COMMITTEE OF PUBLIC ACCOUNTS debate

Chairman

Before we begin, I remind members and witnesses to turn off their mobile telephones as they interfere with the sound quality and transmission of the meeting.

I wish to advise witnesses that you are protected by absolute privilege in respect of the evidence you are to give this committee. If you are directed by the committee to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise nor make 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 163 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I want to welcome, Mr. Seán Ó Foghlú, Secretary General, Department of Education and Skills. I ask Mr. Ó Foghlú to introduce his officials.

Mr. Seán Ó Foghlú

I am accompanied by Peter Baldwin, Assistant Secretary, on my left, Vincent Landers, principal officer, on my right, and Niall Monks, assistant principal. All three are in the skills division.

Chairman

I ask Mr. Paul O'Toole to introduce his officials.

Mr. Paul O'Toole

Good morning, Chairman. I am accompanied by Conor Dunne, who is the assistant director general for corporate services, finance and ICT on my right and on my left is Dr. Bryan Fields, who is responsible for research and planning and development.

Chairman

I ask the Department of Social Protection witness to introduce herself?

Ms Anne Vaughan

Anne Vaughan, Deputy Secretary.

Chairman

I ask the Department of Public Expenditure and Reform witness to introduce himself?

Mr. Dermot Nolan

Dermot Nolan, principal officer.

Chairman

I call on Mr. McCarthy, Comptroller and Auditor General, to introduce the accounts.

Mr. Seamus McCarthy

The European Globalisation Adjustment Fund, which is generally referred to as the EGF, was established by the European Union to assist workers made redundant as a result of the impact of globalisation trends, or arising from the economic crisis. Programmes funded by the EGF aim to facilitate the early reintegration of workers into alternative employment and to promote entrepreneurship.

In Ireland, EGF programmes were established to assist workers affected by the Dell, Waterford Crystal, SR Technics and TalkTalk closures. A further programme was established aimed at assisting three categories of workers in the construction industry. The budgeted cost of the five programmes was €99 million, and they were planned to meet the needs of a total of around 14,000 workers.

The EGF funded 65% of the budgeted cost of the early programmes, reducing to 50% of the budgeted cost for TalkTalk employees. EGF funds are provided in advance by the EU, based on the estimated programme cost. Where the outturn cost is less than budgeted, a refund must be made to the EU.

Supports available for those who participated in the programmes included training programmes provided by FÁS, local authorities, vocational education committees and private colleges; assistance in undertaking third level education courses; and county enterprise board assistance for small business start ups. Income support during retraining or re-education was also be eligible for funding.

Each of the programmes has a maximum of two years’ duration from the date of application for EGF funding. At the time of finalising my report, the programmes for Dell, Waterford Crystal and SR Technics workers had finished and outturn data were available. The programmes did not attract the expected number of workers and those who participated took up less costly measures than originally envisaged. As a result, the final cost of the three completed programmes was €17 million, or 45% less than estimated, and €11 million was due to be refunded to the EU.

Early engagement with affected workers is a key factor in maximising participation in the programmes. Overall participation in the three completed company-based programmes was 87% of eligible workers, with participation lowest for the SR Technics programme at 76%. This may have been due to the fact that there was no central co-ordination unit for that programme. There was also a longer period of waiting for EU approval of the proposed programme.

The Department’s application for funding for the construction programme was submitted in June 2010, which meant it could include support measures for workers in that sector until June 2012. Final EU approval for the programme was received in November 2011.

It was only at that stage, about six months prior to the programme's completion, that eligible construction workers were contacted and became aware of the opportunities. The Accounting Officer will be able to inform the committee on the final programme uptake relative to target. The expenditure outturn on the construction programme was approximately €35 million, which was €20 million or 37% less than estimated. As a result, a refund of €13 million was due to the EU. The chapter found that the Department did not regularly monitor participation or expenditure and was dependent on the support providers for such information. This prevented the Department from identifying the low uptake of support at an early stage. That would have allowed more scope for steps to be taken to improve participation.

Determining the outcomes for the targeted workforce is critical in evaluating the effectiveness of programmes and in shaping future programmes. In particular, it is important to establish how many workers were re-employed and to assess what the outcome might have been in the absence of the programme. The response of participants to the Departments' surveys on outcomes was low and there was little canvassing of non-participants to establish the reason they had not availed of the opportunities available to them. As a result, it is not clear that any of the reviews of the three complete programmes gives reliable overall indicators of the outcomes for the targeted workforce.

In the interests of better targeting of any further programmes, the report recommended the use of person-by-person data to monitor participation and help identify whether there is a need to re-direct the focus of measures, the introduction and monitoring of implementation plans for participants and more comprehensive assessment of outcomes for both participants and non-participants.

The National Training Fund was established in 2000 as a ring-fenced fund to support the training of those in employment and those who wish to take up employment. It also is used to provide funding of research into existing and future skills requirements of the economy. The context for the fund's establishment was a shortage at the time of skilled labour in certain key economic sectors. The fund is resourced primarily by a levy on employers of 0.7% of reckonable earnings of certain categories of employees. In July 2011, the levy was reduced to 0.35% for employees earning less than €356 per week. The income of the fund from the levy proceeds in 2011 was €316 million, which was a marginal increase on 2010 levy income. European Social Fund, ESF, receipts into the fund tend to be less consistent from year to year. In 2011, some €80 million was received, including €24 million in refunds relating to ESF programme activity from 2000 to 2006. No ESF funding was received in 2010.

The resources in the fund are applied under two main programme areas. Approximately three quarters are spent on programmes of training for those seeking employment. Most of the remaining expenditure is on training and upskilling of those currently in employment. FÁS is funded under both headings. It received a total of €286 million from the fund in 2011. The other main beneficiary of the fund in 2011 was Skillnets Limited, which received a total of €14.5 million. This is a company established mainly to provide financial support for training of employees of established businesses. My office reported in 2010 on the utilisation by Skillnets of its funding and on weaknesses in the control of its spending. I should also point out that the audit of the 2012 accounts for the National Training Fund is ongoing at present.

The audit of the 2012 financial statements of FÁS has been completed and they also are before the committee today. The primary function of FÁS is to provide a range of training programmes and supports to both unemployed and employed people. The agency's activities in 2012 were mainly funded from the Vote of the Department of Education and Skills and the National Training Fund. Total expenditure by FÁS in 2012 was €442 million, compared with €943 million in 2011. The transfer on 1 January 2012 of the employment services and community programmes functions from FÁS to the Department of Social Protection accounts for most of the decrease in expenditure year on year. A clear audit opinion was issued in respect of the 2012 financial statements. However, my audit report drew attention to an impairment charge in 2012 of €4.1 million in respect of a vacated training centre, as well as asset write-offs in 2012 of €1.2 million with regard to two vacated leasehold properties. I also drew attention to an investigation of a jobs initiative scheme being carried out by FÁS. Potential irregular expenditure with regard to this investigation is estimated at up to €150,000.

Chairman

I invite Mr. Ó Foghlú to make his opening statement.

Mr. Seán Ó Foghlú

I thank the Chairman for the opportunity to make this statement concerning the examination of three areas of interest to the committee. As requested, I have forwarded some advance briefing in respect of each of these issues and I will therefore keep this opening statement quite short. I will deal with each of the issues in turn.

The European Globalisation Adjustment Fund, EGF, is an EU fund that provides co-financing for approved programmes of guidance, training, education and enterprise supports for workers made redundant as a result of the adverse impacts of globalisation. National sources must meet between 35% and 50% of total costs of EGF programmes. To date since 2009, Ireland has had seven EGF programmes approved in support of approximately 13,100 redundant workers. One programme is still operational, namely, that in support of almost 600 workers made redundant at the TalkTalk call centre facility in Waterford and at a number of ancillary enterprises. Since 2009, the Irish authorities, overseen by the EGF managing authority in the Department of Education and Skills, have provided more than 21,330 individual interventions to some 9,355 beneficiaries on the six completed programmes. To date on the TalkTalk programme, almost 1,760 interventions have been provided to 390 beneficiaries. Approximately €59 million in funding has been expended on the completed Irish EGF programmes with €5.4 million available for the TalkTalk programme, which will finish in February 2014.

A review of the EGF process in Ireland was undertaken by the Department in 2012 to assess the fund's strengths and weaknesses. This involved a public consultation process. Irish EGF programmes have also been audited by the European Commission and the European Court of Auditors and examined by the Comptroller and Auditor General. Arising from these various examinations and the review of the EGF conducted on Irish programmes, greater emphasis is now being placed by the EGF managing authority on the improved monitoring and evaluation of outcomes for EGF beneficiaries. This approach has been assisted by improved data flows from the Department of Social Protection and the Office of the Revenue Commissioners and by the undertaking of a series of longitudinal surveys for the managing authority both during the actual programme implementation period and up to 12 months after programme completion. These analyses indicate increasing levels of employment and corresponding decreases in unemployment for the cohorts involved on all relevant EGF programmes.

