Irish Universities and the FETAC 2008 Accounts and the Royal Irish Academy of Music 2009 Accounts.

Mr. Kevin McCarthy(Assistant Secretary, Department of Education and Skills), Mr. Stan McHugh(Chief Executive Officer, Further Education and Training Awards Council), Mr. Tom Boland(Chief Executive Officer, Higher Education Authority) and Dr. Brian Aylward(Chairman of Governing Body, Royal Irish Academy of Music) called and examined.

I welcome all the witnesses. Our meeting may be disrupted on a few occasions because in order to do business here effectively, we normally have a pairing arrangement but there is no such arrangement today. Therefore, we are at the mercy of votes in the House.

We will look at Special Report 74 of the Comptroller and Auditor General: Chapter 1 - Strategic Innovation Fund, Chapter 4 - Early Retirement Scheme in FETAC, Chapter 5 - the Royal Irish Academy of Music - Remuneration and Expenses, Special Report 75 of the Comptroller and Auditor General: Irish Universities and FETAC 2008 Accounts and the Royal Irish Academy of Music 2009 Accounts.

Before we commence I advise witnesses that they are protected by absolute privilege in respect of the evidence they give to this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of the proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make public charges against a Member of either House, a person outside the House nor an official by name or in such a way as to make him or her identifiable.

Members are 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 policy or policies.

I welcome Mr. Kevin McCarthy, Assistant Secretary General, Department of Education and Skills. Will he introduce his officials?

Mr. Kevin McCarthy

I thank the Chairman. I am joined by Mr. Philip Crosby, principal officer, Mr. Phil O'Flaherty, principal officer, Mr. Jerome Kelly, principal officer, Mr. Pat Pykett, Mr. Micheál Lenihan and Ms Laura Casey.

I thank Mr. McCarthy. I welcome Mr. Tom Boland, chief executive officer, Higher Education Authority. Will he introduce his officials?

Mr. Tom Boland

Good morning, Chairman. I am joined by Mr. Muiris O'Connor, head of policy and planning in the Higher Education Authority with responsibility for managing the Strategic Innovation Fund.

I thank Mr. Boland. I welcome Mr. Stan McHugh, chief executive officer, FETAC. Will he introduce his colleagues?

Mr. Stan McHugh

Good morning, Chairman. I am accompanied by Mr. Ultan Tuite, director of corporate services, and Ms Barbara Kelly, director of awards and standards.

I thank Mr. McHugh. I welcome Dr. Brian Aylward, chairman of the Royal Irish Academy of Music. Will he introduce his officials?

Dr. Brian Aylward

I thank the Chairman. I am accompanied by Ms Deborah Kelleher, director of the academy, Ms Dorothy Sheil, secretary and chief financial officer, and Ms Ciara Higgins, the PR concert manager.

I thank Dr. Aylward. I welcome the representative from the Department of Finance, Mr. Brendan Ellison.

Mr. Brendan Ellison

I am from the sectoral policy division in the Department of Finance dealing with education policy.

I thank Mr. Ellison. Will Mr. John Buckley, Comptroller and Auditor General, introduce the business today? The full text of chapters 1, 4 and 5 can be found in the annual report of the Comptroller and Auditor General or on the website of the Comptroller and Auditor General at www.audgen.gov.ie

Mr. John Buckley

Universities received €922 million in grants from the Higher Education Authority in 2009. In the academic year 2008-09, there were 82,000 full-time and 15,000 part-time students in the seven Irish universities.

Special Report 75 examined the arrangements for the allocation of moneys to universities, the methods being developed to improve costing of services, how quality has been assessed and how the universities have responded to reviews of their operations. It also examined some elements of remuneration and pensions. These matters were discussed by the committee at its meeting of 23 September last and certain follow-up information and explanations have since been furnished.

Turning to Special Report 74, chapter 1 looks at the application of the first round of funding allocated under the Strategic Innovation Fund. The fund, which was introduced in 2006, provided money for projects designed to stimulate innovative thinking and change in the third level sector. It was part of a response to the findings of an OECD review of higher education in Ireland that had been completed in 2004.

To date, approximately €143 million has been allocated to SIF projects under two cycles of funding - €42 million under cycle I and the remainder, €101 million, under cycle II. The projects focused on four main areas - institutional restructuring; development of postgraduate education; enhancing learning and teaching; and promotion access and lifelong learning.

The status of individual projects in each of these areas is assessed in annexes to the chapter in the report. Some €58 million has been paid out on these projects up to the end of 2009 and 50 of the 59 projects were still in progress, although a mid-term evaluation had been done at that stage. While acknowledging that there must be reasonable latitude in a programme designed to encourage innovation in targeted areas of strategic importance, there are some lessons to be learned from the first round of projects.

The range of projects submitted was very wide and by focusing assessment and allocation at institutional rather than project level the contribution of individual projects to the overall objectives became difficult to gauge. Allied to this, there was an absence of measurable targets for individual projects. In particular, there was limited identification by the applicant institutions of expected outcomes in measurable terms in approximately 70% of project proposals and project plans. Only 5% of projects clearly identified expected measurable outcomes. The identification of target outputs and milestones in project plans would have helped better focus the projects and allow for achievement to be gauged.

The audit also found that there was some funding of similar projects which could reduce overall effectiveness of the programme spend. Since successful projects can be replicated across the system once the project concept is proved, it is important to avoid overlap to the extent possible.

A further core aim of the programme was to achieve greater collaboration between institutions. Achievement in this area was somewhat variable. Initiatives such as regional procurement had clear payoffs for all partners while in other cases, collaboration appeared to be nominal and was more or less driven by an assessment process that awarded marks on the basis of collaboration.

Going forward, if the third level sector and the State is to get maximum value for these investments, it is essential that the results be assessed on their completion and the opportunities for better practice identified, mainstreamed and shared under the guidance of the HEA and the sectoral representative bodies.

During 2008, in contemplation of the amalgamation of a number of certifying and awarding bodies, the executive of FETAC offered an early retirement package to certain staff. Four individuals availed of the enhanced pension arrangements. The additional cost to the Exchequer was estimated at €800,000, more than entitlements that would have accrued under the model scheme authorised by the Department of Finance.

In this instance, there are three more or less overlapping accountability issues. There was a failure of the internal governance arrangements since a function reserved to the board was exercised by the executive. The required ministerial approval was absent since sanction was not sought for the arrangement. The impact of the matter was that €800,000 in 2008 money terms was committed in excess of entitlement.

It is not possible at this stage to say whether the approvals would have been forthcoming if the necessary submissions were made to the Department. However, from a wider value for money perspective, it would be preferable if restructuring such as this had been carried out as part of an overarching plan approved by the Department and which sought to achieve process efficiency and the maximum synergy in the combination and integration of the amalgamating entities.

A further consideration in these instances should be whether any excess staff should be redeployed, whether within the education sector or across the public service generally.

Turning to the Royal Irish Academy of Music, in bodies which rely on the State for significant funding, it would be expected that expenditure and pay policies would be in line with public sector norms and any departures would be agreed with the Department overseeing them. The Royal Irish Academy of Music got 53% of its funding from the State in 2009 and the board of the academy is responsible for setting the terms and conditions of employment of the director. The director of the academy had two separate contracts of employment, with one relating to the director post and the other in respect of the teaching of music. The total value of the remuneration package, including some additional fees, was of the order of €225,000 at September 2008.

Following audit inquiries the academy wrote to the Department requesting agreement to or sanction for his remuneration arrangements. The Department did not approve or sanction the arrangement. Revised contractual arrangements have been put in place following the appointment of a new director.

In 2008, the academy also paid approximately €23,000 for hospitality provided by the director. This expenditure mostly related to restaurant meals which were hosted by him and also catering provided at his home. In general, these expenses were not approved in advance by the governing body and were paid by the academy without full vouching. Following the completion of audit in 2008, the management and finance committee of the academy reviewed and revised the director's expense arrangements. This led to a substantial reduction in the expenses budgets, formal vouching and pre-approval arrangements.

More generally, the application of the provisions of the code of practice for the governance of State bodies should help improve internal governance, strengthen departmental oversight and harmonise financial standards for all bodies within the remit of the Department, including the academy, which are in receipt of substantial State subventions.

Mr. Boland will now make an opening statement.

Mr. Tom Boland

The Higher Education Authority, HEA, welcomes the Comptroller and Auditor General's report on the strategic innovation fund, SIF, which we consider to be very comprehensive and fair. It also endorses many of the findings of the independent review of the fund commissioned by the HEA and published last year, although it was necessary for the focus of the two reviews to be somewhat different.

Mr. Buckley has already addressed the background in the first few paragraphs of the statement I have circulated. Overall, and in a relatively short period, the strategic innovation fund has delivered substantial progress on all four stated policy objectives, as outlined by Mr. Buckley, and it should be borne in mind that this has been achieved in an environment of decreasing resources for higher education and increasing demand.

The review of the fund, commissioned by the HEA and conducted by Professor Gordon Davies, concluded that the achievements of the fund projects to date have been impressive with a wide range of direct and indirect benefits to the economy. Flexible course provision, the recognition of work-based learning and prior learning, the enhancement of engagement with enterprise and the development of regionally coherent approaches to improve access to higher education are among the achievements noted. The development and expansion of graduate schools has been significantly advanced through the fund and it has also made an important contribution to restructuring and change management within and between higher education institutions. The fund has facilitated the consolidation of partnerships at regional level and has led to the emergence of a number of truly national resources which enhance the collective identity and quality of the Irish higher education system as a whole.

The Comptroller and Auditor General review identifies a risk of overlap arising from the funding of similar projects in different locations. We fully accept that a number of similar projects were funded under SIF I, and I fully appreciate the issue raised, but duplication is not always wasteful of resources. There is value in seed funding a variety of approaches to common challenges to identify the best approaches. Also some issues are specific to individual institutions and require individually tailored and localised solutions; an example is in the access area, where particular regional conditions might apply.

That is not to deny the core point made in the Comptroller and Auditor General's report and the HEA, following the recommendation of Professor Davies, has undertaken a review of all projects based on the submission of progress reports and sustainability plans by fund consortia. This review sought to protect the projects ranked highly in the Davies report while also achieving a consolidation of the entire fund portfolio. As a result, a number of fund consortia merged in the interests of improved inter-institutional collaboration. One good example of this was the formation of a south west regional access alliance linking a range of projects in the areas of access, life-long learning and assistive technologies, allowing for the termination of the funding of eight lower-ranking projects.

The Comptroller and Auditor General comments that the identification of expected project outputs and outcomes in initial proposals and project plans was limited. Whereas specific objectives and deliverables were associated with each project, the HEA accepts that the sector could have done better and steps have been taken to counter the deficiencies. As the phase 1, SIF I, projects began it became apparent that more precise project plans would have helped to focus activity and offer a better measure of achievements over time. This experience led to enhanced monitoring and review of existing activities and also to a revised project planning process for the second phase, SIF II. The award and conditions letters issued in February 2008 in respect of the SIF II projects offered institutions a longer period for the development of project plans. The HEA also provided institutions with a revised and more detailed project planning template. The improved reporting processes and templates introduced under SIF II were simultaneously applied across SIF I to track project achievements. In addition, as part of the final reporting requirements for concluding the projects, the HEA is requiring institutions to submit a comprehensive statement of outputs and outcomes in respect of each project. We hope that will address some of the main concerns.

