Business of Committee

I welcome the Comptroller and Auditor General, Mr. Seamus McCarthy, who is a permanent witness to the committee. He is joined today by Ms Orla Duane, deputy director of audit at the Office of the Comptroller and Auditor General. Apologies have been received from Deputies Deering and Connolly. Before we commence our main business, there are several matters to be discussed in private session, which we will do after we have dealt with correspondence.

The first item on the agenda is the minutes of the meeting of 30 May, which I propose to hold over to the next meeting, when we can deal with any matters arising. Is that agreed? Agreed.

We will now deal with correspondence received since our last meeting two weeks ago, some of which will be of immense interest to members. There are three categories of correspondence. The first, category A, comprises Nos. 2225A, 2226A and 2230A, from Dr. Fergal Lynch, Secretary General at the Department of Children and Youth Affairs. These are the briefing documents and opening statements for today's meeting. Is it agreed that we note and publish them? Agreed.

Category B is correspondence from Accounting Officers and-or Ministers, follow-up material from previous meetings of the committee and other items for publication. The first item of correspondence in this category is No. 2161B from Mr. Paul O'Toole, chief executive officer of the Higher Education Authority, dated 10 May 2019, enclosing a report undertaken by Mazars into its review of the relationship between Cork Institute of Technology and certain named companies and entities. At our last meeting we agreed to note and publish this report and hold it over for further consideration. We had some discussion on it, with particular reference to situations where people are employed by the institute of technology and also receive some payments from companies in which the institute has a shareholding. The report makes several serious recommendations, including that there be proper agreements in place for such persons, that those arrangements be officially recorded and that assurances be given that their main work with the institute of technology will not be compromised by their additional duties. Our discussion is on the public record and members are free to raise the matter any time we deal with related topics. Is it agreed that we note and publish the report and move on, or would members like to hold it over?

Yes, I request that it be held over. Deputies Connolly and Kelly have a particular interest in this matter and we could have a useful discussion about it.

I am happy to hold it over. We had a preliminary discussion the last day, but there is no problem with having a more detailed discussion at a future date. Is that agreed? Agreed.

The next item is No. 2193B from Mr. Niall Cody, Chairman of the Revenue Commissioners, dated 27 May 2019, responding to recommendation No. A17 of this committee's fifth periodic report regarding the threshold for inclusion in the category of high-wealth individuals. It is a very important and detailed letter in which there will be significant interest from journalists and others. The Comptroller and Auditor General included a chapter on this issue in his last report, in which he suggested that the threshold be reduced from €50 million. In our periodic report, we likewise made a detailed recommendation to lower the threshold. The report of the Chairman of the Revenue Commissioners vindicates the work this committee has done on the issue in recent months. He acknowledges the recommendation in our fifth periodic report and states that Revenue has completed its review, as requested by us, with a recommendation of lowering the threshold for high-wealth individuals to persons having wealth greater than €20 million.

This was agreed by the board of the Revenue Commissioners on 16 May 2019. The implementation of this recommendation will result in an additional 475 cases being managed by the high wealth individual division. This important improvement is a result of our work and recommendations. I thank the Revenue Commissioners for responding in such a forthright manner.

The Revenue Commissioners have produced a case base review document attached to this letter which we will publish but I want to highlight the significance and relevance of this. Up to this point, the threshold for net assets was €50 million and there were 200 high wealth individuals on the books and 278 associated cases. Lowering the threshold to €20 million will add 475 primary cases. There will be close to 700 on the list where there were previously 200 and that has to be a good result. These people may not all be resident here for income tax purposes. They may have property here or investment income. The Revenue Commissioners use three sources of data for this study: their own data, third party data and external sources. In their own data they considered disposal of assets or acquisitions over €5 million, gifts of inheritance, stamp duty, trusts, local property tax, which they considered for one year, income and ownership of property. That led them to compile a significant list. They then examined third party data for people with accounts of greater than €20 million, which showed up in the deposit interest earned, investment from undertakings and people who had income from directors' fees, rents, pensions and other categories. The external sources data was the 2018 rich list that we see published in The Sunday Independent and The Sunday Times. The Revenue Commissioners compared those lists with their own lists and made sure that anybody on both lists was examined. That does not mean that everybody examined was necessarily included in the final list.

The Revenue Commissioners said that there were 68 taxpayers identified, 35 of whom were also identified from the above criteria but they did not come into the division because they fell into other categories, they might have been beneficial owners or resident taxpayers appeared to have large shareholdings in high wealth non-resident companies, and a combination of shareholdings. They examined them very closely. In addition to the 475 individuals, 68 were examined in further detail who did not meet the criteria. All in all, it was a good day for the Irish taxpayer, the public, the Comptroller and Auditor General's report, the Revenue Commissioners and the Committee of Public Accounts. We are seeing the value of the work being done here. I compliment everybody from the Revenue side especially on their willingness to take on board in an open way the recommendations of the Comptroller and Auditor General and the Committee of Public Accounts, and on coming back to say they were being implemented forthwith.

I wanted to welcome some of this. The Chairman has covered much of it. When the Revenue Commissioners were here, there was a question about recruitment of staff. They did not have their full complement. They say in this correspondence that they have an increasing number of specialist experienced staff for the high net worth individuals. We need to keep an eye on that because we want to deliver the return. Does this capture people who are non-resident for tax purposes?

Mr. Seamus McCarthy

It can do, if they have significant economic interests in Ireland or significant assets.

Is that the case even where they have not generated any income but they have assets here?

Mr. Seamus McCarthy

What is important is to ensure they are paying what tax they are due to pay. This is a focused assessment of such individuals rather than a self-assessment without any checking. There is a high concentration on these. The committee and taxpayers can expect that they pay what taxes they are due to pay.

It also means that when they show up in the Revenue list they will be caught for double taxation. The Revenue may have some arrangements in place to make sure they pay the tax in the country where they are resident for tax purposes and paying tax somewhere. It might not always be in Ireland but they pay appropriate tax in the appropriate jurisdiction.

When Mr. McCarthy says they pay the tax they are due to pay, does that imply there has been evidence of that not being the case?

Mr. Seamus McCarthy

No, we did not find significant cases where there was tax due that was not collected.

There was not a suggestion but there was a concern in the interests of transparency and general taxpayer feeling that everybody who should be in the tax net is in it. It is about fairness and transparency as well as collecting tax. Overall it has been good from that point of view. We note and publish that and we acknowledge the good work of the Revenue Commissioners in that regard.

No. 2195B is from Mr. Paul Quinn, chief procurement officer, Office of Government Procurement, dated 28 May 2019, providing follow-up information regarding the Construction Contracts Act 2013 which we requested at our meeting with the National Paediatric Hospital Development Board on 16 May 2019. We will note and publish this and it will feed into our consideration of the matter in our next periodic report.

The key issue here was that we asked about the Construction Contracts Act 2013 which was a side issue to the discussion with the board of the paediatric hospital but it dealt with the question of subcontractors being paid for work. In this document Mr. Quinn points out that the Construction Contracts Act 2013 does provide, irrespective of the provisions of a subcontract, that the subcontractors are entitled to be paid the full value of work completed every 30 days. I am putting this on record because subcontractors get concerned that they may be left waiting. Paying parties must respond within 21 days and if they fail to respond, they can be caught for the full bill submitted in the event that they do not contest it. Any dispute has to be adjudicated and can go for adjudication where that arises. We asked for that to be put on record.

I will go back to Mr. Quinn to clarify a question that has arisen in respect of the children's hospital. Where the main contractor makes a submission for extra work carried out, which could take quite a long time to adjudicate, where stands the subcontractor in the meantime? I do not know the answer. This document states the subcontractor is entitled to be paid for the full value of work within 30 days but if it is for extra work that has not been accepted by the contracting party, where does the subcontractor stand?

It is useful to know that but very often, for example, with road projects, if there is a dispute it is pushed to the end. Whatever about the main contractors, subcontractors could be put out of business. It would also be useful for us to know how the finance for this is drawn down. Is the main contractor drawing down money monthly? How is that managed?

For major contracts, certifying engineers and architects will normally verify the work done on a weekly or monthly basis and interim invoices will be submitted to the contracting organisation.

