COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 17 Nov 2022

Business of Committee

Chairman

This afternoon our business comprises minutes, accounts and financial statements, correspondence, work programme and any other business.

The first item is the minutes of the meeting of 10 November. They have been circulated to members. Does any member wish to raise any matter arising from the minutes? Are the minutes agreed? Agreed. As usual, they will be published on the committee's webpage.

No. 2 is accounts and financial statements. Seven sets of accounts and financial statements were laid before the Houses between 1 November and 11 November 2022. I ask Mr. McCarthy, the Comptroller and Auditor General, to address those accounts and financial statements before opening the floor to members.

Mr. Seamus McCarthy

The first set of accounts is for the National Standards Authority of Ireland for 2021. It is given a clear audit opinion but, in addition, I draw attention to note 12(c) of the financial statements relating to the recognition of a deferred pension funding asset. Most of the income of the National Standards Authority of Ireland is raised through charges, but in its accounting there is an assumption that the State would provide funding to meet pension liabilities as they arise. That is what I draw attention to there.

No. 2 is for Donegal Education and Training Board for 2021. It is given a clear audit opinion.

No. 3 is for the Leopardstown Park Hospital board for 2021. It is given a clear audit opinion.

No. 4 is for National University of Ireland Galway, NUIG. It is given a clear audit opinion, but I draw attention to the recognition of a deferred pension funding asset, similar to what I mentioned earlier. That is a standard issue for universities. I also draw attention to disclosure of procurement non-compliance. Finally, I draw attention to a payroll overpayment. That was a situation in which the university identified that an employee had been overpaid salary of just over €100,000. The overpayment occurred between January 2019 and February 2021 due to weaknesses in system controls. The university has taken steps to improve its controls to avoid a reoccurrence of the situation.

No. 5 is for Crawford Art Gallery Cork Limited for 2021. It is given a clear audit opinion.

No. 6 is for the National Museum of Ireland for 2021. It is given a clear audit opinion, but I draw attention to the disclosure of non-compliance with procurement rules.

Finally, No. 7 is for the National Library of Ireland for 2021. It is given a clear audit opinion.

Chairman

Regarding the NUIG procurement, am I correct that there is €1.1 million in total in non-compliant procurement?

Mr. Seamus McCarthy

Yes, that is the amount.

Chairman

As I understand it, the university has sent information on this, stating that it is now in compliance with current procurement legislation and that rules on appropriate procedures for procurement have been developed. Is that your assessment of the matter, Mr. McCarthy? That has been circulated to staff. They have taken steps.

Mr. Seamus McCarthy

Yes. Obviously, the university is working on reducing the amount. We do not have any difficulty with the disclosure.

Chairman

Does any member wish to come in on the accounts or the financial statements? All are happy with them. Can we agree to note the listing of accounts and financial statements? Agreed. As usual, the listing of accounts and financial statements will be published as part of our minutes.

Last week, Mr. McCarthy, in your absence, the issue of the Social Insurance Fund came up, and we were going to ask you today to address that.

Mr. Seamus McCarthy

I think it was specifically regarding the chapter on the classification of workers for PRSI purposes, which, obviously, is connected to the Social Insurance Fund. The chapter, I hope, is relatively clear. As for the key points that come out of it, we make a number of recommendations and the Department of Social Protection agrees in part with each of them and sets out its position.

What we found was that revised guidance for determining employment status was published in July 2021. It is more comprehensive than the guidance that had been published previously. We found that approximately 14% of workers are classified as self-employed. What is interesting is that the value of PRSI receipts from those who are classified as self-employed has increased significantly in recent years, but the number of PRSI contributors has increased by far less. That means that the average contribution from those in self-employment has increased, which is possibly an indication of higher earnings for those individuals. It may be of interest to the committee to explore what is behind that.

We found there was no reliable estimate of the level of misclassification of employment status. There are some data from Revenue, but those data are from targeted investigations so one cannot generalise from them. However, even in that situation, where they looked at the construction sector, it suggested that misclassification was not that widespread in the sector. Undeclared employees was possibly a greater concern there. We also found that a review of scope section decisions showed that there had been case-by-case determination of the cases. We also found that while there was a determination by the Department to increase the resources to examine classification cases, the provision of the staffing had been slower than expected and it has not yet ramped up to the level the Department expects.

Chairman

Fourteen per cent of the workforce-----

Mr. Seamus McCarthy

Are classified as self-employed, but that does not appear to be increasing significantly.

Chairman

Is 14% an increase on the previous figure?

Mr. Seamus McCarthy

I do not have it off hand but the numbers of PRSI contributors as self-employed is not rising as significantly as the contributions.

Chairman

The contribution is rising because earnings are increasing.

Mr. Seamus McCarthy

Yes.