The Comptroller and Auditor General noted that the matched funding provided by institutions in respect of the fund projects mostly arises from internal staff resources and the recovery of overheads, and that the validity of some elements is questionable. However, there is another perspective. Given that the objective of the programme was to elicit innovation in how institutions carry out their mission, the transfer and reorientation of existing staff was precisely an outcome to be encouraged and supported. It should be borne in mind that institutional resources were applied to the fund in the context of a significant and sustained increase in student admissions and research outputs. In the latter stage, reduced resources were also a factor.

In respect of the monitoring of the programme, all SIF expenditure is subject to regular examination by the HEA, and SIF I funding included in European Regional Development Fund claims in 2007 and 2008 was subject to audit by Mazars and to spot checks by the Department of Education and Skills. The original programme specification, the call text and the letters of contract have always made it clear that ex post financial audits would be carried out on SIF projects. In HEA letters to institutions of 27 August 2010, they were reminded that, as per the terms and conditions of SIF awards, full audits of the expenditure of concluding projects are required.

On receipt of institutions' financial reports for the period ending 31 August 2010, the HEA undertook a comprehensive review of matched funding contributions and in a letter last December in respect of the SIF fourth quarter payments reminded those institutions with a shortfall in their contribution of their obligations; that is, they must have matched funding of at least 50% by the conclusion of projects.

The Comptroller and Auditor General observed that the programme would have benefited from more defined processes for sharing of good practice and lessons learned from project activity. I assure the committee that this is a priority for the HEA. However, SIF projects must reach a certain stage of maturity before the sharing of good practice can be meaningfully pursued. Projects, especially those funded under SIF I, are now at this stage. During the last year there has been considerable activity in the sharing of good practice through a range of meetings, publications, conferences and online resources. The HEA website includes links to SIF project websites, as well as project abstracts and thematic groupings, to facilitate the exchange of "best practice" between SIF consortia. The HEA will continue to prioritise this area as it is a major objective of the fund.

Some of the key programme outputs that have emerged from the SIF to date illustrate its very positive impact upon the development of the higher education sector as a whole. These include the Irish University Association's national online repository for Irish research; the Institute of Technologies of Ireland's portal, BlueBrick, for courses offered on a flexible basis in the institutes of technology; and the development of an integrated regional multiagency approach to educational disadvantage within the Shannon consortium. They provide a good sense of the achievements of the SIF. However, in my view the whole, in terms of impact, is greater than the sum of the contribution of each project. A key system-wide outcome has been the deepening of inter-institutional collaboration, a trend first supported by the programme for research in third level institutions, and now a central feature of the strategy for higher education.

The Comptroller and Auditor General is correct in noting that the full impact of collaboration in the SIF in terms of improved efficiencies and shared resources has yet to materialise but SIF collaborations provide a valuable blueprint for the development of regional clusters, which are also an important recommendation in the strategy. Such collaboration will ensure more and better identification of system-level efficiencies, rationalisation of course provision and joint development and delivery of programmes.

A particularly strong contribution that the SIF has made to the future shape and role of higher education lies in the development of teaching and learning. New and innovative approaches are needed as the sector seeks to cater for the unprecedented level of participation and to bring increasing numbers of citizens up to the skill and competence levels associated with the knowledge economy.

The SIF has laid some strong foundations with projects such as the National Academy for Integration of Research, Teaching and Learning, NAIRTL. This project has made a significant contribution to strengthening the interrelationship between teaching and research. Rather than viewing the teaching and research missions as opposing dimensions of higher education, the priority for the future will be to strengthen the connection between research and teaching to the mutual enhancement of both.

The SIF has also supported an increasingly important but to date relatively underdeveloped feature of Irish higher education, namely, the external engagement of higher education institutions with wider society. As envisaged in the national strategy, this "third mission" of the sector - which embraces engagement with enterprise, with the community and with other providers of education - will become more firmly embedded in the work of institutions. A number of SIF projects have made significant headway in achieving this goal, a number of which are listed in the document circulated to members.

The HEA shares the Comptroller and Auditor General's expressed concern regarding the sustainability of SIF projects in light of the contractions in institutions' core operating budgets. On a positive note, however, much of the SIF activity in areas such as institutional restructuring and graduate education has already been mainstreamed successfully. Moreover, the HEA is determined to ensure that maximum benefit for the higher education sector is extracted from SIF investment. We are, therefore, currently exploring ways in which nascent national platforms emerging from the SIF - platforms relating to teaching and learning, widening access, flexible course delivery, and postgraduate education - can be financially supported in the future. It is also my view that, notwithstanding resource difficulties, a SIF-type approach should form a continuing element in higher education funding, enhanced by the constructive review and observations of the Comptroller and Auditor General. The final observation I would make in respect of this part of my contribution is that in his report on the evaluation of SIF, Dr. Gordon K. Davies stated, "The revolution initiated by SIF is the critical move from doing just what is wanted by institutions to doing what is needed by the people."

Before concluding, I wish to return to matters identified in the Comptroller and Auditor General's Special Report 75: Irish Universities - Resource Management and Performance, which was the subject of discussion at this committee on 23 September last. A particular issue raised at that meeting was the recoupment of unauthorised allowances and other payments made by universities. The appropriate and most effective way in which that matter can be addressed is through the annual grant allocations to the universities. This will take place at the meeting of the board of the HEA on 1 February. It is my intention to seek the approval of the board to the withholding of a portion of the grant payable to each university concerned. The eventual use, during 2011, of the moneys withheld will then be the subject of consultation with the Departments of Education and Skills and Finance and a further decision of the board of the HEA. I assure the committee that I will keep it informed of developments.

I thank Mr. Boland. May we publish his opening statement?

Mr. Tom Boland

Of course.

For the benefit of everyone present, I wish to state that we have been informed by University College Dublin that there is a letter in transit to us regarding the final issue to which Mr. Boland referred, namely, the dispute between the HEA and UCD which arose on foot of the evidence provided at our previous meeting with the universities and the HEA. Unfortunately, we did not receive the correspondence in question in time for this meeting but there is a full report on its contents in today's edition of The Irish Times.

Normal service has resumed.

Yes. We take a dim view of UCD and the way it has done its business with the committee in respect of this issue. For what it is worth, we will be making our views known to UCD. We will now take the opening statement of Mr. Stan McHugh, chief executive of FETAC.

Mr. Stan McHugh

I will make a short PowerPoint presentation which outlines from where FETAC has come. The legislative framework relating to FETAC covers a wide range of areas. The council is responsible for determining standards, making and promoting awards, the quality assurance of all providers registered with us, validating and monitoring the quality of programmes and ensuring that providers establish procedures for fair and consistent assessment. We are also responsible for ensuring the implementation of access, transfer and progression procedures with all our providers.

FETAC was established in 2001. We, therefore, consider ourselves to be a relatively young body. In 2001, the further education and training sector was relatively disparate in nature. There was no coherent national quality assurance framework in place. None of the providers had any detailed quality assurance procedures in place. Some six awarding bodies were operating at these levels. The range of programmes was unknown. Assessment practices were inconsistent and monitoring was relatively poor. The process of making awards was also relatively inconsistent. Many of the awards were provided by UK bodies.

Today, all registered providers are now fully quality-assured by FETAC. There is a single, coherent national common awards system. All programmes are either registered or fully validated according to the quality assurance procedures that have been laid down. Assessment is now much clearer and more consistent than was the case ten years ago. We have monitoring procedures in place. The monitoring system is periodical in nature and relates to the relative risks attaching to the sector. Awards are made by ourselves in a responsive and consistent manner.

In the context of organisational development, in its first five years in operation FETAC focused on policy development. During this period we were entitled, under the legislation, to rely on the transition arrangements that were in existence. This meant that there were legacy arrangements relating to former bodies which were in place and these enabled us to continue to provide the relevant service to learners. The council had some 44 established staff during this period.

From 2006 to 2011, we moved to policy implementation. In that regard, the National Qualifications Authority of Ireland, NQAI, reviewed how FETAC was operating in the context of its functions. Following a detailed review of how we were going about our business, it was recommended that we should consider our structures with a view to adapting them to the new conditions that existed. I refer here to the new operational arrangements that had come into being. There was a clearly established requirement for a different structure. In its deliberations, the senior management team examined the various options. We had a desire to make savings and we were conscious of the need for a reduction in public service staffing numbers. It was announced on budget day that the NQAI, FETAC and HETAC are to be amalgamated.

This was the environment in which we were operating when we introduced the early retirement scheme. In introducing that scheme, we considered a range of schemes that were already in place. We also investigated whether savings could be made in this area. When we reached the conclusion that there were savings to be made and that this would be of benefit in the context of the introduction of a new structure within the organisation, we decided to proceed.

We accept fully the report of the Comptroller and Auditor General. As chief executive, I accept that FETAC failed to comply with legislative and administrative requirements in this instance and I regret this. Once the legislative and procedural requirement was apparent, FETAC immediately acknowledged the error to the Department of Education and Skills. The error was made in good faith. We have put in place a range of corrective actions. The latter have been implemented by the council in order to ensure that this kind of error will never arise again. This is fully acknowledged as a serious matter and as a breach of governance.

I have already referred to the context in which we operated. The external context included the need for savings, the planned amalgamation of the agencies and the overarching need to reduce numbers in the public service. It is worth noting that of the four retirees, three were senior members of staff. It was clear that there was a high quantity of senior staff across the three bodies. That was on our mind as well. When the totality was considered, the savings to FETAC were significant and this was acknowledged in the Comptroller and Auditor General's report. The savings actuarially over the lifetime of the four retirees amount to €1.6 million. FETAC understood that the offer also reflected earlier public sector early retirement schemes and was in line with our mistaken understanding of the 1987 provisions. The failure to seek sanction, however, was a genuine omission.

I refer to corrective actions and what we have put in place since then. Corporate governance structures within FETAC have been significantly strengthened and staff are fully committed to maintaining the highest standards of corporate governance. All major decisions taken at senior management level are now signed off as being fully compliant with FETAC's governing statute, other relevant legislation, regulatory provisions and Government circulars. A comprehensive corporate governance manual is now in place bringing together all the key elements of best practice and it is reviewed and updated regularly by the audit committee of the council. Council members and senior staff have been briefed about their responsibilities in detail and, therefore, they are clear on them. The council's approach to risk management has been revised and strengthened and is now fully implemented by the senior management team as required. I assure the committee of an ethos in FETAC of prudence and efficiency in our resources and of the implementation of a well developed procurement and financial practice system.

FETAC operates within an organisational structure that is strategic, flexible, adaptable and performance-orientated. We optimise our technology and we operate within a culture that is innovative and professional. The current position is that we have a staff of 35. Savings arising from the scheme continue to accrue. Rigorous attention is paid to corporate governance and is embedded in all management decisions. We had been discussing the issue with the Department of Education and Skills and after a number of months the council sought and obtained legal advice in respect of the excess entitlements from retirees. Having considered the legal advice and all the circumstances surrounding the matter, FETAC applied to the Department for retrospective sanction to regularise the position last September. In December, the Department informed us that it could not grant sanction and asked that the payment be adjusted. I am in the process of discussing the implications of this with my counsel, as I am obliged to do under corporate governance arrangements, and I will also follow this up with the Department shortly looking forward to an early resolution.

