COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 14 Jul 2011

Chapter 27 - Agricultural Inspections, 2009 Appropriation Accounts

Mr. Tom Moran (Secretary General, Department of Agriculture, Fisheries and Food) called and examined.

Chairman

I ask members and witnesses to turn off their mobile telephones. The interference from mobile telephones affects the sound quality and transmission of the meeting.

Before we commence I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give to this committee. If they are directed by the committee to cease giving evidence regarding a particular matter and continue to do so, 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 asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or 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 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 policy or policies.

I welcome Mr. Tom Moran, Secretary General of the Department of Agriculture, Fisheries and Food, and invite him to introduce his officials.

Mr. Tom Moran

I wish you, Chairman, and the committee well in your work over the future. I am accompanied by a team from my Department and a representative from the Department of Finance. Mr. Martin Herrity, assistant secretary, is in charge of commodity areas such as milk and meat and of our State body co-ordination and food safety; Mr. Phillip Carroll, assistant secretary, is in charge of HR and animal health and welfare; Mr. Tony Burke, assistant secretary, is in charge of the financial area including internal audit and environmental schemes such as REPS and the agri-environmental options scheme, AEOS; Mr. Heber McMahon, principal officer, and Mr. Jim Caddle, assistant secretary, work with Mr. Tony Burke on the financial control of the Department; Mr. Kevin Smyth, assistant secretary, is in charge of the single payment, disadvantaged areas and suckler cow schemes; and Ms Gráinne McGuckin from the Department of Public Expenditure and Reform is the principal officer dealing with the Vote part of this Department and others.

Chairman

I invite Mr. John Buckley, Comptroller and Auditor General, to introduce the 2009 annual report of the Comptroller and Auditor General and Appropriation Accounts, Vote 31 – Agriculture, Fisheries and Food, Chapter 27 – Agricultural Inspections; and Chapter 7 - restructuring of the sugar industry. The full text of chapters 7 and 27 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 Agriculture, Fisheries and Food spent €3.3 billion in 2009, of which €1.94 billion was processed through the Vote and the balance disbursed under EU schemes that it manages on an agency basis. The expenditure under its main schemes included €1.3 billion paid to farmers under the single payment scheme, €341 million under the rural environmental protection scheme, €224 million under the disadvantaged areas schemes and grant aid of almost €320 million was paid under the farm waste management and farm improvement schemes. Expenditure borne on the Vote also includes almost €50 million in respect of a pigmeat recall scheme introduced in response to a crisis caused by dioxin contamination of feedstuffs. This led to the recall of pork products from markets at home and abroad.

Two items of reporting work in the annual report for 2009 relate to the Department of Agriculture, Fisheries and Food. These are a report on agricultural inspections and a review of the sugar restructuring scheme. Agricultural inspections arise out of the need to confirm eligibility under the payment schemes as well as compliance with statutory management requirements under EU legislation and the requirement to maintain land in good agricultural and environmental condition. Ireland has a good track record of compliance, which can be gauged from the fact that the level of disallowances Ireland has suffered over the ten years to 2008 was less than one tenth of that imposed across the EU-15 area.

Following a conciliation process, the Commission imposed a penalty of €715,000 in 2009 because it considered that not all farmers selected for on-farm cross-compliance inspections were checked for all statutory management requirements that applied to them. There are 18 such requirements. This partly prompted the review in the course of which we looked at how the inspection regime was now working. The audit found that the required number of checks and the minimum levels of random checks were being carried out. From the viewpoint of inspection efficiency, while cross-compliance results were along expected lines, a surprising result was that the randomly selected inspections in the area of eligibility resulted in more penalties than those conducted using a risk-based methodology. Usually, risk targeted cases should result in detection of more non-compliance than a sample selected at random. While accepting that the Department's case selection methods are largely influenced by EU rules and that the proportion of remote sensing inspections can distort the results, there appears to be merit in exploring why on-farm eligibility inspections selected at random detect more non-compliance than on-farm inspections selected based on risk factors.

In carrying out its inspections efficiently, the Department has to balance achieving coverage while minimising the inspection burden on farmers and the cost to the Department. Considerable funds have been invested across all Departments under a management information framework. A neglected area despite this investment is costing and management accounting. The Department needs to give consideration to how it might get unit costs of its different types of inspections and combine the results in a way that feeds into evidence based allocation decisions.

Regarding sugar restructuring, in 2006 Ireland's sole sugar processor, Irish Sugar Limited or Greencore, decided to cease production under the terms of an EU restructuring scheme to encourage less efficient producers to exit the market. The result was that Greencore was paid €127 million under a compensation scheme, growers of beet were paid around €97 million, part of which was to meet the costs of diversifying into other areas of farming, and €6 million was paid to machinery contractors. A report by the European Court of Auditors examined implementation across the Union and found that by the third year of the programme the overall target reduction of 6 million tonnes was largely achieved although producers who ceased production were not those in the least competitive regions. It also noted that in the case of Ireland the closing down of what was regarded as an efficient plant had been justified on the basis that there was a risk that lower prices for growers would reduce the supply of beet to an uneconomic level. The Accounting Officer will update the committee on developments since the reports were completed.

Chairman

I invite Mr. Moran to give us his opening statement. May we publish the statement?

Mr. Tom Moran

Yes. Thank you, Chairman. I propose to outline some of the main events of 2009 from a general as well as a departmental point of view as a reminder to the committee of the year in question, to comment on the appropriation account itself, to respond to some of the issues covered in the Comptroller and Auditor General's annual report and to refer briefly to some current developments.

In 2009, the global economic and financial crisis continued to impact on all areas of the economy including the agri-food and fishing sector, where the effects were felt most severely in commodity markets and food and drink exports. Agri-food exports in 2009 were €7.12 billion and, in volume terms, reached 97% of 2008 levels despite the depressed export environment. In value terms there was a drop of 12% over 2008 which was primarily caused by challenging currency fluctuations, particularly the 13% fall in the value of sterling. Towards the end of the year, there were tentative signs of currency and economic recovery which heralded the increased level of agri-food exports in 2010.

2009 was a difficult year for the Department. There was a substantial cut in the Department's Vote in 2009 by comparison with 2008 which required policy and scheme changes to be implemented. In July 2009, REPS 4 was closed to new applicants due to budgetary pressures. The Department was also heavily involved in negotiations with the Commission on changes to the rural development programme under which a number of the major schemes implemented by the Department are co-funded. The negotiations led to a substantial revision of the programme in 2009, involving the development of a new agri-environment options scheme, AEOS, which prioritised biodiversity, water management, climate change and broadband. In addition, a series of new farm investment schemes known as the targeted agricultural modernisation schemes, TAMS, were developed and agreed. These schemes were introduced in 2009 and 2010 and included measures for dairy and sheep enterprises, pig welfare, poultry welfare, water conservation and bio-energy.

At a structural or organisational level, the restructuring plan for the Department's local office network was announced by the Minister. The major rationalisation plan involves the establishment of 16 enhanced regional offices and the closure of 42 offices to provide an improved service to customers using a more cost effective service delivery model. The restructuring process, which is now well advanced, will result in an overall reduction of around 400 staff and when completed should result in an annual savings of the order of €30 million.

There were also major successes on the disease eradication front and Ireland achieved official brucellosis free status that year. This is a major achievement and the ongoing objective is to maintain this status. There are considerable benefits to be had from this particularly in respect of the significant reduction in the cost of testing to farmers estimated at some €7 million and savings in testing costs to the Department of some €2.4 million. The incidence of bovine TB reduced by 20% in 2009 and while the number of reactors fluctuates annually the overall trend continues to be downwards.

In terms of trade, the economic recession and the exchange rate movements were the primary factors influencing the market performance of agricultural commodities generally in 2009 and this was evident in the beef sector where a combination of reduced volumes and lower prices had an impact on export returns. However, live cattle exports surged to an estimated 286,000 head in 2009, almost double the level recorded in 2008. The value of this trade grew by around 70% to an estimated €157million.

Dairy markets remained weak following the decline in 2008, reaching a low point in spring. This weak market led to the Commission reintroducing the range of market supports at its disposal. Export refunds were reactivated in January 2009 and were increased during the year. Intervention for butter and skimmed milk powder continued after reaching the mandatory limits and was extended beyond the August closing date. Tentative signs of recovery showed in the second half of the year.

It was a crucial year for the pigmeat sector. The fallout from the dioxin incident dominated the early part of the year. Considerable work was done to restore international confidence in the safety of Irish pork resulting in the reopening of the majority of markets closed in the immediate aftermath of the incident. Profitability margins for pig producers remained low with feed prices high for most of the year. It was also a difficult year for the cereals sector, with dramatic reductions in prices and harvest.

The other significant issues dominating were the discussions on the broad outline and principles of the future Common Agriculture Policy and the reform of the Common Fisheries Policy. In both cases, an extensive consultation process was initiated nationally to seek stakeholders' views on the most appropriate policies to be pursued. This process provided valuable input and continues to influence consideration of the policy options being adopted and exercised. My opening statement refers to a number of areas but I will pass over them on the basis that the document will be published and to save time.

During the year there was a Supplementary Estimate, the purpose of which was to make good use of €107 million in savings that had been identified in the Vote and to make use of increased receipts from the EU. The Supplementary Estimate did not involve any addition to the Department's net Vote. In addition to the transfer of savings, Dáil approval was sought for an increase of €18.437 million on the gross side of the Vote that was matched by additional EU receipts for the same amount. Theadditional EU co-funding receipts which had not been anticipated when the Estimate was prepared arose from the EU contribution to the cost of the disposal and destruction of livestock and pigmeat product withdrawn from the market in December 2008.

The effect of the Supplementary Estimate, which was approved by the Dáil, was that the Department was enabled to make increased budget provisions totalling €125 million to cover the payment of expected maturing liabilities under four demand led headings which were as follows: REPS, an additional €39 million; farm improvement scheme, an extra €15 million; farm waste management scheme, an extra €70 million; and the food industry research measure, an extra €1.288 million.

The final outturn for the year resulted in a saving of just over €65 million on the Supplementary Estimate. These savings arose in several areas of the Vote, the largest being under REPS, subhead F. The intention, in seeking the Supplementary Estimate, had been to increase expenditure by €39 million over the original Vote allocation. However, despite intensive efforts to process as many payments as possible by year end, the increase in expenditure was of the order of €11 million. This was due to the volume of claims, the level of administrative checks required before payments could issue and adverse weather conditions towards the end of the year that disrupted inspections.

The annual report of the Comptroller and Auditor General covers a number of issues, the first being the agricultural inspections. Two issues were highlighted in that. One was the risk versus random outcomes of eligibility inspections where random outperformed risk in 2009 and the other was the cost of inspections and average number of inspections conducted.

Before I address the conclusions in the report, it would be helpful to put the inspections regime and the findings in context as the Comptroller and Auditor General has done. Agriculture still accounts for about 45% of the EU budget and, within that, the main element of EU spending on agriculture and rural development is on direct incomes and market supports. Expenditure under the single payment scheme, which applies throughout all member states and is 100% funded by the EU, is the single biggest component of expenditure. Ireland's share of the 2009 EU budget amounted to more than €1.7 billion, €1.3 billion of which came through the single payment scheme. In addition, payments under the rural development programme under REPS, disadvantaged areas, early retirement and farm improvement schemes, are all co-funded to the tune of €324 million.

The direct payments under the single payments scheme are crucial to the farming sector in Ireland. The direct benefit to the farmers concerned and their families is obvious and the reality is that direct payments comprise a high proportion of the income on many farms. The injection of substantial funds also benefits the wider rural economy, enabling a wide variety of businesses, large and small, to operate successfully.

The key to unlocking the €1.7 billion in EU payments that is channelled to farmers from the EU through the various schemes each year is the inspection system which underpins the payments and provides assurances necessary to the EU Commission that the expenditure is in compliance with EU regulations. Without a robust inspection regime, Ireland could not stand over the legality and regularity of payments and severe financial corrections would be imposed by the EU Commission. This is the regime which is the subject of the Comptroller and Auditor General's examination.

The risk versus random inspection is quite technical, and I apologise for this. The basis for the inspection regime is set down in strict EU requirements under which the number and type of inspections are prescribed. Under the single payment scheme, the Department is obliged to carry out two types of inspection, namely, land eligibility and cross-compliance - in other words, having the land and what one does on the land. Inspections are selected mainly on the basis of risk assessment but 20% to 25% of cases must, according to the EU Commission, be selected on a random basis.

Some 5% or approximately 7,000 farmers who submit applications for single payment scheme and other direct payments, including the disadvantaged areas scheme, must be checked for eligibility annually. Individual farmers are selected for inspection on a risk assessment or random basis and the checks are generally carried out as one inspection in one of two ways, either by remote sensing using satellite technology or by ground or field inspections.

In the case of remote sensing, the checks are carried out without the need for an on-farm visit. The reality is that the level of problems, due for instance to ineligible features, uncovered during remote sensing checks will generally be lower than that uncovered by the classical ground inspections. The more detailed close scrutiny of a farm by an inspector on the ground is always likely to pinpoint more problems than an image generated by satellite technology. As there is a higher proportion of field visits involved in the random selection process, the results of inspections tend to be distorted in favour of randomly selected inspections. This explains the apparent anomaly which is commented on by the Comptroller and Auditor General in his report.

