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COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 11 Nov 2010

Vote 34 - Department of Enterprise, Trade and Employment

Mr. Seán Gorman(Secretary General, Department of Enterprise, Trade and Innovation) called and examined.

Before commencing, I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give this committee. If they are directed by the committee to cease giving evidence regarding a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a Member of either House, a person outside the Houses, or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provisions within Standing Order 158 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Mr. Seán Gorman, Secretary General of the Department of Enterprise, Trade and Innovation, and invite him to introduce his officials.

Mr. Seán Gorman

Thank you, Chairman. With me is Mr. Dermot Curran, assistant secretary at the Department of Enterprise, Trade and Innovation with responsibility for employment rights and industrial relations, Mr. Páraig Hennessy, finance officer, Ms Catherine Carroll, our accountant in the finance unit and Mr. Dermot Mulligan, formerly a member of our Department, who is now with the Department of Education and Skills.

Áine Stapleton

I am from the Department of Finance, and with me is my colleague, Ms Gráinne McGuckin.

The witnesses are all welcome. I invite Mr. John Buckley to introduce today's business. The full text of chapters 29 and 30 can be found in the annual report of the Comptroller and Auditor General or on the website of the Comptroller and Auditor General at www.audgen.gov.ie.

Mr. John Buckley

The Department of Enterprise, Trade and Innovation made payments of €1.5 billion in 2009 and the bulk of its spend occurred in two main areas, enterprise development, including science and technology in which it spent €730 million and labour force development on which it spent €687 million.

The Department also administered the National Training Fund, which has made payments of €366 million in 2009. The resources of the fund are used to train people who are either in employment or seeking employment.

Chapter 29 of the 2009 report deals with payments by Skillnets Limited, which is a company entirely funded from the National Training Fund. Skillnets was allocated €16.6 million from the fund in 2009, a reduction from the €26 million budget in 2008. The funding allocated to Skillnets is applied in supporting industry-specific training under a training networks programme. The network concept involves funding enterprises which come together and collaborate to address their common training needs jointly. The enterprises participating in the networks provide contributions towards the cost of training provision. In 2009, these contributions were of the order of €8 million.

Under the 2008-09 programme, 123 networks were initially approved for funding, but this had been reduced to 103 networks by the end of 2009. More than 40,000 participants were trained in 2009. Skillnets supports 62 networks in the latest 2010-11 programme. The Department of Enterprise, Trade and Innovation had overall responsibility for the oversight of Skillnets at the time of my report and had three ministerial representatives on its board.

Chapter 29 deals with the control and monitoring of expenditure under the programme. It also outlines how Skillnets dealt with allegations of irregularities by a training provider who delivered services to the networks. The subsequent investigation by Skillnets found that 24 networks had made payments to the provider in 2008-09. No evidence was found of irregularities in the payments made by ten of the networks. However, there was evidence of such irregularities in 12 cases and investigations were continuing in two further cases.

In the 12 networks where irregularities were found, the training provider had been paid to deliver 24 courses. The investigation made findings in respect of the 24 courses. Although eight of the courses paid for had not been delivered, nevertheless there were trainee profile sheets, evaluation forms and signed attendance sheets on file for the trainees who allegedly attended those courses. A further eight courses had been delivered to companies that were not members of the relevant network. A further eight courses were delivered to network members, but in four of these cases there was insufficient evidence that all of the trainees who had been claimed for had attended the training. In three of the eight courses delivered to network members, the training provider collected the matching income directly from member companies.

The total amount of Skillnets grant expenditure found to be ineligible was approximately €200,000. However, since a proportion of grant funding to the networks concerned had been retained, the bulk of the ineligible grant funding could be offset. The net loss of public funds is estimated to be of the order of €50,000.

I understand that the training provider in question recently ceased trading. A tighter monitoring regime might have mitigated the risk. Skillnets aimed to visit each of the training networks once during each two-year cycle to check the administrative and financial controls. This suggests there would have been approximately 50 visits each year in 2008 and 2009. In practice, there were 16 visits in 2008 and just two in 2009. According to Skillnets, the reductions in its funding and its efforts to manage the consequent downsizing had resulted in an increased administrative workload which impacted on its ability to carry out inspection visits to networks.

The lack of direct contact by Skillnets with the member companies of networks and with trainees and the absence of spot-checking on individual courses or events run by networks made it difficult to confirm that training took place. The training provider was allowed by training networks to take too active a role in the delivery and financial management of courses. This made it difficult to identify whether courses that were paid for actually took place or were provided for the benefit of the network members. There also needed to be more separation of the functions of training procurement and provision.

Overall, the experience points up the need to ensure that, in cases where the Department uses third parties to deliver programmes, there is an adequate control and inspection process in place sufficient to guarantee that expenditure is regular and that public moneys are safeguarded and applied for the purpose intended.

Turning briefly to chapter 30, this deals with redundancy and insolvency payments administered by the Department but paid out of the Social Insurance Fund. Payments in 2009 in respect of redundancy amounted to €336 million. A further €20 million was paid in respect of other employment entitlements in cases of insolvency. The report notes that administration of the payments was in accordance with the parameters of the scheme and, by year end, employers owed the State €144 million in instances where the State needed to step in to meet their obligations to pay statutory redundancy entitlements and other employment entitlements unpaid where employers became insolvent. As would be expected in the current environment, the recovery of these amounts has been low. One of the functions of the Department is to ensure that redundancies are genuine. The audit noted that the level of subsequent rehiring of workers made redundant was relatively low, with straight rehires accounting for 1.6% of payments and blocks of employees moving to related enterprises accounting for 1% of payments. Some 2.6% of payments were to persons who moved onto occupational pensions. Some further information on redundancies by sector is set out in chapter 13, which deals with revenue, but the 2009 report also contains some information on the sectoral breakdown of redundancies.

I thank Mr. Buckley. I invite Mr. Gorman to make his opening statement.

Mr. Seán Gorman

My comments relate primarily to the contents of chapters 29 and 30 of the report of the Comptroller and Auditor General and to Vote 34 of the appropriation accounts, which in 2009 covered the operations of the Department of Enterprise, Trade and Employment, now reconfigured as the Department of Enterprise, Trade and Innovation. With regard to the overall Vote for the Department, total gross expenditure in 2009 came to €1.5 billion, including €18 million in carry-over capital allocations from 2008. Comparative figures for 2008 were gross expenditure of €1.5 billion and €23 million in carry-over capital.

I am happy to note that the Comptroller and Auditor General's report on the Department for the year is generally positive. In spite of a particularly difficult global environment, there are a number of positive achievements to record on the basis of the supports provided to enterprise through the Department's Vote. For example, IDA Ireland approved 125 investment projects, Enterprise Ireland supported 73 new high potential start-ups, county enterprise boards exceeded their targets by supporting more than 1,000 enterprises, more than 700 indigenous enterprises undertook research development or innovation projects and IDA Ireland secured 62 research development and innovation projects.

I would like to address the two specific issues raised by the Comptroller and Auditor General's report, namely, redundancy and insolvency payments and the National Training Fund - Skillnets. There was a threefold increase in the number of redundancy and insolvency claims lodged between 2007 and 2009, placing a major administrative demand on the Department to deliver employees' statutory entitlements within acceptable timelines. The Comptroller and Auditor General's audit focused on redundancy payment administration and reviewed departmental controls to manage the payment systems. On this point I am pleased to note that, despite the considerable pressures on my Department to process redundancy payment claims as expeditiously as possible, the audit concluded that the control systems governing payments were satisfactory and that all cases reviewed for eligibility under the legislation were found to have an entitlement to payment.

On the issue of debt management, the Comptroller and Auditor General's report concluded that all debt was found to be listed for recovery and that the Department would need to apply focused risk management to all components of the debt and to guard against the premature write-off of amounts owing. I can assure the committee that my Department, through the efforts of the recoveries unit which I re-established in April 2008, continues to make every effort to recover moneys owing to the fund. To this end, I am exploring with the Revenue Commissioners, given the significantly greater resources and powers available to that office, the possibilities of Revenue also acting to seek to recover debts due to the Minister arising from payments made under the redundancy and insolvency payment schemes.

In terms of write-offs, I assure the committee that my Department does not engage in the premature write-off of debts outstanding as evidenced by the fact that, of the amount of €4.1 million written off in the year to date, €3.5 million related to debts dating back to 2004 and earlier. Of the total amount of €8.7 million written off in bad debts in 2009, some 83% or €7.1 million related to debts arising in 2004 and earlier.

At this point, the Department is engaged only in debt write-off in cases where the official liquidation or receivership process is complete and a final statement of accounts has been provided. As the committee will be aware, the Government has decided that with effect from 1 January 2011 full responsibility for this activity will transfer to the Department of Social Protection.

Chapter 29 of the Comptroller and Auditor General's report deals with Skillnets and the National Training Fund, NTF. Skillnets is an enterprise led limited company funded under the NTF to support development of workplace upskilling and promote training of those employed in the private sector. This funding model involves supporting networks of companies who come together to identify and meet their common training needs. While Skillnets now operates under the Department of Education and Skills, in 2009 it was run under the aegis of my Department. The financial allocation for the Skillnets training networks programme in 2009 was €16.6 million. A total of 103 networks were funded under this provision and 41,610 persons were trained over 193,757 training days, of which 93,020 days were provided to those with low basic skills. In the past five years to date Skillnets is estimated to have trained more than 200,000 persons, including almost 5,000 unemployed persons for the first time this year in an innovative element of the unemployment activation agenda.

Skillnets Limited currently employs 21 staff to administer, support, control and monitor its national training programme. Each of its networks is assigned a programme support manager who guides and advises on the implementation of training plans and Skillnets requirements, procedures and protocols. Skillnets Limited also conducts at least one monitoring visit over the normal two year programme period. Resource constraints in 2009 arising from budgetary adjustments meant these vital visits dramatically declined that year.

The Comptroller and Auditor General's report identifies two cases where allegations of malpractice were reported to the Department. The first had already been identified by Skillnets Limited and was being dealt with since September 2008. The Department sought a response from Skillnets Limited in February 2009 to anonymous allegations made that month and a further detailed report was sought in April 2009 and subsequently received in August 2009. The second allegation arose from an anonymous phone call in February 2010 which Skillnets Limited immediately brought to the attention of the Department before putting in train a thorough investigation which culminated in an external auditor's report being issued to the Department in June 2010.

In both these cases, my Department ensured that Skillnets took immediate action to ensure potential losses of public money were identified and minimised, and that training participants were not adversely affected. All appropriate bodies, including the Garda authorities, were duly notified of the allegations by Skillnets Limited and thorough investigations were conducted. These investigations uncovered a number of breaches of procedures which were addressed by Skillnets and culminated in the conclusions and recommendations set out in chapter 29 of the Comptroller and Auditor General's report. The fact that the allegations had foundation is of concern to the Department. We have pursued these concerns with the CEO of Skillnets, who has responded appropriately.

Key to the measures that have been put in train is the greater emphasis being placed by Skillnets Limited on the oversight of the relationship between networks and their training providers. In this context, more intensive spot checks and compliance visits are being undertaken, including sample checks by Skillnets Limited personnel of network companies and trainees. Greater emphasis has also been placed on network managers attending training events. We will continue to closely monitor these actions in consultation with Skillnets Limited. In addition Skillnets Limited is enhancing its control regime by: providing clear written instructions to each network of its responsibilities; allocating unique identifiers to training providers and conducting quarterly reviews of payments to providers; recording matching income and reconciling income for each course; reviewing procurement in each network; and confirming that only one bank account is operated and that independent accountants obtain standard bank confirmations. Moreover, in December 2009, even before the training provider allegations, my Department had agreed on the following new measures for Skillnets in 2010: a consolidation and streamlining of the number of networks funded with a cap of 70 networks in total, compared to the 123 networks funded under the 2008-09 programme; a revised public-private funding ratio for networks of 50:50; a capping of management costs of networks at 25% of total expenditure, that is, solely from private funding sources; and the capping of retention payments to networks at 10% of total grant paid and at the level of €1 million in total across the programme.

Skillnets has tendered for an external evaluation of all network activity under the 2010 programme, something that was previously procured by networks themselves. The results of this evaluation will be considered by Skillnets and the Department in due course with a view to informing any further improvements in programme operations. The maximum exposure of public funding arising from the activities of the training provider highlighted in the Comptroller and Auditor General's report is estimated by Skillnets to be just under €54,000. Skillnets is taking all appropriate steps to minimise this figure and recover any outstanding funding. It has also conducted a review of this training provider's earlier activity between 2005 and 2007 and is satisfied that there was no improper conduct or loss of public funding during that period. Moreover, it has instituted a wider ranging review and quality assurance of other significant training providers under the programme from 2008 to the present. The sampling results available to date provide positive assurance on all the training tested during that period.

The matters arising in the external evaluation, the ongoing work of Skilllnets Limited and the Comptroller and Auditor General's Report will all be taken into account by the Department of Education and Skills in the context of future funding for Skillnets.

I thank Mr. Gorman. May we publish his statement?

Mr. Seán Gorman

Yes.

I thank Mr. Gorman and the other officials for attending this meeting. The first issue I wish to raise is chapter 30. As of 31 December 2009, €144 million was due to the Department in redundancy and insolvency payments. How much has since been collected and what is the current figure?

Mr. Seán Gorman

Our latest and best estimate of the total amount recovered out of the aforementioned €144 million is €24 million. These are problem cases from the outset.

Mr. Seán Gorman

The State only steps in to help employees where a company has failed or is unable to meet its statutory redundancy obligations. From the outset, we are dealing with an employer that does not have the financial capacity to meet these obligations or, in some cases, has chosen not to meet them.

What is the balance due?

Mr. Seán Gorman

The current outstanding figure is €183 million.

It increased from approximately €100 million at the beginning of 2009 to €144 at the end of that year.

Mr. Seán Gorman

Of the outstanding figure, 39% accumulated in 2009 on the back of the financial difficulties companies were experiencing.

The additional €40 million this year was obviously incurred in 2010. There is a large backlog in processing applications because of the volume received. Is Mr. Gorman able to estimate what level of debt will be in the fund when the applications notified or made to the Department are processed? We all know that it can take months to process applications and issue payments. When is it expected to clear the backlog?

