knew what the outcome of the project would be, that the market would not express an interest or that an applicant would withdraw after expressing an interest, one might decide not to run a process. However, the initial appointment of the consultants was based on the best price. The consultancy went on for a significantly longer period than had been originally contracted for, yet the cost of the project did not increase significantly. Like many such projects involving a public competition, expertise is required and there is always the risk that no applicant will come forward.
On the Vote, why did the Bureau for European Minority Languages close in 2001? Was it co-funded with the EU?
Mr. Kearney
Basically this reflected a decision at European level to restructure that office. It was closed but has subsequently been re-established and re-opened. It was an EU decision, not our own.
Under subsection F in 2001, did the Department give €2.6 million to mná tí? They were recently embroiled in a controversy concerning their relationship with the Revenue Commissioners. Can the committee be given an update on that?
Mr. Kearney
Yes. Previously, I think of the order of 10% of income from this area was regarded by the Revenue Commissioners as reckonable for tax purposes. However, they are now proposing that from 2004 this arrangement would be discontinued and mná tí should keep sufficient records to enable annual returns of income to be made.
Has that information been put into the public domain?
Mr. Kearney
People are certainly aware of it. In fact, CONCOS, the umbrella organisation of summer colleges, which also represents mná tí, is in discussions with the Revenue Commissioners on it. Separately, the Department has been talking to the Department of Finance about the possibility of some income threshold to address this issue so that it would not be unduly burdensome on mná tí to try to discriminate between ordinary household expenses and particular amounts attributable to students.
Will the fact that it is going to be taxed have an impact on its viability and the invaluable service it provides, given that it is being exclusively promoted by householders and women working in the home?
Mr. Kearney
It is under discussion with the Department of Finance and the Revenue Commissioners and how we go forward from here remains to be resolved.
Is Foras Teanga totally dependent on the Department for funding?
Mr. Kearney
Foras Teanga receives income from two sources. The Chairman has raised a very interesting question. It is a cross-Border body so it receives some funding from us and some from the Department of Culture, Arts and Leisure in Northern Ireland. Foras na Gaeilge, for example, gets 75% of its funding from the State and 25% from Northern Ireland. Foras Teanga also comprises a second body called the Board of Ulster Scots which is based in Northern Ireland and receives 75% of its funding from Northern Ireland and 25% from the State.
What are its main functions?
Mr. Kearney
The function of Foras na Gaeilge is to advance the use and application of the Irish language, to advance key publications such as an English-Irish dictionary and to promote Irish throughout the island. The Ulster Scots board seeks to promote the awareness, culture and practice of Ulster Scots. North-South bodies have particular significance in the context of the Good Friday Agreement.
How many people are employed in Údarás na Gaeltachta funded industrial developments?
Mr. Kearney
There were 7,571 full-time and 4086 part-time at the end of 2002.
How much did Údarás spend on industrial development grants in 2001 and 2002?
Mr. Kearney
About €34 million was spent in 2002 and about €35 million in 2001.
What was the capital expenditure in 2002?
Mr. Kearney
It was €19.61 million. That is included in the complete figure. In terms of grants to industry the expenditure in 2002 was €14 million and Údarás capital expenditure on buildings, etc., was €20.3 million.
I would like to thank everybody for coming. I thank Mr. Purcell for his detailed work. Is it agreed that we note the Vote? Agreed.
The witnesses withdrew.
The committee adjourned at 2.15 p.m. until 11 a.m. on Thursday, 12 June 2003.
