COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 3 Jul 2014

Section 38 - Agencies Remuneration

Ms Laverne McGuinness (Chief Operations Officer and Deputy Director General, HSE) called and examined.

Chairman

Today we will examine the 2012 Annual Report and Appropriation Accounts of the Comptroller and Auditor General - Vote 39, HSE: section 38 agencies' remuneration. We will also examine the report of the interim administrator appointed by the HSE to the CRC and Friends and Supporters of the CRC Limited.

Before we begin proceedings, I remind members, witnesses and those in the public gallery to please turn off their mobile phones as they interfere with the sound quality and transmission of the meeting. I also advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence.

They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a Member of either House, a person outside the House, nor 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 163 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Ms Laverne McGuinness from the HSE and I ask her to introduce her officials.

Ms Laverne McGuinness

I thank the Chairman and members of the committee for the invitation to attend today. I am joined by my colleagues Mr. Pat Healy, national director of social care, on my right and Mr. John Cregan, interim administrator of the Central Remedial Clinic. Mr. Tony O'Brien, the director general, would have been present but for the fact that he is on annual leave. He advised the committee of that accordingly.

The appointment of an interim administrator to the Central Remedial Clinic-----

Chairman

I remind witnesses to turn off their mobile telephones because they cause interference.

I welcome Mr. Kieran Timmins, chairman, and Ms Stephanie Manahan, CEO, of the CRC. I also welcome Mr. Hamilton Goulding, the former chairman of the CRC, and Mr. Peter Brazel from the Department of Public Expenditure and Reform. I ask Ms Laverne McGuinness to make her opening statement.

Ms Laverne McGuinness

The appointment of an interim administrator to the Central Remedial Clinic and the Friends and Supporters of the CRC Limited by the director general of the HSE on 16 December 2013 followed the resignation of the board of governors of the CRC and the resignation of all the directors of the Friend and Supporters of the CRC on 13 December 2013.

The interim administrator's role had three strands and he confirmed to the director general, in regard to those specific standards, that service arrangement obligations have been met and there are no apparent obstacles to the HSE and the CRC entering into similar arrangements for the foreseeable future; a competency based board of governors has been appointed and a CEO has been appointed by the new board on the recommendation of the Public Appointments Service following an open competitive process; and the CRC has sound systems of financial control in place and legacy issues identified are confined to a small number of issues which have to be brought to a conclusion by the CRC. The CEO of the CRC had resigned with effect from 6 December 2013 and the interim administrator also carried out many of the duties normally performed by the CEO.

The appointment formally ended on 31 March 2014 and the final report was submitted to the director general of the HSE in May 2014. It is important to note that the HSE did not have concerns in regard to the quality of services or the quantum of services being delivered under the service arrangement. The problems identified at the CRC related to governance and general compliance issues. I must emphasise for the committee that the interim administrator did not have any specific powers or legal standing. However, the exemplary co-operation forthcoming from staff at the CRC enabled him to fulfil the roles assigned to him in an effective manner.

The interim administrator was not appointed as an inspector or investigator and was not authorised to embark on a formal investigative process entailing the formal taking of evidence by way of interviews with a view to making any findings of wrongdoing. In the event of any wrongdoing being alleged, reported or suspected, it would have to be reported to the appropriate authority. The interim administrator did not find it necessary to refer any matter to any third party or authority. However, there were governance difficulties at the top of the organisation relating to certain practices, questionable procedures, wrong interpretations of compliance requirements and poor judgment.

Access was afforded to all available documents and records. The overall standard of record-keeping was good and the normal financial transactions, in particular, were properly supported or vouched. There were some exceptions in the report which are referenced.

Boardmatch Ireland was engaged to assist in the recruitment of a new board of governors for the CRC and a board of directors for the Friends and Supporters of the CRC and the continuing members of the CRC and the Friends and Supporters of the CRC co-operated fully in the appointment of the new boards.

In regard to the operation of service arrangements, it has been recommended that the HSE should assign operational responsibility for each of the larger non-statutory agencies to a designated HSE manager.