Mr. Seán Gorman

Our worst position in terms of the backlog was a nine month waiting period. We have reduced the waiting period to six months and we hope to improve it further. Two factors are at play in improving processing times. The level of demand is dropping, that is, the volume of redundancies is decreasing. However, the number of claims for processing increased from 35,000 in 2008 to 50,000 in 2009. Over the past 11 months, we have reduced that backlog by 15,000 claims from a high of just over 43,000, and I expect to reduce this to 25,000 by the end of the year. We have doubled the number of staff in this area to do that. We prioritised whatever funding we had from our overtime allocation in this area, and we have also used the call centre at the National Employment Rights Authority to take pressure off the people whom we would prefer to be engaged in processing rather than explaining and answering calls. That has been a significant help. The current time is six months and we hope to continue to reduce this. Thankfully, the volume of demand is falling.

That means somebody being made redundant this month - that is, November - whose employer does not pay redundancy may receive his or her redundancy payment by next May.

Mr. Seán Gorman

Yes, as things stand today.

That is a very long time.

I am concerned about one item which I was going to come to later on, but I will deal with it now. During the year in question, there was an application for €13 million from the European Social Fund, and it was expected that this would be received. However, the application was not submitted by the Department and the funding was not received. We are talking about people who have been made redundant. Trying to find overtime to pay people increases the pressure on the overtime budget. If the Department had collected the €13 million it was due from the EU, it might have had some funds to give people their redundancy payments much more quickly than in six or nine months. Can Mr. Gorman see the connection between the shortage of money in the Department and the failure to claim money it should have claimed and received?

Mr. Seán Gorman

Yes.

If I was waiting for my cheque and the Department said it could not pay overtime, but I knew the Department was short by €13 million which had not been applied for from Europe, I would be very frustrated. As Accounting Officer, how does Mr. Gorman square this?

Mr. Seán Gorman

That €13 million, which arises out of the FÁS problems, is not money I can automatically transfer over. It belongs in an entirely separate space.

Has the Department received that money since?

Mr. Seán Gorman

No; that claim has been deferred. We expect to get the money but it is not-----

Mr. Seán Gorman

Next year some time, yes.

It was in the 2009 Estimates approved by the Dáil, but it did not come through, and it is not coming through this year. Is it in the Estimate for next year? It is in the published Estimates for 2011.

Mr. Seán Gorman

It would be under the Department of Education and Skills vote now because it has moved.

Yes, but it is still expected.

Mr. Seán Gorman

Just to clarify, I do not have an automatic entitlement to move that money around. It is governed by Department of Finance sanction. It is in a different space. The area of salaries, staff numbers and overtime is - understandably - tightly controlled at the moment.

Can Mr. Gorman tell us why he did not claim the money? Why has he deferred the claim?

Mr. Seán Gorman

When FÁS put together the draft claim for this money, our auditors and the EU were concerned about the accounting methods used to calculate expenditure for contractor training for the unemployed. The formula was designed to convert the initial estimated costs to actual payments at the end of the contract period. When FÁS examined its claim on a case-by-case basis, it found a difference. It was only €165,000 in terms of the conversion. However, in view of the time available, putting in that claim in the knowledge that the €165,000 would have to be sorted out could have jeopardised the full €13.6 million. Therefore, the decision was taken to defer the lodgment of the claim. It is not lost. Putting in the claim while that issue remained unresolved could have jeopardised it, so a prudent call was made not to risk the €13.6 million.

I do not want to dwell on the issue of FÁS; we can discuss that another day.

I wish to ask about the sum of €144 million - now about €183 million - that is due to the Department in redundancy and insolvency payments. Approximately €39 million of this represents money that was due prior to 2004. Realistically, if money that was due nearly a decade ago could not be collected even during the boom times, are we codding ourselves thinking we will collect it? Mr. Gorman might say it has not been written off, but how much of the money from prior to 2004 does he actually expect to collect in cash? His chances of collecting it now must be close to zero. I know the money is technically due, but why is it still being shown as an asset of the State in the Department? We are dealing with public accounts based on Estimates produced by various Departments which include what I would call fictional debts of almost €40 million, yet this is supposed to add up to represent national assets, on which the State finances are based. There is not a chance in hell of that being collected. How much of that €39 million does Mr. Gorman expect the Department to receive in cash over the next two or three years?

Mr. Seán Gorman

The Comptroller and Auditor General acknowledged in his opening statement that it is a challenge to recover that debt, and the older the debt, the more difficult it is. I cannot give an estimate. Some of the money is locked into protracted receivership and liquidation processes. We have been slow to write off debt lest an opportunity arise.

It seems to be an attitude similar to that of the banks - there is money out there that we have been owed for eight or nine years but we are slow to write it off because we are pretending it is a good debt. That was one of the reasons we had a banking crisis - because people were reluctant to accept that some of the figures on their books would never be collected. Now a Department is saying that it operates on the same principle. Two years after the bank crisis it still has such figures on its books. I realise some of it was written off last year, but I am still looking at €40 million, although the Department would be doing well if it received €4 million of this.

Mr. Buckley might wish to comment on this.

Mr. John Buckley

The way the accounting works is that this money is already fully charged to the accounts at the point at which it is paid. Therefore, it is not an asset that is being carried. It is actually a memorandum figure that is being pursued. In the way it is recorded here, it is off the books. It is an amount of money that has been fully charged and absorbed in the State accounts.

I did not see that in the chapter I am reading. If Mr. Buckley is saying this figure of €39 million is off the books, that is fine, but it is written here in black and white in front of us. That is an important distinction. We had a debate and then we were told the money was not really due, or it was due but was off the books. It is a funny way of doing things. One can understand why the public is becoming mightily confused. We are becoming confused on this side of the table.

Mr. Seán Gorman

We are trying to strike a balance in terms of walking away from money that is owed. We are being very careful. It can happen that companies that continue to trade but are in difficulty at a point in time actually get themselves out of it, and we can obtain money from them by pursuing them down the line.

I accept the Department will get some.

Mr. Seán Gorman

There are opportunities to recover the money. In addition, when the receivership or liquidation processes come to a conclusion, we get a certain amount - sometimes none, sometimes a small percentage. If there is any prospect at all of getting the money, we will keep chasing it. Maybe it is time to see whether there is some we should write off. We have been writing off the certainties; if there is no prospect of collecting the money, they are gone.

I will move on from this, because we have made our points. Can Mr. Gorman break down the figure of €39 million, which is based on amounts paid out in various years up to 2004, and give us the amount year by year? If Mr. Gorman has this information he can circulate it, and if not I ask him to send it to us. Does some of it go back to the 1970s?

Mr. Seán Gorman

Yes.

Therefore, included in the figures are moneys that have been owed to the State for 30 years, since which time we have had booms and recessions.

Mr. Seán Gorman

Yes, and we are still getting some of it in, believe it or not.

Mr. Gorman might give us the year-by-year figures.

Mr. Seán Gorman

Yes.

Maybe when the tribunals are finished, something might fall out of the bottom of one of them, which would be good.

Mr. Seán Gorman

I do not have the figures but I will obtain them.

I did not expect Mr. Gorman to have them here. He can supply them to us.

Mr. Gorman said the Department had been sending out letters each quarter. Many of these companies, which go back to the 1970s, the 1980s, the 1990s and the early part of this century, no longer exist - we all accept that. However, many letters must be returned in the post using the "return to sender" facility. Is there a mechanism for dealing with this outcome when the building in question is no longer there? What does the Department do with such letters? Mr. Gorman has made the point that letters are sent once every quarter. What happens to the ones that are returned?

Mr. Seán Gorman

They are referred to the write-off committee for assessment.

An Post is one of the significant actors in supplying information on whether something should be written off.

Mr. Seán Gorman

Yes.

In regard to write-offs, the report states the largest write-off in the year in question was €1.9 million. What was the name and address of the company involved? I accept the money will not be collected, but we would like to know whose debt we are writing off.

Mr. Seán Gorman

I do not have the name of the company involved.

Does any of Mr. Gorman's colleagues know it? From a business rather than an administration point of view, I would have thought the chief executive of an organisation which had written off a debt of €1.9 million for one client would know the name of the company involved when attending this committee.

Will the Department supply the information, please?

Mr. Gorman might inform the committee of the name before the end of the meeting because that figure jumps out from the report.

I will move to the Vote for the Department concerning which I have noted some comments and Mr. Gorman might help me by providing some information. I will begin on page 448 of the accounts. I note the payments made by the Department to Enterprise Ireland, namely, a grant to meet administration and general expenses of €93 million and grants to industry totalling €111 million. These are ball-park figures which give the impression, although I am sure it cannot be the case, that half of the money given to Enterprise Ireland for business development is used to meet its own administration costs. That cannot be correct. Is that description accurate? It looks extraordinary.

Mr. Seán Gorman

No, it is in addition to the amount to cover classic wage and pension contributions, rent, rates, insurance-----

To meet administration costs.

Mr. Seán Gorman

It funds the advice given to client companies and covers promotional activities, trade fairs, outward missions with companies and inward missions with buyers. It also covers market research-----

Am I reading this correctly? Are we agreed that of the €204 million given by the State to Enterprise Ireland, only about half worked its way to Enterprise Ireland client companies by way of grants? No county enterprise board would be allowed to operate in that way. Mr. Gorman cannot mean to say only half of the money awarded to the organisation by the Exchequer goes to companies.

Mr. Seán Gorman

No. Of the outturn figure of €93 million in 2009, the outturn figure for pay would have been €64 million, while €28 million would have gone towards supporting companies and meeting other overheads, in addition to the direct grants to actual companies, as shown in the next subhead, D2.

If that sum was paid to companies, that is grand, but why is it not shown?

Mr. Seán Gorman

There is a distinction made between current expenditure and supports and capital supports to companies.

Will Mr. Gorman explain what he means by that?

Mr. Seán Gorman

Capital supports to companies means fixed asset support, seeking venture capital, feasibility studies, employment grants and consultancy grants, but the cost of running overseas trade missions and advice is largely-----

Mr. Seán Gorman

They are promotional rather than capital costs and, as such, are dealt with in subhead D1.

I reiterate that I find it unacceptable that a State grant agency given €204 million in a particular year was able to pass on just over 50% in indirect grants to organisations and companies and that almost 50% went on salaries, administration and promotional costs. While I accept promotions are essential, does Mr. Gorman understand my basic point?

Mr. Seán Gorman

The sum of €111 million is paid out from subhead D2.

I mentioned that figure. Just over 50% of the figure of €204 million - €111 million - is paid out by way of direct grants.

Mr. Seán Gorman

No. The pay element is €64 million.

That is contained in the figure of €93 million.

Mr. Seán Gorman

Yes. However, it is important to understand the supports companies receive are not provided only from that subhead. From subhead D2, capital supports, €111 million is provided.

That is the figure to which I keep referring. I shall start at the beginning. It is very simple. In the year in question the Department gave Enterprise Ireland €204 million, consisting of sums of €93 million which Mr. Gorman stated was used to cover salaries, administration, rental, rates, promotional and trade missions costs, and €111 million to client companies by way of grants. My point is that no organisation should be allowed to use almost 50% of its money in that way. If a county enterprise board had such proportions, Mr. Gorman would close it down on the spot. Most are confined to spending 15% of their budget on administration and promotional costs, with most of the money going directly to companies. Does Mr. Gorman understand my basic point?

Mr. Seán Gorman

I accept the basic point being made.

I find the proportions to be all wrong.

Mr. Seán Gorman

A significant amount of what Enterprise Ireland does with companies does not only involve direct financial transfers; people sit down with them to do business plans with them, assess their grant applications, give them market information and work with them on the ground both here and in overseas offices. It does not involve just light administration.

Deputy Fleming is asking a simple question. Can Mr. Gorman give us a breakdown of the figures in subhead D1?

The Secretary General might send us a breakdown of the figures in the two subheads. I would not be happy with such proportions. No county enterprise board or partnership company would be allowed to keep 45% of its budget, passing on only 55%.

Mr. Seán Gorman

The figures in subhead D1 break down into €64.5 million for pay and €28.4 million for non-pay items.

Mr. Gorman can send the information to the committee.

Mr. Seán Gorman

In recent years-----

Can Mr. Gorman break down the €28.4 million figure even further?

Mr. Seán Gorman

Yes, I can. Some €9.6 million went on rent, rates, service charges and insurance. Staff travelling expenses amounted to €4.5 million because of the network of overseas offices and travelling with companies and trade missions. There is an extensive requirement to travel both internally and overseas with companies. Professional fees for accountancy and other advices amounted to €2.6 million. Other staff overhead costs came to €2.8 million, for which I do not have a breakdown. Communication and IT costs were €2.6 million. Light, heating and cleaning costs amounted to €1.4 million. Postage, printing, stationery, repairs, maintenance and leasing costs came €1.2 million. Market and client development costs arising directly from the non-pay element came to €946,000, while miscellaneous other operating expenses amounted to €1.6 million.

Chairman, perhaps we should bring in representatives of Enterprise Ireland to discuss its world programme. Mr. Gorman has provided figures, but now I see the figures for 2008 are alarming. In that year Enterprise Ireland received a grant to meet administration costs and other expenses of €100 million but paid out only €60 million in grants to industry and to meet capital expenditure. Almost two thirds of the €160 million given in 2008 to Enterprise Ireland remained within the organisation building, while just over one third was paid out by way of grants. This is crazy stuff. The 2009 figures are utterly unacceptable and the 2008 figures are bizarre; two thirds of the money went on the organisation and one third went on grants.

Mr. Seán Gorman

Enterprise Ireland has been reducing its staff numbers in recent years.

I wish to move on from Enterprise Ireland.

This is a standard question which we put to each Accounting Officer. We did the same last week. Have you satisfied yourself in a meaningful way that all the expenditure with regard to foreign travel, entertainment and so on has been in compliance with Department of Finance guidelines? What is the nature of your confirmation?

Mr. Seán Gorman

All the new guidelines introduced by the Department of Finance have been communicated to the agencies. We have issued an office notice internally to our staff, offices and agencies that builds on the Department of Finance guidelines and requires compliance. In his annual report and accounts the chairman of each agency must certify compliance with these guidelines. The guidelines require prudence in the class of air travel used and the types of hotel used. The emphasis is on economy and moving away from first and business class. We pursue this through the annual statement we receive from the chairman.

Does the Department take the statement as read and accurate?

Mr. Seán Gorman

Yes, we take the statement as read and accurate. It is a formal certification.

