COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 18 Feb 2010

Special Report No. 73 of the Comptroller and Auditor General: Internal Control and Governance in FÁS.

Mr. Paul O'Toole(Director General, FÁS) called and examined.

Chairman

This meeting is to consider Special Report No. 66 of the Comptroller and Auditor General on advertising and promotion in FÁS and Special Report No. 73 of the Comptroller and Auditor General on internal control and governance in FÁS. We have been examining issues related to FÁS since September 2008. Many issues, such as breaches of procurement rules, poor value in advertising and foreign travel, arose in head office under the direct supervision of Mr. Molloy, the former director general of FÁS. We will be looking for evidence today that the new director general is putting the house in order.

We are aware that a further 22 internal audits into activities in the corporate affairs area were completed late last year. We are not in a position to deal with those at today's meetings as the findings contained in these reports are a matter for FÁS management at present. That said, the committee does not want these further investigations to drag on unduly. The committee has before it a review into the CDP area which highlights serious weaknesses in the way one of the FÁS core programmes was run.

As a committee we need to get assurances for the taxpayer that what has been highlighted in respect of the CDP programme was not and is not replicated across other programmes. There was €140 million of taxpayers' money involved in those programmes. There was a lot of publicity about travel and subsistence, etc., which was quite rightly highlighted, but that was small fry compared with what was involved in the CDP area. We need assurances on that.

The committee has respected the view of FÁS that the internal audits cannot be made available to the committee in an uncensored manner. I have possession of redacted versions that were made available to third parties by way of freedom of information requests. Having said that, we respect what FÁS is doing but we are concerned that the investigation should not drag on indefinitely. We will demand copies of the 22 internal audits if it goes on for too long. We do not want explanations that matters are under investigation to be a barrier to our getting at the facts and the truth.

I am putting FÁS and the Department of Enterprise, Trade and Employment on notice that we will be looking broadly at all FÁS programmes later in the year, at which time I expect that the fallout from the ongoing investigations and arising from the 22 internal audits will be dealt with. We will also be looking for full publication of all the audit reports.

The committee received a letter from a Mr. Corcoran who is a senior official within FÁS. We are publishing that letter today as we received it. Mr. Corcoran was the former head of internal auditing at FÁS. The letter, among other issues raised, makes for disturbing reading as it outlines how an internal audit investigation was interfered with by senior management while it was ongoing. The executive head of a semi-State body with a budget of €1 billion was effectively able to face down a sub-committee of a board of the organisation and delay an internal audit report from being referred to the board and the Comptroller and Auditor General. These are issues that need to be addressed by FÁS and the Department of Enterprise, Trade and Employment, as the example cited in the letter points to flagrant breaches of corporate governance. We will be seeking a definitive response from the Department and FÁS on the substantive issues raised by Mr. Corcoran. We will want to know whether there is a code of practice in FÁS related to these issues. We would like to get a copy of it if it exists. I am sure Mr. O'Toole is aware of the letter of Mr. Corcoran. I would like his opinion on whether he believes there was a breach of codes of practice in this case.

I draw everyone's attention to the fact that while members of the committee enjoy absolute privilege, the same privilege does not apply to witnesses appearing before the committee. The committee cannot guarantee any level of privilege to witnesses appearing before it. I further remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government, or a Minister of the Government, or the merits of the objectives of such policies.

I welcome Mr. Seán Gorman, Secretary General of the Department of Enterprise, Trade and Employment, and ask him to introduce his officials.

Mr. Seán Gorman

I am accompanied by Mr. Dermot Mulligan, assistant secretary, labour force development division, and Mr. Padraig Ó Conaill, principal officer in the labour force development division.

Chairman

I welcome Mr. O'Toole, director general of FÁS.

Mr. Paul O’Toole

In advance of introducing the team, I must state my new chairman, Mr. Dempsey, asked me to apologise for his not being able to attend this morning. He did wish to do so to represent the new board but a minor medical procedure, which was carried out earlier this week, prevented it.

I am accompanied by Mr. Denis Rowan, assistant director general in FÁS dealing with training, Mr. Con Shanahan, director of finance, Mr. Patrick Kivlehan, director of internal audit, and Mr. Martin Lynch, assistant director general dealing with employment services, community, and business.

Chairman

I ask the representatives of the Department of Finance to introduce themselves.

Ms Grainne McGuckin

I am Grainne McGuckin, principal officer in the sectoral policy division.

Mr. Tom Clarke

I am Tom Clarke from the pay and remuneration division.

Mr. Tony Jordan

I am Tony Jordan from the pensions section.

Chairman

I ask Mr. Buckley to introduce his report.

Mr. John Buckley

The report which is before the committee today is the third in a set of special reports on FÁS. This report deals with FÁS's control over its head office expenditure and business expenses, how the organisation was governed and arrangements for performance management and reporting compliance.

The report has a large number of specific findings and recommendations, of which I will mention a few. They include the need to revamp FÁS's risk management system, which has not operated as envisaged since its adoption in 2005; the need to review the design and operation of the system of internal control so that it both controls transactions processed and contributes to organisational effectiveness; the need to ensure that control functions are fully effective and that breaches are reported; the desirability of making the annual review of the operation of internal control more evidence-based through declarations from key managers on compliance with requirements of the Code of Practice for the Governance of State Bodies; and the need to improve the quality of financial information presented to the board in conducting budget reviews in the course of the year.

Our conclusion was that performance reporting would be more useful to the board if there were clear distinctions between operational targets, change management actions and stakeholder satisfaction indicators. Reference must also be made to the need to improve the monitoring of training provided by external providers and capturing results in terms of certification as well as participation.

With external training, the examination found that in the management of the competency development programme only approximately half of the courses in the regional stream had been monitored. While programme objectives were set out and indicators established in business plans, these were not tracked on an ongoing basis. Achievement of the main goals of the programme has not been evaluated to date.

Overall, the rapid expansion of this programme placed strain on the system which was manifested in shortcomings in procurement, management information systems, monitoring and evaluation. In foreign travel, the examination found that one-third of all flights paid for in the period reviewed were not booked through the designated travel officer or the external agent appointed by FÁS.

In the interests of completeness, the report also examines the audit arrangements relating to FÁS and reports recent adjustments made by internal audit and by my office to audit approaches. It is worth recalling that external audit by my office is an independent review of the discharge by State bodies of their accountability. Their primary accounting responsibility is to produce fair and accurate accounts.

Ultimately, fair and accurate accounting can only be built upon probity in doing business, regularity in applying moneys for the intended purpose and systematic processing so that moneys voted are managed in a safe and secure way.

As part of that systematic processing, a system of checks and balances appropriate to its business should be put in place by each State body. At the pinnacle of such a system is internal audit, which can be thought of as a function that reports on programme administration to both management and governors. It is, in effect, the review or feedback element in the internal control system. It operates under the general superintendence of the audit committee which in FÁS consisted of three board members.

In this context, especially in the light of recent media comment, it is important to point out that accountability for financial management and performance rests at all times with the audited organisation — in this case FÁS. Audit by my office is primarily focused on reporting independently to Dáil Éireann on whether financial statements are materially accurate. Where major risks are identified or materialise, a more in-depth examination is carried out and reported in special reports.

There have been repeated reports in the media that my office said the controls in FÁS were excellent. No such assurance was or could ever be given. In its dealings with State bodies and audit committees my office has always been explicit about the purpose and scope of audit work and the level of assurance that can be taken from it. My office takes special care to point out the limits of our review of internal controls in three particular ways, namely through the audit certificate attached to each set of accounts, in a preamble to each management letter and in a written introduction to discussions at any audit committee.

Specifically, the audit report draws attention to the fact that I and external auditors, either in the public or private sector, are not required to form an opinion on the risk and control procedures. The post-audit management letter explains that my office obtains an understanding of and examines many aspects of the business and financial processes but that the audit cannot be expected to identify all weaknesses and irregularities that may exist.

However, where we find them in the course of audit we point them out. At the audit committee meetings we explain that internal controls are examined to determine audit procedures for expressing an opinion on the financial statements and that we can only confirm that we have not identified material weaknesses in internal control within that limited context.

Consequently, I reject the assertion that has been printed and broadcast several times that I or my office gave assurance that the controls in FÁS were excellent. On the contrary, we have always tried to ensure audited bodies do not take more comfort than is warranted from a clear audit opinion.

All Comptroller and Auditor General examinations are conducted independently and take account of information, explanations and representations from State bodies. This includes their internal audit work. The key consideration in reporting matters that come to audit attention is not the source of the information but rather the judgment following evaluation on whether the matters merit reporting to Dáil Éireann. In the case of the matters set out in the special reports, I considered that they did.

I cannot, therefore, accept any suggestion that because a matter has already been the subject of an internal audit report, it should automatically mean that it does not warrant a report to Dáil Éireann in the interests of public accountability.

I stress that in our public accountability system my primary role is to audit the accounts of State bodies in the interests of the State. It is the role of internal audit under the general superintendence of the audit committee to provide assurance to the governing authority about the effectiveness of the internal control system.

Reverting to the report under consideration, I acknowledge the changes FÁS has put in train to date to address the shortcomings that came to light and the steps it is taking to deal with any remaining issues. The chief executive will no doubt outline these in detail.

Chairman

Will Mr. Gorman make his opening statement?

Mr. Seán Gorman

I will make several comments from the Department's perspective on the areas covered by the Comptroller and Auditor General's report on internal control and governance in FÁS, focusing particularly on governance and internal controls, departmental supervision and the competency development programme. I will also update the committee on the position of the severance package granted to the former director general of FÁS.

The Department has in the recent past made several significant changes in FÁS's governance and internal control arrangements. These changes were made through the Labour Services (Amendment) Act 2009 which implemented many of the recommendations in the committee's fourth interim report, published in February 2009.

Specifically, the 2009 Act made changes to the structure, size and composition of the board. On foot of this a new board was announced in January this year. The legislation provides for the removal of any barrier to a FÁS board director reporting issues to the Minister for Enterprise, Trade and Employment. It makes the FÁS director general clearly accountable to the Oireachtas, including this and other Oireachtas committees. It requires the disclosure of conflicts of interests by FÁS directors and staff and prohibits their involvement in matters where such conflict exists. Importantly, it protects whistle-blowing FÁS staff members who report serious wrongdoing in the organisation. Taken together, these changes have significantly strengthened governance and accountability in FÁS.

At the departmental level of oversight of FÁS activities, the Secretary General and Accounting Officer must be satisfied the requirements of the code of practice for the governance of State bodies is being implemented. Since 2002, apart from 2006, FÁS has confirmed that steps were taken to ensure an adequate control environment. A review of internal financial controls found no weaknesses in the system. In 2006, FÁS stated its internal audit had found some procurement weaknesses but that the board had taken steps to address them.

The Department has quickly followed up any issues that have been brought to its attention by reports of this committee, the Comptroller and Auditor General or the FÁS internal audit unit. In particular, the Department has sought to ensure that adequate systems and controls are in place in FÁS to prevent any recurrence of the activities which the committee has been reviewing. New procedures have been established in FÁS for reporting significant control failures and ensuring appropriate corrective action is taken. The Department has closely monitored the remedial actions taken by FÁS in respect of issues raised by requiring regular progress reports on the implementation of the audit reports' recommendations.

However, departmental oversight of FÁS does not solely rely on meeting the requirements of the code of practice. The Department also has a series of oversight arrangements to ensure moneys are spent in accordance with the purposes for which they were allocated and that value for money is achieved. We have enhanced these arrangements since the beginning of the period covered by the report. For example, in line with other public service organisations and the requirement since 2007 of laying output statements for Departments before the Oireachtas, we have been putting much greater emphasis in recent years on outputs, performance indicators and value for money. We have continued to refine and develop this approach to the point where, in 2010 — without micro-managing day-to-day activities, which are matters for the director general and the board — FÁS is being given specific targets for each of its programmes. These targets relate to matters such as the budget for each programme, the type of participants who should get priority access to its programmes and how this will be operationalised, the target numbers of participants on each programme and the level of certified training they will receive, and the target number of participants who will progress to employment or education and training after programme participation.

We have ensured liaison meetings between the Department and FÁS management take place more frequently, normally monthly, and sometimes more frequently than that. These meetings review programme implementation in the organisation and cover how it is meeting its financial programme and output targets. The Department regularly reviews FÁS programmes in terms of their effectiveness and value for money. Examples of such reviews include the competency development programme which I will refer to in more detail later. Taken together, these new arrangements represent a significant level of enhanced departmental oversight of FÁS programmes, supported not least by the new legislation enacted by the Oireachtas.

I would like to update the committee on the severance arrangements for the former director general. Members will recall that last November the Tánaiste ordered a review of these severance arrangements in light of the reported statements regarding the deliberate withholding of information from the board of FÁS. The review was conducted by my Department in conjunction with the Office of the Attorney General. Key components included a series of audits completed by the FÁS internal audit unit into the activities of the corporate affairs division and the findings of the Comptroller and Auditor General's report on internal control and governance. This review is now complete and advice has been received from the Office of the Attorney General on the matter to the effect that, on the basis of the information available, there is no legal basis to set aside the terms of the severance arrangements with the former director general.

I would now like to make some comments on the competency development programme, CDP. The CDP has a sound policy basis as the main FÁS response to the strategic imperative of upskilling Ireland's workforce. This imperative was identified as a key issue in the 2004 enterprise strategy group report entitled Ahead of the Curve. The report argued that skills, education and training were a key component to the economy building a strong competitive advantage in world markets and formulated the concept that the workforce needed to make a "one step up" improvement in terms of its skills and education levels.

The need to upskill the Irish workforce had been previously strongly advanced by the European employment strategy and it was given more detailed expression in Ireland in the 2007 report entitled Towards a National Skills Strategy, published by the expert group on future skills needs in 2007. The national skills strategy identified the need to upskill more than 500,000 people by one level on the national framework of qualifications over the period to 2020. It also recognised that most of these people were already in employment. It was necessary therefore to implement programmes which would focus on the upskilling of those already in employment. The CDP trained a total of 123,000 people in employment over the period 2004 to 2008.

In addition to being included in the overall departmental oversight of programmes referred to earlier, which now includes specific performance indicators regarding budget and the numbers and profiles of those to be trained, the Department has played an active role in the FÁS board sub-committee which had an oversight role in the implementation of the CDP. This sub-committee met a number of times each year and gave general direction to the focus of the CDP, emphasising the need to focus on the low-skilled who would not otherwise receive training and, without micro-managing the detail of particular contracts, regularly reviewing budget and programme outputs.

I would now like to update the committee on the Department's value for money review of the CDP. Members will recall that in July 2009 the chairman to the steering committee for this review resigned his position. Since then, the Department has appointed a former official of the Department of Finance, Mr. Pat McBride, as chairman of the steering committee. Mr. McBride had been on a panel of possible independent chairpersons for such reviews, maintained by the central expenditure evaluation unit of the Department of Finance. Since his appointment last October, the new chairman has participated in two meetings of the steering committee and it is anticipated that its report will be completed in the coming weeks.

I have given the committee the Department's perspective on the areas covered by the Comptroller and Auditor General's report on internal control and governance in FÁS. My comments have covered governance and internal controls in particular, as well as departmental supervision and the competency development programme. I shall be happy to answer any questions the committee may have.

Chairman

May we publish Mr. Gorman's statement?

Mr. Seán Gorman

Yes, indeed.

Chairman

Does Mr. O'Toole wish to make an opening statement?

Mr. Paul O’Toole

The new board of FÁS, which was appointed following the enactment of the Labour Services Amendment Act 2009, held its first meeting last week on 9 February. At this meeting, the board immediately declared its intention to operate to the highest standards of probity and good governance. It also stated its intent that the training, employment and other services provided by FÁS will be developed and implemented to ensure they are high quality, market relevant and valuable to our learners and other clients. With specific reference to the report of the Comptroller and Auditor General on internal controls and governance in FÁS, it decided to extend the remit of the audit committee to include risk management. It will also put in place a new finance committee which will monitor the allocation and progress of income and expenditure.

The recommendations of earlier reports have been implemented or are in the process of being so. The other recommendations contained in the most recent report of the Comptroller and Auditor General are being actively evaluated and we believe that, in the main, they can be incorporated in our future processes. Again, with specific reference to this report and as previously indicated by me, we will carry out a detailed review of our systems and processes to ensure they are appropriate for our organisation in the future.

I emphasise these points to demonstrate to the committee that the board, senior management and all colleagues in FÁS are serious and committed to ensure we deliver our services in an exemplary fashion, giving real value for the taxpayers' investment, and can demonstrate this through our stewardship. In addition to the measures referred to, the outgoing board put in place a new measure whereby each manager with budget responsibility, up to and including myself, will submit twice yearly certificates of compliance with procurement procedures.

We are in the process of recruiting a new assistant director general for finance and information and communications technology. The incumbent, in conjunction with myself, will take responsibility for the development and implementation of our finance, procurement and technology functions. This work will be subject to the oversight of the board and its committees.

The Comptroller and Auditor General has divided his findings on our internal control and governance into four main chapters. We believe that most of the underlying practices behind many of his findings have already been eradicated in terms of head office expenditure and business expenses. We are, however, examining these findings closely to ensure this is the case and that if further system improvements are required, they are put in place. We are also examining carefully the findings and recommendation in respect of governance, performance management and compliance. Again, we believe that most if not all the recommendations made by the Comptroller and Auditor General can be incorporated into our future processes.

This has been a long and difficult period for FÁS the organisation and its team of people. We acknowledge that legitimate but challenging questions have been raised, internally and externally, to which we have endeavoured to respond to the best of our ability. The consequence of the various reviews has been the requirement to identify and progress a process of significant change within the organisation. In doing so, we are seeking to retain and enhance the strong tradition of service to our learners and other clients which is a hallmark of FÁS and its people. Therefore, our change programme is being directed to the following: governance, stewardship and procurement; systems and processes; our training and employment products and services; and a culture of excellence, underpinned by transparency. This work is under way in many respects, but we have more to do. We will continue our change process in conjunction with our new board and with our staff. While it is impossible to guarantee that nothing can ever go wrong in the future, we can significantly reduce the risk of repeating past mistakes and we are committed to doing so.

Finally, I would like to assure the committee that FÁS has worked hard to ensure that our services have continued apace, while the various reviews of our activities have been under way. In particular, the organisation has significantly increased its supports for those unemployed and seeking guidance and training interventions. In 2009, despite the impact of the many difficulties which we faced, over 80,000 people completed FÁS-operated or funded training courses, while there were 18,000 learners still in training at year end. Almost 37,000 participated in employment programmes. Guidance capacity was put in place for 120,000 unemployed people referred under the employment action programme, 102,000 interviews were scheduled and over 70% of those referred attended their interviews. Many thousands of others benefitted from our services, including access to the 55,000 job vacancies which were notified to us in 2009.

While the issues that went wrong in FÁS were significant and should not have happened, they relate to a small minority of our staff. FÁS has a tradition of caring for its clients. This will continue and will be reinforced through improved systems, a focus on quality and a clear understanding of our obligations to the taxpayers who fund our activities.

Chairman

May we publish your statement?

Mr. Paul O’Toole

Yes.

Chairman

In order to manage our business efficiently, we in the committee decided yesterday to divide the questioning into four areas to be handled by three people. Deputy O'Brien will deal with control of head office expenditure and business expenses, governance will be dealt with by Deputy McCormack, and performance management and compliance will be examined by Deputy Shortall.

At the outset, I said that the competency development programme involved €140 million of taxpayers' money, but in fact I should have stated €126 million. Mr. Gorman's statement referred to the fact that the chairman of the review resigned last year. He resigned because he was unhappy about the pace of progress by that review. We expressed a concern at the time that we should have possession of the review as quickly as possible. The Department appointed Mr. Pat McBride, but I find it hard to believe that the review group only met twice since the appointment last October. This does not show any real urgency in dealing with an issue that we are here today to address. An excuse was given at the time that the Department was awaiting a report from the Comptroller and Auditor General, but the Comptroller and Auditor General fast-tracked that portion of the report in order to facilitate the Department. I find it unacceptable that the review group has only met twice since the new man was appointed.