May we publish Mr. McHugh's opening statement?

Mr. Stan McHugh

Yes.

Dr. Aylward has a long opening statement. Perhaps he will give the committee an abridged version. We will publish the full statement.

Dr. Brian Aylward

I welcome the opportunity to put the issues raised by the Comptroller and Auditor General in his report in context. We accept the report. We want to outline steps we have taken to improve our systems and corporate governance. Founded in 1848, the academy is Ireland's oldest musical institution. It has a 35-member unpaid governing body, including ten representatives from Dublin City Council. The academy has a staff of 118, 67 full-time equivalents, and a student body of approximately 1,300. It provides a comprehensive musical education for all ages from preschool to doctoral level. Its wide-ranging examination system caters for more than 42,000 people annually on every part of the island in addition to a performance and awards scheme which has seen 5,000 students perform to more than 20,000 audience members nationwide since 1999. The latter was initiated and developed by a former director.

The operating budget is approximately €8 million and approximately 50% of our funding comes from the Department. The balance comes from tuition and examination fees, music publications, sponsorship, donations and gifts. We own our own premises on Westland Row, Dublin 2. In 1994, Dr. O'Connor, a musician with a major international reputation, was appointed director by the board. In addition to normal artistic and education targets, his remit was to significantly raise the profile of the RIAM, both nationally and internationally, attract substantial corporate sponsorships and private donations and secure performing opportunities at home and abroad for students. We believe that he was extremely successful in meeting these criteria. Internationally, he created numerous opportunities for academy ensembles. He also sourced funding in excess of €500,000 for student bursaries in addition to securing sponsorships and funding partnerships in excess of €1 million with a large number of organisations, both private and public. He led the recruitment of many of Ireland's finest musicians to the teaching staff of the academy.

In appointing him in 1994, the academy took cognisance of the fact that he wished to continue his teaching and international performing career, which is why the position of director was offered part time with his existing part-time teaching contract standing. The board's strategy for educational development and marketing consciously leveraged his international and national reputation on the basis of his contacts. The academy has no marketing budget outside of Dr. O'Connor's expenses. It does not employ fund-raisers, it has no advertising or touring budget and it does not employ a public relations company. The academy has always come in on budget and has not had an operating deficit. RIAM expected Dr. O'Connor to entertain to attract, secure or thank sponsors and private donors, to cultivate relationships with the diplomatic corps and to return hospitality and network with international promoters or institutions that hosted academy representations in their own country. The management and finance committee has signed off and approved all these expenses.

Since 1994, the academy audit has been conducted by the Office of the Comptroller and Auditor General. Once our auditors raised these issues with us in 2009, we co-operated swiftly and fully to comply with procedures and directives issued as we are in receipt of substantial State support. We accept that in this case we were not in line with public sector norms but once we became aware of this, we addressed it. The director's salary is now benchmarked against norms for the sector and is sanctioned by the Department. His or her annual expense budget is capped at €12,500 and all expenses are vouched. The position is full time with no separate contract. Additionally, the governing body has taken steps to provide a more effective system of corporate governance together with a more effective accountability framework. The code of practice for the governance of State bodies has been adopted in full by the governing body. The board has accepted that a structure established under the Educational Endowments (Ireland) Act 1885 needs to be reformed and we will need the assistance of the Oireachtas in that regard. I give the assurance to the committee that practices highlighted by the Comptroller and Auditor General have been addressed and will not occur in the future. We are an organisation that is deeply committed to the musical development not only of our students but also children and adults nationwide.

I thank Dr. Aylward. May we publish his full opening statement?

Dr. Brian Aylward

Yes.

I welcome all the witnesses. I would like to revisit the issue we discussed last September with Mr. Boland regarding the unapproved allowances paid in third level institutions, particularly in UCD. What is his reaction to the report in today's newspapers, to which the Chairman referred, which indicates there is a stand-off between the university and the HEA on the issue? What has happened since he last appeared before the committee in September 2010?

Mr. Tom Boland

I am a little uncomfortable giving a reaction to a newspaper account, which, with all due respect to the journalist, is inevitably not complete.

Perhaps it might help all of us if UCD was contacted. It is not far from here. If the letter was sent by courier, one would think we would have had the courtesy of receiving it in time for the meeting. We will telephone UCD and ask for the letter to be e-mailed in order that we are not depending on a newspaper article.

Mr. Tom Boland

We have the letter here and if it is at all helpful to the committee, I could give a short summary of the letter. Obviously it is available if the secretariat would like to copy it for members.

We should copy and circulate it.

Mr. Tom Boland

This is the letter of 6 December. I understand UCD will send the committee two letters, one a letter I sent to UCD this week - and to other universities - outlining what I described in my opening statement as an intention to withhold funding in 2011 and a letter of 6 December addressed both to me and the Secretary General of the Department in which a number of issues are outlined. I will summarise it, but members will have a copy of the full letter in a moment. UCD revisits a range of issues that were already discussed at the meeting last time we met, around the bona fides and appropriateness of the payments, the value obtained and the fact that the making of these payments had precedent in other parts of the public sector. It also raises the issue that in any case most if not all of the funding for the additional payments came not from Exchequer sources but from private funding raised by the university. It also raises the issue of the legality of the HEA imposing what it describes as a sanction on the university. In broad terms, that is what the letter says.

My reaction to that letter is that it brings forward nothing new. It does not change the position that the payments were unauthorised. It matters not a whit whether the funding for the allowances came from private or public sources, the statutory position is that allowances cannot be paid without the consent of the Ministers. Obviously, we would context the issue of legality. It is not the intention of the HEA to impose sanctions as such, but we can certainly impose conditions upon funding and we can decide the quantum of funding to go to any university.

With regard to what has happened since, it is, by and large, being conducted through correspondence. I have raised the issue of unauthorised allowances with a number of the universities and the fact that we will take action on that. It was not possible from a practical point of view to take action last year. One might ask why we cannot just take money back from universities before the end of the year. In fairness, given the already difficult funding position and the facts budgets were set for the year, our view was that it was better to address the issue in the context of allocations for 2011. It is in that context that we will, pending resolution of these issues, withhold funding from each of the universities concerned and then enter into a process of discussion as to what is to be done with that funding. Discussion is primarily with the Department of Education and Skills and the Department of Finance, but also with the universities concerned.

To clarify, is it the intention to make that proposal to the board on 1 February and to seek its approval for that approach?

Mr. Tom Boland

Yes, and 1 February 2011 is the first date this year on which it is possible to do that, because the authority will consider the allocation of grants then.

Has Mr. Boland a schedule of the proposed reductions in the grants to the various third level institutions arising from this issue?

Mr. Tom Boland

I do not have a specific schedule at the moment, but my proposal to the board will be that the withholdings will be consistent with the figures outlined in Mr. Buckley's report. They will be informed by those figures.

Can we have a summary of the figures involved? I think it is €1.6 million for UCD.

Mr. Tom Boland

I do not think it is quite that figure in Mr. Buckley's report, but something of the order of €1.2 million on an annual basis. There were unauthorised allowances and there were also some bonus payments. I do not have the precise figure, but think it is approximately what I have said. In the case of some of the other universities, the figure would be in the low hundreds of thousands.

Sure, but can we clarify the global overall figure? Mr. Buckley may be able to provide that figure shortly if he has it to hand.

Mr. Tom Boland

The figure in Mr.Buckley's report was an annual figure. If we take the annual figure for UCD, for instance, we could be talking of approximately €6 million over a period of five years.

Over the course of this dispute.

Mr. Tom Boland

Over the course of the unauthorised payments being made. That is a ballpark figure, but it is of that order.

What would the figure be for the entire sector, taking every year into account?

Mr. Tom Boland

I anticipate it would not be much more than another million for the rest of the sector.

Potentially approximately €7 million.

Mr. Tom Boland

That amount in total, in terms of unauthorised payments.

Is it Mr. Boland's view the proposed action is the most appropriate course of action? Is there any suggestion to seek recoupment from individuals rather than deal with it at institutional level through the block grant?

Mr. Tom Boland

I advised the committee previously that legal advice indicates there would be considerable difficulties with regard to recoupment made of payments made to individuals, because in part the individuals can make the case that they accepted the payments bona fide and they did not understand that they were ultra vires, a reasonable enough argument in the circumstances.

Perhaps Mr. McCarthy would like to comment on the current situation and the proposed action of the HEA. Is the proposed action supported by the Department or what is its view of it?

Mr. Kevin McCarthy

I can confirm that the Department supports the proposed action. We have had some discussions with the HEA on the proposed approach and we are satisfied it is appropriate in the circumstances that it would put the proposal Mr. Boland has outlined to the board on 1 February as a means of resolving the issue.

What impact, if any, is this likely to have on the funding situation for the third level sector at a time when funding is diminishing and the sector is struggling to provide the services it needs to provide?

Mr. Tom Boland

That is an important question. It would not be the intention of the HEA to withdraw that funding completely from the higher education sector. The moneys were properly voted to the sector and it was not as if the payments led to additional Exchequer expenditure. The problem is the moneys were improperly used. The intention would be to see that the funding is used properly. A possible approach may well be for the HEA, with the agreement of the Departments, to require the universities to use the resources for specific purposes on which they would not otherwise have spent them. It is not a question of withdrawing the funding from the universities and returning it to the Exchequer, but more a question of putting restrictions on the autonomy of the universities in this particular instance and in respect of this particular amount of money and requiring it to be spent in a particular way.

Is Mr. Boland satisfied that the practice of these unapproved allowances has ceased entirely throughout the sector?

Mr. Tom Boland

Yes, we have had assurances from the universities that is the case.

Mr. Kevin McCarthy

On that point, we are satisfied that no new allowances have been approved. However, there is still a residual issue, with some outstanding issues in a couple of cases. We have corresponded with the committee on those and have undertaken to provide regular reports. Those issues remain to be resolved, but we are satisfied and assurances have been given that no new allowances have been sanctioned.

Is it not a deeply unsatisfactory situation that this issue cannot be resolved by agreement? I know Mr. Boland may not wish to use the word sanction, but that is what the proposal is to withhold funding from the universities because they have failed to reimburse the HEA for the unapproved allowances. Is it not deeply unsatisfactory that it has come to this? Allowances were paid over a period of ten years or so which were clearly unapproved and which had no legal basis and were, therefore, unlawful. The universities, particularly UCD, appear to dispute what is indisputable fact. That is unsatisfactory. Given the annual allocation, as outlined by Mr. Buckley, is close to €1 billion, this is not a reassuring incident.

Mr. Tom Boland

Notwithstanding the fairly colourful language used in The Irish Times report, which might be informing the Deputy’s view, I have not given up hope at all that agreement will be reached. I would be very optimistic that agreement will be reached with most of the universities. UCD differs in terms of the quantum and the length of time during which the payments were made and perhaps a rather more robust assertion on its part that it was done in a bona fide way and that it was entitled to do it. In all cases I would hope we can find a reasonable solution and I am still optimistic that this is the case.