The correspondence between the HSE and CRC board on the application of public pay policy and related matters commenced in 2009 and continued until 2013 when all of the CRC governors resigned. A full declaration of all pay arrangements has now been made to the HSE by the CRC and the revised administrative and governance arrangements in place will ensure good practice and compliance with public pay policy in the future.

It is still necessary to red-circle salaries in a small number of cases for further review and deliberation by the new board but the use of an artificial split of the salaries by the CRC that facilitated the avoidance by senior staff of the full impact of public sector pay cuts has ended. The former CEO, as the person charged with the executive responsibility for the administration of the CRC, would have been familiar with public pay policy and moneys paid to him in excess of the properly calculated reduced rate for the period January 2010 to the date of his termination in June 2013 should be recovered. Members of the committee will be familiar with the broad terms of the former CEO's termination agreement as it was discussed by the committee at its meeting on 16 January 2014. In the report, major difficulties with the package, from an employer standpoint, are identified.

There was no ambiguity around the need, under the service arrangement, to obtain the HSE's approval to the subsequent filling of the vacant CEO position in 2013. It is difficult not to conclude that the board knowingly ignored the terms of the service arrangement and its 2009 commitment to the HSE when it proceeded with the appointment of a replacement CEO without HSE approval and offered a salary in excess of the approved pay scale.

Two defined benefit pension schemes are operated at the CRC - the voluntary hospital superannuation scheme, VHSS, and the Central Remedial Clinic pension and death benefit plan, CRC plan. The report states that, from an employer standpoint, the CRC has enjoyed substantial benefits from the VHSS arrangement. The new board now governs the CRC and it has assumed responsibility for its operations. The CRC board and the new Friends and Supporters of the CRC board are also reviewing company governance to ensure best practice in the future.

Undertakings related to the CRC, namely, the Friends and Supporters of the CRC, the Care Trust and CRC Medical Devices Limited are referred to in the report of the administrator. None of these undertakings is in receipt of public funds and they are not section 38 or section 39 organisations. However, a number of big ticket items are referenced in the report which impacted on CRC finances and decision-making. These items include forgiveness of loans to the Care Trust, an unsecured interest free long-term loan of €3 million to the CRC to assist in pension liabilities and a donation of €700,000 to the CRC to finance the termination agreement entered into with its CEO.

In regard to the Friends and Supporters of the CRC, the HSE was not aware of the funds being accumulated by the Friends and Supporters of the CRC. It is recommended that the current Friends and Supporters of the CRC functions should be transferred to the CRC board as soon as is practicable and, ultimately, the company should be wound up.

In the case of CRC Medical Devices Limited, it is recommended that the process of winding up that company in an orderly manner should proceed, preferably with the assistance of its directors and company secretary.

The Care Trust has built a successful lottery for the benefit of the CRC, Rehab and the Mater hospital and it has consistently generated significant funds for the benefit of the CRC. The Care Trust has its own governance arrangements and management structure. It is stated in the report that the Care Trust should be urged to go beyond the minimum company law requirements and publish more details of lottery proceeds and associated expenses.

The report of the interim administrator was accepted in full by the HSE and, since its publication on 19 June 2014 by the HSE, I understand the newly appointed board of the CRC has met to develop a comprehensive plan of action to address legacy and other issues identified in the report. The HSE will support the new board and CEO in their efforts to restore confidence in the CRC as a charitable organisation delivering quality services. The HSE is strongly committed to addressing all pertinent matters referenced in the report under the governance arrangements now in place.

Clarification was sought by Mr. Brian Conlon in regard to the report. May I read that into the record as part of this statement?

Chairman

Yes.

Ms Laverne McGuinness

Mr. Conlon's legal representatives, in a letter dated 25 June 2014 to the director general and in media statements, have called for alleged errors in the interim administrator's report to be corrected.

The alleged factual errors in the body of the report were examined and a comprehensive response was issued by the HSE to Mr. Conlon's legal representatives on 2 July. The points raised are disputed and no change has been made to the report. It has also been stated in the response by the HSE that, although presented as errors, the points made are more in the nature of cavils and, as such, even if their validity were accepted in toto, they would not alter the narrative of the report, the report's conclusions or the report's recommendations.

