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COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 5 Feb 2015

Business of Committee

Are the minutes of 29 January 2015 agreed to? Agreed.

The committee has received an invitation from the Minister for Foreign Affairs and Trade requesting a delegation of the committee to examine the Irish Aid programme as well as the performance of our trade mission in Vietnam. In view of the costs involved, the delegation would have to be confined to two or three members. I will ask the clerk to the committee to liaise with members to see who might be interested in attending.

The Minister sets out in correspondence the total amount spent in the programme from 2011 to 2015 - €55 million. He also emphasises the importance of Vietnam in our trade relations with south-east Asia generally and that Vietnam’s economy has 90 million people. It is important to the growth of our exports. If members have a view on that, they can talk directly to the clerk of the committee. The suggested date is 7 March 2015. If members are agreeable to accepting the invitation from the Minister of State at the Department of Foreign Affairs and Trade, Deputy Sherlock, we can then undertake to make the arrangements.

Clerk to the Committee

I will circulate it later as it only came in last night.

There is also a report from the Comptroller and Auditor General on a North-South body due to be published jointly with a report from his Northern Ireland counterpart on 3 March 2015. It is proposed this committee and the Northern Ireland Assembly's Public Accounts Committee will get a joint briefing on the report at a meeting in Belfast on 4 March 2015. It is proposed the committee will travel to Belfast and back on the same day. The clerk to the committee will be in touch with members to finalise arrangements for the visit.

There is follow-up correspondence from the National Asset Management Agency from our meeting on 18 December 2014.

It relates to the briefing that committee members and other Oireachtas Members received regarding Ms Annette De Vere Hunt. While her name is not mentioned, the issues relate to the processes within NAMA dealing with matters of that kind. I want to put on the record my disappointment with NAMA because of the manner in which it is treating this individual. Despite the fact that a group of cross-party Oireachtas Members were informed, she and her family received an invitation to enter into mediation after some pressure was applied. She told us her husband took his life. Within weeks of her meeting with us, papers were served on her late one Friday night. They were thrown into the reception area of her home. She was given the opportunity to attend a mediation meeting with NAMA after that. I understand that NAMA is now proceeding to court even before it meets her. It is unacceptable that a State body would behave in that way. I ask members to note it. I ask the clerk to express these views to NAMA and insist that it do what it stated it would do, namely, enter into mediation to determine whether this situation can be resolved. It is bringing nothing but trauma and sadness to the woman's life. She has lost her husband. This is another case of the State at war with a citizen and I ask members to consider proceeding on this basis.

I do not know about other members of the committee, but I was not aware that that had been the turn of events for the family subsequent to our meeting with its members in private session. Strictly speaking, it is not our job to get involved in the particularities of individual cases. That said, we had a lengthy discussion on the question of mediation and were led to believe by NAMA that this was its first preference in every circumstance. It is extraordinary and shocking that NAMA would act in the way described by the Chairman. I would be in favour of the clerk writing to NAMA, with all of the caveats around us and particular circumstances, while making it clear that, after giving us by way of testimony to the committee the clear impression that it was committed to mediation and on which we took its word, we were most alarmed to see that such did not appear to be the case in this instance. NAMA is in open contradiction with its evidence.

I was not aware that the issues that we discussed with that particular lady had taken a turn for the worse. The note that NAMA presents to us indicates that it has been successful in 160 of the 162 completed cases and that a number were mediation cases in which the success rate was equally high. Perhaps we need an in-depth presentation on the nature of the mediation, for example, whether it takes place under threat or is fully consultative and whether there are guidelines. Requesting more in-depth information on how NAMA operates would be useful, both in terms of the 160 out of 162 completed court cases that it took successfully and the 21 out of 22 cases taken against it that it completed successfully. The success rate in terms of mediation is another day's work. Could we get a full statement on these issues and the nature of the mediation?

We will request it from NAMA.

I was not aware of the situation. One of the lines in the correspondence reads: "However, as mediation requires the agreement and full co-operation of all parties to a dispute". As the family in question has agreed to mediation, this means that the other party has not. It is not good enough that a State body would do such to a family, particularly under the circumstances. I support the letter and am actually quite disgusted with NAMA. It is outrageous.