Will Mr. Gorman provide information on subheads C1 and C2? We have discussed Enterprise Ireland. In one year, two thirds of its money was spent on the organisation and one third went on grants. Let us move to subheads C1, C2 and C3. They refer to the IDA. In 2009, the IDA received €42 million for its activities but it paid out €68 million in grants. From a total budget of €100 million for the IDA, two thirds of its money went to client companies and one third did not, whereas the figures are in the opposite proportion in Enterprise Ireland. Is there any chance of our having another FÁS here? Mr. Gorman may say they are different organisations and we know as much. However, on the face of it, I cannot understand how of the money the IDA receives from the Department two thirds goes in grants whereas with Enterprise Ireland between one third and one half goes on grants. Is the organisation doing its job? It might be very efficient at procedures and the administration might be good but is it doing its basic job?

Mr. Seán Gorman

I believe it is. In addition to the direct moneys administered by Enterprise Ireland in subheads D1 and D2, it plays a major role in subhead F, the science, research and development area. It has spent €134 million in 2009 specifically on administering in that area and assisting companies. All the administration for that is charged to the same subhead D1. As the Deputy will see, the proportions begin to change.

Yes. Let us look through the accounts. I will list several organisations and I call on Mr. Gorman to send on this information. It is listed in the accounts and I will not ask Mr. Gorman about them individually. It will be on the record and Mr. Gorman has the list before him. The list is the IDA, Enterprise Ireland, Forfás, Shannon Free Airport Development Company, FÁS, the Labour Relations Commission, the Competition Authority, the National Consumer Agency, the Companies Registration Office, the Registrar of Friendly Societies, the Health and Safety Authority, the National Employment Rights Authority, NERA, the Labour Court and possibly some others. Is it possible for Mr. Gorman to prepare a document for each of these listing the top five salaries in each organisation, any other remuneration entitlements by way of pension, or the value of their pension funds if they are private, any expense allowances for the top five people, how many company cars there are in each of these 14 organisations, whether credit cards are held by the top five people, the credit limit in each case and the throughput for each credit card for the year? Mr. Gorman will understand why we ask the questions. Given the level of money going through those organisations, it is the quickest way of cutting to the chase. As Accounting Officer, Mr. Gorman will be able to get the information. The Department probably has staff on the board of each of these organisations.

Mr. Seán Gorman

Yes, we have.

Will Mr. Gorman sent that information to us? It will be useful information. Is that feasible?

Mr. Seán Gorman

Yes, that is feasible.

The committee has received a complaint from a member of the public about one of the agencies, the Health and Safety Authority, regarding the level of expenditure on travel and subsistence. The file is being made available to you. We seek from you information on the nature of monitoring by your Department of that agency and whether it is in compliance with the Department of Finance guidelines post-February 2009 and before February 2009. As you know, the guidelines changed arising from the FÁS report we made. We seek information on the nature of reporting between you, as Accounting Officer, and the Chairman of the board of that authority and the nature of certification by that board. What do you do as Accounting Officer of the Department to ensure there is full compliance? Do you go beyond the assurances received?

Last week, we heard from the Department of Community, Equality and Gaeltacht Affairs that assurances were given and accepted at face value regarding Údarás Na Gaeltachta. The file will be made available to you. We request a detailed examination of the file. Records were released under freedom of information legislation to a member of the public and made available to us and we will use this exercise as a test run along with the information Deputy Fleming has sought.

Will Mr. Gorman tell us the benefit of another figure in the accounts and then subsequently give us a more detailed note? Some €13.5 million is paid out each year for the European Space Agency. Will Mr. Gorman talk to us about what value Ireland gets from that and give a general overview? Will Mr. Gorman send a detailed note to the committee subsequently?

Mr. Seán Gorman

Membership of the European Space Agency gives opportunities for research institutions, universities and companies to participate in space research programmes run by the European Space Agency. It gives opportunities for Irish companies to win business from the European Space Agency. During 2008, we carried out a review of the return for the investment. That was the last time we looked at it formally. Irish contractors involved with the European Space Agency on the back of our membership generated a total turnover of €136 million of which €20 million was directly related to the space programmes. Those companies supported employment of approximately 1,000 people. The businesses involved are highly research and development intensive. Typically, they would invest 40% of their turnover in research and development. We expect that more and more opportunities will become available through membership of the space agency. I can provide a good deal more detail of the actual companies who participate and the precise benefits they gain. The €14 million generates at least €20 million in direct return.

It would be helpful for the committee to receive a note on that. The Department paid €1.2 million in grants for trade union education and advisory services. Will Mr. Gorman take us through the details of the €1.2 million?

Mr. Seán Gorman

This is a long-standing subvention which the State pays to the Irish Congress of Trade Unions. It dates back to 1975. Essentially, it supports investment by the trade union movement generally in training and education of trade union people, officials and administrators.

Is it for shop stewards or full-time staff?

Mr. Seán Gorman

It is not confined to shop stewards, it may include full-time staff as well. The thinking has been that it helps to equip the unions to do their work more professionally. The underlying rationale is that it contributes to industrial relations and the professionalism with which industrial relations can be and are conducted. We have a rule that no intervention should be higher than 80% of the expenditure being incurred on the particular training activity. The averages that have been coming in for the State's intervention were 52% in 2007, 44% in 2008 and we estimate that intervention rate for this year will be about 39%, although we do not have final figures.

There is a detailed breakdown of where the €1.2 million was spent.

Mr. Seán Gorman

There are annual audited accounts.

Is that in the Department?

Mr. Seán Gorman

Yes.

Can the committee get a copy of that?

Mr. Seán Gorman

Yes.

Is anything going to this famous SIPTU account?

Mr. Seán Gorman

No, that is a separate arrangement. The Department of Health and Children oversaw that.

There is nothing from the Department of Enterprise, Trade and Innovation?

Mr. Seán Gorman

Our money goes to ICTU, which in turn funds trade unions but I am aware SIPTU gets some money from ICTU as part of this fund.

The Department does fund individual unions directly then.

Mr. Seán Gorman

No, not directly.

Another thing that caught my eye is the figure on page 458 for extra receipts payable to the Exchequer. I have the revised Estimates for Public Expenditure that were discussed at the relevant Oireachtas committee and approved by the Dáil. It shows a figure under this heading for FÁS sale of assets; €22 million was expected to be received. When we look at the accounts at the end of the audit, there is a note that states the estimate for the FÁS sale of assets is €22,000 and was incorrectly represented in the 2009 revised Estimates for Public Services as €22 million. I do not understand how an organisation can ask for its Estimates to include a figure of €22 million in respect of extra receipts payable to the Exchequer and then a year later when the accounts come in we are told it was a typing error.

Mr. Seán Gorman

That is what it was in the final printing of the Estimates volume.

The Estimates that went through the Dáil and were voted upon contained that error. What date did that happen?

Mr. Seán Gorman

Probably late autumn or early winter 2009.

When that was discovered, was the Minister asked to correct the Dáil record for a wrong Estimate approved by the Dáil caused by a typing error? The Estimate was passed based on the receipt of the €22 million being part of the equation for that year. What happened to correct the Dáil record?

Mr. Seán Gorman

We did not go back to the Dáil, we brought it to the attention of the Department of Finance on the basis that the Book of Estimates is produced there.

Exasperation is setting in with me. We now see the Estimate for the Department included a figure of €22 million. Someone realised there was a typing error. The Department did not even get the €22,000 as it transpired. The Department was then aware that the Estimates for the finance of State, which we had discussed, were incorrect. I thought there was a standard procedure where a Minister knows incorrect information has been given to the Dáil, it is corrected at the first available opportunity. I thought that was how a democracy worked; when a figure of €22 million is a typing error and we make decisions based on it. Was the Minister asked to correct the record? It is not good enough to say it was a typing error 18 month later. The Department might accept it was a typing error but the Department of Finance expected that €22 million at some stage.

Mr. Seán Gorman

No, it did not.

The relevance of the Dáil is important here so I would like to know about the record. This is the Committee of Public Accounts and it is the first we have seen of this. If it was €22,000 I would not say anything but it is €22 million.

Mr. Seán Gorman

We brought it to the attention of the Department of Finance and produced a revised Estimates volume. We did not take it any further. The Department of Finance worked on the €22,000 figure, there was never an expectation of €22 million.

The figure the Dáil was given and that was laid in the Oireachtas Library, that was on the public record, is €22 million. We are being told that what is presented to the Dáil and what the Dáil votes through is not important. This is a cavalier attitude to the Dáil, saying the Department was aware of the mistake but did nothing because the Dáil would not notice it. Am I making a mountain out of a molehill when I say the Dáil should be given accurate information?

Mr. Seán Gorman

No, the Deputy is correct. It is not cavalier, it was a typing error, the figure was always to be €22,000, and we brought it to the attention of the Department of Finance, which produced the volume. Perhaps we should have gone further.

I accept the €22 million was not due and the Department knew that. What did the Department of Finance make of this?

Ms Gráinne McGuckin

What does the Deputy mean?

That the revised Estimate put through the Dáil on behalf of the Government included a typing error of €22 million for a receipt the Members of the Dáil believed to be part of the figures making up the revised Estimates for 2009.

Ms Gráinne McGuckin

I am not sure there is a procedure for the Minister to go back into the Dáil in such circumstances. It was a mistake and it was not accounted for in our numbers. We formally apologise for the typing error in the revised Estimate. I do not take a view on the actions of the Department of Enterprise, Trade and Innovation on foot of the typing error.

I understand what happened. The mistake was caught at official level and the Departments were aware of it. It is as if, however, the Dáil was not relevant to the process when passing an Estimate. One of the few functions of a parliament is to pass the estimates of expenditure. I would ask the Secretaries General to reconsider that where there are errors we were misled. I voted on it on the basis of this €22 million being received and no one told me until today that was not the case. Perhaps the Department of Finance thinks it runs the country and once the officials know about something, it does not matter about the Dáil and the Government.

Ms Gráinne McGuckin

On behalf of the Department, we apologise.

It might sound a small point but this carry on is making little of the Dáil.

Does the Department of Finance not have guidelines to deal with an issue like this, where the Dáil must be informed?

Ms Gráinne McGuckin

In terms of the financial procedures, I am not aware of any procedure in place but, certainly, we can check and get back to the committee.

Will the officials check?

Ms Gráinne McGuckin

Absolutely.

We have to suspend, there is a vote.

Are we not paired?

Deputy Fleming and I are paired but there was no other Fianna Fáil pair.

Perhaps the Chairman has some questions he would like to ask. I would prefer if we did not have to adjourn. Perhaps the Comptroller and Auditor General has an observation to make on the Dáil voting figures through on the basis of what is presented to it and officialdom being happy if those figures are not accurate? Should there be a mechanism to correct such occurrences?

Mr. John Buckley

We must look at what is encompassed in the Vote and the Estimates. The Vote and the Estimates deal with the subheads and the appropriations-in-aid. Appropriations-in-aid are one particular type of receipt, they are receipts that can be estimated. As well as getting appropriations-in-aid, Departments get windfall receipts from other sources and these are called Exchequer extra receipts. If we look at the start of the annual report, there is a full list of those, and some Departments manage to estimate them and put in a provisional figure, as happened here. Others put in zeroes because they cannot estimate the figure. The definition of Exchequer extra receipts is, to use quaint language from Gladstone's time, receipts which are not germane to the Vote. In other words, they are not particularly relevant to the accounting of the Vote and are usually windfall receipts. If one wants to look at it in terms of lessons to be learned we may need to look a bit wider.

When we are dealing with a range of receipts which are not estimable and come from left field perhaps none of them should be estimated and they should just appear when they turn up, or alternatively some effort should be made to estimate them all. One needs to look at it in the round. From the point of view of formal adoption by the Dáil, the Estimate that is voted only refers formally to the sub-heads and to the appropriations-in-aid. The Appropriation Act that comes at the end of the year ultimately confirms that the Estimate only refers to those two elements. The other elements are more or less pieces of additional information which are included.

I take the Deputy's point that when they are included for information purposes they should be accurate and perhaps there should be some way of-----

It was an observation. I accept what Mr. Buckley is saying. There are other items of expenditure in this heading, such as IDA grants and refunds. That is fine and they might come in. One can overestimate or underestimate, which nobody argues with. An event might come sooner or later than planned. However, this was not an overestimate or an underestimate, rather, it was an error known at official level. The figures printed in the Dáil record were not accurate. I recommend that we have a procedure whereby when known errors come to light they are corrected at the first available opportunity. I understood that was the normal procedure.

While we are waiting for some of the members to return, Mr. Gorman might tell the committee about the Aer Lingus redundancy scheme where approximately 715 staff were made redundant and some were re-employed at reduced rates. He might take us through the Department's attitude to that scheme and the current status of the redundancy package.

Mr. Seán Gorman

On the current status of the claim by Aer Lingus for a rebate, a decision has not been taken on its eligibility.

The rebate would be-----

Mr. Seán Gorman

There would be a 60% rebate to the company of the cost of making statutory redundancy payments.

Is there a cost in that?

Mr. Seán Gorman

It is approximately €5 million. Since the redundancies occurred we have engaged in a long protracted discussion and correspondence with Aer Lingus about the circumstances.

To set the scene, how long ago did the redundancies happen?

Mr. Seán Gorman

In 2008-09.

A scheme which occurred in 2008 is still being considered.

Mr. Seán Gorman

The legal aspects of it are under consideration. The most recent correspondence from Aer Lingus is from October.

Has a payment been made?

Mr. Seán Gorman

We have not made a decision or formal payment on the claim. There were 11 individual cases for which payments were made in error; they were put in the wrong processing batch. They are not a problem in terms of what decision is made. We have an ongoing account with Aer Lingus for the normal churn of redundancies and we can offset those in the event that a decision was made that the redundancies were not eligible.

Eligibility is a matter of the Act and the law. The circumstances have been parsed and analysed in great detail. At the time the company and trade unions were negotiating the redundancy package clarification was sought from us in advance as to whether the redundancies in the circumstances which applied, whereby some people would be rehired with different job specifications on different terms would qualify for redundancy, were eligible. We were not in a position to give a definitive commitment in advance that those redundancies would qualify for a rebate.

We were precise in what we said to the company at that time We told it that until the full facts were known after the event we would not be in a position to make a final call on it. We said based on the preliminary information which was available to us at the time, while we were not making a definitive legal interpretation and it was not legally binding, the redundancies may qualify under the Redundancy Payments Act. We told it in writing that this could not be taken in any way to be a commitment by the Department or its deciding officers, nor would it preclude any other wider considerations of its eligibility.