Mr. Conlon raised two points in regard to the appendices to the report. It should be noted that the appendices as presented in the report are exactly as found - that is, a true copy as they have been presented and they have not been altered by the interim administrator in any way. The source of each appendix is also identifiable. It is, therefore, not strictly necessary to revisit the appendices. However, for the purposes of absolute clarity, the word "February" is now redacted in line 2, paragraph 3, page 57, appendix 21 and Mr. Conlon's name is redacted under the headings of remuneration committee, CRC and CEO, Friends and Supporters of the CRC on page 71, appendix 27. The HSE's website version of the report will now incorporate these redactions.

I can make this piece available to the committee.

Chairman

Please do. Can we have a copy of the HSE's response to Mr. Conlan?

Ms Laverne McGuinness

We can file a copy of the response. I thank the Chairman.

Chairman

We will circulate it to members during the meeting. I thank Ms McGuinness. I ask Mr. Timmins to make his opening statement.

Mr. Kieran Timmins

I thank the committee for the invitation to attend today's meeting to discuss the report of the interim administrator appointed by the HSE to the Central Remedial Clinic, or CRC, and Friends and Supporters of the CRC Limited, or F&S. I introduce my colleague who is with me today, Ms Stephanie Manahan, the new CEO of the Central Remedial Clinic. The Central Remedial Clinic, Friends and Supporters of the Central Remedial Clinic, the Care Trust and Central Remedial Clinic Medical Devices Limited are all mentioned in the report. I point out that they are all separate legal entities. I am here today as chair of one of those entities - albeit closely intertwined with the others - and will primarily address the issues in relation to the CRC. I will touch upon the other entities as far as I can. The standing and relationship among all these legal entities is currently the subject of discussion and consideration among the boards concerned.

The new board of the CRC received Mr. Cregan's report on Tuesday, 19 January 2014 and considered it at its meeting the following day. As the new chairman of a new board, I consider that the report is clear, fact-based and helpful. I hope the committee agrees. In summary, the following emerges from the report. There is no question but that the competence, professionalism and care provided by staff is of the highest quality. There are sound financial systems in place. The CRC delivered on its services arrangement obligations and there are no apparent obstacles in place to the HSE and CRC entering into similar arrangements for the foreseeable future. However, governance did not meet modern standards and the report reveals that the board did not follow the commitment it gave to the HSE on the remuneration and appointment of senior executives.

The root of its problems and the reason we all find ourselves here today related to the application of public pay and CEO recruitment policies at the CRC. As stated in the report, whether deliberately or unintentionally:

In regard to the application of Public Pay and CEO Recruitment Policies the CRC, notwithstanding its 2009 commitment to the HSE, approved a series of appointments to the Executive Team without consulting the HSE; and the CRC artificially divided senior management and administrative salaries into two categories – Agreed HSE and Private CRC - and used the artificial split of the salaries to facilitate the avoidance by senior staff of the full impact of public sector pay cuts.

The report further states:

There was no ambiguity around the need, under the service arrangement, to obtain the HSE's approval to the filling of a senior management position. It is difficult not to conclude that the board knowingly ignored the terms of the service arrangement and its commitment to the HSE in 2009.

This was facilitated by a number of undesirable governance practices whereby members and board members served several companies in several different capacities and the distinctions between companies and their boards may have been allowed to become blurred. We cannot change the past but we can put measures in place to ensure that this could never happen again. The new board is here to support Ms Stephanie Manahan in leading the organisation in her role as CEO. Together, we are determined to drive a culture of good practices, ensure good policies are in place and above all ensure transparency and accountability. We do this to underpin the delivery of quality services to all of our clients and service users and to establish comprehensive engagement with all our stakeholders.