One discovers more difficulties with ground or field inspections than by satellite technology. This point was discussed recently with the EU auditors who accepted that the use of remote sensing will distort the results of eligibility inspections in favour of randomly selected cases. Given developments in the meantime, including the improved accuracy of the land parcel identification system and the increased involvement of consultants and advisers at application stage when farmers submit applications, I can advise the committee that the error rate in the risk sample for eligibility inspections is now approaching that in the random sample.

In regard to cross-compliance, while random selected cases produced more penalty cases than risk based selections in eligibility inspections, this is not the case with cross-compliance inspections. The 2009 outcome was not available during the Comptroller and Auditor General's audit but this is now to hand. In 2009, more than 19% of farms selected on the basis of risk received penalties while just over 10% of those selected on a random basis received penalties. This is the more logical outcome and gave rise understandably to the Comptroller and Auditor General's comments in the report.

The cost of inspections is the other issue. The Comptroller and Auditor General's report also comments on the cost of farm inspections and estimates that the total cost of the farm inspection service in 2009 was €15.8 million, including direct salary, overheads, imputed pension costs and travel and subsistence. To put the overall cost in context, this underpins and facilitates the payment of €1.3 billion in payments to farmers under the single payment scheme not to mention the other schemes. The cost of inspections identified by the Comptroller and Auditor General covered the cost of all 140 staff in the integrated control division and works out at a cost of €1,800 per inspection. The Comptroller and Auditor General report is based on the 8,650 cross-compliance and eligibility checks selected as part of the annual selection process I have already outlined.

I will comment on the Comptroller and Auditor General's findings, which, let me hasten to add, the Department does not dispute. We should be clear about what is covered in the Comptroller and Auditor General's comments. Besides the direct costs of inspections work, the costings include the full annual cost of the salaries and all associated costs of the staff concerned in the inspections as well as the full cost of local office infrastructure and all its service and back-up costs, from which the inspections staff operate. The calculation also isolates the inspection work of the staff concerned without taking into account the limited timescale within which the inspections are carried out, the other work done by the staff concerned or even other inspections that may have been carried out. There were some others carried out in that year and in the subsequent year the cost of €1,800 had fallen to €1,200.

The direct cost of inspections to which I referred are the salary costs for the number of hours spent by the inspector on the farm, plus the cost of travel to and from the farm, subsistence, if any, and the time required to complete the inspection report. This calculation would show a massive reduction in cost by comparison with the Comptroller and Auditor General's methodology but I accept that it would not present a full picture of the total cost to the taxpayer.

There are two important points I also want to make on the cost of inspections. The Department has the data, procedures and processes in place to identify the actual cost of inspections. This issue is the subject of Comptroller and Auditor General comment and I confirm that capacity is available to analyse the data with a view to securing efficiencies. Also, the Department has made substantial progress in reducing the cost of inspections since 2009. Staff numbers are down, travel and subsistence costs have been cut, additional inspections are now being carried out and the overhead, in the form of the local office structure, has been rationalised and the cost reduced.

We continue to seek further efficiencies. The Department has always accepted the need to avoid duplication of inspections and to maximise efficiencies and has acted accordingly. I emphasise to the committee that these inspections protect the €1.7 billion in payments made to farmers each year. This is an administrative cost of 0.9% to underpin the income platform that determines farmers' livelihood. All member states are obliged to carry such administrative costs.

The annual report of the Comptroller and Auditor General also has a chapter on EU financial transactions for 2009 which, inter alia, detail agriculture and rural development funds received in 2009 and the methodology employed by the EU Commission in conjunction with member states to manage and account for those funds, including EU audits, Court of Auditors audit opinion and irregularities, recovery and financial corrections which may be imposed.

I am pleased that the Comptroller and Auditor General has noted that Ireland's disallowances for expenditure incurred in the years 1999–2008 amounted to approximately 0.13% of EU funding as compared to a disallowance averaging 1.44% for the EU 15 over the same period. I also draw the committee's attention to a recent special report of the Court of Auditors which looks at the issues to be addressed to improve financial management. A précis of the report and a specific letter written to the Chairman by Eoin O'Shea, a member of the court, compliments Ireland, stating "Ireland is considered both honest and careful in its performance." In addition he states that there is a strong control environment in the agriculture receipts area involving the Department, the external auditors and the Comptroller and Auditor General.

The annual report of the Comptroller and Auditor General also deals with State body management and other than a reference in the annex relating to Bord Bia, BIM and COFORD in the context of rationalisation, there are no specific references to the Department in the chapter. Nevertheless, I assure the committee that the Department is committed to ensuring that the State bodies that come within its aegis comply with the highest standards required from them, taking particular account of the guidelines on corporate governance issued by the Department of Finance in May 2009.

The operating climate for the agriculture, food fisheries and forestry sector continues to be difficult as a result of the unfavourable economic and financial conditions, at home and in our major trading partners. Exchange rates continue to be unstable and consumer spending continues to be tight. Nevertheless, 2010 was a very positive year for the Irish agri-food sector following a very difficult year in 2009. Exports in the sector have grown faster than many other sectors and are now worth close to €8 billion per annum. The cereals and dairy sectors had a particularly good year, while new markets were found for the forestry sector in Britain and for potatoes in Russia.

We do not underestimate the challenges ahead. A key element of our strategy is implementation of the Food Harvest 2020 report, which proposes a strategy of smart, green growth that will map the future direction of the agri-food sector for the next decade, a period that will be crucial for the development of a dynamic and forward-looking industry.

I will be happy to deal with any questions or comments that the members of the committee may have.

Deputy Sean Fleming

I thank the Secretary General for his comprehensive report and the documentation supplied with it. A significant element of today's discussion relates to inspections. People would appreciate more information on the satellite inspections. I read that two thirds of inspections were from satellite reports and a third from field inspections. Are those costs included in the costs referred to here or are these just field inspections? What does the satellite programme cost the Department? Most rural Deputies will have seen satellite maps and heard complaints about them. How are farms identified for inspection under the satellite or are the satellite maps of the whole country from which inspections are picked? What international company does this? Who links up with that company? What is the tendering process like and what is the annual cost of that aspect of the Department's activity? Many people are conscious of this area.

Generally, about 5% of farmers had inspections during the year, which is accepted by the EU. I welcome that fact because those of us who have attended meetings over the years were given the impression by the IFA that inspectors were crawling over every gate and hedge and there were unannounced inspections regularly. I am surprised to hear that 19 out of every 20 farmers did not have an inspection. I would not like to accuse the IFA of exaggerating the difficulties caused by inspection, but it would give the impression that every farmer is inspected on a regular basis. It is good to put the figure in context. How many farms had double inspections under different schemes?

The notes also mention that the Department has taken on the role of nitrates inspections for local authorities and that it will carry out 1,500 inspections under that heading. Has the Department absorbed that into its existing cost structure or are local authorities billed for that work? Are those inspections simpler and less time consuming or are they incorporated into the other 8,000 inspections?

I am not clear about the overall penalties, which amounted to about €1.9 million. Based on field inspections, according to the report, there were 1,071, representing 14%, attracting penalties of €958,000. More than half the fines resulted from the satellite mapping. We know 14% of farmers were fined as a result of field inspections. Will Mr. Moran tell the committee how many farmers in total were fined based on the two methods of inspection and what percentage of the payments due to them the fine represented?

Elsewhere in the documentation, I see a figure for a financial correction of €1.8 million as a result of the EU thinking there was a risk, and then a compromise figure, which it settled on, of €715,000. Do these figures relate to two separate issues? In other words, are the fines that result from inspections one issue? Did the EU perception of risks in Ireland result in a financial correction? Did the EU attribute a 5% risk to the payments under the headings where there was a risk and then settle on a compromise figure?

Mr. Tom Moran

Chairman, I may not be able to take all the questions, as they were quite detailed. I will answer some of them but I will definitely come back to the others.

We have tried to make our inspection regime as efficient and effective as possible. We were able to identify some areas that would contribute to this effectiveness. One such area was to take on work from other agencies. For example, we agreed to take on the nitrates checks for the local authorities. That is an extra 1,500 on-farm checks that we conduct. We do not bill the local authorities for that service. We take the view that, technically, while the Department of the Environment, Community and Local Government and the local authorities are the implementing bodies for the nitrates directive, we have the bodies, are on the farms and have the facilities, and we felt it is a better use of State resources to do that. We would like to think that other State bodies would do similar things for us.

The farming bodies were happy that we would do this. As the Deputy quite rightly points out, farmers have expressed concerns ever since checks were carried out on farms. Farmers have an understandable level of initial suspicion and doubt about such checks. I can fully understand that because the single payment, especially for certain farmers in the livestock sector, represents a major proportion of their income. Our inspectors who conduct on-farm inspections have a very important say. The eligibility checks are to check whether the person has the extent of the land in question, or whether the land is eligible in a broad sense, that is, whether it is usable for agricultural purposes. As well as that, the cross-compliance check involves 18 different measures that must be checked on the selected person's farm. It is a big deal if an inspector goes out to visit a person's farm. In the Department, we are very conscious of that and we try to organise the inspection in such a way as to make it as user-friendly and as acceptable as possible.

At the same time we must balance that against the threat of disallowance or criticism which has financial implications that come from the Commission. The Deputy raised the point about the extent of this disallowance and whether it is part of the penalties. The answer is that it is a refusal on the part of the Commission to sanction payment to a member state at the end of any year. It is a straight top-line disallowance. It is highest on the Department's risk list. We as a Department cannot afford to incur those disallowances that will impact on the Exchequer. Even though, as the Comptroller and Auditor General acknowledged, that figure is quite low by comparison with other member states, we do not regard it as low. Every single potential risk of a disallowance is taken extremely seriously by us. We must try to balance that against going over the top with inspections and I believe we strike the right balance. We do precisely what is required.

Deputy Fleming asked what is required and that is set out very clearly: 5% of total population must be checked for eligibility and 1% of the total sample must be chosen for cross-compliance where 18 different measures are taken that span from animal welfare, environmental, tag identification, food safety and so on. It is a significant burden. It is an issue we have tried to get across in all the CAP reform negotiations that the single payment is not a payment for nothing. It is given in return for a public good where the taxpayer is getting an assurance that all this is being done. Major sums hang on it, but there is a very strict table setting out the checks the Commission requires at farm level. The Commission auditors conduct a serious examination not just of what the Department does and how many inspections it conducts but also go onto farms and check whether the land is eligible. If there are elements on the farm that are deemed to be ineligible, such as scrub or whatever that has been used to graze, it is subject to an ineligible result. In relation to satellite testing, the satellite photography of a particular area is provided by the Commission, there are 12 zones and the photography is provided free from the joint research unit of the Commission. We also have a contract with the Ordnance Survey which also does a high flying inspection of land as well. There is a second level of photography and we pay for it.

Deputy Sean Fleming

I thank Mr. Moran for his response on inspections. I have a series of other questions. I have a number of specific questions on the accounts. The Department had a surrender of €69 million at the end of the year and a Supplementary Estimates of €125 million. Will Mr. Moran give me the date of the Supplementary Estimate and how close to the year end it was raised? I could understand if it was two months out, but if the Department raised the Supplementary Estimates in December and yet was able to hand back €69 million, I would query the figure.

Under the heading of veterinary supplies, there is a supply of €2.5 million worth of product at the end year. In terms of months what would veterinary supplies of €2.5 million represent? Is it one month's stock or five years stock? Will Mr. Moran explain the reason for the interest charge of €4.25 million during the course of the year, when the Department had to borrow money pending receipt of funding from the EU, in view of the fact that it was handing back money? I do not understand the reason for the overdraft requirement.

Will Mr. Moran give a global picture on the €1.4 billion of EU funds processed through the Department? We have discussed the detailed inspections, but that is only one aspect of administering that €1.4 billion to ensure it is all properly done. In terms of staff and overheads associated with the processing of €1.4 billion, what proportion of the Department's budget goes in that area? Would we be efficient in terms of the ratio of cost to processing versus other EU countries?

I know I am throwing out questions and I hope somebody is noting them. The farm waste management scheme is an ongoing issue and a great deal of additional money was invested in that scheme. That was well thrashed out, but what area had to suffer to make up for the staff shortage in that area? Mr. Moran referred to the closure of 42 offices and the enhancement of 16 extra offices during the year. Will he outline separately the enhancement cost of the 16 extra offices? Obviously if staff are moving from Portlaoise to Naas, extra accommodation must be provided. What savings were achieved from the closure of the 42 offices? There may not have been a saving on staff if they were redeployed to other offices. Were leases surrendered or is the Department stuck with them?

The last issue I want to raise is the decentralisation of staff to Portlaoise. Mr. Moran would be surprised if I did not raise it. We all know the situation. Mr. Moran might tell me how many staff are in Portlaoise. I am sure there are at least 500 staff there. The last time we discussed this, I was told the Department was renting temporary office accommodation at seven locations around the town. I think 11 different leases had been agreed. The Department was paying well over €1 million in rent per annum. This temporary arrangement had been adopted on the basis that a new office would be built. I understand the Department has acquired and paid for a new site. Planning permission has been obtained for the new office. I am aware that the intended preferred bidder did not proceed with the project. Where are we now? Was the Department's decision not to proceed with the construction of this office a financial one or a policy one? Is the current policy that the construction of the new office will proceed? It is obvious that there are inefficiencies. It was fine to move staff from Dublin to Portlaoise until they ended up in seven different locations. I understand the Department is upgrading its broadband network around the town to facilitate co-operation between the various offices. It is not desirable for officials to be in seven different locations. Is there a proposal to proceed with the construction of the new office so that the temporary accommodation can be released? When the Department signed the leases on the accommodation in question, I assume it was intended that it would be used for a couple of years only. If the landlords realise after a year or two that the office will not be built for another ten years, and the Department is therefore stuck in the seven rented locations, it will have knock-on implications on the rent levels being paid. The staff are there at this stage. Can Mr. Moran update me on that matter and the other matters I raised?