Mr. Seamus McCarthy

For work that is certified as completed.

There is an ongoing method. Nobody waits for two years to get paid any more. Bills are submitted regularly and at different stages. The stages would be set out in each contract.

I am asking about the main contractor.

I am talking about the main contractor submitting it.

Mr. Seamus McCarthy

The main contractor could be submitting its claims for payment to the public sector body. Once the work has been done and it is certified as having been done to the satisfactory standard, the public sector body is under an obligation to make a payment. This deals with the on-payment or stage payment, if that is the issue, in the meantime. Does the third bullet point not address the Chairman's question about dispute?

It also says that any dispute relating to payment may be referred to an adjudicator. We know, however, in practical terms, that if a subcontractor informs the main contractor that he or she is being taken to adjudication by the subcontractor, and there is a job coming up next year-----

Mr. Seamus McCarthy

That is a different point.

-----subcontractors can be in a vulnerable position, which is the point. I stress again for people who have an interest in this that the Construction Contracts Act applies to contracts in the private sector. It is not just the public sector. This applies across the board in the entire State and is not confined. People who are working in the private sector in building etc. have the same rights. It is not just for public sector contracts. It is important for people to understand this.

In the Carillion example, there were a lot of subcontractors who were in fact put out of business.

In respect of No. 2195B, we note it and are asking for clarification in that, when a claim is being processed by the main contractor with the contracting body, where stands the subcontractor in the meantime? How does that fit into that legislation?

No. 2196B is from Robert Watt, Secretary General of the Department of Public Expenditure and Reform, dated 29 May, in response to our request for an unredacted version of the memo regarding the national broadband plan from the Department of Public Expenditure and Reform to the Department of Communications, Climate Action and Environment. A copy of this memorandum had been provided but Mr. Watt advises that there is still some redaction. The earlier letter dated 16 April that people had seen in the media had significant redactions. There are a couple of small redactions.

There are three short redactions blanking out key issues, but it provides more information than had been provided publicly in the earlier document. It is not 100% but it at least goes some of the way. We note and publish that.

It is very useful and we should ensure that the Committee on Communications, Climate Action and Environment has a copy of this, if it has not been provided with it already.

We will forward it.

At what point is commercial sensitivity not an issue? That is, presumably, why those numbers that have been redacted. They would be quite interesting and useful to know. We are only guessing otherwise. There are fairly stark comments made here as well. This should find its way into the report that we do. Where are we with that?

We will discuss the actual work programme on our report during private session. We will have suggestions in private session regarding our work on broadband because we do not want any unnecessary duplication between us and the communications committee. We will forward this to it in the event that the committee members there have not seen it.

This is a side issue but I got a reply to a parliamentary question yesterday on the national broadband plan. It may be useful as it came up with Deputy MacSharry in a different context last week in relation to KPMG. The reply stated that KPMG is an adviser appointed by the Department to give specialist advice on the national broadband plan and it continues to do so. The Department is aware that KPMG performs the statutory audit and provides tax advice to Granahan McCourt. We should nearly have another Department called KPMG at this point.

We could do that but it is not answerable to this committee. That is the only difference.

It just strikes me as-----

It is one of the big four companies.

We had the Secretary General from the Department of Health before this committee, and he told us that he did not use the same company that audits the Department - I cannot remember who it was - because he did not want even a perceived conflict.

He went to PwC rather than Mazars which had done its internal audit.

Exactly, and here we have another Department taking a contrary view. Even a perceived conflict of interest is problematic. I have serious concerns that we need to be looking at. I do not know where one frames this but there is most definitely a perceived conflict of interest when the only remaining bidder is audited by KPMG. KPMG are providing advice to the Department on specialist, commercial and financial areas. It just does not sit with me as not being in the territory of conflict of interest.

There are a few other items on the national broadband plan in correspondence, and before we get into the session with our witnesses today, we will discuss in private session our next report and how we will deal with those issues. We may have a brief comment but we will be discussing in private session the formatting of our report and the inclusion of this information to bring our work to date on this to a conclusion. Does Deputy Cullinane wish to come in?

I imagine the next periodic report will be dealing with the national broadband plan-----

It will.

-----and that precise point of perceived conflicts of interest. It is an obvious one and is not even perceived, in my view. Even if there is a perception, it is a policy decision and is probably something that has to be looked at from that perspective, but we can at least make a recommendation.

We will discuss that issue in private session because we will be discussing how we proceed with the work that we have carried out to date on that matter. We note and publish this letter from Robert Watt.

No. 2199B is from Maurice Buckley, chairman of the Office of Public Works providing information, including costs incurred, requested by the committee regarding public infrastructure at Bellurgan, Dundalk, County Louth. We note and publish this and we will send the response to the correspondent who raised the particular matter.

No. 2201B is from Robert Watt, Secretary General of the Department of Public Expenditure and Reform, enclosing a minute from the Minister for Finance and for Public Expenditure and Reform on our periodic report No. 5, September-November 2018. I welcome the prompt response to our last periodic report and I want to hold over the publication of this until we discuss it at our next meeting. There is quite a bit in it and we could take quite a bit of time to deal with it this morning. We have a few other things we want to do. We will ensure that we deal with it next week. The one item I might refer to as we go along relates to other correspondence relating to that, but I will hold over the publication of that until the next meeting.

No. 2206B is again from Robert Watt, dated 4 June, providing a further update to information requested by the committee previously regarding the single public service pension scheme. We will note and publish this. When the new single public service pension scheme was introduced, the Department responsible for the public sector and which sponsored the legislation did not know what public bodies were going to be covered by this. It took it several years after the passage of the legislation to work out which public bodies were included in this. We had a detailed discussion on this and I believe we referred to it in a previous report or perhaps it was to be included in our next report. We received a report in February 2019, when we were dealing with this, showing that the Department was still not quite sure about quite a number of bodies some three years after the passage of legislation.

Mr. Watt has given us an update now as to where the Department stands on this issue. At this stage, there are four issues in respect of all the public bodies that the Department believes should be included in this. One issue is that three organisations, namely, the Residential Tenancies Board, the Health Products Regulatory Authority and the National Standards Authority of Ireland, submitted cases to the Minster for Public Expenditure and Reform explaining the difficulties they would face in meeting the arrears. When this legislation came in, which was effective from three years ago, those organisations which had not provided the employer contribution in respect of the public service pension scheme were going to be asked to pay the arrears for the three years that they did not cover. These three organisations said that they would operate the scheme from now on but that they did not have the resources to pay the arrears. The Minister has accepted the case. Accordingly, a ministerial direction was given quite recently to the three bodies under the 2012 Act to enable the bodies to retain the moneys owed in respect of the single pension employer contributions for the prior years.

The three public service bodies have started to remit the single scheme employer contributions due from 1 January 2019 onwards. Essentially, the argument was the funding provided by the Department to them did not allow them to cover for arrears in previous years. It will not affect the employees' scheme when they come to retire. It is a pity it came to this.

There is one other issue. We also mentioned the Dental Council. It has arrears of €7,000. That figure has now been agreed but has not yet been paid. It is the only organisation that has not paid its arrears where the Department is insisting the arrears be paid. The Department of Health, which was engaging with the Dental Council, has confirmed the Dental Council's agreement to remit the required contribution in the near term. We take it this will be wrapped up and paid by the Dental Council. At the end of the day, three organisations did not pay the arrears. This was because the Department did not have its house in order when the Oireachtas passed the legislation and it took three years to get on top of the legislation the House had passed. The lesson is that, in future, any Department asking the Oireachtas to pass legislation must have arrangements in place to implement the legislation on the due date. We will note and publish this. At least we have now concluded this matter.

No. 2222B is from Mr. Maurice Buckley of the Office of Public Works, providing information requested by the committee regarding the costs, oversight and procurement process of the Kevin Street Garda station project. This matter arose at our recent meeting with An Garda Síochána on 9 May 2019. The OPW came back with a letter. We will note and publish this. It seems to have dealt with the issues with regard to control of the project.

With regard to Departments doing their budgets and having certainty, are timelines applied for the conclusion of this type of claim? Is it normal for claims to be completed the following year?

