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COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 10 May 2012

Business of Committee

Before we begin, I welcome Deputy Gerald Nash, who was appointed by the Dáil this week. I wish well our outgoing member, Deputy Anne Ferris. She contributed well to this committee.

Are the minutes of the meeting on 3 May agreed? Agreed. We agreed last week to adopt two reports on the National Aquatic Centre and on the Irish Red Cross. The revised draft reports were circulated this week showing the changes that have been made at the request of committee members. Are the contents of the two reports agreed?

The report on the Red Cross is excellent and I thank the Chairman and his officials for all the work that has been put into it. I know we have made some changes already. The final sentence in red in the second paragraph on page 2 states that it will recommend that an audit of branch accounts will give further assurances in the area of financial controls at the Red Cross. It might have fallen off the page, but I cannot find that recommendation.

Clerk to the Committee

That is fine. I will make that change.

That will make it recommendation No.6.

Clerk to the Committee

Yes.

The language is fine but I think the recommendation should be a bit stronger, stating that a regular audit of branch accounts must occur to give further assurances in the area of financial controls at the Red Cross.

Clerk to the Committee

That is fine.

Did we get sight of appendix 1?

Clerk to the Committee

We did, but I was not able to incorporate it here.

I would not mind seeing it for the sake of completeness.

Clerk to the Committee

I will circulate it immediately after the meeting.

It is a very good report. The first paragraph of page 2 gives an insight into the way the issues were highlighted, and refers to a resignation in March 2009 and March and April 2008. Are we correcting the dates? Should that read March 2008?

Clerk to the Committee

No. The resignation took place in March 2009, but the person said it was known in March and April 2008.

Is it agreed that we adopt and approve the report on the Irish Red Cross? Agreed.

What happens once we adopt the report?

The normal practice is that we would have a press launch some time next week in the audio-visual room. The second report deals with the National Aquatic Centre.

Once again this is a very good report. There are one or two items which arise, however. Under the change in the legislation, effectively the capitalised value of the lease had to be greater than the development cost. Does the latter cost relate to the actual cost of the building or does it relate to something else? The section of the report relating to alliance and revenue guidelines refers to the matter "being contested by the DWW" and also to "the major disparity between the open market value of €35 million" and the capitalised lease value. The open market value was €35 million, while the capitalised lease value was almost €76 million. Previously, the open market value could have been used and this would had to have been greater than the development cost.

Clerk to the Committee

After the introduction of the 2002 legislation.

Instead, the open market value was ignored. The clerk stated that the Revenue guidelines were deemed to be unlawful by the Supreme Court.

Clerk to the Committee

Yes, they were.

Those involved completely ignored the open market value test. I have been informed that the Revenue guidelines indicated that the formalised value could only be used if the open market value was not available.

Clerk to the Committee

Yes, that is right.

The open market value was available in this instance.

Clerk to the Committee

That is correct.

They just relied on the capitalised value. Does the clerk understand my point in this regard?

Clerk to the Committee

I do. I will clarify that point for the Deputy. My understanding is that they concluded that the open market value of €35 million was not based on enough evidence. In other words, there was not sufficient evidence to demonstrate that this was the value and, therefore, they ignored it. However, the Supreme Court found that there was evidence because the Valuation Office had carried out an assessment and had arrived at that figure. It also found that this was a competent assessment of the open market value. Previously, they had ignored it because they said it was not supported by evidence. However, it was supported by evidence.

I wish to make one or two other points. On the role of the Department of Finance, do we know who actually provided the advice?

Clerk to the Committee

No. It was based purely on the evidence of an internal memo in the then Department of Arts, Sports and Tourism.

The report also states:

The Committee, having regard to the C&AG advice, can only conclude that the Department of Finance may not have been brought fully up to speed ... when it became involved and, more than likely, will be surprised that its stance was interpreted by the Department of Arts Sports and Tourism as giving no leeway to having this VAT charge dropped.

Are we safe in making that assertion?

Clerk to the Committee

When one considers the law, on one side, and the Accounting Officer's statement to the effect that they had no leeway to back out of the VAT charge and that the Department of Finance was insisting on it, on the other, it is clear that those two positions do not match. The wording we used contains phrases such as "we were surprised". In fact, we were amazed.

The report also states: "While the VAT Guidelines provided that the lessor, in this case ... had a choice as to which of the three methods to use". Is it possible to clarify that they had to use the market value method in the first instance?

Clerk to the Committee

Yes. I will come back to the Deputy after the meeting and we can make a slight amendment to that paragraph.