We have been through this protracted process and are at the final stage. I have referred the latest information to our legal advisor for a final piece of advice before we refer it to the Minister for a decision.

Can the Secretary General tell us what elements of the claims have been paid to the workers who were rehired?

Mr. Seán Gorman

We have paid none. The company would have paid the redundancy settlement terms to the workers. Where eligible redundancies are in play Aer Lingus or any other company would normally be entitled to a 60% rebate for the statutory element of those redundancies. We paid the company no moneys on that basis.

Was there a precedent for a scheme like this?

Mr. Seán Gorman

Not directly. That is why it is taking so long to make sure it ticks all the legal boxes. It is a matter of compliance with the law and will be significant, in terms of the precedent value it will have.

What was the scale of discussions the Department had with the Revenue Commissioners regarding the payments? What is the view of the Revenue Commissioners?

Mr. Seán Gorman

Normally the Revenue Commissioners would regard redundancy payments as eligible where we do but it is separate from us and makes its own determinations------

I know that. What interaction was there?

Mr. Seán Gorman

We have had some discussions with it and it said it will always retain its independence and make its own decisions, having regard to Revenue legislation and tax law. It has not pronounced on the Aer Lingus case yet, to my knowledge.

With regard to the Dublin Airport Authority and the transfer of staff to the new terminal, has the Department received any communication from it about a similar scheme?

Mr. Seán Gorman

We have 350 claims on the back of that change and they are in the queue for processing. We have not made a decision.

The Secretary General said that the Department is taking legal advice. When does he expect to have it? Has he received any legal advice so far?

Mr. Seán Gorman

Very much so. We received legal advice when we gave an indication on the possibility that Aer Lingus may be eligible and we were not making a determination. That position was taken on the back of legal advice and a referral to the Government at the time.

It is two years down the line and the Department still has not made a decision. What is the average time for it to adjudicate on a redundancy scheme?

Mr. Seán Gorman

It is normally six months.

Aside from the DAA, are other cases outstanding?

Mr. Seán Gorman

I am not aware of any of that nature. There are many straightforward cases. Each case is considered on its own merits and the circumstances of its claims within the context of the statutory provision.

What is the interaction between the Department and the Department of Finance? What is its attitude?

Mr. Seán Gorman

We have not gone to the Department of Finance on this matter. We have dealt with it internally with our legal advisors and the Office of the Attorney General. The decision is one for the Minister to make.

Earlier Deputy Fleming asked a number of questions on Skillnets. Is there a common denominator between the board of Skillnets and FÁS? Will the Accounting Officer name those on the board of Skillnets and indicate if any of those served on FÁS at the time of the problems in regard to training?

Mr. Seán Gorman

I have the list of Skillnets board members: Mr. Domhnall MacDomhnaill, retired from IBEC, chairman; Mr. Sexton Cahill, IBEC, retired; Ms Mairead Divilly, Small Firms Association; Mr. Seán Heading, TEEU; Mr. Terry Hobdell, ministerial nominee, Irish Fencing and Railing Limited; Mr. George Hennessy, CIF; Ms Nuala Keher, Lionra, a regional educational group; Mr. Brendan McGinty, IBEC; Mr. John McDermott, an official of our own Department, appointed directly by the Minister; Mr. Henry Murdock, a former FÁS official-----

Mr. Dermot Mulligan

Yes.

Mr. Seán Gorman

-----retired from FÁS; Mr. Peter Rigney, ICTU; Mr. Niall Saul, IBEC, who was chair of the internal audit committee in FÁS; and Mr. Ian Talbot, Chambers Ireland, IBEC.

I have one other question regarding IDA Ireland and Enterprise Ireland. What is the average cost of a new job being created by each organisation?

Mr. Seán Gorman

About €10,000 is my recollection. I will have it updated in light of the events of the past couple of years. I do not have a bang up-to-date figure. Given what has been happening in the economy that figure could have changed.

We may have to adjourn for a few minutes.

Has the Deputy a few questions?

Is the Office of Director of Corporate Enforcement in your Department?

Mr. Seán Gorman

Yes.

Given that I do not see it listed, where does it appear?

Mr. Seán Gorman

It is at subhead A9.

I did not see him or his office listed anywhere. That can be included in the list of organisations I mentioned earlier. On the issue of decentralisation, I understand the Department was to decentralise to Carlow.

Mr. Seán Gorman

Yes.

What costs have been incurred? Have staff moved? Are premises rented? What happened?

Mr. Seán Gorman

We have 100 people in Carlow who are-----

Separate from the NERA people.

Mr. Seán Gorman

No, including NERA.

Is NERA a separate agency or is it part of the Department?

Mr. Seán Gorman

NERA is an office of the Department.

What does that mean?

Mr. Seán Gorman

It means that it is essentially part of the Department-----

Mr. Seán Gorman

-----but will become a State agency in its own right.

Is it mainly NERA that has moved?

Mr. Seán Gorman

It is a statutory office, not a Stage agency.

We might get the Comptroller and Auditor General to give us a memo on the difference between a statutory office and a State agency.

Mr. Seán Gorman

The staff will still be civil servants. That is the essential difference.

Mr. Seán Gorman

We provide the staff to NERA.

Under the employment subsidy scheme there was an estimate for €20 million and €18 million was paid out. I understand that scheme was highly oversubscribed. I have only heard of the poor unfortunate companies that did not get into the scheme. Tell me about that scheme. If there was such a high demand, how is it that the Department did not spend the money? What has happened since the year end in this year to date? It appeared to be a very good employment subsidy scheme. It is where we should be at in the economy, trying to keep people in work. It is geared towards export companies to make them competitive. Where is that scheme? Has the EU an issue with it in terms of subsidising companies or in terms of competition issues?

Mr. Seán Gorman

There is no issue with the EU. In fact the EU has facilitated that scheme under a flexibility which it introduced under a temporary arrangement for State aids.

Can there be an extension to the scheme? Is there a next phase?

Mr. Seán Gorman

The EU is considering an extension into next year.

Have you requested that?

Mr. Seán Gorman

No, it is being done. It was not a request from us. It is a general-----

Mr. Seán Gorman

The EU is taking a general look at that facility. It is not just an Irish facility, it is generally available.

How many companies or business are there?

Mr. Seán Gorman

One of the requirements is that companies must retain employees for a certain period.

Mr. Seán Gorman

One of the difficulties Enterprise Ireland is finding is that companies, because of the difficulties in the economy, are not in a position to comply with the terms and, therefore, are actually-----

Having been approved for the grant.

Mr. Seán Gorman

Yes, in the circumstances that prevailed at the time of the application, subsequently find they cannot live with them.

Does the Department pay them at the end of the year when they promise to hold on to the people or does it give the money and seek to recoup if they let people go?

Mr. Seán Gorman

We pay quarterly in arrears.

Is there any question of having to clawback money the Department gave already?

Mr. Seán Gorman

No.

How many jobs are being supported under this scheme today?

Mr. Seán Gorman

I have the figures before me.

It is said that it is a good scheme.

Mr. Seán Gorman

There are 453 enterprises and 44,000 jobs.

Is that for an average of a year?

Mr. Seán Gorman

It is for an average of about a year.

At present the scheme is not operating.

Mr. Seán Gorman

It is currently operating.

No more approvals are being given. The applications are closed.

Mr. Seán Gorman

There was a second call for proposals.

Mr. Seán Gorman

Towards the autumn or early winter of last year.

Mr. Seán Gorman

There were 1,632 approvals under the second call. The total number of jobs the second call was supporting was 14,902.

Could any of those 14,000 be the same as for the first call, only people-----

Mr. Seán Gorman

They would have been new.

So more than 50,000 have been assisted.

Mr. Seán Gorman

Yes.

I thank the Accounting Officer.

Going back to the Aer Lingus issue, would it be unfair to say this seems to be a bogus redundancy scheme operated by Aer Lingus and that the taxpayer should not have to pay for a scheme which is basically changing the terms and conditions of employees and staff and if it wants to do that it should do so through its own resources?

Mr. Seán Gorman

The scheme is designed to help companies retain people. It is aimed at helping companies through a difficult period to retain staff rather than make them redundant with the resultant calls on the State for either redundancy rebates or social welfare. The intention is to avoid redundancy, not, if I understand the Chairman's question-----

That is not the question.

Mr. Seán Gorman

Sorry, the Chairman asked about the Aer Lingus situation. My apologies, I was interpreting it in the context of-----

No, I said Aer Lingus.

Mr. Seán Gorman

That is the decision that has to be made, whether that arrangement qualifies under the legislation.

Is it really a buy-out?

Mr. Seán Gorman

It is certainly an instrument that is being used to rationalise and change terms and conditions but I cannot make a call on it until I have the final legal position and a ministerial decision.

It is going on a long time - two years.

Mr. Seán Gorman

It is very complex.

My last question - I hope I am not stealing any of Deputy Enright's questions - is on the McCarthy report. It states that there should be a rationalisation of services supporting the developing agencies and that in some cases the promotional work being done by these agencies should be amalgamated. What progress has been made on that?

Mr. Seán Gorman

In regard to the mainstream agencies - Enterprise Ireland and IDA Ireland - we have not restructured the organisations in terms of doing away with one or the other. What we have put in place is a much closer level of co-operation between the two agencies on the ground in dealing with companies. In terms of the county enterprise boards which are also part of that enterprise support structure, the Minister has announced his intention to bring proposals soon to the Government to restructure and refine the basis on which those enterprise boards are structured and to look at streamlining the number. Given that he has not been to the Government with it I do not have a decision on it. That is the publicly announced position of the Minister.

I thank the Secretary General.

I apologise in advance if I repeat points that were raised previously while I had to leave for a vote that was called in the Dáil. If I may return to Vote 34 and the failure to submit the European Social Fund claim, Mr. Gorman has explained the reason for that to the Chairman and Deputy Fleming. What was the effect of not submitting that money? What has not happened as a result of not having that funding of in excess of €14 million?

Mr. Seán Gorman

It has not affected the direct delivery of programmes or services but the effect it has had is that the receipt of that money to the benefit of the Exchequer has been delayed. That has been the direct impact of it.

Therefore, everything that was planned, for which such funding should have been used, has gone ahead.

Mr. Seán Gorman

It has gone ahead. It is a retrospective claim.

On the FÁS training budget, I refer to the labour force development subheads, can Mr. Gorman explain the rationale behind the reduction in the funding for the FÁS training integrated supports at this time when the numbers requiring those services has increased? Had the funding been reduced five, six or seven years ago, I could have understood why that happened but it was reduced in this climate. Was it related to a lack of satisfaction with the delivery of those supports or was there another reason? Was it simply a cutting exercise?

Mr. Seán Gorman

A decision was taken by the Minister that there was to be an important shift in emphasis reflecting the unemployment problem, that more resources were to be devoted to training of the unemployed. In terms of the levels of voted moneys that were being made, we leaned more heavily on the National Training Fund for additional funds for that area of training but the most significant shift was to bring the unemployed more into focus and to reduce the focus on those at work.

Under subhead C2 - the grants to industry - with which Deputy Fleming has dealt with in different detail, there was a significant drop in the grants to industry from the IDA in the period from 2008 to 2009. Are we supporting fewer companies as a result of that?

Mr. Seán Gorman

The moneys which go to the IDA for the purposes of these grants reflect two dynamics - historic demand and obligations due to companies that have already made investments, and moneys that are being made available to allow for new investments and new commitments to companies. The level of funding determination each year is both a factor of pipeline demand and headroom for new business. The figure reflects the market as it prevailed. No companies that were offering and ripe for assistance from the IDA have been turned away and no project has been refused, denied or not assisted. During 2009 it won 125 new investments and new companies investing in Ireland during 2009 were up 11% on 2008. Some 49% of investments in companies are in the research space and more than 4,500 jobs were created during that year in IDA companies with exports increasing to the value of €110 billion. Therefore, we have always been very careful, as had the Minister, to ensure that the IDA would be resourced to both meet obligations and avail of new business opportunities.

There have been less opportunities. That is the bottom line.

Mr. Seán Gorman

It is a much tougher market.

Yes. There are fewer projects in the pipeline for 2009 and, I presume, for 2010 than there was 2008.

Mr. Seán Gorman

There is a very strong pipeline of companies with which the IDA is negotiating. I cannot give the names and the details but it a very strong pipeline and the IDA is very encouraged. Investors are continuing to come here and existing multinationals are continuing to expand and invest in new areas.

We always have attrition which, unfortunately, is a natural part of the business. The year 2009 was very difficult because global foreign direct investment decreased overall by 30% and the scale of investments being made by companies was also smaller. We did not see, even globally, 1,000 or 2,000 job size investments that we might have seen in the past.

Moving on to Skillnets - I will deal with the overall problem and the investigation into it later - was the rationale for the reduction in the funding for Skillnets the same reason Mr. Gorman gave for FÁS, that the Department was concentrating on the unemployed? If Mr. Gorman is going to answer "Yes" to that, which he seems to be indicating by nodding his head, many industries need support. The FÁS budget for the previous area I dealt with was cut to concentrate on the unemployed and the same has happened in the case of the budget for Skillnets. The parallel in that respect is are we giving business less support and, as result, are more people likely to become unemployed?

Mr. Seán Gorman

The reality is it is a difficult call that must be made in the context of the wider Estimates choices that are made by the Government and the Minister. There is not as much money to go around as there was - we all know that. The focus has been to shift more into the unemployment space and it has meant that while we have asked Skillnets to do some training of the unemployed as a new initiative side by side with people who are at work to give them that interaction and experience, we have had to reduce the budget for Skillnets. It is still getting €16.5 million, which is substantial, but there is a very clear change in Government emphasis from training those at work to training people who are unemployed because of the pressures that exist.

When an evaluation is done and a decision like this is made, and I appreciate it is more of a political decision - I will deal with the evaluation of Skillnets in general later - what is done to ensure the balance is right and that jobs are not being lost as a result of a reduction in support in those two areas, Skillnets and the FÁS budget to which I referred?

Mr. Seán Gorman

It is a judgment call that is made. People who are at work have the opportunity of their companies' training them. The more educated one is, the more training one tends to get and the better one tends to do. The policy choice was very stark for the Government, when it was dealing with so many people who were outside the labour market altogether. For it the choice was straightforward and that was the decision we were given. Therefore, we proceeded on that basis.