Mr. Tom Moran

I will do my best. It might be logical to begin by referring to the administrative cost of the Department, which is the issue that comes immediately to mind. We are very focused on it. Some commentators do not take account of the financial throughput of the Department. They just take account of the Exchequer Vote. If one takes account of both factors, one is talking about the guts of €3 billion. All of that needs to be handled and controlled. The proportion of our total expenditure that is spent on pay is 6.4%. That is a very important figure. It is coming down constantly. We are reducing the numbers and the pay levels. It is important to take account of the full amount. It compares reasonably well with other EU member states and other Departments. We benchmark our performance on the single payment system. A recent survey of five member states - Ireland, France, Germany, Italy and Denmark - related to the administration of the single payment and the cross-compliance. Ireland was found to be the most efficient of the five states.

Deputy Sean Fleming

Well done.

Mr. Tom Moran

We do not sit on our laurels. Can I deal with the Portlaoise issue? I know it was the last matter to be raised by the Deputy. He will be aware of the background to this. I do not need to go into it to any great extent. When the initial decision was made, it was agreed that the headquarters of the Department would move fully to Portlaoise. We already had a fairly sizeable office in Portlaoise and we moved fairly quickly to add to that. We were heading towards a programme that would leave us with between 800 and 850 people in Portlaoise. We completed the 2005, 2006 and 2007 advance phases by adding another 150 people down into Portlaoise. When the decentralisation decision was first taken, the number of staff in the Department was 4,580. That has been coming down constantly. We have reduced the number of staff in the Department by 1,200 since 2005. We are continuing to downsize. A great deal of water has passed under the bridge since the initial decision was made.

The Deputy is absolutely correct to suggest that we moved people down to try to begin to build a major centre. We have done that. Our very successful single payment stuff, as well as our work in many other areas, is done down there. The idea was that a new custom-built building would be built in Portlaoise. I understand that is now being reviewed in light of the other expenditure reviews. We have approximately 500 people in Portlaoise at the moment. They are spread across seven buildings. That is not efficient, from anyone's point of view. It is hard to manage. It is not efficient on a number of fronts. There is no need for me to state the obvious. If it were possible to rationalise that in some way, even in the context of the expenditure constraints that would apply to a building project, obviously we would do that. I assure the committee that we are actively looking at that possibility. That is really where we are in relation to Portlaoise.

Chairman

Would Ms McGuckin like to comment on the review mentioned by Mr. Moran, in the context of the provision of a new building?

Ms Gráinne McGuckin

I assume the Department will look at all elements of expenditure, including all the costs associated with the Portlaoise option, in the context of the comprehensive review of expenditure.

Chairman

When is that review likely to be completed?

Ms Gráinne McGuckin

The Department has already submitted a preliminary report to us. Considerable work remains to be done on it. We expect to have the full report by September.

Chairman

Does the primary report indicate anything in relation to Portlaoise?

Ms Gráinne McGuckin

Apparently, quite a few papers have yet to be done on various aspects of expenditure that need to be looked at. I cannot comment further on that at the moment. The Department will look at all aspects of expenditure. It will also look at its numbers policy and the degree to which the numbers are moving up or down in the Portlaoise context. That will obviously have implications for the numbers in Portlaoise. That is a matter for the Department in the first instance.

Chairman

Will the review also take into consideration the inefficiencies and poor value for money associated with the Department's presence in multiple locations in Portlaoise? Will it consider the savings that could be made if a single headquarters were to be established in Portlaoise to house all the employees there?

Ms Gráinne McGuckin

On the face of it, having seven locations is sub-optimal. If the review comes up with something that can achieve value for money as an outcome, obviously it will be looked at sympathetically. I cannot pre-empt the outcome of the review. Obviously, anything that would enhance efficiency and attain value for money would be considered. I do not want to pre-empt what is coming down the track.

Chairman

Can I ask Mr. Moran about the leases and the ownership of the various buildings that are being leased in Portlaoise? Are they long-term leases? Would it be easy to get out of them? Are we committed to them for long periods? We are talking about whether a single office should be developed, but is it the case that it will not happen because the Department is legally tied into the leases?

Mr. Tom Moran

The arrangements vary across the seven buildings. It would be fairly easy to deal with some of them. It would be slightly less easy to deal with others. We are discussing how that might be rationalised with the OPW. Perhaps I am going further than I should - I am an optimist - when I say I am confident we might be able to do something to rationalise the seven locations we have at present. It would make a significant difference to the performance of the Department. The areas that are based in Portlaoise are crucial to the core operation of the Department. The single payment, disadvantaged area payment and suckler cow schemes are based there. Many other divisions are divided between Portlaoise and the Kildare Street office because we are in the process of trying to do something. A good bit of work has to be done. We are considering that at management level in the Department. I hope we will be successful in rationalising it a bit more before the end of the year.

Deputy Sean Fleming

I will make a suggestion which goes a little further than I have gone in previous public statements on this matter. The Department has a large, established, publicly owned office in Portlaoise which houses more than 200 staff and was in operation before the decentralisation process began. Perhaps it is possible to rationalise the other six locations in one new location rather than building an office for 800 staff. I am reading between the lines in interpreting the Secretary General's comments as meaning the original plan, which was for 800 staff, may not be realised. The final staff figure for Portlaoise may be slightly more than 500 if the Department does not proceed with decentralisation. It has one good office. Perhaps it should have one more good office of a fraction of the scale of that originally envisaged, which was for 800 staff. This would bring together the other six locations and the Department would then have only two locations which would not be such a big deal. I am not proposing such a scenario but asking the Department to examine it as part of its efficiency review. The simpler solution may be to build an office for 300 rather 800 people. We will raise this issue again with the Department.

Mr. Tom Moran

That is exactly the kind of thinking we are engaged in at the moment. The State owns the building to which Deputy Fleming refers and there is a great deal of sense in the kind of thing we are talking about. Those are exactly the conversations we are having now with the Office of Public Works and so on in relation to rationalising.

Deputy Sean Fleming

The Department has already purchased the new site.

Mr. Tom Moran

Yes, but the State owns the old building at the roundabout to which the Deputy refers.

Deputy Sean Fleming

I will not delay Deputy Deasy who has been waiting for a long time to speak. I would be happy for the Secretary General to respond later. I have only put two of my six or eight questions.

Mr. Tom Moran

I have answers.

Deputy Sean Fleming

I am finished speaking.

Deputy John Deasy

I will pick up on a couple of the issues raised. On nitrates, will the Secretary General indicate what level of problem cases the Department has found compared with the level found by local authorities before the Department assumed responsibility for inspections pertaining to nitrates last year? Does Mr. Moran have figures on the number of problem cases the local authorities found? Will he compare their figures with those of the Department? What are the costs involved? Perhaps Ms McGuckin knows how much the local authorities spent per visit. Has risk profiling changed since the Department assumed responsibility for nitrates?

Mr. Tom Moran

I will make two points on nitrates. We inspect nitrates as part of cross-compliance. The legal responsibility for legal enforcement other than in the area of cross-compliance - in other words, if there were to be prosecutions strictly from the environmental point of view - still rests with the local authorities. Our inspections are add-ons to our cross-compliance because they are part of the cross-compliance criteria that must be applied. Therefore, by definition and given the conversation we have had, by adding them into our inspections, we reduce the costs of our inspections considerably. That was one of the main considerations that has brought the overall cost down in one year from €18 million down to €15 million.

Deputy John Deasy

I understand the integration issue. It is clear from the report and makes perfectly good sense. Does the Secretary General have any idea of the rate of problem cases the Department is finding compared with the rate the local authorities found?

Mr. Tom Moran

While I do not have the exact comparator at the moment, what I can say is that when the local authorities have to follow up on an issue, for example, an issue in relation to potential pollution, they will follow a particular risk area, for example, along a water course. They would, therefore, follow a particular line. The Department is on a different spread. I will come back to the Deputy. I take the point he is making.

Deputy John Deasy

That is fair enough. I return to risk profiling outside of satellite imagery. Will the Secretary General explain how the Department profiles risk? I will explain the reason for my question. Reading the documents, I was surprised when I compared the rates of success in terms of finding problems for cases involving risk profiling with cases involving random selection. The figures jump out. One would assume a better hit rate for farms selected using risk assessment that those selected randomly. Will Mr. Moran explain the risk profiling process used by the Department? Has it changed in recent years?

Mr. Tom Moran

The risk profile for selecting cross-compliance checks spans several areas. It includes, for example, the size of the farms, their activity and location, their past history in relation to penalties and other factors. These are all the logical, normal things one would pick if one was trying to profile those where non-compliance would be likely. The reason that the random produced the counter-intuitive effect - the effect the Deputy referred to - is that satellite imagery was being used to check and would, by definition, find less than if a fellow went out to walk the land. That really is how that comes about.

Deputy John Deasy

To address one of the factors to which the Secretary General referred, namely, previous history, how heavily is this factor weighted by the Department? When one examines the figures, it does not appear to have worked, although I may be incorrect in that regard. How heavily does the Department weight problem cases from previous years?

Mr. Tom Moran

The formatting of the risk is decided by the European Commission. That is one of the reasons we discussed with the Commission auditors this illogicality between the remote sensing and on-the-ground checks.

Chairman

As Deputy Deasy noted, the methodology is in place. The question is how the Department identifies the individual and builds the risk on him or her.

Deputy John Deasy

It appears from the figures that the current approach is not achieving what it is intended to achieve. The presentation makes clear that the gap is declining, which is fine. Improvements are being made in the Department. The Comptroller and Auditor General specifically found in his 2009 report that the number of inspections being carried out exceeded the threshold set by the European Union. How many more inspections are being carried out above the EU threshold?

I will make my point, which is that it costs €1,800 per farm inspection. Is the methodology used correct? Mr. Moran states it is improving. We are carrying out more inspections that the European Union requires of us and our costs are declining. Could we do fewer but more specific and successful inspections and, in so doing, reduce their cost? That is the point I am getting at. Does the methodology need to improve and can we reduce the number of inspections and thereby save the taxpayer money? I agree with the Secretary General that billions of euros are riding on this issue and we must act properly in this regard. That is the conclusion I am making on the basis of the Comptroller and Auditor General's report and the Department's presentation.

Mr. Tom Moran

If we were determining all of this ourselves and we did not have the Commission setting criteria for us, one could follow the logic of the Deputy and possibly reduce the number of inspections or target them differently or whatever else to suit the resources at one's disposal. Unfortunately, in this case the Commission determined precisely the minimum level of inspections one must do. We must adhere to this minimum and if we do not, we are at risk of disallowance.

Deputy John Deasy

Is the number of inspections in excess of the Commission's minimum level?

Mr. Tom Moran

I do not have the exact figure but if we are above the minimum, it is not by very much. From time to time, we have to do other inspections, for example, to follow up on issues that arose. We keep a very close eye on what is happening in other member states and on the problems identified by the Commission in how accounts are cleared. If we thought we had a difficulty, it would be only prudent and logical to do further checks.

Deputy John Deasy

I note that the cross-compliance section of the Secretary General's report shows the figures are the other way round.

Mr. Tom Moran

That is right, because it deals with what is happening on the ground.

Mr. John Buckley

The figures are just marginally above the requirement. For example, the eligibility requirement for a single payment scheme, SPS, would be 5%, but the outturn would be 5.3%. In the disadvantaged areas scheme, DAS, the requirement for eligibility is again 5%, and the outcome is 5.6%. In REPS for the year 2009, the figures were 5.9% as against 5%. On the cross-compliance, it comes in almost bang on the 1%. It is 1.2%, 1% and 1.2% across the three schemes I mentioned.

Deputy John Deasy

While I have time, may I turn to something Mr. Moran mentioned in his presentation, namely, the downsizing of offices throughout the country. I have spoken on this issue in private session and would like to give the background to my thinking on this.

The Department of Agriculture, Fisheries and Food has probably been the pioneer with regard to downsizing throughout the country over recent years and quite a few offices have been downsized. My concern is that not all Departments have models for downsizing that may occur within their systems. I presume the Department of Agriculture, Fisheries and Food has a system, model or methodology which it put in place to identify the locations for new offices. Can Mr. Moran give me some idea of that system?

Mr. Tom Moran

The Deputy is correct. It was a major move for the Department to downsize in 2009, because we realised we could not sustain the cost of maintaining all our offices. The country, the Vote, farming, roads and many other things had changed. The level of disease was going in a particular direction. More importantly, the Department had invested in and developed an IT system which changed the footprint demand of the Department. We recognised, therefore, that there was no need to have an office at every crossroads. It was a combination of all the changes that led to that realisation.

We have an effective management services unit within the Department, which is a small internal team of people whose job it is to examine the various aspects of the Department, all the schemes and so on, from time to time. They are constantly working on that. We asked that unit to do an analysis and conduct the necessary consultation within the Department. That was the basis or genesis of the change. We felt there was a need to capitalise on what we had invested and to reflect the changes in society and in farming.