Mr. Seamus McCarthy

They can be quite protracted. They can be appealed or they can go into arbitration or conciliation. Then there may be legal proceedings. It would not be unusual that they extend to a year after a project.

Or more.

Mr. Seamus McCarthy

Yes.

Preliminary site works commenced in 2008. The letter we have received states no changes were made to the size of the building and the OPW believes it is substantially in line with the original tender. The claims are still subject to ongoing negotiation of the contract. It is not even completed as we speak today.

We will write back and ask for an update at the end of September in respect of the outcome of the negotiations that are still under way. It is our job to tie this one down. We will ask for that.

No. 2227B is from Ms Rhonda Evans from the National Paediatric Hospital Development Board, dated 7 June. We received this a week ago but we are only having our meeting now. It provides a response to matters raised. Some of these issues may been mentioned at yesterday's meeting but I will highlight the points we raised. We will note and publish this. We asked for details on the procurement subcontract committee meetings in 2016 and confirmation that trilocation in terms of the maternity hospital is a key objective. We also asked for a note on consultancy fees in 2018 to include the name of the PR company and the length and total cost of the contract. Q4 Public Relations was appointed in April 2015 and the contract runs until March 2021. In the years from 2015 to 2018, inclusive, it was paid €1,003,593 plus VAT. That might have been mentioned yesterday at another meeting. There is also a note on the decision examined by the board as to whether it would lease or purchase various high-tech hospital equipment. There is a case to be made for both choices. In February 2019, the board recommended reverting to the traditional capital funding approach of purchasing it rather than leasing it for an extended period. We can discuss the merits or otherwise of this. I am sure the board has gone into it in ten times more detail than we could do here. We will just have to accept that it made the best decision it could.

We also asked about the cost certainty. We asked for a note on the design costs of the hospital, including details of the 95% cost certainty of the preliminary design and the difference in the final design costs. We were told the design team gave 95% certainty. The board confirms the main mechanical and electrical construction contracts were received in October 2017 and the adjusted tender was €636 million. In November, the adjusted contract sum was €890 million, which was an increase of €254 million or 40% of the adjusted tender amount. We asked the board to talk to us about how it is dealing with the design team with regard to the certainty it gave, which clearly has not stood up. This issue has not been addressed. We have been given the figure but the hard question has been avoided. We asked whether it was following the company. Certainty of 95% was given but now it is being shown that it did not hold up. I believe the letter states the board is dealing with it but we want a more comprehensive note on what that means at this stage.

These are all important matters but the issue came up at another meeting, presumably because of dual membership between this committee and other committees-----

People probably had these documents. That is probably what happened yesterday.

That is grand. There was €1 million spent on public relations.

Yes, to date.

I have nothing against the firm, and the contract was tendered, but I wonder how would €1 million in public relations be required to build a hospital. Is it about spinning the right story? We should get a detailed breakdown of what this involves.

Of the brief and what the firm does.

Yes, and what work was carried out and how necessary it was. I am not trying to get at the PR company but I am interested to know why a PR company is needed to build a hospital.

Okay, the Deputy is correct. We have seen periodic glossy newsletters on progress and I presume some of the money is spent on that. We need to know what has been covered by the contract. We will ask for specifications or the brief.

I have one more point and the Chairman can let in other people as I do not want to be annoying people. I asked a question with regard to the considering of tenders generally. I mentioned that the contractor involved is also in what I am told up are to nine litigation cases against the State regarding other contracts. Would this not be taken into consideration? If somebody built our house and was then suing us, we would not employ them to build the house next door.

There is a detailed answer to that.

There is a detailed answer but it is a little bit of a cop-out of an answer.

It states it is with regard to legislation. We asked for a note on procurement policy and possible exclusions or previous litigation conducted by a prospective builder with regard to the most economically advantageous clause in the contract. It states it was done in accordance with the European regulation of 2006 on the award of public contracts and that if it were to exclude an applicant on the basis that an applicant was involved in legal proceedings in other public bodies, that may make the entire process subject to legal proceedings on the basis of unfair exclusion.

What I am saying is that I think what we are saying is right and that the law is-----

Maybe powers higher than us need to consider including aspects of this. There may be perfectly good grounds for the contractor to be suing the State. I am not saying there are not. However, if it is doing it nine times, it looks like there is a little bit of form and consistency. As the people writing the cheque, we should have some element of discretion. There is no doubt the State is defending these nine actions and spending money doing so. I find it bizarre that the law provides for somebody to win a contract. I suggest that perhaps our interpretation of European law and the practice is sometimes a bit too literal and lacks an element of common sense.

I want to pick up on the 95% cost certainty. The difference is a sizeable amount of money. I remember some discussion about there being a gigantic underestimate with regard to cabling. That would not account for the amount of money involved here.

This will tell us something about the flaws in the tendering process. It would be useful to explore this because that is where there is a degree of learning to be had. We have to interrogate that particular aspect and we must do so forensically.

On the pattern of tendering, let us take the example of a company that goes in low and adds extras. That appears to be a criticism of the contractor in this instance but it also applies in respect of other contracts for which that contractor tendered. Is the European tendering process interpreted the same way in every member state? Would that be the case for a Dutch company tendering in Holland?

And it is also operating in Ireland.

Is that the pattern of how the company operates in Holland as opposed to how it operates in Ireland, or is there a weakness in the system here?

Mr. Seamus McCarthy

The rules are the same throughout the EU and they are interpreted in the same way.

Is the same fallout happening in Holland?

Mr. Seamus McCarthy

That I cannot answer.

This is why I am after the figure of 95% for cost certainty. It all went wrong from the point at which the assurance was given that it was 95% certain. The latter was not the case. The problems started to arise at the very beginning. The company went on site before the design was completed and the taxpayer has been playing catch-up ever since. The risk was not transferred to the contractor. It was a case of "Start work and we will talk about the design as we go along". It was a fundamentally crazy mistake and the Irish people are going to pay for it for decades. Those involved got it wrong from the very beginning in order to get on site early and we are paying the penalty now. It would have been better to take a few extra months, as necessary, to get all this done in advance and know where matters stood with the company involved before it was allowed on site.

I am with the Chairman on that. However, the second point I would make is that this is about European countries competing for contracts above a certain value. There is one company which seems to be winning a large number of public contracts. The criticism is that it comes in low and then adds extras. Are we handling the tendering process differently in this country and is that then being exploited?

Mr. Seamus McCarthy

Capital project overruns are an international phenomenon.

That is not really the point. I might not be making myself clear.

I understand what you are saying. I will try and help.

Are there weaknesses in the system here which expose us further? Would this company do exactly the same in its home jurisdiction?

It would. It depends on the nature of the contract and the level of certainty and risk. We have had road projects where parameters were set as regards design and the companies involved had to work within those. Any risks within those parameters were the main contractor's problem. This has shown up two possible alternatives. I am more concerned about the second of those alternatives than I am about the first. The first is that the contractor goes in low, knowing that it will be able to add extras. That is the general presumption. My concern is that the contractor in this instance has much of knowledge and experience of dealing with the public sector in Ireland and other countries. It habitually gets the design wrong. It covers precisely what it is asked to cover in the full knowledge that it has more experience than the people with whom it is dealing on behalf of the Irish public and that they will have to come back and correct their earlier mistakes and ask for work that they should have asked for upfront to be done. The contractor is very good at spotting where it knows it is getting designs submitted for tender.

I will provide an example. One guy in the industry told me that if one goes through some of these designs, one could find that a contractor designed a room without including a door. The guy putting in the tender has spotted that knowing full well that those requesting the work will have to come back to him to put in the door and he will charge a hefty amount for doing so. Much of this is down to the fact the design work done on behalf of the contracting body may not have been up to scratch at the beginning. The fault could lie as much with those on the public sector side not getting their house in order.

Mr. Seamus McCarthy

Not commenting on any specific contractor, the only thing we can do is focus on the weaknesses in the public bodies when they put a specification out to market that misses out on things which are inevitably going to have to be paid for.