I am more than happy to return to the committee to provide further updates or for any member of the committee to contact me with any queries in the future. What we hope to do today is to give the committee a sense of the steps we have taken and to set out our action plan. Some of the issues facing us – particularly those concerning individuals – will require expert advice before final decision making. To take governance first, a new board of governors of the Central Remedial Clinic is now in place. The new board is competency-based. I have sent on copies by way of background material of the biographies of each member of the team. Each individual member has been identified and selected on the basis of that individual member's skills, expertise and experience drawn from relevant disciplines and different industry sectors. The current composition of the board is on our website. I say "current composition" because the board is committed to continually examining its needs versus its skill set and will consider appointing new members as required. We are also examining ways of letting our clients and staff get more involved in providing input to the board.

The board has set up the following work groups and committees: a remuneration committee charged with ensuring that the remuneration for senior members of the CRC is open, fair and transparent; an audit committee charged with oversight of financial reporting and disclosure; a committee on fundraising governance, structures and best practices; and a working group to review the current memorandum and articles of association with a view to bringing them into line with current legislation and best practices including term limits for board members to allow new blood to be constantly added to bring in fresh ideas and challenge existing practices. I note that the remuneration committee was involved in the appointment of Ms Manahan who was appointed following an open and transparent recruitment process using the Public Appointments Service with effect from 1 June 2014. Ms Manahan has extensive experience in the health sector both in the UK and Ireland and was most recently deputy hospital manager at James Connolly Memorial Hospital.

Friends and Supporters of the CRC, as a separate legal entity, now has a separate and independent board, chaired by Mr. Tom Quinn. Mr. Quinn is also on the board of CRC but is the only member from F&S. I believe this is prudent. Mr. Quinn excuses himself from meetings during discussion of any area where there would be a conflict of interest, real or perceived. As part of its deliberations, the F&S board recently wrote to me and informed me that it had resolved that its 50% shareholding in the Care Trust Limited should be transferred with immediate effect to the Central Remedial Clinic; that all revenues accruing to F&S from the Care Trust Limited from a current date should be paid direct to the Central Remedial Clinic, and that it should request its legal advisers to prepare all the necessary legal documentation to give effect to these resolutions. This offer is being considered by the relevant subcommittee of the full CRC board and will subsequently be considered by the board itself. I welcome the general thrust of these resolutions. In addition, we have asked our audit committee to meet with our auditors, Ernst and Young, to understand how we best reflect the relationship between CRC and F&S in our 2013 books so that anyone who examines the accounts of CRC will be immediately made aware of the existence of F&S.

Given the current separation of the two boards and our committee on fundraising governance, structures and best practices, we are in the interim implementing a process by which funds can only be drawn down on foot of an agreed and approved business case signed off by both boards. In the meantime, the CRC board has resolved as an additional layer of transparency that all donations raised by the CRC itself in 2014 will be put in a separate bank account. Those funds may only be accessed on foot of two of the three authorised board level signatories. We are committed to full transparency and accountability so that all our funding partners, including the HSE and our donors, can see how all monies are spent. CRC Medical Devices is a subsidiary of F&S which has had no directors since the resignations in December last. I understand that F&S is in the process of appointing directors to allow it to regularise legalities surrounding the company, pay off outstanding invoices and wind the company down in an orderly fashion.

I trust the committee will appreciate that there are several constraints to my going into executive and senior administrative pay arrangements in any great detail at this time. However, I would like to make the following comments.

On payments to former chief executive office, Mr. Paul Kiely, it is the intention of the board to write to Mr. Kiely about the report’s finding. The calculations of payments to the former chief executive officer, however, are complex and require careful consideration and legal advice prior to any decisions on how to proceed. Issues such as the full implementation of the Financial Emergency Measures in the Public Interest Act, as well as the Croke Park and the Haddington Road agreements, on the full salary, calculation of severance payments, retirement age and other matters all need to be looked at prior to any contact with Mr. Kiely.

On other executive and senior administrative pay arrangements, the new board is determined all salaries and appointments will be at levels consistent and agreed with the Health Service Executive, HSE. A small number of senior management pay levels are outside the approved HSE scales. Mr. Cregan’s report recommended these salaries be red-circled until 2015 to allow some limited time for the new board and chief executive officer to review management structures, job descriptions and executive pay arrangements. We consider this is appropriate as it gives us time to develop a new strategic plan for the Central Remedial Clinic, CRC, for 2015 and beyond. We already know the current management structure has to change as key gaps need to be filled and several retirements will take place in 2015. I am willing to attend the committee again, either formally or informally, to update it as we go through these processes.

