The first item on the agenda is the minutes of the meeting of 12 January 2012. Are they agreed? Agreed.
Business of Committee.
Do the matters arising appear on the agenda? I do not have it to hand.
Clerk to the Committee
The three documents will be dealt with as correspondence.
Thank you.
Under the matters arising, at the meeting last week on 12 January the committee received a letter dated 11 January from the Secretary General of the Department of Finance, Mr. Kevin Cardiff, and it was decided to discuss it this week. I propose, with members' support, that the committee sends a letter to Mr. Cardiff stating that it seeks closure to the issue and rapid preparation of the report, a copy of which should be sent to the committee in order that it can deal with the matter and bring closure.
Does the Vice Chairman propose to send the letter back?
No, I propose replying to the letter to that effect.
The next item is correspondence received since the meeting held on Thursday, 12 January 2012. Correspondence dated 10 January 2012 was received from Mr. John Buckley, Comptroller and Auditor General, and was deferred from the meeting of 12 January 2012 regarding consultation document and VEC rationalisation. It is to be noted and published. Deputy Deasy was particularly interested in the matter and I invite him to comment.
I was disappointed by the analysis carried out by the Comptroller and Auditor General. Effectively, the conclusion was that it was premature at this point to prepare a report. I found this strange. The decision to place the headquarters of VECs was made before any process was formulated. This was precisely the sort of thing we should not do but were doing for 20 years. Consequently, I do not understand the reason it would be premature to look into this matter when it was a basic failing in respect of governance.
Can Mr. Buckley respond?
Mr. John Buckley
As I said in the document, we might look at three elements: the appraisal of the change project; the management of the change, which has not yet occurred; and the outcome of the process. To create a meaningful report one would have to look at all aspects of the change. It is also important to keep in mind that audit has to be done as a review function looking backwards; it cannot really be done as a pre-audit in advance of the decision. The decisions are largely policy decisions for the Department, but the implementation of those decisions can be reviewed. We are quite willing to review them once they have been taken, but we would not like to involve ourselves in the policy process. That is our net point. The reason we have laid it out in some detail is that the Secretary General will appear before the committee soon and it will be open to the committee to discuss, in a preliminary way, most of the issues we have identified in the discussion document. Perhaps the committee can elicit some information at that stage.
The difficulty I have with that is that the policy decision was made before the policy was formulated. The problem I have with that is that none of this actually applies because it was constructed, formulated and put together after the actual decision was made and, in some constituencies, announced. The formula was then put together by the Department and sent to me. That is the difficulty here. Effectively it has been a fabrication of a policy after a decision had been made.
Mr. John Buckley
It is at all times open to Deputy Deasy, as a member of the committee, and open to the committee, to follow such an issue. To my mind, if it is an open and closed issue like that - a single issue - there is not much point in me putting resources into it at this stage.
Fair enough, but there is a remit within the Office of the Comptroller and Auditor General which concerns governance. What is the point in being here if, effectively, we are scrutinising policies and their formulation after the fact? There was no investigation into how to do this properly. The decision was made first and the policy came second. There is a remit within Mr. Buckley's office to examine that. That is what happened in this case, in my opinion. It is the last thing we should do, after the last 15 years, because that is what happened in the previous Government's time.
Deputy Deasy is down as one of the lead questioners when Ms Brigid McManus, the Secretary General of the Department of Education and Skills, appears before this committee on 9 February. Following from that questioning, maybe the matter could be reviewed then with the Comptroller and Auditor General.
That is fine, but the tracks have been covered skilfully and professionally from a governmental standpoint. I can do my job with regard to the Secretary General but what we needed was an independent analysis of how this did or did not happen. We still need that.
Can we take it this way? I have no doubt that the Deputy's political skills will elicit information from the Department's Secretary General.
I have failed here many times before.
The discussion can then take place after that questioning, just to see if there is a case to examine that matter.
Fine.
Correspondence 3.2, dated 10 January 2012 from Mr. Dermot B. Quigley, acting commissioner of valuation, a progress report previously requested by the committee on how defects in the accounting control system are being dealt with and the improvements that have been made since the publication of the Comptroller and Auditor General's report; to be noted and published. Is that agreed? Agreed.