Ireland is a small country and does not have the specialist expertise its public sector that Germany might have, particularly on foot of its advanced infrastructure and historical experience in rolling out and delivering contracts of this nature. Are we more exposed? Is there a weakness in our procurement process that would require us to adopt a different type of infrastructure specialisation which would allow us to deal with what is involved here in a comprehensive way?

Mr. Seamus McCarthy

This is one of the things I have pointed out in the special report on capital project cost overruns in the education sector. Essentially, each college is approaching one or two projects over a ten or 15-year period. In such circumstances, it is difficult for them to have the full spectrum of skills and experience when they come to commission projects. Undoubtedly, there is an element of that kind of exposure. What is the solution? An OPW for the third-level sector involving specialisation might be worth considering. However, it might not be the answer either.

The Deputy referred to larger economies not having this problem. Famously, the new airport for Berlin is still not open after many years.

There are other issues with that.

Mr. Seamus McCarthy

There can be circumstances that give rise to these kinds of project cost overruns. The problems are always the same. The solutions and protections are probably always the same. The pitfalls lie in maintaining that level of control and ability to specify a project and oversee its delivery.

This is an issue we will come back to consider in the context of the conclusions and recommendations of our report. The issues on which we need to try to crystallise our thoughts are being well ventilated. We may not have the answer but we may have some useful suggestions. We will move on. This will be in our next periodic report on the national paediatric hospital.

No. 2228B is correspondence from Mr. Mark Griffin, Secretary General, Department of Communications, Climate Action and Environment, dated 10 June 2019, providing information requested on behalf of the committee. I want to highlight several items in this letter about which some members will be concerned and disappointed regarding the factual position as to how the country operates when it comes to certain issues. We asked for an information note for the cost that will be incurred by the State for not meeting the 2020 climate action targets and when such costs will be due. When one reads the letter, one can see that the State response, our collective response at Oireachtas and Government level, is entirely hypocritical. The letter indicates that the arrangement at European level requires member states to meet their targets using unused emissions credit from earlier years or through purchasing credits from other member states via international markets. In simple English, if we do not meet our targets, we can buy our way out of the problem by purchasing unused emissions from somewhere else. This is the biggest act of gross hypocrisy when it comes to the environment. We are stating that if we do not meet our targets, we will buy unused emission credits from somebody else before the deadline and pay the price. This means that when the 2020 deadline arrives, we will be below our target because we will have unused credits in the system.

The NTMA is the body that purchases these on behalf of the State. An important point is that to date the NTMA has already spent €86.8 million of Irish taxpayers' money purchasing these credits, which is horrific. This is to avoid a fine. I know some of them may have been released in the meantime. We asked about the 2020 climate action targets. The letter goes on to state the Department estimates the additional cost of the requirement to be in the region of between €6 million and €13 million between now and then if we do not meet the additional cost.

We also asked about renewable energy targets. People will find this equally upsetting. The letter states Ireland has a target of 16% of renewable energy by 2020 and that we have increased it by a lot since 2005 when we were just at 3%. The letter states the Department expects Ireland to achieve something in the order of 13% by 2020. The letter also states that some years ago the Sustainable Energy Authority of Ireland estimated we could buy our way out of the problem at a cost of anywhere between €65 million and €130 million, depending on the price range of the trade. This was carried out before any market activity emerged in the public domain. In 2017, trades between Luxembourg, Lithuania and Estonia suggested a cost in the order of €22.5 million per percentage point below our 16% target. If we are 3% below our target based on those prices it could cost us another €60 million to buy our way out of pretending we are meeting environmental targets.

I want to put this on the public record. I want everyone who has an interest in the environment to know that what we are doing in this country is a charade . We buy unused credits, targets and emissions from other countries just to balance our books and pretend we are coming in under target. We are doing nothing of the sort. We should not have to spend taxpayers' money to buy our way out of these problems. We should do the right thing in the first place. I want to put this on the record and I hope people with an interest in the environment will take up the issue.

There is more in the correspondence from the Department with regard to broadband and we will discuss it in private session. When the Department with responsibility for communications came before the committee we asked for details on bidder membership of the Granahan McCourt bid. We wanted details on it because it has changed. In the correspondence, the Department tells us that in March 2016 there were five bidders and that was the position at the time. There was a process for making changes to a bidder. Approval was granted in September 2017 following assessment of a further change in the make-up of the bidder. This resulted in changes. A further change to the bidder membership was approved in September 2018 and following approval the bidder membership is now set out as Granahan McCourt Dublin Ireland Limited, with reliance on the resources of McCourt Global LLC and Tetrad Corporation, as lead bidder and provider of equity; Enet as key subcontractor and not an equity holder; Kelly Group, with reliance on resources of Kelly Communications Group Limited and Kelly Integrated Limited, as a key subcontractor with nothing to do with the ownership; and Actavo Ireland Limited and KN Networks as key subcontractors. The fact they are subcontractors is not the issue. We are talking about ownership of the group, which has changed at least three times.

The final tender submitted by Granahan McCourt reflects the bidder membership as approved in September 2018. We would like to know the current status of all of the companies involved and that have been in and out of the process since 2016. They may have fallen out but are they still trading? Did they ever trade? What is their status and the link between them and the new companies? The committee will not get to the bottom of it now because it is a bigger issue than what we will be able to conclude looking backwards. They are all events that happened during years when accounts were audited by the Comptroller and Auditor General. It is an issue we will highlight. It is a matter of great concern. I acknowledge Mr. Mark Griffin for being upfront and forthright with information when we ask a question. I must accept that. We will note and publish it.

It is really important that we know who this entity is and its ability to fund and deliver a project. Knowing who the entity is will tell us this. If a firm goes in for a tender to build schools it has to say what its turnover was in the past three years and what its form is. This seems to be absent. It is critical that we know who the bidders are. The inclusion of subcontractors is a real curve ball. Are they beneficial interests? Can those subcontractors change? Why are they even included if that is at the case except to say the firm cannot deliver it itself but these people might be able to do it. This really exposes a huge flaw in the prospect of delivering and the longevity of the entity here. I have something in my head but I had better not say it.

We will come back to this. The committee will have to finalise a report on where we are up to this point on the broadband issue because it is ongoing. Another committee is looking at it and we will not unnecessarily duplicate each other's work. We will bring our work to a conclusion at a particular point as soon as practicable and hand it over to the other committee. No doubt it will come before members of this committee in years to come. The Comptroller and Auditor General will have had a look at it in the meantime. We will note and publish the correspondence. We are highlighting the issues. There is good information in the letter. I have touched on only two particular topics. We will move on.

Category C is correspondence from private individuals and not necessarily for publication. No. 2191C, from a solicitor’s firm, is dated 24 May 2019 and encloses a subpoena issued by the investigative committee to Mazars regarding President Trump from 2011. There is no request to the committee so we will note the item. I do not know why we got it.

It is from solicitors.

Yes. I know people might say we go beyond our brief but to go after the President of the United States might be stretching it a little bit.

Surely there is an angle.

No. 2192C, from an individual, is dated 27 May 2019 and is with regard to the foal levy. We have previously received inquiries from the same correspondent on this matter and forwarded a response from the Department of Agriculture, Food and the Marine which provided a background to the foal levy. The Department advised that Horse Racing Ireland administers the levy and it is not practical to base the levy on the actual amount paid by the breeder for the nomination due to the variety of deals and shares available in the industry. That is what the Department states; we do not necessarily endorse it. It is just what it says. Just because we repeat what it states does not mean we agree with it. We are just acknowledging that is what it states. I propose to advise the correspondent that the committee will not be taking the matter any further because ultimately it is a policy matter for the Department if it wants to change how the scheme is managed. That is a policy decision for the Minister and it is not for the committee. We will note it and inform the correspondent accordingly. Is that agreed? Agreed.

No. 2194C, from an individual, is dated 27 May and people will be interested in it. It requests an explanation for payments to Deputies for sitting on committees. We are well used to people making allegations against Deputies. Some of them are based on false information and some are just done for the sake of doing it. The correspondent asked for someone to explain whether Deputies who already receive a salary for being a politician are paid extra for sitting on a committee. The answer is "No". Members sit here as part of their work in the Oireachtas. The correspondent wants to know whether there is extra money for sitting on a committee and, if so, this individual wants the job. For the record, and this is important, there is an allowance for chairpersons of Oireachtas committees only but not other members. I propose we refer the correspondence to the Oireachtas website, where there is detailed information on Oireachtas salaries and allowances for specified positions.