Chairman

It is disappointing there is no estimate of the loss of revenue through the potential misclassification of persons as self-employed as opposed to PAYE employees for PRSI purposes.

Mr. Seamus McCarthy

There is no reliable estimate of misclassification. The only way one can do that is by random sample and then extrapolate from the sample to the whole population but that is not being done. The investigation work is targeted at where it is expected to find a higher level of misclassification.

Chairman

There have been figures in recent years ranging from €100 million to €500 million.

Mr. Seamus McCarthy

I do not think that there is any-----

Chairman

It is not as high as that.

Mr. Seamus McCarthy

-----basis for concluding a figure such as that.

Deputy Catherine Murphy

Is Mr. McCarthy saying there is no real evidence that the scope section is determining sectors such as Deliveroo?

Mr. Seamus McCarthy

Not in the sample that we looked at. In the cases we looked at there was always evidence on record of evidence having been taken from the employee and the employer. There was no evidence that it was simply an application made and a determination going back on the basis that someone was in the sector. We did not see anything like that.

Deputy Catherine Murphy

From the perspective of somebody who is self-employed and employed, when that is mixed, an S stamp and an A stamp cannot be amalgamated for the purposes of pension. The employee will have to go with one or the other. If someone spends 20 years of their working life on an S stamp and 20 years on an A stamp, they really only have 20 years. There can be a considerable disadvantage in mixing employment and self-employment from the point of view of pensions.

Mr. Seamus McCarthy

Yes, that is if that is what somebody chose to do. It is different if somebody is misclassified but one can apply to the scope section for a determination of one's circumstances.

Deputy Catherine Murphy

Okay.

Deputy Paul McAuliffe

I will explore that point. The concern was that test cases were being used. Mr. McCarthy said there was no evidence in the sample he examined of a test case being applied across a whole sector. Is that fair?

Mr. Seamus McCarthy

It was a small sample but certainly in the cases we looked at, we did not see evidence of the test cases being applied.

Deputy Paul McAuliffe

There are issues with the word, "test". When the courts are determining between a contract of service or a contract for services, they use a number of tests such as integration and control tests. That is separate from the use of the word "test" in the example that we have used.

Mr. Seamus McCarthy

I would have described those as criteria one would assess with regard to an individual case.

Deputy Paul McAuliffe

The courts use the term "test" but those are the criteria. Is there any evidence that criteria are being used for industries or were questions pursued and a response given in each case looked at?

Mr. Seamus McCarthy

There was individual questioning, yes.

Deputy Paul McAuliffe

What was the size of the sample?

Mr. Seamus McCarthy

We only looked at 25 cases, I think, to understand the process effectively.

Deputy Paul McAuliffe

Did that sample cover some of the sectors of concern?

Mr. Seamus McCarthy

Certainly, 25 cases is too few. It allowed us to understand how the process works.

Deputy Paul McAuliffe

Did any of the cases cover the delivery driver sector?

Mr. Seamus McCarthy

I cannot recall off hand which sectors were involved.

Chairman

We know someone working in construction will have all the attributes of an employee but is self-employed. It seems to be fairly widespread on many sites. However, we have to go by the findings. Mr. McCarthy is correct with regard to the Revenue investigation.

Mr. Seamus McCarthy

Revenue looked at those cases and determined, in most cases, that the circumstances presented suggested that people were self-employed.

Chairman

If everybody is happy with that, we will move on to-----

Deputy Catherine Murphy

Obviously, the Comptroller and Auditor General is doing that work but would the Department do that work as well with regard to particular sectors?

Mr. Seamus McCarthy

Is it reviewing?

Deputy Catherine Murphy

Yes.

Mr. Seamus McCarthy

What we describe in the report is the work the Department has done. We obviously do not go on to construction sites to try to assess. We try to look at the systems in Revenue and the Department of Social Protection to examine this.

Chairman

We have been given figures in the past with regard to the number of inspections in different industries and the outcomes of those inspections.

Deputy Colm Burke

I apologise for being late and I may go off the point a bit. Are people employed through Departments being looked at? I know RTÉ is separate from any Department but I have an issue with one aspect of the Department of Education.

Mr. Seamus McCarthy

Is that the home tutors?

Deputy Colm Burke

Yes.

Mr. Seamus McCarthy

I think it is an established arrangement.

Deputy Colm Burke

It is but the issue is the Department pays home tutors but also deducts tax. At the same time, home tutors are limited in what they can do outside of providing home tuition and what other work they can take on. It seems to be a difficult one from the point of view of the limitations the structure imposes on home tutors. All the indications are that the Department of Education is dictating the terms in every way. It could be argued that home tutors are employees rather than contractors.

Chairman

In that particular case, the scope section needs test it. It is an area that needs to be examined. I thank Mr. McCarthy for the information.