Correspondence 3.3, received on 12 January 2012 from anonymous, re Cork City Council; to be noted. Correspondence to be forwarded to the local government audit service for a note on the issues raised and appropriate follow up. Local authorities are currently outside the remit of the Comptroller and Auditor General, as we have discussed many times. As members are aware, the Minister is reviewing this matter as part of a second phase of streamlining a number of State bodies.
Correspondence 3.4, dated 9 January 2012, from anonymous, re Enniskerry Golf Club; to be noted. Correspondence to be forwarded to the Office of the Revenue Commissioners for appropriate follow up.
Correspondence 3.5, dated 16 December 2011, from Deputy Niall Collins, re forwarding correspondence from Mr. Pádraig Smith, managing director, PS Power Systems; to be noted. Correspondence to be forwarded to the HSE for note on the issues raised.
Correspondence 3.6, dated 9 December 2011, from anonymous, re SIPTU; to be noted and published. We will write to the HSE asking that it confirm that these individuals are part of the internal audit investigations. Do members feel that is sufficient? Do they have any comments to make on that particular issue? If not, we will deal with that as outlined.
Correspondence 3.7, dated 2 January 2012, from Mr. Noel Wardeck, former head of international department, Irish Red Cross, re forwarding a letter sent to Mr. David O'Callaghan, chairman, Irish Red Cross; to be noted and published. Members may wish to raise issues on this correspondence at today's examination. Representatives of the Irish Red Cross will appear before us shortly.
Correspondence 3.8, dated 9 January 2012, from Mr. David Cooney, Secretary General, Department of Foreign Affairs, re forwarding the audit report on grants awarded to GOAL in 2009, as previously requested by the committee; to be noted. I know that Deputy Anne Ferris is particularly interested in this audit. We will return to this issue when this committee examines the overseas aid budget after Easter. Does Deputy Anne Ferris wish to comment on this matter?
Yes, Chairman. This report that we received was in response to my letter to the Committee of Public Accounts on 9 December 2011. I was concerned about recent media reports on how the aid agency GOAL had spent €14 million in State funding. I welcome the audit we received on overseas aid, but there are many issues in the audit about which I am concerned. I will refer briefly to a couple of them. They refer to the board and it was widely reported that board members had resigned. The chief executive of GOAL had said it was for one reason or another, and these board members then came out and said "No, that wasn't the reason". There are issues concerning the board therefore.
The audit mentions two staff members being kidnapped in the Sudan. The audit requested certain documents from GOAL and it says here that they were not made available. That is a very serious situation. There are also a number of recommendations. The report stated: "We also refer to the limitation in scope which was placed on the audit due to certain documents not being made available to the audit team." There are many queries as to why this happened and why the information was not given to the audit team by GOAL. GOAL is spending €14 million of State or taxpayer's money, yet there are question marks about the operation, the board of directors and the whole situation.
I am delighted to hear the representatives of Overseas Aid are coming in to the committee so that I will have a chance to question them. There are certainly serious questions to be answered.
As an initial step, apart from Overseas Aid coming in, we might write back to Mr. Cooney effectively requesting whether he is satisfied that the moneys being granted to GOAL are being spent in the requisite fashion.
Yes, that is a good idea. Thank you, Chairman.
Correspondence 3.9, dated 13 January 2012, from Mr. Ray Mitchell, HSE parliamentary and regulatory affairs, re providing a note on an Irish Examiner article from 12 September 2011 as previously requested by the committee; to be noted and published. This issue relates to the practice in the HSE of rehiring retired staff, in this case two former CEOs of health boards. The Committee of Public Accounts will examine the whole issue of consultancies, which is covered in chapter 45 of the annual report of the Comptroller and Auditor General, after Easter. We will include this issue as part of the briefing documentation for members. Members can take up directly with the Accounting Officer for the HSE the whole practice of procuring the services of staff who are on substantial pensions from the public service.
