I thank the Chairman and members of the committee for the opportunity to meet with you to discuss Special Report No. 10 of the Comptroller and Auditor General and also the FÁS Annual Report and Financial Statements for last year.
Report No. 10, insofar as it dealt with FÁS, was a comment on an investigation prepared by the internal audit section of FÁS. The report was fair in that it outlined the findings of our internal audit section investigation and the management response. The report spelled out my response to the recommendations in the internal audit report and I can confirm to the committee that we took the recommendations in the report seriously and that we have put in place revised procedures and controls to ensure that there is no recurrence of the breaches outlined in the report. I should add that all our internal audit investigations are forwarded on completion to the Comptroller and Auditor General.
Unfortunately the publication of Report No. 10 unleashed a frenzy of interest in the activity of our internal audit section whereby we had to release some 20 internal audit reports, a few directly to journalists and 19 to the Fine Gael spokesman on Enterprise, Trade and Employment, Deputy Leo Varadkar.
I would like to make some general comments on the role of internal audit. Internal audit is a vital component of the governance of any organisation. By its nature it looks critically at the processes in an organisation. Internal audit reports, whether in the public or private sectors, are written, both in style and language, for an internal audience and not for general public consumption. As a consequence the language used can, at times, be robust. This is as it should be for the proper governance of any organisation. In this regard FÁS internal audit reports are no different from others. Unfortunately the internal reports released by us under the Freedom of Information Act have been sensationalised by the media and used by some with a destructive agenda towards FÁS.
It is important for the efficacy of the audit function that those who are charged with preparing the audit reports can continue to exercise their function without fear that anything written will be used by persons outside the organisation with a negative agenda. Otherwise the operation of internal audit could be undermined, not just in FÁS, but throughout the public service.
There is not an organisation, company, bank or institution that does not have critical comments from their internal audits sections. That is the function of internal audit. If these reports were released into the public domain they could be damaging to the organisation. All our internal audit reports are referred immediately on completion to the Comptroller and Auditor General.
Like any organisation in the public or private sector, FÁS is not a perfect organisation. The vast majority of FÁS staff are decent hard working people doing their best to serve our clients any way we can. We have systems in place, which I believe are as good as those of any organisation, to identify weaknesses and to rectify them.
I welcome the fact that the Comptroller and Auditor General is going to look at our internal processes. I can assure the committee that any proposals that come from the Comptroller and Auditor General to improve our processes or procedures will be fully implemented. Our internal audit function is as vigorous as it should be in an organisation with an annual budget of €1 billion performing an important function in the economy. It is a tough watchdog. It bites from time to time but that is precisely what we want it to do. I would be more concerned if our internal audit did not identify weaknesses in our systems.
The importance of an agency working to train and upskill individuals and enterprise in general is particularly obvious at this time of economic uncertainty where unemployment is rising again. I would hope that today's meeting and the Comptroller and Auditor General's involvement will end the constant stream of negative commentary on FÁS. As the committee may know I already spoke and answered questions on this issue before the Joint Committee on Enterprise and Employment in July, so in this opening statement I will seek to keep repetition to a minimum.
I wish to outline the circumstances surrounding our internal audit report which led to the references to FÁS in Special Report No. 10 of the Comptroller and Auditor General's report. In late September 2004, the office of the then Minister for Enterprise, Trade and Employment, Deputy Harney, received an anonymous letter which made various allegations of a criminal nature. This letter was ultimately passed to me. I then directed our internal auditors to conduct an investigation into these allegations and to submit a report. In doing so, I had the following priorities: I needed a full investigation of the allegations; I had to ensure these allegations were investigated in a timely manner; and I had to ensure that no individual was deprived of his or her right to natural justice.
The audit I ordered was very extensive, covering the period from 2000 to 2004, and it began in November 2004. Due to the seriousness of the allegations, the investigation was conducted by the head of internal audit and an audit manager, who initially investigated the list of allegations of criminal behaviour made in the anonymous letter. The audit found no evidence to substantiate any of those criminal allegations.
However, in the process of investigation, the auditors found possible breaches of procedure which warranted further investigation, so we asked the auditors to conduct that investigation. In June 2005, during the course of the audit, we passed certain information to the Garda for investigation which is still ongoing. The audit was completed in December 2005 and a draft report was issued to the assistant director general, corporate services, and me in January 2006. As a result of a legal issue raised by the assistant director general, FÁS was advised that individuals named in the report, both internally and externally, should be given an opportunity to comment on sections relevant to them. This process of consultation lasted until May 2006 and a final report was then issued.
In dealing with these allegations and deciding whether disciplinary action was warranted, we were conscious of the need to afford due process to the individual at the centre of the matter and to proceed in a legally correct manner. We underwent a number of internal procedures to ensure the matter was handled correctly. If we had not followed the correct procedure, we might have faced legal challenges. Following the receipt of legal and audit advice and after observing the usual internal procedures of presenting the report to the appropriate people, the final report was issued to the Comptroller and Auditor General in February 2007.