From our early beginnings in 1951 to today, the CRC has grown to be one of the largest organisations dedicated to the well-being and health of people with physical disabilities. The legacy issues we are discussing today were not of the making of the staff. They were caused by governance issues at the top of the organisation. Staff at the CRC continue to provide our clients with the services they need and deserve in the professional manner they have come to expect.

Chairman

I thank Mr. Timmins. I call on Mr. Hamilton Goulding to make his opening statement.

Mr. Hamilton Goulding

Chairman, members and staff of the committee, I have come here because of my lifelong attachment to and concern for the CRC. I wish it to be recognised that I am here voluntarily in a spirit of co-operation in the hope of supplying honest answers to questions raised and, above all, enabling the clinic to fully restore its function and reputation. I must state also that the former board is no longer an entity but a group of private individuals. Accordingly, it must be clear that anything that I say here today is an account of my own personal opinions, observations and actions. I am not representing other former members, nor speaking on their behalf.

The CRC is a great organisation. It has been providing world-class services to disabled people for 63 years and should be recognised as a great success story. It has an extraordinary, skilled, dedicated, hard-working and compassionate staff, as well as extraordinary clients, children, parents and families who also contribute so much themselves to the success of the clinic. There is a new board in place now, as well as a chief executive officer, well qualified and generous people who will give their time freely, as did the former board, to bring the clinic forward to new and great achievements. I ask everyone, politicians, the media and the public, to support them and help the CRC in every way to return to the excellence and dignity that it has for so long enjoyed. This must be our foremost objective.

CRC has been a presence in my life since my earliest memories. My mother, Lady Valerie Goulding, founded it when I was four years old and ran it on a full-time voluntary basis for its first 30 years. I first shook a collection box for CRC from the age of 15 and did so on various streets in many towns across the country. Due to these personal and family connections, the difficulties and damage of the past year leave me with a feeling of deep sadness and regret. I must mention again something that seems to be widely ignored or perhaps disbelieved. We took neither pay nor expenses of any kind in connection with CRC. The governors were volunteers, receiving no material benefit whatsoever themselves. We have incurred considerable expenses ourselves and contributed to numerous fund-raising ventures, not ever claiming anything back. I state again this only to reinforce the fact there is no motive, no incentive and no benefit for any director to see anyone in the CRC receive excessive payments. It would have been perfect for the board if all staff were to be paid by the same approved scales.

With a few exceptions, I generally welcome Mr. Cregan’s report. It positively and unambiguously exonerates the board from the major accusations that have been raised. It finds there was no wrongdoing and no need for further investigation, which slightly makes me wonder why we are here. There was sound financial control, as well as robust and sound control of credit card use. The standard of record and file keeping was good. The audited accounts of CRC and Friends and Supporters of the Central Remedial Clinic were accessible and transparent. The care trust had built up an infrastructure that contributed significant funds for the benefit of CRC. Employee contracts could not be unilaterally broken without significant risk. Management salaries were fully declared to the HSE as late as May 2012. Service arrangement obligations were met. There was co-operation in forming the new board.

There is one item, however, which I view as seriously and damagingly incorrect, namely the allegation that the company had then been virtually abandoned by all its previous governors, company secretary and chief executive officer. It is clear that Mr. Cregan has not received a full understanding of the events that led to the board’s departure and the popular perception that the board, having decided it had done something wrong, had run away. Senior people in the HSE will know in fact the board was effectively dismissed at a few hours’ notice. At a meeting in HSE headquarters on 13 December 2013, the then chairman was informed that unless all the board resigned forthwith, HSE funding would be withdrawn from the clinic. The resignations were tendered directly because the board’s position was untenable, its primary concern being not to allow any impediment to the continued funding by the HSE of the CRC, which would effectively shut down the clinic. This subsequently put the legal status of the HSE’s running of the clinic into dubious legal territory. To sort this out, it had to request myself and others to facilitate this which was willingly given in the clinic’s interest.