Mr. Seán Gorman

When we discussed the report at this committee before, I shared your concern to have it wrapped up. However, I got a clear message that there were some concerns that the people who were dealing with the report were internal people in the Department who had been dealing with the FÁS brief and who were connected with the work of FÁS from a departmental point of view. When I reflected on the discussion we had here, I decided that it would be prudent and advisable to bring a third party in to complete this work who had no direct connection with the Department or with the work of the division, or who had no direct reporting responsibility to anybody who was connected with the FÁS brief in the Department.

We consulted with our colleagues in the Department of Finance to see if there was an option available, and it was suggested we use somebody from this panel of experts. We appointed Mr. McBride as quickly as we could. He took up his role and it is a fact that there were two meetings. Much other work has gone on behind the scenes. The report has not been wrapped up partially because he had some personal commitments. He is a retired officer of the Department of Finance and is not a full-time worker. He has assured us that this work is about to be wrapped up. It is disappointing that it is not finished, but significant progress has been made. Picking up a very strong message here, I felt that it would be better if we brought in somebody who would be absolutely unconnected with us, with FÁS or the brief, or with the expenditure of that money. Mr. McBride has had to read up on this and get the background, and it has taken longer that I would have hoped, which is regrettable. However, I am satisfied that through his involvement, it will clear up any concerns that the committee might have had about the review being too close to the Department.

Chairman

If that is your explanation, I do not accept it. This committee is sitting today to deal with the issue, yet we still do not have the review. You may have your problems and Mr. McBride may have his problems, but we also have our problems in getting at the truth. We cannot make judgments while the Department is dithering. We are always one step away from taking action. We are held up by internal audits because we cannot get them for understandable reasons. However, I do not understand the long delay here, and I wish the Department had its act together and dealt with this. We are talking about €126 million of taxpayers' money. The committee has serious concerns and we are being hampered by the inaction and ineptitude of the Department. I do not accept your explanation whatsoever.

Deputy Darragh O’Brien

I welcome the representatives from FÁS, the Department of Enterprise, Trade and Employment and from the Department of Finance. As the Chairman pointed out, I will cover two areas, namely, head office expenditure and business expenses. Before I do, I must admit that I am extremely disappointed with the view taken in Mr. O'Gorman's opening statement about the severance package for the former director general. I know it has been taken in light of advice from the Attorney General, which is as good as can be got. However, it is remiss of everybody that we did not seek proper legal advice before the package was agreed and signed off. I am still of the view that the package given to the former director general was outside the terms of existing legislation. It has caused much anger among the public, which is absolutely understandable, but my main concern with all this is that everything was done after the event. We had a representative from the pensions section of the public service — I think it was a Mr. Connolly — and I was not happy with any of the evidence given during the negotiations with FÁS and the Department, or with the advice given to the Tánaiste and the Minister for Finance.

We must get to a stage where we move on. I welcome many aspects of Mr. O'Gorman's opening statement, such as the speed in which the Department has implemented the recommendations of this committee. It is important that we can effect the required change. With the Labour Services (Amendment) Act 2009 now in place, it is good to see that the vast bulk of those recommendations have been implemented. However, I am still not happy with Mr. Molloy's severance package. I hope that in future, every State agency and Department would look at the experience gained from this event and think twice before they sign off on any severance package for senior staff. I will leave it at that.

I will now turn to a couple of other items. I was very pleased to see in the opening statement the measures FÁS has taken in regard to a new finance committee being put in place to monitor the allocation in progress of income and expenditure. Will Mr. O'Toole explain how this will interact with the finance unit and the procurement unit within FÁS? I will then have further questions in this regard.

Mr. Paul O’Toole

This was resolved last week. I am in constant engagement with our chairman and the board will meet again in March, by which time we will aim to have the two committees put in place, namely, the audit and risk governance and finance committees.

We will prepare detailed terms of reference for submission to the board for its approval. What is envisaged is that we will prepare annual budgets in line with the direction from the Department. We will then, at least four times a year, review progress on those budgets in terms of income and expenditure. Where matters change within a year, there will be formal recognition, formal submission and formal approval.

One of the issues raised by the Comptroller and Auditor General in his reports is that there was perhaps a lack of sufficient thinking given to budgets. Budgets were set, everything rolled on and they were then reviewed at a later stage. The first change would be a greater frequency at board level in scrutinising the accounts and income and expenditure. Another measure we intend to put in place will be the requirement for more detailed reports to the committee and the board, as required, which will not just list expenditure against budget for the programmes but will highlight significant variances. We have begun this process and more detail is now provided on variances as they occur. This will be available to the finance committee for consideration in more depth on an ongoing basis, rather than perhaps once a year, as was the case.

Deputy Darragh O’Brien

How often does the finance committee meet?

Mr. Paul O’Toole

The finance committee has not determined that yet. I would envisage a minimum of four times a year, quarterly, and, at its discretion, it may meet more frequently.

As I indicated, we are appointing through a new recruitment process a new assistant director general of finance and ICT, and it will be that person's role to liaise with the finance committee, with me and with our senior management to ensure we are on top of, in a more detailed way than was perhaps the case before, variances as they occur, that we have a closer ongoing monitoring of our expenditure and that we are engaging with the board on that at a more detailed level.

Deputy Darragh O’Brien

It is good to hear that is happening. One would expect that in a matter of weeks the board would have——

Mr. Paul O’Toole

The board meets in March and at that stage we will have proposed terms of reference and, hopefully, we will have both of those committees at the March meeting.

Deputy Darragh O’Brien

In the area of procurement, to which the Comptroller and Auditor General referred in his report at some length and which was referred to in previous investigations, while procedures were in place, they were not followed in a number of instances. One aspect of this was the issuing of confirmation orders, which seemed to be prevalent after the event in the sense that, effectively, the finance unit and the procurement unit would seek a post hoc confirmation order after the process was complete. What is the stance on that at present and has this happened in the past year?

Mr. Paul O’Toole

The use of confirmation orders itself is a legitimate practice.

Deputy Darragh O’Brien

Yes, I know that.

Mr. Paul O’Toole

It is the misuse of them as a tidying up exercise for expenditures that should properly have been tendered in a different way that is the issue. Where we continue to use those conformation orders, they are subject to senior level approval before they can be confirmed. I invite my colleague, Mr. Con Shanahan, the director of finance, to provide more detail in this regard.

Mr. Con Shanahan

I will begin by giving an indication of the performance of the finance department as outlined by the Comptroller and Auditor General in his report. As part of their work in 2008 and to inform the special investigation or review, the Comptroller and Auditor General's auditors undertook a forensic examination of 100 transactions that arose in 2008. Of those 100 transactions, 99% were properly evidenced as to proof of delivery, proper recording and appropriateness to business, and were reported correctly in the books of account. The one transaction out of 100 that failed those tests is at present before the courts.

In regard to compliance, which was the concern raised by the Comptroller and Auditor General, it was acknowledged that the procedures and policies were adequate but there was an issue of compliance. A total of 98 of these transactions were forensically tested and 97, or 99%, were properly approved. Some 95% were correctly authorised but five transactions had some issues with authorisation, three of which were in corporate affairs. A total of 90 transactions, or 92%, were properly procured, but eight had some issues, of which four were in corporate affairs. That is the context in which I will respond to the Deputy's question on the details.

Appendix B highlights a list of procurement issues, of which there are 14 in all, 12 of which arose in the corporate affairs department. FÁS has acknowledged the shortcomings in regard to procurement. I am simply trying to paint a picture of the issues outside the corporate affairs department.

Deputy Darragh O’Brien

That is fully understood.

Mr. Con Shanahan

As the director general said, many confirmation orders are perfectly legitimate within any business, be it as a result of time delays in putting through a physical order urgently, or, for example, because an unexpected invoice might arise on a maintenance contract. The proper way to operate is to evidence the transaction with an order and, in those circumstances, a conformation order would be raised. In some cases where we have sole providers who would not be in competition with any other providers, a confirmation order would be raised.

Any order that does not impact on good procurement is acceptable but must be managed and controlled to make sure the numbers are acceptable overall. We would have issues if confirmation orders were confirming goods that had been approved without a proper procurement process.

Deputy Darragh O’Brien

Has that happened?

Mr. Con Shanahan

It happened in a very small number of cases, as I have outlined. In order to ensure it will not happen again, we now have a situation where, if confirmation orders are raised, they will be segregated from the normal confirmation orders and they will go one step up in terms of approval. In other words, if a manager raises a confirmation order because he or she has not gone through the process properly, irrespective of whether there was competition in the process, it will go up to the next level – to a director – for approval. There will be clear evidence so that auditors can see the scale of this but there also will be separate approval and separate governance of that area.

I would also note that in 2008, the period under review in this special exercise, there were 3,200 orders. I want to put the issue in that context.

Deputy Darragh O’Brien

I understand the context. I agree with Mr. Shanahan that the 2008 investigation carried out by the Comptroller and Auditor General met the requirements. However, that is just one year. In many instances before that, it did not happen. We can improve and then slip back, which is the context in which I am asking these questions.

There was a situation involving contracts worth €2.3 million where there was a failure in the tender process. Contracts worth a further €2 million should have gone to the board of FÁS for approval but did not. Other contracts to the value of more than €270,000 were awarded in breach of internal controls, as the person who signed for them did not actually have the authorisation to do so. There were also issues with invoices being split so that a person whose authorisation limit was lower could, through the accumulation of invoices, authorise the amount.

I understand that. I give credit for the fact that, in the majority of instances, proper confirmation occurred. In previous years, however, there were major losses to the Exchequer on projects that were not properly procured. While it is good that there was improvement in 2008, I want to make sure for 2009 and 2010 that FÁS can get on with the important job it must do. We must be satisfied the procedures are in place.

The area of procurement, while it is obvious in the current economic climate, is one that should always have been of particular importance in any State agency or Department. In FÁS, what are the qualifications and experience of the people heading up the procurement unit?

Mr. Con Shanahan

The head of the procurement unit in FÁS is a very professional individual who has a professional qualification in procurement. He has been in place only since late 2005 so we did not have his expertise until recent years. However, the reality is that, in the majority of cases, the procurement unit would have been bypassed. If that had not happened, the problems we have encountered probably would not have arisen. It cannot happen again for a variety of reasons, as I said. Anything that is inappropriate by way of procurement must be stepped up to the next level for approval. In addition, all the programmes that were referred to in respect of which there were procurement issues have been stood down. We have a new structure in place in terms of responsibilities and so on in order to ensure that can never happen again.

Chairman

Mr. Shanahan said that procurement was bypassed. However, was the procurement unit not obliged to authorise decisions made by the corporate affairs department? In effect, did it merely rubber stamp decisions by corporate affairs?

Mr. Con Shanahan

No, that would be unfair to say. The problem was that procurement was responsible for orders that were processed through that department. In general, where procurement arose as a result of a contract, as opposed to a purchase order, then other units tended to be responsible for procurement under that process. That can no longer happen because the Comptroller and Auditor General has recommended that we keep a central register of contracts outside of our orders, which are in themselves contracts. The register will ensure, where there is no order, that procurement rules are followed. Moreover, the register will now be subject to scrutiny by the procurement manager to ensure the same problems do not recur. That is essentially what happened. The procurement department was responsible for all the orders raised through it. Where there was a separate contract as opposed to an order, it tended not to go to procurement. That gap has now been closed.

Deputy Darragh O’Brien

Mr. Shanahan said the head of the procurement unit is qualified in the procurement area. Have all FÁS staff taken part in comprehensive training on the importance of following proper procedure when procuring goods and services?

Mr. Con Shanahan

Over a period of four months, throughout the summer and into the early autumn, all management staff and all staff involved in procurement took part in an intensive one-day training programme. Participants were given all necessary materials and documentation to which they can refer for future use. As members heard from the director general, all staff with any involvement in procurement are obliged to sign on twice a year to evidence the fact that they have complied with procurement procedures.

Deputy Darragh O’Brien

Does FÁS have many roll-over contracts and contracts that have not been put out to tender? I understand this is common practice for many agencies and that there may be valid reasons for it. In what way is FÁS seeking to derive value for money from the goods and services it is getting? How many contracts are due to be tendered and how many are roll-over contracts?

Mr. Con Shanahan

Much of the work of the procurement department is of a strategic nature, the objective being to put as many contracts as possible under a framework arrangement whereby the regions can call off goods and services as required. In recent months we have brought a large number of framework agreements to the board for approval. This will ensure we get value for money because we will have greater economies of scale in terms of the volume of goods we are purchasing.

Deputy Darragh O’Brien

Are contracts procured on a regional basis?

Mr. Con Shanahan

We advertise central contracts through the e-tenders website or the European Union's tenders website, depending on the amount of money involved. We are centralising and automating that process so that users can draw from it as and when they require goods. Through a series of strategic procurement processes, we will put in place contracts that will cover for one, two or three years, for example, the price of goods and services that the particular procurement staff can use when they are buying over that period. It is a strategic approach to procurement so that everybody is not approaching the purchase of one piece of equipment or one service individually. There is a framework agreement whereby the amount of work that is involved over a two to three-year period is estimated and applications are invited to bid for that project or items of equipment, such as computers. The agreement will cover the procurement process over the life of that contract.

Deputy Darragh O’Brien

Has the director general set a target for potential savings in terms of costs of goods and services?

Mr. Paul O’Toole

We have not set a specific target but we are already starting to achieve savings. As Mr. Shanahan outlined, he and his colleagues brought forward several framework agreements to the board last year. In each case they have delivered savings on costs in prior years, with those savings being very significant in some cases. Savings are beginning to come through but we have not yet put targets on them. We are moving ahead, exactly as Mr. Shanahan outlined, to improve the entire procurement process, and we intend to do that vigorously and rigorously. As the Comptroller and Auditor General observed, it is important not only to overhaul the existing systems but to ensure they are fit for the future purpose of the organisation. Ours is quite a complex organisation with complex systems. That is something we may have to look at to ensure those systems suit the business of the organisation and are transparent. We are beginning to see significant results from our procurement work based on that strategic approach and we hope to continue that process.

Deputy Darragh O’Brien

Will FÁS be able to share those results in time with the committee, and, most importantly, with the public? FÁS has a great opportunity now, after a terrible two years, to get it right. All members have emphasised that our questions are not a reflection on the 2,000 staff who are doing a very good job of working in a difficult environment. The management has an opportunity to put in place robust systems and it should advertise its successes in this regard. FÁS has been seen as a €1 billion hole in the Exchequer. That is how it was portrayed in certain areas in recent years, sometimes unfairly. By way of confidence-building measures, FÁS must let people know when it has successes. In particular, any progress in the area of procurement, which fell down so badly in a four or five-year period, should be communicated when appropriate. The committee will be very interested to hear about that.

Mr. Gorman outlined several recommendations from the committee's report that have been implemented. Mr. Shanahan outlined changes that have been made that will be good for the organisation. If it is good for the organisation, it is good for the public and for clients. It is encouraging to see the prominence given by Mr. Shanahan in his opening statement to the issues of procurement which, in many organisations, is seen as something that is a separate issue and a matter for office management. It is crucially important that we ensure value for money.

Chairman

To put it in context, how much is FÁS's annual budget for 2010?

Mr. Paul O’Toole

Our annual budget, subject to the Revised Estimates volume, will be in the region of €1 billion. It will be down on last year but will be in that region.

Chairman

Approximately how much will be spent on procurement of goods and services?

Mr. Paul O’Toole

I do not have the precise figure. Our central overheads, which are mainly subject to procurement, are in the region of €31 million. We then have specific expenditure on overhead items of some €9 million. Therefore, approximately €40 million is spent on procurement of various goods and services. In addition, we also procure training, are involved in community schemes, procure services for special training providers for the disabled and so on. All of these must come under the procurement scrutiny process. However, in terms of what we might refer to as "normal" materials, goods and services, the figure is approximately €40 million. If I am materially wrong in that amount, which I have taken from the top of my head, I will get back to the Chairman.

Chairman

It would be helpful if that figure could be included in the form of a statement within FÁS's accounts on an annual basis in respect not only of those services but of all the external services that are procured.

Mr. Paul O’Toole

Yes.

Deputy Darragh O’Brien

I understand Deputy Shortall will deal with the competency development programme in due course. That is also an area of procurement, and there are services, including training services, in respect of which issues have arisen. That is an area that needs to be tidied up.

There are some startling figures in regard to business expenses. We have covered travel on several occasions. While I do not wish to go into too much detail, suffice it to say that more than €1.7 million has been spent in business expenses alone, the vast bulk of which has been spent by senior management. The Comptroller and Auditor General has outlined this expenditure and I wish to ascertain what changes will be made in respect of the amount of expenditure on sporting events, concerts, hospitality, lunches and so on. The amount was significant, particularly in the context of what could be used now. I acknowledge that access to and limits in respect of credit cards within FÁS have been altered drastically. Is it correct that the limits have been reduced to approximately €7,500?

Mr. Paul O’Toole

There are no credit cards within the organisation. They are all gone.

Deputy Darragh O’Brien

So there no longer are lunches, Robbie Williams concerts or anything like that? What view does FÁS now take in respect of corporate expenditure on events? I refer in particular to events such as the examples I provided, sporting events and so on. What changes are being made by FÁS in this regard?

Mr. Paul O’Toole

Simply, it is not appropriate at present and we are not doing any events. We are trying to ensure, based on revised guidelines that have issued through our Department and the Department of Finance, that we are fully compliant. We watch those budget headings, which are relatively small in the overall context. We delivered a highly significant reduction in our foreign travel last year.

Deputy Darragh O’Brien

How much?

Mr. Paul O’Toole

I think our expenditure on flights in 2009 was just over €90,000, which would be down from €380,000 in 2008 and an average of €420,000 over the seven years. The expenditure was approximately one quarter of what it had been.

Deputy Darragh O’Brien

Very good.

Mr. Con Shanahan

There is no business travel.

Deputy Darragh O’Brien

No business travel at all. As for the science challenge programme, I note that FÁS is no longer sending many people to Florida.

Mr. Paul O’Toole

The science challenge programme has been discontinued completely.

Chairman

A report was prepared on the science challenge programme. Did the committee received a copy of it?

Mr. Paul O’Toole

I do not know. It was a report prepared by the Department, in which we participated.

Chairman

Does Mr. Gorman know whether the committee received a copy of the report?

Mr. Seán Gorman

While we certainly have released it under freedom of information legislation, I do not know whether it was formally sent to this committee.

Chairman

I would like a copy. I do not think we received one.

Mr. Seán Gorman

I have a copy to hand that I can leave with the committee.

Chairman

Mr. Gorman should do so as I understand it was not published.

Mr. Seán Gorman

Not formally, no.

Chairman

I think it should be.

My other points relate to those to which Deputy O'Brien referred. I will ask two or three questions on points that intrigued me. In respect of the lunch at which 64% of the cost was spent on drink, was it a good wine or did the participants emerge legless? I am not being smart but seek further detail on this point. Who allowed 64% of the total cost of a meal to be spent on alcohol? Furthermore, what was the purpose of spending money on golf fundraisers? As for the concert tickets, I wish to ascertain who was involved and the mind set of those who decided to spend taxpayers' money on pop concerts. The committee should be provided with some detail on these points so that members can pass judgment.

Deputy Darragh O’Brien

On the point of golf fundraisers, the internal audit function of FÁS sought information in this regard. However, it never got an answer from the former director general as to the reason FÁS should sponsor specific golf outings for charitable events to the tune of €8,000. The lunch mentioned by the Chairman is simply one aspect and members are not merely picking up on that issue alone. This lunch, at which three staff members spent a significant amount of money, pertained to the One Step Up project. This is the type of issue that really grates on people. Obviously, an organisation must incur a certain amount of legitimate business expense.

Chairman

Another point that intrigues me and on which I seek further detail relates to an event associated with the International School for Peace Studies, at which 40% of the budget was spent on alcohol. While I am not being flippant, I would call that drinking one's way to peace. I seek details on how 40% of the budget could have been spent on alcohol.