Regarding mediation, while I agree with the sentiment of the letter, it should just find out the procedure. Perhaps papers have to be issued before mediation can commence. The carrot might be better than the stick in seeking a resolution.

I have not read the letter. It does not do what it says on the tin. That is what I found. Deputy Costello wished to address the correspondence relating to the Irish Greyhound Board, IGB.

Yes, especially the correspondence on the sale of Shelbourne Park. Can I take it that-----

And Harold's Cross greyhound stadium.

Yes. According to the extra note at the back, the board is disposing of 1.5 acres at Shelbourne Park.

Mr. Seamus McCarthy

That was an historical disposal. It was in 2001.

Having disposed of them, are the grounds still available? As the letter puts it, Shelbourne Park is now the flagship of greyhound racing in Europe and attracts in excess of 2,500 patrons each Saturday night. Greyhound racing will continue-----

Mr. Seamus McCarthy

Yes.

-----despite the suggestion that further houses may be constructed.

Mr. Seamus McCarthy

The board sold a part of the lands at Shelbourne Park. As I understand it, the money was then used for the capital development of Shelbourne Park, which has put it in the position of being the premier stadium.

We received correspondence dated 28 January 2015 from Professor Declan McGonagle, director of the National College of Art and Design, NCAD, in follow-up to our meeting on 22 January. It is to be noted and published, which is also the case for the previous two items of correspondence.

We received correspondence dated 23 January 2015 from Mr. William Tracey re his ongoing issue with Horse Racing Ireland. This is to be noted. As we have previously stated regarding this matter, there does not seem to be anything further that the committee can do. Deputy Fleming raised this issue.

No. 3B.2 is correspondence dated 2 February 2015 from Mr. John Treacy, CEO of the Irish Sports Council. This is an update on the negotiations regarding Millstreet arising from our meeting on 25 September 2014. I find this correspondence unsatisfactory in terms of attempting to resolve the issue between Millstreet and the Irish Sports Council. I will ask the clerk to bring forward all of the correspondence on this matter and seek a meeting with the Irish Sports Council.

The letters and the commentary are at variance with Millstreet itself. It is important, because of the compliments paid to that particular enterprise by Mr. Mulvey when he was here, that we set the record straight if that is what needs to be done. Perhaps we could request a meeting with Mr. Treacy to deal with it.

No. 3C is documentation relating to today's meeting. The correspondence dated 3 February 2015 from Mr. John McCarthy, who is the Secretary General of the Department of the Environment, Community and Local Government, is his opening statement. It is to be noted and published. We also have reports and statements-----

I think the Chairman might have missed out on one or two items of correspondence. No. 3B.4, for example, relates to the 2002 indemnity agreement.

Clerk to the Committee

That was from last week.

The Deputy is still catching up.

I wanted to raise the matter.

Will the Deputy withdraw his remark about the Chair missing out on pieces of correspondence?

Certainly, of course. It is 100% withdrawn. The Chair would never miss anything - neither an opportunity nor an item of correspondence.

In that order.

I want to refer briefly to this matter because today's edition of The Irish Times contains quite an amount of information and freedom of information material which indicates that approximately €300 million is still outstanding in relation to the indemnification that was agreed in 2002 by the various religious orders. The reason that is given for this is the fluctuation in market prices. I would like to ask the Comptroller and Auditor General, if appropriate, how commitments that are made in this manner are reflected in financial statements and analyses. Can one pass over responsibility for an inability to sell properties, or an inability to get what was thought at one time to be an appropriate valuation for those properties? Does the contract remain the same? When that is reported in a financial statement, how does the Comptroller and Auditor General reflect that particular aspect of it?

Mr. Seamus McCarthy

I am not sure if I understand the Deputy's point. Whose financial statements is he referring to?

I refer to a financial statement made by the Comptroller and Auditor General when he is presenting an account or a report to us in relation to the indemnification that was promised by the religious institutions in terms of the redress legislation. The religious orders are referring to the fluctuation in the property market as an excuse for their apparent failure to provide to the Department of Education and Skills the amount of money that was promised on the basis of a 50:50 entitlement. Is that regarded as a means for writing down what would have seemed to be a commitment to pay their way in relation to the indemnification? How would the Comptroller and Auditor General reflect that in a report he would provide to us?