The Irish Presidency of the European Council achieved the agreement of a general approach on a new EGF regulation for the next 2014 to 2020 funding round at the Employment, Social Policy, Health and Consumer Affairs, EPSCO, Council in Luxembourg on 20 June 2013. The agreement allows the next Presidency to enter into trilogue discussions with the European Parliament with a view to implementing a new and significantly broadened EGF by 1 January 2014. All institutional stakeholders view the fund as a concrete and practical instrument of solidarity with the tens of thousands of workers being made redundant through changing world trade patterns.

On the 2012 FÁS financial statements, as members will be aware, FÁS has undergone significant organisational change over the past few years. On 1 May 2010, responsibility for FÁS and all its functions transferred to the Department of Education and Skills. Responsibility for budget and policy in respect of employment services and community employment programmes transferred to the Department of Social Protection with effect from 1 January 2011. FÁS was therefore funded by both Departments for the financial year 2011. FÁS employment services and community employment programmes, including approximately 700 staff, subsequently were transferred to the Department of Social Protection on 1 January 2012.

The financial statements and annual report for 2012 were laid before both Houses of the Oireachtas in June 2013 in keeping with the code of practice for the governance of State bodies. In 2012, FÁS received €424 million from the Department of Education and Skills and approximately €700,000 from other Departments. FÁS was also in receipt of other income of €3 million from training and other activities. The Estimate for FÁS for 2013 from this Department amounts to €419 million.

Staff costs amounted to €63 million. The FÁS staff count, as at 31 December 2012, was 1,096 full-time equivalents.

FÁS delivers an extensive range of programmes to those seeking and changing employment, redundant persons and school leavers as well as marginalised and disadvantaged groups. Over 65,000 persons completed training programmes in 2012. This included over 30,000 persons, both unemployed and employed, who participated in evening courses and online programmes.

The number of those entering apprenticeship during 2012 was 1,434 which was 10% higher than the 2011 level. In 2012, the total number of apprentices across all phases of training was 8,862.

Following the enactment of the Further Education and Training Bill 2013, it is expected that FÁS will cease to exist later in the year. It will be replaced by the new further education and training authority, SOLAS. As part of this process, FÁS training courses will be transferred on a gradual basis to the newly-formed Education and Training Boards.

On 1 May 2010, responsibility for the National Training Fund was transferred from the Minister for Jobs, Enterprise and Innovation to the Minister for Education and Skills. Funding from the National Training Fund is allocated by the Minister for Education and Skills with the consent of the Minister for Public Expenditure and Reform, in accordance with the provisions of the National Training Fund Act 2000.

The fund provides for expenditure on training for those seeking employment, training for persons in employment, literacy and numeracy training; early school leavers; and persons with disabilities. It also provides funding for the identification of existing and future skills needs for the economy. While the fund does not form part of the Vote of the Department, expenditure is allocated as part of the Estimates process.

The fund is mainly funded by a levy on employers of 0.7% of reckonable earnings in respect of employees in class A and class H employments, which represents 75% of all insured employees. This was reduced, in 2011, to 0.35% for low-earning employees as part of the Government's jobs initiative. It also receives funding from other sources such as the European Social Fund and the European Globalisation Adjustment Fund. The total income in 2011 was €400 million and expenditure amounted to €326 million. The surplus in the fund at the end of 2011 amounted to €178 million and this will reduce to an estimated €117 million at the end of 2013 due to an anticipated reduction in receipts.

On an annual basis, FÁS receives approximately 77% of the expenditure from the fund. In recent years, a number of innovative projects have been funded through the National Training Fund's contribution to the Government's Pathways to Work and Action Plan for Jobs initiatives. Funding for these in 2013 include €22 million for Springboard, €20 million for Momentum and €5 million for ICT skills conversion course.

Expenditure from the fund is subject to public service accounting rules and is audited by the Comptroller and Auditor General. The 2011 accounts were audited and certified by the Comptroller and Auditor General.

Together with officials from the Department and our colleagues in FÁS, I will be happy to deal with any questions arising from the issues outlined.

Chairman

I thank Mr. Ó Foghlú. Can we publish your statement?

Mr. Seán Ó Foghlú

Yes.

Chairman

Will Mr. O'Toole make his opening statement?

Mr. Paul O'Toole

I will provide a brief opening statement regarding the work of FÁS during 2011 and since. The figures I will quote have all been rounded off.

Over this period, FÁS has concentrated on meeting its core objectives. These are to provide relevant training to our learners who are mainly unemployed persons; to provide employment support services to our clients, which responsibility ceased following the successful transfer of the FÁS employment services and community employment programmes, with their accompanying staff and other resources, to the Department of Social Protection at the end of 2011 - 772 staff members or 720 full-time equivalents were redeployed as part of this process; to continue the programme of improvements and reforms to our training products, quality control systems and governance systems; and following the decision of Government, to prepare for the winding down of FÁS, the establishment of SOLAS and the transfer of training centres, staff and other resources to the new education and training boards. This work was carried out in the context of ensuring prudent management of budget resources and meeting the obligations of the Employment Control Framework. Since the beginning of the moratorium, staff numbers - full-time equivalents - have been reduced from 2,271 to 1,068 today, a fall of over 1,200 or 53%. Over the period from 2009-12, the cost of operating FÁS has reduced by some €480 million in total compared to 2008 as a base year. This takes into account the transfer of resources to the Department of Social Protection.

Unemployment rates continue to be high with average unemployment over the period, ranging from 14.5% in January 2011, to 15% in January 2012 and to 13.7% currently. Yesterday, according to the live register report, it stood at 13.6%. FÁS responded by introducing a new training strategy in 2011 which seeks to optimise the use of its resources. This entails balancing the opportunities that employers are providing and the skills-sets they require, with the needs of persons who are more distant from the labour market and, therefore, require longer periods of support and progression. This has, for example, meant responding to the needs of the ICT industry for entry level and intermediate skills while providing digital literacy tuition for learners seeking to improve their competency. It has also meant a reduction in the volumes of construction related training which, in turn, has been reoriented to courses supporting green technologies and retro-fitting.

In 2011, 50% of the overall FÁS budget of €943.3 million, representing 64% of the programme budget, was used to provide income support to those accessing our programmes. Of the balance, 28% was spent on other programme costs, 15.4% was spent on pay and overheads and 6.6% on pensions. Some 163,000 interventions were provided across the range of programmes. I have similar figures available for 2012.

As referred to previously, with the expected passage of the legislation to establish a new further education and training authority, SOLAS will be established and FÁS will be wound down. This will bring to an end an organisation which has served Ireland for some 25 years. Despite the many challenges and serious issues which the organisation has faced, particularly in recent years, it has demonstrated a considerable commitment to supporting its learners and other clients. In so doing, the staff of FÁS have demonstrated considerable resolve, resilience and expertise in their work. No doubt this team of people, who will soon leave FÁS, will bring their commitment and expertise to bear in the new education and training boards and in SOLAS as they transfer in the near future.

Chairman

I thank Mr. O'Toole. May we publish your statement?

Mr. Paul O'Toole

Yes.

Deputy Simon Harris

I thank Mr. Ó Foghlú and Mr. O'Toole and their teams for being here today.

In my questions, I will focus on the European Globalisation Adjustment Fund, and Deputy Nolan on FÁS. If I can make one comment, I acknowledge what Mr. O'Toole acknowledges in his statement. We have had many a stormy meeting with FÁS at this committee, in my time and previously, but as FÁS is about to be wound down and new structures put in place, it is important to acknowledge the excellent work carried out by the overwhelming majority of Mr. O'Toole's staff throughout the country who I and my colleagues on this committee would deal with on a regular basis in all of our communities. Change in any workplace is difficult but when one looks at the figures that Mr. O'Toole presented, in terms of both the structural change and the vast drop in the number of staff at a time when we are facing an unemployment crisis compared to the large numbers of staff at a time when there was full employment in this country, it is a testament to their dedication. I wish to put that on the record of this committee.

I will direct my questions to Mr. Ó Foghlú on the European Globalisation Adjustment Fund. We all will be aware of the unemployment crisis that we are going through and clearly we want to see every possible cent of funding tapped and utilised effectively. In looking through the Comptroller and Auditor General's report, no doubt there is good work being done on the utilisation of the European Globalisation Adjustment Fund for Ireland but there are a number of areas where, as Mr. Ó Foghlú acknowledged, there is room for improvement. He also acknowledged in his opening statement that there are new regulations on the future operation of the fund, and I might get his opinion on that later.