We then set about developing a template, which was modelled on the basis of what was required, for example, the spread throughout the country, the ease of access for clients, the extent to which a building is owned rather than leased, the availability of staff to work in the particular or enhanced location or the ease of redeploying staff. For example, we thought about whether some other State sector - in our case it was social welfare - had requirements in certain areas and whether our staff could be redeployed there. This was another addition to the modelling we would use. For example, in Castlebar we blazed a bit of a trail. We closed an office there, but we were able to move the staff into the Garda PULSE office, which was a great success.

Deputy John Deasy

Am I right in thinking that this was the Department's model and that there is no central Government model per se? To be blunt, the placement or relocation of offices over the past 20 years was based more on personal political relationships than on good governance. Decentralisation proved that. However, the system Mr. Moran is explaining is one that was developed within the Department of Agriculture, Fisheries and Food and there is no central model. Is that correct?

Mr. Tom Moran

I am not aware there is an off-the-shelf model that one could simply take and apply. We worked out our model ourselves. Our model does not just relate to staff and buildings. We also had to take account of disease and the location of animals, of where an enhanced office might be required and where we could do without a local office. The development of our IT system helped us enormously. If we focused too much on the closure of 42 offices - from 58 down to 16 enhanced offices - we would lose sight of what we are doing on the enhanced offices. With these, we are actually building up offices that are effectively one-stop shop offices where people can go in and do all their agriculture business, if necessary. Again, this has been facilitated by the development of IT.

To answer the question specifically, we were not following any set model. We developed our own model following an examination of all the factors and then came up with the plan. We put the plan to Government and it was agreed. We nearly have it finished, but there will probably be a further phase.

Deputy John Deasy

I have served on the Committee of Public Accounts previously and whatever Department comes before the committee, the fisheries sector seems to be like the forgotten aunt in the basement and is pushed aside somewhat. I would like to focus on the travails faced by fishermen, particularly inshore fishermen, in my constituency. Could Mr. Moran explain or give us a brief synopsis of where we stand with regard to the Common Fisheries Policy? Are there any attempts by the Department or is there any expected breakthrough due from the European Commission with regard to additional quotas? Is there anything on the horizon, even if it just pertains to inshore fishermen, not the big trawlers?

I always get confused with regard to the farm improvement scheme and the farm waste management scheme. Four weeks or so ago, the Department announced the suspension of the farm improvement scheme. Is that correct?

Mr. Tom Moran

The on-farm investment scheme.

Deputy John Deasy

Quite a few farmers in Waterford were in the process of making applications, but the announcement came quite abruptly. Farmers have been asking me what the future holds. Some of them have spent money on plans and have had the drawings done. They have invested quite a bit, but had not made their applications by the time the announcement was made. Will an additional tranche of money be made available in the coming two years for the on-farm investment scheme?

Mr. Tom Moran

In keeping with tradition I will deal with the questions in reverse order and begin with the on-farm investment scheme one first. The scheme suspended recently was the targeted agriculture on-farm investment scheme. A range of schemes is co-funded - roughly 50-50 - between the Department and the European Union. The Minister made it clear at the time that the scheme was only being suspended, on the basis of prudent management of finances, because until such time as the expenditure review, which is ongoing, is complete, it would be unfair to producers to put them to the trouble and expense of going ahead with applications and drawing up plans if they were not going to be funded. Therefore, it is a temporary suspension of the scheme to check the lie of the land after the expenditure review. They are valuable and useful schemes. The people the Deputy is talking about are probably dairy farmers around his area who would be investing in getting ready to increase their output for the next five to ten years, as other farmers will be doing throughout the country. The schemes are important, but the temporary suspension was in the context I have explained.

Decisions like this must be quite abrupt. We cannot announce that we are suspending a scheme next week or in two weeks' time, because the postman-----

Deputy John Deasy

Granted.

Mr. Tom Moran

It is just prudent management of finances. I understand the point the Deputy is making.

Fisheries is a very interesting sector and is by no means a forgotten sector. The current Minister has a very strong interest in it, and not just the pelagic sector. The reform of the fisheries policy will now take place. The very strong likelihood is that the under the Irish Presidency in 2013, we will have to lead the reform of both the CAP and the fisheries policy. Those two large sets of proposals are trundling along through the various stages of proposals and consultation by the Commission. The proposals on the fisheries policy are out today or tomorrow. We have certain areas of the policy that we wish to protect. We have made those views very clear to the Commission and to other member states. The Minister has met the Commissioner and we have met at senior level with other member states.

We need to protect our quotas and to avoid a situation where those quotas can be privately traded and taken away. That would affect small family fishing businesses. We want to maintain the Hague preferences, which were a mechanism introduced around the time we joined the EEC to ensure relative stability and that when quotas were being reduced, certain recognition would be given to the fact that we brought a good deal of fish potential with us when we joined.

We are working with the Commission and other member states to develop a policy on discards, which is something that needs to be addressed in the reform. It is a mad system at the moment. We cannot have a situation where the fishermen are telling us that a particular species is abundant but they have to throw it back into the sea if they catch it as a by-catch with some other fish.

As part of the 2020 process, which covers the Department's entire ambit, fish and aquaculture were highlighted as a key growth area. This needs to be addressed in the Common Fisheries Policy, as does the possibility of landing fish from boats that are not necessarily Irish, processing them here, creating added value and moving them on to the markets. The economics of hawking fish to big consumer countries like Spain does not necessarily stand up if we can take them in here and efficiently process them, add value and carry them across as a higher value product. We are working on that potential. We are not just taking a protective approach to what we have under the Common Fisheries Policy, but an offensive one on how we can develop a very valuable resource. That does not just apply to large-scale pelagic offshore fishing but to inshore fishing as well.

Deputy Eoghan Murphy

I have a few questions on the inspections. I hope Mr. Moran excuses my ignorance. I am from Dublin South-East and there are no farms in my constituency, but I am aware of the importance of the inspections for the €1.7 billion we receive, and I would like a better understanding of the process. I also apologise if any of my questions were asked already, but I was voting in the Chamber.

On page 13 of his statement, Mr. Moran speaks about the administrative cost of 0.9% underpinning this income platform of €1.7 billion. On a previous page, there is some discussion about the different ways of establishing this figure. On which cost model is the 0.9% based? If it was based on the methodology used by the Comptroller and Auditor General, what would be the percentage of that €1.7 billion for the administration costs of the inspection scheme?

The Comptroller and Auditor General's report refers to the Department not developing norms in respect of the cost and duration of the various types of inspection. Is it the Department's intention to establish such norms? There seems to be a problem with the remote sensing for inspections. It does not seem to work as efficiently as an on-site inspection. Can we combine those inspections? Is there a possibility that an individual site would receive dual inspection, both remotely and on site?

Are the fines coming from the EU because we are not complying and not carrying out inspections properly? The Comptroller and Auditor General stated that Ireland has a good level of compliance, but if we look at the percentages of random inspections for eligibility, penalties have been imposed in 23% of cases inspected. If we look at cross-compliance, we see penalties being imposed on 31% of cases inspected. That seems quite high to me. It is one in four in respect of eligibility, and almost one in three in respect of cross-compliance. I would appreciate further clarification on that.

Mr. Tom Moran

The 0.9% figure is based on the methodology used by the Comptroller and Auditor General. If a difficulty is discovered by remote sensing, then an on-the-spot inspection follows. In that sense, it is a screen.

Deputy Eoghan Murphy

If a difficulty is detected, then we just do not know and there could be a problem, yet we are not getting on site to see what it is.

Mr. Tom Moran

Other checks are carried out. The remote sensing is done to determine eligibility of land, in other words, the area of the land and what is on the land. If there is a problem with that, then on-the-spot inspections take place.

Deputy Eoghan Murphy

However, if there is no difficulty, then we assume there is no problem and a case for eligibility will not arise.

Mr. Tom Moran

That is correct. The disallowances by the EU represent a view taken by the Commission. This is done for all member states. The view is taken by the Commission after a long process. It does not determine that we are doing it wrong. It is not black and white. It happens if the Commission has a particular issue with the way in which we carry out some controls. That has always applied to all EU market schemes. The Commission will determine the extent to which there is a risk to the fund. We do not necessarily agree with the Commission on an issue such as this, and we took it through the process of conciliation and it effectively halved the fine. When the Commission takes a view, we have to take it seriously because the ultimate step is that the Commission can impose a penalty on a fund that is transferred to Ireland. Ultimately, it can go to court. We have gone to court on it in the past, as have a large number of member states. It is a long, difficult process once the Commission's auditors see something that they do not particularly like. It results in a disallowance on the member state. Ultimately, we look at the balance of advantage and we carry the Commission's approach if it is reasonable.

The penalties applied in some member states are quite considerable. Before the single payment came into effect, there was a range of smaller schemes in operation. There was a different scheme for cattle, for sheep and so on. If there was a difficulty with one scheme and a penalty was applied due to a risk to that fund, then that was a relatively small amount. Once all of those schemes have been amalgamated into a large, complex single payment fund of €1.3 billion or €1.4 billion, then a percentage of that becomes a serious problem.

Deputy Eoghan Murphy

It is a disallowance, rather than a penalty.

Mr. Tom Moran

It is a disallowance of funds. They are transferred back across the next year. It is not a penalty on an individual farmer.

Chairman

Does the Deputy have any more questions?

Deputy Eoghan Murphy

I asked two questions on compliance figures and norms.

Mr. Tom Moran

If the Deputy wishes, I will give a detailed breakdown of what is involved in the finds. We can get a chart showing these. Often they relate to fairly small amounts and minor difficulties. The 18 measures checked at farm level cover a wide range and are rather complex. It is likely that if someone was checked there would be a small issue arising. In the early stages of the single payment many of the penalties related to the tagging and identification of animals in cases where the records might not have been up to scratch or were related to something else. I can get the details and send them on to the committee.

Deputy Eoghan Murphy

The question relates to an excerpt from the final page from the Comptroller and Auditor General's report which states that the Department has not developed norms in respect of the costs and duration for the various types of inspection and questions if the Department intends to establish such norms.

Mr. Tom Moran

We take the point. We have made significant advances with regard to the development of these norms and information systems. We have developed an information technology-based system known in the Department as the agricultural field inspection and testing system, AFIT. It is a custom-built system for checking the amount of inspections done. That is in play at the moment and will help us greatly to build on the suggestions the Comptroller and Auditor General has made in terms of measuring precisely what inspectors are doing, when they are doing it and if synergy can be realised with other checks when they are in a given area and so on. It will follow up on that point.

Chairman

Mr. Moran, you have committed to give some information to Deputies Fleming and Murphy. Will you submit that information as soon as possible in the course of the next week so that we can keep up-to-date with the meeting just held? We are asking each of the Accounting Officers to do this rather than leave a time lag between the question asked and the information coming in so that the Deputies can follow up with the Department if they wish to do so or at a later meeting.

Mr. Tom Moran

No problem. We have noted it. Some of the questions were rather detailed.

Chairman

Deputy Fleming's questions in particular.

Mr. Tom Moran

We have noted them and we will follow them up directly.

Deputy Sean Fleming

I might come back before the meeting is over on one or two of them.

Deputy Paul J. Connaughton

On disease eradication, it is welcome that we are brucellosis-free. That is reducing costs not only in the Department but for the farmer as well. What is being done to continue to keep the country disease free at the moment? Is there testing on a geographical basis or spot-testing? How is it done to ensure this? At the moment some farmers are not having the brucellosis test. How are we keeping an eye on this?

I note tuberculosis, TB, testing has been reduced by 20%. Is there any way we can continue to save money and reduce the costs to the farmer while continuing TB testing throughout the national herd? Will any further changes be introduced to TB testing in the coming 12 to 24 months? How much money is the Department spending on disease prevention and to eradicate TB from badgers and wildlife? We believe they are responsible for spreading the disease. What is the allocation of money for this and is it protected? Will this continue to ensure we remain disease free?

Mr. Tom Moran

It was a major achievement to become brucellosis-free. However, one does not sit on one's laurels. We continue to test, especially in certain areas in northern parts. We have managed to reduce our testing as a result of being brucellosis-free. We continue to be vigilant and this has helped us greatly. The numbers are down for TB although they fluctuate from time to time. There were 24,000 reactions in 2009 and the figure reduced to 20,000 in 2010. We continue with the badger programme and we believe it is a key contributor. We have evidence to this effect. We are working on a badger vaccination for TB eradication. That is a couple of years down the road but we are making progress.

The overall spend on disease eradication is shared between ourselves, the State, and the farming sector. A contribution is made by farmers in the form of disease levies. A contribution to the cost of the testing is made by farmers as well. Then the State comes in with the second round of testing. We must examine this area closely in the context of the expenditure review referred to earlier. We will do this just as we are doing with everything else but in the context of not cutting corners with something that is so important to us. At the risk of stating the obvious, the area of disease is fundamental to the way we proceed as a country which exports 90% of our beef and 80% of our dairy products. This is not something with which we will take any chances. Where we have made progress we will not row back.

I emphasise a new point with regard to disease. A whole range of diseases are commercial and are not taken account of under the ERAD programme within the Department but they must be addressed from an economic and commercial point of view. I refer to bovine viral diarrhea, BVD, Johne's disease and so on. They must be addressed. The initiation of Animal Health Ireland, an industry funded joint venture and an innovative model in this case, should lead to results in this area. It will bring down the costs of production of beef and milk significantly and add to the success we have had in managing disease.