Mr. Seamus McCarthy

I have not seen the material that has been issued and reported on in today's newspapers. I made the point last week that where a legal agreement is entered into, the valuation of land at the point of the making of the agreement is normally the value that stands on completion, even if there is a delay of a number of years. If one is acquiring an asset, one might have to pay a price that would be the price fixed at the time the agreement was made. If one is disposing of an asset, one might have to receive such a price. As I have said, because we are approaching the wind-up of the redress scheme, I am examining it and I propose to report on it in September. I would prefer not to prejudge any of the issues until I have seen the data in relation to this.

So a legal contract is a legal contract and market fluctuation does not affect it.

Mr. Seamus McCarthy

It does not affect it unless there is a clause written into the contract providing that the price will vary in line with a market indicator or something. I think that would be relatively unusual. We have seen cases in the private and public sectors in which prices were paid for land two or three years after the agreement was made, when the value of the land may have changed. One is committed to the price or the value that one agreed in the earlier period.

I thank the Chair.

No. 4.1 is the financial statements from Kilkenny VEC. It is a clear audit. No. 4.2 relates to St. Patrick's College in Drumcondra. I ask the Comptroller and Auditor General to explain how it emerged that the college's foundation had reserves of €1.2 million.

Mr. Seamus McCarthy

The college established a foundation in 2009. We noted in the course of an audit that there was a transfer from the college to the foundation. The resources in the foundation, which is not consolidated in the college's financial statements, came to a total of approximately €1.2 million on 30 September. We established that this consists almost exclusively of transfers from the college to the foundation. The expectation would be that a foundation transfers funds to the college. At the time, there was no clear indication of how the resources would be used, although the foundation obviously exists to benefit the college. We just drew attention to that because it is an item that is outside the balance sheet.

Funds are being transferred from the college. What is the purpose of the foundation?

Mr. Seamus McCarthy

The purpose of the foundation, as I understand it, is to be to the benefit of the college. It is an independent entity. It has a different set of directors.

What right does the college have to transfer money to that fund and remain outside of the audit of the Comptroller and Auditor General?

Mr. Seamus McCarthy

I think that is a good question. That is why I am drawing attention to it.

Who will ask that question?

Mr. Seamus McCarthy

Well, you can ask it. We have already asked it.

Can we write to the college and ask them?

Clerk to the Committee

We can write to the Department, to the college and to the Higher Education Authority.

We will find out the details.

Mr. Seamus McCarthy

My predecessor reported on the question of foundations. Many colleges and third level institutions have foundations. We were concerned that if control was exercised over those foundations, their resources should be consolidated and included within the financial statements. Obviously, foundations can be a very useful vehicle for bringing philanthropic resources to the benefit of colleges. It is important that there is clear sight of and accountability for those resources.

Is it not the case that they usually work in the opposite direction?

Mr. Seamus McCarthy

They would usually work in the sense of resources coming from philanthropists into the foundation and then into the college.

To be clear, did this money originate from the Higher Education Authority by way of allocation to the college concerned?

Mr. Seamus McCarthy

The main funding of the college is from the Higher Education Authority.

Mr. Seamus McCarthy

Obviously, fees would be paid by students as well. We can establish that an amount of money, which was €180,000 in 2013, was transferred from the college's resources into the foundation.

Did the Higher Education Authority make any note, or did it-----

Mr. Seamus McCarthy

The Higher Education Authority would not be involved in the-----

Is it aware of it now?

Mr. Seamus McCarthy

It is certainly aware of it now because I have drawn attention to it in the audit opinion.

The last time we had the Higher Education Authority in here was only a fortnight ago. Its responses in relation to what it is doing with State money, and any degree of oversight it has in that regard, were appalling. This seems to be another example of that. I think this is an opportunity to have representatives of the authority in on their own to explain what they actually do, if that would be appropriate.

Mr. Seamus McCarthy

As I mentioned when representatives of the Higher Education Authority were here, I am preparing a report on the oversight function-----

Specifically on that-----

Mr. Seamus McCarthy

-----of third level institutions by the authority. I expect I will be reporting on that in a special report.