My final point relates to the assertion in the report to the effect that "Legal strategies should be underpinned by a cost benefit analysis that encompasses the risks associated with litigation ... that are likely to be associated with ...". Ultimately, what is involved here is the fact that there was no net saving to the State. That point is made very well throughout the report and perhaps it should be included in bold print. The clerk has suggested some very good procedures within the report. Henceforth, all Departments should evaluate whether there will be a net cost to the State in respect of any matters they are pursuing.

Clerk to the Committee

Yes.

It is clear that there was a huge net cost to the State in the context of the legal fees relating to this matter.

Clerk to the Committee

That is correct. We made that finding and we have recommended that, going forward, Departments must carry out cost-benefit analyses.

Is there any other issue relative to this report which members wish to raise? I am aware that certain members have been discussing the report with the clerk. If there are no other issues arising, we can adopt the report. General practice is that reports of this nature are launched into the public domain by way of press conferences held in the audio-visual room. I ask the clerk to arrange for such a press conference to be held some time during the coming week. We will clarify the points that have been raised at this meeting and we will then see what room is available for the press conference. Is that agreed? Agreed.

The third item on the agenda is correspondence received since our meeting on 3 May. No. 3.1 is correspondence received on 2 May 2012 from Department of Transport, Tourism and Sport in which is contained a briefing paper on matters to be considered at today's meeting. This is to be noted and published. No. 3.2 is correspondence received on 3 May 2012 from the National Roads Authority forwarding a briefing paper on matters also to be considered at today's meeting. This is to be noted and published. No. 3.3 is correspondence received on 2 May 2012, from Mr. Joe Hamill, Secretary General at the Department of Arts, Heritage and the Gaeltacht, forwarding correspondence with Bernard P. Cunnane & Co. regarding Foynes Aviation & Maritime Museum. This is to be noted.

No. 3.4 is correspondence, dated 2 May 2012, from Mr. Bev Cotton re Youthreach Macroom. This is to be noted. The committee's position in respect of Youthreach Macroom is that all correspondence received has been given to the Comptroller and Auditor General. If a report is submitted to the committee by the Comptroller and Auditor General, then the committee will examine it. The committee has no further role in this matter at this stage and Mr. Cotton is to be informed accordingly.

No. 3.5 is correspondence, dated 2 May 2012, from Mr. Ray Mitchell, assistant national direct of parliamentary and regulatory affairs at the Health Service Executive re correspondence previously forwarded by the committee regarding KARE. This is to be noted. It appears that the accounts of KARE have been reconciled with the HSE allocations to that body. The Comptroller and Auditor General will be given access to the HSE's internal audit report. If a matter has to be reported, it will be included in the Comptroller and Auditor General's report and we will examine it at that stage. For now, the committee cannot pursue this matter further. Perhaps the person who has been sending the relevant letters to the committee could be informed of that fact.

I do not understand that. We have received a letter from a Mr. Owen Mullins highlighting the apparent discrepancies between what the KARE organisation in Kildare shows in its accounts versus the payments shown in the HSE's accounts for 2010. Mr. Mullins asked that the difference between the two figures should be explained. The HSE has responded to the committee and has provided four explanations as to why some of the differences arose, including the fact that it mixed up the name of an organisation in Dublin with that of one in Newbridge. The HSE also indicated that lottery grants were treated differently and that KARE had disclosed grants separately in its accounts. The response concludes by stating that the accounts have been fully reconciled. I want the committee to be provided with information on that reconciliation.

What has occurred here is nonsensical. KARE presented one set of figures, while the HSE presented a completely different set of figures. The latter admitted that there were some errors with regard to how it presented its figures and has now written to us and indicated that the matter has been checked internally and that it is satisfied that the position has been reconciled. We have not been provided with information on that reconciliation. I want that information now and I want it to be provided in public session of this committee. The original letter to the committee was, after all, presented in public session. I have no difficulty with the Comptroller and Auditor General considering this matter in due course. All that is required from the HSE s a simple reply in which is detailed the figures relating to the written explanation that has been supplied. I want to see the reconciliation.

We will send another letter to the HSE requesting the accounts and seeking for clarification on the matter.

Tell it to send the reconciliation. I do not necessarily need to see the internal audit report, I just want to see the reconciliation. All I want is the answers to the questions that were asked.

We will send the letter.

No. 3.6 is correspondence received on 3 May 2012 from Mr. Tom O Mahony, Secretary General at the Department of Transport, Tourism and Sport re his opening statement. This is to be noted and published.