The first point that struck me was what constitutes an intervention as opposed to an effective intervention. I note the Comptroller and Auditor General's report, at 17.27, states:

The Department collates data on the number of occupational guidance interviews provided. However, it does not record the extent to which individuals availed of more than one guidance interview.

If, for example, I was a worker in Waterford Crystal or TalkTalk and I turn up for an initial guidance meeting about my future options, that constitutes an intervention but I may go away and never obtain further educational training, go on another course, re-skill or up-skill. Mr. Ó Foghlú might comment on how the system captures effective interventions as opposed to actual interventions.

Mr. Seán Ó Foghlú

I thank Deputy Harris. There have been a number of different reviews of the EGAF and we have certainly learnt a lot from them.

We should place the Deputy's comment in the context of considering a group of redundant workers. We all recognise the trauma that a group of workers goes through in the time leading up to redundancy. Typically but not absolutely in terms of the EGF, the workers would be working in a company, although I know there are companies that are linked. Sometimes, the company might help in getting staff ready for a redundancy and sometimes it might not. We are all aware, from our interaction with our friends in society, never mind the EGF, of the trauma that unemployment brings to any individual. In the early days of redundancy, it is quite difficult to find ways to engage. What we are seeking to do and what we have learned in the EGF unit is that we must seek to engage in as many different ways as possible.

The standard former mechanisms that were in place within FÁS and the Department of Social Protection have been integrated in Intreo. That has to be a very formal part of the intervention such that people who have been made redundant will have interaction with the State services. That is an appropriate interaction. The interaction can lead to some people moving on to further training immediately, or it can lead to a period of reflection for those who may want to enter training at a later date. Others may already be moving to employment and may not even need the type of interaction in question. The difficulty and challenge with knowing what is effective and not effective is that, because of the different backgrounds of people who are made redundant, they can take different options. The key for us, as has been advised in the audits of the European Court of Auditors and Comptroller and Auditor General, is to try to capture a way of measuring the effectiveness of the overall outputs - that is to learn for the future - while at the same time having a real manner of engagement with the groups of people who are made redundant so we can try to develop the programme locally to meet their needs to the greatest extent possible. In some cases, it is possible to develop particular unique programmes to assist where there are a number of redundant workers in a similar position. This can mean the work is done by a private contractor, or it can mean that FÁS steps in. It is all in the manner of the engagement.

In terms of the review of the effectiveness, on an ongoing basis and afterwards, the comparison has to be between those for whom there has been some intervention and those for whom there has been none, while not forgetting that there may be reasons there has not been an intervention. The reason may be because somebody has moved on to employment relatively quickly and, therefore, did not need an intervention. It may be that it is more mobile workers who do not require intervention. That may not always be the case. We have developed - we have given quite a lot of details in the brief - a quite sophisticated way of trying to measure the outcomes. We did this for the construction workers and for TalkTalk. It is a matter of trying to contrast the impact on those who had no intervention with the impact on those who did. We have a lot to learn from that on a continuing basis.

We are not just learning for the EGF. It is right and proper that we have a big focus on the EGF. Obviously, today, there is a chapter on the EGF, but for us it is really a matter of how we deal with people being made redundant. Not all workers who are made redundant are made redundant in the context of a redundancy that arises from globalisation or under the crisis derogation that we had. They may not be of that scale. Therefore, we must learn continuously how to work with people who have been made redundant and the unemployed. In that regard, we work very much in partnership with the Department of Social Protection. We are working very closely with FÁS in that regard.

Deputy Simon Harris

That is reasonable. Mr. Ó Foghlú mentioned the issue of linkages. There has been some success in finding linkages from other companies, spin-offs or spun-off areas that are adversely affected by the closure of a firm. On a cursory glance, one would be concerned to see that there were no linkages established with construction programmes. When one goes beyond a cursory look, one sees the real difficulty. The construction applications related to 3,272 different companies in the sector. I very much understand the difficulty in applying the concept of linkages. Given the particular crisis in terms of unemployment within the construction sector, has Mr. Ó Foghlú any thoughts on how linkages could possibly be formed? Do we really need to face the harsh, unpalatable reality that it is nearly impossible to apply the fund to linkages when so many smaller-scale companies are involved?

Mr. Seán Ó Foghlú

When the Deputy says linkages, does he mean linked companies?

Deputy Simon Harris

Yes, supplier and downstream.

Mr. Seán Ó Foghlú

I think we have succeeded to a certain extent. Where there has been a redundancy in a company, it is easier to identify the linked companies. We have had some success in identifying the linked companies. With the sectoral one, it was much more difficult. That was not realty an option to the same extent because there was not the same regional aspect to a group of workers that could be worked with. There were not the same types of companies linked informally.

With regard to TalkTalk, the role of the FÁS co-ordination unit is very helpful because it can be the one to identify the various individuals, whether they were employed by TalkTalk or in the linked companies. It can talk through the options and supports and then consider various individualised possibilities, such as personalised services. We would have introduced a new element after the various reviews and audits. We introduced an expenses contribution scheme. We were getting feedback to suggest that while the fees we were willing to pay for further and higher education were helpful, there were additional expenses arising from attendance and participation in learning. We introduced a particular scheme on that basis that has been in operation for the TalkTalk staff. We understand from the feedback that it is very well received and is enhancing participation and learning.

Deputy Simon Harris

I want to explore the issue of using private companies to manage the records of one of these programmes, most specifically the SR Technics one. The Comptroller and Auditor General's report states the records for the SR Technics programme were collated by a private company. The next point outlines how there can be difficulties in that there may be long periods before valid records are received, etc. What is the logic behind using a private company? Do we lack the capacity to do this work internally?

Mr. Seán Ó Foghlú

I suppose we are seeking as a government to have a certain level of outsourcing of work, where appropriate. We have had difficulties and challenges in making staffing resources available. We are all in a declining ECF environment. In this regard, I include ourselves and FÁS. That was one of the reasons, in particular, for the delay in putting the necessary co-ordination arrangements in place for SR Technics. We ended up putting a contact point in place for both FÁS and the Department of Social Protection in relation to SR Technics. We have learned from that and we will be having a FÁS co-ordination unit for any further case.

We found the involvement of a private company very helpful. We tendered for the assistance of a private company. We had to go through two tenders in respect of SR Technics to come up with somebody. The advantage of having a private company is that the EGF can be sporadic. We had the cases of three companies and the construction sector very much in quick succession, then a bit of a break and then TalkTalk. It is more difficult and challenging to assign FÁS and departmental staff at short notice when an urgent matter arises. If there is a contract, it is easier not to have to pay unless there is a need. When a need arises, we can draw down the assistance. We have found that very helpful.

Deputy Simon Harris

Consider the use of private colleges to provide course programmes for people availing of intervention.

It refers to courses which are not available within the public system. Can Mr. Ó Foghlú expand on what such courses are?

Mr. Seán Ó Foghlú

Ireland has a strong private training system and of the 80% of FÁS funding which is outsourced to public and private providers, a high proportion goes to the latter. There are many private colleges in the higher education sector. We are very supportive of their active engagement in the various programmes. An example is the momentum initiative, which is deliberately designed to have programmes which lead to people accessing employment again. We had open tenders, which FÁS organised, for public and private providers. This is outside the EGF. We are very supportive of the private sector getting involved. We are trying to put in place an appropriate mix of public sector further and higher education and training which must meet a wide range of needs. Public sector provision must meet the needs of school leavers, adult learners and the long-term unemployed, including the needs of the long-term unemployed aged under 25 years. We have been developing aspects of specialism within that over the last three or four years and there are limits and cost pressures to address. We have had to increase the pupil-teacher ratio for post-leaving certificate courses and reduce the funding for higher education institutions. We have had to reduce the funding and number of staff available to FÁS.

There are challenges to operating within the private sector and we are very open to the concept in the EGF of grants which a redundant worker can use for a training or higher education programme. The person will know what programme will meet his or her needs and fund the fees with the grant. We are as positive as possible about the balance between the public and private sectors. The EGF is framed in that context.