Mr. Con Shanahan

I will check to see whether I have anything on those two items. In respect of hospitality, the first point is that the provision of hospitality was largely at the discretion of the director general and payments were made on that basis. I can state that no expenditure of that nature was incurred in 2009 and there will be no expenditure going forward.

Chairman

I refer to a director general's dinner that cost €1,700.

Deputy Darragh O’Brien

It was in 2005.

Chairman

They were hungry people.

Mr. Con Shanahan

I have some information for the Chairman. If it will be of help, I can list for him the beneficiaries of the golf outings. Autism Awareness was given €2,000 by way of support for its fundraising event. Maynooth GAA club was given €1,200 on two occasions in support of fundraising. This was at the discretion of the director general.

Deputy Darragh O’Brien

Who played the golf? Does Mr. Shanahan know which staff members played?

Mr. Con Shanahan

I do not know who played the golf or if indeed it was played. Stepping Stones school received sums of €1,500 and €1,000 in support of fundraising there. As for the expenditure on sports events——

Deputy Darragh O’Brien

On the charity, were all these payments at the discretion of the former director general?

Mr. Con Shanahan

Yes.

Deputy Darragh O’Brien

Would Mr. Molloy have signed off on them all?

Mr. Con Shanahan

Yes.

Deputy Darragh O’Brien

Very well. What school did Mr. Shanahan mention?

Mr. Con Shanahan

Stepping Stones school.

Deputy Darragh O’Brien

Does Mr. Shanahan know where it is located?

Mr. Con Shanahan

I do not.

As for the sports events, these also were at the discretion of the director general. While there is no information as to who attended any of these events, a limited amount of information exists regarding the invitations to them, all of which were approved by the director general. We have received a freedom of information request that we are finalising at present in respect of the Robbie Williams concert about which we have details of the invitation list but not of the people who attended it.

Deputy Darragh O’Brien

The total expenditure on sports tickets, concerts and so on probably was approximately €35,000. This does not even take into account the ten-year tickets that were bought for Croke Park. In fairness, I note the previous acting director general, Mr. Sullivan, secured a refund of the vast bulk of this amount. However, is it known whether senior staff members of FÁS attended such matches or events? Did FÁS board members attend any such concerts or sporting events?

Mr. Con Shanahan

As I mentioned, the information is quite sparse. While it is non-existent as to who attended, we have an invitation list for one of the aforementioned concerts, which indicates the people who were invited to that event. That is being——

Deputy Darragh O’Brien

Were FÁS board members on the list?

Mr. Con Shanahan

No board members are on that list.

Deputy Darragh O’Brien

Good.

My next point about the previous board also pertains to travel, on which significant funds were spent, including foreign travel. Sticking with the sporting events, a freedom of information request is being processed at present. Has FÁS reverted to the former director general to ask who attended these events? Have the witnesses asked the former board members whether any of them attended these events?

Mr. Con Shanahan

No, but we have asked the director general the reason the funding was spent at these events and his response was that these were legitimate representation expenses.

Deputy Darragh O’Brien

I seek information and I am not being petty. This is in the context of an overall budget of €1 billion, much of which comprises allowances paid to FÁS trainees and clients instead of a social welfare payment. At the crux of this matter are the people who are going to matches and concerts and travelling abroad. Did any of those on the competency development programme supply FÁS with goods and services? This is the importance of finding out these matters. It is not necessarily a question of the monetary amount under discussion, which is relatively small in the context of the overall budget. This is the purpose for which I am looking for this information. Does Mr. Shanahan have any opinion on whether I will get it?

Mr. Con Shanahan

The only information we have is an invitation list to the Robbie Williams concert, if that is of any significance. It is a list of most, if not all, of the people invited to that concert. It will be released under a freedom of information request.

Chairman

Will Mr. Shanahan read the names into the record today?

Mr. Con Shanahan

Mr. Rody Molloy got six tickets for that concert. Mr. Christy Cooney got two tickets. Mr. Billy Finn got two tickets. Mr. Padraig Cullinane got two tickets. Mr. Seán Gorman got two tickets. Mr. Tom Pomphrett got two tickets. Mr. Kieran Mulvey got two tickets. Mr. John Walsh got two tickets. Ms Siobhan O'Connell got two tickets. Mr. Greg Craig, in respect of whom there is a record of an apology, got two tickets. Mr. Oliver Egan got two tickets.

Chairman

They operated in a parallel universe to people on the ground who must account for every penny in centres throughout the country and other people who must get clearance from the Department of Social and Family Affairs to get involved in community employment schemes and must account for their activities. I hope that the people who made the decisions in question understand the damage done to staff morale, to which we referred earlier. Those staff feel shame when FÁS is mentioned. People at the top were operating in a parallel universe and seemed to be out of touch.

We would also like the other information on the conference for peace and the 40% expenditure on alcohol. It may have been a small amount but it is important for the people operating the system.

Deputy Darragh O’Brien

Mr. Shanahan might get further information on the other events. Did the Department attend other events at the invitation of FÁS? I am glad to hear this practice has stopped, as that is important. However, it is the small things that trip one up and these issues are still important.

Regarding foreign travel by spouses and others who were unrelated to the FÁS organisation, the Comptroller and Auditor General's report outlines how €21,000 was spent on eight trips for the former director general's spouse. The flights ranged in cost from €600 to €5,300. To give some examples, €11,200 was incurred for 11 trips by the spouse of an assistant director general. Who is that assistant director general?

Mr. Con Shanahan

Mr. Gerry Pyke.

Deputy Darragh O’Brien

Who has since retired. Who was the board member whose flight cost €550?

Mr. Con Shanahan

If the Deputy will give me one moment, I will tell him. I believe it was Mr. Attley. I will confirm it.

Deputy Darragh O’Brien

Our guests have stated that travel has been reduced to €90,000.

Mr. Paul O’Toole

Overseas travel.

Deputy Darragh O’Brien

There are legitimate expenses where people in FÁS need to travel. I am assuming that FÁS is adhering to the guidelines issued by the Departments of Finance and Enterprise, Trade and Employment last year. No spouses are travelling.

Mr. Seán Gorman

That is right.

Deputy Darragh O’Brien

Mr. Gorman mentioned that the Science Challenge programme has basically been binned. Over the course of the past year, people were at pains to tell us how important the project was. I got the impression that the problem with the programme lay with how many people were going over to see it and the subsequent adverse publicity rather than with the nature of the programme itself. During the past year, a number of witnesses stated that Ireland was fortunate to have this programme in place, as other European countries had looked for it from the United States but had not received it. What is the rationale in removing the programme?

Mr. Seán Gorman

We did an internal review of Science Challenge in terms of its relevance to upskilling and its contribution towards increasing participation in sciences and engineering. Notwithstanding the travel costs and so forth, instead considering the core issues, we concluded that the programme was not a core function of FÁS. We did not consider that it represented best value for money on the basis of the expenditure incurred. We concluded that, in the final analysis, it had not contributed to the Government's strategy for science, technology and innovation in any significant way that would justify its continuation. A number of individuals benefited in terms of PhDs and opportunities to study in the United States. However, having regard to the cost of the programme, it did not represent the best value for money.

Deputy Darragh O’Brien

I am glad to hear there was a review. I would need to go back through the minutes of our meeting only a few months ago, but I was told that the programme, with the exception of everyone travelling to see how great it was, was good value for money. I was also told that we were fortunate to have that link with the United States and NASA for high-end scientific training. Is that link with the US gone completely? I cannot remember who, but someone mentioned that countries like Hungary had looked for the same type of link-up but had been refused. On this basis, the committee was told it was a good programme that was value for money, leaving the foreign travel aspect aside. I cannot understand how the situation has changed in six or seven months.

Mr. Seán Gorman

It is completely finished. When we decided that the programme should be terminated, we allowed anyone currently in the process to complete it. They have all left the system. When we took a hard look at the programme we concluded that while it had merit in that it served to strengthen links between colleges in Ireland and the US and gave people an opportunity to study, its cost was a problem. The bang for our buck was not what it might have been.

Deputy Darragh O’Brien

Mr. Rowan is head of training. What is the opinion of FÁS regarding the programme's discontinuation?

Mr. Denis Rowan

I was not involved in that at any time.

Mr. Paul O’Toole

I am trying to read it from a different perspective. There were the programme's core costs, but there were also the peripheral costs, namely, travel, advertising, etc. Valuated against a gross cost of €7.8 million, it was an expensive programme. The core costs——

Chairman

That is an understatement. The figure I have is a total cost of €7.79 million. Advertising and publicity cost €3.283 million. Accommodation cost €1.16 million. Training, the core of the programme, only amounted to €880,000 of the €7.79 million. Flights cost €600,000, payments to local aides amounted to €366,000 and transport cost €173,000. How did the Department of Finance authorise this programme?

Ms Grainne McGuckin

The Department of Finance operates on the basis of a delegated sanction. There is oversight by the Department of Enterprise, Trade and Employment and, in turn, by FÁS. We are not responsible for the day-to-day running but the financial procedures are set out, as are procurement procedures. The onus is on the organisations concerned, whether FÁS or the Department of Enterprise, Trade and Employment, to ensure these are complied with.

Mr. Seán Gorman

When the revelations about the excess costs of the associated travel came to light the Tánaiste asked us to take a hard look at what it was costing. When we discovered the extent to which this was an expensive programme with questionable value we decided it should be closed. The Tánaiste agreed with our conclusion.

Chairman

Was it only when questions were asked that Mr. Gorman decided to look at this?

Mr. Seán Gorman

We decided to examine it when it came to our attention that there were concerns about the cost.

Chairman

The Department was authorising it.

Deputy Pádraic McCormack

Did Mr. Gorman not consider leaving the programme but closing the travelling aspect of it? The latter was the main cost.

Mr. Seán Gorman

The programme was not really necessary or delivering the value it might. We encouraged the colleges that had developed links with NASA and the colleges in the United States to continue these links in their own right. In the context of FÁS it was not the most appropriate area to be in and the costs were excessive.

Chairman

Is there a science unit in the Department? Did it examine it?

Mr. Seán Gorman

The unit was of the view that it did not contribute to the overall objective of increasing participation rates in science and engineering in schools and colleges.

Chairman

That was after the money was spent.

Mr. Seán Gorman

Yes, it was when the programme was well under way.

Chairman

When the programme had been set up, what was the view of the science unit?

Mr. Seán Gorman

We asked the science unit for a view when we were doing the review. This was a programme initiated in FÁS but we took a hard look at it well into the programme.

Chairman

Mr. Gorman sanctioned the money without examining it.

Mr. Seán Gorman

The money was sanctioned as part of the overall allocation to FÁS. The board of FÁS developed the programme as part of an overall sanction of funds.

Chairman

Mr. Gorman has the report. Can he provide the report to the committee and allow us to publish it?

Mr. Seán Gorman

Yes.

Deputy Darragh O’Brien

I have a final question on foreign travel. The report of the Comptroller and Auditor General referred to €200,000 spent on travel for non-FÁS personnel, many of whom were spouses. It was a trip that was much sought after. According to the report of the Comptroller and Auditor General, the spouse of the assistant director general, Mr. Shanahan, reimbursed €200 towards the cost of a flight. Did the former director general, any other board member or any other person who travelled to Florida and such places make a reimbursement payment for the cost of the flight?

Mr. Con Shanahan

Not in respect of trips to Florida. Some of the trips concerned the families of the astronauts and other senior officials in NASA who came here to the opportunities exhibitions.

Deputy Darragh O’Brien

I am not talking about that; I am talking about our people going over there.

Mr. Con Shanahan

There were no reimbursements in respect of that.

Deputy Darragh O’Brien

Did the wife of the former director general or the wives of other board members travel over?

Mr. Con Shanahan

Other board members travelled over but not their spouses. The full list of spouses' travel has already been indicated. Their names are available.

Deputy Pádraic McCormack

Regarding the last point, it seems the programme was set up to give personnel an opportunity to travel to Florida at taxpayers' expense. It seems the programme has now been cancelled because it was not effective at all.

We know the format of the director general's report to the board was changed by the 2009 amendment to the Labour Services Act 1987, which stated that the prohibition on disclosing information shall not prevent the disclosure of information to the Minister either by a board member or in a report by FÁS. What action has been taken to amend the reporting by the executive or its advisory committees to the board? What is happening now?

Mr. Paul O’Toole

Our new board met for its first meeting last week. It resolved immediately to create a new finance committee, which will have access to the executive and will be reported to on a regular basis, by the executive on all financial matters. The remit of the new audit committee we will set up has been extended to embrace risk management. As indicated by the Comptroller and Auditor General, we will seek to use these tools more effectively in the future, having a better understanding of the risk inherent in our operations and we will attempt to manage the risk in a more careful way in conjunction with our board.

Regarding disclosure, now that the Act has been passed we will seek to complete work on a speaking-up policy. Staff members or others who feel there are matters of importance they are worried about raising to line management will have the opportunity to report to a member of the board or a member of the Garda Síochána. We will also set up a system allowing them to raise lesser matters in a safe and confidential way.

Deputy Pádraic McCormack

Will that solve the problems that existed?

Mr. Paul O’Toole

One can never say never but it will make a significant improvement to the culture and make everyone very aware that the actions they take are subject to scrutiny and will be reported and recorded and people will have to account for themselves.

Deputy Pádraic McCormack

Have the risk registers and associated plans been brought up to date and reviewed by the executive?

Mr. Paul O’Toole

The risk registers were brought up to date last year. We have now placed risk management as a standing item in the weekly meetings I hold with senior management. We will have a national senior management team that has monthly meetings and we will bring risk management to the fore, along with other matters. Extending the remit of the audit committee to include risk governance means we will up our game in respect of risk management. We will up our game in how we use these tools in a more productive fashion. Having reviewed it twice this year, we will hold a further review next week. We will try to ensure we do not just have lists of risks but practical mechanisms for dealing with those risks and acknowledging them. The Comptroller and Auditor General has made other recommendations about how we should look at risk management. We will consider this carefully, including the separation of duties suggested as a means of making this tool more effective.

Deputy Pádraic McCormack

Who will check if the review and internal controls are being carried out? Whose responsibility is that?

Mr. Paul O’Toole

At board level, the recommendation is that the board examines compliance with governance matters, as distinct from the audit committee as was done in the past. Overall, in terms of our statement of internal financial controls, the board will carry out the review of the compliance against our governance requirements. I have personal responsibility to delegate certain functions to my senior team.

Deputy Pádraic McCormack

Will the board monitor itself?

Mr. Paul O’Toole

The board does not monitor itself. The board produces a checklist of its requirements. For every State board there is a listing of compliance requirements and specific actions that must take place on an annual basis, or more frequently on whether declarations of interest have been completed. A variety of headings may be chosen in that regard. They are declared in our annual statements to the Tánaiste and Minister for Enterprise, Trade and Employment and publicly through our accounts. They can be reviewed by the Comptroller and Auditor General and we are accountable to this committee, the Oireachtas generally and, as a board, to the Tánaiste. It is not the case that the board simply monitors itself, therefore. It has specific obligations, one of which is to examine how we can ensure governance and compliance from an executive point of view.

Deputy Pádraic McCormack

In Mr. O'Toole's opinion, will that correct what used to happen in the past?

Mr. Paul O’Toole

It will certainly go a long way towards correcting the mistakes. It will introduce formality and an additional range of measures to ensure we are up to the task. However, one can impose all the rules one wants but the culture of implementation must also be addressed. It is not simply a case of checking that the rule has been applied. Everyone must realise that they operate within a culture of compliance as well as a set of rules.

Deputy Pádraic McCormack

Does Mr. O'Toole believe the culture within FÁS has entirely changed?

Mr. Paul O’Toole

I believe it has substantially changed. When we publish the 2009 accounts, we will be able to demonstrate tangibly the reductions in some of the high profile areas of expenditure that have caused such concern and debate. I do not suggest that everything has been done, however. We have made good progress but our work needs to continue.

Deputy Pádraic McCormack

Will the budget provided to FÁS change? I get the impression that because the Government provided an annual budget of €1 billion to FÁS over the two years in question, if the money was not spent towards the end of the year, expenditure was invented to ensure the agency would receive the same amount the following year. Could it be the case that €500 million or €750 million would be sufficient next year? It appears that the remaining budget money was being spent on golf and tickets to Florida to ensure it was gone by the end of the year. Has that culture changed?

Mr. Paul O’Toole

The most tangible evidence I can provide in that regard is that we returned €58 million to the Exchequer in 2009 because we did not believe we could spend it appropriately.

Deputy Pádraic McCormack

I welcome that statement because the agency would do its best to spend or waste that €58 million in previous years. How soon are the minutes of the audit committee brought before the board?

Mr. Paul O’Toole

This matter was raised in the Comptroller and Auditor General's report, which suggested that minutes should be provided on a more timely and regular basis. Perhaps my colleague, Mr. Patrick Kivlehan, who is the director of internal audit, will outline some of the changes made in the area of internal audit reporting.

Mr. Patrick Kivlehan

Previously, we presented the minutes of audit committee meetings on a periodic basis, normally twice per year. We have now agreed that once the meeting has concluded and the minutes have been signed by the committee, each set will be passed to the next board meeting so the flow of information will be more timely. This will allow the audit committee to raise any matters it may wish to address at each meeting.

Deputy Pádraic McCormack

How often does the audit committee meet?

Mr. Patrick Kivlehan

The audit committee meets between four and six times per year and one would expect minutes to be forwarded to the board every two months on that basis. Additional changes have been made in the context of the reporting structures on specific audit reports. Where past reports mainly focused in the findings of audits, these will be accompanied by recommendations arising from them, the management response to recommendations and a sign-off by management and internal audit as a commitment to implement recommendations. It will present a more complete picture to the audit committee and the board in regard to what is coming out of audits and what actions are being taken by management.

Deputy Pádraic McCormack

How many audits were carried out in 2009 and what is happening in 2010?

Mr. Patrick Kivlehan

Last year's focus was primarily on the 22 modular audits, but there were in addition a number of investigations and carry over work from 2008. There were probably in the region of 32 assignments in total.

This year, the focus is on a number of investigations which we plan to complete by March. After that we are going to focus on a new procurement audit programme which will audit procurement practices in all our 18 procurement locations with a view to ensuring the procedures as set out by the board last year are being followed. We will also be beginning a new risk assessment audit programme, which we call the pulse audit programme. This will consist of short-term assignments to determine additional information to help us with our risk profiling.

At that point we will look to reverting to our cyclical audit process whereby all the business units are audited. That process will also be changed in that some locations which would have been on a three-year cycle will be audited annually under headings such as payroll and treasury management. The audit process will be broadened to include the cost centres for the directors general and assistant directors general to ensure greater transparency. We will seek to fulfil the cyclical audit process every two years but in the context of, for example, the pulse assignment, every unit will have at least some interaction with internal audit every year.

Deputy Pádraic McCormack

Are the audits outsourced?

Mr. Patrick Kivlehan

That process is currently ongoing. A couple of weeks remain in the tender process from which we will seek to select co-sourcing agents who will enter into a framework agreement over four years. In the context of audit planning, we will select a number of audits which can be implemented by the co-sourcing agent. Primarily, we are considering systems audits and some of the more technical work around treasury management. Our view is that our own staff are better focused on dealing with delivery mechanisms, such as community and training services, in the interim. We hope to begin co-sourcing audits from April.

Deputy Pádraic McCormack

In light of the breaches in the codes of practices by employees, is it now necessary to draw up a revised code of practice?

Mr. Patrick Kivlehan

In the context of the revised code introduced last May, we are working on that now. We sought assurances on approximately 42 items in the previous code to ensure its appliance. These were presented to the board and we are reviewing the revised code and determining how many items will have to be presented. We will also be changing the format in which we present the report to the board.

Deputy Pádraic McCormack

Should the code of practice set out what actions might be imposed on foot of investigations?

Mr. Patrick Kivlehan

The investigation will be conducted by our own unit and our findings will be passed to management to pursue a disciplinary process if it decides an issue arises which needs to be addressed. That is not something with which internal audit would be involved.