We will move on to correspondence. As previously agreed, items that are not for discussion for this meeting will continue to be dealt with in accordance with the proposed actions that have been circulated and decisions taken by the committee on those items of correspondence will be recorded in the minutes and published on the web page of the committee. The first category under which members have flagged items for discussion is category B, which is correspondence from Accounting Officers and-or Ministers and follow-up to committee meetings. The only correspondence flagged in this category is No. R1562 from Ms Anne Graham, chief executive of the National Transport Authority, NTA, dated 7 November. It contains information requested by the committee with regard to the transport strategy for the greater Dublin area. It is proposed to publish this correspondence. Is that agreed? Agreed. Deputy Catherine Murphy flagged the correspondence.

Deputy Catherine Murphy

If something is not in the transport strategy, it will not get done, and I understand that. I will use DART+ West as a reasonably good example of something that does not make sense. Even if the project will be very disruptive in some locations, it will be brilliant to have the Maynooth line electrified. The railway order is with An Bord Pleanála. The NTA says the extension goes west of Maynooth. In fact, it goes to within 350 m of Kilcock train station but that is not included in the project because it was not in the previous strategy. It has said it will consider a separate process that could be bolted on to this project. That shows shortcomings in the strategy. It would make complete sense to do the project in one go but the NTA did not wish to open up the process because to do so could add to the project. I understand that.

I am not sure this is the most efficient way of doing things, in that there is no means to add something where it makes complete sense to do so. For example, they are building railway sheds in Kilcock to do all the maintenance. The train will be there, but people will not be able to get on it.

Chairman

The point the Deputy is making is that the DART+ West line from Maynooth to Kilcock needs to be connected to the railway station in Maynooth.

Deputy Catherine Murphy

I am just using it as an example. It is not in the strategy. Bringing the line to Maynooth was in the strategy but bringing it to Kilcock was not. Railway sheds are being built in Kilcock, but they are not being connected to the railway station in Kilcock, which is only 350 m away. It does not make sense. Will the Department look at how such anomalies can be dealt with, rather than having to go through an entirely different process, when they are only small additions in the overall scheme of things? It is worth writing to the Department of Transport in that regard.

Chairman

It would cost more to have a separate scheme later for the 350 m. Is that the point the Deputy is making?

Deputy Catherine Murphy

Yes. It does not make sense on any level.

Chairman

Do we agreed to raise this with the National Transport Authority, NTA? The Deputy has raised this issue in the past.

Deputy Catherine Murphy

No. We should not be raising it with the NTA. We should be raising it with the Minister because it is on a policy change. The NTA will only tell us what the strategy is.

Chairman

The Deputy proposes we write to the Minister for Transport, Deputy Ryan, on this matter so that there is a connection between the proposed DART line and the station.

Deputy Catherine Murphy

I would like that, ideally. We should look for it as it would make an awful lot of sense. This will not be the only case where something like this happens, such as when it makes absolute sense to do something and everyone is in agreement it makes sense but the process does not allow it to happen. It makes financial sense to do it all at the same time.

Chairman

The die is cast.

Deputy Catherine Murphy

Yes.

Chairman

And it needs to be changed. I propose the committee writes to the Minister about this issue. I am sure citizens would like to have this line connected. It makes perfect sense to connect the DART line with the local station. We will ask for that. In addition, we will suggest that when such anomalies are identified, there must be a process to resolve them. Does that capture the Deputy's wishes? Is she happy enough with that?

Deputy Catherine Murphy

Yes.

Chairman

We move to the work programme. The engagement schedule to year end is as follows. Next week we will engage with the regulator of the national lottery. The following week, on 1 December, we will have two public engagements. In the morning we will meet representatives from the Department of Social Protection, with whom members may wish to revisit the issue of categorisation of employees. In the afternoon session we will meet with the operator of the national lottery. On 8 December, we will meet with the Office of the Revenue Commissioners. The final engagement of this year, before members go off for Christmas, will be with the Office of Public Works. We have also agreed to engage with An Bord Pleanála in the new year. Do members wish to raise any matters about the work programme? I ask members to be mindful that we do not want to come to the year's end without having some idea of the schedule for January. Since Covid, we have been trying to work a system of providing details a minimum of six or seven weeks out. It gives the clerk to the committee and potential witnesses a chance to align their diaries so that people are available to come before the committee. Next week, I propose we look at the programme of work for December and January. Is that agreed? Agreed. It is the committee's prerogative to set the agenda and I am anxious we do so. I have a couple of issues I wish to include.

The final item on the public agenda is any other business. Do members wish to raise any other matter? We will briefly go into private session before adjourning until 9.30 a.m. next Thursday, 24 November, when we will engage with the national lottery.

The committee went into private session at 1.55 p.m. and adjourned at 2.40 p.m. until 9.30 a.m. on Thursday, 24 November 2022.