The Cregan report identifies an issue I believe to be at the heart of the problems raised:

It should have been clear to the CRC from 2009 that the environment in which it operated had changed significantly and the maintenance of an attitude of provider independence could not prevail in the long run.

The board was very concerned about independence. CRC is not a branch of the HSE. Board members did have a strong culture of independence. There was a justifiable feeling that the exercise of this independence was the key to much of the CRC’s success over 63 years. My mother, the founder, was not known for bending to other people’s rules. Perhaps, as it goes back a long way, that is the origin of some of these problems. We wished to exercise provider independence only to achieve two primary goals, namely the continued provision of excellent disability services, along with the ability to expand them further, as well as the achievement of this in a cost-efficient manner. However, on reflection, it is judicious to admit to having pushed this independence too far in light of acknowledged and written commitments to the HSE. More determined co-operation from both parties should have alleviated this situation.

High executive pay was a real difficulty. I believe most of the current difficulties arose essentially from the legacy of climbing down from the apparent economic boom of the early years of the century and the difficulty of one body, the HSE, funding a job whose contract of employment is with a different body, the CRC. Mr. Tony O’Brien, director general of the HSE, stated everyone must understand that all employees in section 38 organisations should be considered as government employees. He may understand it but I, and the rest of us, find that hard because normally an employee is an employee of the company with whom they have a contract of employment.

This is one of the difficulties. I will give a brief account of how these salary arrangements arose. Prior to 2009, all management salaries, including that of the CEO, were declared by the CRC and fully funded by HSE. In 2009, the HSE announced that it was introducing new consolidated scales for senior management. These resulting benchmarking levels were substantially below some rates already being paid. It was agreed at a meeting with the HSE in June 2009 that the clinic would independently pay the outstanding difference to those receiving salaries above the sanctioned rate - what are wrongly referred to as "top-ups". That expression is difficult because it suggests that-----

Interruptions

Chairman

Can members and witnesses check their phones again?

Mr. Hamilton Goulding

The word "top-ups" suggests that the CRC looked at the HSE levels and said that they were not enough for its employees and that it would add something to them and give them some more. That is not the case. They were never "topped up". It was simply continuing what they had been paid fully by the HSE until these new scales came in. While the HSE had backed out of part-payment of these salaries, the clinic had contracts of employment with these individuals which are legally binding. The board was advised that it could not unilaterally break these contracts without expensive compensation and the risk of legal action in addition to severe disruption of clinical function. The board's view, which was rejected by the HSE at the time, is now supported in the Cregan report by the following statement:

It would be unwise for an Interim Administrator (or a Board of Governors) to unilaterally break existing employee contractual arrangements and, thereby, expose the CRC to significant financial risk. It should be remembered that the cuts in public sector pay required the passing of the FEMPI legislation.

Any legal person will back that up. A recently published article by Professor Michael Doherty from the Department of Law at NUI Maynooth states:

The core of the employment contract is that in general, terms agreed cannot be altered unilaterally by one side to its benefit, or to the detriment of the other. Pay cuts, for example, cannot be simply "imposed" on unwilling employees.

This article goes on to warn the HSE specifically to be cautious about this issue.

The board's decision to continue to pay these long-established contracts is, for example, exactly what the Government or the HSE have done in the case of medical consultants' contracts. They found that while they wanted to reduce these levels, they were unable to do so and had to continue them. Replacements were allowed to come in a newer level but those on the higher level were allowed to stay to the end of their contracts. We are simply following practice that has been done elsewhere. It was agreed at a meeting with the HSE in June 2009 that the clinic would pay the difference from other sources while maintaining the longer-term objective of bringing pay levels into line with the consolidated scales. Salary levels were also reported to the HSE since 2009, as previously denied, unfortunately, but now specified in the Cregan report from 25 May 2012. This problem does not just relate to the CRC, and it is strange that it has been highlighted as such. The director general of the HSE confidently announced last December that by the end of January all section 38 salaries would be brought into line with approved scales. Six months later at this committee, he conceded that there are still 58 employees whose salaries remain in excess. When asked why this was the case, he cited "contracts and legal restraints," which is exactly the problem we have been trying to deal with. There does not seem to be an easy solution for anyone.