Deputy Simon Harris

The area about which I am most critical and which needs most improvement, as the Department has acknowledged in the Comptroller and Auditor General's report, is the evaluation of outcomes. The Department has also acknowledged it to an extent today. People who have availed of an intervention are asked to complete a survey. In the case of SR Technics, the rate of non-response to the survey of outcomes was 67%. Even in the case of Dell, it was 42%. While people have suffered what Mr. Ó Foghrú correctly calls "the trauma of redundancy", they have also availed of public money and received a benefit from it in terms of returning to employment or starting a business. However, there is an unwillingness to respond to the survey. Perhaps it is a matter of human nature that people get surveys and do not fill them out. Can we strengthen the structures in place to ensure that we get the information back? It is not a question of filling out the survey for the sake of it. It is about the fact that we do not know how 67% of people in SR Technics who received an intervention felt how it went. It makes it difficult to form an opinion on the success of the outcome.

Mr. Seán Ó Foghlú

We recognise the challenge and the difficulty. The change we have implemented on foot of our own review and the various audits to which I have referred is to integrate information from the Revenue Commissioners and the Department of Social Protection to provide that the assessment of outcomes is not primarily survey based. We can get the full information by looking at pps numbers to see if people are in employment or receiving something from the Department of Social Protection. If there is no record, it may be that the person has departed from the labour force completely, is not in receipt of a welfare payment and is not making a Revenue return. He or she may have emigrated. The information we have provided to the committee sets out the various data sources we use in that context.

We made a call arising from the Comptroller and Auditor General's report about the extent to which we would go back to get information. We carried out a detailed examination and decided to include construction workers. We were not sure we could do so, but made a big push to ensure we included them in the Department of Social Protection and Revenue information to the greatest extent possible. We have done it with the construction workers and are doing it with TalkTalk. We will operate on that basis going forward.

Deputy Simon Harris

That sounds like a dramatic improvement, which is good. I have read the Department's views on the issue of the return of €11 million, which was not spent. I understand that the issue is more complex than it appears at first glance. Some people would take the view that the Department received €11 million which it did not spend, whereas the Department might say that there was an overestimation. The idea is that it is almost better to ask for more than one needs, which can be given back, rather than to have too little. I do not know if that is a fair way to portray it. I am not sure that view is fully borne out in respect of the lack of awareness of the availability of interventions. For example, only one third of the publicity budget which was made available to promote interventions was spent. On the three finalised programmes, as little as 10% of the available publicity budget was spent. Is the Department satisfied that the money that is being given to Ireland for these interventions is being spent in devastated towns where there have been major job losses? Are we doing everything we possibly can to ensure we do not have to give the money back and that everybody who is eligible for an intervention can access it?

Mr. Seán Ó Foghlú

Clearly, we seek to maximise the expenditure from the estimation we have given and the available funding. We are not happy to have to return amounts of any significance. However, it is very challenging to maximise expenditure in the context of the nature of EGF arrangements as confirmation comes fairly late in the process. We have sought and discussed upfront ways to increase expenditure by reference to the national training fund and the Exchequer contribution. We know that we will never achieve 100% spending because a maximum amount will never be realised. The TalkTalk experience shows that even where we are implementing a programme having learned all the lessons and are getting relatively positive feedback from the workers, there are still workers who do not engage or who have engaged to an extent, but have entered employment and do not want further measures. We know that the spending maximum is not 100%, it is somewhat below that. All other countries are struggling in this regard. While I am not sure if a spending average has been calculated since 2011, we are above the average overall and have only had one programme which was below the European average.

The question of awareness is a key one. One of the difficulties we have experienced has related to the initial national blast from the media to say that money is available. There has been some criticism about this. When we started off initially, we did not have the communications systems in place to ensure that people attending FÁS would be made aware of the programme. We accept that. It often happens in our business that there is a media announcement but not everybody on the ground knows about it. It was exacerbated in that case as the initial media announcement took place before we had worked out exactly what we were going to do. We were developing the concepts and ideas as the announcement was happening.

Engaging with workers is harder in sectoral rather than non-sectoral programmes.

The engagement in a company-based one is to get in on the ground with the company with the FÁS co-ordination unit and a consultative group that is recognised by the workers as being representative of them and meeting their needs. Where we do that, we will seek to maximise.

It is worth saying that we deliberately overestimate when we make the initial submission because we want to leave scope for any possibility for any worker whereas when it comes to the actual expenditure, the expenditure has typically been somewhat less even on a per worker basis in respect of those who have assessed. In summary, we are not happy to be returning money. It is not a position we want to be in and we are seeking to maximise the return from TalkTalk and any future ones.

Deputy Simon Harris

Is the rate of return in line with other European countries? I understand the point Mr. Ó Foghlú is making. These are estimations the Department is submitting and it is asking for the maximum to cover all eventualities but are we in line with the rest of Europe?

Mr. Seán Ó Foghlú

We are about 10% better than the average. As far as I know, the average is a 2011 average and I am giving the Deputy our total, counting TalkTalk. I expect that like everything else, other countries have improved as well. I do not want to over-egg that but it is higher than the average we have.

Deputy Simon Harris

I want to return to the construction sector. Obviously, it is an extremely important sector where huge numbers of people are unemployed. I know Mr. Ó Foghlú sent some of this in the material but could we pad it out a little for the record of the meeting? The Comptroller and Auditor General report noted that the Department did not have standardised procedures in place for the compilation of regular meaningful data on the number of individuals participating, interventions provided and the related costs in respect of the three construction programmes. I know this was because these outturns do not become available until the programme is completed. I understand that this is the Department operating completely in line with the scheme but while it might be operating by the rule book, are there not missed opportunities in terms of not having this data at an earlier stage to make sure the interventions are as tailored and targeted as possible?

Mr. Seán Ó Foghlú

We listened carefully to what the Comptroller and Auditor General said to us and have put in place tighter monitoring arrangements in respect of the TalkTalk programme so that we can see better as we go along. It cannot ever be an absolute tracking because there may be additional EGF-only expenditure associated with it but there is also expenditure running in various programmes which is part of the typical expenditure of FÁS or an institute of technology that is very difficult to track and take out. It can be monitored but it cannot be done so absolutely. Yes, we have learned the lesson and are seeking to do it in a more co-ordinated and enhanced way. We will have a real challenge if and when we have another sectoral. We are obviously not pleased that there was another occasion in TalkTalk but the fact that we had another opportunity to test the concepts for improvement that have been identified in the various reviews was very fortuitous for us in the context of being able to design a set of arrangements.

We also have a lot of challenges if there is another sectoral application. I do not know if there will be another sectoral application but we talked about the possibility. It is looking very likely that we will have an EGF. Unfortunately, in the past couple of days, we have also had job loss announcements. Whether those announcements give rise to the possibility of EGF applications remains to be seen because they must be made in periods of time and of certain volumes within periods of time. They are within globalisation but, hopefully, it will be expanded back into the crisis after the start of 2014. We must take the lessons we learned from construction and seek to apply them to the overall if there is another sectoral. The figure of 63% in construction is in the context of the difficulties and challenges we had with construction. It is notable that we got that level of completion. I would like it to have been higher but it is notable that we got to 63%. Even looking at the effectiveness of it and the numbers of people involved who are in employment, in the context of the national dialogue about construction workers, the fact that a certain proportion of those construction workers are back in employment, regardless of whether or not they received support under the EGF, is heartening. It is heartening that it is possible for construction workers to re-enter the labour market at the moment.

Deputy Simon Harris

In terms of success rates, is Ireland still the highest beneficiary of EGF funding?

Mr. Seán Ó Foghlú

We were up to 2011. We have not received the 2012 report which will have the various comparative data. The maximum programme was €55 million for construction. Under the EGF, the Commission annually spends around €130 million. We did not spend all of the €55 million and it was not all in a single year but that will give the Deputy an idea of the scale.

Deputy Simon Harris

The Irish Independent reported on 23 July 2012 that in some instances, the Department of Education and Skills had to step in with funding so that workers accessing funding could finish third level courses they had started and that spanned longer than the two years covered by the fund. Somebody might have had funding for part but not all of a course. Obviously, this leaves people in a situation where they are effectively left out of funding. Why were workers approved for funding for courses that spanned longer timeframes than the amount of funding they were provided with?

Mr. Seán Ó Foghlú

One of the difficulties with the EGF and one of the issues we hit in our own review is the question of whether we could commit to longer funding than the two years allowed under the EGF. Obviously, there are some relevant higher education courses that are longer than two years and if workers were willing to commence on an understanding that they would seek to complete them, I do not think we should not allow workers to commence them under the EGF. We would seek to help them in any way we can, provided it is in a manner consistent with the EGF and our overall funding arrangements.

Deputy Simon Harris

I have a question for both FÁS and the Department that is probably connected with Deputy Nolan's questions for FÁS. The Economic Adjustment Programme for Ireland - Winter 2012 Review, which was published in April 2013, contained a number of comments about the high level of unemployment and the fact that this continues to be a very pressing issue and talked about the structural reform agenda. It acknowledged that reforms relating to further education and training are progressing but it basically said that fast progress is needed and we need training programmes that are closely linked to the labour market. Could representatives from the Department and FÁS give a response about where they feel we are in respect of the troika review?