The Houses of the Oireachtas Commission is the one exception.

Members of the Houses of the Oireachtas Commission-----

All members?

That is correct. The Oireachtas website will cover that comprehensively.

No. 2198C, from Deputy Marc MacSharry, is dated 29 May 2019 and is with regard to correspondence from Mr. David Hall on the IBRC liquidation. This item has been referred to and we will deal with it in private session in a few minutes.

No. 2200C, from an individual, is dated 31 May 2019 and requests an independent review of the technological, roll-out and investment options for the national broadband plan.

He highlights the importance of emerging technologies, such as satellite and 5G. We will take that matter into consideration when we are drafting our report. Is that agreed? Agreed.

The next item, No. 2204C, dated 3 June 2019, is from an individual responding to correspondence from the committee regarding the Social Welfare Appeals Office and the use of precedent test cases. The individual believes that legislation is being breached. Basically, there is legislation on the operation of the various schemes operated by the Department of Employment Affairs and Social Protection and by the appeals office. Not everything is covered in the legislation. Obviously, they have their own procedures to deal with similar-type cases. The correspondent wants to know if there is any legislative provision for this and he is saying it is illegal that they have procedures in place that are secret and that are not covered in legislation. If somebody thinks it is illegal, he or she can take it up legally but it is not a matter for the Committee of Public Accounts. We will note the item. Is that agreed? Agreed.

The next item is No. 2205C, dated 3 June, from an individual regarding Kerry County Council and costs associated with the Tralee and Listowel bypasses. Matters related to the local authorities are not within the remit of the committee and I propose to advise the correspondent that she may wish to bring the matter to the attention of the local authority audit service. Is that agreed? Agreed.

Nos. 2207C to 2216C, inclusive, are correspondence received from a glazing company, dated 4 and 5 June, requesting the committee to make inquiries regarding what the individual sees as procurement failures by the OPW of anti-ligature glazing in Garda stations. I must be upfront on this one, without revealing the person's name. This is a company which has a commercial interest in tendering for all these projects and which did not get any of the jobs and is dissatisfied with how the OPW has done it. It is an issue between himself and the relevant body which we are not getting into. The anti-ligature issue he raises is that the window, the window frames and the window openers are not designed in such a way that somebody could try to hang himself or herself in a Garda station and that the glass in the windows should be free from anything that could assist that process. This is a company that is involved in the industry. It is not our business. That is all I would say.

Is there a formal process if there was somebody who felt that he or she missed out on a tender, maybe not for straightforward reasons? What is such a person's recourse? Whoever this individual is, he took that effort. I agree with the Chairman's summation, but is there some other avenue we can send this person back to that is the correct avenue?

Okay, we will ask the OPW for a general response, not specific to this particular contract and contractor. He says he provides all the information on the type of windows but he did not get the job.

If somebody is not happy with a contract awarded as a consequence of a tendering process, is there an appeal process or some mechanism by which he or she can raise concern?

Mr. Seamus McCarthy

There is what is called the remedies directive if there is a defect in the procurement process. However, I think the complaint he is making is that the specification was incorrect and there is not a remedy for that through the remedies directive. That is an issue for quality that is sought by OPW and it is really down to the performance of the thing.

There is also a reference to glass blocks having been used and then having to be replaced. Obviously, if there is a pattern of that coming through, it is a matter of waste. That would be unsatisfactory, and that would be within the remit of the committee.

This is an individual case. People who have had to tender for something have quite a forensic knowledge, because it is not a minor deal to put together a tender for a large project, and would likely have a great deal more detail than the average person. I would be cautious about dismissing - we are not doing that - something because somebody is upset that he or she did not get a contract. Sometimes they have a valid point to make. If, for example, something ends up being an add-on later on, they certainly would have a serious issue that they might be bringing to our attention. Let us see what the OPW has to say.

The question is whether there was a potential cost to the Exchequer because the standards were not what they should have been in this case.

Mr. Seamus McCarthy

There is also a point, which was made by the chief administrative officer of An Garda Síochána when he was here, that these capital projects are the responsibility of OPW but the specification of minimum safety standards that are required for prisoners being held, let us say, in cells in Garda stations, is definitely a matter for An Garda Síochána. It might be worth referring it to An Garda Síochána as well for its view, and whether it has issued a minimum requirement specification to be put into a contract by OPW.

That is fair enough.

That is good.

I agree on at least informing. I read through that correspondence and was confused as to why we had it. The problem I foresee in the Committee of Public Accounts dealing with this by writing to both OPW and An Garda Síochána is that we then confirm our unintentional catch-all status. We should refer it back to the sender and ask him or her to refer it back to the OPW, which was the first point of contact, and perhaps note that the OPW should consult with An Garda Síochána on the points raised. The difficulty is that if we start filtering these issues that have nothing to do with the Committee of Public Accounts, we will be doing it for hours every Thursday morning. There is more and more of this happening, as the Chairman and the clerk to the committee will be aware.

If the committee recalls, we had the Garda Síochána in here talking about its Vote and expenditure on contracts the previous year and we mentioned Garda stations overrunning. This is in relation to contracts in previous years that have been audited by the Comptroller and Auditor General. We just want to know, and I will wait for the confirmation of the OPW that it and the Garda Síochána are satisfied with the standards. If they are, they are. We are not getting into the individual contract.

Fair enough, I accept the Chairman's point. Maybe we should refer it to the appropriate committee then.

The Joint Committees on Justice and Equality, and Finance and Public Expenditure and Reform, and Taoiseach for OPW. We could send it to the two committees.

I do not agree with that analysis at all. I totally agree that we would need to look at what is within and not within our remit. I have no difficulty with that. There is much correspondence that comes our way that is not within our remit.

We have disposed of it, noted it and moved on.

That is why we have the three categories and they are well filtered for our benefit by the secretariat. Tendering and procurement is certainly within our remit.

We have to be careful that we protect our own committee.

Deputy Farrell is correct generally, but given the issues that are being raised, it would be remiss of us to merely send it back to the sender or send it off to a sectoral committee.

The opening sentence of the email to the Committee of Public Accounts states that the following emails and attachments are a submission of evidence regarding major procurement failures by the OPW that have cost the taxpayer significant money. He is saying there are procurement failures by the OPW that have cost the taxpayer money. We cannot ignore the opening sentence. We will write to the Garda and the OPW for a response to the issues highlighted without getting into the specifics of the contract - the safety measures - and ask if they are satisfied that it was appropriate.

The next item is No. 2217C from the Irish Road Haulage Association, dated 5 June 2019, regarding concerns about how the road safety authority, RSA, performs its functions. It refers to what it sees as systemic shortcomings in governance. I propose to forward this item to the RSA for a response. Is that agreed? Agreed.

The next item is No. 2219C from an individual dated 5 June 2019 who is inquiring about the system of councillor allocations in county councils, in terms of how councillors get nominated to the different committees, in view of the fact that there is remuneration for some posts. This system is a policy matter.

I am not sure that existed when I was a councillor.

This is not within our remit. The individual can take that up with the Minister for Housing, Planning and Local Government, if he chooses to. We will so advise the individual. We are not going there.

Correspondence No. 2223C from an individual relates to the financial viability of wind farms in Ireland.

This matter is not within the remit of the committee. Is it agreed that we forward the correspondence to the Joint Committee on Communications, Climate Action and Environment? Agreed.

Item No. 2224C is correspondence, dated 6 June 2019, from an individual making inquiries about the Residential Institutions Statutory Fund Act 2012. The correspondence was addressed to the Minister for Education and Skills who sent a copy to the committee. It is not a matter for us and requires no further action. The correspondence is noted.

Item No. 2229C is correspondence, dated 11 June 2019, received from Deputy Cullinane, concerning clarification given by the Garda Commissioner, Mr. Harris, on evidence given to the committee. Deputy Cullinane sets out a number of additional questions that require a response. Does he wish to comment?