Deputy Pádraic McCormack

Have steps been taken regarding the conduct of investigations where allegations were made of serious wrongdoing?

Mr. Patrick Kivlehan

In the context of an investigation, that is not something which internal audit would decide. We would highlight the findings of an investigation and it is for management to determine whether to engage in a disciplinary process and what the outcome might be.

Deputy Pádraic McCormack

Does the Department of Enterprise, Trade and Employment have access to internal audit reports as a matter of course?

Mr. Patrick Kivlehan

It does not as a matter of course. Line management receives reports where it is involved in the auditing process. We will be changing the circulation policy to include the director general and all assistant directors general. The audit committee and the Comptroller and Auditor General will receive copies and they will go to the Department in the context of community support framework evaluations. Other departmental units can request reports but they are not automatically provided.

Deputy Pádraic McCormack

Would it not be beneficial to put in place a protocol that ensures the Department receives copies of all reports?

Mr. Patrick Kivlehan

That approach certainly could be taken. The Comptroller and Auditor General has also suggested that internal audit should regularly report an abridged summary of its activities to the board. That would represent one mechanism whereby departmental representatives could receive information. If it is thought to be beneficial for the Department to receive copies of all reports, I do not see that as a major issue.

Mr. Seán Gorman

The Department has a representative on the new board of FÁS, which the Tánaiste appointed recently. That representative will receive copies of whatever documentation is sent to the board as a result of the work of the internal audit committee. A significant provision in the new legislation removes any barrier, either real or perceived, to board directors, including the Civil Service board director on the FÁS board, reporting issues to the Minister. If our departmentally appointed representative on the board is picking up something or a specific issue that rings alarm bells or there was any doubt in the past about the primary duty of the board member, whether to the board and corporation, the Minister or both, it would be removed. There is a clear provision allowing the director, if he or she decides it appropriate, to report these issues. Rather than dealing with them on the board, they will be reported to the Minister.

Deputy Pádraic McCormack

I welcome the fact that the new board has met and there appears to have been a clean sweep with us getting down to business. I am weary of coming to meetings of this committee for the past two years and getting the same answers, more or less, to the same questions. We are going through the motions and nothing concrete has happened in the end. I look forward to the operation of the new board and reviewing the process over time. Although we, as a committee, have exposed what was going on, there has been no apology from the Minister. The former director general walked off with his bonuses, pension and drove off with his golden handshake, including a car. We have not solved anything but we have talked about it. Would anybody like to comment on that?

Mr. Seán Gorman

One of the very significant benefits, advantages and added value coming from this discussion is that there have been very substantial changes in the legislative basis on which the board of FÁS is structured and mandated and also in terms of the improvements in the internal relationships and monitoring between the Department and FÁS and the significant changes being put in place within the body. Its internal controls are being repositioned and reconfigured to avoid the problems we are discussing recurring.

Many of the recommendations of the committee have been specifically picked up both in the legislation which has now been implemented by the Oireachtas and in the internal governance changes that have been suggested by the committee and are being implemented. We have made significant advances in recent years, not least driven by some of the discussions which have taken place in this forum on the setting of targets and performance indicators for FÁS. If one considers, for example, the 2010 Estimates engagement which we have had with FÁS and the discussion of the deliverables we are expecting across a range of approximately 30 heads, one can see we are setting out the budgets, targets for delivery, etc. in very specific areas. Much has moved forward and not just in aspiration. Practical improvements have been put in place which will change the way things are done.

Deputy Pádraic McCormack

What concerns me is that nobody from the Minister down has put their hands up and apologised for what happened. There was a scandalous waste of taxpayers' money but there is now a new board. Nobody has said sorry to the taxpayer for the absolutely scandalous waste of money in the activities of FÁS and the board over the past four or five years.

Mr. Seán Gorman

I am not sure about the——

Deputy Pádraic McCormack

I would not be entirely confident we will not be back here again if we did not start at that level, although I welcome the new board and all the assurances given by the witness today.

Mr. Seán Gorman

I do not know about the use of the word "apology". I cannot recall if it has been used. The seriousness and responsiveness of the Tánaiste and the Minister for Enterprise, Trade and Employment as well as her Department and FÁS itself in dealing with the issue is notable. The changes made are a concrete expression of the concern, worries and reactions to the problems that have manifested. It is an understatement to say that nobody is proud of what has happened but people are showing their concerns through their responses from the Tánaiste down.

Deputy Pádraic McCormack

I would not accept the comments of the witness on the Tánaiste's actions. She oversaw——

Chairman

Leave the Tánaiste out of it.

Deputy Pádraic McCormack

She oversaw a sweetheart deal with the former——

Chairman

Leave the Tánaiste out of it, please.

Deputy Pádraic McCormack

Okay.

Chairman

You know our guidelines.

Deputy Pádraic McCormack

A sweetheart deal was arranged with the former chief executive, which was scandalous, so somebody must be responsible. I do not accept at all that everything was done right. I will conclude on that.

Chairman

We know everything was not done right. Our responsibility is to expose the issue and react to the reports of the Comptroller and Auditor General.

Deputy Pádraic McCormack

We must——

Chairman

The Deputy should let me finish. He is doing himself a disservice in saying we have achieved nothing.

Deputy Pádraic McCormack

We must get a result.

Chairman

A lot has been achieved but as the saying goes, there is much more to be done.

Deputy Pádraic McCormack

Okay. If we have spent two years raising the same questions time and again, there must be a result at some stage. I have not seen it yet but I hope we will see it.

Chairman

Unfortunately, we will not be finishing today because of what I referred to earlier. We will not go over it again today but the development programmes and internal audits will need to be discussed again. Before I ask Deputy Shortall to deal with the competency development programmes, I have questions on the section that Deputy McCormack was dealing with, which was appendix A in the Comptroller and Auditor General's report.

I refer to the Department of Finance guidelines relating to bonuses. Why was the 10% bonus scheme cap breached with the blessing of the Department of Enterprise, Trade and Employment and the Department of Finance? Some 11.5% was paid to assistant directors general in respect of their performance in 2007. How did both Departments allow the cap to be breached? The detail is on page 88 of the report. What great achievements did the FÁS assistant directors general attain to get an 11.5% bonus? Which person in each Department signed off on that deal and was ministerial approval sought for this breach of guidelines?

Mr. Seán Gorman

I will have to get chapter and verse on the signing off and correspondence as I am depending on memory. My recollection is the bonus scheme was capped at a cash limit of 10% of the salaries of the assistant directors general. It was not that the individual bonus schemes were capped at 10% of individual pay. It was an overall cash limit that was available in a pool of money to be available for the payment of bonuses, if I remember correctly. Bonuses were decided on and following an appeal——

Chairman

The report of the Comptroller and Auditor General indicates that the following compliance failures require explanation. On the top of page 88 the details of the breach are outlined. I apologise. I indicated it was the Comptroller and Auditor General but I refer to a report from the chairman of the board to the Minister under section 10.1(ii) of the code of practice. It is stated that this requires explanation.

Mr. Seán Gorman

My recollection is that one individual had appealed the fact that he had not received a bonus and made a case which was accepted by the director general, put to us for approval and which we in turn put to the Department of Finance. The extra payment was sanctioned but I do not have the correspondence with me to take the committee through the process. I am at a loss with regard to the exact chronology, but I can certainly obtain the information. It arose from an appeal by one person who came back in after the generality of the bonuses were determined.

Chairman

How are they determined?

Mr. Seán Gorman

The individual ADGs within FÁS or any other similar organisation of equivalent rank set targets for performance in any given year and the determination of the bonus is done by the director general in assessing the performance of individuals against those targets. The reason we came into it was the issue regarding the late appeal and its impact on the overall budget.

Chairman

I still do not understand, to be honest. However, we will wait for——

Mr. Seán Gorman

I will obtain chapter and verse on it for the committee.

Ms Grainne McGuckin

We will also check from our perspective and clarify it for the committee.

Chairman

Could Ms McGuckin also check whether there were breaches in other Departments and agencies, please?

Ms Grainne McGuckin

Yes, certainly.

Deputy Róisín Shortall

I welcome all our visitors. I have a couple of questions for the representatives from FÁS, starting with Mr. Kivlehan. Is there anything we need to know about the rapid turnover of the two previous directors of internal audit — that is, Mr. Kivlehan's two predecessors?

Mr. Patrick Kivlehan

There were three people. My understanding is that the first person retired, perhaps slightly early. I am not aware of the reason the second person held the post for a year and a half. There was a recruitment process for three director vacancies, for which I successfully applied. From that, there was a rotation of a number of director posts and I was appointed as director of internal audit. I am not aware of any other details as I obviously was not party to the process.

Deputy Róisín Shortall

All right. The two terms were quite short.

Mr. Patrick Kivlehan

Yes; if there is a context——

Deputy Róisín Shortall

I am just asking out of curiosity whether there is anything we should know.

Mr. Patrick Kivlehan

Apart from that, the only other context is the fact that I and the first holder of the post are both qualified accountants whereas the person who had the role for a short time was not. That may have been it. I was not party to how the decision was reached, but that may have had some influence on it.

Deputy Róisín Shortall

Mr. Corcoran was the director of internal audit dealing with INV 137. Why did he not remain as director of internal audit until that audit was completed?

Mr. Patrick Kivlehan

When I was appointed in May 2007 I was allocated a portfolio, and I was given that of internal audit. If the organisation had taken the approach that Mr. Corcoran was to continue, there was almost another year of INV 137 to go. On the basis that I was given the internal audit portfolio, I took responsibility for that particular audit. When the audit was finished and the report had been issued, there was still the process of following up on recommendations that had been made, which took some time to get through. One still takes on the responsibility of the audit even though it has been completed.

Deputy Róisín Shortall

The reason for the late completion of the audit, which was outside the control of the individual involved, was that senior people were delaying the process. However, it would be unusual that a person who had started a serious examination and audit would not be allowed to continue it.

Mr. Patrick Kivlehan

To give it its full context, we must consider the process from November 2004, when the letter came in, until the issue of the report at the end of 2006. Because of the protracted period, the report was dealt with by two different audit committees — that is, the committee with which I worked up to last year and the previous committee — and three different directors. Mr. Killeen dealt with the audit work itself — the investigation part — between November 2004 and December 2005, when he retired. Mr. Corcoran then took over at the stage of drafting the report, brought it through the closing meeting process, and did the additional work with regard to legal issues. The report was issued around the time I came in. The Comptroller and Auditor General had a copy and I dealt with the recommendations. INV 137 is quite an unusual report because of the sheer size of the investigation and the matters raised. It would not be normal for an investigation to take that long.

Deputy Róisín Shortall

After Mr. Kivlehen took up the post, were any attempts made to change the staffing structure of the internal audit unit under Mr. Molloy prior to the PricewaterhouseCoopers report?

Mr. Patrick Kivlehan

In the context of additional staffing? I am not sure what the question is.

Deputy Róisín Shortall

Was the structure of the internal audit section changed in any way?

Mr. Patrick Kivlehan

We put together a plan for staffing structure arising from the PwC review. When I took over the unit there were four auditors and two managers. We have had a larger cohort of auditors in place. Arising from the review and the request of the audit committee that we implement a plan for moving the unit forward, we have restructured so that we will have six auditors in place to report to the manager, an additional IT support person who reports to our IT manager, and myself as head of internal audit. The plan is to enhance the resources within the unit to ensure we have greater coverage and a reduction in what we call our audit cycle — the period it takes to do an audit. For example, when we audit a training centre, the audit cycle determines when we come back for a repeat visit.

Deputy Róisín Shortall

My question was what attempts had been made, if any, to change the staffing structure within internal audit prior to the PwC report.

Mr. Patrick Kivlehan

I am having difficulty understanding the question. Is the Deputy asking whether people were changed?

Deputy Róisín Shortall

Were there any attempts to change the staffing structure in the section?

Mr. Patrick Kivlehan

Yes; there was a discussion with one person, but that was resolved and the person has not moved anywhere.

Deputy Róisín Shortall

What was the nature of the proposal?

Mr. Patrick Kivlehan

I want to be respectful to the process. There were some issues in the context of the way in which the unit was being run and reports were being prepared, and there was a process——

Deputy Róisín Shortall

What was the concern about that?

Mr. Patrick Kivlehan

I had my own concerns and some issues were brought to my attention by colleagues.

Deputy Róisín Shortall

By a colleague?

Mr. Patrick Kivlehan

No, by colleagues.

Deputy Róisín Shortall

Colleagues more senior to Mr. Kivlehan?

Mr. Patrick Kivlehan

Some, but a number at peer level.

There was discussion and no moves were made on the basis of that. We have tried to focus the way in which we deal with our client group to ensure the audits are giving a more client-focused service. In the past, the sense was that some of the audit reports were more personalised than they should have been. There should have been independent reviews and not ones dealing with personalised issues. We have dealt with that and in the future we will be able to engage with the client to give a better service.

Deputy Róisín Shortall

Mr. Kivlehan mentioned discussions with an individual. Did proposals come from this person or were they being imposed on him or her?

Mr. Patrick Kivlehan

There was discussion between myself and the individual.

Deputy Róisín Shortall

Was Mr. Kivlehan trying to change the staffing arrangements?

Mr. Patrick Kivlehan

Yes; I was trying to change the structure. It was a discussion about whether we should make any changes.

Deputy Róisín Shortall

And they were resisted by one of the individuals?

Mr. Patrick Kivlehan

No; he or she made a case and we agreed that we could move forward with the structure we had. The individual is in place and we continue to work together; we have a good working relationship, I believe.

Deputy Róisín Shortall

I wish to ask Mr. Shanahan why payments were made to Croke Park for the Opportunities fair in 2008 without the proposal going to the board for approval.

Mr. Con Shanahan

The view was taken that the director general had the discretion.

Deputy Róisín Shortall

Sorry?

Mr. Con Shanahan

The view was taken, clearly, that the director general had the discretion to incur that expenditure.

Deputy Róisín Shortall

Who took that view?

Mr. Con Shanahan

The finance department, I can only assume, although I was not there. That can be the only assumption — that if the director general had personally approved those expenses——

Deputy Róisín Shortall

What was the total value of those payments?

Mr. Con Shanahan

As the committee has heard, we are talking about circa €30,000 over a period of years, depending on what one includes in the calculation. We were reimbursed by Croke Park in the amount of €33,000 early last year.

Chairman

No; that is the matter of the tickets. Deputy Shortall is asking something else.

Deputy Róisín Shortall

I asked about the Opportunities fair.

Mr. Con Shanahan

I beg your pardon; I misunderstood. Could the Deputy give me her question again, please?

Deputy Róisín Shortall

I am asking why payments made to Croke Park for Opportunities in 2008 did not go to the board for approval.

Mr. Con Shanahan

Because they were not presented to the board for approval on time. A contract was entered into by the director general with Croke Park and it was finalised and signed before it came to anybody's attention. An advance payment was made because the Opportunities event had to proceed and Croke Park required a payment to enable it to proceed. Subsequent to that the finance department arranged that a paper be prepared and brought to the board, covering the event.

Deputy Róisín Shortall

What was the total value of the payments made?

Mr. Con Shanahan

It was circa €500,000 plus, which was in excess of the requirement for the board's approval in any event.

Deputy Róisín Shortall

Is Mr. Shanahan saying that Mr. Molloy was the only person responsible with regard to making that payment? Presumably other senior people would have been involved.

Mr. Con Shanahan

My recollection is that Mr. Molloy and the secretary signed the contract.

Deputy Róisín Shortall

Who made the payment?

Mr. Con Shanahan

Finance made the payment, on the approval of Mr. Molloy.

Deputy Róisín Shortall

Who in finance?

Mr. Con Shanahan

The financial accounts payable department.

Deputy Róisín Shortall

Without the necessary approvals?

Mr. Con Shanahan

Clearly, it was on the basis that the paper would have to be prepared and go to the board. Otherwise the event would not have gone ahead.

Deputy Róisín Shortall

That is not an acceptable procedure.

Deputy Pádraic McCormack

The cart before the horse.

Deputy Róisín Shortall

The proposal has to go to the board and the board must give formal approval before a payment is made.

Mr. Paul O’Toole

If I may make a point——

Deputy Róisín Shortall

If Mr. O'Toole does not mind, for the moment I would prefer if Mr. Shanahan dealt with this.

Mr. Con Shanahan

The decision was made that there would be no final payment, which was the major portion of the account, until it went to the board.

Deputy Róisín Shortall

That is not what I asked.

Mr. Con Shanahan

There was no board meeting which might have coincided with the event that would have enabled the proposal to be approved by the board in advance of the event taking place, if the Deputy knows what I mean. The alternative would probably have been to cancel the event. As soon as it was practically possible——

Deputy Róisín Shortall

The organisation was not working to the kind of time scale where a board meeting could not have been organised if one had not been scheduled. These things just do not happen overnight, whereby one is expected to come up with €500,000 within a matter of days. There are procedures with regard to such transactions that involve a huge amount of money and there should have been very clear procedures within FÁS for the approval of that kind of spend.

Mr. Con Shanahan

Yes, there are. The contract would have been signed in late 2008. The first indication of that contract would have come to finance in early 2009, at the time the opportunities event occurred. In advance of the event, perhaps two or three weeks before it, a payment was requested. It was necessary to make it in order for the event to proceed. I am not sure of the time line for a board paper to be prepared in time for the next available board meeting, which I presume would have been in February. In any event, a decision was made to pay the advance and ensure that the board was apprised and could approve it before the final payment was made.

Deputy Róisín Shortall

That is a very unsatisfactory reply, Chairman. The question concerns a very significant amount of money.

Chairman

There is a vote in the House.

Deputy Pádraic McCormack

That will be in three minutes.

Chairman

We want to sort out the arrangements.

If we do not get this right we will bring down the Government.

Mr. Con Shanahan

There were two payments made: an advance payment on account and then the final invoice and account. The notice of the advance payment of the account came very late for finance. The event had been contracted, signed and agreed and was going ahead. Funding was sought by way of an advance.

One might argue it was a mistake to pay that advance, allow the programme to go ahead and subsequently take steps to ensure that the full cost and full programme were presented to the board for approval before the final payment was made, but that happened. The alternative would have been to refuse the advance and perhaps prevent the programme from going ahead and then present the full facts to the board at its next meeting.

However, in simple terms there were two payments. An advance payment came in, which was the first notice that came to the finance department. It decided to pay it, rightly or wrongly.

Deputy Róisín Shortall

What was the amount?

Mr. Con Shanahan

It was for €200,000 odd, or about 40% of the cost of the programme. I can give the Deputy the exact figure.

Deputy Róisín Shortall

I do not accept what Mr. Shanahan is saying. In any reputable organisation there would be proper procedures in place for approvals of that kind of expenditure, never mind in an organisation the size of FÁS. It is not something that arises overnight, where somebody is putting pressure on for a cheque. There are procedures that need to be followed. If, as director general, Mr. Molloy did not have regard for those procedures, other senior staff members should have had. Clearly, they did not.

Mr. Con Shanahan

The expenditure was incurred inappropriately. The proper process was not followed. It should have been brought to the board in 2008 and it was not.

Deputy Róisín Shortall

Who was involved in that?

Mr. Con Shanahan

The director general signed the contract with Croke Park.

Deputy Róisín Shortall

Who else was involved?

Mr. Con Shanahan

The assistant director general, or secretary, Mr. Gerry Pike. They are the two persons whose names are on the contract.

Deputy Róisín Shortall

Who would have written the cheque?

Mr. Con Shanahan

The cheque would have been written by the accounts payments department.

Deputy Róisín Shortall

The people there would have known the proper procedures had not been gone through

Mr. Con Shanahan

That was the first point or notice they would have had that there was a payment to be made to Croke Park which would have been in breach of procedure.

Deputy Róisín Shortall

They would have been aware of that.

Mr. Con Shanahan

I am not sure that they would have been.

Deputy Róisín Shortall

What was the procedure in that case?

Mr. Con Shanahan

The procedure was that the whole programme should have been brought to the board in the first instance, before any contract was entered into.