Mr. Seán Ó Foghlú

We have detailed engagement with the troika when it is here and certainly are seeking to address many of the issues it is raising. We have quite a few initiatives under way to seek to enhance employment relevance. I will let Mr. O'Toole deal with the detail of what is happening within FÁS. A NESC review of the employment relevance of further education and training generally is under way and will be completed in the autumn. We have commenced a very important review of apprenticeships. There is a considerable amount of discussion on the European stage about the relevance of apprenticeships so we have commenced work on that and are looking options for developing the apprenticeship model. We have also issued guidelines to the VECs in respect of aligning their provision with the skills needs of enterprise on the basis of some Forfás work on the alignment of further education needs with the labour market. We have a number of specific initiatives where we are targeting unemployed people and are working with higher education on part-time and Springboard courses. We are also working on the Momentum programme, which FÁS is organising on our behalf. We can provide the committee with more details of those.

The IECT programme is an important skills initiative not primarily aimed at the unemployed. We provide a number of conversion programmes in ICT for graduates to encourage students to take up ICT and science and technology programmes generally. This goes back to secondary level education through, for example, the literacy and numeracy emphasis, project maths, bonus points for maths in the leaving certificate and the work being done to reform the junior cycle. In regard to bonus points for maths, the proportion of leaving certificate students taking honours maths at leaving certificate level increased from 16% to 20% last year and the indication is that the proportion will increase by a further 4% this year, although that will not be confirmed until the examination results are issued. When people study maths, it opens them to considering other career options. We provide a wide range of measures across the higher education and training system to enhance the employment links of education and training. This is not to say that education is solely for employment. I do not need to get into this debate, other than to note that education is underpinned by a range of other values. The work of the expert group on future skills needs is important in this regard, by ensuring education and training are relevant to employment.

Mr. Paul O'Toole

In the FÁS part of the equation, the reform involves structural and strategic aspects. We have been working with the Department and others to implement reforms on both fronts. In terms of structural reform, the organisation has downsized and transferred two significant divisions to the Department of Social Protection. In line with the enactment of the legislation, we will wind down FÁS, work with the Department of Education and Skills to establish SOLAS and transfer approximately 80% of the remaining staff along with the training centres to the 16 new education and training boards. As members can imagine, these structural reforms involve a lot of work in themselves.

Strategic reform relates to the fitness for purpose of investments in training. We are as aware as everybody else of the need to continually reflect on the impact of our work. In 2011 we introduced a new training strategy through which we sought to balance the resources available to us against our purpose. We identified various drivers of our training, including those with a primarily economic focus, that is, were designed to meet the needs of employers in terms of the skills provided, and the programmes that are primarily driven by social inclusion and equity. We are seeking to balance those drivers, measure their impacts and improve them. We have introduced 100 new or redeveloped programmes, many of which are tailored to specific skill niches. Others being improved through the common award system that was formerly under FETAC to ensure fitness for purpose. We are also improving how we survey and measure outcomes in this regard.

The SOLAS legislation anticipates that SOLAS will propose a strategy to the Department of Education and Skills on how its investment in further education and training can be optimised for the future. The intention is to prepare that strategy in the first six months of the life of SOLAS so that it can be brought to the Department for broader consideration. That strategic development process will be informed by a wide ranging consultation with the actors in the area and the review outputs of the NESC report on the impact of further education and training, both of which will give us a better understanding of further education and training.

Perhaps it is useful to explain the role FÁS will play in this process. Like many countries, Ireland operates a national framework for qualifications from level one to level ten. The FÁS training space is between levels three and six. We are primarily focused on entry and intermediate skills, whether in crafts or basic entry level for people who need to go further. We are constantly striving to optimise the impact of that.

Deputy Derek Nolan

I will primarily focus on Mr. O'Toole's organisation. I agree with Deputy Harris regarding the good work that we regularly encounter FÁS doing in our communities. This work never gets headlines in the press but it valuable none the less and some excellent people have dedicated their entire careers to working with FÁS. That needs to be acknowledged. The dissolution of FÁS and the transfer of its functions should not be seen as a reflection on these individuals' work.

Mr. O'Toole outlined the process of transformation in FÁS. When is it expected that the sign will be taken down from the organisation's door? I am not sure what will happen to Mr. O'Toole or his board. I assume the board has to dissolve and his position become redundant. When does he expect the door to be locked?

Mr. Paul O'Toole

That is in the remit of the Department. The legislation is well advanced and once it has been enacted it will be for the Minister for Education and Skills to determine a date for its commencement and for the establishment of SOLAS. I know from the Department and the Secretary General that the intention is to do so at the earliest opportunity this year.

Mr. Seán Ó Foghlú

The Bill has almost completed its passage through the Houses. I understand it finished Committee and Report Stages in the Seanad yesterday. The Minister is keen to establish SOLAS at the earliest opportunity and he has met the board of FÁS and thanked it for its work, while recognising that it must continue to do that work until it is completed. He gave his thanks, and that of the Department, for the work it has done over the previous three years.

We hope to establish SOLAS as a body as early as possible in the autumn. SOLAS will not be able to undertake all of its tasks at that stage, however. It will begin to undertake its tasks but it will still need to organise the delivery of training until the training centres are transferred to the education and training boards. Our target is to transfer at least six centres before the end of the year and the remaining centres by the end of the following year. There will be a rolling transfer of training centres to the education and training boards from the point when SOLAS is established and for approximately one year afterwards.

Deputy Derek Nolan

SOLAS is designed to have nothing to do with training centres. Instead of transferring the training centres first it is being given a function for which it is not designed so that it can dispose of that function over the course of a year. That appears the wrong way to proceed.

Mr. Seán Ó Foghlú

A considerable amount of detailed work will need to be done in respect of transferring the training centres. By establishing SOLAS, it can continue to manage the responsibilities of FÁS while taking over overall policy advisory responsibilities in regard to the further education and training sector and work on the proposals to which Mr. O'Toole referred. It is a matter of ensuring the new arrangements are in place and planning to transfer the others. We found that a big bang transfer date would not work and it is more helpful to plan for a number of stages. We entered into a consultative process and have published an implementation plan. This is a huge programme of public sector reform when combined with the education and training boards established on Monday.

We have established an education and training reform office in the Department. We are bringing in experts to be part of that to help plan and work with FÁS and the ETBs in rolling out its implementation. It is a three- to four-year programme of change, which will involve the introduction of shared services, new ways of doing business and new financial systems in the ETBs in a consistent manner across all of them, and it will take a lot of work. We are conscious, for example, that we planned for the establishment for SUSI. Notwithstanding that, what is clear from the review we undertook is we did not plan sufficiently. We needed to invest as many resources in the initial planning for this, so that is why we are not jumping into the transfers. We are seeking to plan them appropriately and well. It is vital that there is continuity of provision because we are in an economic downturn and, technically, in recession again, and we need to ensure the provision of further education and training is not threatened by this and that no balls are dropped. That is the important thing that makes a difference for the learner on the ground. We are working closely with FÁS and the ETBs to ensure the transfer takes place as seamlessly and in as planned a way as possible.

Deputy Derek Nolan

Mr. Ó Foghlú mentioned that the ETBs were established on Monday. They are basically entities established with the future capacity to deal with these skills and training centres. Are they currently continuing their main operations under separate VECs? Did anything substantial happen on Monday bar a legal transformation?

Mr. Seán Ó Foghlú

The difference on Monday particularly was that 33 entities stopped existing and 16 replaced them. We had a series of amalgamation of bodies. It was just as I described and it was business as usual. There was no difference in the provision of services. The teachers are being paid by ETBs this week when they were paid last week by VECs and so on. There is a continuation in the provision of services.

The ETBs will have developing functions over time. Training is one example of that. The fact that they are there will enable them to support schools in different ways over time. There are some changes but, again, it is not a big bang. It will be a gradual change and one of the important things we had worked through over a long period was identifying who the chief executive officers of the ETBs would be. They all commenced office on Monday. Each ETB has agreed a date with the Department on when they will have their first meeting. Technically the Minister has to decide the date but he decided that on advice from the ETBs. They are all having their first meeting in the next few weeks. Some may have had that meeting. They are working on with their regular business. The ETBs include all the members of the former VECs, but after the next local government elections their membership will be reduced.