Is there any issue of sanctions against individuals? I do not mean against the recipients of these allowances rather the people who continued to approve the practice of paying these allowances against the direct advice of the HEA that this was unlawful. We have reviewed the extensive correspondence over many years but there were occasions when the HEA made it explicitly clear that these allowances were not lawful and should not continue and yet they did. What is the outcome of this from a governance point of view and from the point of view of individuals concerned who continue to support that practice?

Mr. Tom Boland

That is entirely a matter for the internal governance of the universities. The HEA department would have no capacity to intervene. Obviously, I could say that I would expect governing bodies to consider it as a serious matter but it is entirely a matter for themselves.

Has it been raised with them? Has it been suggested to them that this is a matter that should be looked at?

Mr. Tom Boland

Not in those terms but I assure the committee that last year there was correspondence with the chair of the governing body of UCD but not in the context of suggesting any personal action of any sort. That is an internal matter.

I will ask Mr. McCarthy to comment on that issue. It seems disturbing to me to have a situation where the HEA points out very explicitly that the continuation of these allowances is not lawful, contravenes the Universities Act and yet the situation was allowed to continue. This all seems to be very gentlemanly with a few letters exchanged here and there and a consideration given to withholding some money, holding it back in reserve and hoping the issue could be resolved. It is not very reassuring to the public when we are giving an annual allocation of close to €1 billion to the third level sector and people can decide to continue to pay allowances that have no legal basis and when this has been brought to their attention.

Mr. Tom Boland

The HEA has addressed to the governing body the matter of this being a governance issue and there it rests for the moment.

I think Deputy McGrath's question was addressed to Mr. McCarthy.

Mr. Kevin McCarthy

As Mr. Boland outlines, there is an issue for governing authorities to reflect upon how they would respond to a report from the Comptroller and Auditor General which outlines failures of process with the degree of alacrity with which requests to take particular actions were responded to. Some of the facts are in dispute. The committee heard competing accounts at the September session when people were clear.

Mr. Boland asked at the time what part of "No" was not understood. This was giving a clear message.

Mr. Kevin McCarthy

I agree. The Chairman is correct. We are very clear in our view of what universities were asked to do in these cases and when they should do it. Governing authorities should reflect upon the issue regarding the extent to which they are satisfied that full compliance with the requirements of the Legislature and the requirements of good governance are being adhered to.

Mr. McCarthy's response to Deputy McGrath's question gives the impression that the Department was anything but assertive in protecting the rights of the taxpayer. It seemed to allow the whole situation to stay between the HEA and UCD. There seemed to be no guiding hand from the Department. What is Mr. McCarthy's response to the point that the Department did not seem to be assertive in protecting the taxpayers' resources?

Mr. Kevin McCarthy

The history of the sequence of correspondence with the universities would demonstrate that the Department was extremely proactive in corresponding directly with the universities concerned to try to resolve this matter.

Deputy McGrath describes the actions of UCD as unlawful. What action will the Department take?

Mr. Kevin McCarthy

The issue was ultimately resolved. A commitment was given to cease allowances from April 2009 in response to issues raised at governing authority level directly with the governing board. The potential impact on UCD funding was discussed. As outlined at the last hearing, there are a limited number of instruments available, either to the HEA or to the Department, in intervening in the internal affairs of the university. The requirements and the provisions of the Universities Act are quite clear as to where responsibilities rest and the level of autonomy for managerial affairs which is given to the university and more particularly with regard to the capacity of a Department to intervene directly. The Department exercised the tools and instruments available to it, such as keeping pressure on the university and attempting to bring about a resolution over a protracted period of time.

At the last meeting we outlined for the committee the sequence of correspondence over a protracted period of time and the attempts made through meetings and correspondence to bring this matter to a resolution. It was finally brought to a resolution with a commitment given to cease allowances from April 2009, even though there are some issues outstanding which the Department is still pursuing. We have been in discussion with the authority since the last hearing regarding the question of how the exposure to the Exchequer can be limited through a process of recoupment. The withholding proposals as outlined by Mr. Boland will attempt to deal with this. It would have been better if the Department could have intervened more directly at an earlier stage. The instruments available under the Act include the appointment of a visitor which is reserved for cases of severe failure of governance, or conditions on funding, which is a matter for the Higher Education Authority.

Does Mr. McCarthy agree with Deputy McGrath's statement that the university acted unlawfully? What action will the Department take in this regard? What is happening now to change the situation? If persons acted unlawfully, what sanctions will the governing Department impose ?

Mr. Kevin McCarthy

The immediate sanction is the proposal to withhold funding from universities that clearly acted without sanction, acted ultra vires and where there was a failure to ensure adherence to the requests made and the requirements of the legislation.

It is suspected that persons acted unlawfully. Will those persons be sanctioned?

Mr. Kevin McCarthy

As Mr. Boland has outlined, it is a matter for the governing authority to satisfy itself regarding any compliance failures at university level.

Mr. Tom Boland

I can make some comments in order to be helpful. I confirm that the Department of Education and Skills was absolutely in lock step, so to speak, with the HEA on each and every occasion that we engaged with the universities on this issue. One development which addresses the Deputy's point to a significant degree, is that since this issue of unauthorised allowances has blown up, we have revised the code of governance for all universities. This now requires the governing body, through the chair of the body, to confirm that it is acting in accordance with public sector pay. The intention was to fix on the governing body in a specific and direct way the responsibility for these matters. In relation to the governing bodies, themselves, as individuals - as individual members - of course there would not be any individual liability, but in any case although I do not have the precise information, I expect the actual composition of the governing bodies now is quite different from the ones that would have been engaged in these decisions. The key point I want to make is that for now and for the future there is very little doubt but that this specifically is an issue which governing bodies through their chair have to sign off on.

May I ask a few questions on the issue as it is the live one at the moment rather than reverting later? Has a line been drawn under the issue at the moment? Are any allowances now being paid in breach of the departmental sanction?

Mr. Tom Boland

No, there are some payments being paid that are not allowances per se.

What payments are being made?

Mr. Tom Boland

There is an issue of the payments of presidents in the University of Limerick, for instance.

I will come to the University of Limerick in a moment.

Mr. Tom Boland

That is one that is still ongoing.

Are the payments for posts of higher responsibility?

Mr. Tom Boland

The assurance from UCD, which I accept, is that those allowances are not being paid.

Has the situation been rectified as far as UCD is concerned apart from the historical background?

Mr. Tom Boland

That is my understanding.

Are we clear on that?

Mr. Kevin McCarthy

I might clarify. There is still some ongoing correspondence with UCD on the president's own salary but also there may be a small number of other cases. There is also a question in UCD where there were - I think it was referred to the last day - a number of historical allowances paid to more junior members of staff. These would have preceded the 1997 legislation - craft staff and so on. There is a range of these. A process has been entered into with the Department of Finance and the Department of Education and Skills to regularise those. Effectively, I think they will be sanctioned. They are an historical carryover.

What is the situation on the president's salary?

Mr. Kevin McCarthy

We are still in correspondence with UCD on that.

Is the current payment to the president in accordance with departmental approval?

Mr. Kevin McCarthy

No. There is still an outstanding issue; we referred to it in the follow-up correspondence to the committee in October setting out an issue relating to health insurance.

Are the views of the Department and the HEA being defied?

Mr. Tom Boland

No, I do not think so. The issue of the president's salary is a matter being dealt with directly with the Department. I think the issue there is that there is an ongoing process to establish exactly what the position is, but there is no defiance relating to the allowances; the allowances have stopped - the allowances that Mr. McCarthy referred to. My sense of those is that there is a technical issue of a formal approval for them, but they are not contested allowances per se.

Mr. Kevin McCarthy

Again-----

What is the issue between the Department and the HEA on the one hand, and the university president on the other?

Mr. Kevin McCarthy

Is that in terms of his own remuneration?

Mr. Kevin McCarthy

The issue there relates to the calculation of benefits-in-kind, the inclusion of health insurance payments and there was one other dimension to it. It was private medical insurance, income protection and life assurance. So we would take the view that benefits-in-kind of that nature form part of the total remuneration package and that the total remuneration package should be in line with the sanctioned rate for the post. We have been in correspondence with UCD and asked it to bring it in line with the approved rate for the post with effect from April 2009 and we expect that the matter will be resolved.

However, so far UCD has not agreed to that request.

Mr. Kevin McCarthy

We are awaiting confirmation.

This issue has being going on for a long time and there is a concern that proper procedures have not been put in place to regularise the current situation whatever about the recoupment for the past, which has been covered by Deputy McGrath. We want assurances that that will be put right quickly.

Mr. Kevin McCarthy

It is our intention to keep the committee updated on developments and progress in bringing that matter to a resolution and, as I say, we expect it will be brought to a resolution.

There is one other issue regarding universities, which seems to be continuing. That is the issue in Limerick where if my recollection is correct there was a suggestion of a number of people being paid at the presidential salary rate. What is the situation in that regard?

Mr. Kevin McCarthy

Again, we have been in correspondence with the University of Limerick. As the Deputy will recall Professor Barry offered an explanation at the committee's meeting in September and we indicated that we were still not satisfied with the arrangements that were entered into. There has been an exchange of correspondence following on from that in which Professor Barry offered further explanations on the arrangements. We sought to clarify aspects of that. From the information we have we are satisfied that the arrangements that were entered into with president B, who I think I am at liberty to name as his name is in the public record - he is Mr. John O'Conor - were not appropriate. The university acted ultra vires in entering into those arrangements. The Secretary General has again written to the president of UL on foot of the last correspondence we had to relay our conclusions on this matter and to ask that the matter be brought to the attention of the governing body in the University of Limerick and resolved forthwith.

In effect nothing much has happened since the matter was before the committee last September.

Mr. Kevin McCarthy

The University of Limerick put its case to this committee and subsequently to the Department. We have considered that and there was a necessary exchange of correspondence in order to clarify all the details to ensure that in drawing conclusions on the matter there was a firm basis for drawing those conclusions. We are satisfied now that there is a firm basis for drawing those conclusions that Mr. O'Connor continued on a president's salary in a period when he should not have been on a president's salary. When Professor Barry was appointed on 1 May 2007 he should have reverted to his previous level of remuneration or retired. Neither of those things happened; he continued to be paid a president's salary until April 2009 and we have issues with that.

How long is it expected to take to clear up the matter? Will the Department brief the committee when a resolution has been found?

Mr. Kevin McCarthy

Yes. Having asked it now to bring it to the attention of its governing body and to bring forward proposals for resolving this, we would expect to receive those proposals quickly.

I will conclude on the university issues. In the cases of the president of UL and remuneration package for the president of UCD, has the Department made a final determination setting out its position?

Mr. Kevin McCarthy

Yes and that has been communicated.

In both cases that has not been readily accepted.

Mr. Kevin McCarthy

I think that is fair to say.

That concerns me because there seems to be a trend of pretty loose compliance. The Department makes a determination based on the legislation and in some cases it is disputed. We would expect that compliance with the Universities Act and other legislation would be unequivocal. When the Department, as the relevant body, draws attention to its determination on an issue, it should be accepted. That it is not being accepted suggests that some universities need to be dragged kicking and screaming into compliance, which is very disconcerting.

Mr. Kevin McCarthy

The Deputy wants me to comment on that.

It is a view, an opinion based on the evidence.