At that time, I directed the human resources director to conduct a disciplinary investigation into matters arising from the audit report. This investigation began in February 2007 and was completed in June 2007. Disciplinary action was taken against the individual involved. In accordance with normal practice, we cannot divulge the details of the disciplinary action.
The internal audit report deals with issues pertaining to the relationship between FÁS and various outside contractors. Once we became aware of the issues, we began to change management procedures around the operation of the procurement process within the organisation. We have implemented most of the recommendations of the internal audit report and those which we have not implemented are under active consideration. This has involved various management changes. All the units of the organisation have been instructed to follow best procurement procedures at all times and new financial controls have been developed.
In summary, FÁS management instigated an internal investigation as soon as these allegations were brought to our attention. We passed information to the Garda as it became available to us. We took disciplinary action against the individual at the centre of the issue and none of the contractors covered in this report currently has a contractual relationship with FÁS.
We have many internal audit reports, and these have given us valuable recommendations on how to improve how we operate. No doubt these internal audit reports, or indeed the internal audit reports of any large private or public sector organisation, could provide news stories for many months to come. To publish the internal reports of any organisation in this way would be to give a distorted impression of reality. It would also disrupt the smooth operation of companies and agencies who would have to divert substantial senior management resources to explaining the meaning and context of a whole series of matters.
There has been some comment recently suggesting that there is something odd about the fact that FÁS spends considerable sums on marketing services including media, public relations and advertising services. This is to fundamentally misunderstand what it is that this organisation does. All of our services can only succeed if they are promoted and marketed effectively and it is right that we have a substantial spend in this area.
As FÁS prepares for one of the most challenging periods for many years, I have heard commentators making comments such as: "Nobody knows what FÁS spends its €1 billion budget on". Let me enlighten these people. In 2007 we spent €216 million on training for employment. During that year just over 50,000 people who had reached three months on the live register were referred to us. By the end of the year 63% had left the live register. In addition, 20,300 people who were unemployed or seeking jobs underwent training programmes. This included 1,790 early school leavers who completed training in community training centres, 2,792 people from disadvantaged backgrounds who completed local training initiative programmes and 1,503 people with disabilities who received specialist training provider vocational training.
Another major aspect of our work was community employment. We spent €358 million on community employment schemes last year, the majority of which was accounted for by participants' wages. There were 24,500 participants on such employment programmes at the end of 2007, including 2,200 people with disabilities. We spent €129 million on the apprenticeship system, a core element of our strategy of equipping people with skills relevant to the labour market. A total of 17,919 people completed the three off-the-job phases of apprenticeship during 2007.
In addition to helping train the unemployed and apprentices, we also assist existing employees to upskill. The major element of employee training in 2007 was the competency development programme which trained more than 45,000 people. In addition, more than 2,000 employees with low skills participated in the workplace basic education programme. We initiated training programmes aimed specifically at small and medium enterprise management development and also developed in conjunction with strategic partners initiatives targeting persons with low skills or low qualifications.
Last year we also provided a major job matching service through our employment services and our website. A total of 142,000 vacancies were notified to us and about half of those were filled by candidates referred by FÁS.
We held two major careers fairs during the year — the annual Opportunities Exhibition in Croke Park where nearly 130 organisations exhibited, and the FÁS Jobs Ireland Munster Careers Exhibition in Cork.
To meet the growing demand for skilled workers in the pharmaceuticals sector, last year we opened a new centre of excellence training facility at Carrigaline, County Cork. That will provide practical skills training to process operators-technicians in the bio-pharmaceutical and pharmaceutical sector.
That is a brief outline of our activities and where our budget goes. Overheads comprised a very small proportion of our budget — just 4.6%. Fifty six per cent of our expenditure, or nearly €600 million, was for training allowances and payments to FÁS participants. A substantial proportion of that money is, in effect, a substitute for social welfare payments.
All of this information is available in our annual report and therefore I do not understand the commentary from some who said recently they do not know where our budget goes. What I do understand is that some of those who claim not to know where our budget goes have another agenda, which is to say there is no need for FÁS in the first place. Rather than hide behind the baseless claim that they do not know how we spend our budget, they should come out and clearly make their real case.
I am happy to debate the need for FÁS and for any of its individual programmes. Virtually all our programmes have been evaluated at one time or another by the European Union, Departments, the Economic and Social Research Institute, the Organisation for Economic Co-operation and Development and various consultants and all have come to largely positive conclusions.
As FÁS looks to play its role in dealing with the difficult economic circumstances, I hope we now can be allowed to do that. Our internal audit systems will continue to work to improve what we do. We have 2,200 employees who are all doing a good job throughout this country, often in difficult circumstances. I look forward to a full discussion of our report and accounts, and to a report from the Comptroller and Auditor General in due course.