Maybe we should write to the Higher Education Authority as well as St. Patrick's College and the Department to see what knowledge they have of it.

Is this a widespread practice with other colleges?

Mr. Seamus McCarthy

To have foundations?

To have foundations that are channelling money away from rather than towards the institution. Essentially, that is what is going on here.

Mr. Seamus McCarthy

Yes. A number of colleges are paying the expenses of the foundation, such as administration costs, accountancy costs and so on. The argument in favour of so doing is that in general, donors want all the money they donate to be used for capital purposes or for another specified purpose and do not wish to see the money they contribute eroded in administration costs. Consequently, a number of colleges are paying the administration costs of their foundations. We have argued for a disclosure of those payments in the financial statements in order that it is clear what it costs to run the foundation. This can then be balanced against the donations coming through the foundation to the college.

The note mentions non-compliance with public procurement contracts. Can the Comptroller and Auditor General give members an idea of the kind of non-compliance that occurred and how much was involved?

Mr. Seamus McCarthy

We looked at a number of contracts or procurements in the year and found procurement totalling approximately €1.6 million that had not been subjected to competitive tendering. It included things like cleaning and catering services, gas and electricity supply and electrical services.

That is a lot of money and is a wholesale ignoring of procurement policy.

Mr. Seamus McCarthy

Of procurement rules.

Has the Comptroller and Auditor General seen anything as bad as that?

Mr. Seamus McCarthy

We certainly have found difficulties regarding procurement in other colleges. The Deputy may recall that when the National College of Art and Design appeared before the committee, what we found there was almost complete non-competitive tendering for services and goods. However, there have been other colleges over the years to whose attention we have been drawing in management letters the fact they were not compliant. We also have drawn attention in the audit opinion where a significant level of procurement is not tendered competitively.

I seem to remember a couple of colleges being the same way. Outside of the scrutiny the Comptroller and Auditor General gives in this regard, is it really the responsibility of the Department to enforce procurement policies? Who governs this area?

Mr. Seamus McCarthy

The code of governance requires the chairman of the governing body of each institution to confirm it is compliant. In a situation in which a college is not compliant, it would be obliged to explain why it is not compliant and what steps it is taking to rectify the situation. In effect, that is what we have been pushing with the colleges. Those compliance statements are submitted to the Higher Education Authority.

Can the Comptroller and Auditor General give members an indication of the general tenor of the response as to why the public procurement policies were not followed, as the practice was so widespread?

Mr. Seamus McCarthy

In general, the procurement process is time-consuming. It is expensive and there are many steps through which one must go. It may be a matter of convenience that a contract that is in place is rolled over for a transitional period. There could be things like a sole supplier where the institution is only able to identify one supplier of a particular product.

The Comptroller and Auditor General is saying there is a problem in this area in this sector. It is not just this college but across the board, in organisations and entities like this, that the guidelines are being disregarded.

Mr. Seamus McCarthy

I think the performance is variable. Some colleges have a quite professional procurement service and are procuring competitively on a routine basis. In other cases, perhaps for individual reasons in individual contracts, there may be a legitimate or an acceptable reason for rolling it over. However, where there is non-competitive procurement, it exposes a college or a public body to the risk of a case being taken against it by a bidder or potential bidder who might have wished to submit a tender for a service not being allowed to so do. There is of course also the problem that the college or public body may not be getting good value in the procurement.

In this case, would the head of the board be obliged to sign off even though it had not gone through the proper channels?

Mr. Seamus McCarthy

The chairman of the governing body is required to confirm to the HEA each year that it has adhered to proper public procurement procedures. If that has not been done, then the obligation would be on the governing body not to confirm that it had complied but to explain that it had not, as well as to explain why it had not and what it was doing to remedy the situation.

What happened in this case?

Mr. Seamus McCarthy

Offhand, I cannot say.

Can the committee write again to the HEA in respect of this matter to ask how many colleges nationwide have followed this procedure? Would this be an easy way to do it?

Mr. Seamus McCarthy

It probably also is something at which we will look in looking at HEA oversight of bodies, namely, whether it is getting the declarations and whether it is following up on them where there is apparent non-compliance.