Mr. Kevin McCarthy

Yes, we would not be satisfied with the response received in certain instances where our understanding would have been conveyed based on our interpretation of the requirements of the Act. We would expect that universities as autonomous institutions - they have been given responsibilities under the Universities Act - have responsibilities that go with that, public accountability responsibilities and compliance responsibilities that they are required uphold and we would expect them to uphold those.

Mr. Tom Boland

I would like to make a quick comment. The examples we are discussing undoubtedly demonstrate loose compliance and universities acting ultra vires in certain circumstances. On the issue of the length of time, it is inevitable that there has to be a process whereby a university argues its case. They generally act in a bona fide manner when making such arguments. The key point - I think it is the point Deputy McGrath was making - is that the time for talking is done, to an extent. Conclusions have been reached. Both sides have put their arguments. It is now time to fix it.

Before I leave that issue, do the HEA and the Department not have a duty to write to the chairpersons of the governing bodies of universities in which they believe there has been a clear breach of legislation and there are examples of lack of compliance to point out to them that they have been exchanging correspondence, extensively in some cases, to bring the institution into compliance? Should the HEA and the Department not be directing that, as a governance issue, to the heads of the governing bodies of the institutions concerned?

Mr. Tom Boland

To some extent that has been done with one Government body. We can certainly consider that proposal. I will not dispute it. I will give an example of a more meaningful action we have taken. The code of governance has been revised. The chair of the governing body is now specifically required to sign off on this kind of issue in the future.

Fair enough. Given the difficulty in getting them to comply with legislation, I am not convinced that a new code of governance will necessarily-----

Mr. Tom Boland

I am not quite so pessimistic. If it is the wish of the committee, we can communicate the Deputy's view to the governing bodies. While that view has some weight, in practical terms the requirement in the code of governance that they satisfy themselves they are in compliance is likely to be very effective in the future.

To be fair, I do not wish to draw from the specific examples any inference to the effect that there is widespread non-compliance or anything like that. The committee is considering these specific examples.

Mr. Tom Boland

I agree.

We have to deal with them and raise concerns. In light of the amount of money that is involved in the third level sector, on a global basis, I think the concerns are valid.

Mr. Tom Boland

I agree completely.

That is the whole purpose of our raising of these concerns.

I have listened to what has been said by the members and the witnesses. There seems to be a fair level of pussyfooting going on. Without getting political in any way, at this stage I believe there is a responsibility on the Department and the Minister to write to the chairpersons of the governing bodies to deal with this matter and bring it to a conclusion. It has been going on for a long time.

I will move on. I wish to ask a couple of questions on the other issues that were raised in special report No. 74. I welcome Mr. McHugh and his colleagues from FETAC. In his opening remarks, Mr. McHugh conceded that FETAC failed to comply with certain legislative and administrative requirements. He outlined the changes in governance that have happened since then. They are to be welcomed. How did it happen in the first place? I assume FETAC has investigated the issue of these retirement packages not being approved in the appropriate manner. Can he explain why it happened?

Mr. Stan McHugh

It happened because of the context. I do not think the Deputy wants me to go back into that. Essentially, we were looking at a body that had a high proportion of senior staff. It happened because we wanted to adjust and restructure the organisation to deliver better on the objectives we had in place. That is why it happened.

Is it simply the case that FETAC was not aware that approval was required?

Mr. Stan McHugh

Yes.

Is Mr. McHugh telling us it was a genuine mistake?

Mr. Stan McHugh

Yes, that is exactly the case.

Okay. Does the Department of Education and Skills believe there has been a satisfactory improvement in FETAC's governance arrangements? Does it think the new arrangements are sufficiently robust? Does it accept in good faith that a mistake was made? Does it accept this issue is different from other issues we have discussed, in so far as the requirement had not been brought to FETAC's attention?

Mr. Phil O’Flaherty

The Department accepts that the various corporate governance changes - the procedures with regard to lines of responsibility, clarification and sign-off that have been put in place by FETAC - are designed to specifically address the shortcomings that were exposed in light of FETAC's failure to observe the statutory and administrative requirements. The Department is satisfied in that regard. Obviously, it is a matter of serious concern to the Department that the requirements were not observed within the organisation, in terms of the lines of responsibility of the council, the board and the executive. Equally, the requirement for ministerial sign-off was not observed. We fully accept that FETAC, from a corporate governance perspective, has put in place appropriate measures to address what happened.

Before I ask Dr. Aylward a question about the Royal Irish Academy of Music, I would like to ask the departmental officials about the oversight of bodies that receive grant aid. The organisation in this case would have received over 50% of its funding for the year in question from the Exchequer. Can Mr. McCarthy give the committee details of the level of oversight of the returns and governance procedures of bodies that receive grant aid of this nature but are not under the direct control of the Department? The academy has its own constitution. What is the relationship between the Department and a body like the Royal Irish Academy of Music?

Mr. Kevin McCarthy

As the Deputy rightly points out, the academy has historically had a different form of relationship with the Department. The Minister does not have any statutory role in relation to the academy. It has its own independent legislation, etc. There is no requirement for sanction with regard to rates of pay or appointments, for example.

Mr. Kevin McCarthy

It has its own independent legislation, etc. There is no requirement for sanction with regard to rates of pay or appointments, for example. We have issued the code of governance that was published by the Department of Finance to all bodies that receive grant aid. We expect all of them to comply with it. The code provides a basis for informing the Department of events that are recorded off the balance sheet. The academy and other similar bodies are required to submit their annual accounts. We have an ongoing operational interaction or engagement with it in relation to the drawdown of funds, etc. Our relationship with the academy may historically have been at a greater remove than our relationship with other bodies. I refer to agencies that are directly funded by the Department, are under the direct aegis of the Department or have a legislative relationship with the Minister. We are anxious to ensure the capacity and necessary processes are in place to satisfy ourselves that the significant funds given to certain bodies are being discharged appropriately. We are doing that through the provisions of the code of governance, through the audit function of the Comptroller and Auditor General, which was extremely important in this case-----

Mr. Kevin McCarthy

-----and through our ongoing operational relationship with the individuals in question with regard to, for example, the drawdown of funds, funding requirements and budgetary issues, etc. At a more strategic level, we have biannual or annual meetings with these people to address identified matters that may need to be addressed.

Is Mr. McCarthy satisfied that the oversight arrangements are sufficiently robust?

Mr. Kevin McCarthy

Yes. There are lessons to be drawn from the case that has been raised in this instance. The academy has acknowledged that and strengthened its internal processes. There is a renewed determination on the part of the Department and the academy to ensure our relationship and our processes for interacting are strong enough to ensure an issue of this nature will not arise in the future.

I welcome Dr. Aylward's comment that the failings were clearly identified and acted upon and that new arrangements have been introduced. Reputation is everything for a body such as the Royal Irish Academy and the last thing it needs is to incur reputational damage.

On the remuneration arrangements for Dr. O'Conor, I was struck by the payment of €21,698 for a piano workshop given in September 2008. Will Dr. Aylward provide some background information on the workshop, the work involved in it and the reason the payment made was separate from Dr. O'Conor's annual salary and the arrangements in place for his teaching post?

Dr. Brian Aylward

While we say we accept the Comptroller and Auditor General's report in its totality, in reality we may well argue that this figure being added into Dr. O'Conor's remuneration from the academy is not correct. Dr. O'Conor, before he became director of the academy, ran this seminar and produced the booklet, which is mentioned in the expenses, off his own bat. It is a copyright booklet which is annotated by Dr. O'Conor. When he became director of the academy he suggested he might use the facilities of the academy to run this particular school. It is a very successful school, as members will see. Up to 200 teachers attend and it is run within the academy. We offset any expenses relating to the academy against the fees and we take 50% of the remaining fees.

We had looked at this issue and this is ongoing at the moment. We have spoken with Dr. O'Conor and suggested that maybe we should just do the seminar in a hands off way. Some teachers use the facilities of the academy totally themselves and pay a rental to the academy and do master classes. We are saying to Dr. O'Conor that he should perhaps do the seminar in this way and it would not then appear on our books. He continues to do the seminar in his own time and was doing it before he was director. The seminar was a plus for us. The matter was debated at the board and it was decided that it was better for us to have ten grand than not to have ten grand. We might get two grand for rental of the hall and two and a half grand for rental outside of that.

Is Dr. Aylward satisfied that the academy is now fully compliant with the code of governance?

Dr. Brian Aylward

In so far as anybody ever knows, yes.

Would this matter have come to light through the internal processes of the academy if the Comptroller and Auditor General's report had not noted it?

Dr. Brian Aylward

I do not think so. It has been in place since 1994 and the Comptroller and Auditor General has been in since 1994. As soon as it was drawn to our attention that there were problems around this, we moved to address them as quickly as we possibly could because, let us be honest, we depend on the Department for support. Not all of us can remember back as far as 1994 but I imagine we did not get sanction from the Department at that time. What I definitely do remember was that the linkage with the DIT director was there.

I will work backwards by beginning with Dr. Aylward. To clear up the issue, is it now clearly understood by everyone in the Royal Irish Academy of Music that when questions are raised, it does not in any way reflect on the huge international reputation of Dr. O'Conor but rather on the need to have full transparency on the issue of payments?

Dr. Brian Aylward

The recent coverage the academy has received has not been good for anybody's reputation - either Dr. O'Conor's or the academy's. We feel it was unfair in a sense on Dr. O'Conor because he was operating on a mandate from the academy. As soon as the Comptroller and Auditor General raised the issue with us, we moved to address it as promptly as possible. I do not know if that answers the Deputy's question. I do not believe we could be faulted in that regard. These particular matters certainly will not arise again.

From the reputational point of view, the Committee of Public Accounts does not have any inclination to cast aspersions on the huge reputation enjoyed by Dr. O'Conor and the credit he has brought to the country. At the same time, I presume Dr. O'Conor understands that the questions that are being raised are in the context of the need for full transparency where public funds are involved.

Dr. Brian Aylward

Dr. O'Conor is still a part-time teacher of the academy. His contract comes to an end next year. He is paid more than other teachers in the academy and we have to address that issue. As soon as news broke that he was no longer director of the academy, he was promptly recruited to a part-time teaching job in America. Dr. O'Conor has a very high reputation and we were very glad to have him. He is one of the most recognised interpreters of Beethoven in the world and is recognised in that particular category. He will not have any position which will put him in any areas of this context. We have the issue again in 2012, which we will have to address at that time, but we will do so with our Department.

The academy will address the issue in the context of the need for compliance with public sector rules and regulations.

Dr. Brian Aylward

Yes.

Any steps taken by the academy or Dr. O'Conor will not be taken in a way that would reflect in any way on his reputation but would be related solely to the requirement for transparency and full compliance with public sector arrangements.

Dr. Brian Aylward

I have already stated that we will stand behind Dr. O'Conor. The errors made, if any, were made by the academy. As far as we are concerned, Dr. O'Conor's reputation is intact. If we have to address the issue, the normal way is that we would do so in the context that the people who are giving us money are telling us we have to-----

The academy will do what is necessary to comply fully with the regulations.

Dr. Brian Aylward

Yes.

Under Dr. O'Conor's stewardship, did the academy increase its income from private sources?

Dr. Brian Aylward

Yes.

Did private income increase as a percentage of the overall budget? That figure would be a good indicator. We cannot be negative about the matter.