No. 3.10 is correspondence, dated 13 January 2012, from Ms Brigid McManus, Secretary General, Department of Education and Skills regarding properties transferring under the terms of the indemnity agreement. It will be noted and published. Members may wish to raise issues in this correspondence with the Secretary General on 9 February 2012.
No. 3.11 is correspondence, dated 16 January 2012, from Ms Brigid McManus, Secretary General, Department of Education and Skills regarding audit committee report on Youthreach, Macroom, County Cork. It will be noted and published. A copy of this correspondence will issue to Mr. Humphrey Deegan, the original complainant.
No. 3.12 is correspondence, dated 16 January 2012, from Mr. Ray Mitchell, parliamentary and regulatory affairs, Health Service Executive, HSE, regarding Right of Place, Cork. It will be noted.
No. 3.13 is correspondence, received 17 January 2012, from Ms Brigid McManus, Secretary General, Department of Education and Skills providing a note on the labour market activation fund, as previously requested by the committee. It will be noted and published. The committee can deal with this matter at its meeting on 9 February 2012.
No. 3.14 is correspondence received 17 January 2012, from Mr. David J. O'Callaghan, chairman, Irish Red Cross, on the chairman's report on progress and developments at the Irish Red Cross, June to December 2011. It will be noted and published. Members will be dealing with this matter later this morning.
No. 3.15 is correspondence, received 17 January 2012, from Mr. Donal Forde, Secretary General, Irish Red Cross regarding a letter received from the International Federation of Red Cross and Red Crescent Societies regarding reform of the Irish Red Cross corporate governance structures and procedures. It will be noted and published.
No. 3.16 is correspondence, received 17 January 2012, from Mr. David J. O'Callaghan, chairman, Irish Red Cross, regarding opening statement. It is to be noted and published.
No. 3.17 is correspondence, dated 16 January 2012, from Mr. Brendan Kennedy, chief executive, Pensions Board, regarding response to correspondence forwarded by the committee from Councillor Philip Cantwell on the Tara mines disabled miners. It is to be noted and published and a copy to be forwarded to the Mr. Cantwell.
At last Thursday's meeting, Deputy Sean Fleming requested the following correspondence be put on the agenda for today's meeting: correspondence, dated 13 December 2011, from Mr. Brendan McDonagh, chief executive, National Asset Management Agency, NAMA, providing additional information requested by the committee at its meeting of 26 October 2011 arising from correspondence, No. 3.16, at committee meeting of 15 December 2011; correspondence, dated 21 December 2011, from Mr. John Corrigan, chief executive, National Treasury Management Agency regarding providing further information requested by the committee at its meeting of 6 October 2011 regarding savings negotiated under the lower interest on EFSF and EFSM arising from correspondence, No. 3.8, at the meeting of 12 January 2012; correspondence, dated 4 January 2012, from Mr. Brendan McDonagh, chief executive, NAMA regarding response to correspondence forwarded by the committee from Mr. Brian Flanagan on NAMA's accounts, arising from correspondence, No. 3.10, at the meeting of 12 January 2012. It is agreed to note and publish these.
Will Deputy Sean Fleming outline the issue he wishes to raise?
I thank the Vice Chairman for giving me the opportunity to deal with the one item of correspondence dated 13 December 2011 from Mr. Brendan McDonagh. It is a follow-through to his appearance at the committee towards the end of last year regarding NAMA's annual report and financial statements 2010. We had a detailed discussion about this. I am going to ask you to bear with me for a minute. This matter has been ongoing and not yet dealt with to my satisfaction. I am not letting this correspondence go without further follow-through.
At the meeting we had the detailed discussion about the interest being included in the NAMA accounts for the year in respect of loans it had taken over. That was fine. We had quite a technical discussion. We asked him specifically to clarify how much of the loan interest it had included in its audited accounts for 2010 was actually received by year end, how much had not been received and how much it would be carried forward.
Rolled forward?