I commend Commissioner Harris for his response. To be fair to him, his giving of incorrect information to the committee was inadvertent. It was an issue he probably did not expect to be raised. However, there are other questions arising from it that should be answered. I ask that my questions be forwarded to the Commissioner's office for clarification.

We will do so. This issue arises from evidence the Commissioner gave to the committee a few weeks ago.

Did we not agree the last day to write to him about how this issue had arisen and to ask from whom he had received the information in question? I understood we had agreed to take that course of action.

We will check the Official Report for the last meeting. Deputy Cullinane was not in attendance and, after a brief discussion, we agreed to hold the matter over. I am informed that we did write to the Minister after the last meeting inquiring as to how the error had arisen. We are not suggesting it was anything deliberate.

That concludes correspondence to the committee. We will now deal with statements and accounts received since the last meeting. There are five statements and accounts for review, as listed on members' screens. The first is the Public Trustee Account which administers 148 trusts related to activities of the Department of Agriculture, Food and Marine, including former Land Commission Trust balances. The trustee account balances and there is only a small turnover. The trust has received a clear audit opinion.

Next is the Strategic Banking Corporation of Ireland which has been given a clear audit opinion.

The Health Information and Quality Authority has received a qualified audit opinion to the effect that its statement gives a true and fair view, except that the authority accounts for the costs of retirement benefits entitlements only when they become payable, rather than when they are earned. All health bodies in the State have received a direction from the Minister for Health to do it this way, which is out of sync with international accounting standards. Historically, the Minister does not want these costs showing up as an annual cost; therefore, they are buried until people retire in 20, 30 or 40 years. This is not in order with international accounting standards, but all Ministers have done it, not just the Minister. It was a regular feature of past practice. We will note that the Health Information and Quality Authority is not accounting for pensions, as is usually the case for other organisations.

Next is the National Asset Management Agency, NAMA, which is given a clear audit opinion. However, attention is drawn to the payment by the agency of €1.9 million to the Revenue Commissioners in November 2018 in respect of an underpayment of VAT on certain services received from abroad. The payment included €600,000 in interest and penalties. The amount of VAT involved was €1.3 million, with the interest and penalties of €600,000 bringing the total owed to €1.9 million. It is noted that there was a lapse in internal control in 2017 which resulted in non-compliant procurement in respect of four services contracts not being notified to NAMA's audit committee or other auditors and not being disclosed in its financial statements. The related non-compliant expenditure total was €4.35 million in 2017 and 2018. Will Mr. McCarthy comment on the VAT issue, whether it was a genuine error and so on?

Mr. Seamus McCarthy

The original problem was a genuine error. Somebody did not understand that given the scale of the contracts, they should have been advertised in the EU Journal and should have been disclosed in last year's financial statements. When they were assessed, it was regarded as a technical issue, but they should still have been brought to the attention of NAMA's audit committee, my office and the other commercial auditors.

I will hold over the noting of these accounts of the National Asset Management Agency until next week. Our periodic report includes several recommendations in respect of NAMA which I do not think we have time to get into today. As I am not at all satisfied with the response from NAMA, I will hold over the response from the Minister for Finance to the periodic report. However, if members wish, we can deal with it now in five minutes. I have one or two sharp observations to make about NAMA's response.

Does NAMA accept that it was a failure on its part that the disclosure was not made in the annual financial statements and that the audit committee was not informed, or is that just Mr. McCarthy's opinion? Has he received a response from NAMA on this point and is it an ongoing issue for his office?

Mr. Seamus McCarthy

NAMA has recognised that they were non-compliant procurements that should have been disclosed.

I accept that, but has it acknowledged that it was a mistake not to disclose them in the annual report and financial statements? Does it accept that it should have informed the audit committee and the Office of the Comptroller and Auditor General? May we write to the agency giving Mr. McCarthy's opinion on the matter?

Mr. Seamus McCarthy

There is a detailed note in the financial statements on this matter and how it evolved. The agency has indicated its position.

Has it accepted the reality of the situation?

It is not clear whether NAMA has accepted that it was a mistake not to put it in the financial statement and inform the audit committee about it.

Mr. Seamus McCarthy

The fact that NAMA has included it for 2018 is a recognition that there was a laxity of controls.

I am satisfied with that if Mr. McCarthy is satisfied with it. My concern is that if NAMA did not accept that a mistake had been made, it could happen again.

Did NAMA identify the issue or did the Comptroller and Auditor General find it?

Mr. Seamus McCarthy

It came to NAMA's attention. The Deputy would have to ask agency management the circumstances in which it came to light.

We will write to NAMA asking how the issue arose, how it came to light and why it took so long to deal with it.

When is it likely that a delegation from NAMA will come before the committee again?

The agency's annual report and financial statement for 2018 have been published and laid before the Oireachtas. It records an after-tax profit of €795 million for the year. NAMA is now stating that, subject to market conditions, its projected lifetime surplus is up from €3.3 billion to €4 billion. I had a quick look at the summary and it shows that the agency has disposed of 93% of its loans. It is nearly there. The Comptroller and Auditor General is producing a special report on Project Nantes which, I understand, is expected to be completed in the autumn. We will schedule a meeting with NAMA to discuss its financial statements and Project Nantes at that stage. Will Mr. McCarthy confirm the expected timescale for completion of the report?

Mr. Seamus McCarthy

We have just received a response from NAMA to the first draft. I expect that we will be able to progress it quickly.

We are probably looking at a meeting in the autumn.

An issue I have raised on previous occasions is that there has been only one complaint to An Garda Síochána under section 172(3) of the NAMA Act 2009. Do we have any way of finding out where it is in the system? It was a complaint submitted by an individual three years ago that an asset had been sold back to the connected person. NAMA did not accept that there was an issue. I am surprised that there has been only one complaint to the Garda under the relevant legislative provision. I believe I know who it is from. This is an important section of the NAMA Act and, given that there has only been one complaint, we should have some idea of where it is at, particularly as it was submitted three years ago. May the committee ask the Garda about it?

Has the Deputy raised this issue before?

Yes. I have tabled parliamentary questions about it, but the responses have been a bit evasive. It has been indicated that there will be a register showing the beneficial owner, but that does not address the issue which arises from the complaints procedure set out in this important section of the legislation. There was one complaint made three years ago and it is ongoing. It does not seem to be a very effective way of dealing with the issue.

It is worth tracking from that point of view.

I ask the Deputy to bear with me. We will hold this topic over until the next meeting because I want to raise it also.

It was the subject of a recommendation in our periodic report which has been rejected by the Minister and NAMA. They are nearly there, which is fine. However, I am not satisfied and we will hold our ground. NAMA included some wholly unnecessary and gratuitous remarks in its response to the committee, which remarks I reject. I wish to discuss the matter next week. NAMA stated the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 and the central register of beneficial ownership of companies and industrial and provident societies were in the course of being finalised and would be in operation by November this year. It will nearly be finishing up at that stage.

Yes; that is the point.

The answer NAMA is giving ten years after it was established is that the regulations and the register might capture it, but it will be winding up at that stage. I am asking that this topic be held over because I wish to raise it and I am conscious that the committee has a few things to do in private session. We will return to it because it is very much on my radar. I was going to deal with it today, but I do not think there is enough time to do so.

The Chair wishes to hold it over until next week.

We will hold it over until next week for discussion. I am holding over the noting of the National Asset Management Agency 2018 accounts. We are not noting them today; we are holding over noting and discussing them until next week.

The next item is the Health Service Executive accounts. They received a clear audit opinion, but attention is drawn to the fact that, on the direction of the Minister, the HSE has not recognised in the financial statements the liability, estimated at €198 million, arising from a legal settlement with medical consultants which was agreed and adjudicated on by the High Court in June 2018. There is also recurrent non-compliant procurement by the HSE, including 30% by value of a sample of payments, totalling €66 million, examined in the course of the audit. Representatives of the HSE are scheduled to appear before the committee, but I wish to raise certain issues with the accounts. I want people to listen because the financing of the HSE is an important issue in the public arena.