Dr. Brian Aylward

Overall in his stewardship, Dr. O'Conor raised €3.4 million. We have a breakdown which we can submit to the committee if it likes.

Please do so.

Dr. Brian Aylward

We have a confidentiality issue, however, as some of our donors would prefer not to be known. We will submit the document after the meeting, perhaps some time this afternoon.

As one would expect, Dr. O'Conor has been a major plus to the academy and country. The committee accepts that.

Dr. Brian Aylward

If I may, I will make one further point on Dr. O'Conor's work for the academy because it comes up in the various expense issues and things like that. In 2008, the academy orchestra toured Seoul, Beijing and Tokyo. The tour was possible for a number of reasons. Dr. O'Conor raised funds from various sources, including some State funding. However, it was his contacts in Seoul, Beijing and Tokyo which enabled the tour to happen. Unfortunately, none of my children are good enough to have attended the academy but, as a parent, when one sees the pictures of the academy students on bus stops in Seoul, Korea, and emblazoned across the national concert hall, it is almost worth paying him anything. I accept that is a bit over the top. He established a worldwide reputation in the academy and that is of benefit to it.

We recognise and appreciate that. We are pleased to have it on the record but we still have a duty to raise issues.

Dr. Brian Aylward

As I do. Sometimes the matters raised are not nice.

If I can turn to FETAC, those responsible put their hands up to say a mistake had been made. In legal terms the situation with recovery has been examined. Is it the case that there are serious problems in terms of the reimbursement of overpayments?

Mr. Stan McHugh

I am sorry; I am not sure what the Deputy's question is.

Overpayments or unauthorised payments were made. Has the reimbursement of those payments been examined?

Mr. Stan McHugh

Yes, it has been looked at. We have been advised by the Department that the pension payments need to be adjusted. We are now looking at the implications of that with the Department. I need to talk to the council about it as well to see what precisely needs to be done in that regard.

Are we talking about pension payments for the future or reimbursement of what might be considered overpayments in the past?

Mr. Stan McHugh

The emphasis has been on pension payments for the future. However, all is still under consideration.

I see. Will Mr. McHugh report back to the committee?

Mr. Stan McHugh

Yes.

There is a relatively small number of staff. We are talking about four people who were relatively senior who as far as I can gather were essentially surplus to requirements. The organisation is a relatively young one of ten years standing. The question arises as to how such a relatively young organisation could have four senior staff, in such a relatively small staff complement, surplus to requirements. How did that happen?

Mr. Stan McHugh

I would not have looked at them as surplus to requirements up to then. As I indicated, we were restructuring, we had spent a considerable amount of time on it and three out of four people were involved in policy development. Once those policies were developed then the operation moved over to encouraging and working with providers to implement those policies. While they are FETAC policies they are implemented in the broadest sense by all of the providers. Therefore, the need for policy development was considerably reduced. That is what we are talking about in that regard. Looking to the future there was less of a need for the precise skill set that those people had. We were also looking forward to the amalgamation.

What is the up to date position on the amalgamation? I am not sure to whom to pose my question.

Mr. Phil O’Flaherty

The question is probably best addressed to me. All three bodies involved in the amalgamation - HETAC, FETAC and the National Qualifications Authority - are statutory bodies that were established under the Qualifications (Education and Training) Act 1999. Therefore, legislation is required to bring about their full amalgamation. The general scheme of the legislation was approved in January 2010 by Government and we are very close to completing the drafting of the legislation. We expect to publish it, notwithstanding some of the uncertainty around the current Oireachtas term, in the current term with a view to establishing the body on a full statutory basis in the second half of 2011.

To some extent the amalgamation perhaps addresses some of the comments of the Comptroller and Auditor General. That is the legislative track. There is also an administrative planning side to the matter. Last year the Minister appointed an interim board of the new body essentially comprising the chairs of each of the existing bodies and also appointed the new chief executive officer of the National Qualifications Authority of Ireland as the CEO designate. He will be the new chief executive officer of the new organisation. Under his auspices there is a process of administrative planning to cover the bringing together of the functions of the various agencies, the resource issues involved, accommodation for the new agency and other such matters. The intention is that when the legislation permits the statutory establishment of the authority that it can hit the ground running because it will have done the work of administrative planning in large part before the legislation is passed.

Mr. O'Flaherty mentioned that he expects the legislation to be circulated "in the current term". Does he mean in the term of the current Government?

Mr. Phil O’Flaherty

I shall choose my words carefully. Assuming the term is as has been expected we would hope to have it completed for publication by the end of February.

The end of term appears to be a moveable feast. We await developments in that regard. I will turn to the previous comments on the strategic innovation fund. The amount of money involved in that is considerable and is worthy of a little more detailed examination. In broad terms, is Mr. Boland satisfied with the outcomes to date?

Mr. Tom Boland

Yes.

It has been a plus.

Mr. Tom Boland

Unhesitatingly, I would say "Yes". The Comptroller and Auditor General's report highlights issues, as did our own review, but overall it has been a successful project which in broad terms has helped the higher education system to do two things, one, to cope better with the economic downturn and the difficulties placed on their budgets and, second, it puts the sector in a good position to hit the ground running now that the Government has published a national strategy for higher education. It was a new project in this country and inevitably there were some difficulties. It was not perfect but it has been a sound programme overall.

My recollection is that an bord snip nua suggested that the continuation of the fund was a luxury we could not afford. Do I take it from Mr. Boland's comments that he would not be in total agreement with Dr. McCarthy?

Mr. Tom Boland

I would not be in total agreement with him at all. It is a minor point but I thought the Comptroller and Auditor General's report made reference to the funding for the strategic investment fund, SIF, being cut on foot of the report of that group. I do not think the two were necessarily directly connected in that way. The cut in funding for SIF arose from the general budgetary difficulties rather than necessarily the recommendations or the views of the so-called McCarthy group or an bord snip.

There was a case for the entire elimination of the fund.

Mr. Tom Boland

I do not want to get into too much debate on the work of that particular group but in fairness, significant and detailed analysis and reviews of the fund have now been done, both independently commissioned by the HEA and by the Comptroller and Auditor General.

Mr. Tom Boland

In fairness, I do not think any reasonable person would reach the conclusion from either of those reviews that this was a totally worthless programme that should be stopped immediately.

In fairness to Mr. O'Connor, the conclusion was that it was a luxury we could no longer afford. I do not think he condemned it as being entirely useless.

Mr. Tom Boland

We will hear from Mr. O'Connor in a moment. Far from being a luxury we could ill afford, it represented much better targeting of needed funding. There were two options available to the Government regarding the funding of higher education, one of which was to make a broad across-the-board increase in so far as that was possible, and the other of which was to make a very targeted increase in areas of particular national importance, as was decided.

Mr. Muiris O’Connor

The collaboration supported by SIF has created efficiencies that are actually quality enhancing. There has been a huge impact owing to universities and institutes of technology working together on different things. A good example is the flexible learning platform now established across all the institutes of technology. There is a web portal to host the content of all Irish research. Access programmes are now run nationally through the CAO.

For a rather modest investment in the grand scheme of investments by this State in universities and higher education institutions, the SIF has had a huge impact and has leveraged very significant change that is very relevant as we adopt a new national strategy for higher education.

Will Mr. Boland situate the fund in the context of the international status of our universities? It has always been a concern of mine to see the international and national status of our universities enhanced. I take it Mr. Boland shares that view. Has the approach adopted in respect of the fund helped in any way to improve the status?

Mr. Tom Boland

First, the Irish higher education system has a very high status internationally. Various reports - from the OECD, the Lisbon group and so on - demonstrate that. In addition, some of our universities are in the top 100 in the world. The status is good. To the extent that I am convinced that it makes for a more efficient system and helps create a system of higher education as opposed to stand-alone institutions, I believe the programme can only have a positive impact on the higher education sector. The programme is still fairly new and its full impact has yet to be felt. Sometimes it is very difficult to be precise as to the outcomes of programmes like this; that is one of the criticisms of the Comptroller and Auditor General. Overall, I would be optimistic that the programme cannot but help make a better higher education system for Irish people, which in itself should improve the standing of our system internationally.

Mr. Kevin McCarthy

I want to add to that. We share the view that the SIF has had a very positive impact on the higher education system generally. On the specific question raised on the standing of universities and institutions and international rankings, one can create a direct linear relationship between one of the projects that Mr. O'Connor just cited, the open portal for research, and the visibility of Irish research internationally and the citation rates for Irish research internationally, which have an impact on the rankings of Irish institutions. The more important question is not related to how many of our universities feature in the top 100, although that is important from an inward investment point of view, but to how the whole system operates and to the quality across the entire system. One of the important dimensions of the SIF was that it encouraged a system approach to the development of higher education, building on what the programme for research in third level institutions had encouraged in terms of greater inter-institutional collaboration. The SIF brought that a step further in regard to the organisation and delivery of teaching at an undergraduate level and some of the other projects on the access front. All in all, it has had a number of very positive impacts.

Let me revert for a moment to the question of funding. The Deputy asked why it has been wound down. I will address that directly because it is an issue for the Department in the first instance. Clearly, the budgetary context changed quite dramatically from mid-2008 onwards. When the SIF was first conceived in 2006, funding for higher education was on an upward trajectory. This was seen as a better means of targeting any additionality for the direct achievement of desired policy outcomes in the system. It gave us a mechanism to identify the kinds of strategic objectives that we wanted to see delivered at system level, to ensure there was a funding mechanism to incentivise behaviour in support of those objectives, to support innovative ways of delivering on those objectives, to encourage collaboration across the system to deepen the system approach, and to encourage a redirection of existing resources within the system through the matching resources requirement. It was a very significant vehicle. As Mr. Boland outlined in regard to the mid-term review, it was identified as almost revolutionary in some ways in attempting to achieve the objectives.

All in all, the story is very positive. We have been constrained by very significant budgetary issues in the past couple of years. As a result, the programme is being wound down. The mid-term evaluation and the Comptroller and Auditor General's report point to the very positive outcomes of a significant number of projects. The HEA has been building on the outcomes of that mid-term evaluation, looking at means of ensuring that the projects that have succeeded and are delivering can be sustained through mainstream funding. It is important that we do not lose the benefits of the projects under this investment.

I understand there have been two cycles so far. The second cycle planned to take on board some lessons learned from the first. Is there a third cycle planned?

Mr. Kevin McCarthy

Unfortunately, there is not because that would require funding. There are no specific proposals. Mr. Boland, in his opening remarks, pointed to the value of a strategic approach to the allocation of available higher education funding. The higher education strategy sets out an agenda for the development of the system over the next 20 years. The strategy identifies the need to ensure that funding for the sector is aligned to strategic objectives. We must find ways and means of ensuring that the allocation of funding follows the delivery of strategic objectives, however we achieve that. SIF was one mechanism, and there are other ways. That is a challenge for us now in terms of how we use the available resources in the system. There are no direct immediate proposals on a SIF cycle.

Mr. Tom Boland

I want to clarify that.

In clarifying, could Mr. Boland give me a handle on the figures? My understanding is that the original figure was approximately €500 million for the period to 2013. How much has been allocated and spent?