Deputy Derek Nolan

One issue should be monitored carefully during the establishment of the ETBs. All the VECs had separate branding, including logos, letterheads and so on. This needs to be controlled in order that millions of euro is not spent on new signs, logo design and rebranding of offices and so on. If there is a backlash, that is where it will come from if we spend a fortune rebranding and making things look nice with the new headings.

Mr. Seán Ó Foghlú

Of course we will try to make things look as nice as possible. We heard concerns such as that during the process and to be fair to the ETBs and Education and Training Board Ireland, which is the IVEA's successor body, they have taken an initiative in partnership with a private partner to design a consistent logo for all the ETBs in order that there will not be separate logo design going on. There will be a single consistent logo for all the ETBs.

Deputy Derek Nolan

That is good.

I refer to the 2012 FÁS accounts. The Comptroller and Auditor General mentioned a number of issues relating to fixed assets in his opening statement. The note referred to intangible assets, the first of which was in respect of the Cabra training centre, for which there was an impairment charge of €4 million in 2012. According to the notes, €7.4 million was spent on the centre and there was an impairment charge of €4 million but at the end of December 2012, the €7.4 million expenditure was worth €1 million. Can Mr. O'Toole explain this?

Mr. Paul O'Toole

I will do my best. The Cabra training centre was brought into being in 1975 when AnCO purchased a factory that made bowling equipment for approximately €400,000. Over the intervening 35 years, FÁS and AnCO spent approximately €7 million on capital works improving and equipping the centre and making it fit for purpose. The total expenditure over 35 years was about €7.4 million. The building was built in the 1950s and over that period of time literally tens of thousands of learners either attended Cabra or had training managed from there.

The impairment arises because at the time of disposal following 2010, the carrying value of asset - in other words, how it was reflected in the books of FÁS - was greater than the net recoverable amount. It was carried in the books on an historical cost basis. The €7.4 million charge is accumulated, the depreciation is charged against that annually and the result is termed the net book value. That is the accounting convention used by FÁS and by many organisations. Buildings are written off over a period of 50 years. There is not an active market in FÁS training centres so on the rare occasion they come to the market, it is basically what the value is for their alternative use. It was on the basis that people might use the asset. What has happened is that the site and the buildings are going to different State organisations. An Post is developing a sorting office on the site and we have handed the remainder of the site to the Department of Education and Skills for a national school. At the time of disposal, we looked at what market opportunities were there and we had the site and buildings valued at €1.5 million. A repair was required to the roof and that is where the net realisable value of €1.2 million came into being. It reflects the commercial value of its alternative use at the time of disposal.

The observations of the Comptroller and Auditor General mean we need to look at our depreciation policy to see if it is appropriate to write off buildings and fittings over that period of time. It reflects the fact that the assets are purchased and developed not as commercial assets but as State institutions and if they go on the market where one is looking for alternative uses, it will depend on market conditions at the time.

Deputy Derek Nolan

So it reflects an incorrect or inaccurate accounting policy over the years.

Mr. Paul O'Toole

There are different views on this. The accounting policy of historic cost and accumulating depreciation is the correct one. We do not have a revaluation policy on an ongoing basis because there is no simple basis for that and there are accounting criteria in this regard. What it prompts is a need to look at whether the universal, one-size-fits-all depreciation charge of buildings over 50 years is appropriate in all cases going forward. That is the issue, as distinct from an inappropriate accounting policy.

Deputy Derek Nolan

The Comptroller and Auditor General also draws attention to an issue with the two offices in Birr and Athlone. There was an asset write-off of €1.8 million on one of the leasehold properties. Can Mr. O'Toole explain that?

Mr. Paul O'Toole

Birr was chosen as the site for a FÁS head office on the back of the decentralisation decision in 2004. FÁS acquired a temporary premises in, I think, 2007 and began the process of putting some people into it. It took a ten-year lease on a building in Birr and it equipped and fitted out that building to operate as a temporary premises for the ten-year period. In 2010, the then Government indicated that some of the functions would be split off and in July 2011, the current Government decided on the winding down of FÁS and the establishment of SOLAS. In February 2012, the Government decided that the decentralisation in respect of FÁS was to be discontinued. We had a five-year break clause on the lease in 2012.

We took the option to close the operation because we believed it to be the most commercially sensible thing to do at the time as we did not require the out office. This entailed writing off the accumulated fitting costs carried in our books. It was a sunk cost at the time. We have saved the rent and operation costs for five years and we believe on balance it was the correct decision to take and hence the charge arose.

Deputy Derek Nolan

The charge reflects the fact it was anticipated the investment would be written off over ten years but FÁS had to take a hit because the clause was broken.

Mr. Paul O'Toole

We took the hit.

Deputy Derek Nolan

In 2007 actions were taken to implement the decision in 2004 with regard to Birr-----

Mr. Paul O'Toole

Yes.

Deputy Derek Nolan

-----and the ten year lease was signed and equipped. How many people worked in the office in Birr?

Mr. Paul O'Toole

I do not know precisely how many but it was more than 20. My colleague has just informed me it was 17. There may have been 20 at one stage.

Deputy Derek Nolan

Was is intended this figure would grow if it were to be a head office?

Mr. Paul O'Toole

The original intention was for it to be a temporary premises while a head office was being built in Birr. There are varying figures in this regard, but I believe the intention at the time was that up to 400 staff would have decentralised to Birr to form a new FÁS head office.

Deputy Derek Nolan

What work was undertaken in the provision of a new head office in Birr? Was a site allocated?

Mr. Paul O'Toole

A site was purchased in Birr. I cannot remember what year, but it was in or around that time the site was purchased. I have just been informed the year was 2005.

Deputy Derek Nolan

For how much was the site purchased?

Mr. Paul O'Toole

Approximately €1.5 million.

Deputy Derek Nolan

Is the site still an asset of FÁS?

Mr. Paul O'Toole

It is an asset of FÁS but it is for sale.

Deputy Derek Nolan

What is the asking price?

Mr. Paul O'Toole

There is an advertised minimum value of €150,000 but I do not know what it actually will be. In common with other sites we have had available we will go through the State system, and we have commenced the process to see whether any other State organisation can make use of it. We will weigh up the options on whether the State could use it for another purpose or whether it would make more sense to sell it commercially.

Deputy Derek Nolan

Where are the 17 people now who were working in the temporary office?

Mr. Paul O'Toole

They have been distributed. Some have transferred to the Department of Social Protection and some are working on a temporary basis in Tullamore. Like everything else the number of staff has been reduced over time.

Deputy Derek Nolan

What was the rent on the office?

Mr. Paul O'Toole

It was approximately €100,000 a year.

Deputy Derek Nolan

This is not directed at Mr. O'Toole or FÁS because I know they were following a policy and were instructed by a Minister of the day to do so. To implement the decentralisation policy, 17 people were put in an office in Birr at a rent of €100,000 a year and a site for €1.5 million was bought which is now worth €150,000. Five years into the lease it was broken, leading to a capital write-off of approximately €1 million in 2012 and the policy was ended. This seems to be an extraordinary waste of money for no benefit and a policy which was questionable from the outset. I understand FÁS was under instruction at the time to implement the policy but it seems an extraordinary waste of resources.

Mr. Seamus McCarthy

I wish to make a point on the depreciation charge with regard to the lease in this case. The depreciation charge is 2%, which assumes a 50 year life of the improvements. This is the point we have raised with FÁS. We must examine this because in reality it should be depreciated over the life of the lease and in this case it was a ten year lease because it was anticipated that at the end of ten years a new building would be on the site. More generally we will examine with FÁS its accounting policy and see the implications. FÁS is effectively in its last year of operation and it will wash out anyway in the final reckoning, but it is an important principle that improvements made to a leasehold building should be depreciated over the life of the lease or otherwise as appropriate to the nature of the improvements made.

Deputy Derek Nolan

In this case, this was not an accurate accounting policy, because it was a temporary office and FÁS never intended to be there for more than ten years but it was being depreciated over a 50 year period.

Mr. Paul O'Toole

We must accept the Comptroller and Auditor General's observations. It should have been written off over ten years and not an extended period.

Deputy Derek Nolan

Another issue arises under note 7 with regard to the Baggot Street office and an accelerated depreciation charge in 2012 of €860,000. Will Mr. O'Toole update us on the Baggot Street premises. What is the current lease and when does FÁS intend to be out? I know the plan is to leave the premises?

Mr. Paul O'Toole

Mr. Dunne will answer the question on the accelerated depreciation charge. FÁS has had a long lease on two premises on Baggot Street, a main office and an adjoining office. The tenure in one is due to complete this year and we are actively seeking alternative premises suitable for SOLAS which will have a much smaller staff complement than the FÁS head office. We are taking advice on this and looking for an appropriate premises. We aim to exit the building this year if it is possible and move to an appropriate premises for SOLAS which will be much smaller and should be more economical to run and operate.