The number of networks fell from 103 to 63 in the period from 2009 to 2010. That were 40 fewer but the funding amount between the two years only reduced by €100,000. How were 40 networks lost and only a saving of €100,000 made?

Mr. Seán Gorman

There was a considerable rationalisation and merging of networks behind those figures. There was not only a net reduction in overall levels of participation but an administrative merging of networks.

In terms of people and training places, what was the difference?

Mr. Seán Gorman

I can give the Deputy the figures in terms of training days or trainees.

The figures for trainees would be better.

Mr. Seán Gorman

In 2008, there were 57,863 trainees, in 2009, there were 41,610 and the number estimated for this year is 46,000. I believe we will get a small extra throughput this year.

We lost 16,000 trainees as a result of the reduction.

Mr. Seán Gorman

Yes, that is correct.

Then the Department managed to increase the number a little with a saving in funding of €100,000.

Mr. Seán Gorman

Yes.

What kind of cost-benefit analysis was done on the outcomes of Skillnets by the Department? Of the 130,000 or more people trained in the past three years, does Mr. Gorman know how many of them are still in employment? Has the training they received been successful in that sense? Of the companies in the networks that participated in Skillnets in the past three years, how many of them have ceased trading, or are they all still trading?

Deputy Edward O'Keeffe took the Chair.

Mr. Seán Gorman

I do not have the number of people who are still at work and I do not have a list of those companies that were assisted which are still receiving training. Since 1999 when Skillnets was set up, more than 50,000 enterprises were supported as well as 300 networks and 240,000 employees. Some 59% of all of the training days delivered were on courses that received national framework of qualifications certification, so that has a value.

Some 95% of the companies supported were SMEs. In a survey of 6,000 companies in 2009 conducted by Skillnets but of which the Department got the benefit, 88% were of the view that the cost efficiency of the training provided was lower than they might have expected to otherwise pay, so that was positive; 93% would recommend becoming a member of a training network to other companies; 86% stated it allowed them avail of training they would not have had available to them otherwise; and 83% felt the training was better suited to their needs than other options available largely because of the flexibility and the fact that it was enterprise that was driving the nature of the training rather than a "We have a course, can you put someone on it?" type of approach.

The Skillnets model was also looked at by Forfás in the context of the work of the expert group on skill needs and has been regarded by it as a very positive, relevant and useful instrument. In addition, the EU considers the Skillnets model to be a very good, useful model and frequently arranges study visits to Ireland from other member states to see how Skillnets works and the value it delivers.

Very recently, as I stated, we have now asked Skillnets to include an element of unemployed persons to work and be trained side-by-side with persons in work because of the value that can add to an unemployed person.

Deputy Bernard Allen resumed the Chair.

I accept those are fairly good recommendations on how the programme is working, but does the Department propose to carry out any more detailed examination to see if it is genuinely assisting persons remaining in and upskilling within employment?

Mr. Seán Gorman

We do. We are reviewing and revisiting the mandate for Skillnets which expires on 31 December 2010. In the context of a decision having been made to renew that mandate, and in light of the findings of the Comptroller and Auditor General's report and the difficulties that have arisen, we are taking a very close look at Skillnets - its objectives, the board structure and, generally, its continued relevance beyond mere governance issues. It will be done by the Department of Education and Skills.

A few years ago Skillnets aimed to carry out monitoring, or what it called finance visits, to each network within a two-year cycle. Some 103 networks existed in 2009, but in the 2008-09 period, it only carried out a total of 16. In its comments to the Comptroller and Auditor General, Skillnets blamed the funding reduction on its inability to carry out those reviews. The funding reduction was obviously very significant - over €10 million between 2008 and 2009 - but Skillnets still only carried out 16 reviews in 2008. Before it ever suffered a funding reduction, Skillnets was nowhere near meeting its target of carrying out the reviews. Is the Department concerned by that?

Mr. Seán Gorman

Yes, we are. Skillnets has accepted that is not acceptable. When it talks about the impact of the funding reduction, it is not so much that it was left without the capacity to do these visits, in terms of losing staff or losing resources in that way. Its budget had been adjusted downwards a few times during that period and much reshaping and reprioritisation had to be done, and it had put this forward as the main reason for the failure to maintain a high level of compliance visits. Skillnets has now undertaken, as one part of the response to this latest report and to exhortations from ourselves, that it will do one visit per network each year and will be undertaking 62 visits this year as part of that.

Does the Department attribute Skillnets failure to do what it should have been doing all along, or what it had aimed to do, to the difficulties we have discovered later with Empower? Would that have been able to happen if Skillnets had carried out the visits?

Mr. Seán Gorman

It is a hard one to be absolutely definitive about, but certainly visits would have helped. The Empower situation was complicated, and there was a referral to the Garda fraud squad. As I understand it, that investigation is still under way. Certainly, more compliance visits would have been desirable. I do not know whether or not they would have totally prevented it, but it certainly would have helped.

Is there not a failure within the organisation in the sense that in the companies it visited in the 2008-09 period, Skillnets identified control weaknesses, particularly in the procurement procedures? What happened when Skillnets identified them? What was done about it? Did it not make Skillnets realise that it really needed to up its game in terms of getting out to the other networks if the small few it had investigated showed up these problems?

Mr. Seán Gorman

What Skillnets has done as a result of its own work, its own visits and, indeed, the reporting of these two cases, is tighten up its own procedures, which includes the compliance visits. It has tidied up and strengthened the wording of the funding agreements and the general conditions which it applies to the networks who are participating. It is also providing for additional monitoring of the expenditure and the actual income of the networks themselves. It is providing for unannounced visits by Skillnets staff to the actual training events themselves. It is tidying up the arrangements as regards bank accounts and it has put in place a new system to track matching income to specific training events. It has been moving along, but on these two cases, in one there was no financial loss and in the other there is a financial loss of approximately €53,000---

It is still unclear to me. That is a great many matters Skillnets stated it needs to change. Where was the fault-line in that Skillnets was not doing all of that up until it discovered these problems? Beside the budgetary excuse or reason Skillnets used, why was it not done? There has been no consequence for anybody in the organisation for the fact that it was not carried out. It was Skillnets's own aim. It was clear that it was something that was to be done. I assume it was the responsibility of someone or some group within the organisation to ensure it was done.

Mr. Seán Gorman

Skillnets has accepted that it should have been done as part of its oversight. It has accepted that in its response to the Comptroller and Auditor General.

Has Skillnets identified the failures within the organisation that stopped it happening so that it was not done?

Mr. Seán Gorman

Yes, through a combination of updating the framework agreements, greater inspections, greater clarity around procurement rules at the level of the networks, and taking evaluation roles away from the networks themselves and bringing them into the centre of Skillnets. It has taken on board significant changes as a result.

Has the Department encompassed all that Mr. Gorman told us there in a service level agreement with the organisation?

Mr. Seán Gorman

We have.

Is there one in place now?

Mr. Seán Gorman

There is what is called a funding agreement in place with Skillnets which we have updated.

A funding agreement and a service level agreement are two different matters.

Mr. Seán Gorman

Skillnets has introduced these changes on foot of the contracts and arrangements-----

That is not the question. Is there a service level agreement between the Department and Skillnets?

Mr. Seán Gorman

There is, yes. That is now part of this review that we are doing in light of this and in the light of its mandate expiring on 31 December.

Perhaps I am slow, but I do not understand what Mr. Gorman is saying. Is the Department about to do it, has it done it or is there one in place?

Mr. Seán Gorman

We have one in place and we are updating it now - the Department of Education and Skills will update it - in the light of these experiences and the learning that has taken place.

Is that the one called Mandate 2005-2010-----

Mr. Seán Gorman

Yes.

-----and funding agreement?

Mr. Seán Gorman

Yes, that is the one. With that goes an actual service level agreement. The Mandate is the high-level piece.

That is what Deputy Enright was addressing.

Mr. Seán Gorman

Yes.

I refer Mr. Gorman to the last paragraph of his opening statement. The first case that was identified by Skillnets, which I had not seen - it is probably my own fault - in the briefing document, was being dealt with since September 2008. Did this arise as a result of the 16 visits carried out in 2008? How did this case come to light? I am aware that the second case, from February 2009, arose as a result of an anonymous allegation.

Mr. Seán Gorman

The first case also arose on foot of such an allegation.

Mr. Seán Gorman

In respect of the first case, Skillnets had already identified that there was a matter which would require examination. It was already involved in investigations prior to the anonymous allegation being received.

Was that as a result of one of the 16 visits which were made that year? If not, how did the matter come to light?

Mr. Seán Gorman

I am not sure how Skillnets identified the fact that there might be something amiss.

Mr. Dermot Mulligan

It was the result of a visit and some contact with Skillnets.

Mr. Seán Gorman

Whether it was as a result of one of the 16 structured visits or a special visit, I do not know.

What I am trying to establish is the importance of the visits.

Mr. Seán Gorman

The Deputy is referring to the routine checks.

Yes, and whether such visits are able to bring matters such as those under discussion to light. Were any of the networks using Empower Training to deliver the course covered in the visits carried out in 2008 and 2009?

Mr. Seán Gorman

To my knowledge, yes. I do not have the full list but I can obtain it for the committee.

Surely any problems which existed should have been identified during these visits and it should not have taken an anonymous telephone call to lead to those problems been investigated and matters being referred to the Garda fraud squad.

Mr. Seán Gorman

I would have to check which networks in the client base of Empower Training were visited. A sophisticated manipulation of data and information was involved so what was going on was difficult to detect.

Yes. However, people are often obliged to deal with complicated and difficult matters.

Mr. Seán Gorman

Compliance visits would have been of assistance.

I am trying to ascertain whether such visits took place. Is Mr. Gorman in a position to obtain the relevant information in this regard because it would make a major difference?

Mr. Seán Gorman

I will try to discover which participants in the network were visited prior to the detection.

Yes, prior to the anonymous allegation which gave rise to the investigation.

Why is Mr. Gorman not in receipt of the information requested by Deputy Enright?

That is a good point.

Mr. Seán Gorman

I do not have it in my possession.

Surely Mr. Gorman has seen it.

Mr. Seán Gorman

I do not have the list of those that were visited.

Did the Department not examine the list when the complaint was received and it was realised a problem existed?

Mr. Seán Gorman

We examined the problems with the issue. However, we dealt with the issue of compliance visits at the level that they were not taking place on the scale and frequency which should have applied.

Is that the only way in which the Department dealt with the matter?

Mr. Seán Gorman

Yes, at that level.

That is a fairly relaxed approach. In respect of the 24 courses that were investigated, it emerged that eight were not delivered and that a further eight were delivered to companies which were not members of the relevant network. Were those companies members of other networks? If not, how were the courses delivered to them?

Mr. Seán Gorman

I do not know if they were members of other networks. However, they were not eligible because they were not members of the network in respect of which funding was being provided for Empower to provide training.

Mr. Gorman said it was a fairly complicated scenario. How was that the case? Either the companies were members of the network or they were not. Surely the position is black and white and problems should have been identified when claims were submitted. I do not see where the complication arises in ascertaining whether a company is a member of a network.

Mr. Seán Gorman

The claims were being submitted but they were not based on fact. There were no records to show that the levels of attendance matched what was claimed.

Before we deal with attendances, I wish to resolve this matter in respect of companies which were not members of the network. If a claim was submitted in respect of a company that was not a member, the fact that it was not a member should have emerged when the company's name was checked against the list of members.

Mr. Seán Gorman

The contractual relationship is between Skillnets and the network. It is the latter's responsibility to deal with the training providers and the companies that are part of the network. Claims are submitted by the networks to Skillnets. Compliance visits may very well have highlighted the matter under discussion. However, these were not happening at that level.

So it was a very relaxed arrangement.

Mr. Seán Gorman

Yes.

It would have been a very loose arrangement.

Mr. Seán Gorman

Yes, there would have been a lack of checking at network level.

Does Mr. Gorman know if the companies in question were members of other networks?

Mr. Seán Gorman

No.

Can he check the position in that regard?

Mr. Seán Gorman

Yes.

With regard to the second instance, it is stated that in four cases there was insufficient evidence that all trainees claimed for attended. There are three levels - four if one includes the Department - in operation here, namely, Skillnets, the networks and Empower Training. It is clear that there was a real problem with the networks because they were not checking what was going on.

Mr. Seán Gorman

Yes.

Has that problem been addressed in order that there will not be a recurrence of the type of behaviour under discussion?

Mr. Seán Gorman

It has been addressed by Skillnets. In some instances, ticks rather than signatures were provided. This did not really prove-----

So a tick was placed after a person's name on the roll.

Mr. Seán Gorman

Exactly.

Is Mr. Gorman of the view that there was a level of collusion between Empower Training and particular networks in this regard or was the system just too loose?

Mr. Seán Gorman

No. The evidence - from the audit which Skillnets carried out and the information we have been able to garner - suggests there was no element of collusion between the networks and Empower Training. There was a lack of oversight.

Mr. Gorman referred to courses being needs-led rather than provider-led. The information provided and some of the comments that have been made would seem to indicate that the courses were, in many instances, provider-led rather than being informed by the needs of the relevant industry. What is Mr. Gorman's opinion on that matter, particularly in the context of Empower Training?

Mr. Seán Gorman

In the first instance, the model provides for a demand-led approach whereby companies or sectors come together with proposals in respect of training. I am aware that the company in question was extremely active in selling its wares to and indicating what it could do for other companies. It also encouraged such companies to use the Skillnets model as a way of effectively generating business here.

FÁS is also carrying out an audit in respect of Empower Training. Is there a timescale for the completion of this audit?

Mr. Seán Gorman

I am informed that it should be completed in the coming weeks.

On 18 February last - prior to my becoming a member - the committee met representatives from FÁS. While the cost to the taxpayer has been extremely different, the problems which arose in respect of Skillnets - infrequent monitoring, a failure to record outputs and the absence of an impartial evaluation of the objectives - are exactly the same as those which arose in the case of FÁS. I am concerned with regard to whether the solutions which have been put forward will actually work. It seems that this matter has been left to Skillnets and it has been stated that the latter recognises that there is a problem. I do not know whether those who are in place at Skillnets can introduce the changes required in order to rectify that problem. We would certainly be obliged to ask questions in that regard.

There is also the fact that FÁS is due to issue the results of its audit in a few weeks. Officials from FÁS are due to come before the committee in two weeks. It would be extremely helpful if the audit in question could be completed before that date rather than it again being stated at our meeting two weeks hence that the audit is still in train. Perhaps Mr. Gorman could ensure that the audit will be completed and copies of it presented to the committee before the meeting to which I refer.