Mr. Tom Boland

Mr. O'Connor will give the Deputy chapter and verse on that in a moment. On a specific point with regard to the continuation of the SIF - it would be my view that we should be prepared to put our money where our mouths are if we consider SIF to have been such a success, which we do - the HEA needs to consider how, even with limited resources, one can build into the funding model an element of funding for real innovation in the system. Funding does grease the wheels of innovation. That is something I would like to explore with my colleagues in the executive and the authority when the SIF programme is ultimately terminated.

Mr. Muiris O’Connor

SIF 1, when announced, allocated €41 million. To the end of 2010, €38.57 million was released in the SIF funding.

Mr. Muiris O’Connor

Some €38.57 million of €41 million.

SIF 2, at the point of announcement, anticipated the investment of €101 million. So far, we have released €38.3 million to SIF 2. It is highly unlikely that we will be honouring the full allocations announced under SIF 2. The management of the SIF has involved pruning the fund as we have taken cuts, but we have been guided in the management of resources by the rankings assigned to projects in the mid-term evaluation and, more recently, by the insights emerging from the Comptroller and Auditor General's review. We have always monitored closely — the universities argue too closely — quarterly financial reports and biannual statements of progress. We keep a close eye on them and have routinely withheld moneys in cases in which an institution held, say, one and a half times a typical quarterly payment. This has helped us to focus on the projects that show most promise. The Comptroller and Auditor General and the external evaluation observed that the projects that had displayed the most ambition, the best collaboration and clear objectives had been the most successful.

The Comptroller and Auditor General raised issues concerning the requirement for the production and quality of matched funding. Has this issue been addressed?

Mr. Muiris O’Connor

The term "matched funding" creates the impression that there is cash on the table which was never anticipated by the Higher Education Authority. Most of the matched funding has been taken in the form of staff time. We welcome this as part of the thinking behind the strategic innovation fund which involves a relatively modest amount of investment in the grand scheme of things. The idea behind matched funding is that it will leverage a commitment from what we are investing in through the use of core funds. The Higher Education Authority does not have a difficulty with the fact that most of the matched funding is in the form of human resources. It has, however, created difficulties for institutions, of which the Comptroller and Auditor General is aware, in that a large amount of bureaucracy is generated in quantifying and recording the inputs and participation of the various individuals involved in the institutions. However, it has been very valuable. In some cases we have also encouraged the provision of matched funding from outside the higher education sector in projects involving better engagement with business and communities. The Higher Education Authority recognises and considers valid inputs by external partners as matched funding also.

Mr. Tom Boland

I am not at liberty to give full details, but I understand an announcement is due shortly from one university on its strategic innovation fund project which will receive a substantial philanthropic donation to allow the project to continue. That is an example of where cash is following the project.

We certainly want to encourage this in these difficult times.

Mr. Muiris O’Connor

The matched funding mechanism which involves a heavy commitment of core staff time to the strategic innovation fund project, helps to achieve the objectives of sustainable change in how an institution does it business.

Were there many examples of universities or institutes of technology re-tailoring existing courses to draw down funds as extra funding for themselves? If so, was funding refused in such cases?

Mr. Muiris O’Connor

The strategic innovation fund is not so much about the production of new courses, as that is a core business and institutions always revise the content of their academic programmes. We did keep a close eye on the fund to ensure it was producing something additional over and above what could be legitimately expected. There were instances where, if we thought the strategic innovation fund was being used, say, to fund the payment of salaries that could not be credibly regarded as additionality, we terminated the projects or withheld payments.

The discussion has centred mainly on universities, but the fund also applies to institutes of technology. What is the breakdown in participation between the two?

Mr. Muiris O’Connor

The Comptroller and Auditor General's report which focused mainly on the first tranche of funding observed that 70% of awards went to universities and 30% to institutes of technology. In the second tranche, the figure was 56% for universities and 44% for institutes of technology, which showed a substantial improvement in the draw-down from the fund for the institutes. I was impressed by the way the institutes of technology sector engaged with the fund. It undertook co-ordinated and ambitious initiatives. The 14 institutes can now upload and provide information on their flexible learning and part-time programmes and there is an application facility on their portal website www.bluebrick.ie. The business intelligence information available to senior management in the institutes has also been greatly improved by the strategic innovation fund.

Some projects have generally resulted in collaboration between third level institutions. Is there a Chinese wall between the institutes of technology and the universities? Has there been a crossover between the two sectors?

Mr. Tom Boland

There are no Chinese walls. We heartily encourage collaboration across the two parts of the sector. A good example of this which is still at a relatively early developmental stage is the Dublin regional higher education alliance which takes all of the higher education institutions in the Dublin region under a single umbrella with the view to creating a dynamic higher education system. We very much encourage cross-collaboration between the sectors so long as they stick to their mission and it does not lead to mission drift.

Mr. Muiris O’Connor

There are many examples of universities and institutes of technology collaborating on a regional basis. That provides a blueprint for the regional cluster concept coming through the national strategy. For example, the Shannon consortium involves the University of Limerick, Limerick Institute of Technology, Mary Immaculate College, Limerick, and the Institute of Technology, Tralee. They have developed a very impressive multi-agency approach to educational disadvantage in the area and are connected with the broader Limerick regeneration project. The strategic innovation fund is not about going off on a new tangent but that the institutions plug into the range of higher education agencies in their area.

I want to inform the meeting that correspondence, dated 20 January 2011, was received from Hugh R. Brady, president of University College Dublin and addressed to me as Chairman. It reads:

Dear Chairman,

It has come to UCD's attention that as a follow-up to Report 75 of the Comptroller and Auditor General, Irish Universities Resource Management and performance, the issue of allowances will be considered at today's meeting of the Committee of Public Accounts. UCD thought it appropriate that its position on the matter, as communicated to the HEA and the Department of Education and Skills in early December 2010, should be available to the committee.

The letter refers us to the one discussed earlier from Professor Hugh R. Brady to Mr. Tom Boland, chief executive of the Higher Education Authority, and Ms Brigid McManus, Secretary General of the Department of Education and Skills. There is nothing in the letter that would have changed the discussion we had.

Regarding FETAC's relationship with Empower Learning Limited, the Kilkenny-based company which went out of business, is it correct that in February 2010 FETAC was contacted by Skillnets to highlight problems with the company? The communication included a preliminary investigation which concluded that the trainer, Empower, was issuing false certifications. Would that be correct?

Mr. Stan McHugh

Could the Chairman just-----

In other words, FETAC got a communication from Skillnets in February last year informing it that it had carried out a preliminary investigation into Empower and concluded that the trainer was issuing false certifications.

Mr. Stan McHugh

We were informed by Skillnets that there were issues with the Empower organisation. At that stage it was simply informing us that it was investigating issues. I do not have the detail of that with me but as far as we were concerned when we were informed that Skillnets had issues, we instigated a monitoring arrangement with Empower. Our monitors went to Empower to look at what it was doing in respect of its responsibilities to us. That happened in July.

On foot of that monitoring visit, certain recommendations were made. We then followed up in September with a further visit to see what the situation was in respect of the recommendations, and it was then that the situation became clear to us as regards Empower itself. Other issues had come to the surface. For example, Empower had sent a cheque to us which had bounced for payment of fees in respect of certification. We drew these matters to the attention of Empower and said we would be withdrawing all certification from them until the issues were resolved. Within a week a notice went on our website, and we then formally suspended from the certification service.

Did Mr. McHugh say that it went on the website a week afterwards?

Mr. Stan McHugh

Yes, that is correct.

What specific date did FETAC issue notice of suspension?

Mr. Stan McHugh

It was put on our website on 7 October.

What date did FETAC suspend the company from its register of trainers?

Mr. Stan McHugh

We informed it that we were in the process of suspending it. I do not have the date here.

Was it 13 September?

Mr. Stan McHugh

We actually held a meeting with the managing director of Empower on 20 September.

On what date did FETAC suspend the company from its register of trainers?

Mr. Stan McHugh

That was 13 September. I just have it here, as regards its access to FETAC certification until it fully complied.

That was the question, as regards 13 September. On what specific date did FETAC put on its website the fact that this company was suspended?

Mr. Stan McHugh

On 7 October.

Mr. McHugh said it was a week later, however.

Mr. Stan McHugh

I apologise, my dates were wrong.

If I did not know that, Mr. McHugh would have misled this committee.

Mr. Stan McHugh

Not deliberately, Chairman. I would not have done that.

If I knew it, why did Mr. McHugh not know it, as the man responsible?

Mr. Stan McHugh

I would have known it at the time. I apologise for that.

Why did it take from 13 September to 7 October to inform the public, and more importantly the students, of this issue?

Mr. Stan McHugh

We were dealing with the issues. Our responsibility is, through quality assurance, to ensure that providers are improving their quality assurance arrangements, so when we-----

The fact is FETAC made a decision to suspend on 13 September and did not inform the public, and more importantly the students, until 7 October.

Mr. Stan McHugh

In the first instance, we took legal advice as to how this should be done. Once we had informed Empower, the intention was that we would announce this publicly as soon as possible. It took some time. This was new territory for us, and it had not happened before. A considerable number of private providers are registered with us, it had not happened before and the circumstances were particularly difficult because, as I said, it was new territory.

As a result of the gap between suspension and informing the public and students, substantial fees were lost by how many students?

Mr. Stan McHugh

The relationship surrounding fees was between the students, the learners and Empower. Our role was to ensure that-----

FETAC's responsibility was to inform the public and students that Empower was suspended since 13 September, surely.

Mr. Stan McHugh

I accept that.

As a consequence of its failure, students lost substantial amounts of finance.

Mr. Stan McHugh

Our responsibility in this is also to ensure that the learners are protected in terms of completing their courses. We have put considerable time and effort into ensuring that those learners have access to programmes of a similar standard. The arrangement with regard to protection for learners allows us to work with other providers to ensure that these learners are not let down. In terms of that, there were 1,164 learners in total on the register, with Empower. Given that the owners had left the country we had to take exceptional steps to get that information in the first place, which we did. Of that number, 528 were certified reasonably quickly, arising from assessments that took place in August, and we are still in the process of arranging and managing assessments for 161, so that they can obtain the relevant certification. Some 444 are on programmes with other providers through the protection for learners process, and we are still working with a further 31 in terms of finding providers for them.

Was FETAC aware of the Garda investigation of Empower?

Mr. Stan McHugh

Yes, we were aware that there were issues, in the broad sense.

When did it first become aware of the Garda investigation?

Mr. Stan McHugh

This would have been earlier in the year, around February or March.

Still no action was taken vis-à-vis the tutors and staff.

Mr. Stan McHugh

Our remit is around the courses. We were very careful to stay within our remit. That is our responsibility.

What does Mr. McHugh mean by "around the courses"? Surely accreditation is the most important thing.

Mr. Stan McHugh

Yes, and that was what we looked at when we visited Empower. We looked at the assessments and the various courses. There is a report on our website regarding earlier initiatives we had visited upon Empower. What we found afterwards was that there were not issues in relation to courses. The vast majority of learners found that the courses were very good. That was the general feedback we got. We spoke to tutors and they were very respectful of FETAC's requirements. The issue, I believe, was something that had to do with the ownership and management of the organisation.

My opinion for what it is worth is that FETAC's credibility is not great. When the question of accreditation arose, it suspended the company but did not tell the students, the staff or the public.