However, it seemed to me that within our pay structure, with these high pay levels coming from the boom years, we had an exceptional anomaly, which was the pay level of the chief executive. I took action on that question due to unease about this salary level in the charity sector and brought it to the board hoping to address it in some practical way while respecting contractual constraints. I held talks with Mr. Kiely and an agreement was reached and approved by the board which reduced the enormous contractual liability of €2.08 million by €1.34 million over the next six years. I went home thinking that this was a marvellous success for the clinic. Although it was uncomfortable to have to give such a large payment to one individual, it was a huge step towards conformity with HSE scales. It was, in fact, a normal commercial buy-out of a contract.

I will go through the sources of the CRC's income, which comes largely from the HSE. Some of it comes from voluntary sources. The CRC also generates independent income. From 2004 to 2012, the clinic accumulated revenues of €34.7 million. Breaking that down, €13.12 million came from revenues and activities within the clinic; €19.16 million came from commercial lotteries operated by The Care Trust, which should not be confused by Rehab lotteries; and €2.46 million was in investment income. The last two items are held by F&S, a company whose purpose is to hold funds for capital projects and a reserve against future shortfalls in normal operating costs and State funding reductions. It makes payments on a roughly annual basis to the CRC to cover any deficit and special projects. This money is used to provide additional services to people with disabilities. Every cent of it goes towards those purposes. It included co-funded projects with the HSE, such as those in Waterford Regional Hospital, and also with the Department of Education and Skills, such as Scoil Mochua. Without these matching funds raised for the CRC, many of these valuable projects which gave so much aid to disabled people would simply not have happened. The CRC used a small portion of its independent funds to achieve the settlement and associated savings with Mr. Kiely without recourse to either State or voluntary funding.

These past few months have been very difficult for me personally. I can only apologise for any shortcomings or inadequacies on my part in dealing with the issues that so affected staff and clients of the clinic over the past year. Difficult issues confronted us and difficult decisions were made, which the committee may not like. I have, however, a clear conscience that nothing I did or failed to do resulted from any motive other than the best interests of the clinic. I believe this to be true for the other former board members. I still cannot now specify how a better outcome could have been achieved, given the circumstances and options open to us at the time. I am also disappointed that the HSE, in pursuing these issues, forced a position on the CRC board that it now accepts cannot be implemented. It has in the process caused serious damage to public perception of the CRC and to the charity sector in general. I believe the HSE should correct the public record in this regard. I look forward to answering any questions to the best of my ability.

Chairman

Can we publish each of those statements?

Mr. Hamilton Goulding

Yes.

Ms Laverne McGuinness

Yes.

Deputy Shane Ross

I welcome everybody to the meeting. I regret the fact that several people the committee has invited are not here today, but I hope they will come in at a later date. I will start with Mr. Cregan, because it is really his report that has sparked the discussion here today. What he has done as interim administrator is fantastic. What he has done for the CRC is great. The changes that have taken place in a very short period have been prompted and stimulated by what he has done. We are seeing the beginning of a renaissance in the CRC, which Mr. Cregan has done much to contribute to.

Was Mr. Cregan the HSE's man in the CRC? He was sent in to do three specific things, some of which were current and some of which involved looking at the past. He was to investigate the past. I am bit uneasy about the fact that he is employed by the HSE and came in and made judgments about his employer, which was in direct conflict with the old board of the CRC.

Does he feel uncomfortable about it?

Mr. John Cregan

Not really; I received clear terms of reference from Mr. O'Brien and he would have been very disappointed had I found issues relating to the HSE that I was unwilling to reflect in the report. I made it very clear that I would go in as administrator and report what I had found, irrespective of whom it affected, and that I would try to bring forward a report from which everybody could learn lessons. I was not appointed as an investigator. I identified issues for the attention of the CRC, the HSE, Friends and Supporters of the CRC and the Care Trust. My discomfort was related to my legal position - I was not an officer of the CRC - and I took legal advice on what I could do. Having said that, I did not have legal standing; the CRC staff were excellent, co-operative and enabled me to do what I had to do.