While I do not wish to make an issue of it right here, the same could be said of the HSE, which does not use proper procurement procedures in quite a lot of cases.

Mr. Seamus McCarthy

That is correct.

Not only that, but the people who get the contracts often are past employees of the HSE and, without procurement, this looks a bit funny to the public looking at this, to say the least. I intend to raise this issue with the HSE shortly.

Mr. Seamus McCarthy

We have a chapter on procurement by the HSE that is due for hearing by the committee on 2 April.

We might set an earlier date for that meeting. Perhaps 19 February, when we have a vacant spot, because-----

Mr. Seamus McCarthy

It is not that far away.

----- there are serious issues in this regard.

How long does the Comptroller and Auditor General reckon it will take him to complete his report on the HEA? May I follow that up with a further question after he answers this question?

Mr. Seamus McCarthy

The fieldwork is under way at present. Obviously, we will have queries that we will raise with the HEA and then we will draft a report and will have a clearance process. I think it certainly will continue through the summer and we would expect to have something by September.

That is quite a long time to wait before talking to the HEA again, if it will take the Comptroller and Auditor General that long. However, I can understand why it would take a considerable length of time. In common with Deputy O'Donovan, I was very unhappy with some of the HEA replies when its representatives appeared before the committee. If the Comptroller and Auditor General finds inadequacies there, can further sanctions be imposed to ensure it operates in a more satisfactory way in the future?

Mr. Seamus McCarthy

I think the Secretary General also spoke of his concern that proper oversight be exercised by the HEA. Effectively, the reporting relationship is from the HEA to the Department and I think it would be for the Department in the first instance. It certainly has a concern that there would be adequate oversight of colleges.

Is it the Comptroller and Auditor General's impression that in a way, the Department also is remiss in this regard?

Mr. Seamus McCarthy

I do not wish to prejudge the issues until the work has been completed. Certainly, however, the Deputy may recall from the Secretary General's contribution on the day that he is pursuing improvement in that process. Moreover, the HEA representatives themselves talked about improvements the authority currently is implementing. Consequently, we are trying to report on a moving target in this respect but we will try to lay all that out in the report.

It will be interesting to see whether there is any sign of improvement within its procedures in terms of the report produced by the Comptroller and Auditor General.

Mr. Seamus McCarthy

In general, when we turn to examine a subject it is an opportunity for clients to think about the process we are examining and very often they will make changes. They are open to making improvements in many cases.

Okay. Thank you.

I call Deputy Perry.

Does the new office of Mr. Quinn in the Office of Government Procurement come under the Comptroller and Auditor General's audit?

Mr. Seamus McCarthy

Yes. I believe he is due to come before the committee

Yes, on 5 March.

With regard to criteria applying to centralised buying and securing value for money, what remit has Mr. Quinn over the colleges? Do they buy into the procedure Mr. Quinn has clearly laid down where a value for money report would be completed? Have colleges not adhered to the new code of centralised buying and securing the best value for money with regard to school supplies? Is the Comptroller and Auditor General of the view that the colleges are not adhering to those regulations?

Mr. Seamus McCarthy

All the general framework agreements are available to colleges as well as to other public bodies. The remit of the new office spans the third level sector and it will have initiatives there. It will be trying to improve procurement in that sector as well as in every other one.

On that point, and having regard to the Chairman's point regarding the HSE, I know the office is currently employing people in different regions solely to deal with the €15 billion of State contracts that are being brought through various Departments. It may be advisable that on the day the delegates from the HSE or from the colleges next come before the committee that Mr. Quinn would also appear. One would imagine the accountability procedure with regard to the Office of Government Procurement would be very clear and that it would complement the job the Comptroller and Auditor General. It is important that it would.

We could ask him to come in. At the moment we seem to have experts on closing the gate when the horse has bolted. We need a few experts on making sure the gate is secured before the horse bolts.

The next item is St. Angela's College. I will ask the Comptroller and Auditor General to give an outline of the issues involved. I know that while Deputy Deasy was in the chair during last week's meeting concern was expressed about the college. The Secretary General of the Department of Education and Skills said that but the college is adamant that there is no concern.