Mr. Seán Gorman

I will discuss that matter with FÁS. The audit in question is part of the latter's internal audit process. I will raise the matter with the director general of FÁS.

We established earlier that €13 million in EU co-funding has been obtained and that questions arise in respect of a small element of this. What is the total amount of co-funding the Department receives from the European Union? Are there any other cases where European Union funding has been withheld on foot of audit concerns?

Mr. Seán Gorman

Yes, there have been a number of instances where we have encountered difficulties in respect of European funding. We have the €13.6 million claim that we are referring to, which is deferred. It has not been refused but deferred. For the period 2000-06 in the employment and human resources development operational programme, we have submitted a claim to the Commission for €407 million for FÁS. I cannot say what we will get for that.

The final claim, which is already gone to the Commission for that period, internally has an unqualified audit opinion from the national ESF auditing authority, which is the best rating we can get and, therefore, we are not anticipating any loss to the Exchequer. There were earlier cases where we lost money under an earlier round. We took a case to the European Court of Justice where we believed that the Commission was wrong in its interpretation of some of the rules regarding particularly how we converted at that time from ECUs to punts. We lost the case and the Commission eventually withheld €15.6 million. This was in the 1994-99 round of ESF funding. The Commission contested our claim. It accepted there was no fraud, everything was done in terms of delivery of training, etc., but because of the methodology used by the Department in converting punts to ECUs, we lost €15.6 million overall in that claim. That was the previous round.

There was a €12.75 million employment community initiative case where an audit established overpayments to Ireland, which again, was contested and we had to concede the bulk of that money to the Commission.

When was that?

Mr. Seán Gorman

It was the 1994-99 round and it was the same point on which we had challenged in the court, which was the audit trail and the basis of conversion.

Is that the total range of issues?

Mr. Seán Gorman

There was a different programme known as INTERREG. There was a maritime case where €1 million was withheld under the maritime community initiative in the 1994-99 period and we managed in the context of the outcome of that to reduce the hit to €652,000. There have been significant losses of funds to the Commission going back to the 1994-99 round. We believe we will get €13.6 million but it is delayed.

I welcome Mr. Gorman and his colleagues. How much have we lost in EU funding for various reasons?

Mr. Seán Gorman

A sum of €15.6 million in the court case. There was €12.75 million withheld under an employment community initiative case.

That is more than €28 million.

Mr. Seán Gorman

Then there was approximately €600,000 in the INTERREG maritime case.

That is €29 million. How did the system work between 2000 and 2006? Mr. Gorman said the Department has a claim in for €407 million.

Mr. Seán Gorman

The system works on the basis that the EU funds are provided on a retrospective basis. Claims go in periodically. A final claim goes in at the end of the period for any moneys outstanding under the programme and that has to be accompanied by a certificate from what is known as the ESF financial control unit, which is an audit unit now located in the Department of Education and Skills. They have to certify for the Commission - they act as agents for the Commission - that the claim is robust and that there are no issues.

Is €407 million the total claim under ESF funding for that round?

Mr. Seán Gorman

It is the total allocation of ESF funding for that round.

Is it normal that the Department would claim back over a ten-year period? The round started in 2000. Have we received any of the €407 million yet?

Mr. Seán Gorman

There are two rounds: 1994-97 and 2000-06. We would have received instalments of the €407 million over the years. We are now looking for full and final settlement of the moneys due to Ireland.

How much has the Department received?

Mr. Seán Gorman

I do not have the full figure with me.

So Mr. Gorman does not know how much the EU owes the State.

Mr. Seán Gorman

I do not know what the net figure is off the top of my head. I will have to check that.

This is going back four years.

Mr. Seán Gorman

That is not unusual. The way the funding rounds work is that they have a funding round period for a number of years.

I appreciate that.

Mr. Seán Gorman

Moneys move during that period.

However, Mr. Gorman cannot tell us how much the Commission owes us for a programme that finished in 2006.

Mr. Seán Gorman

I can get it for the Deputy.

Is that the total amount for all ESF funding programmes during that round?

Mr. Seán Gorman

No, that is for the human resources development operational programme. Other ESF moneys could be due.

Are other ESF moneys due?

Mr. Seán Gorman

I do not have that. I am dealing with the FÁS-related programme but I can get the full profile.

Are other ESF moneys due to the Department for training?

Mr. Seán Gorman

No. I will give the Chairman a profile of the full breakdown.

I refer to the issue of partnership funds which was mentioned earlier. Mr. Gorman said that the Department had not contributed to the funds we have discussed previously but it had contributed money to the ICTU. Is that correct?

Mr. Seán Gorman

Yes, the budget line in the Estimate goes to the ICTU and it disburses it then.

What is the purpose of that allocation?

Mr. Seán Gorman

The purpose is to provide for the training, education and development of primarily trade union officials and administrators in the trade union movement.

How much is that on an annual basis?

Mr. Seán Gorman

Just over €1 million. The maximum intervention rate the State pays is 80% of the cost of the training and development incurred by the ICTU and its constituent parts. Earlier I said that the average intervention rate on that in recent times has been significantly less than 80%. It was 52% one year, approximately 30% last year and we reckon it will be 39% this year.

I do not follow what Mr. Gorman is saying. Will he explain it?

Mr. Seán Gorman

We do not pay their full costs. The money is made available as a contribution towards the cost of training but there is a set ceiling of 80% and we have been coming in significantly below that.

What are the arrangements for the oversight of that money?

Mr. Seán Gorman

Audited accounts are provided to the Department. Claims are submitted quarterly in arrears and full audited accounts are submitted by the ICTU to the Department to confirm those figures.

Has the Department any concerns about that?

Mr. Seán Gorman

No, we have no concerns. This is a very long-standing arrangement. It goes back 40 years at least.

I refer to the Skillnets company. Was it set up in 1999?

Mr. Seán Gorman

Yes.

Is it correct that total funding since it was set up is €114 million?

Mr. Seán Gorman

Yes.

It would appear that between 1999 and 2006 this fund increased twenty-seven fold which is faster than the FÁS CDP fund grew and we all know the issues relating to that. This seems to be CDP mark II in many ways, as far as I can see. How many agencies with responsibility for providing training to people who were in employment were in the Department at the time the decision was taken to set up Skillnets?

Mr. Seán Gorman

At the time FÁS would have been the main agency providing training. Enterprise Ireland would have provided some assistance to companies as part of their management development for management training. IDA would have done a small amount with some of its client companies. Skillnets came on board in 1999.

Would Shannon Development have done the training?

Mr. Seán Gorman

It would have largely funded its resources from its property portfolio.

It would have done training with employees.

Mr. Seán Gorman

It would have assisted some companies but very few.

What about the county enterprise boards?

Mr. Seán Gorman

They would do it with micro-enterprises which have fewer than ten employees.

There were other EU funded initiatives.

Mr. Seán Gorman

Yes, there were. FÁS was a major beneficiary of some of the other EU funding initiatives.

At the time the decision was taken to set up Skillnets six or seven other agencies in the Department had responsibility for training people in employment. Why was it decided to set up a new quango?

Are we discussing policy?

Can the Secretary General explain the thinking behind that? It is hard to understand.

Mr. Seán Gorman

The policy decision was taken but the context for it was a 1997 White Paper on human resource development which recommended doing a pilot programme of this nature. In 2000 there was a renewed commitment from the social partners in the context of Partnership 2000 to continue this type of approach. It was a policy decision. Part of the consideration was that this would be very much enterprise driven and because of the nature of the networks and the participation by companies it would provide a relevant, close to business and market type training.

It is very difficult to understand from the outside why a new agency was required given that ample provision seems to have been made through FÁS and all the other agencies to provide training. Why was a new agency needed?

Mr. Seán Gorman

The thinking was to try a more enterprise-led approach using the Skillnets network which involved the participation of companies.

Would it be true to say Skillnets was a creature of IBEC?

Mr. Seán Gorman

No, it had IBEC representation on its board. IBEC would have pushed for and encouraged this type of support to be made available for training for people in enterprises. There is no question about that. The decision was taken to do this. I do not know if I would call it a creature of IBEC. ICTU and other interests were also represented on the board.

We will come to that in a moment. I am trying to understand why on earth a new agency was set up. Given that a decision was taken somewhere to set it up, why was it set up as a limited liability company rather than a State agency?

Mr. Seán Gorman

The thinking at the time was to try to reduce the complexities of having to legislate for new State bodies. It was seen as an efficient way of getting money to the companies quickly and it could be done without the need to introduce new primary legislation. The source of the funding is the National Training Fund which the Minister, with the approval of the Minister for Finance, has authority to allocate to training initiatives. At the time it was seen as a useful and efficient way of moving into an enterprise-led training space.

Did that mean it was not subject to the normal scrutiny to which State agencies are subject?

Mr. Seán Gorman

The National Training Fund is subject to scrutiny by the Comptroller and Auditor General. In that sense it was not placed outside the scrutiny obligation.

Presumably it was, as a limited liability company.

Mr. Seán Gorman

It was audited by the Comptroller and Auditor General.

It was not audited by the Comptroller and Auditor General.

Mr. Seán Gorman

My apologies. It was audited by the National Training Fund.

You said Skillnets was audited by Comptroller and Auditor General. It is not.

Mr. Seán Gorman

Can I correct that? The allocations that we make from the National Training Fund-----

That is not what I asked. I said Skillnets was not subject to the normal scrutiny because it was a limited liability company. Is that the case?

Mr. Seán Gorman

Its accounts would be audited independently by its auditors. Its annual returns are filed with the Companies Registration Office, its financial reporting and annual reports and accounts are sent to us and we have a member on the board.

Who is that person?

Mr. Seán Gorman

He is now an assistant principal officer in the Department of Education and Skills, Mr. John McDermott.

How long has he been on the board?

Mr. Seán Gorman

For about three years.

Can Mr. Gorman outline the structure of Skillnets in terms of the personnel infrastructure in place? I understand there were some 130 networks. What support staff were involved in them?

Mr. Seán Gorman

Skillnets had approximately 23 staff overseeing the networks. Skillnets contracted with the networks who in turn bought the training provision directly into the network. The numbers engaged in each of the networks, in terms of oversight, would have varied. I do not have a detailed breakdown of the actual numbers involved. There was a cap on administration. There would have been one manager in each network.

In each of the 130 networks?

Mr. Seán Gorman

Yes.

What kind of support staff would a manager have had?

Mr. Seán Gorman

I do not have figures for the support staff.

Why does the Secretary General not have figures for the support staff? It is one of three items under discussion today. He should be in a position to provide details to us on the structure of Skillnets.

Mr. Seán Gorman

A provision was allowed for administrative support but I do not have details on the staff.

Mr. Gorman does not know anything about the numbers of people employed by Skillnets.

Mr. Seán Gorman

I know how many were directly employed by Skillnets and the network manager - each network had a manager - but I do not know the numbers employed beyond that.

Mr. Gorman told us there are 23 people overseeing this body and there are 130 managers.

Mr. Seán Gorman

There would be fewer now; the number has been reduced to about 60.

There were 130 managers.

Mr. Seán Gorman

Yes.

Does Mr. Gorman have any idea how many other staff there were?

Mr. Seán Gorman

No, but very few per network. I would not be able to tell the Deputy the numbers now. I can get the figures.

It would be conservative to say that there would be one support staff member with each manager-----

Mr. Seán Gorman

Yes, one can assume that.

-----which means that all of the networks comprised 260 staff and 23 oversight people. Some 283 staff were employed in this organisation at a minimum. Is that the case?

Mr. Seán Gorman

The networks would have employed the managers. There would have been a minimum of one manager per network employed, plus the Skillnets oversight staff.

What is the total staff cost for the organisation?

Mr. Seán Gorman

It is approximately one fifth of the total overhead for Skillnets. I do not have a cash figure for it.

Is the Secretary General saying that approximately €20 million out of the €114 million has gone on staff? Is that correct?

Mr. Seán Gorman

It could have. I will have to check it out as I do not have the staff cost percentages.

Why does the Secretary General not have those details?

Mr. Seán Gorman

I have focused on the problems of the two companies, in terms of Sales Skillnet and Empower Skillnet, as the major problem or issue here.

My questions are about the organisation, which is the subject of this meeting. My questions are basic questions, such as staff numbers and costs and the Secretary General should be able to provide those details.

Mr. Seán Gorman

I can give the Deputy the staff numbers, but will have to get the costs for her.

In 2008 and 2009 the costs were €2.6 million and €2.7 million, respectively. Are these the figures Deputy Shortall requires?

Mr. Seán Gorman

The administration cost of €2.6 million would have included staff, but I do not know exactly how much of that was directly for staff.

It is difficult to continue with this meeting when the witnesses are so ill-prepared. These are basic questions about the Department's oversight of significant amounts of public money and it is impossible to do our business today. This is not the first time this has happened. We have had serious difficulties dealing with the Department throughout the FÁS and Community Development Programme, CDP, sagas, which are still unfinished business. It is highly unsatisfactory that the Secretary General has come to this meeting so ill-prepared despite having had notice of the meeting for some time.

Mr. Seán Gorman

I have invested significant time in this and apologise for not having the particular information the Deputy requires.

We will have to come back to this again, Chairman.

May I ask the Department of Finance -----

Sorry, Deputy Shortall has not completed her questions.

Can Mr. Gorman tell us what arrangements have been put in place within the Department for the oversight of the €114 million being invested in yet another training scheme?

Mr. Seán Gorman

First, we have a formal mandate and funding agreement in place with Skillnets. That requires them to put in place standard accounting and financial control systems through which they must account to the Department for all moneys. They report to us regularly on finance and operational targets. At least two progress reports are required annually and quarterly financial reporting on income and expenditure, personal requirements and bank reconciliation statements. We also require them to ensure that procedures are in place with regard to ensuring that moneys are only paid out to beneficiaries based on binding contracts and so on. We also have a member on the board of Skillnets who participates in its oversight and governance.

I want to move on to the make-up of the board of Skillnets, which seems to parallel that of FÁS over the past decade. We are aware that the board has 14 members, seven of whom are IBEC representatives. Others represent the CIF, ISME and so on and there are a few social partner representatives. How is the board appointed and what is its term of office?

Mr. Seán Gorman

The board is appointed by the Minister on the basis of nominations from the representative organisations and three of the members are appointed directly by the Minister. The members are selected from nominations to the Minister.