Deputy Paul J. Connaughton

Do I take it there will be no changes in the next 12 months in the TB test?

Mr. Tom Moran

No, that is not what I said. Like every other programme, the ERAD programme must be examined in the context of the expenditure review.

Deputy Paul J. Connaughton

I meant the practice of TB testing. I understand the position of funding within the Department.

Mr. Tom Moran

The programme must be constantly reviewed having regard to the risks and the level we are at with regard to managing disease and with regard to the cost of implementing these programmes. Like everything else, it is definitely being examined.

Chairman

I refer to an earlier question about the numbers of staff. At the end of 2009 there were 3,881 staff. In your opening remarks you stated that you were reducing the staff or that a reduction of roughly 400 had been achieved, resulting in annual savings of €30 million. How many staff are employed by your Department now? How many are located in Europe? Have we permanent staff in Europe? The reference to 400 staff and €30 million in savings is relative to your Department. I take it from your answer to Deputy Deasy's question that the figures relate only to savings to your Department and that the bulk of them are or might be employed by another Department.

Mr. Tom Moran

The number at the moment is 3,600. We have a small core of agricultural attachés. We have roughly ten or 11 people in all, the vast bulk of whom are based in Brussels as staff in the Permanent Representation to the EU in Brussels. They are there for a three or four year period. We have a counsellor and two first secretaries in Brussels. We have three in Brussels, one in Germany, one in France, one in Italy, one in Poland and one in the USA. That is the sum total of the Department's foreign attaché service.

Chairman

What about the savings? While one reduces the number, they are not necessarily savings. They are leaving your Department but they are being employed elsewhere. Is that correct?

Mr. Tom Moran

No, the bulk of them are retiring and have not been replaced under the incentivised scheme for early retirement, ISER, and have retired generally but have not been replaced. We have moved a number across to the Department of Social Protection and the Garda. However, the vast bulk have retired.

Chairman

They have retired.

Mr. Tom Moran

Yes.

Chairman

Therefore, the €30 million in savings refers to salaries but one has to factor in the cost of attachés.

Mr. Tom Moran

The figure of €30 million only relates to the local office. That is specifically related to the local office. It saved us 400 staff and €30 million.

Chairman

With regard to local offices, there are 16 enhanced regional offices and 42 offices were closed. Has the Department costed its property portfolio? Has it valued each of the properties? Are there properties which are well located that even in these times might be of interest and sold? Is the Department considering selling such properties?

Mr. Tom Moran

All of the properties are owned by the OPW, rather than by the Department. They are managed by the OPW.

Chairman

It is the OPW. As the Department closes offices or moves from an office and piece of land it owns, it thereafter becomes the problem of the OPW. I am interested in this because next week the Department of Finance will appear before the committee. This would relate to it, if that is the case.

Mr. Tom Moran

I would not say it is a problem for the OPW. It is the property managers. It would become an issue for it to handle. In selecting and dealing with the local office, it would be one of the criteria we would bear in mind. For example, one criteria would be the extent to which the building would be of continued use to the Department or somebody else.

Chairman

It would form part of the conversation with the OPW in terms of what would close down and the impact of that. It would advise accordingly. Is that the way it works?

Mr. Tom Moran

Exactly.

Chairman

Fine. I want to go back to a question asked by Deputy Fleming. It concerns the farm waste management scheme. It was originally reported that the scheme would cost €248 million. However, if one reads other reports one finds it actually cost €1.1 billion. I know it was a demand-led scheme, but was there not some way whereby the Department might define where the scheme might go that would have given the Department a more accurate view of how much it might have cost, other than the €248 million, since the Department knows the profile of its clients and customers all over the country, in terms of the farmers involved?

Mr. Moran or Ms McGuckin may be able to answer my second question. What was the make-up of the eventual €1.1 billion cost? Where did that money come from? Why did the Department get it so wrong in terms of the €248 million?

Mr. Tom Moran

This is an issue that was more than touched on. It was reported on before by the committee and there was a full discussion on it. I am sorry to have to bring in other points. The question may be simple but it is complex to answer.

The farm waste management scheme had a number of origins. The primary one was the nitrates directive and the fact there was an onus on farmers to ensure that they were up to speed on the on farm waste infrastructure, otherwise they were at risk of losing their single payment, something which became more and more apparent. Equally, there was an onus on the State to ensure that the single payment was not put in jeopardy by a failure to implement the nitrates directive properly. This would have been a key element.

The scheme closed in December 2006. In the last month or two there was a rush of about 18,000 applications. One would have to ask why that happened. Apart from the fact that farmers were urged to apply for the scheme, which involved a generous grant, there was also a clear deficit in the local farm infrastructure. At the time there was a forward-looking optimism in regard to where agriculture and food was going to go. It might have been prescient at the time because there was a subsequent dip but we are back at that stage now. There is tremendous sense of optimism which is being built into an expansionary drive in milk, in terms of volume, and meat, in terms of value.

There was push and pull at the time the scheme was introduced. There was a driver, in terms of what farmers saw, and a push in terms of legality and the risk to single payments. There was a generous grant scheme and farmers were urged to do what they needed to do to get in line with the legal requirements. There was a series of negative and positive incentives driving people into the scheme.

It was also very clear that there was a deadline. There was no more grant aid after December 2006, which was the cut-off point. It probably contributed to driving-----

Chairman

Should that not have informed the Department that there was to be a pretty big uptake of the scheme? Mr. Moran is making the case for a position the Department should have factored into its calculations, given what he just described. Therefore, it should have had a larger projected figure than €248 million based on the information Mr. Moran has given us. I understand what he said and that he had to give that information.

Why was the estimate €248 million? Why, based on the information he has given to the committee, did the Department not forecast that the uptake might be substantially greater then €248 million? Is the figure of €1.1 billion the total cost? Where did the balance of the money come from? Deputy Fleming asked what other schemes the money was taken from within the Department or elsewhere to support the payment of €1.1 billion.

Mr. Tom Moran

Yes, that is the extent of it. The scheme is closed and the last payments have been issued. The work has been done and the infrastructure is in place. On the question of whether the estimate could have been more accurate, it could. It was a demand-led scheme. People did not predict the level to which an unlimited demand-led scheme could go at the time. The rush in the last month of the scheme, where there were 30,000 applications in December 2006, was not predicted.

Chairman

I am not going to labour this point as we discussed the matter before. The Department has a great deal of information about the farming community. Mr. Moran has described all the reasons it should have forecast a far greater figure than €248 million. It was a demand-led scheme, for which farmers were encouraged to apply. It was a generous grant, driven by all sorts of other legalities in terms of quality on farms and so on, yet the Department predicted a cost of only €248 million.

I find that to be a little bit shocking in terms of how a Department prepares itself for such a scheme and does not take into account the type of surge it had at the end, given the make-up of the scheme and the generous grant involved.

What changes within the Department have taken place since then, in terms of the analysis of or potential for such schemes? What information does the Department have to rely on in the future should a similar scheme emerge? Has it changed how it gathers information, how it is analysed and so on so that the Department is better informed?

Mr. Tom Moran

Those are reasonable questions. The forecast to which the Chairman refers was made in 2005 and agriculture goes through a great number of changes in a particular period. Nobody predicted the change that took place between 2009 and 2010 nor would anyone have predicted either the fall or the rise in milk prices around that period. It is a difficult enough sector to predict. It is very difficult to predict at farm level and it is difficult to predict the knock-on effect on investment. The Chairman will know better than anyone and people who operate in rural areas will know that the spend will depend very much on this month's milk cheque. This will determine the sentiment and the expenditure, the borrowings or the investment to be made. That forecast was made in 2005, at a time considerably before the period we are discussing.

To answer the question as to what is being done or what could have been done, the scheme was demand-led and it was not cash-limited. The recommendation was made by the Comptroller and Auditor General that if any scheme is to be cash-limited, the applications must be monitored as they are received and that the scheme is closed down when one reaches at or close to the limit. All our schemes are now cash-limited so there is no danger of running over. This brings me back to the point I made to Deputy Deasy about TAMS, targeted agricultural modernisation scheme, about the fact that one cannot give notice. For example, in December 2006, a scheme was ending and people were urged to apply so they applied but a cash limitation means that the scheme ends when the shutters come down. Another measure is the use of selection criteria. One does not apply the criteria of first come, first served. This was discussed in this group previously. Within those who apply, there will be people whom one would wish to target. The new scheme, the AEOS scheme, has inbuilt criteria so that in the event of the numbers exceeding what the scheme has been allocated, there is another mechanism to drill down through the applications and select according to criteria. Those improvements will apply to all new schemes.

Chairman

What happens with regard to the balance of the money? Does it come completely from within the Department's allocation?

Mr. Tom Moran

Yes, the money was voted on an annual basis as required. Under the special measures introduced two years ago, the last payment was phased at 40:20 over a period.

Chairman

I appreciate that changes have now taken place such as those cash limits and that the Department's new analysis will ensure this does not happen again. However, I ask the question again. Was the balance of the money, between €248 million and €1.1 billion, all met from within the Department of Agriculture, Fisheries and Food?

Mr. Tom Moran

In the context of each year's Estimates.

Chairman

No. It is a simple question. Relative to that the scheme was the difference between €248 million and €1.1 billion met entirely from the Department's allocation or was extra money allocated from the Department of Finance at that time to cover the extra cost to that scheme? I understand that the money would have been in the Department's Vote, possibly given by extra money from the Department of Finance, if this is the route we are going to take. Did the Department of Finance give the Department of Agriculture, Fisheries and Food the extra money? If this is the case, did it draw back that money from different Departments and different schemes to fund this scheme?

Ms Gráinne McGuckin

There was a Supplementary Estimate for the farm waste management scheme. The Chairman may be referring to the fact that in February 2009, Departments were levied for an amount of €65 million. This was a Government decision. A total of €65 million came from various Departments. For instance, the Department of Enterprise, Trade and Employment had a 1% levy on its capital. In that respect, most of the money was voted money and there were also savings. The levy was made in February 2009.

Chairman

Was this specifically for this scheme?

Ms Gráinne McGuckin

Yes.

Chairman

So, other Departments ended up giving money back to the Department of Finance and then that was voted to the Department of Agriculture, Fisheries and Food, to the tune of €65 million.

Ms Gráinne McGuckin

That was the gross amount given to the Department of Agriculture, Fisheries and Food. On the same day, the Department of Agriculture, Fisheries and Food, also gave €15 million and it was levied for something else that was going on at the time which was for infrastructural developments.

Chairman

Let us not complicate matters. This was €65 million levied on other Departments, taken back from other schemes to fund the €1.1 billion.

Ms Gráinne McGuckin

I cannot make a judgment as to where the money was taken from but one can assume it was taken from programmes where their administrative spend-----

Chairman

Was that a judgment?

Ms Gráinne McGuckin

Yes.

Chairman

It is a fact?

Ms Gráinne McGuckin

Yes, I am just clarifying where it had been taken from, other programmes or administrative moneys. This is by way of clarification. In terms of the rest of it, as the Secretary General has set out, the money came from voted moneys and from the Supplementary Estimate.

Chairman

That is the answer to Deputy Fleming's question.

Deputy Michael McCarthy

I have questions regarding two areas which may have been covered already. One is the issue of inspections, their efficacy and results. Are these inspections proving to be cost effective? Does it pay the Department? Is there a gain in sending inspectors down to west Cork or the Beara peninsula to make inspections? Does this result in a higher rate of compliance? What does it cost to send two inspectors out to an area like that? I ask for approximate figures.

My second question is about the AEOS scheme which is the successor to REPS. How much money has been allocated to that scheme as of now? How does this compare with the initial allocation? Is there a disparity and if so, what happened? It was thought initially that the scheme would cost €50 million and the Minister subsequently launched the scheme and it was €25 million. What happened the other €25 million or did it ever exist?

Mr. Tom Moran

On the question of inspections, we have covered the cost of the inspections in the report and in the earlier discussion. The gross cost is set out in the Comptroller and Auditor General's report. The point I made earlier was that this cost has been brought down considerably. I would also point out that this cost includes everything, not just the cost of the inspectors going out to do the job. That is the cost to the taxpayer. The cost has come down but I would caution that it must be measured against the overall sum of money that is contingent upon that check being done. If those checks are not carried out to the extent they are done and in line with the criteria set down, good, bad and indifferent, by the Commission, one is taking a greater risk with disallowances and this is a risk we cannot take. We are bringing down the cost and we will continue to do so. It is in all our interests to bring down the costs. We have taken a significant drop in our allocation for salaries, overtime and travel. This will all contribute to bringing down those checks as well as doing other checks and therefore making greater use of the resource.

On the question about AEOS, which is the successor to REPS, the initial figure in AEOS 1, to term it, was €50 million with €34 million for applications received. As recently announced, an allocation of €25 million has been set down for that scheme. The likelihood, based on the number of applications received, is that we will spend some €22 million of this figure.

Deputy Michael McCarthy

Was there ever an intention to have a larger allocation for AEOS II?

Mr. Tom Moran

Under the national recovery plan, the expenditure for every Department is set. This means that if one spends more in one area, one must spend less in another. In other words, if one decides to spend X amount under a particular programme, that funding must be taken from the overall allocation, thus reducing the amount available for other programmes. That is the context within which the allocation of €25 million was set.