No. 3.7 is correspondence, dated 2 May 2012, from Mr. Denis Egan, chief executive of the Turf Club re Mr. William Treacy. This is to be noted. A copy of the correspondence will be forwarded to Mr. Treacy, who made the original complaint. The issue here appears to be one of a charge of animal cruelty. This is not an issue of public accountability and, therefore, the committee has no direct role in the matter. Deputy Fleming raised it.

I did. I understand that the committee wrote to Horse Racing Ireland and perhaps the Department. We wrote to at least two organisations. I suggest that when we get all the replies back we will examine them. We have received the first of the replies and we have two more to receive. We might have them by next week.

The matter will appear again under correspondence.

With the other replies.

We have correspondence dated 18 April 2012 from an anonymous source re County Cork VEC. This is to be noted. While the correspondence is from an anonymous source it has raised an accountability issue and therefore a copy of the correspondence is to be forwarded to the Secretary General of the Department of Education and Skills and to County Cork VEC for a note on the issues raised.

No. 3.10 is correspondence dated 12 April 2012 from Mr. Owen Mullins re alleged fraudulent accounting in the HSE annual report and financial statements for 2009 and 2010. This is to be noted. The HSE has already written to the committee, as outlined at No. 3.5. Mr. Mullins raised the issue of the accounts of other services providers being also wrong. We have dealt with the matter already with Deputy Fleming. The matter will return to the committee in the context of the reply to the correspondence.

We have correspondence received on 3 May 2012 from Mr. Michael Brosnan re forwarding correspondence with the Committee on Investigations, Oversight and Petitions, and the Department of Agriculture, Food and the Marine. It is to be noted.

We have correspondence received on 8 May, 2012 from Mr. Fred Barry, chief executive of the National Roads Authority re his opening statement. It is to be noted and published. We received correspondence dated 8 May 2012, from Mr. Seán Ó Foghlú, Secretary General, Department of Education and Skills regarding correspondence previously forwarded by the committee regarding special needs assistants. It is to be noted.

We received correspondence, dated 2 May 2012, from Mr. Tom Moran, Secretary General of the Department of Agriculture, Food and the Marine regarding correspondence previously forwarded by the committee regarding Mr. Charles Farrell. It is to be noted and a copy of the correspondence is to be forwarded to Mr. Charles Farrell who made the original complaint.

We received correspondence, dated 2 May 2012, from Mr. Ray Mitchell, assistant national director, parliamentary and regulatory affairs, Health Service Executive, regarding correspondence previously forwarded by the committee regarding HSE south. It is to be noted.

No. 3.16 is correspondence, dated 8 May 2012, from Mr. John Moran, Secretary General of the Department of Finance rethe €3.6 billion error in the general Government debt. It is to be noted and published.

Statements and accounts received since the meeting on 3 May, 2012 include, 4.1 Marine Institute, annual report 2009, and 4.2, Marine Institute Annual Report 2010. They are to be noted.

The work programme is now shown on the screen of members. That is to be noted. There are no major changes in it.

Do members have any other matters they wish to raise? If not, could we agree the agenda for 17 May, 2012, the 2010 Annual Report of the Comptroller and Auditor General Appropriation Accounts. At 10 a.m. we will deal with Vote 10, Office of Public Works, chapter 9, public procurement, and we will close off the outstanding issues. Will we deal with that matter in an hour?

Clerk to the Committee

We will.

Will the Accounting Officer be present?

Clerk to the Committee

Yes. There is not a huge number of issues. Matters mainly relate to decentralisation and cost of sites. I can push the other item back. There is no problem with that.

I wish to flag an issue which was raised on the day by Deputy Deasy on the estate in Waterford and the negotiations under way in that regard. I understand that an indication was given that the negotiations were moving in a satisfactory direction but that is no longer the case. Perhaps it is an opportunity to raise the matter again on the day with the Accounting Officer, but we would advise her of that.

Clerk to the Committee

Okay. There is no problem with that.

When is the Accounting Officer coming in?

Next Thursday.

At 11 a.m. we will deal with Vote 30, Communications, Energy and Natural Resources, chapter 25, the national broadband scheme. Those two matters will be taken on the day.

No. 7 is the 2010 Annual Report of the Comptroller and Auditor General and Appropriation Accounts, Vote 32, transport, chapter 27, maintenance of regional and local roads and the National Roads Authority, 2010 Annual Report and Financial Statements.

I invite the witnesses to attend.

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