Deputy Róisín Shortall

What is the procedure when a request goes to accounts payable for a cheque to be written? Is there a written approval? Should there be a written approval from the board accompanying that request?

Mr. Con Shanahan

Yes, and there was not.

Deputy Róisín Shortall

Did nobody in accounts payments pass any comment on that?

Mr. Con Shanahan

Not to me.

Deputy Róisín Shortall

Did they raise it with anybody?

Mr. Con Shanahan

I cannot answer that but it did not come to my attention until the second invoice came in.

Deputy Róisín Shortall

What was your role at that point, Mr. Shanahan?

Mr. Con Shanahan

I was director of finance throughout the process. When the second bill came to my attention, I asked for a paper to be prepared and brought to the board.

Deputy Róisín Shortall

Were you responsible for the accounts payments section?

Mr. Con Shanahan

Yes.

Deputy Róisín Shortall

Were you concerned that a situation arose whereby a cheque for €200,000 was released from the organisation without the proper approvals?

Mr. Con Shanahan

If I recall it correctly, it was for €260,000. The Deputy asked the question. Yes, I was concerned. It is unfortunate but I believe, in fairness to the people concerned, that this was required as a matter of urgency. It clearly had the approval of the director general——

Deputy Róisín Shortall

You sound as if you are justifying it.

Mr. Con Shanahan

I am not justifying it. I am just giving the facts.

Deputy Róisín Shortall

I must say you sound as if you are. What action did you take when you discovered what had happened?

Mr. Con Shanahan

I ensured that the account was not finalised until it went to the board. I withheld the payment.

Deputy Róisín Shortall

Was any individual disciplined because of the breach in procedures?

Mr. Con Shanahan

There was a discussion on how it happened.

Deputy Róisín Shortall

When did you first become aware of it?

Mr. Con Shanahan

After the event. I cannot say exactly when but some time in March, probably when the second invoice came in.

Deputy Róisín Shortall

Did you issue any direction or reminder to staff then in regard to the procedures to be followed?

Mr. Con Shanahan

Yes. I would have asked how this had happened.

Deputy Róisín Shortall

You did not issue any direction.

Mr. Con Shanahan

There were directions being issued throughout the period because the whole system was transformed as a result of the events of the last two years.

Deputy Róisín Shortall

Does Mr. O'Toole want to make a comment on that?

Mr. Paul O’Toole

Mr. Shanahan has probably covered the point I wanted to make. The limit to the amount that the director general can sign, including myself, to approve a payment is €250,000. The payment went through at €260,000 and, as Mr. Shanahan, has said, it should not have. However, it was the finance department which insisted that the appropriate paperwork be completed before the second payment. I wanted to make that point. What they did was they accepted the authority of the director general for a payment of €260,000, which was €10,000 above the required limit. When that was brought to the attention of those at a more senior level, they then ensured that no further payment was made without it being brought to the attention of the board. I wish to make the point that when that was brought to the attention of those at a more senior level, they then ensured no further payment was made without the matter being brought to the board.

Deputy Róisín Shortall

Mr. O'Toole referred to the matter being brought to the attention of those at a more senior level. Who brought it to their attention?

Mr. Paul O’Toole

The matter was raised by the director of finance. I presume he raised it through the assistant director general of finance.

Mr. Con Shanahan

I asked for a report paper to be prepared and presented to the board.

Deputy Róisín Shortall

When was that presented to the board?

Mr. Con Shanahan

It would have been around June some time. The cheque or payment was withheld for several months until such time as the paper was brought to the board.

Deputy Róisín Shortall

When was the first payment of €260,000 made?

Mr. Con Shanahan

I suggest that would have been in early February or late January. It was after the event when the final account came in or some time afterwards.

Deputy Róisín Shortall

Was there not quite a lapse in time?

Mr. Con Shanahan

There was a period of a number of months. The board meets monthly. There is a lead-in time to prepare and send out papers, some ten days in advance of a meeting. The important thing is that it was not paid until such time as we received board approval.

Deputy Róisín Shortall

What was the response from the board and the director general to Mr. Shanahan's paper?

Mr. Con Shanahan

I was not present and I did not present the paper. It was not my responsibility. It was the responsibility of the person responsible for the event to bring that paper.

Deputy Róisín Shortall

Who brought the paper?

Mr. Con Shanahan

I believe it was the corporate affairs department. It may have been the assistant director general at the time, Christy Cooney.

Deputy Róisín Shortall

He brought the paper.

Mr. Con Shanahan

Yes.

Deputy Róisín Shortall

Was there a formal response to that paper?

Mr. Con Shanahan

There was a formal approval by the board for the expenditure and that approval is minuted and, on that basis, I disbursed the final payment.

Deputy Róisín Shortall

I wish to move on to the Department.

Chairman

I refer to one important matter in all of this, namely, procurement. The event was transferred from the RDS. Mr. Molloy stated at the time that the RDS was unsuitable, a point rejected by the chief executive of the RDS. The final contract for Croke Park was €640,000. There was no procurement in all of this. Earlier, we spoke about procurement as an essential issue. Why was the lack of procurement practices or the failure to comply with procurement procedures not questioned at that stage?

Mr. Con Shanahan

The action moved from the RDS to Croke Park. That took place a number of years earlier. As the Chairman indicated, there was no tender process to select Croke Park as a venue. I understand the director general indicated a number of alternative venues were considered and deemed to be unsuitable by the director general.

Chairman

Did he advertise?

Mr. Con Shanahan

No. There is no evidence to that effect of which I am aware, but I understand he has stated that a number of venues were considered.

Chairman

We do not know which venues, we do not know how they were considered and there is nothing on record.

Mr. Con Shanahan

There is no record of that.

Chairman

It was a straight swap or switch from the RDS to Croke Park, without any procurement practices being followed, without any authorisation from the Department. Cheques were paid out and the final bill was €640,000.

Mr. Con Shanahan

Yes. However, that bill came a good deal later. As I remarked earlier, there were contracts prepared by the departments outside of procurement.

Chairman

They amounted to €590,000.

Mr. Con Shanahan

Yes. There were contracts. This would not have gone through the procurement unit. There was a contract. One of the key considerations when disbursing any moneys is the basis on which they are disbursed. The contract would have, effectively, taken the place of an official order. In respect of how the venue was procured, there was no procurement process followed for it. Croke Park was selected by the former director general without a procurement process.

Chairman

For a major move such as that involving a major event, surely the board did not have to get a report to be aware of it? If it had two eyes and two ears, that should have been enough. I call Mr. Mulligan.

Mr. Dermot Mulligan

I do not recall whenever the specific decision was made or in what year that took place. I refer to the change from the RDS to Croke Park in 2004. It would have been before my time on the board. The board would have been involved in that decision. I would have expected the board would have approved that decision. However, it was before my time on the board.

Deputy Róisín Shortall

Was Mr. Gorman on the board at that point?

Mr. Seán Gorman

I was on the board at that time.

Deputy Róisín Shortall

Does Mr. Gorman have any recollection?

Mr. Seán Gorman

I can recall the move but I cannot recall exactly the basis on which it was put to the board. I would have to look up my board papers or the board papers from that time. I do not recall any very significant heavy discussion about the matter or questioning of it. However, I am completely dependent on memory here and I would have to look up the board papers for that time.

Deputy Róisín Shortall

I am surprised Mr. Gorman does not recall that. This would have been a significant spend and a major event that took place every year. I would have expected the decision to move it from the RDS to Croke Park would have come to the attention of Mr. Gorman and that he might be able to recall some of the detail.

Mr. Seán Gorman

The only recollection I have is that Croke Park was identified as the most suitable venue, but I cannot remember exactly the basis on which it came to the board. I would have to examine the board minutes to remind myself of the detail of the discussion.

Deputy Róisín Shortall

What is the position in respect of proper procedures being followed for the taking of that decision?

Mr. Seán Gorman

I do not recall any discussion on procedural issues at that time. There was none whatsoever.

Deputy Róisín Shortall

It was a proposal from Mr. Molloy. Is that correct?

Mr. Seán Gorman

As I recall, that was the case, but I qualify that by saying I will have to look back at whatever is recorded for the discussion. I do not remember a very detailed discussion on it.

Deputy Róisín Shortall

What was Mr. Cooney's role at that stage?

Mr. Seán Gorman

I cannot remember which office he held in FÁS. Was he the ADG, assistant director general, in charge of finance at that stage? I am unsure but perhaps our FÁS colleagues can help us on that.

Mr. Con Shanahan

He was assistant director general. I do not believe he had the responsibility at the early stages for that programme, but at a later stage he did have responsibility for the programme. He was an assistant director general.

Deputy Róisín Shortall

It is very hard to see how one could have a group of people sitting on the board that oversaw this significant change of venue that it could over-see the expenditure of a very large amount of money over a number of years and yet no one stopped to asked if the proper procedures had been gone through from a procurement point of view or in terms of approvals for payments. Does this not mean that the board stands indicted on that issue, or was it simply that things were too cosy?

Mr. Con Shanahan

Clearly, I cannot speak for the board. However, it occurs to me that the third venue considered by the director general was the Point Depot. There is no documentary evidence of what was considered but I can only assume there was a view taken, perhaps inappropriately, that an event of that size the opportunities for——

Deputy Róisín Shortall

I accept Mr. Shanahan was not on the board but Mr. Gorman was. He is the only person here who was on the board at the time.

Mr. Seán Gorman

As I stated I will have to look up the notes of that board meeting. I cannot remember issues being discussed in respect of procurement or proper procurement policies. I remember a discussion about the event moving on the grounds that it was a more suitable location.

Deputy Róisín Shortall

It has already been established that proper procurement procedures were not followed in respect of the payment initiated by Mr. Molloy. Does this not mean the board at the time stands indicted of failing to carry out its responsibilities adequately?

Mr. Seán Gorman

I will have to determine on what basis it was presented to the board. I do not know and I cannot recall.

Deputy Róisín Shortall

Has Mr. Gorman not read the Comptroller and Auditor General's reports up to now?

Mr. Seán Gorman

Yes. I have read the Comptroller and Auditor General's report.

Deputy Róisín Shortall

Did Mr. Gorman not check then?

Mr. Seán Gorman

I would need to check back on the board minutes at the time.

Deputy Róisín Shortall

These are two very significant issues that came out from the Comptroller and Auditor General some time ago and have been aired in some detail at this committee before. Is it the case that Mr. Gorman did not check his records?

Mr. Seán Gorman

Not specifically on that procedural point.

Deputy Róisín Shortall

There are two significant points at issue.

Mr. Seán Gorman

It would have been a matter for the director general as the Accounting Officer for the organisation to ensure that whatever rules were required were followed in terms of procurement etc. As I remarked, I am depending completely on my poor recollection of the discussion.

Deputy Róisín Shortall

I would have thought Mr. Gorman would have prepared better than this prior to appearing before the committee not only on this occasion, but on previous occasions. These are significant events. Mr. Gorman is a member of the board and a representative of the Department on the board. As Secretary General of the Department, Mr. Gorman has responsibility for what occurred in FÁS over a number of years. I am disappointed he is not better prepared to deal with those issues.

Mr. Seán Gorman

The focus we have applied, in particular since these issues came to light, is to ascertain how we can learn from these things and move forward.

Deputy Róisín Shortall

No, that is stage 2. Stage 1 concerns how these things happened and who is responsible for them happening. I hope we will learn lessons afterwards but our first responsibility is to find out why these things happened, how they were allowed to happen and who is responsible.

Mr. Seán Gorman

I will have to look up my notes on the discussion at the time.

Chairman

To clarify one thing which was said, namely, that Croke Park was more suitable, that was only the opinion of Mr. Molloy who did not bother to go through the proper procedures. The labelling of the RDS has been refuted by it. To add to the comments of Deputy Shortall, this is the second occasion today where Mr. Gorman has had to reflect on his memory. One occasion concerned the bonuses and this occasion concerns a fairly substantial element of this report. I expect witnesses to be better prepared. As I said at the start of the meeting, our efforts are being hindered again by the lack of documentation, the failure to produce material and amnesia.

Deputy Róisín Shortall

Earlier, Mr. Gorman reported on the review of Mr. Molloy's package. Did the review consider the legal basis for the package in the first place?

Mr. Seán Gorman

The issue of the legal basis for the package had been clarified in advance of that review. The review we are currently discussing arose in the context of the Tánaiste requesting it.

Deputy Róisín Shortall

Yes, but did that review comment on the legality of the package in the first place?

Mr. Seán Gorman

No, the particular review we asked for in the context of the last discussion and the Tánaiste's request concerned whether the new information which had come to hand suggested any basis on which there was a legal basis to set aside the terms of the severance arrangements. The legality had been dealt with previously and it was approved under section 6(3) of the Labour Services Act.

Deputy Róisín Shortall

What is the current status of that review? When will it be published?

Mr. Seán Gorman

On the status of the review, it has concluded. The Office of the Attorney General has advised, having examined a series of documents, including the internal audit reports of FÁS 2006-07, the minutes of audit committee meetings, INV 137, the 23 audit reports which are in the FÁS process and which the Chairman will address in another meeting, the transcripts of the Committee of Public Accounts hearing and the latest report from the Comptroller and Auditor General on internal control and governance. The conclusion was there was no legal basis, on the basis of all of the information, to set aside the terms of the severance arrangements.

Deputy Róisín Shortall

Will the report be published?

Mr. Seán Gorman

The normal practice, based on legal advice from the Attorney General, is that such reports are not published.

Deputy Róisín Shortall

Mr. Gorman described it as a review carried out by the Department, with input from the Attorney General. It is not just legal advice, rather, it is a review by his Department. Will the review be published?

Mr. Seán Gorman

I am not aware of such a proposal. I would have to consult the Minister on the publication of the review. The review, in effect, was a re-examination of all of the reports which have come to light and the referral of the reports and issues to the Office of the Attorney General for advice as to whether there was a legal basis to set aside the terms of severance. Legal advice was given on two occasions. The first was in the context of the earlier review, which arose when the former head of internal audit had reported that information had been withheld from the board. The matter was reviewed at that stage——

Deputy Róisín Shortall

Chairman, we might pursue that issue with the Minister.

Chairman

We should put a formal request to the Secretary General to provide us with a copy of the review.

Deputy Róisín Shortall

To move on, in response to earlier questions, Mr. Gorman referred to the suite of changes which have been put in place in FÁS. The overriding question is why there was a need to put a suite of changes in place in a major State agency and why a situation was allowed to continue in FÁS which was highly irregular, to say the least, while having a direct line from the Department to FÁS, with a senior member of the Department sitting on the board of FÁS over many years, as Mr. Gorman did prior to that time. Why was the situation allowed to get as bad as it was, in terms of corporate governance, without action being taken?

Mr. Seán Gorman

The issues which have arisen on the corporate governance front have arisen from revelations and investigations which have been carried out. At the level of the supervision of FÁS by the Department, we had assurances that all the various systems and processes were in place and that the code of governance was being complied with. The difficulty——

Deputy Róisín Shortall

Mr. Gorman had assurances that everything was being done properly.

Mr. Seán Gorman

Yes.

Deputy Róisín Shortall

I find that very hard to understand. Mr. Gorman said, as the parent Department, the Department of Enterprise, Trade and Employment has assurances that everything was being done properly, while its assistant secretary general was sitting on the board. Who was not reporting accurately? How did Mr. Gorman come to have those assurances or to think he had them?

Mr. Seán Gorman

First, we had assurances on an annual basis from the chairman, in terms of statements of compliance with the internal governance rules and regulations which were in place. We had assurances that the systems were in place. We are seeing here that those systems were not working and at the various levels of the organisation, various things were happening which were not absolutely in compliance with those rules and regulations.

Deputy Róisín Shortall

It is not a question of "not absolutely". In many cases, things were not at all in compliance.

Mr. Seán Gorman

Yes.

Deputy Róisín Shortall

Mr. Gorman seems to be seeking to minimise the problem.

Mr. Gorman

No, I am not minimising it, but when we learned of problems we took action. We asked for investigations. The Tánaiste has asked for investigations. The board was not aware of many of the difficulties and issues which are coming to light.

Deputy Róisín Shortall

It could be argued that action was taken, especially by the Tánaiste, when the story hit the headlines and went out into the public domain. We should not have to depend on the media to expose this kind of carry-on. There should be systems in place. The Department should have ensured that those systems were in place. There is a very significant spend of €1 billion per year in FÁS. Yet, despite having a senior representative sitting on the board, it was unable to provide adequate oversight.

Mr. Seán Gorman

On the issues which have emerged, there are two levels of oversight. First, there is the level at the Department, which is a higher level of oversight, and then there is the level of oversight by the board. The issues which are coming to light were not identified by the board, and I accept that. The board would not have been aware of many of the issues which have subsequently been revealed. As soon as it learned that there were issues of difficulty or complaints were received, it moved on them and took a fundamental look, not just at procedures and processes, but at the statutory basis on which the agency was structured, and moved and changed them.

Deputy Róisín Shortall

I would like to move on to examine the competency development programme, where a total of €126 million was spent on employment training. It was approved by the board of FÁS. It was a fund which started off with an annual spend of €2 million which grew to €3 million, €12 million, €31 million, €44 million and €32 million. It was a substantial spend over a short number of years. When we discussed this matter last September, we discussed a review of the programme which the Department was carrying out and the fact that a principal officer in the Department who had been asked to chair the review had resigned because of his concerns about the reporting arrangements. At that time, when I asked Mr. Gorman when that review was initiated he told me at that stage it was initiated in 2008. Since then it has been put to me that this review was proposed within the Department in early 2005, that it was approved by Government in 2006 and the first meeting of the steering group took place in mid-2007. That does not sit with Mr. Gorman's statement to me in September that this review was initiated in 2008.

Mr. Seán Gorman

The review was part of a programme of value for money reviews which we agreed to do with and through the Department of Finance. The review effectively got going in 2008 and it was managed internally. When we discussed——

Deputy Róisín Shortall

I am sorry, Mr. Gorman, last September, when I asked you about it, you said, "We initiated it in 2008". That is a quote from the record of the meeting.

Mr. Seán Gorman

When I was talking about 2008 I was talking about when the review actually started.

Deputy Róisín Shortall

That is not what I asked you. I asked when did the Department initiate that review. This was significant because this substantial spend was going on for some time. We had a review that reported in mid-2009 and I asked when did the Department initiate this review because I wanted to know when it first had concerns about it. Mr. Gorman said, "We initiated it in 2008."

Mr. Seán Gorman

Yes and what I meant by initiated was we started the work in 2008.

Deputy Róisín Shortall

However, it was initiated in 2005.

Mr. Seán Gorman

It was first mooted in 2005.

Deputy Róisín Shortall

So that was not an accurate response.

Mr. Seán Gorman

It was my interpretation of "initiation", yes.

Deputy Róisín Shortall

It was not an accurate response to my query about when it was initiated within the Department.

Mr. Seán Gorman

Not now that I understand what the Deputy meant——

Deputy Róisín Shortall

Does Mr. Gorman now understand the meaning of "initiate"?

Mr. Seán Gorman

Yes, in the context of the Deputy's question. The review was not initiated or started or proposed because of particular concerns. The review was part of a programme of reviews, a rolling programme of reviews done in response to requests by the Department of Finance and a programme of rolling reviews carried out across the system. It was in that context we decided to do it because there was so much money involved here. It was not the case that we were worried at that point, it was rather that there was a significant amount of money and we felt it was appropriate to take a look at it. At that point it was not driven by a very particular concern.

Deputy Róisín Shortall

We know that €126 million in total was spent on that programme. Where did that €126 million come from?

Mr. Seán Gorman

Quite a significant amount of it would have come from the national training fund and there would have been some clawback of that expenditure from the European Social Fund.

Deputy Róisín Shortall

The national training fund?

Mr. Seán Gorman

Yes, it is a levy on employers which is applied through the PRSI scheme. I think it is 0.7% of the amount collected under PRSI which is put into a national training fund for purposes of training. It is essentially a contribution by employers. The fund has accumulated a surplus over the years so the bulk of it would have come from the national training fund and which in turn would have been eligible for European Social Fund support.