Mr. Seamus McCarthy

The Secretary General was referring to the point in the audit certificate which drew attention to the fact that the board had not carried out a review of the effectiveness of the system of internal financial control for 2013. It is required by the colleges' code of governance and where it does not happen in a timely way, we draw attention to that because, as the Secretary General said, it is a very important aspect of the control system.

I would make the point that this is the first year we have drawn attention to that in regard to St. Angela's College. The college has, in correspondence with the committee, drawn attention to the fact that they were concerned about its business viability during that period and they prioritised an analysis of their business affairs to try to deal with the deficit they have incurred. I have also drawn attention to that and particularly the basis upon which they decided that it was appropriate to present their affairs on a going concern basis. There is a history of deficits in the college from 2011. The deficit that year was around €116,000. In 2012, it was €528,000 and in 2013, it was €236,000. The combined effect of that has been to practically eliminate the retained revenue reserves of the college. The directors were concerned to draw attention to the fact that the income currently generated is not sufficient for the company to continue indefinitely. I have drawn attention to that in the opinion as well.

The work programme is on the screen. With the exception of the meeting on the 19th, which is to be confirmed, the programme is set out clearly. Are members happy to proceed in that way? Is that agreed? Agreed.

Under any other business, we have an outstanding matter in terms of the DDDA and Ms Brennan in regard to finishing off that report. We should ask the clerk to the committee to clarify if she wants to make a submission, in writing, to the committee if she has anything further add and, following that, we will compile our report. I call Deputy Deasy.

I wish to briefly raise one matter. The HEA was in before the committee a couple of weeks ago and we had asked its representatives about the timeline involved in Michael Kelly completing his report on IT Carlow and the WIT. As I understand it, the clock did not start ticking until 8 January when it comes to Mr. Kelly's report. We should contact Mr. Boland to find out exactly when we can expect the completion of that. It was the opinion of people that it had begun before Christmas but that is not the case. Perhaps we would check that with them and get an update.

In regard to the DDDA report, if we get a written report at this point in time, can we make specific reference to the procedure for the disposal of properties that the DDDA is exercising at present?

They will be coming in to us.

Did the Chairman not indicate that we would get a written report first?

Yes, and we have asked for that, arising from the last meeting we had. We await that.

Would that be included as part of the specific request?

Yes. I ask the clerk to the committee to give us a brief update on the two other outstanding matters, which include the case that we have and the SIPTU report.

Clerk to the Committee

On the Angela Kerins case, my understanding is that it is going back to court in March, but I have asked for an update from the parliamentary legal adviser's office. I understand a number of affidavits have to be submitted by a number of the respondents. That is the next stage in the process.

The SIPTU report.

Clerk to the Committee

There is an issue relating to the investigation by the Garda of an issue the committee wants to examine. We have asked the Garda for clarification on that and are awaiting a reply.

We might send them a reminder.

Clerk to the Committee

Yes.

We asked the Chief State Solicitor's office for a breakdown of figures. We have no reply yet.

Clerk to the Committee

We have not had a reply.

We could send a reminder to them as well.

Clerk to the Committee

Yes. I will do that.

Are we progressing with the SIU issue?

Clerk to the Committee

Yes. I have been in contact with a number of the people whose names the Chairman gave me. I will organise that.

Is it agreed that we will meet on Thursday, 12 February 2015?

On the Chief State Solicitor's office, we had a hearing a number of years ago and the Chief State Solicitor's office refused to talk to us because there was an ongoing legal case regarding a lease and advice given to it. Is that case concluded? Could we resume that hearing?

What case was that?

Mr. Seamus McCarthy

It was the lease in regard to a property acquired for the Probation Service.

At that time it had just issued proceedings and we were prevented from discussing the case. Can we get an update on those proceedings? Are they concluded, and is the Chief State Solicitor's office in a position to talk to us about it?

Yes, and if they were, we could also deal with the other matters we have been raising at the same time. We will write to them.

Is our agenda for the meeting of 12 February 2015 where the committee will examine the financial statements for Enterprise Ireland and the IDA agreed? Agreed.

We will now ask the witnesses to attend.

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