Deputy Michael McCarthy

Was it ever envisaged that €50 million in funding would be administered under the scheme?

Mr. Tom Moran

There was an announcement in December 2010 that €50 million would be spent under the scheme.

Deputy Michael McCarthy

Subsequent to that announcement, when was the decision made to reduce the allocation to €25 million?

Mr. Tom Moran

As I said, overall expenditure is set and allocations under particular schemes must come out of it. That was made clear in discussions within the Government and with the Department of Finance. As spending ceilings are set, money spent in one area must come from the allocation under another heading. It was in the context of matching the willingness to go ahead with the scheme with the constraints of a fixed spending ceiling that the decision was taken to allocate €25 million.

Deputy Michael McCarthy

When the decision was made in December, was it expected €50 million would be spent on the scheme? In other words, was that amount available for the scheme last December?

Mr. Tom Moran

As the overall ceiling was set, any expenditure decision would have to be taken in the context of finding the funding from something else because no other money was coming in. One would have to find the moneys from within the allocations for other schemes. It was a case of where one was increased, another was reduced. That was the expectation around the decision made.

Deputy Sean Fleming

Under the heading of food aid donations to the World Food Programme, there is a figure of some €10 million. Does that sum make up part of our target in the overseas development aid budget and, if so, is the Department's contribution simply handed over the Department of Foreign Affairs and Trade, or are these moneys managed and paid directly by the Department of Agriculture, Fisheries and Food?

Mr. Tom Moran

We pay the moneys directly to the World Food Programme.

Deputy Sean Fleming

In regard to all the schemes operated by the Department, including single farm payments, REPS, AEOS II, targeted agricultural modernisation schemes, farm improvement schemes, food industry measures, disadvantaged areas schemes and so on, will Mr. Moran provide us with a note on how much, or what percentage, of each is co-funded by the European Union? Members are often asked at public meetings why a particular scheme is being cut, given that it is funded by the European Union. The argument is that money is being lost to the State by reducing the allocation under certain schemes. However, I presume it is the case that funding for individual schemes is administered from an overall budget and that reductions under one scheme might serve to protect another. I am seeking an information note on all the various schemes in order that we can understand what is happening.

The Department's accounts show that a grant of €119 million was made to Teagasc, €28 million to Bord Bia, €28 million to the Marine Institute, €35 million to Bord Iascaigh Mhara and €11 million to the Sea-Fisheries Protection Authority. There is also an ex gratia payment to the Irish Equine Centre of €500,000. What is the Department’s relationship with these bodies? I understand departmental staff have been appointed as directors to the boards of some of them, in the same way that the Department of Jobs, Enterprise and Innovation appointed directors to FÁS. Where departmental staff are appointed to the board of Teagasc, a limited company, or another of these bodies, the public assumes their role is as departmental representatives who will keep the Minister informed of what is going on in that body. However, the reality is that such staff, once appointed to the board of directors, have corporate responsibilities to the board, which is not the same as being a ministerial representative.

What is the reporting mechanism for staff members to the Minister on issues about which they have concerns, including those in respect of which they consider they have a corporate responsibility to the organisation of which they are board members and that it may not be appropriate to relay the information to a third party? One need only consider the difficulties we have encountered in other organisations. I am not suggesting for one moment that there is a problem in any of the bodies to which I referred, but I seek reassurance on the relationship between the Department and these bodies, for which significant funding is provided. Will Mr. Moran outline the reporting structure in respect of these organisations and indicate how many directors are involved? I assume the ex gratia payment to the Irish Equine Centre was a once-off. Is the Department represented on the board of that body?

I am somewhat confused as to whom Bord Bia is accountable in respect of its marketing activities. Does anybody other than the Department contribute to its budget, including any industry representatives? For example, does the Irish Dairy Board have any role in this regard? Is there competition between the major food exporters and producers in the State and Bord Bia or are they working well together? Are any of the bodies under the aegis of the Department likely to be transferred to the Department of Foreign Affairs and Trade now that the latter is to concentrate heavily on trade promotion? Will an official from that Department be appointed to the boards of the bodies we are discussing? We do not want these roles to be taken by diplomats as opposed to individuals who know something about food.

Mr. Tom Moran

The Deputy has posed an interesting question.

Deputy Sean Fleming

I may not have referred to all of the relevant bodies; there may be more.

Mr. Tom Moran

I shall deal with the easiest part first. The once-off ex gratia payment to the Irish Equine Centre, a private organisation, was in regard to work done specifically in the area of virology. That is a key input in ensuring horse health and an area we must monitor, given the huge sums generated by the sector.

The Deputy's other question is broader and relates to the relationship between Departments and semi-State bodies. There are many ways of looking at it. We do not have a specific staff member from the Department on the boards of the Marine Institute and Bord Iascaigh Mhara. Departmental staff have been appointed to the boards of Teagasc, a statutory authority as opposed to a company, and Bord Bia. The reporting relationship between the Department and all of the relevant semi-State bodies is set down strongly and clearly under the governance rules drawn up by the Department of Finance, to which we adhere very closely. It does not rely on a person being appointed to the board. The reporting arrangement between these bodies and the Department is a formalised structure involving adherence to the code of practice set out, the endorsement undertaken by the chairman and the organisation that they adhere to that code, the submission of annual reports and the holding of regular meetings to check on various aspects of performance, as set down in the code of governance. The system does not depend on there being a departmental staff member on the board. Departments have different views on the matter. We do not have a departmental representative on the board of commercial semi-State bodies. We have discovered that, in practice, this works quite well and we have no difficulty with it. The board of Teagasc comprises not only officials from the Department and from the organisation itself but also farmers, representatives from farming organisations, etc.

Deputy Fleming also referred to Bord Bia, which is the entity with overall responsibility for the generic marketing of Irish food at home and abroad. As the information relating to the Vote indicates, Bord Bia is funded by the State. However, it is also funded by means of a levy imposed on meat producers. This levy is not imposed on milk producers. It is an overarching body which is funded by the State but also by its clients, namely, farmers. Bord Bia does an excellent job. I could provide evidence of the work it has done in a number of areas. This work is widely acknowledged as underpinning a huge proportion of our export presence. For Ireland - which, as already stated, depends on exports to a major extent - having a body such as Bord Bia, with its experience, expertise and reach, is very good.

There is no crossover or conflict between Bord Bia and the Irish Dairy Board. The latter, which was previously An Bord Bainne, is a co-operative owned by the member co-ops. It is a private entity, not a State company. Obviously, it has a huge role to play in the context of export marketing. However, it exports on behalf of its members and is very successful in selling their products abroad. The Irish Dairy Board has a very good relationship with Bord Bia and there is no conflict whatsoever.

Deputy Sean Fleming

The Irish Dairy Board and Bord Bia have separate stands at trade shows, etc.

Mr. Tom Moran

The Irish Dairy Board is a commercial entity which sells products. Bord Bia does not sell.

Deputy Sean Fleming

Its job is promotion.

Mr. Tom Moran

Yes, it provides a sort of marketing backdrop and it also underpins the marketing endeavours of all food companies, large and small, across the various sectors. Bord Bia is pushing out the marketing umbrella to include not just quality and safety but also environmental sustainability. It provides a sort of overarching umbrella under which individual Irish food exporters and marketing interests can sell. There is no conflict whatsoever in the context of having these entities operate as they currently do.

Deputy Sean Fleming

The Department gives Bord Bia €28 million per year.

Mr. Tom Moran

Yes.

Deputy Sean Fleming

How much funding does it receive from other sources? What proportion of Bord Bia's funding does that €28 million represent? Obviously, a number of individuals from the private sector are directors on the board of Bord Bia.

Mr. Tom Moran

No, Bord Bia is a statutory body. The directors are appointed by the Minister.

Deputy Sean Fleming

Does that include those who are funded by the private sector?

Mr. Tom Moran

Yes, they are appointed by the Minister.

Deputy Sean Fleming

Will Mr. Moran reassure me in respect of the governance issues? How satisfied is he, as Accounting Officer, that everything is kosher regarding the €119 million the Department gave to Teagasc and the €28 million it gave to Bord Bia? I am not suggesting that anything is amiss. In light of what we have seen in respect of other bodies which would not be dissimilar in structure to those under discussion, which are funded by Government Departments and in respect of which difficulties arose, however, has Mr. Moran taken any steps to ensure that everything is kosher at Teagasc and Bord Bia?

Mr. Tom Moran

The grant aid is transmitted to these bodies on a monthly basis. Each month, checks are carried out in respect of both the need for and the use of the funds. The bodies are responsible to their own boards for the moneys they receive. They are obliged to comply with the State in respect of accountability for that funding. They have their own delegated responsibility within that. For example, a detailed programme of activities is approved each year in respect of Teagasc. This is done in conjunction with the Department. This is to ensure that it is operating in line with Government policy.

Deputy Sean Fleming

In view of the fact that Teagasc is given €119 million and that it charges farmer-clients and has its own money, does Mr. Moran know how many employees of the organisation have company cars or company credit cards? Is he aware of the credit limits which apply in respect of the latter? The committee spent most of last year discussing such matters in the context of another State body. I am not suggesting that there is anything wrong with how Teagasc or Bord Bia operate. Is the Department satisfied that everything is above board in respect of the matters to which I refer? What is the position with regard to the governance issues? Is Mr. Moran in a position to provide me with reassurance in respect of the questions I am posing?

Mr. Tom Moran

A body such as Teagasc is responsible for managing within its own remit. It has a board and a chairman. In that sense, it has its own remit. The Accounting Officer in Teagasc has responsibility for that. The issues to which the Deputy refers are day-to-day issues which are within the competence and the management of the board of Teagasc. We are obliged to ensure that bodies such as Teagasc comply with the code of governance and that they comply broadly with Government policy. The latter is set out for them each year and they report on it. They also give necessary undertakings to comply with the generality of the governance issues that emanate from the my Department and the Department of Finance. However, we cannot deal with the detailed management of travel claims. etc.

Deputy Sean Fleming

Mr. Moran can understand my concern. I am somewhat surprised, in light of everything the country has endured in recent years, that Teagasc is being given €119 million in funding and that the type of questions to which I refer are not even being asked. Surely such questions should form part of a reassurance measure. Is Ms McGuckin aware of whether the various Department of Finance guidelines are being implemented by bodies such as Teagasc? I am aware that circulars have probably been issued over the years. In my opinion there is not a business in Ireland which would not ask the type of questions to which I refer.

I accept that the Department of Agriculture, Marine and Food must take an arms-length approach to some extent. However, it provides major funding to Teagasc and it will be obliged to take the flak if something goes wrong with that organisation. It is fine to state that the board of the latter can be blamed if something happens. However, the Department and this committee will be obliged to deal with the fallout. I would have thought that the Department of Agriculture, Marine and Food, which is the line Department, would be involved to a greater degree. Perhaps Ms McGuckin will comment.

Ms Gráinne McGuckin

I have nothing to add to what the Secretary General has already stated. There is a code of practice and bodies such as Teagasc must adhered to it. They must also adhere to all circulars, financial procedures, procurement procedures, etc. There is an expectation that the accountable officer and the board should adhere to those.

Deputy Sean Fleming

It would be a fruitful exercise - if only to reassure the public that taxpayers' money is being well spent - that the committee be given information in respect of organisations such as those under discussion to which the taxpayer, via the Department, is providing substantial funding. We should be given information on the number of company cars owned by these organisations and who has the use of them. We should also be informed as to the number of company credit cards they have, the identities of those permitted to use them and the amount spent on each them. When we return in September, it would be great if members were given documentation in which it was indicated that there had been very limited expenditure on such company credit cards and that everything had been fully and properly authorised. I am not suggesting that there is a problem. However, it would be great if we could state that we know everything is above board.

Perhaps the Chairman will provide guidance on this matter. The committee previously requested such information from the Secretary General of another Department in respect of a list of organisations. However, I accept that the matter may not have been followed up with the advent of the general election. I do not know if it is appropriate to ask organisations to provide the information to which I refer. However, if the Committee of Public Accounts stands over the allocation of €119 million to Teagasc and if, six months from now, an issue arises in respect of that organisation, people will ask why the committee never asked the relevant questions.

Chairman

That is a valid question.

Deputy Sean Fleming

It is a template we should put to all Secretaries General.

Chairman

As well as putting it to all the Accounting Officers, I suggest the committee would write to each of these bodies and put the questions posed by the Deputy to them. If that was agreed by the committee, we could instruct the secretariat to write those letters, as well as what Mr. Moran-----

Deputy Sean Fleming

The Chairman might clarify if the committee would be able to write to all these bodies or only to those in respect of which the Comptroller and Auditor General carries out an audit and where there is an Accounting Officer or an accountable officer to this committee. Some of these bodies might not be audited.

Chairman

It would be those that are of concern to the Comptroller and Auditor General, the bodies that-----

Deputy Sean Fleming

It goes by the Votes of the Departments.

Chairman

Yes. We can link that and discuss what we might achieve by doing what the Deputy suggests with each of these bodies. If there is other information that the Accounting Officer can give on this topic, he or she can get that information and give it to us. We had a discussion on random checks, risk analysis and so on and perhaps the same should be applied to the various bodies about which the Deputy has spoken. A few random checks and risk analysis might assist him in the information he is trying to garner.

Mr. Tom Moran

To take the example of Teagasc, I know Deputy Fleming is not expressing any-----

Deputy Sean Fleming

I am not. I repeat I am not saying a bad word about it.