These are the financial statements that were signed off on by the chairperson and chief financial officer on Monday, 13 May 2019. The Comptroller and Auditor General completed his report on that day. On the Friday before, there was a development that I, or any member of a Committee of Public Accounts, would find unacceptable. It involves what the Minister or the Department on his instructions did before the board signed off on its accounts. The net operating deficit shown in the financial statements is €85.174 million for last year. That is the audited figure. However, it masks an issue referred to by the Comptroller and Auditor General, namely, that a High Court settlement on consultants' pay was adjudicated on in mid-June 2018. In the normal course, the accounts should include a provision for that liability of €198 million in the financial statements. That would be the case for every organisation which produces accounts to international financial standards. On the Friday before the accounts were signed off on, the Department, on the instructions of the Minister, issued a direction to the HSE not to include that liability. However, it is a liability for the HSE. Had the Minister not interfered with the final preparation of the accounts on the weekend before they were signed off on and audited, the deficit for the HSE last year would have been noted as being €283 million. This gross interference by the Minister or the Department is an attempt to massage the figures, fool the people and present unacceptable figures to the Committee of Public Accounts. On the weekend the accounts were being finalised, the Department issued a letter to state the settlement of €198 million was outstanding and the HSE was formally directed to exclude it from the financial statements. That is outrageous. That is how the HSE and the Department are managing their accounts and presenting them to the Oireachtas. The Comptroller and Auditor General has no role in that regard; he cannot change how the Minister presents his accounts. However, I thank him for highlighting the issue and will ask him to comment on it. He had to receive a copy of the letter before he could sign off on the accounts. The legislation gives the Minister authority to do make this intervention. He or the Department took advantage of it to whitewash the accounts. They are fiddled accounts. The accounts, as presented, are not acceptable by international financial standards. The decision to exclude €198 million from them on the weekend before they were signed off on was scandalous and I do not think the Committee of Public Accounts can be silent on the matter and we will not be. I am highlighting it. We will bring in representatives of the HSE and immediately write to the Accounting Officer of the Department.

When I referred to the Minister, I meant the Department. We know that the Minister is the political head of the Department, but the committee deals with the Accounting Officer. We will write to the Accounting Officer to seek a detailed explanation of the rationale for a direction issued to the HSE to exclude the liability of €198 million from its annual audited financial statements. If it had not been issued, the HSE accounts being presented today would show a deficit of €283 million, but it produced accounts which showed a deficit of €85 million. I have made my point. I want people to listen to what is going on. Accounting Officers need to control expenditure, but presenting accounts that do not present a true and fair view in accordance with international accounting standards is not acceptable to the committee. We may end up rejecting the accounts. It is probably a new issue of which people are not aware. It has only come to light because we are looking at it today.

I agree completely with the observations of the Chairman. I would be slow to use the word "fiddled" because it has certain connotations, but it certainly involves massaging the figures and sleight of hand. I would like to contribute on the audit opinion, but I will allow other members to comment on this issue first.

We will take comments and then ask the Comptroller and Auditor General to respond in more detail.

On the audit opinion, how many times have we raised the issue of non-compliant procurement by the HSE? There are several issues on which we have shone a light in terms of the presentation of accounts. The Chairman gave the example of one aspect of the HSE accounts and how the Department or the Minister presents them. The committee has been quite good on the issue of the late presentation of accounts and organisations have stepped up their game in that respect. However, non-compliant procurement has been an issued since I joined the committee. Members have raised it repeatedly, but there seems to be no sanction, other than it appearing as a footnote in the audit opinion. At what point do we say that is not good enough? Our periodic report must deal strongly with this issue. We previously considered dealing with it as a single issue. I do not know whether the Department of Public Expenditure and Reform or another Department sets the guidelines for procurement. How is it that 30% of the sample came back as non-compliant? That is an extremely high figure, considering the amount of money the HSE spends on procurement. I know that the Comptroller and Auditor General does his job in citing this issue each time it arises, but at what point does the committee state enough is enough and that better controls are needed? It is coming up time and again and we are not seeing any improvement.

I thank the Deputy for highlighting the issue. For the purposes of clarification, I withdraw my usage of the word "fiddled". I want to clarify what I meant when I referred to "fiddled accounts". I will choose my wording more precisely. Speaking as a chartered accountant and Chairman of the Committee of Public Accounts, the accounts, as presented by the HSE, do not present a true and fair view of its financial position at 31 December 2018 in accordance with international accounting standards.

There are several things one must be able to trust. I echo the outrage expressed by the Chairman on this issue because it goes beyond being an issue of concern. All members know that there is a separation between the Comptroller and Auditor General and the interrogation of accounts by the committee. There is respect for the independence of his office. With that independence comes public trust which is incredibly important in being assured that the figures are accurate and a true and fair account of the state of play.

Is the Accounting Officer from the Department of Health not the person we need to have before us? That is where the buck stops. Who signed the letter that came to the Comptroller and Auditor General?

We will ask the Comptroller and Auditor General.

Mr. Seamus McCarthy

The direction of the Minister was a direction by the Minister but it was addressed to the Health Service Executive. It was an instruction to the board of the HSE to present its financial statements in a particular fashion.

Is there not something bigger or as big at stake regarding the independence of the audit function at the HSE when a Minister can issue such an instruction? My understanding always was that there was an administrative side and a political side. There is an interference here that is highly unusual. I do not know if it is unprecedented but it is very unusual that it should happen. I have serious concerns on this issue.

On that point, there is in the health sector provision for the Minister to issue a direction. Several of the health bodies that are audited in the health sector are subject to presenting their accounts in the format directed by the Minister. The Minister has the legal authority to make a direction. Normally, it is not to include the costs of pensions and pension provision. That is not correct but at least we know from year to year that is always there. This, however, is a new directive. The Minister had the legal authority to issue it and the board of the HSE was obliged to follow the legal directive from the Department. There is statutory authority to do this.

Can we see that directive? That would be helpful.

Yes, we will write to the Secretary General of the Department of Health, who is the Accounting Officer, for a copy of the directive and the legislation underpinning this directive. What I found very unusual was that this was done on the last working day before the accounts were sent. It was obviously known that the accounts would present figures showing a deficit of €283 million and a decision was taken to issue that directive to take that figure out of the accounts. It is within the law but bad practice.

Once we finish the discussion on this topic, can we address the questions of who exactly we will have in front of us and why?

We have already arranged to have representatives of the HSE before us on 11 July to discuss its annual financial statements. I consider this matter so serious that we may have to have an urgent meeting with the Accounting Officer of the Department of Health. This is a new departure and, as Deputy Catherine Murphy stated, if we cannot trust the accounts of the HSE as presented, we have a problem.

Will the Chair remind us of what was left out?

I am speaking now from recollection as I do not have the papers in front of me. My understanding is that hospital consultants had taken a case regarding their remuneration under the 2008 contracts.

Mr. Seamus McCarthy

That is correct.

That case was adjudicated on in the High Court on 15 or 16 June 2018.

That adjudication resulted in the court obliging the HSE to make payments to the hospital consultants. The cost of these payments has been put at €198 million.

Mr. Seamus McCarthy

That is an estimate.

The payment of that sum is being deferred to 2020 or 2021.

Mr. Seamus McCarthy

No, it is 2019 and 2020.

The liability determined by the court in its final decision was incurred in 2018 and should have been in the accounts for 2018. It could have been paid last year and would have been in the accounts, but it has been deferred. It is a liability.

I did not state that the cashflow was not correct. The payment has not yet been made. I say that so that people understand the position.

I am not an accountant and I appreciate that the comments made by the Chairman derive from his own experience and qualifications. I am sure Deputy Burke would concur with him if he was here. As I have not seen the letter, unlike the Chairman, I am not privy to its contents. I thought this settlement may have been on the books of the State Claims Agency but the Chairman has provided clarity on the matter.

It concerns consultant pay.

The estimated liability is €198 million. If it has not been expended and it is to be recorded in the 2019 and 2020 books, as the Comptroller and Auditor General has indicated, would that not comply with the requirements?

No, it would not. We operate on an accruals basis and that there is a balance sheet showing an organisation's liability.