Who makes the nominations to the Minister?

Mr. Seán Gorman

The participating organisations, including IBEC and ICTU.

Basically, the company itself makes the nominations.

Mr. Seán Gorman

Yes. They submit names to the Minister.

So, three people are also appointed by the Minister.

Mr. Seán Gorman

Yes, including one official.

Who are those three people?

Mr. Seán Gorman

The three people appointed by the Minister are: John McDermott, an assistant principal in the Department of Education and Skills, Henry Murdoch, a ministerial nominee and Terry Hobdell a ministerial nominee from a company called Irish Fencing and Railings Limited.

What are the arrangements for remuneration for board members?

Mr. Seán Gorman

I am sorry, but I do not have details of their remuneration with me.

Can the Secretary General get those details for us please?

Mr. Seán Gorman

I will.

I have a question with regard to potential conflicts of interest on the board. In the case of the CDP we saw that large amounts of public moneys that were being dispersed were being dispersed to organisations that were closely associated with board members within FÁS. What safeguards has the Department in place, if any, to ensure that board members do not benefit, either personally or through their companies, from decisions relating to spending?

Mr. Seán Gorman

Skillnets has in place a procedure which requires board members who are involved in the determination of eligible applications for assistance to declare in writing in advance any potential conflict of interest for each meeting they attend. This information must be provided in writing to the company secretary. The members of the board of directors are also required, under the arrangements with Skillnets, to declare any direct or indirect interests they might have and the company secretary records all such declarations.

On a related matter -----

Sorry to interrupt, but I have some figures on remuneration to board members. The remuneration ranges from €9,400 for the chairman down to €6,300 for each board member. This information is in the Skillnets Ltd. report and financial statements. A total of €31,500 was paid by way of payments to the directors and out of pocket expenses came to €10,100.

Mr. Seán Gorman

I apologise for not having that information.

The Chairman certainly has more information than Mr. Gorman.

Our Chairman is very efficient.

I want to ask about a related matter in respect of Chambers Ireland. Recently I submitted a parliamentary question to the Minister for Finance with regard to a sanctioned write-off, by way of legal agreement, of more than half of a sum of €630,000 owed by Chambers Ireland under the EQUAL programme of the European Union. How did that decision come about and how was it that the Minister for Finance wrote off approximately €320,000 owed by Chambers Ireland?

Mr. Seán Gorman

At the time that issue arose Chambers Ireland was experiencing some financial difficulty. We considered whether we should take it to the courts to pursue those moneys, but the legal advice was we would be unlikely to win the court case. We balanced that advice with the risk of costs being awarded against us if we lost the case and then put a proposal to the Department of Finance that the prudent thing to do was to write off those moneys. We got sanction to do that.

It is hard to understand how the Department could reach the conclusion that was the prudent thing to do. It was €320,000 of public money.

Mr. Seán Gorman

The legal advice suggested we would be unlikely to win the case, and the legal costs would have been substantial.

Why? Why was the Department unlikely to win or why was that advice given? What was the basis of the advice?

Mr. Seán Gorman

It was on the basis that the arrangements that were put in place with Chambers Ireland and the Department at the time were insufficiently watertight and could have allowed Chambers Ireland to win the case.

Will Mr. Gorman provide us with a separate note on that issue as I would like to get more detail of it?

Mr. Seán Gorman

I will.

I apologise for not being here earlier, but I had to attend a function. The county enterprise boards support 1,000 enterprises. They are out of date, being more than 30 years in existence. Has any cost analysis of the county enterprise boards been undertaken? Should they be restructured? Is the Department satisfied with their work to date?

Mr. Seán Gorman

Any decisions to restructure them are a matter for the Minister but he is on record as saying that he is well advanced in a process of examining the county enterprise board structure. He is of the view and the Department is also of the view that they provide a valuable local support to micro-enterprises. The Minister is examining their structure and the sheer number of them to decide if they can be streamlined. He is finalising proposals for consideration by the Government.

The Department of Enterprise, Trade and Innovation is the lead Department in the World Trade Organisation negotiations. I note a report issued today by the EU Court of Auditors in Luxembourg about the sugar beet industry. The WTO negotiations were begun in Cancun, Mexico, in 2001. Reading yesterday's report, it seems Ireland was misled by the European Union as a result of the decision of the WTO which at the time was seen by Ireland as being very serious for our sugar beet industry which was a significant employer in four towns and important to growers and industries such as the service industry. This has now been lost. We are informed by the EU Court of Auditors today that it was the wrong decision. Will the Secretary General describe the Department's role? Arising from the WTO decisions, the European Commission took the decision to close an Irish industry because it was not competitive, highly subsidised and was a threat to imports of sugar.

Mr. Seán Gorman

That matter is being handled by the Department of Agriculture, Fisheries and Food as the lead Department.

I do not wish to argue with the Secretary General. His Department has responsibility for trade matters and this was a trade issue which then went to the Commission. What happened between 2001 and when the decision was taken by the Commission to close the factories? Where does the Department fit in that chronology? It was the lead Department in this case.

Mr. Seán Gorman

We co-ordinated the attendance at the World Trade Organisation but the lead Department on the sugar beet policy was taken by the Department of Agriculture, Fisheries and Food. I will have to study that report which was issued today and come back to the committee. I am not in a position to comment on the report as I have not read it.

Mr. John Buckley

I refer the Deputy to a section in the annual report of the Comptroller and Auditor General on sugar restructuring on which, presumably, the Department of Agriculture, Fisheries and Food will be in a position to answer further questions upon when it appears before the committee.

This is a trade issue and the lead Department for trade issues is the Department of Enterprise, Trade and Innovation. The backup information had to come from that Department before it reached the Commission.

Mr. Seán Gorman

I will study the report and come back to the committee.

Will the Secretary General report back to the committee?

Mr. Seán Gorman

Yes, I will provide a written report to the Chairman.

It is a most serious matter that the European Court of Auditors would say that it was provided with the wrong information. Ireland is very closely scrutinised by the European Court of Auditors and by the court officials. We are one of the leading countries for overpayments or underpayments. We do our business very well.

I am inquiring about the name of a company which had defaulted.

Mr. Seán Gorman

Is it in order for me to name the company?

Yes, under absolute privilege.

Mr. Seán Gorman

The company is Clover Meats Waterford and the amount involved was €1.9 million.

What elements of the McCarthy report have been implemented in the Department of Enterprise, Trade and Innovation?

Mr. Seán Gorman

The Minister is close to finalising his proposals to Government on the restructuring of the county enterprise boards. We have also taken over responsibility from the Department of Education and Skills for the PRTLI funding as part of streamlining the arrangements for the single point of delivery for science and research and development policy and funding. Apart from structural changes, we have significantly reduced numbers and pay bills as a result of changes, rationalisation and reductions in general. The pay bill in the Department and its agencies has been reduced by more than €6 million, which is €5 million in the Department in 2010 compared with 2009. This is due to rationalisations, restructuring and approximately €2 million as a result of the incentivised scheme for early retirement, ISER. Considerable work continues in an examination of the area of how the enterprise supports are delivered. The McCarthy report made very wide recommendations about consolidating a range of agencies such as Enterprise Ireland, IDA Ireland, Údarás na Gaeltachta and the Irish Film Board. These are being examined and a decision will be made on the basis of whatever policy the Minister decides. One of the recommendations was the rationalisation of Forfás and its absorption into the Department. The Minister has decided this should not happen because he wants to keep Forfás as a separate policy advisory entity with its own board. In his view, this is the best position for Forfás.

The Department is examining the relocation of a number of the industrial relations institutions into a single location, including the Labour Court, the Labour Relations Commission and the rights service. The Minister of State, Deputy Dara Calleary, is leading an exercise on improvements in streamlining shared services and efficiencies by means of co-location of those agencies. Recommendations were made for a merging of the Health and Safety Authority and the National Employment Rights Authority into one inspectorate. We are looking for more co-operation between those agencies. They are two very different types of agency serving very different client bases with requirements for very different types of expertise. Most of the employees in the health and safety area are chemistry graduates and engineers while the staff in NERA who inspect employment rights tend to be general civil servants who are trained specifically for enforcement of the Acts in question. The Competition Authority will be merged with the National Consumer Agency and the enabling Bill will be ready shortly. This was a recommendation of the McCarthy report.

Did the Department acquire staff in the process, for instance, when PRTLI transferred to the Department from the Department of Education and Skills?

Mr. Seán Gorman

One head of staff. It did not have a big resource.

This agency is now being administered by the Department.

Mr. Seán Gorman

Yes.

The Registrar of Friendly Societies used to be responsible for regulation of the credit unions. What is the position in respect of that agency?

Mr. Seán Gorman

This was one of the recommendations of the McCarthy report but the Department had already merged the position of head of the Companies Registration Office, CRO, with the Registrar of Friendly Societies which is an office with two or three people. It is not a big office.

What is its function now?

Mr. Seán Gorman

It receives reports from the trade unions and such organisations that are not limited companies. Such companies send in their returns to the Registrar of Friendly Societies. Its work parallels the work of the CRO somewhat. The two offices are the responsibility of the same public official in the same building so there is very little value in doing any more merging.

Let me ask Ms Stapleton from the Department of Finance a question. Training is an important issue as significant amounts of money go through various training organisations under the aegis of the Department. We have just had a discussion on Skillnets. Is the Department of Finance satisfied that we are getting value for money? Is it satisfied with the quality of administration of these moneys?

Ms Áine Stapleton

I will not go into detail on Skillnets. The Department looks at certain requirements as part of its general oversight of programmes and schemes of this nature. It examines the delivery mechanisms and outputs of training programmes. I will ask my colleague, Ms McGuckin, to talk about the enterprise area from the perspective of the sectoral policy division.

Before Ms McGuckin comes in, I would like to ask whether the Department is satisfied with the lapses we traced earlier. Is the Department of Finance engaging with the Department of Enterprise, Trade and Innovation on tightening the ship?

Ms Áine Stapleton

Clearly, we are always concerned when such issues come to light. The Department generally puts a framework in place from the perspective of its governance role. The framework sets out the corporate governance requirements of the agency sector, for example, supplemented by guidelines in appropriate areas. We always wish to ensure appropriate arrangements are in place in the parent Department and agencies to ensure there is compliance.

That is a general statement of policy which I am sure the Department of Finance implements. I am asking whether it is satisfied with the manner in which these arrangements are operating in the specific case of the Department of Enterprise, Trade and Innovation.

Ms Áine Stapleton

The Accounting Officer present at the meeting has given us assurances about the steps the Department of Enterprise, Trade and Innovation has taken to communicate with the CEO of the organisation concerned on the mandate and service level agreements in place. We have been assured that new procedures will be put in place to ensure some of the incidents that occurred in this instance will not be repeated.

Is the Department of Finance involved in the oversight or preparation of these procedures?

Ms Áine Stapleton

Regarding direct communication between the Accounting Officer and the CEO of Skillnets, the Department of Finance would not be involved in that individual set of guidelines. Anything done in this area would be within the broader framework of the accounting responsibilities of the State agency and ensure it was operating within the code of practice.

I am not criticising the total training throughput because I appreciate the investment in training and upskilling is very important. The Department of Enterprise, Trade and Innovation has a very important role to play in that regard. Is the Department of Finance actively concerned about the difficulties we have experienced with FÁS and Skillnets and the matters about which Deputies Enright and Shortall asked? Has it recently been actively involved with what has been highlighted in the general training area?

Ms Áine Stapleton

The Department always takes account of the effectiveness of the corporate governance arrangements in place in organisations engaged in the delivery of training programmes. At a more general level, it also ensures the arrangements are in place to deliver on accountability. That matter is always under review in the Department. We certainly take on board the issues presented today.

Ms Stapleton is still answering with generalities in respect of the ideal framework she would like to see in place. I am asking whether the Department of Finance has been seized of the issue since all of this erupted in the public domain.

Ms Áine Stapleton

When individual instances come to light, the appropriate role of the Department of Finance is to ensure the appropriate framework is in place. We see it as a matter in the first instance for the Accounting Officer, the CEO and the chairman of the board of the agency involved to address operational issues that arise in individual programmes. Of course, these issues would be of concern and feed into the broad policy discussion within the Department.

What did Ms McGuckin wish to say?

Ms Gráinne McGuckin

I do not disagree with anything Ms Stapleton has said on the subject.

I did not expect Ms McGuckin to do so. Did she want to add anything?

Ms Gráinne McGuckin

Not really, no. Unfortunately or fortunately, we have a role to play and that framework role has been set out. We set the broad policy parameters. Obviously, it is up to the parent Department and the CEO of Skillnets, in this case, to adhere to the policies, procedures and rules in place. It would not be possible, given the plethora of organisations for which we are responsible and which form this Vote alone, for us to go down the road of engaging in oversight on a day-to-day basis. Certainly, the issues that have been raised with regard to Skillnets and FÁS raise concerns for us. We will redouble our efforts to ensure the procedures and policy rules are in place.

They raise concerns for the Department of Finance. I am trying to find out what activities happened between the Departments of Finance and Enterprise, Trade and Innovation when those concerns were raised. Was there direct contact with FÁS? What exactly did the Department of Finance do once-----

Ms Gráinne McGuckin

No.

I accept that the Department cannot oversee everything at a micro level.

Ms Gráinne McGuckin

Yes.

I am trying to find out what the Department did when it erupted in the public domain that there were questions about value for money in terms of the training budget. When it emerged that there was waste and perhaps worse in some cases - questions have been raised today in respect of Skillnets - what proactive measures did the Department take, other than to assure the committee that there was a framework in place and that it was concerned?

Ms Gráinne McGuckin

Obviously, if there was a need to look further at the procedures or the framework, we would actually do this. We are aware that issues arose on the travel side, for example. We would have taken action in that area in the context of FÁS. The rules on the procurement side are very clear. There are plenty of guidelines available to organisations. I am satisfied that the procurement rules, as set out by the Department of Finance, are clear and explicit. It is up to the CEO charged with running the organisation-----

They were ignored.

Ms Gráinne McGuckin

I am satisfied-----

Is that not the case?

Ms Gráinne McGuckin

Can I finish?

No, I am saying they were ignored by Skillnets. The Department did not police its guidelines.

Ms Gráinne McGuckin

It is not the job of the Department of Finance to police the guidelines on a day-to-day basis. Enough procedures and structures are in place to do this.

