I propose to describe the role of the Department of Enterprise, Trade and Employment in monitoring and overseeing the activities of FÁS. The Department carries out this role through two main mechanisms. First, it does so through a series of oversight arrangements which have been put in place to ensure moneys are spent in accordance with the purposes for which they were allocated and that value for money is achieved. The second mechanism is based on a reliance on agency compliance with the code of practice for the governance of State bodies.
The Department seeks to ensure moneys are expended according to the purposes for which they were allocated through an intensive system of monitoring FÁS activities. The budget for FÁS is agreed on the basis of detailed discussions between it, the Department of Enterprise, Trade and Employment and the Department of Finance in the context of the annual Estimates process. FÁS expenditure is monitored by my Department on a weekly and monthly basis in the context of the draw-down of funds from the Department. FÁS programme activity is monitored on a monthly basis. FÁS's draft annual accounts are examined by the Department in the context of publication of the FÁS annual report. The Department also monitors FÁS annual programme activity in the context of the annual output statement which the Minister presents to the Select Committee on Enterprise, Trade and Employment in the context of the annual Estimates process. Meetings are held with senior departmental and senior FÁS staff, normally on a monthly basis and sometimes more frequently, to deal with issues as they arise. The departmental member of the FÁS board attends its monthly meetings and participates in the strategy, upskilling and remuneration sub-committees of the board. We also make a significant input into the development of the FÁS statement of strategy.
This supervision and monitoring of FÁS and other semi-State bodies is, of necessity, at a fairly high level and reflects the fact that, under Department of Finance guidelines, the board and particularly the chief executive officer are responsible for the day-to-day running of the organisation, preparing accounts and responding to the Committee of Public Accounts and others in that regard. It would not be feasible for the Department to involve itself directly in the detailed financial and other day-to-day activities of a large organisation such as FÁS which has an annual budget of more than €1billion and a staff of more than 2,000. That is why, in addition to the Department's monitoring of activities, the second mechanism for ensuring the requirements of the code of practice for the governance of State bodies are adhered to is so important.
To this end, the Department ensures that this is achieved through the assurances in the FÁS annual report each year, confirming that steps have been taken to ensure an appropriate control environment. This is in line with the Department of Finance guidelines which require that Accounting Officers should satisfy themselves that the requirements of the code of practice for the governance of State bodies are being implemented in State bodies under their aegis.
Since the code of practice was issued, it has in fact been confirmed by FÁS each year over the period 2002-07, with the exception of 2006, that steps were taken to ensure an appropriate control environment. It also stated that the audit committee on behalf of the board conducted a review of the effectiveness of the system of internal financial controls and that no weaknesses were found in the system which resulted in any material loss, contingencies or uncertainties being disclosed in the financial statements or the auditor's report on the financial statements. It was not until the 2006 statement on internal financial control, which was dated 27 June 2007, that it was noted that internal audit had pointed to some weaknesses in procurement and that the board had taken steps to address them.
As regards the issues covered in the Comptroller and Auditor General's report on advertising and promotion, the Department was not aware of the full details of the management and promotion spending within FÁS, much of which was contained in more general programme budgets. Specifically the substance of Internal Audit Report 137 was not made known to the Department directly before May 2008.
When the Department did discover what had happened it responded quite specifically. I wrote to the director general of FÁS on 30 June 2008 seeking formal assurances from him that the practices outlined in the FÁS internal and Comptroller and Auditor General audit reports had ceased and that adequate systems and controls were in place to prevent any recurrence; and requesting details of the remedial actions taken by FÁS in respect of the issues raised by the audit reports, with progress reports on the implementation of the audit reports' recommendations. The director general replied on 1 July 2008 confirming that the unacceptable practices referred to in the audit reports had ceased and that adequate systems and controls were now in place to prevent any recurrence. Since then, the Department has been monitoring this on a regular basis. In addition, the Department has insisted on the FÁS advertising and promotion budget being reduced significantly. The budget for 2009 is €1.6 million. This compares to an outturn of €6.3 million in 2008. The Department also chaired an internal review committee that examined the Science Challenge programme and the Tánaiste and Minister for Enterprise, Trade and Employment agreed with its findings that Science Challenge did not represent best value for money and should be closed down and this is now under way.
Since June 2009, the Department has been preparing legislation to amend the Labour Services Act 1987 to provide for a new board structure for FÁS. This legislation will be published in the next few weeks.
In this short statement I have set out the role of the Department in the oversight of FÁS as a semi-State agency under its aegis. I have also outlined the responses of the Department to the issues raised to date. I will be happy to respond to any questions the committee may have.