I understand that but if it was not accrued because-----

The point is that it should have been accrued because the court determined that it should be accrued. That cash flows when it is paid out-----

The Chairman said it had not been paid out.

It has not been paid yet.

Mr. Seamus McCarthy

There is a note in the financial statements dealing with this issue. It is note No. 26.

What page is that on?

Mr. Seamus McCarthy

It is on page 213. A provision was already made for payment of this sum. Where it is recognised that there is a claim and that there is a likelihood of payment, then there is an obligation under the accruals principle to provide for that. A provision was put into the financial statement in 2008 for the sum of €168 million. That was maintained while the case was ongoing. In the event, because it persisted for so long, the final bill is going to be significantly higher than that figure. It is now estimated at being €198 million. However, because of the direction that was given, the provision had to be reversed as well to comply with that.

May I ask-----

The HSE in previous years made a provision not knowing the outcome.

I get that. I have another question that may be relevant. Instead of going to the HSE, could we not just ask the Minister what the rationale was for the directive?

No, this committee does not deal with Ministers. That is a matter for the health committee. We only deal with the Accounting Officers and we must try to keep within our remit.

I support Deputy Farrell. It is a good idea.

I am trying to protect the Deputy.

Yes, I understand that.

Have we teased out this particular topic sufficiently?

I have some direct questions for the Comptroller and Auditor General. What would the Chartered Accountants Regulatory Board, CARB, the regulatory body for chartered accounts, think of this?

Mr. Seamus McCarthy

I do not think it would express an opinion in relation to it. There is law in relation to the Minister's power to set the accounting standards for the HSE.

The Minister was within his rights to do it.

Mr. Seamus McCarthy

Yes, he perfectly had the right to set accounting standards.

The law provides for that.

The law provides for this to be done but it gives a dishonest picture.

It does not give a true and fair picture in accordance with accounting standards.

Can the regulatory standards that would apply to the chief financial officer, who probably is a qualified chartered account among many other things, be trumped by the Minister and the powers available to him?

Mr. Seamus McCarthy

The Minister has the power to set the accounting standards and-----

I know what the Minister does. I am interested in the people who are on the board and their fiduciary duties. They are all professionals and they are regulated by international financial accounting standards. There is the CARB, the Association of Chartered Certified Accountants, ACCA, and various other bodies. I am asking if those individuals complied with their regulatory duties-----

Mr. Seamus McCarthy

Yes, they did.

-----or does the ministerial intervention under the law trump any responsibilities they have under the accruals principle?

Mr. Seamus McCarthy

There is generally provision or recognition internationally that different formats of accounting may be specified and may be required by law. It is perfectly acceptable from a professional point of view for somebody to prepare a set of financial statements in compliance with what is non-GAAP or generally accepted accounting policies format. There is no difficulty, from a professional point of view, with the accountants in the HSE preparing the statements in this fashion or with me giving an opinion. I have given a clear audit opinion here because they have been properly prepared in accordance with the accounting standards specified by the Minister.

If this was a private company and the owner instructed the board to remove a liability for pay or something else in the following year, would that be a problem?

Mr. Seamus McCarthy

I think it would be a problem in that companies legislation requires the presentation of financial statements on a true and fair view.

The Minister has the status to present it whatever way he wants. If it was a company, would we be into breaking the law here?

Mr. Seamus McCarthy

I think that is hypothetical. It is not a company.

I agree. I suppose we are just trying to develop an understanding that the State has one set of rules and the rest of us have another set of rules.

Correct.

The State has chosen to do it in this way, and to give what is the wrong outcome, but if it was a company, we would have regulators kicking in, Revenue kicking in, and we would be breaking the law, would we not?

Mr. Seamus McCarthy

That is a hypothetical question.

I am just saying "if it was". It is a real question. If the situation applied out in the real world, would it be breaking the law?

Mr. Seamus McCarthy

It is hypothetical. A company would have to provide financial statements based on FRS 102 and that is what it would do.

What if it did not? I appreciate it is hypothetical but this would not be allowed in the private sector or any other sector.

Correct. I want to clarify this matter because we are going to move on. In the HSE annual financial statements, note 1, on accounting policies, states:

Statement of Compliance and Basis of Preparation

The financial statements have been prepared on an accruals basis, in accordance with the historical cost convention. Under Section 36(3) of the Health Act 2004, the Minister specifies the accounting standards to be followed by the HSE.

That legislation governing the HSE trumps normal accounting standards used by all other public bodies. This is only happening in the health area; it does not happen in NAMA or any of the other bodies. We are conscious of the fact it has always excluded the liability for matters with the State Claims Agency until they are settled and, although that would not be normal, at least we are all aware of it. I highlighted this €198 million because this happened on the last working day before the accounts were signed off. This is a new departure that had never happened before. It is referred to on page 188 of the accounts in regard to the consultant contract settlement. It is not in accordance with normal practice. It was an exceptional issue brought in by the Department on the last working day.

I take this very seriously. I propose that we write to the Secretary General of the Department of Health to ask him to appear before us as quickly as possible on this issue. I want to explain the background to this issue.

If he is coming in, I ask that we also include procurement.

We had suggested bringing in the HSE to our last meeting. We might now try to bring forward our meeting with the HSE on its annual financial statements, which is on our work programme for about five weeks' time. We will try to bring that forward as urgently as possible. If we have to swap something around next week, we will try to do that. The Department of Agriculture, Food and the Marine is due in next week. In my view, and I am saying this publicly to the HSE, it has now signed off its accounts and it has to be fully familiar with them. They have been approved by the Cabinet and presented to the Oireachtas, so HSE officials must be up to date and up to speed, and they do not need to do any further preparation as it is fresh in their heads. I am saying that we want to see them here, possibly next Thursday, and we will try to swap around our schedule and have the Secretary General of the Department of Health with the HSE for a full discussion on the HSE accounts on that day.

We will also discuss note 2 on page 194 of the financial statements, which deals with expenditure. It states: "The Director General (1 January 2018 to 11 May 2018) received total payments of €238,207 during 2018, comprising basic salary payments of €139,649 and severance pay of €98,558." Therefore, the outgoing director general got a severance payment of €98,558. I want people to be aware of that as well because it might have been in some people's minds.

We will bring forward the meeting with the Accounting Officer of the Department of Health and the HSE as urgently as possible to deal with this issue, rather than leaving it hanging there for the next five weeks. On that basis, we will not discuss the work programme other than to ask the secretariat to try to make those arrangements. We will move on without further discussion on our programme. We are running late as we have had to deal with quite a lot of significant issues this morning. I apologise to the witnesses waiting outside. However, there are one or two items that we have to discuss in private session and we will try to do that as quickly as possible.

Can we deal with "any other business" before that?

I must apologise but I will not be here for the opening statements as I have another meeting. I do not like missing the opening statement and then coming in afterwards as it is possible to repeat what the first speaker has said, but it cannot be helped.

We had a lot of business to do today. I called Deputy MacSharry under "any other business".

I too want to apologise as I will not be here for the main session with the Department. I have one issue for the clerk and we can deal with it on another day. I was going through old files to do with protected disclosures and the rules around them. A letter came to the Committee of Public Accounts from the Secretary General of the Department of Education and Skills, dated 12 June 2018. The references is No. 1386 B and would have been raised at the meeting on 21 June 2018. We can discuss this matter on another day but perhaps we could circulate it to members and have a chat about it. In the last paragraph of the letter, the Secretary General seems to indicate that protected disclosures in certain instances cannot be retrospective whereas that would not be my understanding of the law. I have three questions I would like the Committee of Public Accounts to write to him on. First, was the response in the letter a direct legal opinion? If it was a legal opinion, would he be prepared to give us a copy of that legal opinion? It does not sit with my understanding of protected disclosures. When we brought in the Act in 2014, it was most unusual in that it was designed to be specifically retrospective, whereas most legislation could not be retrospective, as I understand it. I am looking for those clarifications based on that letter. As I said, I was doing some work on protected disclosures and I came across this. I would like that clarified, if possible.

We will do that. We will now go into private session.

The committee went into private session at 10.57 a.m. and resumed in public session at 11.40 a.m.