Mr. Tom Moran

The Comptroller and Auditor General audits Teagasc. I assume if there were concerns in that regard, they would be picked up in that context.

Deputy Sean Fleming

I will respond to that because the Secretary General will appreciate our concerns. I sat at meetings of this committee that dealt with audited organisations, FÁS being one of them. We can learn more information from a freedom of information request in the Sunday newspapers than we have extracted from the directly responsible people who sat in front of us. We have been frustrated in our efforts. Perhaps that is due to legislative framework or the role, function or powers of committees. The broader issue has nothing to do with the Secretary General's Department but we have not achieved satisfaction under the mechanism which he and I would have thought would have been one under which we could have achieved it.

Chairman

I will ask Mr. Buckley to comment on that.

Deputy Sean Fleming

I have made my point.

Mr. John Buckley

I should put this in the context that semi-State bodies are usually independent statutory entities. They are responsible and accountable for their expenditure and administration. The framework which has been established by the Department of Finance involves the chairman giving an assurance once a year that they have carried out everything that is in the code of practice for the governance of State bodies. Internally they must have risk assessment, an internal audit, an audit committee and at the end of the year draw up a statement of internal financial control. That must recount how they have handled all those aspects in the year - the risk assessment, the control regime they have in place, how the internal audit has worked and whether it has come up with anything unusual and how the audit committee has functioned. That level of assurance is public and is attached to their accounts.

From the point of view of my audit, for the past two years I have had a probity programme under which I examine all the issues the Deputy mentioned, namely, credit cards, the numbers, the limits and so on, and I would check that invoices were attached to the spending that was done by way of credit card.

The Deputy also mentioned the provision of company cars. We also examine perquisites. We have a detailed programme which at some point I could circulate to the committee to enable the members to note the kind of work we do. As I explained to the Deputy a few weeks ago in private session, we look at probity, regularity and obviously the accuracy of accounts. The probity programme picks up on many of the concerns the Deputy expressed. It does not necessarily guarantee that it will surface everything but there is a good chance, with the adjustments we have made in recent years, that it would.

The big question that arises then is whether the governing Department should involve itself to an extent. If these are fully mature, grown up organisations with their own terms of reference, set by law, and they are accountable directly to this committee, the big question with which the committee must grapple is whether it should contact them directly, call them in here and hold them accountable or whether it should have the Department examine the minute details of its operations. What is behind the governance code set by the Department of Finance is the second option, namely, that the committee should not go that direction, that it should make them directly accountable. This is in contrast with the practice in Britain where executive agencies are more or less nested inside government departments, whereas in Ireland we have taken the route that they are independent with their own boards and are statutorily underpinned.

Chairman

Is that all right for Deputy Fleming?

Deputy Sean Fleming

Yes.

Chairman

I have a question in regard Mr. Moran's opening remarks on the dioxin incident in 2008. According to the accounts, the cost to the State was €164 million or €165 million. Is that correct?

Mr. Tom Moran

No. Off the top of my head, the overall cost of the dioxin incident will work out at a little more than €100 million for the pigmeat recall scheme. It will be about €103 million or €104 million.

Chairman

It will be what amount?

Mr. Tom Moran

It will be about €103 million or €104 million and there is an extra cost of about €20 million in regard to the destruction of animals.

Chairman

It all comes under the pigmeat recall scheme at a cost of €164 million or almost €165 million.

Mr. Tom Moran

Yes.

Mr. John Buckley

I do not want to keep butting in but I believe the Chairman is looking at commitments in that respect. The original estimate by the industry was that it would cost something over €180 million. The commitment and the actual spend are two different things. There is a lower spend than was originally envisaged.

Chairman

The question I am asking is what was that lower spend? The figure we are talking about is €165 million, which is the commitment, and I am asking for the figure Mr. Moran just mentioned as being cost to the State. It is-----

Mr. Tom Moran

The spend to date is approximately €130 million.

Chairman

The spend is €130 million.

Mr. Tom Moran

Yes, €130 million.

Chairman

Does that include the figure of €20 million for the destruction or slaughter of animals?

Mr. Tom Moran

Yes.

Chairman

Therefore, the figure is €130 million.

Mr. Tom Moran

Yes.

Chairman

Is there any way for the State to recoup that or what action has Mr. Moran taken to do so? Has the source of the problem been identified? Should we now go after that source to recoup the money? What is the attitude of Mr. Moran's Department in that regard or what action has he taken?

Mr. Tom Moran

In regard to recouping the money, the overall facility that was put in place by the State will be substantially underused and we are pleased about that.

Chairman

That is the facility in the sense of the money that it was thought it would cost.

Mr. Tom Moran

Yes. It was impossible to say precisely how much this would have cost when it was dealt with. The co-funding element of it related only to the animals. We recouped €17 million from the EU in regard to the taking out of animals. The rest is not recoupable from anyone other than through legal action or whatever. In that regard, I know the Director of Public Prosecutions is looking at some action at present, but in regard to recovering the money overall, I do not think that is a serious possibility.

Chairman

I wish to pursue this with Mr. Moran. My understanding is that this cost €130 million, as Mr. Moran confirmed, and I would have thought the Department would have an interest in pursuing that legally to recover it for the State. Is Mr. Moran saying the Department will not do that? Has the Department examined the possibility of doing it? Is there a legal case to answer or is there no entity at the end of the line from which the money could be recovered? Is outstanding money due to people? Animals were slaughtered and €17 million was recouped from Europe for that. Are the owner or owners entitled to some form of claim against the State in regard to the €17 million? Where does the blame lie? If it does not lie with the company or the farmer, do they claim from the Department? Does the Department expect a claim from them? Where did the feed end up and did the State pay for the disposal of the feed?

Mr. Tom Moran

A small amount is outstanding. In dealing with the scheme we are at the stage of the residual and contested cases, largely to do with tertiary products that had a certain amount of pigmeat in them and where the overall product might have been damaged, or else contested claims within the overall payment facility arrangement.

Chairman

Where did the claims originate?

Mr. Tom Moran

From companies. In the case of one individual a claim has been made for a payment for animals that were taken out, but until such time as the legalities have been concluded or reach a certain point we are not at liberty to say anything about the case. As yet, there is not a huge amount outstanding.

Chairman

From a legal standpoint and taking into account the claims that may be outstanding, is the amount in excess of €130 million?

Mr. Tom Moran

No, the amounts are very small.

Chairman

A total of €130 million has been spent already.

Mr. Tom Moran

Yes, approximately €1 million or €2 million is in dispute, as one would expect in any such major arrangement.

Chairman

What about the disposal of the product itself? Is that the responsibility of the Department or some other body? Has the product been disposed of already?

Mr. Tom Moran

The product has been disposed of already. It has been taken back, rendered and destroyed. Is the Chairman talking about the pigmeat product that was withdrawn from the market?

Chairman

No. Mr. Moran is talking about the product that was withdrawn from the shelves. I am talking about the feed. Having identified the problem, is it the Department's responsibility that it would also dispose of the feed?

Mr. Tom Moran

No. The Department's interest in that regard is to ensure that the feed does not get used in any area.

Chairman

So the Department does not have any responsibility in that regard and therefore no costs arise.

Mr. Tom Moran

I am not quite sure what the Chairman is getting at. The overall spend to date has been approximately €130 million. A very small amount of money is outstanding, which is in dispute, and there is discussion with potential claimants. An amount of money is being claimed by a particular individual for animals that were slaughtered. The slaughtering of the remainder of the animals was funded by the Department. That was the co-funded element for which the Commission paid a portion of the costs. In the particular case to which I refer the consideration of the legal action has not yet concluded and until that happens we cannot proceed with payments.

There is no scheme for the destruction of feed which is owned by an individual. If contaminated feed is being held, its disposal is not the responsibility of the Department. However, I will check that.

Deputy Sean Fleming

Just on that point, has the contested issue gone to open court yet?

Mr. Tom Moran

There has been one case.

Deputy Sean Fleming

Has it gone to public court?

Mr. Tom Moran

It is a private case.

Deputy Sean Fleming

It has gone to court. The Chairman obviously knows more about this than me. Is there a possibility that a person who may have been involved in causing a potential problem that has cost the taxpayer €100 million may now be involved in a case seeking compensation from the fund set up to resolve the problem? Did I hear correctly? One can couch it cleverly in front of a court. I am utterly aghast. The softest phrase that comes to mind is "hard neck". Am I correct in what I have heard so far at the meeting? Perhaps that is not the case. It is baffling to think that I could inflict damage of €100 million on the taxpayer and because of the damage suffered by me as well as everyone else I could claim against the taxpayer even though I may have caused the damage.

Chairman

Deputy Fleming and I are coming from two different perspectives.

Deputy Sean Fleming

Yes, perhaps, but is there a possibility of what I suggest being the case?

Chairman

Deputy Fleming's question is separate. The cost to date to the State is €130 million. Any business would pursue an individual found to be culpable. As I understand it, the cause of the problem has been identified. Therefore, the State should pursue the source unless there is absolutely no way of it ever succeeding. The decision would be based on legal advice. I am trying to determine to what extent the Department has examined the prospect of pursuing the company or individual - or companies or individuals - who caused the problem.

To complete the circle, the Department must look at the other companies and individuals who have been affected by the problem, by way of bringing the feed into the system. No guilt has been attached to them but they have been put out of business. Are they due to be compensated by the State? Is Mr. Moran pursuing that approach? The Department is central to the completion of the circle in terms of who started it, if the State is to be compensated for what it had to spend - leaving aside the €17 million from Europe - and how it should deal with the other innocent parties that are now out of pocket by considerable amounts. Are they entitled to seek compensation or assistance from the Department to clear up the mess in which they find themselves to allow them to resume normal life and business? They were not responsible for the problem.

Has the Department examined all of those aspects of the problem to determine the role it can play in bringing about a conclusion that is beneficial to the innocent parties and the State in terms of the €130 million? Mr. Moran has said matters are being considered. Are they being considered by the Department and a legal team, by some other Government agency or the DPP? It is unfinished business from the point of view of those who caused the problem and the innocent parties caught up in it.

The other question that has arisen from Deputy Fleming's contribution and which is separate from the questions I put is whether a party who assisted or caused this to happen has some claim against the State or is claiming against the State or is the case to which Mr. Moran refers from an innocent party who is simply making a claim for compensation? Is that correct, Deputy Fleming?

Deputy Sean Fleming

Yes.

Mr. Tom Moran

To use the Chairman's phrase, it is unfinished business in the sense that the Garda investigation has not been completed and the Director of Public Prosecutions is still examining the possibility of action. That aspect of it is not completed and therefore, as the Chairman will understand, that precludes me from going much further than that.

The extent to which somebody who may be claiming from the State under this arrangement may have some involvement ties very much into that. I would not be in a position to say here whether they had or had not got an involvement. I will wait to see what the outcome of both of those processes is before we can do that. We will all remember clearly that this was a situation where the State moved in to rescue a sector that was going to suffer from this problem. The other issues emerged after that. The money was put in to try to keep the sector afloat.

Chairman

Can I interrupt Mr. Moran? I accept he came in to rescue a sector.

Mr. Tom Moran

Yes.

Chairman

What I am trying to determine is that within that rescue there appear to have been innocent casualties, which often happens, and therefore there should be an onus on the Department to complete that circle as quickly as possible to try to deal with those who have been found to have engaged in no wrongdoing but have experienced a great loss. That does not appear to have happened. I understand where we are in terms of a Garda investigation and so on and I will not go there but I want to get to the point of it which is that three years later there should be some explanation of the direction we are taking in regard to that, be it from the Garda, the DPP or Mr. Moran's Department, which he said earlier was examining this whole area in a legal way.

First, can the Committee of Public Accounts have some report or up to date position on each element of this saga in terms of the parts being considered by the DPP, who is involved in that, what is being considered by the Garda, is it near completion of a report or where is that report? Second, from the Department's point of view, which Mr. Moran said came to rescue the sector, and I understand and respect that, within that rescue how are those who have been found to be innocent being dealt with in terms of the disposal of the feed which I mentioned earlier or the slaughter of the animals because they suffered losses? If they are innocent how does the Department intend to deal with it and what is the exposure in that area in terms of dealing with the cost to the State? Who is quantifying that because a Garda investigation, a DPP investigation or whatever stands to one side in regard to that. Someone has to examine the costs and how to get out of this and it is not right that innocent people involved in this should not be compensated three years later.

I ask Mr. Moran and his Department to examine the questions I have put before them. They may not answer them today but investigate them further because I intend to return to this matter at a later date. The overall question that must be addressed is where we stand in regard to pursuing the more than €130 million it has cost the State. Surely someone must be pursued on that. Mr. Moran mentioned the Garda and the DPP. I ask him to consider again furnishing the committee with an overall report on that after he has examined the detail of the questions which have been put to allow us pursue it further. Is that fair?

Mr. Tom Moran

That is reasonable. To avoid the cryptic conversations we have been having I will write to the Chairman and give him an up to date position on where we are on all the different strands, it being understood that we do not have access to activities of the DPP and so on but we will set out what we can for him.

Chairman

To help us with that Mr. Moran might explain EU Directive 2001/46/EC when he writes to me.

Mr. Tom Moran

I will, yes.