They just do not work.

Ms Gráinne McGuckin

I am not taking-----

What is Ms McGuckin saying about oversight of misspending, wasteful spending or worse? Whose task is it? Is it the task of this committee in direct exchanges with the relevant Accounting Officer? Is the Department of Finance stating "once we are satisfied we have a sound framework in place, even if it does not operate, we do not have time to get involved"? Is that what Ms McGuckin is saying to the Chairman?

Ms Gráinne McGuckin

I am saying guidelines are in place and the Accounting Officers in the particular Department and its respective agencies are required to adhere to them.

What happens in the event of non-adherence?

Ms Gráinne McGuckin

Obviously, the situation arises where the Comptroller and Auditor General raises issues. If there is a need to do so, we can discuss it with the Accounting Officer in the particular Department.

Was that done in this case?

Ms Gráinne McGuckin

No, we did not do so formally in this particular case but we would have had discussions informally with the Department.

Is it not reasonable for us to expect it to have been done in this case?

Ms Gráinne McGuckin

Perhaps.

I am sure Deputy Rabbitte remembers his time as a Minister. I recall that each year one would have to justify one's budget for the forthcoming year. I visited the Department of Finance and had to go through, line by line, the areas for which I was responsible and I was put through hoops in doing so. While in discussion with the then Department of Enterprise, Trade and Employment, did the Department of Finance at any time question closely the operation of Skillnets, FÁS and the training programmes?

Ms Gráinne McGuckin

On a day-to-day basis, what we look at, certainly on my side of the house, is the actual allocation. Most of our discussions on Skillnets, if there were any out of a very large vote, would be on decisions they might make on the allocation itself. We do not get involved in the operational policy of Skillnets. That is quite clearly the case.

I have a final question for Mr. Gorman. On Skillnets and the FÁS competency development programmes, Deputy Shortall has expressed dissatisfaction with the information provided today and the committee cannot close on this matter at this meeting. It strikes me that having spent considerable time discussing FÁS, the committee is now spending considerable time discussing Skillnets. That the Department lost control of FÁS was unfortunate but then to lose control of what was taking place in Skillnets indicates either carelessness or poor governance. Is the Department fit for purpose in terms of controlling vast budgets?

Mr. Seán Gorman

It is not a question of losing control of Skillnets. What is involved here is a small amount of €53,000. There were gaps in how the procedures were followed and implemented and there was a need for them to be improved. We learned that on the basis of this experience. It is not so much a case of losing control but rather a case of tightening in the light of what we have learned. Skillnets has tightened and the Department of Education and Skills is tightening again the agreements we have with Skillnets. The amount of money at issue is relatively small.

While the amount of money may be small, the consequences are serious for those participants in the training programme who suffered because of a lack of certification and so forth.

Mr. Seán Gorman

Yes, there were big issues there. In the case of Skillnets, however, certification was not an issue. The look-backs that have been taking place are validating and confirming issues of certification.

The Secretary General states there are no questions with certification. What about Waterford?

Mr. Seán Gorman

That aspect has to be-----

That was a certification issue, was it not? The Secretary General stated there were no questions of certification.

Mr. Seán Gorman

On the general issue of certification, which is being looked at by Skillnets, I have been assured, as of last night, that there is not a widespread problem of certification.

The company involved was issuing false certificates from the Waterford Institute of Technology. Mr. Gorman stated there were no questions of certification. How many trainees were issued with false certificates?

Mr. Seán Gorman

I do not have that number.

It is about time we had it. We should invite the chief executive officer of Skillnets before the committee because we are not being given enough information.

Mr. Seán Gorman

Part of the issue is the distance between where we sit and where the delivery on the ground sits. That is the gap.

Perhaps we will bridge that gap by asking the chief executive officer of Skillnets to appear before us because we are not getting the information we seek. This is the second time the committee has expressed concern that Departments are not taking this committee seriously. We had a similar episode with the Department of Finance last week. As has been stated, this meeting has been under way for three hours and we are not getting the information we seek. We have to bridge the gap, as Mr. Gorman says, between his Department and Skillnets by getting the chief executive officer of Skillnets before the committee.

On the question of accountability, how on earth can the Department of Finance oversee this kind of model in which a limited liability company is entirely funded from State resources? What other examples of that model do we have? Is it not quite an unusual model? How can one have adequate oversight of such a company?

Ms Gráinne McGuckin

Does the Deputy want me to discuss the delivery model of Skillnets? The delivery model of Skillnets, as has been decided, is obviously a policy matter. On the particular matter of the-----

No, I am asking about the Department's oversight.

Ms Gráinne McGuckin

The oversight role rests, in the first instance, with the line Department. The chief executive officer also has a role. The oversight rests with the Department of Enterprise, Trade and Innovation.

Given that the ultimate oversight role rests in the Department of Finance, are there not real difficulties with having this type of model in which a limited liability company is in receipt of large sums of public money?

Ms Gráinne McGuckin

What this has raised is the full total of €54,000. The net loss of €54,000 in this case-----

I am not talking about that. I am talking about the €114 million that has been paid to the company over the past 11 or 12 years. How can one have adequate oversight of a model in which a limited liability company is entirely funded from the public purse? Are there other similar models where limited liability companies are entirely funded from the public purse?

Ms Gráinne McGuckin

I am not aware of any such company on my side. In terms of the €114 million, this is a particular type of model which, as far as I know, has worked quite well up to now. The report has thrown up issues and irregularities and a net loss of €54,000.

With all due respects, how does Ms McGuckin know that? How can she pass judgment on the matter?

Ms Gráinne McGuckin

The onus is either value for money studies or the Comptroller and Auditor General's oversight. Our response to that depends on the Comptroller and Auditor General's work in that area.

The Comptroller and Auditor General does not audit Skillnets.

Ms Gráinne McGuckin

By extension, if one likes. This is why the matter has come up in the context of the look-back on the Department of Enterprise, Trade and Innovation's Vote.

Again, as the Department with ultimate oversight responsibilities, is there not something very strange about the fact that-----

Ms Gráinne McGuckin

May I stop Deputy Shortall there?

The Member is speaking.

Is there not something very strange about the fact that at the height of the boom, some €27 million per annum was being channelled into a limited liability, essentially private company to provide training for employees who were in employment and that this was done at a time when business generally was doing extraordinarily well and there was no reason it could not fund its own training requirements? It is very strange that such large sums of public money were being channelled into private businesses in such an unusual model and with little or no accountability. Are there concerns in the Department about this model and about the fact that so much public money has been channelled through it over the past 12 years?

Ms Gráinne McGuckin

The decision on the delivery model was a policy decision so I will not comment on it. I am not commenting on the delivery.

I am asking Ms McGuckin about the delivery model from an accountability point of view. Does she accept that there are real difficulties in establishing accountability for the spending of public money if such money goes through a private company?

Ms Gráinne McGuckin

Not if the procedures, rules and guidelines are being followed and adhered to.

Which rules and guidelines are they?

Ms Gráinne McGuckin

There are financial procedures and procurement procedures.

Ms Gráinne McGuckin

With regard to procurement of training, for example, there are procurement procedures that should be adhered to.

Do those guidelines and procedures not apply to public companies and State agencies?

Ms Gráinne McGuckin

Under procurement rules, if a body is funded or partly funded from public funds, it is subject to the procurement rules.

Okay. In terms of other aspects of corporate governance, is there not a difficulty in establishing accountability?

Ms Gráinne McGuckin

In what sense?

By and large, they are a law unto themselves and are not required to adhere to the normal guidelines that apply to State agencies. Principally, they are not audited by the Comptroller and Auditor General. They arrange their own audit.

Ms Gráinne McGuckin

That is true but, in terms of the accountability model, it is a matter for the parent Department. It has already set out the reporting mechanism to ensure it is satisfied the money is going through properly and that there is accountability.

I accept that but there are major question marks over it. We will deal with that through the Department. It is equally valid to ask the Department of Finance if it has concerns about that model, given what has entered the public domain.

Ms Gráinne McGuckin

Certainly on the basis of what has been thrown up by the Comptroller and Auditor General's report, we would reflect on it.

Has the Department of Finance not done anything about it?

Ms Gráinne McGuckin

Not since the publication of this matter.

I thank Ms McGuckin.

On that topic, will Mr. Gorman elaborate on the community employment schemes delivered through FÁS and funded by the Department. Are there 400 or 500 community employment schemes?

Mr. Seán Gorman

There is a budget of approximately €400 million.

That is fine. We need not get into detail.

Mr. Seán Gorman

Yes.

Will Mr. Gorman explain the structure of the local community employment schemes that operate in most parishes and communities? What is the corporate structure? Are the companies limited?

Mr. Seán Gorman

They are community organisations that FÁS contracts with to provide these services.

They do not contract with organisations; they contract with a legal entity.

Mr. Seán Gorman

Yes.

The point I am making is very simple.

Mr. Seán Gorman

I do not think they are limited companies.

They are companies that are subject to independent audit.

Mr. Seán Gorman

Yes.

I make this point because an erroneous impression was given in the past five minutes. All FÁS local community employment schemes with which I am familiar are run by local limited companies. Different sponsors come together and elect a board of directors. I and, I am sure, most Deputies attend annual general meetings. The companies are audited independently and will not be approved for participation in the community employment schemes next year until the audited accounts are submitted to and double-checked in the FÁS office. It is a common and successful method of channelling funding for community employment - a lot of it is geared towards training - to limited companies in local communities. Mr. Gorman says €400 million is going through the local schemes. All the problems we have had with FÁS, by and large, have not been at that level. Hundreds of examples exist of successes involving hundreds of millions of euro. I would not want anyone in this committee to suggest that the model for community employment schemes is not very good. Every company is subject to an independent audit. A different interpretation might have been generated on the basis of an earlier conversation.

Is the Deputy referring to community employment schemes?

No, the questions were being asked about channelling State funds for training purposes to limited companies. That was the issue. I am saying this is well tried and tested in respect of 400 cases in every FÁS scheme. Somebody was trying to suggest or ask whether the mechanism is flawed.

The difference is that all of the payments are made and set by the Department in that regard. It is not-----

No, there are training budgets and procurement. On the local FÁS schemes, there is a certain level of discretion in relation to procurement. Given that the schemes are publicly funded, they must follow the same procurement regulations. All I am saying is that not all is as it looks. The system is good and is working all over the country.

Point taken.

Is the point taken? FÁS monitors and supervises, supposedly in considerable detail, the operation of community employment projects. That is the difference. Skillnets is not monitored by FÁS, nor, it would appear, anybody else.

We shall conclude shortly.

Excluding community employment schemes, are there other private companies operating in the way Skillnets was allowed to operate under FÁS? When Deputy Shortall asked Ms McGuckin whether it was the only one, I got the impression from her answer that it was. Would there not be other companies, at least under the FÁS umbrella?

Mr. Seán Gorman

FÁS would have contracted with many private training providers to provide training.

With 100% of their income from FÁS?

Mr. Seán Gorman

It would have been a direct contractual relationship. Here the model is that there is a limited company provided with funding that then contracts with a network to provide the training. The network secures the trainers and the training service. It is not as close as the community employment schemes would be to FÁS.

It could be close to it.

Mr. Seán Gorman

One has Skillnets and the network, and the network procures the training.

I call on Mr. Buckley to make his concluding remarks.

Mr. John Buckley

I shall make two general comments, one on each of the two issues we were considering today, redundancy and Skillnets. With regard to the latter, there are wider important lessons to be learned. Forthcoming budget reductions will probably lead public bodies to resort to more programme delivery through private sector mechanisms and intermediaries. The State may opt to buy rather than make.

The experience in this case and in the case of the CDP programme suggests that there needs to be as much control and monitoring of these arrangements as there would be if the programmes were delivered through State agencies. It needs to be both sufficient and timely to reduce the risk of public funds being wasted. Monitoring, even with private sector intermediaries and such arrangements, must still be of a high or sufficient standard and carried out on a timely basis.

With regard to redundancy, I will pick up on what Deputy Fleming was talking about. We considered the question of what the figures meant and the fact that the moneys listed are in memorandum lists of debts that must be followed and so on. It seems that with the integration of this activity into the Department of Social Protection, there will be access to more information and capacity to run computer sweeps that would match debts with companies that are in expansion mode. Much information comes from the Revenue system to the social welfare system, especially with regard to commencement of employment information. By running the sweeps, one will be able to see those companies that would be a reasonably good mark for repayment purposes and match that against the debt record because one has the employer RSI references and employee references in respect of all this information. Therefore, there would be room for more focused debt-recovery actions in the future. That, in turn, may allow repayment schedules to be agreed with those companies that would be in a position, over time, to start to repay these debts.

Reverting to Skillnets, I want to emphasise that, in the case of bodies that get more than 50% of their funding from the State, I can inspect them in exceptional cases. That opportunity exists should an issue of concern arise. The problem is that something must arise to draw one's attention to a problem before such an inspection. There is a lot to be said for operating bodies that are effectively resource allocators, as is Skillnets as a State agency. It is effectively carrying out a core function of the State in allocating funds to downstream organisations. There is merit in having the full rigour of the code of corporate governance and the State audit conducted in respect of those bodies. However, I do not want to question policy and I accept that this has been set by policy. In the overall framework, the concept that was more or less agreed when the 1993 Act was introduced was that non-commercial State activity would be subject to audit by the Comptroller and Auditor General whereas commercial activity would be the subject of audit by private sector auditors. In this context and if the issue were to be re-examined, it could be useful to try to determine where the boundary lies and whether Skillnets is on one side or the other.

I thank Mr. Buckley. Is it agreed to note Vote 34 of the Department of Enterprise, Trade and Employment?

I have no further questions now, but we are awaiting a great deal of information.

I was referring to the Vote and proposing that we not dispose of the chapter on the National Training Fund - Skillnets.

We are also awaiting a great deal of information on the Vote. I do not dispute anything, but I would like to get the information before signing off.

We will not note Vote 34 or chapter 29. What of chapter 30 on redundancy and insolvency payments?

No, we are still waiting for information on it. Again, I do not dispute anything, but we should get the information before noting the chapter.

That is fair enough. We will keep everything open. I thank the witnesses for attending.

Next week's business is Report No. 76 of the Comptroller and Auditor General on the National Asset Management Agency - acquisition of bank assets.

The witnesses withdrew.

The committee adjourned at 1.35 p.m. until 10 a.m. on Thursday, 18 November 2010.
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