Deputy Róisín Shortall

Is Mr. Gorman saying that the entire national training fund was made up of employers' contributions?

Mr. Seán Gorman

Yes. The sources of funding for training which are supported by the State are really threefold; direct Exchequer moneys which are voted straightforwardly; European Social Fund moneys which can be claimed as an offset against Exchequer funding and then there is a special fund covered by very specific legislation which established a national training fund and which is funded by 0.7% of the PRSI contribution and which in turn is available to the State to redirect into training.

Deputy Róisín Shortall

I ask Mr. Gorman to detail the makeup of the €126 million.

Mr. Seán Gorman

Between the different funds?

Deputy Róisín Shortall

Yes. Where did it come from?

Mr. Seán Gorman

The bulk of it would have been the national training fund.

Deputy Róisín Shortall

How much of it came from that?

Mr. Seán Gorman

I would not have the exact breakdown but the way it works initially is that all of the money is funded up-front and then there is a subsequent clawback from the European Social Fund. In the first instance, the gross cost would have been funded from the national training fund.

Deputy Róisín Shortall

Ultimately, where did that money come from? Can Mr. Gorman give the committee a breakdown of that €126 million? How much of it was ESF funding?

Mr. Seán Gorman

The intervention rate on ESF funding would have been about 35% overall, I think. I do not have the precise breakdown with me.

Deputy Róisín Shortall

A total of 35% ESF? How much was Exchequer funding?

Mr. Seán Gorman

There was no direct Exchequer funding in that sense, in there, as it was national training fund money. It is important to point out that the national training fund, while it is a contribution by employers, becomes available to the State to redisburse or to disburse, for training. To put it another way, if we did not spend national training fund money and we wanted to do the same thing, we will spend straight voted Exchequer money.

Deputy Róisín Shortall

The impression was given — and certainly this is carried through from the Comptroller and Auditor General's report — that there was this pot of ESF funding, that there was underspending in the Department and this had to be got out quickly in case we lost it.

Mr. Seán Gorman

Yes, ESF funds were available at the time.

Deputy Róisín Shortall

However, it did not have to be got out quickly did it? That was only a portion of it anyway.

Mr. Seán Gorman

Yes, it was only a portion of it. However, at the time there were constraints on the amount of time we had available to spend these moneys.

Deputy Róisín Shortall

What were the constraints?

Mr. Seán Gorman

They were deadlines against which ESF moneys had to be drawn down under various programmes.

Deputy Róisín Shortall

What were they?

Mr. Seán Gorman

It would have been a 2004 to 2008 ESF programme, during which there would have been certain deadlines for making commitments.

Deputy Róisín Shortall

That could have been done in a planned way and should have been done.

Mr. Seán Gorman

It was done in a planned way in that the money was available for training purposes. The thinking at the time was that there was significant need to upskill people at work. There were three strong areas in particular where the whole idea of upskilling the workforce was being advocated, at European level from the Commission through its broad employment strategies, through a domestic enterprise strategy group which was called ahead of the curve which came up with this One Step Up initiative and the report of the expert group on future skills needs in 2007 which supported the idea of upskilling people. The idea of training people in employment and upskilling them was very much current policy.

Deputy Róisín Shortall

Given the times that were in it and how the economy was performing and so on, one would imagine that if there was €126 million to be spent on training, many of us would have views about how that should have been spent. We still have large areas of educational disadvantage and many people have no skills at all, such as those who remained on the dole, for example, in spite of a booming economy. All of those issues could have been tackled at that stage. It is very difficult to understand why this was used as, what could be described as, a slush fund. Large amounts of money were being shovelled into various organisations, a number of them being employer organisations, union organisations and other people who came forward, some with links to FÁS, to offer to provide training to people who were already in employment. In essence, this was a subsidy to employers and an investment in companies that were already doing extremely well. There has to be questions about the decisions surrounding the setting up of that fund in the first place and the fact that this was a direct subsidy going to employers in a booming economy.

Mr. Seán Gorman

First of all the policy decision is a policy decision on which it is not appropriate for me to comment as Secretary General. The policy decisions——

Deputy Róisín Shortall

Was not Mr. Gorman responsible for devising the policy?

Mr. Seán Gorman

I may have had an input into the policy but the policy decisions on where policy priorities are determined are decisions of Ministers.

Deputy Róisín Shortall

Ultimately.

Mr. Seán Gorman

Ultimately.

Deputy Róisín Shortall

Mr. Gorman quotes from Ahead of the Curve. Is it not the case that Ahead of the Curve was very severely criticised by Colm McCarthy at the time?

Mr. Seán Gorman

He may have criticised it but I have to point out that we were in a period when we enjoyed a much more healthy labour market than at present.

Deputy Róisín Shortall

A much more healthy labour market situation.

Mr. Seán Gorman

In terms of the rate of unemployment being significantly lower.

Deputy Róisín Shortall

Is that not all the more reason one should have invested in those people who were outside of employment?

Mr. Seán Gorman

The people who were unemployed were continuing to receive supports through other measures. We were looking at people who were in the workforce and it had been accepted in policy terms that from a competitive point of view it was a good thing to enhance their skills, particularly from the point of view of being more portable in the workplace and it was viewed as a competitive advantage. That was not just the thinking in Ireland at the time but it was a much more broad and widely accepted approach to training, that there was merit in training people in employment who were in need of it. That was the decision that was taken.

Deputy Róisín Shortall

Mr. Gorman instanced, as well as Ahead of the Curve, the national skills strategy. Has that come to anything?

Mr. Seán Gorman

This particular scheme has made a significant contribution to over 100,000 people being trained. There are a whole series of training initiatives.

Deputy Róisín Shortall

As a defence for the decision to invest €126 million in companies, rather than in people who are outside the workforce, Mr. Gorman quotes some of the policy documents that were around at the time. What I am saying is that the national skills strategy has not come to anything. Where is the implementation body?

Mr. Seán Gorman

The bulk of the national skills strategy is delivered through FÁS and through other training providers so that there is a skills strategy. That has changed quite significantly from the time when a very focused approach was being taken to people in employment to a situation now where the switch has gone right back in terms of the bulk of the investment going to people who are unemployed. Our in-company training provision is down to approximately €6 million in 2010. The strategy is evolving all the time and has continued to evolve and now reflects the more pressing demand of unemployed people.

Deputy Róisín Shortall

I think the decisions which were taken within the Department in respect of spending that money in the way it was spent are very questionable and many people would have different views on the priority which should have been attached to training people who are already in employment and subsidising employers to the extent that it did. Is it the case that a memo went to Government proposing that programme be enhanced and that €0.5 billion be spent on in-employment training?

Mr. Seán Gorman

I do not recall a proposal for €0.5 billion specifically going to Government.

Deputy Róisín Shortall

Does Mr. Dermot Mulligan recall that?

Mr. Dermot Mulligan

I do not recall a memo for €0.5 billion unless the Deputy is referring to a memo for Government in relation to the national skills strategy which detailed the targets in the national skills strategy over a period to 2020. We referred in our opening statement to the need to upskill 500,000 people by one level on the national framework of qualifications. There may have been estimates in the document in regard to the possible cost but I do not recall what those estimates were. The point is that in relation to the whole area of education and training and skills, it is now seen as a crucial element of economic enterprise development for any country in the global marketplace and if we are to compete effectively, we need to have our people upskilled. That was the thinking not just in Ireland under the national skills strategy but also across Europe as we try to compete with those other economies in the global marketplace.

Deputy Róisín Shortall

Given that the €126 million was directed from your Department into FÁS, what systems were in place to ensure we are getting value for money?

Mr. Seán Gorman

When we had the discussions with FÁS as to how we might address the issue of upskilling people in the workplace and how we could best utilise the funds that were available, we got a series of proposals from FÁS which we discussed with it. The final proposal was in September 2004 which set out the various costings, target groups, delivery methods and levels of participation. These were discussed with FÁS and we agreed on the broad basis that we should proceed with this competency development programme on the scale we have now seen.

Deputy Róisín Shortall

So there was not really any system in place in the Department in terms of securing value for money.

Mr. Seán Gorman

There was an agreement as to the focus and the top priority areas which would be addressed. They were people in employment——

Deputy Róisín Shortall

That is not what I am asking Mr. Gorman. I am asking what system was in place in the Department to ensure we were getting value for money for a spend of €126 million.

Mr. Seán Gorman

We had regular reporting from FÁS on its general spend and including this in terms of output statements. We had reports to the board and a special sub-committee of the board was established to monitor and oversee the implementation of the competency development programme on which we had a representative.

Deputy Róisín Shortall

Does Mr. Gorman now accept that those systems which he says he had in place failed abysmally?

Mr. Seán Gorman

I am not sure I would accept they failed abysmally. There were over 120,000 people trained to some significant benefit.

Deputy Róisín Shortall

What certification?

Mr. Seán Gorman

These are the details we are finalising in our own review to capture exactly the levels of certification. We certainly would accept that things could have been done better. We certainly accept that ultimately there were issues around the extent to which the programme was as effective as it might have been. Certainly significant numbers of people were trained and significant numbers have received certification. Those are the details we are finalising in our own report.

Deputy Róisín Shortall

We know now, and again thanks by and large to the media, that many of the participants did not attend the training courses which they were supposed to have attended. We know that many of the courses were delivered by unregistered tutors. We know there were major gaps in the monitoring of the programme. We know that the targets were not met. The strategic initiatives and alliances delivered less than half the volume of training days envisaged by the board. We know that some courses that were part of the CDP were as a result of approaches from suppliers rather than being initiated by FÁS itself. We know that some courses, especially for the low skilled, were very poorly targeted and that no evaluation was undertaken of the benefits delivered to participants. Is that not a fairly damning indictment of the role played by the Department in terms of ensuring that this significant spend achieved what it was supposed to achieve and that it was properly monitored?

Mr. Seán Gorman

We have concerns about the monitoring of it. The issues around the quality of certification, attendances and non-attendances——

Deputy Róisín Shortall

When were those concerns first raised with Mr. Gorman?

Mr. Seán Gorman

Essentially, they would have come to light in the context of our own review. There were very specific complaints made by people, most recently, in the north east of the country about certification problems. Various concerns were expressed at different times about different aspects of the particular delivery of the programme, which FÁS has pursued and will continue to pursue. What we are doing now is focusing on whatever changes need to be done as we continue in-company training, even if it is on a much smaller scale now of €6 million a year.

Deputy Róisín Shortall

It is difficult to believe that because Mr. Gorman's own Department's review was first mooted in 2005. It is a full five years later and we still have not seen that review. There is clearly no sense of urgency about this very big spend in terms of examining whether the Department met its targets, was properly dealt with and proper procedures were followed and so on. Mr. Gorman does not appear to be taking it very seriously.

Mr. Seán Gorman

I certainly am taking it seriously. I had hoped I would have had that report before the end of the year.

Deputy Róisín Shortall

There is a view shared by many of us here that this was just a very large slush fund of €126 million for employers. Mr. Gorman is here now, as Secretary General of the Department, and he is not providing any reassurance whatsoever to me that these moneys were properly disbursed and that the spending of them was adequately overseen by his Department. In fact, he is displaying no evidence of any sense of urgency in regard to getting to the bottom of this, given that he has been sitting on the review for a considerable length of time. Mr. Gorman would need to do better to assure us that this money has been properly spent or that his Department is doing its job adequately.

Mr. Seán Gorman

It is unfortunate that the review is not finished. We are concerned, and I hope I am not creating the impression that we are not. We agreed broad targets with FÁS for the delivery of the programme. We did have arrangements in place whereby they were reporting. We did have someone on the board sub-committee monitoring the implementation of it.

Deputy Róisín Shortall

None of those things worked.

Mr. Seán Gorman

Not everything about the programme was a failure, and I think we will see this in the outcome of the review as well.

Deputy Róisín Shortall

A lot——

Mr. Seán Gorman

There were a lot of problems. I would not want to underestimate——

Deputy Róisín Shortall

I am asking Mr. Gorman, as Secretary General of the Department, if he can provide any assurances to us that this was anything other than a slush fund.

Mr. Seán Gorman

None of the moneys we provide are slush funds. All of the moneys that are provided to FÁS or any other agency are subject to the normal rules of approval and sanction and compliance with policy. There is no money provided as a slush fund. Issues may have arisen later on as regards tendering and various things which we are addressing but there is no question of slush funds. This was a deliberate policy decision to target the upskilling of people in employment and it was pursued on that basis.

Deputy Róisín Shortall

The final draft of the review of that programme from the steering group, initiated in 2005, was completed in the middle of last year. When Mr. Gorman was before the committee in September he told us that he was waiting for the Comptroller and Auditor General to complete his report. That was news to everybody and I understand the Comptroller and Auditor General forwarded Mr. Gorman the relevant part of his report very quickly after that meeting in September. Why is it that we still have not seen the review in the month of February?

Mr. Seán Gorman

The principal reason we have not seen the conclusion of the review is that it became clear in the discussions here on the previous occasion that there were significant concerns around the extent to which the review was perceived to be very much internal and that the review was being done almost by ourselves. When I reflected on that discussion I decided to look to see if I could bring in a third party to complete the review, given that the chair had previously resigned. We checked with our colleagues in the Department of Finance——

Deputy Róisín Shortall

That is not what Mr. Gorman told us. He is changing the story completely. That is not what he told us in September.

Mr. Seán Gorman

No. I am saying that after the discussion here on the previous day——

Deputy Róisín Shortall

The discussion here centred on the need to complete that review as quickly as possible. There was concern about the fact that the person who was chairing it felt he had to resign from that position——

Mr. Seán Gorman

And there was also concern——

Deputy Róisín Shortall

——because of the manner in which it was being handled and what seemed to be endless delays in the publication of the report, and we wanted to see that report as quickly as possible. Mr. Gorman is somehow using the discussion here as an excuse——

Mr. Seán Gorman

No.

Deputy Róisín Shortall

——for further long fingering it.

Mr. Seán Gorman

No. I am not. I am saying I got a distinct message that there were also concerns. There were discussions around the reporting lines for that review in terms of who it would be going by and who that person would report to. I went away and reflected on the fact that it was all internal and I made an arrangement with the Department of Finance to get an external chair to finish it.

Chairman

He is not external. He is a former Department of Finance official, is he not?

Mr. Seán Gorman

He is external to FÁS.

Chairman

He is retired.

Mr. Seán Gorman

He has had no reporting relationship or involvement good, bad or indifferent in any of this up to now.

Deputy Róisín Shortall

Chairman, this is ludicrous. It is ludicrous that we cannot get our hands on a report completed last summer about a programme that has been going on since 2003 about huge expenditure. There are many concerns about the nature of that expenditure and Mr. Gorman seems to be dragging his heels in regard to that. We expressed concern about the inexplicable delays that occurred last September and five months later we are still no closer to seeing that review. It is completely unacceptable that there is this dragging——

Chairman

While the Deputy was voting earlier I made the point that we are hindered by the unavailability of this report. There have been only two meetings since that individual became part of the group last October.

Mr. Seán Gorman

Two formal meetings.

Chairman

Whether they are formal or informal there were two meetings since last October. To be honest, I was thinking earlier in the meeting that we would abandon our consideration of this element of the meeting today as our hands are tied because of a lack of information.

Deputy Róisín Shortall

The intention seems to be to wear down this committee. We have devoted a huge amount of time to this already. It is arguable that if there had been proper oversight and if Mr. Gorman's Department had been doing its job in regard to FÁS there would not be a need for this investigation. We are extremely hampered in bringing this investigation to a conclusion by the lack of co-operation from Mr. Gorman and that is unacceptable from our point of view. It is not something on which we will get worn down. I agree with the Chairman. If necessary we will park this issue until that is completed but we will come back to this issue and we will get to the bottom of it.

Chairman

I think we will park it because we are getting nowhere and there are huge amounts of money involved — €126 million. Many questions arise, including on procurement and so on. A company that was getting €18,000 in 2004 is now getting over €1 million. We have many questions to ask but we will park the issue and note that we are getting scant co-operation and are being hindered. We will not go away, however, either from FÁS or from the Department because I believe FÁS is long fingering us also on this entire issue. We expect FÁS to come to conclusions about its internal investigations and Mr. Gorman's Department had better conclude its review quickly because we have a duty to do for the taxpayer and we are not going to go away. Some people believe we will get weary of it but we will not.

Mr. Seán Gorman

We are not long fingering or in any way——

Chairman

That is our opinion.

Mr. Seán Gorman

I accept the Chairman's interpretation on that.

Deputy Róisín Shortall

Chairman, may I briefly address two questions to Mr. O'Toole? I am conscious of the damage that has been done to morale within the FÁS organisation because of the behaviour of the then director general and a small number of other people whom we hope Mr. O'Toole will be dealing with in the coming weeks. All of us are familiar with the excellent work done by FÁS at local level through the local offices. It was never more important to have a properly functioning training organisation. It is desperately needed at the moment.

I want to ask Mr. O'Toole about two aspects of that because they have been in touch with many staff members. First, what steps is Mr. O'Toole taking to get rid of the culture where any attempt to whistleblow is frowned upon and, in some cases, bullied down, so to speak? That unhealthy climate has prevailed at senior level in the organisation in recent years. I am aware in particular that there are difficulties in the north east about people who sought to blow the whistle and have suffered because of that. What steps is Mr. O'Toole taking to create a more healthy environment within the organisation to ensure that where people see wrongdoing they will not afraid to draw attention to it? On morale and those excellent officers in the organisation throughout the country doing their jobs, has Mr. O'Toole anything in mind in terms of staff development? What steps is he taking to bolster morale? I am conscious of the damage done by particular individuals.

Mr. Paul O’Toole

In terms of the Deputy's first question on the capacity of an individual in the organisation to blow the whistle, namely, the culture where one can say something that needs to be said without feeling he would be victimised for doing so, that is provided for formally and informally. The formality that provides for it is the Labour Services (Amendment) Act, which gives protection to staff members and others who wish to raise issues regarding concerns they have of dealings in FÁS. They are now protected within the law for reporting directly to the board and to the Garda, as they see fit. They have a particular protection in that regard.

On the back of that we have a draft speaking up policy, which will outline how this process will work in practice and will provide a conduit for a member of staff to raise concerns in a safe environment where he or she will be listened to. That is the formality for this process.

Informally, we are working hard to improve communication within the organisation. We are a large organisation and, geographically, we are widely distributed. Many people work in small offices, some people work in larger offices and, obviously, we have a centre. We are working hard to ensure that people feel linked to the organisation and to its objectives, that they are aware of what is happening and the context in which it is happening.

I have made other practical moves. I have reorganised the senior team, to mention a phrase that was used here, and was of concern to the committee, the executive board no longer exists. We are a senior management team that operates centrally and more broadly nationally. We have far more regular meetings in that regard. Each ADG has been tasked in a different way. We had a matrix structure in place but have now removed that structure from the organisation. Each ADG will now have specific responsibility for an area of policy, support or operations and it will have tasks and individual objectives to achieve within those.

The new chairman and the new board are hugely conscious of the Deputy's point regarding morale within the organisation. We have had an initial engagement with the new board and the new chairman and the board is clear that it wants to reinforce those messages. Therefore, we have a formality about systems and structures that have changed but, equally important, we must have a change of culture within the organisation that connects us, ensures people are clear about the objectives, that provides that if issues arise they can be heard in a safe environment and provides an understanding that we are an organisation working for the good of others.

Morale in the organisation is low. The Deputy is correct about that. What has happened has had a devastating impact on many people. Many people with very long service who were not connected to the problems in the organisation probably feel let down in that respect and that is manifest throughout the organisation. As we satisfy the committee, address its concerns and prove we have done so, more than anything the organisation needs to look to its future purpose. We need to be able to say this is what we are for and this is what we are attempting to do. As the Secretary General outlined, we need to state the specifics we are meant to deliver upon and demonstrate that we are doing that. There will be a turning point when we will say we have dealt with the issues, fixed what we needed to fix, acknowledged all our problems to the best of our ability and that now we are moving forward. That turn is very important to the organisation.