Deputy Eoghan Murphy

I have two questions, the first of which is somewhat off theme but concerns the memorandum of understanding with China signed some years ago. Recently, the Minister for Agriculture, Fisheries and Food, Deputy Coveney, signed an action plan with the Minister from China who was here. I understand that as part of that action plan the Minister intends to visit China. Has the Department any further details on that or if plans have been progressed in that regard?

My second question relates to what Deputy Michael McCarthy spoke about regarding the agri-environment options scheme, AEOS. I did not quite understand something in Mr. Moran's answer. In December 2010, €50 million was allocated to the scheme but subsequently the scheme only included €25 million. Where did that other €25 million go in the interim?

Mr. Tom Moran

In regard to China, the memorandum of understanding signed recently was based on a visit here by the deputy Chinese agriculture Minister. He visited meat plants, dairy plants, laboratories, including our own laboratory in Backweston, and throughout the country and was very impressed with what he saw. We are paying great attention to China, as is everyone else. The Minister has given China a very high priority, given where it is going in terms of demand for food, our ability to supply food and so on. The memorandum of understanding provides for exchange of information, expertise and experts. We are building on that and the Minister is considering an early trip to China, along with trade delegations and so on, to try to build on that. It is an area where Bord Bia, for example, has a presence. The Irish Dairy Board is keen on China as a dairy market. It is hugely important in regard to pigmeat and various other products. It has huge potential, we have huge potential to supply it, and we are pleased enough with that.

Regarding the more specific question about the AEOS, the allocation to which the Deputy referred, of €50 million in December, was an indication in public that €50 million would be made available. It was not allocated in terms of moneys in Estimates, budgets and so on but it goes back to the point I made earlier on the ceiling set out under the national recovery plan to ensure that any amount of money earmarked, spent, promised or whatever would have to come within that and other money would have to be reduced. It is not a question of another €25 million being unspent. It means there is €25 million that does not have to be taken out of something else.

Deputy Eoghan Murphy

Some €25 million was then moved somewhere else. If, in December-----

Mr. Tom Moran

No. The €50 million would have been contingent upon finding it within those overall headings.

Deputy Eoghan Murphy

How was that figure of €50 million derived? How did they come to the figure? I understand it was not actually allocated but it was a case of earmarking the amount that would be spent. Surely that was being done in the context of the overall budget and where money was going in other Departments. The figure was somehow arrived at. Thus, the Department was able to make that cost projection.

Mr. Tom Moran

No decision had been taken as to where that money would come from.

Deputy Eoghan Murphy

How was the figure arrived at?

Mr. Tom Moran

It was the same figure as in the first year of the AEOS. The first time round, the AEOS had an allocation of €50 million, in respect of which expenditure was approximately €34 million. The figure was based on a projection that the same allocation would be required again.

Deputy Eoghan Murphy

However, it had not been done in the overall expenditure projections for the Department at the time.

Mr. Tom Moran

That was for spending in 2012. It was not going to be spent in 2011 anyway.

Deputy Eoghan Murphy

What was the figure earmarked for 2011?

Mr. Tom Moran

The bulk of the €34 million out of AEOS 1 was to be spent in 2011. There is a time lag.

Deputy Eoghan Murphy

With a projection of €50 million for 2012.

Mr. Tom Moran

That is when it would have been spent.

Deputy Eoghan Murphy

There is a projected increase on 2011 even though all indicators show savings had to be made by the Department.

Mr. Tom Moran

If money is allocated for a particular scheme, given that one's ceiling is fixed one must find the money in some other area. One has to reduce expenditure under some other heading pertaining to the Department. Those decisions had not been taken. The figure of €50 million that was circulated was in the context of other money that would have had to be found for the purpose.

Deputy Eoghan Murphy

I am curious about the rise in the allocation for 2012 over that for 2011 given the economic circumstances in which we find ourselves, and that this would occur without cost projections being taken into account in respect of where money would be saved in other areas of the Department, for example. We all knew costs were coming down; surely that was built into the plans of the Department.

Mr. Tom Moran

When one takes a decision, it probably has two halves: that one will spend the amount in question and where one will get the money, especially if the ceiling is fixed. In the case of the announcement in relation to the €50 million, that element of the decision was taken into account but the other was not.

Deputy Eoghan Murphy

I thank Mr. Moran.

Chairman

How does the system for ex gratia payments work? The Department made such payments to the tune of €1.18 million. Two hundred and twelve animal welfare organisations were involved. Is it the Minister who makes that decision?

Mr. Tom Moran

That is on the basis of applications from the various animal welfare bodies throughout the country. Applications are made and a decision is made on an annual basis.

Chairman

How are these decisions reached? Is there a scheme requiring formal applications or are applications made informally to the Department? Who makes the decision on the amount of money to be allocated? Is the figure involved a little over €1 million?

Mr. Tom Moran

It is advertised every year that the money is available. Generally, the same organisations apply. Their finances are examined and close attention is paid to the amount of voluntary funding available to match what we give.

Chairman

Therefore, the Department takes into account the local authority or voluntary funding when allocating the money.

Mr. Tom Moran

We take that into account.

Chairman

That is the process within the Department. I presume that Mr. Moran or the Minister signed off on it.

Mr. Tom Moran

Yes.

Chairman

Will Mr. Moran explain the cash balances? At the end of 2009, the Department had a cash balance of €42.5 million. There is a big jump by comparison with the figure for 2008.

Mr. John Buckley

The reality is that falls as part of the surplus to be surrendered. If one considers paragraph 2.7, which concerns liability to the Exchequer, we will find that the surplus to be surrendered was €69 million, to which the Chairman drew attention earlier. That is made up of a number of other balances. The bank balances and the other balances are the representation of that.

Chairman

That was my question. I was asking it for the purpose of clarification. The Department surrendered €69 million in 2009. This seems to be a feature of the Vote because the figure was €31 million in 2008 and €131 million in 2007. Can the witnesses explain that?

Mr. Tom Moran

The underspending?

Chairman

It goes back to the Exchequer, the central fund.

Mr. Tom Moran

Yes.

Chairman

So it is a feature of the Vote. I am making the point that the figure was €131 million in 2007, €31 million in 2008 and €69 million in 2009. What is the explanation?

Mr. Tom Moran

There is a combination of reasons. We dealt with this partly in the discussion on the Supplementary Estimate. For example, some of the provisions in our Vote relate to animal disease. If the animal disease outcome is better than anticipated, one must provide for it. One finds that there may be savings in that regard. With certain demand-led schemes, the uptake would not have been as great as provided for. We would have certain underspending based on the uptake of schemes related to animal diseases.

Consider the capacity to spend. In 2009, for example, we anticipated spending a certain amount of REPS money. It was due anyway and it would have been a liability but we did not get to spend it in the last couple of days of December due to a combination of factors. We had difficulty at that stage with an IT issue and there were problems having inspections done due to the seriousness of the weather.

Chairman

It is the nature of the schemes.

Mr. Tom Moran

It is the nature of running these kinds of schemes. In the year in question, the sum relates to approximately 0.2% of the Vote. In absolute terms, it is big but, in relation to the overall Vote, it is not too big.

Chairman

Chapter 7 refers to the restructuring of the sugar industry. I will not rehash the debate on this because the horse has bolted. The sugar company in Carlow, which was in my constituency, was central. The European Court of Auditors was highly critical of the European Commission in terms of how it went about its business and took the inefficient producers out of the equation. Efficient plants in Carlow and Mallow were closed and the Irish industry was affected. We sold on our quota and the Department had a view on this. We are now left without a sugar-manufacturing industry, which has greatly affected the employment rate. There is now a deficit in the European Union. What is the Department's view on the view of the European Court of Auditors? It appears that, for Ireland, a completely wrong decision was made. This has nothing to do with the Department based on my having read its views on this matter earlier. The decision was taken by the European Union and, as a result, Ireland has suffered badly in terms of employment and so on. As I stated, the reverse now applies as there is a deficit in Europe. I comment on this matter because it comprises part of chapter 7 and to give Mr. Moran the opportunity to comment, if he so wishes. I refer to how such mistakes are made and what, if anything could have been done. I am relating this matter to the beef industry and what happened in respect of the WTO negotiations the last time, as well as to our position on it and so on. It requires the country to commit itself heavily to protect certain sectors such as beef or, at that time, sugar, and we should not have been afraid to go out on a limb to do this. While I acknowledge the Department did its bit, does Mr. Moran wish to comment in this regard?

Mr. Tom Moran

I have already said a lot on this subject and in the previous Dáil, I appeared before the Joint Committee on Agriculture, Fisheries and Food in respect of the Court of Auditor's report and so on. The only point I will make is that Ireland had a position in the very early stages of the run-up to that reform. We did not wish to go down the road down which the Commission wished to go and the Chairman will recall that at the time, Ireland was leading a bunch of approximately 14 countries that were involved. The Commission chose to take a particular route, which essentially comprised an offer of a buy-out of entities with sugar producing capacity. The decision to avail of this offer was taken by the private entity which was involved here. I presume it took a rational view that based on the economics of the sector and given what it knew at the time, the new reform regime would not have been an economic proposition in which to continue operating. The Chairman is absolutely correct that sugar prices have rocketed and there is an issue for some sugar-using entities in Ireland, which are obliged to ensure they secure a correct and appropriate supply of sugar at a reasonably competitive price. However, such are the vagaries of the commodity world and the manner in which sugar prices have gone since the reform. The position the Department took at the time was, I think, the only reasonable position to take and ultimately, therefore, it was a decision by the entity producing sugar to ascertain whether it would avail of the package that was on offer at the time. It chose to so do and matters then proceeded from there.

Chairman

In my opinion, it was wrong in its assessment in respect of Europe. What happened thereafter? Has everyone involved now been paid? I note that a percentage was earmarked for social purposes and so on. The Comptroller and Auditor General report found that significant moneys had not been paid to growers. Was this money returned to the European Union? Are there outstanding claims or has that entire saga concluded and been wrapped up?

Mr. Tom Moran

By and large, the whole thing is wrapped up. As far as I recall, the only thing outstanding concerns a small security that still is held by the Department. I understand it should be releasable within the next month or two.

Chairman

Is that €9.6 million?

Mr. Tom Moran

No, it is closer to €2 million.

Chairman

It was €9.6 million.

Mr. Tom Moran

Yes. The Chairman will know better than anyone that the plants themselves have been decommissioned to the extent required by the rules and the payments have been made.

Chairman

The Department handled the restructuring payments to growers and to contractors. Did it charge a fee to Greencore plc? As the Department handled certain aspects of the payments to growers and contractors, did this entitle it to seek fees of any kind from Greencore plc?

Mr. Tom Moran

I am not sure.

Chairman

I am simply curious.

Mr. Tom Moran

It is coming back to me. The diversification funds disbursed by the Department were paid out directly with no fee. No fee was accruing to the Department as a result.

Chairman

All right. Does Mr. Buckley wish to comment further?

Mr. John Buckley

Just a tiny bit. The Chairman was grappling with the idea of the surplus to be surrendered. From the perspective of Vote management, it is important to understand the biggest sin that can be committed in the management of a Vote for an Accounting Officer-----

Deputy Eoghan Murphy

Mr. Buckley means accounting management. There are many sins attached to the other type as well.

Mr. John Buckley

Yes, I do not refer to members' type of vote management. However, the biggest sin that can be committed is that one would have an excess Vote and an Accounting Officer is held accountable for that. Consequently, it is always a balancing act between ensuring all the matured liabilities are accounted for and ensuring there is a small surplus at year-end, which members will find in each Vote across all Departments. There has not been such an excess Vote for the last three or four years. This is one point of information.

In addition, I welcome the idea that the Department is moving on costing systems and allocation models, which we suggested. It is also good to hear there has been a productivity achievement. Clearly, as I told members at the last meeting with regard to the HSE, as auditors we will always check on such things and will ascertain they are eventualising in fact. Moreover, on the risk versus random inspections issue, the Department clearly is only in an influencing position because it deals with the European Union on the structure and method of inspection. However, in so far as it has an influencing power, it would be useful for it to bear in mind the anomaly that exists between the outturn of risk and random inspections and to ascertain the extent to which it can balance the compliance requirements set down by the European Union with the efficiency yardstick that we, as auditors, suggest should be taken into account.

Chairman

Does the committee agree to note Vote 31, Agriculture, Fisheries and Food and to dispose of chapter 27, agricultural inspections, as well as chapter 7, restructuring the sugar industry? Agreed.

I thank Mr. Moran and his officials for their attendance. Before turning to other business, I remind Mr. Moran with regard to the questions asked by members which require follow-up in respect of information, as the committee has done with other Accounting Officers who have appeared before it to date, that he should make it available to the committee in as timely fashion as possible to ensure members receive full responses or the information as required by them. I ask Mr. Moran to note that point, particularly in respect of the issue I raised.

Mr. Tom Moran

I will ensure this happens and I thank the Chairman.

Chairman

If there are no further matters members wish to raise, can we agree the agenda for Thursday, 21 July 2011, regarding the 2009 annual report of the Comptroller and Auditor General and Appropriation Accounts, Vote 6, Office of the Minister for Finance, chapter 1, central Government, financial outturn 2009; chapter 5, central Government, financial commitment under public private partnerships; chapter 6, banking stabilisation measures, resumed; and chapter 7, central Government, European Union financial transactions 2009? Agreed.

The witnesses withdrew.

The committee adjourned at 1.20 p.m. until 10 a.m. on Thursday, 21 July 2011.