Mr. Conor Dunne

There are two leases on the Baggot Street buildings. One is up this year and we intend to hand back the building. The other is not up until 2017. It is a much smaller building and we will have a use for it. With regard to the overall accelerated depreciation we went through an exercise where we reviewed much of the expenditure on leases, particularly before the transfer to the Department of Social Protection, and where they had been written down over 50 years and we brought them back to the period of the lease. Unfortunately some of them slipped through, Birr being one. With regard to the accelerated depreciation in 2012, we looked at the depreciation policy on this and put in an additional charge for 2012 given that we would be exiting in 2013.

Deputy Derek Nolan

It is to compensate for the fact FÁS is leaving.

Mr. Conor Dunne

We will be exiting the building.

Deputy Derek Nolan

There are times I wish I were an accountant. We always examine the big changes from one year to the next and I did a little financial analysis. The noticeable change in 2012 is that the cash in the bank went from €8 million at the end of 2011 to €13 million at the end of 2012. This seems to be a large increase in cash on hand. Will Mr. Dunne explain this?

Mr. Conor Dunne

If the Deputy examined the previous year he would have seen the figure was €20 million in 2009 or 2010.

Deputy Derek Nolan

It is not in the report.

Mr. Conor Dunne

It fluctuates. We operate on an accrual basis but we are funded on a cash basis. We must do a reconciliation at the end of the year. If one looks at the net current assets it is simply a function of that. We owe money or cash has not come in from debtors.

Deputy Derek Nolan

What is the average cash balance?

Mr. Conor Dunne

It changes throughout the year. We draw down our cash every week from the Department.

Deputy Derek Nolan

There is obviously a lot of money in the accounts at any one time.

Mr. Conor Dunne

There is only approximately five days' cash in the accounts. It is certainly not excessive. We are run very tightly by the Department.

Mr. Paul O'Toole

It is important to state that €20 million is approximately ten days' cash and the greater bulk washes through by the middle of January.

Deputy Derek Nolan

I want to pick up on another aspect of the accounts, which is the statements regarding investigations which have taken place in the organisation and statements on internal financial control.

The report lists three investigations that were in progress or had been concluded. The first was an investigation into a jobs initiative in Tipperary, with a potential inappropriate expenditure of €150,000. The report on this was due to be completed by the end of last month and there had been communication with the Garda on the matter. Will Mr. O'Toole update the committee on that report?

Mr. Paul O'Toole

We have finished that report and passed it to the Department of Social Protection, which has responsibility for the jobs initiative. We had responsibility for it at the time. There was what we believed to be irregular expenditure. The greater bulk of expenditure on a jobs initiative programme by FÁS is on the cost to participants. We have reviewed the initiative from our perspective and believe that some of the expenditure was inappropriate. We have been in constant contact with the Garda and have sent the report to it. The Garda will consider the report from the point of view of whether matters of a criminal nature arise. We cannot determine that.

The report has just been produced. It will go to the next meeting of our audit committee, which will be this month. We will consider it and its implications then. Due to its nature, we are constrained in what we can say. The report has just gone to the Garda for consideration.

Deputy Derek Nolan

Mr. O'Toole's answer is obviously vague in a way. Are we referring to a user of FÁS courses or to someone who works for FÁS?

Mr. Paul O'Toole

To the use of the people within the scheme and whether the payments for their wages were used appropriately in all cases.

Deputy Derek Nolan

The communication with the Garda has been ongoing for some time, as this was mentioned in the 2012 report. Is an investigation under way?

Mr. Paul O'Toole

The Garda had been awaiting our final report, which was concluded just last week. The Garda would only have received it last Friday or on Monday of this week. The Garda will have to consider the degree of investigation that it will bring to bear.

Deputy Derek Nolan

What kind of scheme are we discussing?

Mr. Paul O'Toole

It is called a jobs initiative scheme, a type that has existed for many years. Originally, it was directed in particular towards unemployed men who had been affected by previous recessions. The scheme in question closed a number of years ago, but several of its participants and participants on other schemes around the country are still in position.

Deputy Derek Nolan

Has any FÁS employee been sanctioned or disciplined?

Mr. Paul O'Toole

Certainly not yet. Many of the staff have retired or moved on. In terms of the process, we must first establish whether there was illegal content, then take on board the implications.

Deputy Derek Nolan

The number of people who have retired early when we put these questions to various witnesses is amazing. Is Mr. O'Toole satisfied that the governance that is in place means that this situation cannot arise again?

Mr. Paul O'Toole

I will never say that something can never happen again. Time and again, experience demonstrates otherwise. In recent years, we have sought to improve our governance in every aspect of what we do. We are making good strides in some areas in this regard. Human nature being what it is, though, one can never say that something will never happen again.

One must do two things. First, one must concentrate on getting systems, controls, governance, culture and behaviours as right as possible. Second, when issues occur, which they always do, one must tackle them. This is the approach that we would take.

Deputy Derek Nolan

A jobs initiative was taking place in Tipperary and €150,000 was allocated for payments to people for certain purposes, but the money was not used for those purposes. Was it pocketed?

Mr. Paul O'Toole

No. These were wages paid in the normal course of doing business. It is a question of whether they were used appropriately and whether the application of the project was used for the purpose intended.

Deputy Derek Nolan

The second issue that arises in the report is an investigation into a community employment, CE, scheme with ineligible expenditure of €28,000 between 2004 and 2007. According to the report, there was "no loss to FÁS as claims due to the sponsor group have been put on hold". Will Mr. O'Toole update the committee on this matter?

Mr. Paul O'Toole

I will ask my colleague to do so.

Mr. Conor Dunne

There was an issue with this CE scheme in Cashel. Funding stopped. There has been no loss to FÁS, but the Garda has been informed and is following up on certain matters. An issue was noted and we stopped the funding immediately. We owned the money. The State has lost no money, but there is a problem with the scheme. It has been handed over to the Department of Social Protection and the Garda is actively investigating it. I do not want to discuss it further, as it is sensitive.

Deputy Derek Nolan

It was 2007, some six years ago. That is a long time for it still to be sensitive. When did the matter come to FÁS's attention?

Mr. Conor Dunne

A number of years ago. To be honest, we had a resource issue within our internal audit unit. Some of these reports are the last of what I call our legacy issues being completed.

Deputy Derek Nolan

These reports are the last of the investigations.

Mr. Conor Dunne

Yes.

Deputy Derek Nolan

Despite the €28,000, there was no loss to FÁS.

Mr. Conor Dunne

There was ineligible expenditure of €28,000, but we did not fund it.

Deputy Derek Nolan

The scheme's other sources of funding were used.

Mr. Conor Dunne

Not necessarily. The scheme had other sources of funding, but when we found this ineligible expenditure, we did not fund it, effectively closing the scheme.

Deputy Derek Nolan

When did FÁS conclude its investigation?

Mr. Conor Dunne

This year, a number of months ago.

Deputy Derek Nolan

When did the matter first come to FÁS's attention and when did the investigation begin?

Mr. Conor Dunne

I do not have the information before me, but it would have been a number of years ago.

Deputy Derek Nolan

Around 2007.

Mr. Conor Dunne

After that, probably in 2010.

Deputy Derek Nolan

That is a long time to be investigating a matter.

Mr. Conor Dunne

Yes. There was a resource issue in our audit unit.

Deputy Derek Nolan

If FÁS did not lose the €28,000, has the money been recouped by whomever was entitled to it?

Mr. Conor Dunne

We did not. The sponsors were funding it upfront and would have claimed for a grant. We did not pay it, as it was inappropriate expenditure.

Deputy Derek Nolan

The third investigation related to the renting of a property in the Tolka Valley Business Park and was completed in 2012. It concluded that "appropriate procedures had not been followed in procuring a lease at an annual cost of €42,000". Will Mr. Dunne update the committee?

Mr. Conor Dunne

It was reported in previous accounts as nugatory expenditure. There were two separate leases over two time periods. We held two investigations. We rented premises that were not fit for purpose or used as a training centre. It had been used for storage. Nearly everyone involved in the lease has retired. We have new procedures in place whereby, if someone wants to renew a lease, one must make a business case that must be approved by the assistant director general of operations and signed off by me. The case must then go before the chairman and the director general for approval. We have had a robust procedure for a number of years.

Deputy Derek Nolan

The leased property was supposed to be used for training.

Mr. Conor Dunne

Yes, but it was not fit for purpose.

Deputy Derek Nolan

In what way was it not fit for purpose?

Mr. Conor Dunne

The building did not have health and safety or fire certificates. For training, it would have required substantial work.