Not quite rolled forward. Rolled forward means it is not due to be paid this year. Mr. Brendan McDonagh sent us a letter on this in November which was utterly unsatisfactory and we returned it to him forthwith. He replied to us on 13 December 2011, just before the Christmas break, and we did not get an opportunity to discuss it in detail. I am still not satisfied with this. I am requesting the committee to write to him further on this matter. My query needs to be spelled out to Mr. Brendan McDonagh because he seems to be avoiding dealing with the issue. I would not suggest the man does not understand my query.
Do you want a specified breakdown on the interest charged?
No, will you bear with me for a minute? The last paragraph in the letter sent on 13 December 2011 states:
Since the acquisition of loans, NAMA received a total cash of €734.431 million per their accounts of which the proceeds from the sale of property is €363.333 million and other loan receipts of €371.098 million. For the purpose of the NAMA 2010 audited financial accounts, the cash received was applied against the interest recognised in the profit and loss during the period of €447.860 million with a balance of €286.571 million being applied to reduce the principle bans on acquired loans.
I am aware that now all members have studied this but bear with me. I am sure those following me will understand what I am saying.
On the previous page in his letter, Mr. McDonagh says, "the interest reflected in the accounts reflects NAMA's expectation that its accrued loans will be paid down primarily through cash received from the future disposal of the related properties which are security for the loans acquired".
I am getting to the nub of the issue. In one section Mr. McDonagh refers to the cash received in respect of related properties. In the last paragraph I read he refers to the proceeds of sale of property which can be different property. I will not delay the committee with this aspect but the accounts he deals with are the figures on page 62 of the annual accounts which is the consolidated statement of cash flow. I will not read note 2 on the bottom of that account. I just want to give the reference to him so he knows what we are referring to. On page 70 of the accounts, note 2.10, he deals with the policy issue of interest and on note 5, page 78, to the accounts he deals with interest on loans and receivables. On page 88, he deals with a breakdown of a reconciliation of moving loans and receivables.
I am concluding on this. I have no argument with the €448 million it has included in its accounts as interest receivable. For the fourth time, I am asking the simple question. How much of that €448 million was received during the year and how much was not paid and still outstanding? It is a simple question.
In the letter Mr. McDonagh says that the agency received €734 million from the sale of property and other loan cash receipts and then says, "For the purpose of the NAMA 2010 audited financial statement, the cash received was applied against the interest recognised in his profit and loss account". What is the basis for the statement? Mr. McDonagh is saying the agency received money from the proceeds of property A from developer A and has included that in respect of interest charged against property Z owned by property Z in the accounts, which is not connected.
In his previous letter, Mr. McDonagh referred to the related properties on which interest is charged. He stated, "I received €734 million in 2010 from the sale of property and other interest payments". He has a figure of €448 million in his accounts for interest and he is going to assume and allocate. He said he has applied it against the interest to give the impression that none of the €448 million is outstanding at year end. In the final paragraph, he states he has applied this amount to cover the interest included in his profit and loss account. I want to know the basis of that calculation because I cannot accept that the €734 million relates specifically to the interest on the various loans he included in the profit and loss account unless he shows that. Surely that relates to sales of property unconnected to the interest charge and he seems to have just lumped it in there.
For the fourth time, I want to know how much of the €448 million he included in his audited accounts was not paid during the year. I hope Mr. McDonagh understands the question I ask because each time he has replied, he has referred to the same few phrases in the annual report and he has provided no clarification.
Correspondence will be forwarded to Mr. McDonagh with that specific question.
A total of 18 reports and statements have been received since the meeting of 12 January 2012 and they are to be noted.
No. 5 is the work programme, which is to be noted. No. 6 is any other business.
I would like to follow up on the issue raised by Deputy Ferris last week about the compulsory purchase of land in County Wicklow. We have been waiting six months for a response to the initial inquiry. I acknowledge it was agreed at the last meeting that the clerk to the committee would write to the Department again and that the committee would seek a detailed briefing on the substantive issue in advance of the Secretary General addressing the meeting.
The letter requesting the terms of reference was sent this week and the clerk to the committee will follow up on that over the next week. Perhaps the Deputy can raise it again at next week's meeting. Is the agenda for that meeting agreed? Agreed.