Chairman

Deputy Fleming has been waiting a long time to speak.

Deputy Róisín Shortall

It is important that a message goes from this committee to the 2,000 plus staff that we appreciate the work being done at local level. We are conscious of the potential damage to morale. We desire to deal with this matter as quickly as possible, as quickly as perhaps we are allowed to, for the betterment of the organisation and we very much appreciate the work the vast majority of staff in FÁS do.

Mr. Paul O’Toole

I thank the Deputy for that message and we will ensure it is circulated.

Chairman

With reference to Mr. O'Toole's comments that whistleblowers will not be victimised, I would like to get a report on the Waterford situation. Two of the people who made complaints regarding work being done on a property of a staff member in Waterford were let go subsequently. Mr. O'Toole might comment on that.

Mr. Paul O’Toole

If it is the one I am thinking of in Waterford, it is what is called a CTC, a community training centre, which is funded by FÁS, which has its own board of supervision. We have carried out several investigations into that and have made a number of recommendations to the board. There is a dispute between the employer, which is not FÁS, and two individuals. The problem is being worked through. We are ensuring that the State's investment in that community training centre is being handled properly.

Deputy Seán Fleming

I wish to conclude on a topic Deputy Shortall raised about the value for money report of €126 million and the competency development programme. One of the officials might outline the sequence of events. The person who resigned as chairperson of the steering committee had a particular grade in the Department. Was the superior officer in the Department on the board of FÁS?

Mr. Seán Gorman

Yes.

Deputy Seán Fleming

This is important. It was clearly stated here on the last day the Department officials appeared before the committee — I am on the Department's side on this one but perhaps not on it side on the rest of the process — that the chairman of that committee was being put in an invidious position by being asked to chair the investigation committee. His superior officer was involved in FÁS. The view was clearly stated by some members that day that the report should not be completed by somebody in the structure in view of the clear difficulties in which it would place staff members of Department. It was right that the Secretary General sought somebody from outside the Department to complete the process. We now have a difficulty with the lack of action arising from that. That was definitely said here the last day and I recall it being said.

When did the process surrounding completion of the value for money report start? I do not refer to spending of the money going back to 2003 but the value for money report?

Mr. Seán Gorman

In 2008.

Deputy Seán Fleming

How far advanced was it before the chairman resigned?

Mr. Seán Gorman

It was almost ready. My expectation when I was here the last day was that we would have had it wrapped up by the end of the year. It was that close.

Deputy Seán Fleming

Did I hear Mr. Gorman say it could be the end of this year before we get it now?

Mr. Seán Gorman

No.

Deputy Seán Fleming

What did the Mr. Gorman say?

Mr. Seán Gorman

What I said was that we are quite close to finishing it but that the new chairman has done considerable work not only in the steering committee but behind and outside it. We are looking at wrapping up that report within weeks, not months. There is no question of it being the end of year. He had to immerse himself in a great deal of work that had already been done and get on top of it and take control of it, as an outsider coming in.

Deputy Seán Fleming

It was right to appoint somebody outside the Department. Mr. Gorman can understand the frustration of this committee.

Mr. Seán Gorman

I can.

Deputy Seán Fleming

We are clearly unhappy with the time taken. I want to move on to where this process is going under the chairperson, and I address this question to the Department of Finance officials.

Mr. Seán Gorman

A retired——

Deputy Seán Fleming

No, I want to address this question to the Department of Finance officials here today. In his opening statement Mr.Gorman said:

I would not like to update the committee ... Since then the Department has appointed a former official of the Department of Finance, Mr. Pat McBride, as chairman of the steering committee. Mr. McBride is on a panel of possible independent chairpersons for such reviews maintained by the central expenditure evaluation unit of the Department of Finance.

Is Mr. Gorman in a position to provide this committee with the names of the people on that panel and their qualification for carrying out such reviews? There is a panel of people to deal with issues such as this. Mr. Gorman can send the names and qualification of the people on that panel to the committee. How many of the people on that panel are former public servants?

Ms Grainne McGuckin

I am not dealing with that directly but I will get the Deputy the names of the individuals. I do not know if there is a competency requirement in terms of their involvement or their former employment status but we can get that information for the Department.

Deputy Seán Fleming

I look forward to receiving a list of those people and their qualifications. I have a serious concern, which I hope is unfounded, to ensure that these are not public servants who have retired on full pension and who will now get an additional sinecure to return to do a job, although perhaps not in the Department they previously worked. I would worry that public service ‘lifers', what I would call lifelong clones in the public service — without being too derogatory — could return to carry out a report on another section of the public service. I would not have confidence if this panel was composed primarily of retired public servants. There must be a minimum of 50% from outside the public service. I am disappointed we do not have information on who is on the panel because it was specifically mentioned in the opening statement. It is an obvious follow through——

Chairman

Could we get it before the meeting finishes?

Deputy Seán Fleming

I do not know how long that will be. I will leave that to you, Chairman. However, it is a logical follow-up question.

Ms Grainne McGuckin

If I am in a position to provide it, and there is no constraint on providing it, I will provide it today. I will not make any statement on value judgments about those on the panel, their competence or otherwise.

Deputy Seán Fleming

We need to know of their former or current occupations.

Ms Grainne McGuckin

Their qualifications for the review process?

Deputy Seán Fleming

No, their former occupations.

Ms Grainne McGuckin

Their occupations only?

Deputy Seán Fleming

Yes, and their suitability. In addition, a note could be provided on how these people came to be on that panel. This is obviously the type of group whereby every time something arises in a Department, somebody will be pulled off a panel that is already in the system. We would like to know about that panel.

My second question is for Mr. Gorman regarding a review of the severance package. He said the Tánaiste asked in November that it be examined and that this examination has concluded. When was it concluded?

Mr. Seán Gorman

We had two specific responses from the Office of the Attorney General. The matter was referred on two occasions, in late 2009 and earlier that year. The matter was concluded and the final legal advice from the Office of the Attorney General was on 9 February.

Deputy Seán Fleming

Something that started only a few weeks before Christmas was completed within a few weeks after Christmas, yet the bigger value for money matter is taking a very long time. It gives the impression that when the Department wants to get something done quickly, it can do so. I contrast the speed of that review with the lack of speed in the other matter.

The severance package is mentioned on page 52 of the report. I will direct my comment to Mr. Buckley because I am quoting his figures. On chart 4.4, he gives the figure of €892,269 for the enhanced value of the severance package for the former director general. That figure is fine. However, when one puts a stark figure such as that on such an issue of public interest, it is guaranteed to be in the front page headlines in the media. In view of how starkly he put that figure, with the small print note qualification which we will return to in a moment, it was inevitable that it would be picked up and printed that way and, as a result, Mr. Buckley clearly gave the impression that the former director general has walked away with €892,269 in his pocket. The small print states that this is based on the assumption of a 30 year life expectancy and that he will draw down this pension over 30 years. It is also based on the assumption that his pension will increase by 1.75% above the rate of inflation.

The use of the single stark figure was an unfair representation of the cost of the severance package. It would have been better if it had been put on the basis of it continuing for ten, 20 and 30 years. However, to pick the 30 year figure and make it almost €1 million was guaranteed to feed into the media. I accept Mr. Buckley is not responsible for how the media write their stories but it is directly related to this figure. It would have been fairer to all concerned if that figure had been given a range according to how many years it was paid. There is also the extraordinary assumption, that nobody can make, that the pension will increase at 1.75% above the rate of inflation. Mr. Buckley could have factored in a range of options, including that figure. Picking only the 30-year figure did not help the public understanding of how much the former director general received. I am not defending the package but it gave the impression that he walked away with €900,000 in his back pocket. Will Mr. Buckley comment on why he did not give a range of potential costs? This is a potential cost over 30 years if we all live that long. It is not a cost incurred at this point but the public does not understand that because it is in the small print.

Mr. John Buckley

The Deputy will recall from last week that we did a report on pensions. We therefore had access to various assumptions relating to pensions, including the fact that experience is that they increase. The 1.75% comes from that report. In general, the rate of increase is 1.75% over the rate of price inflation. The discount rate comes from that report as well. We were trying to be consistent with our other work.

I appreciate what the Deputy is saying in one respect, that it would have been better to give a range. I will accept that from this point of view, that when one is doing something in the aggregate, as one is doing for all civil servants and as we did in the report last week, obviously the law of averages takes over. In this case we are dealing with an individual. While an individual on average will have the life expectancy we assumed, there is no guarantee that a particular person will match what happens to the vast bulk of people. The figures are founded on the assumptions that we used in our pensions report and are valid to that extent. However, I appreciate the Deputy's comments that perhaps a range might have been a better way of presenting it.

Deputy Seán Fleming

I appreciate that. I was anxious to make that point because when I read that headline in the newspaper, I assumed the former director general had driven away with €900,000 in his back pocket.

There is another point on which Mr. O'Toole might comment. On pages 61 and 62 of the report, paragraph 453 states that the board should adopt appropriate procedures to enable public interest disclosures and to investigate concerns in a robust manner. We have already mentioned cover for people making allegations and that there are clear operating rules. Mr. O'Toole mentioned that there is a draft process in place, but that it is not completed. Will he respond to the comment in the Comptroller and Auditor General's report that there will be public interest disclosures to deal with some of the concerns that are raised? What is the position on the public interest disclosure, aside from the staff protection issues?

Mr. Paul O’Toole

There are two aspects to that. The first is that under the code of conduct for the operation of semi-State bodies each board director has an obligation to fill out certain information in respect of their interests and any conflicts of interest that might arise in respect of their membership of the board of FÁS. Once they were appointed and prior to the first board meeting, each board member was sent a pack and asked to make a set of disclosures in that regard. That work is under way and might be already completed. Everybody, me included, has been required to make certain disclosures with regard to it. Each year there will be a formal return under the ethics legislation by board members in respect of their interests and their work on that.

This issue was addressed very specifically by the board at the first board meeting. There were two presentations, one from a member of the Institute of Public Administration in respect of the operation of the code of practice for semi-State bodies and the second from our legal representatives who advised members of their responsibilities under the legislation. Already, therefore, this was the first agenda item that was brought to their attention, discussed and questioned. On foot of that they resolved immediately that any interests that required their removal from a board meeting or the non-issue of the papers would be followed and, in fact, that occurred at the first meeting. We have sent them a pack stipulating the requirements. We have given them two briefings on the legislation and on their duties as directors. The board itself has resolved to operate within best practice on governance. It has already put in place its own procedures to ensure there are no conflicts of interest that may arise at board meetings.

Deputy Seán Fleming

I appreciate that. The next question I wish to raise refers to page 63 of the Comptroller and Auditor General's report, which may be for the person dealing with the internal audit. Paragraph 4.60 states: "In the period between 2005 and 2009, Internal Audit issued 29 reports arising from investigations." I find it unusual that it also states that 14 of those 29 reports were triggered by concerned staff members, seven by external sources, three from anonymous sources and two from unclear sources. Only three out of the 29, which is 10% of the audit investigation, were triggered by work carried out by the internal audit department. That sounds as if the department is not in charge. It is spending 90% of its time doing reports reacting to what somebody else has done rather than its programme of work being able to identify the issues. I would have thought that the majority of internal reports and investigations in an organisation the size of FÁS, or any other big organisation, should come from the internal audit programme rather than 90% landing on Mr. O'Toole's desk as somebody else sends in a letter. Perhaps Mr. O'Toole could comment on that. I find that three, or 10%, figure very low.

Mr. Paul O’Toole

My colleague, Mr. Patrick Kivlehan, will deal with it in more detail. If I understand it correctly, there are special investigations. The standard audit programme would be on top of this.

Deputy Seán Fleming

The title is "Internal audit investigation".

Mr. Paul O’Toole

I will ask my colleague to clarify that.

Mr. Patrick Kivlehan

We make a distinction. We would have what we call an internal audit report, which comes from our cyclical audit programme, looking into adherence to our own controls. That would be the vast bulk of our work, whereas the investigations are special once-off projects and, by their nature, do not follow a standard audit programme. They react to the information received. We do a large amount of work, therefore, which entails looking at our control processes across all of the business. This is additional work, but it is only a portion of what we do, not the majority.

Deputy Seán Fleming

How much of the work is related to internal audit investigations: 10%, 20% or 50%?

Mr. Patrick Kivlehan

It depends, because one reacts to what information one receives.

Deputy Seán Fleming

Over the course of year.

Mr. Patrick Kivlehan

Over the course of a year, it is a minority, no more than 10% or 15%.

Deputy Seán Fleming

I want to come back to the main issue and will ask Mr. Buckley to come in on this as well. In fairness to FÁS this has been said several times. I have to ask Mr. Buckley whether he has found any evidence of a slush fund for employers during the course of his audit?

Mr. John Buckley

The answer is "No".

Deputy Seán Fleming

Has the Secretary General of the Department found any evidence of a slush fund for employers?

Mr. Seán Gorman

No.

Deputy Seán Fleming

Has the chief executive of FÁS found any evidence of a slush fund for employers?

Mr. Paul O’Toole

A slush fund for employers? No, I have not.

Deputy Seán Fleming

I have to ask that question because it was bandied about here publicly several times. I am pleased that all of the witnesses have confirmed that, including the external auditor. It is easy to make a comment like that. However, it is clear from what Mr. O'Toole is saying, as well as the Comptroller and Auditor General, that there is no basis for the statement that there was a slush fund for employers in FÁS. I am happy he has responded to that point because his response was not as emphatic as I would have liked. Perhaps he did not want to respond, but I put it to him that way.

I wish to move on to page 99 onwards, which concerns the external audit. It states that: "In each of the years 2002-2008 a clear audit opinion was given on the accounts of FÁS." That is fine. Mr. Buckley went to great lengths in his opening statement — I do not have a copy of it, but I am trying to recall it — which said that it is made clear to FÁS and audited bodies that he is not responsible to find every irregularity in the system. He makes that clear through the statutory audit report, the management letter and meetings with the audit committee. I think he gave three examples of where he made it clear to FÁS that it was up to the agency to deal with these issues. He never made a statement that controls in FÁS were excellent. I do not think it is his job to make such a statement. He was emphatic in putting on the record that he never made such a statement. That is a matter for FÁS management.

The most important issue is that of management letters that are issued. In page 101, it states that management letters are a line of reporting to management on aspects of control and administration. Later on in the paragraph, it states that the purpose of these letters is to pinpoint shortcomings and make recommendations for the future. According to the chart, in 2002, recommendations were made on shortcomings in three issues, three in 2003 and two in 2004. There did not appear to be any issues in 2005 and there were three issues again in 2006. However, when we come to 2007 the chart shows that the management letter pointed out shortcomings and made recommendations under nine different headings, dealing with fixed assets, creditors, procurement, banks and cash, legal and secretarial, travel and subsistence, other expenses paid to staff, risk management, and payment processing and approval. That must have sent enormous signals ringing in the office when the management letter for the 2007 audit had to cover such a wide variety of issues. Has the committee seen a copy of that letter?

Mr. John Buckley

No, I do not believe it has. We do three layers of reporting. First, we given an audit certificate, which is a public document — the audit opinion on the accounts. The second level of reporting is something like we are dealing with now — the special reports we produce. Across all organisations and in common with every other external auditor, we issue management letters. The purpose of these management letters is to be a layer of reporting on matters that we do not believe merit public accountability. They are adjustments that the organisation really ought to take in certain areas. When we identify these they are low level, low ebb issues to which the organisation can respond at management level and adjust accordingly. On that basis, we issue hundreds of these letters every year. We had about 600 recommendations in management letters last year. They are all designed to cover adjustments that are not serious or material in the context of whether the financial statements give a true and fair view. However, it is another line of work we do below the radar which is designed to help management to improve its systems.

Deputy Seán Fleming

Is Mr. Buckley saying it represents shortcomings and may not have led to a financial irregularity?

Mr. John Buckley

In all likelihood it would not have.

Deputy Seán Fleming

Would that letter be presented to the board or the board's audit committee?

Mr. John Buckley

Yes.

Deputy Seán Fleming

I wish to make a suggestion through the Chair concerning future special reports proposed by the Comptroller and Auditor General. If he has dealt with those issues in management letters to a particular organisation, he might include the relevant extracts in the report so that we can see what he has been saying over a period of years. We are told that he referred to all these headings, but we are in the dark. I do not know what was in those headings. Perhaps he could consider that, although if he is not allowed to then perhaps FÁS could do it. I ask that this committee be given a copy of those management letters for the years 2002 to 2008 as referred to in page 101. Either FÁS or the Comptroller and Auditor General might be happy to give them to us. Can FÁS supply those management letters to us?

Mr. Paul O’Toole

Yes, we can.

Deputy Seán Fleming

That is good because it is a piece of the jigsaw I would like to see. I congratulate Mr. O'Toole on his new portfolio. In what month did he take up his post?

Mr. Paul O’Toole

In June of last year.

Deputy Seán Fleming

I accept that it is long and tedious work here in dealing with FÁS, but this committee has contributed. There is a new chief executive in place and we have an entirely new board of directors. Am I right in saying there are no former directors on the new board?

Mr. Paul O’Toole

That is correct, yes.

Deputy Seán Fleming

If we had achieved that level of clear-out in the banks, we would all be very happy, but we have achieved it through this Department anyway. Serious as the issues are — we are still awaiting that report — how much of Mr. O'Toole's time and that of his senior executives is spent dealing with the legacy issues, which relate to a period prior to them coming on board, compared to time spent on the job they should be doing in this time of high unemployment?

Mr. Paul O’Toole

It has taken quite some time. From my point of view, I have had to try to understand and help to explain the past. It is important that I understand the issues. I have had to invest heavily of my time and that of senior management colleagues in doing that. As I indicated to Deputy Shortall, there is a tipping point where it is important that all of my time is spent on the future of the organisation and working with colleagues on the board. We are moving in that direction but as I indicated to the committee, it is important we deal with the issues to the satisfaction of the committee and to the best of our ability and that we put the processes in place and that we put in place the method of ensuring those processes are carried out. We understand that is necessary. It is not all done but we are working in that direction.

Deputy Seán Fleming

I hear 22 internal audit reports are still being dealt with. There was some reference to that. Will we be here this time next year discussing those 22 internal audit reports? Somewhere along the line, I would like Mr. O'Toole to be able to do what we want him to do. I am not making light of what happened in the past but we are in the midst of an unemployment crisis and I would like to see the main training agency being able to devote the majority of its time to dealing with that.

Chairman

If we had received co-operation, which we should have received over the years, we would not be here now and we would have moved on to other matters.

Deputy Seán Fleming

In fairness, the report was only issued in December 2009 by the Comptroller and Auditor General. This is only six weeks——

Chairman

I am not referring to the Comptroller and Auditor General's report but to information we sought for oral hearings of this committee over the years.

Deputy Seán Fleming

As a member of the Committee of Public Accounts, what I find most frustrating is that we can discuss issues at length at the committee but when I pick up my Sunday newspapers, I find far more information on those issues which has been obtained through a freedom of information request and which was not disclosed to us. Will Mr. O'Toole comment on that? Would he take the view that if information can be issued under a freedom of information request, it could be given to the Committee of Public Accounts if it is dealing with the matter?

Deputy Róisín Shortall

That is a policy matter in regard to the powers of this committee. We need to seek additional powers as we have tried to——

Deputy Seán Fleming

I asked Mr. O'Toole a specific question. If he can issue information under a freedom of information request, is he in a position to issue that information directly to this committee? Can he find a mechanism by which he can do that? Does he understand our frustration? Some 48 hours after a committee meeting, we read about issues which if we had known about, would have allowed a much more beneficial discussion. Is there mechanism to deal with that?

Mr. Paul O’Toole

Freedom of information operates under certain legislation and we have requirements under it. It is our aim not to obfuscate or delay giving information to this committee or to play games in how that information is given. An example of that can be found today when committee members questioned us about certain events. We indicated to the committee that we had received a freedom of information request in respect of those matters. We provided that detail to the committee in an open hearing today.

Chairman

We communicated with the Minister for Finance expressing concern with the provisions of the Data Protection Act which inhibited us in the performance of our duties. We looked for changes which would give us stronger rights, the rights the freedom of information legislation gives to people who make inquiries.