Mr. Stan McHugh

With respect, I think we told them as quickly as we could. As I indicated to the Chairman, this was new territory for everybody involved. The learners who have come through the process and who have been in touch with us on a regular basis have expressed gratitude to FETAC for sorting out the situation.

Many have expressed dissatisfaction, namely, the people who have lost fees and have been left high and dry because of FETAC's delay of six days short of one month, from 13 September to 7 October.

Mr. Stan McHugh

With respect, there were difficulties around that time but those issues have been resolved.

Not to the satisfaction of the students because they have been left high and dry because of their fees. There is also the question of accreditation.

Mr. Stan McHugh

I have to disagree with the Chairman. The students have been placed on other programmes. The numbers I have provided to the committee relate to what the students were entitled to at the time. Some 528 students were certified as they had completed their assessments and we ensured they got their certificates. That was part of our role to ensure they were looked after. We are also looking after students who were due to be assessed but had not been assessed. Those students who had enlisted on programmes and lost money have been offered other opportunities to complete their programmes. We acknowledge that it was not a perfect situation. I accept that, but we have done what was required of us under the legislation and within our remit. We may not have proceeded at the pace that some learners would have wished but we have given this issue significant time resources to do what we could in respect of the issue.

I beg to disagree with Mr. McHugh. On the broader issue what is the FETAC position on all FÁS courses that it has been examining? Is Mr. McHugh in a position to satisfy himself that all FÁS courses are bona fide?

Mr. Stan McHugh

We are going through a process relating to certification. FÁS is obliged under its quality assurance agreement to bring certain issues to our attention and in November 2010 it did what was required under that agreement. We talked to them and said we would look at their internal quality assurance in respect of assessments and requests for certification. We visited four particular centres and on foot of the visits to those four centres we found issues that needed to be resolved. We were not sure whether this was reflected in the particular four centres or whether it was across all 17 centres. We continued our examination of their procedures and went to all 17 centres across the country where they request certification from us. We will publish a report in February when the whole issue is resolved. We found some systemic issues and we then requested FÁS to put in place certain measures that would allow us to proceed with certification. FÁS is in the process of doing that but in advance of that, there were a number of areas where we were able to say there were no issues and we could proceed with certification. There were no issues in relation to apprenticeships, CSCS courses or single certificate awards, known as minor awards where there is a single component. The delay that occurred because FETAC decided not to issue certificates was resolved in relation to those. What remains outstanding relates to certification requests on foot of completion of courses. There are two areas where FÁS is co-operating with FETAC on major awards and special purpose awards which have more than one component. The issue that we found was that the computation of the requirements needed double and treble checks and FÁS is now carrying out that process and we would expect to be able to resolve the matter in the near future.

Is what Mr. McHugh described a reaction by FETAC to an invitation from FÁS to examine the courses?

Mr. Stan McHugh

Yes, that is right. That is its responsibility. Under the quality assurance agreement that we have with all providers, if there are issues relating to any certification, providers are obliged to bring this to our attention and we address it. There are other ways of looking at this which FETAC has in place. I mentioned earlier that FETAC monitors private providers. We have a risk assessment of areas where issues might come up and we focus our monitoring on those areas. We have a programme of monitoring that is now in place. As I would have said, in the first instance, we concentrated on private providers, the second step which is starting shortly is to monitor FÁS and to detail the degree to which it has implemented its quality assurance approval. We will then be following that with a monitoring of the VECs.

Would I be unfair if I said that the FETAC monitoring programme seems to be deficient in that in the case of Empower it took the Skillnets State agency to inform FETAC about its reservation about that company's courses? In the case of the deficiencies in a broad range of FÁS courses, it took FÁS to alert FETAC to the issues relating to its courses. How can FETAC have confidence in its monitoring programme?

Mr. Stan McHugh

It is not quite accurate to say that FETAC relied on Skillnets to tell us that there were issues with Empower.

That is what Mr McHugh said earlier. He agreed with me when I said that Skillnets brought it to his attention in February 2010.

Mr. Stan McHugh

It brought certain matters to our attention, but it did not bring matters that were -----

If FETAC was aware of it before Skillnets brought it to its attention, will Mr. McHugh tell us what he did before Skillnets brought it to his attention?

Mr. Stan McHugh

There are two reports on our website relating to monitoring businesses that we were looking at and we had brought to the attention of Empower. We were already aware of Empower and its operations.

Mr. McHugh states that FETAC was aware of Empower and its operations? Was it aware of deficiencies in its training courses?

Mr. Stan McHugh

The deficiencies were not major.

Was Mr. McHugh aware of difficulties before February 2010?

Mr. Stan McHugh

There were no major deficiencies in its procedures. The issues that were arising related to matters outside our remit, which related to funding. These items are on record. We were aware of what was happening in relation to our responsibilities. We did not get involved and we did not follow through on funding issues, because that is not within our remit.

Whose responsibility was it?

Mr. Stan McHugh

As I am not responsible for it, I cannot say-----

Did Mr. McHugh ever tell anyone who had responsibility about his concerns?

Mr. Stan McHugh

Yes, we also had discussions with FÁS. However, I would not like to state on oath who precisely has responsibility for the funding of our funding-related issues that arose in Empower Training because that is not my-----

When Mr. McHugh became aware of funding deficiencies, did he take the trouble to establish who was responsible and did he tell them?

Mr. Stan McHugh

No, they told us that they had funding issues.

Who did?

Mr. Stan McHugh

FÁS did, as did Skillnets. It was through Skillnets and it stated there were funding issues. We decided that we had better ascertain-----

When did Skillnets tell FETAC that?

Mr. Stan McHugh

In the letter the Chairman mentioned earlier in February or March of-----

However, Mr. McHugh has stated previously that he knew of this before then.

Mr. Stan McHugh

No, I refer to funding issues. We are getting confused here between what are funding-----

I am getting confused because I cannot add up what Mr. McHugh is telling members. He has stated that he was aware of deficiencies prior to Skillnets informing FETAC of this in February 2010.

Mr. Stan McHugh

Yes.

What was Mr. McHugh aware of, who told him and when he became aware of it, who did he tell?

Mr. Stan McHugh

I am stating what are our responsibilities. Our responsibilities do not relate to funding and consequently, we did not follow through on funding. That was not our responsibility.

FETAC did nothing about the-----

Mr. Stan McHugh

We looked at that for which we were responsible, namely, the procedures it was required to carry out under its quality assurance agreement with us. Other bodies were responsible for the funding. We simply were keeping each other informed of the various steps that were being taken. However, we do not have any responsibility in respect of funding.

FETAC has a responsibility to pass on information to those who have such responsibility, if it is aware of deficiencies in funding.

Mr. Stan McHugh

Yes, if we were.

The question I asked earlier was whether Mr. McHugh passed on that information to the responsible bodies.

Mr. Stan McHugh

They informed us and not the other way around.

I revert to my original question. Is Mr. McHugh satisfied as of now with the monitoring mechanism that FETAC has in place?

Mr. Stan McHugh

We have in place a monitoring system that addresses the key risks that face us. That said, we examine it continually because the situation is evolving all the time. We are satisfied with what we have but endeavour continually to strengthen the approaches we take. Last year, for instance, we introduced a different focus on monitoring and how it might be done, which is being implemented at present.

It has been reported that when Mr. McHugh was asked the reason the students, that is, the customers or consumers, were not informed about the situation with Empower Training, he replied that it was the college's responsibility to inform its students. Was that a fair comment? FETAC was aware that Empower Training was suspended but did not inform the public or the students and left it to the company or college to inform its students that it had been suspended.

Mr. Stan McHugh

I appreciate there was a time lapse there and I said that earlier. We were in new territory and had to be sure to be careful about following due process. Were this to happen again, we would be in a much better position to address these issues faster in order that the sort of things that happened would not happen again.

Mr. McHugh has been quoted as stating, "When Empower was told about the suspension, it was the college's responsibility to inform its students." Is this quotation correct?

Mr. Stan McHugh

As part of their quality assurance agreements, all providers are required to keep all their learners up to date with all the current situations. I agree with the Chairman that this does not absolve FETAC from making statements if matters are drawn to our attention. As I mentioned, having learned from that situation, we would be in a much better position to address such issues. It was a most unusual situation in that the owners left the country.

However, FETAC left it to them to inform the students. Surely that constituted the washing of one's hands and responsibilities to the students that FETAC was meant to protect.

Mr. Stan McHugh

It was not our intention not to carry out our responsibilities.

I thank Mr. McHugh. Does Mr. Buckley wish to comment?

Mr. John Buckley

I wish to clarify one or two things. In respect of the split between the university sector and the institutes of technology, I think the figure quoted by Mr. O'Connor was for one category only. There actually are four categories and the details may be found in paragraphs 1.16 to 1.18 of Special Report 74. Second, we do not really have issues with regard to using staffing as matched funding and so on. Our issues there pertained to the consistency of calculation, which again was set out in the report at paragraph 1.71. In addition, some notional amounts were used as matching funding in one institution we visited.

As for the Royal Irish Academy of Music, it is of course true that this issue was first raised in 2008. The context here is that I have been in this job for approximately two and a half years and after the first year, I changed the audit policy and introduced a new probity checklist. At that time, we also began to consider the wider implications for pay policy downstream, especially in the health and various other sectors in which the same staff-type resources are used both in the course of direct delivery and delivery by in grant-aided bodies. When we began to look more deeply and in a more systematic way, those two changes in audit policy threw up this issue. I acknowledge it did not come to our attention in any structured way through sampling before that or if it did, in the case of the Royal Irish Academy of Music it was not an issue because of its institutional independence and because of the actual funding environment that existed in the past.

Finally, I wish to consider the three broad points that might arise out of what has been discussed today. Basically, it is better to summarise them at systems level. Obviously, there is a need for boards in particular to ensure there is regularity in the commitment and payment of funds. In particular, scarce resources should only be committed by the correct governing organ of the entity and in accordance with any approval mechanisms set by law. This is the general principle that would arise out of looking at the FETAC situation. The principle that we were applying in the case of the Royal Irish Academy of Music would be that to manage the wider delivery system, whether in education or in any other sector, it is desirable that the broad pay and expenses norms applicable to State agencies be mirrored in the case of the other delivery entities and while they may not be constituted as State bodies since they rely on the taxpayer for a substantial proportion of their funding. In conclusion, I note that the detail contained in both Special Reports 74 and 75 indicates a high level of innovation in universities covering all the areas such as access, participation, teaching and learning and restructuring. The crucial point is that the results of the SIF projects and the various other innovative approaches that can be found in Special Report 75 should be mainstreamed and, where appropriate, identified opportunities for better practice should be shared widely throughout the system.

I thank Mr. Buckley. Is it agreed to dispose of chapters 1, 4 and 5 of Special Report 74? Agreed. Is it agreed to dispose of Special Report 75, to note the 2008 FETAC accounts and to note the 2009 Royal Irish Academy of Music accounts? Agreed.

I thank all the witnesses for their attendance and apologise for the absence of some members who have other business at present outside this room. We must agree next Thursday's agenda, which is Votes 39 and 41 and chapter 36 of the 2009 annual report. We will also be considering the latest accounts of the National Treatment Purchase Fund, NTPF.

The witnesses withdrew.

The committee adjourned at 12.55 p.m. until 10 a.m. on Thursday, 27 January 2011.