Deputy Derek Nolan

For how long was the lease signed?

Mr. Conor Dunne

Two leases were signed. I do not have the information before me, but I imagine that they were five-year leases. We tried to get out of the lease legally but were unable to do so. In November 2011, the lease expired.

Deputy Derek Nolan

FÁS had to rent it for five years.

Mr. Conor Dunne

For a number of years.

Deputy Derek Nolan

What was the total spent on the leases?

Mr. Conor Dunne

As far as I am aware, the nugatory expenditure was approximately €249,000.

Deputy Derek Nolan

For storage space.

Mr. Conor Dunne

Yes.

Deputy Derek Nolan

The people responsible have retired.

Mr. Conor Dunne

Yes.

Deputy Derek Nolan

Those were all of my questions. I thank the witnesses.

Chairman

I seek to clarify a number of issues that have been raised.

On the last point, €249,000 was spent on storage space. What was stored?

Mr. Conor Dunne

Course materials.

Chairman

What is the size of the storage unit?

Mr. Conor Dunne

I do not have that information. The only purpose for which the unit was suitable was storage. We needed storage space and it was cheaper to rent.

Chairman

What was the size of the unit in square footage terms?

Mr. Conor Dunne

I do not have that information with me.

Mr. Paul O'Toole

We will get that information for the committee.

Chairman

Was all of the space used for storage?

Mr. Conor Dunne

Yes.

Chairman

So it was full of course material.

Mr. Conor Dunne

My understanding is that it was originally to be used as an electrical or plumbing workshop, but it was not suitable.

Chairman

On the office in Birr, am I correct that the cost of renting that office space was €100,000 per annum?

Mr. Conor Dunne

It cost €99,000 per annum.

Chairman

Did the office have to be fitted out?

Mr. Conor Dunne

Yes.

Chairman

Who bore the cost of the fit-out and who was awarded the contract to do the work?

Mr. Conor Dunne

This was previously reported on 25 November 2010. The work was carried out to FÁS specifications by a builder on-site who was doing other work on behalf of the landlord.

Chairman

What was the cost?

Mr. Conor Dunne

It was approximately €1.019 million.

Chairman

A little over €1 million.

Mr. Conor Dunne

Yes.

Chairman

Who now owns the building?

Mr. Conor Dunne

The building is in the ownership of the landlord and is used in part by Birr Technology Partnership.

Chairman

So the landlord from whom the Department leased the building now owns a building that has had €1 million worth of improvements to it.

Mr. Conor Dunne

Yes. It was a shell and core fit-out, including raised floors, dropped ceilings, etc. The Chairman is correct that the building that was returned to the landlord after five years is greatly improved on what it was when the Department leased it.

Chairman

In terms of the site and the €1.5 million, what was the valuation in this regard? Was the site zoned at the time of purchase?

Mr. Conor Dunne

At the time of purchase, it was zoned for housing. The problem was that in Birr there was very little land available for the proposed head office. It would have been within the OPW's then range of €100 to €500 per acre. The site was zoned for residential and mixed use. There is planning permission on it, although not for a building but for an access road.

Chairman

Did the Department have to seek rezoning of the site?

Mr. Conor Dunne

No. We had to seek planning for the access road.

Chairman

Was planning permission sought in respect of the building?

Mr. Conor Dunne

No.

Chairman

So the Department purchased a greenfield site that was zoned for housing.

Mr. Conor Dunne

Yes. It was originally zoned for housing and mixed use.

Chairman

Was planning permission sought for the road?

Mr. Conor Dunne

Yes.

Chairman

What was the cost in that regard and who constructed the road?

Mr. Conor Dunne

We did not build the roadway; we only sought the planning permission.

Chairman

What was the cost?

Mr. Conor Dunne

I do not know, but it would not have been a major cost.

Chairman

Who valued the site at €150,000?

Mr. Conor Dunne

The agents, Lisney.

Chairman

It is a site zoned for housing and mixed use that was valued at €1.5 million and is now for sale at €150,000.

Mr. Conor Dunne

Correct.

Chairman

We will now move on to the Tipperary hostel project. The figure of €150,000 was mentioned. This is a matter that has been raised in the House and at this committee a number of times by Deputy McGrath. The report states that the estimated cost of work on the site to date is approximately €4 million, that some or most of that €4 million was taxpayers' money and that the project is not yet complete. Whose responsibility is it, in terms of ownership of the project, that almost €4 million in taxpayers' money has been spent on this project to date? It is now not only a question of an investigation into the spending of €150,000 but an investigation into how this asset will be realised for the State, which has already spent €4 million on it.

Mr. Conor Dunne

There were two sources of funding, the first from Pobal, which was spent on materials, and the second from FÁS, which was used to pay workers on the jobs initiative, JI, scheme. The project involved refurbishment of a famine hostel outside Tipperary town. There are a number of items included in the €150,000. Pobal is conducting an investigation, which I understand is also with the Garda Síochána. Wearing the State's hat, we provided funding for the scheme which, in our view, was not spent correctly.

Chairman

We are speaking about the €150,000.

Mr. Conor Dunne

The funding was halted by Pobal and FÁS.

Chairman

How much did Pobal spend on the project?

Mr. Conor Dunne

I do not know. A number of corporate governance issues also arise in relation to this initiative.

Chairman

Mr. Dunne does not know the exact figure because funding was provided by Pobal rather than the Department. The reported figure is €4 million of taxpayers' money and some public donations. The project has now cost the State in the region of €4 million. I understand a considerable amount of work remains to be done. Will the State now have to write off further moneys in terms of security for the building, etc.? I am interested in knowing what is happening in the regard to the €4 million. It is one thing if an investigation into how the €150,000 and €4 million was spent is under way, but who is investigating the state of the property and what can be done with it to save the money already invested in it so that there is not a further loss to the State? Obviously, it would be of benefit to the local community if this project were to be completed. I agree on the need to investigate what happened in regard to the €150,000 and the €4 million but I would like to know if our €4 million is being protected in terms of the construction and works already completed. It is not good enough to just say there is an investigation going on.

Mr. Conor Dunne

FÁS halted funding of the scheme because of impropriety. I cannot answer the Chairman's other question. I do not know.

Chairman

Who can answer it?

Mr. Conor Dunne

The Chairman would have to ask those who established the jobs initiative scheme.

Chairman

No. Presumably the funding of approximately €4 million went through Pobal.

Mr. Conor Dunne

Some of it.

Chairman

Some of that amount was probably made up of donations, which I acknowledge. I am interested in knowing if the Garda investigation, in terms of the €150,000 and other spend processed through Pobal, will go ahead. A considerable amount of taxpayers' money has been spent on that building. We accept that.

The Committee of Public Accounts wants to know how the money already spent will be protected. Is it the case that this building or the work already carried out could be vandalised or lost to the State? It is reasonable to ask this, and Mr. Ó Foghlú or Mr. Dunne should tell us what Department will give us the answer. How can we get a report on the matter detailing how the State spend on the site can be protected? It is a simple question.

Mr. Seán Ó Foghlú

As far as I understand, that funding did not come through either the Department of Education and Skills or the former Department of Enterprise, Trade and Employment, which funded FÁS at the time. We will check which Department is responsible and revert to the Chairman. That Department should respond to the committee formally.

Chairman

The witness should revert to us as soon as possible indicating where the line of management exists for the money that has been spent so we can ask the Accounting Officer responsible for a comprehensive report on the site itself, the money spent on the security costs and the potential to complete this work. Apparently, according to reports, there is a year and a half of work left to be completed on the site.

Is there any other property of this kind around the State owned by FÁS which is relevant to decentralisation? Are there idle properties and are there buildings with leases that have nobody occupying them?

Mr. Conor Dunne

No; we have reduced leases from approximately 107 in 2009 to 34 now. There is one piece of land in Tallaght attached to the car park that we are transferring to the Department of Education and Skills for an educational unit. That is the last piece.

Chairman

For what was that originally purchased?

Mr. Conor Dunne

It was part of the old Tallaght training centre and a new facility was built beside it. It was left as a car parking lot.

Chairman

It is not land that was purchased.

Mr. Conor Dunne

No; it would have been purchased originally, but the old Tallaght training centre was located there.

COMMITTEE OF PUBLIC ACCOUNTS debate - Thursday, 4 Jul 2013

National Training Fund

Mr. Seán Ó Foghlú

Mr. Paul O'Toole

Ms Anne Vaughan

Mr. Dermot Nolan

Mr. Seamus McCarthy

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Seán Ó Foghlú

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Seamus McCarthy

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Paul O'Toole

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

Mr. Conor Dunne

COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 4 Jul 2013