Before I call Deputy Broughan, I have a question on the European Commission and the audits it carries out on FÁS. How many audits has the European Commission done in recent years? Has it expressed any concern about the control and governance of FÁS?

Mr. Paul O’Toole

We are currently in an audit process with the European Commission and our Department in respect of the European Social Fund. The Department and the European Commission require a certain level of evidence in respect of claims. They have raised questions — I stress this work is not complete — with us and we are working to address them. I can only speak about the current situation and not about the past.

Chairman

Have they expressed concern about the governance and control of the organisation?

Mr. Paul O’Toole

They have raised questions in respect of the information they have received to date and they have asked us to address those questions to their satisfaction. That process is ongoing.

Chairman

Has the Department of Enterprise, Trade and Employment had to respond to inquiries from the European Commission in regard to FÁS and its governance and controls?

Mr. Seán Gorman

When the European Commission conducts audits in FÁS on the expenditure of the European Social Fund, it also liaises with us. We would be party to the queries raised and would provide information in respect of the Department. European Commission audits are a standard and frequent feature of its own auditing of the expenditure of the European Social Fund and other moneys across Europe. It is a very high level of incidence of audit and it has been ongoing for years.

Chairman

It has been put to me that the Department, or FÁS, has had to cull its claims to the European Commission in regard to some of its activities to the tune of approximately €100 million in recent times. Is that correct or am I misinformed?

Mr. Seán Gorman

There are queries at the moment from the European Commission in regard to some issues arising on audits where it is not satisfied that systems in FÁS were robust. We have withheld some element of claims to the European Commission until the issues it has raised have been resolved. We have options to back fill those claims with other expenditure items in other Departments. There are not necessarily any issues of losing European Social Funds, particularly——

Chairman

Could we have copies of the concerns expressed by the European Commission? It ties into our business in regard to the programme about which we are unhappy and on which we have not got the report. Would the figure come anything close to €100 million?

Mr. Seán Gorman

No. I do not believe it is anything close to €100 million but I will check it out because it is a process that is under way with FÁS at the moment.

Chairman

I would like if we could get a note on it. Are there fears within the Department of Enterprise, Trade and Employment or in the Department of Finance for that matter that Ireland's future drawdown from the Commission is being put at risk?

Ms Grainne McGuckin

I am not aware of anybody expressing that view in the Department of Finance at this point.

Mr. Seán Gorman

We are not aware that they are being put at risk but all of these issues we are discussing and all these audit issues that are turning up pose a certain element of risk in that if they impact and cross over into the drawdown of European Social Funds, the European Commission could take a view that some of the procedures which were not followed in the case of good governance might cause issues for it. It is not possible to say definitively that at some point there could not be, or there might not be, implications from some of this for the drawdown of Structural Funds.

Chairman

Have the audit committee of FÁS and the board been made aware of the approaches from the European Commission?

Mr. Seán Gorman

I would have to turn to FÁS about that.

Mr. Paul O’Toole

We do not have a current audit committee but we will bring it up. If it transpires that there are issues in this process, we will bring this matter in full to our audit committee and to our board.

Chairman

Has the board not been informed?

Mr. Paul O’Toole

I do not think it has been informed, certainly not in my time.

Chairman

Has the Department of Finance any views on European Commission audits?

Ms Grainne McGuckin

In respect of what?

Chairman

In respect of its concerns about governance and controls.

Ms Grainne McGuckin

Clearly, if there is any risk associated with that, it has not been brought directly to my attention in my capacity. If there was, obviously, we would liaise directly with the Department and discuss it with it. Obviously, it would be an issue. However, I am not aware, as of today of any specific real threat. Maybe the Department of Enterprise, Trade and Employment can confirm that.

Chairman

Is the Department of Enterprise, Trade and Employment aware of it?

Mr. Seán Gorman

There is a concern that some of this could have implications for the European Social Fund.

Chairman

Has the Department of Enterprise, Trade and Employment communicated with the Department of Finance on this?

Mr. Seán Gorman

I have not. We are in the middle of the process with the European Commission at this stage so we do not know where it will come out.

Chairman

Could we get a fairly detailed report on the matter?

Mr. Seán Gorman

We shall do.

Chairman

As Mr. Gorman knows, it links into our other concerns regarding the competence programme, to which we referred earlier and which we need to put into abeyance.

Deputy Thomas P. Broughan

I am sorry I missed a large part of the discussion. We came very close — within a casting vote — of having the last meeting of the Committee of Public Accounts for this Dáil. We could almost have been history.

I wish to pursue that point. Did the European Commission not express concern on social funds, including FÁS funding? Had there not been an accusation from Europe that there was a tradition of retrospective auditing of accounts in local social funds? Was there not an ongoing investigation from the European Commission to the Department regarding alleged retrospective auditing?

Mr. Seán Gorman

Some years back there were concerns and in fact moneys were lost some years back from the European Social Fund to the Commission on the basis of the interpretation and application of the rules. This has been referred to in various reports — the annual reports of the Comptroller and Auditor General. Funds were lost. We actually took the European Commission to the European Court of Justice on that very point on one occasion some years back when we believed it was retrospectively applying or changing rules, and rather than that there were retrospective audits it had given retrospective interpretation of rules. We lost the case in the European Court of Justice. Our legal advice was that we had a good case, but we actually lost it. Substantial sums were forfeited at that point.

Deputy Thomas P. Broughan

Did that mean the audit trail of projects funded by the European Social Fund — in some cases FÁS was a conduit — had to be re-examined going back perhaps ten years? I have come across a number of cases where the Department of Enterprise, Trade and Employment seems to have issued instructions to local projects to reinvestigate the audit trail going back over many years.

Mr. Seán Gorman

There have been cases where individual projects have needed to go back many years at the insistence of the European Commission. There is a very long timeline available to the European Commission within which to close programmes. Beneficiaries or projects that receive European Social Fund moneys are required to keep records for an extraordinarily long period of time. There definitely have been instances on the basis of visits from the European Commission where organisations have been asked to go back over records for seven or ten years.

Deputy Thomas P. Broughan

Further to the Cathaoirleach's question, has the Department effectively been warned by the European Commission over the debacle of spending at FÁS? Has it been warned in some way that there will be implications for future European Social Fund expenditure because of perceived lapses and past performance?

Mr. Seán Gorman

No, we have not been warned specifically by the European Commission in the context of the current discussions, but it is something we are particularly concerned about ourselves. Depending on the extent to which these problems get traction with the European Commission there could be issues, but we have not been warned. However, there are queries currently in FÁS on foot of a current audit that is being carried out by the European Commission, which has caused us to withhold certain claims and redirect them in other directions so as to make sure we get the funds. That is the detail I want to get for the Chairman. However, it has not been linked directly to work.

Deputy Thomas P. Broughan

However, it must be transmitted to the Commission. Is it the case that nobody from the European Social Fund has indicated at this stage that the Department will be visited and that there will be repercussions from the investigations of this committee and the Comptroller and Auditor General?

Mr. Seán Gorman

No, not directly in this sense. However, visits are a standard and frequent part of the auditing by the European Commission of funds anyhow.

Deputy Thomas P. Broughan

I thank Mr. Gorman for outlining earlier the new controls under the new Act that exist in the Department of Enterprise, Trade and Employment. We have had this discussion recently about Aer Lingus and CIE, organisations I try to invigilate through the Oireachtas Joint Committee on Transport. Does this mean that this is a fundamental change now? Can the Department see all papers that it needs to see from FÁS? If the Department and its management board calls for a full director's report or whatever that person has, is it available to the Department now?

Mr. Seán Gorman

The way the legislation is structured is that nothing shall prevent disclosure of information by a board member now appointed by the Minister, to the Minister. If that entails sharing of paper information, oral information or any other information, the provision is now in the Act to allow for that.

Deputy Thomas P. Broughan

Does this mean the Department can ask for anything that a State director has in this case?

Mr. Seán Gorman

Yes, on the basis of my interpretation of that section of the Act, or indeed the initiative can come from a director. They do not have to wait to be asked if they have a concern, worry or whatever.

Deputy Thomas P. Broughan

I welcome the FÁS team and its chief executive. Given that they have been asked to go in and effectively reorganise such a vital national body, while I do not believe this committee would like them to spend money on it, have they given any consideration to changing effectively somehow the brand of the company as might happen in private enterprise? Going back, many people will remember AnCo. Has any consideration been given to change and in some way through the new programmes to give the public a new vision of FÁS for the future?

Mr. Paul O’Toole

There are a couple of aspects to that. First — there has been reference to this in the committee before — FÁS needs to put in place an appropriate communications marketing strategy. We intend to do that in conjunction with the delivery of a new corporate plan for the organisation. The executive is currently preparing a three-year plan, which we aim to bring to the board probably in March of this year at its next meeting for its consideration. It is a new board that has not had time to input into anything at this point. What we will attempt to set out in the three-year plan is where the organisation is now and where it wants to go, how we are going to get there and how we are going to measure it — a basic blueprint for the way forward. On the back of that a number of key things need to happen. The branding and the visual representation etc. are part of that. From my perspective, and I believe from the board's perspective, the most important thing is to get the product right. I do not believe that simply changing red to blue——

Deputy Thomas P. Broughan

Or the name.

Mr. Paul O’Toole

——or changing the letters over the door or the shingle of itself will convince anybody. We need to demonstrate clearly that we are moving forward; we are very clearly focused on our client group; we are delivering value for money for the taxpayers' investment; and we can demonstrate that. The way I am looking at it — as I said this has not yet been discussed with the board — over the next three years the organisation has to transform itself in terms of the efficacy and nature of the service it delivers to our client groups as indicated by policy direction and precise direction from the Department. We need to set out a plan about how we are going to get from where we are now and we need to communicate that well, as has been suggested by the committee and by the Comptroller and Auditor General in the past. Within that we will consider how we rebrand, if that is an appropriate message. The key thing has to be the services and the products we provide and how effective they are.

Deputy Thomas P. Broughan

I have reviewed Mr. O'Toole's helpful introduction at the start of the meeting. Obviously 440,000 people need a service. I wish to ask a question about clients whom we meet on an ongoing basis. FÁS has a possible client base of at least 440,000 people. However, there were only 55,000 slots at the end of the day for them. Is that the bottom line? There were 18,000 people on the funded training course and 120,000 were on the employment assistance programme, EAP. However, there were only 55,000 employment opportunities. FÁS now faces the biggest task in its history and that of the country in the context of employment. I commend our guests on the organisation's report on the employment market, which was published in recent days. That report, which is extremely helpful to Members of the Oireachtas, indicates that the number of people in employment has decreased to 1.83 million. The fall has, therefore, been swift. Is it not the case that FÁS faces an extremely difficult task, especially as there were only 55,000 employment opportunities, or have I misread the figures?

Mr. Paul O’Toole

No, that is a fair point. The first thing people who come to our offices are seeking is a job. When my colleagues meet them at a guidance interview in an employment services office, the first question these individuals ask is how they can get a job. The point I was trying to make is that notwithstanding the difficult situation which obtained last year, 55,000 jobs were advertised through FÁS. That was down approximately 47% on the previous year, which was a significant decrease. However, there were 55,000 opportunities.

Deputy Thomas P. Broughan

Were all those vacancies filled by FÁS clients?

Mr. Paul O’Toole

No, because other people would also promote the same jobs. I cannot make that direct correlation, nor would I try to do so. As already stated, the first thing people want is a job. If there is employment available and if a person is what we describe as "job ready", we can set them on the path to obtaining such employment. There are various ways of doing that but many people need to upgrade their skills. Many of our clients are low skilled, come from different backgrounds and require assistance at that level. We try to provide interventions, either ourselves or through other avenues, to facilitate them.

Many people who come to us already possess certain skills but perhaps may require alternative skills. For example, an experienced carpenter may not be able to obtain employment in his chosen field. He might, however, be able to get a job on one of the renewable energy schemes relating to retrofitting homes, etc. and we assist him in that regard. What we try to do is develop tailored responses for our core groups.

An important point to consider is that FÁS should not be seen as an agency that attempts to do everything for everyone. We need to focus our efforts. In that context, the departmental direction to us this year is to focus on the particular cohorts — perhaps those in greatest need — on which we can best focus our efforts.

Deputy Thomas P. Broughan

A recurring theme in the Comptroller and Auditor General's report is the cost benefit of attaining those outputs. In the context of the restructuring of the organisation as outlined in the report and with regard to the work of the executive team, is there a trail established in respect of each FÁS client? For example, what would be the position with regard to a former SR Technics employee who was encouraged to pursue the minimum qualification? Is there an audit process in place which allows Mr. O'Toole and his colleagues to inform the executive team and the board of the number of such clients who obtain employment? I was involved with my local partnership and each month we were aware of the degree to which our programmes were delivering. We were in a position to trace people right the way through the system and that was the standard we requested from the outset. Does FÁS operate in this manner?

Mr. Paul O’Toole

We have a trail of those individuals for the period they remain with us. When they move away from our support or that provided by the Department of Social and Family Affairs, we do not have a direct correlation. Every two years we carry out a survey of the people with whom we have had interventions and we check their employment status at that time. We track them every month for the period they are with us and providing information to us. For example, we would be aware of the employment action plan relating to clients who avail of our services and the number who have left the live register over a period. We report on that to our board. That deals with them after two months. However, people move on and do different things. That is why we carry out the two-yearly survey to which I refer to establish what clients are doing.

Deputy Thomas P. Broughan

Mr. O'Toole referred, in the context of the new Act, to whistleblowers. Is every client surveyed in the interests of obtaining feedback? Most people would state that FÁS looked after him or her extremely well. However, a woman seeking to return to employment might, for example, state that when she completed her course, FÁS did nothing else for her. Does the organisation survey all of its clients?

Mr. Paul O’Toole

On our training interventions, we carry out a feedback session with clients and collate the information they provide to obtain a picture in respect of people's level of satisfaction. I accept, however, that there is a need for us to have a different set of measures. One of the dangers — I was conscious of doing this in my opening statement — relating to providing big numbers is their relevance. To provide ourselves and others with better information regarding our interaction with people, we must dwell more on the outcome and the impact rather than focusing entirely on the absolute numbers.

Deputy Thomas P. Broughan

I thank Mr. O'Toole. To return to appendix D and on the subject of the external audit, the Comptroller and Auditor General referred to materiality, etc. It is clear there were major dysfunctional aspects to the operation of corporate affairs and there were also other aspects relating to the leadership of FÁS. However, from 2002 to 2006, neither the Comptroller and Auditor General nor his office sent FÁS a letter in respect of risk management, travel and subsistence, etc. I accept the point regarding materiality. Should we be concerned that while external audits — this applies to other bodies as well — appear to provide a clean bill of health, fundamental problems remain beneath the surface? Reference was made to the Financial Regulator and other agencies which we are of the view failed the country. However, problems with these agencies were not identified in external audits. Are there fundamental lessons to be learned in respect of the carrying out of such audits? Appendix D is extremely thorough in its treatment of external audits. Perhaps, however, the committee should note the position in this regard.

Mr. John Buckley

Yes, there are lessons to be learned. I have outlined in the report those we have learned from this and our other audits and also from our internal quality review programme. The major lesson relates to reliance on sampling. The kind of issues we come across here may not actually surface through sampling. The response we have made to that is to remove the kind of propriety issues that arose in the case of FÁS and to make them the subject of a specific audit programme. That programme will require each of our people to inquire specifically on all the issues listed in Figure D.7 to Appendix D.

By inquiring in respect of those issues, quite independently of taking audit samples that might or might not actually hit those, we will obtain an assurance every year that, at systems level and in practice, these things are actually functioning. That is a major lesson from the report. We have always had a probity checklist but the difference is that this now becomes a programme. The Deputy can rest assured that in the coming year, I will expect to see this on every file that arrives on my desk. I will also expect to see sign off on that.

There is a continual improvement process within the office. Like everyone else, we must practise what we preach and improve our systems. I have indicated how we are doing that. It is a fact that neither internal nor external audits brought these issues to the surface. They were revealed by a whistleblower. Deputy Fleming indicated earlier that only three of the investigations were launched on foot of external concerns. However, once something is brought to our notice, we are put on inquiry. We are obliged to respond and, like everyone else, examine our systems. It is exactly what we would say to everyone else, namely, that one must learn from what happened. We have put all the training in place to ensure this happens.

Deputy Thomas P. Broughan

All kinds of whistleblowers send us stuff. Some are cranks or they are out to get somebody but there is a scattering of genuine concerns. Are records of issues raised through whistleblowing or whatever maintained along with the final audit sign off and the decision on management letters? Are records of complaints from whatever quarter kept?

Mr. John Buckley

Not in my office. The practice in my office is to take these and transmit them to whoever is in charge of the audit in order that he or she can take them into account in the planning of the audit. The Deputy probably does not know about such audits but audit planning goes through a number of stages based on knowing the business——

Deputy Thomas P. Broughan

I was in an internal audit outfit and, therefore, I have a little experience in this area.

Mr. John Buckley

I will not teach the sucking of eggs. I would only put those kinds of letters at the level of intelligence, which may or may not result in any audit outcome, but we take them into account. We do not track them because the general experience is they rarely amount to anything. The other issue I have to keep in mind as Comptroller and Auditor General is I have to keep people focused on systematic audit. In other words, if we are going to do work, it is only of value to the Deputy or anybody else if the audit is based on a system. It must be based on random samples and not looking always at outliers and areas like that. However, we have to take them into account in informing our risk assessment which, in turn, decides what controls we should expect to find that we can rely on and, thereafter, we test those controls and then we move on to substantive testing. Basically, I would not put these whistleblowing pieces of information at anything higher than the level of audit intelligence.

Deputy Thomas P. Broughan

The odd time a whistleblower raises a fundamental issue. That is the issue, as we all know from experience.

Mr. John Buckley

There is no issue about that. It is a simple fact but, on the other hand, in an audit an efficiency decision has to be made. There is a limited pool of resources. In my office, the pool of resources is 150 while the net cost of the office is approximately €8 million. One must consider external audit functions as a higher level review. For instance, with regard to internal audit, the cost of this function is approximately €1 million in FÁS alone. That is more than one tenth of the net resources I have to do 380 audits. Our audit must be efficient. It has to lever off all the other assurance available from other elements of the wider system. I am probably going on too much, although I hope not in a self-serving way.

Chairman

As a result of the parent review carried out in Comptroller and Auditor General's office by independent sources, we communicated with the Minister for Finance expressing concern, as a committee, about the inadequate resources in Mr. Buckley's office allied to the additional responsibilities it was taking on regarding NAMA. We still have concerns about that.

With regard to whistleblowers, we receive two or three letters from them every week about different issues. My questions regarding the European Social Fund earlier, as Mr. Buckley probably guessed, were the result of an anonymous letter I received. We have to make a judgment ourselves on how we deal with those issues but the procedure we follow is that all complaints and reports members receive are put before the committee, whether they are signed or anonymous. They are forwarded to the relevant Department and agency and to the Comptroller and Auditor General's office. We do not act as judge and jury.

We have exhausted proceedings but a few issues are outstanding, which we need to deal with. We need finality regarding the ongoing review of the competency development programme. I hope we will have a copy of the report within a month, otherwise we will have to report that our examinations are being hindered by a lack of progress within the Department of Enterprise, Trade and Employment. We also need to examine the programme once we receive the Comptroller and Auditor General's report. We also need sight of the internal audits once Mr. Buckley has followed his procedures and the information we sought regarding property acquisitions, use of properties and FÁS's entire property portfolio, which we sought and have not received. In other words, we need to have another session and I presume we will not note the report or the other issues we discussed today. The debate will stand adjourned.

Next week we will deal with chapters 31 to 33, inclusive of the Comptroller and Auditor General's report — review of welfare overpayment cases, recording and recovery of welfare overpayments and the review of jobseeker's payments. I thank everybody for attending.

The witnesses withdrew.

The committee adjourned at 2.40 p.m. until 10 a.m. on Thursday, 25 February 2010.