Deputy Shane Ross

Did Mr. Cregan make judgments about the conflict between the HSE and the board?

Mr. John Cregan

In December I was presented with a fait accompli. Given that the board had resigned, there were no directors or CEO of the CRC. The organisation had been virtually abandoned, as I stated in the report. I did not pry into the motivation of the board members or the content of any discussion between the HSE and the board. Like everybody else, I was a spectator of the CRC's presentation to the committee. I worked from the situation where I had to give some assurance to the HSE that it could continue to fund the organisation. With the assistance of the company members, as opposed to the directors or governors, I appointed two boards.

Deputy Shane Ross

While I do not dispute any of what Mr. Cregan said, he did not have an investigation.

Mr. John Cregan

No.

Deputy Shane Ross

A few months ago I submitted many freedom of information requests and was told they could not be responded to because there was an "investigation" happening.

Mr. John Cregan

I am not clear; I do not recall.

Deputy Shane Ross

It happened.

Mr. John Cregan

The CRC had received very few FOI requests and there was no structure to deal with them. At the time, I was inundated with media reports and FOI requests. In early January I met the chairman and established a section in the CRC to deal with all of the complaints. It was operated at arm's length from my role.

Deputy Shane Ross

They called it an investigation, although Mr. Cregan does not. This was the reason for declining to give me answers.

Mr. John Cregan

I did not interfere with the FOI process.

Deputy Shane Ross

They perceived it as an investigation. We are playing with words. Can Ms McGuinness tell me why the HSE did not send someone independent of the HSE to make these judgments?

Ms Laverne McGuinness

At the time, as the Deputy will recall, we had come before the Committee of Public Accounts and revelations were made to the committee about various pensions, on which we had not been able to get information. Information was still outstanding that we were unable to obtain. The CEO had resigned and there was no CEO. To bring a level of public confidence to the administration of the CRC, we sent in an interim administrator, Mr. Cregan, to carry out some of the CEO's duties and provide a review. The aim was not to perform a legal investigation but to access the records which were in the CRC offices and to which we had no access.

Deputy Shane Ross

Why did the HSE not send an independent person? Who is Mr. Cregan's boss?

Mr. John Cregan

Mr. Tony O'Brien, director general of the HSE.

Deputy Shane Ross

Mr. Cregan is reporting on matters which are of direct interest to the HSE. He has said the board knowingly ignored its obligations to the HSE. It is very judgmental, although I do not quarrel with the judgment. Why did the HSE not send someone else in who could have made, perhaps, similar judgments with more credibility?

Ms Laverne McGuinness

Mr. Cregan is an eminent specialist in corporate governance and has held very senior positions as deputy CEO-----

Deputy Shane Ross

Ms McGuinness knows that is not my point.

Ms Laverne McGuinness

I understand the question. Based on what was required there and then, the assessment at the time was that Mr. Cregan would be an appropriate person to go in and act as interim administrator. In the absence of a board, having come under such great public scrutiny, staff of the CRC were very anxious. Our overall concern was the requirement to deliver a service to the people who depended on the services provided by the CRC. In order to do it very quickly, Mr. Cregan was asked to go in as interim administrator.

Deputy Shane Ross

I do not regard the answer as satisfactory. While I agree with nearly all of the conclusions Mr. Cregan made, although I do not know much about the background evidence, the report would have had more credibility had somebody independent of the HSE been sitting in judgment in what was, in many respects, a dispute between the HSE and the board.

Mr. John Cregan

In the report I stated it would have been preferable for at least two directors of the CRC and the HSE to have worked together to form a new board. I had no wish to go into the CRC. I also stated some alternative mechanism would have to be found for the HSE to deal with such situations in the future. I partially agree with the Deputy. It requires a different approach in the future. The HSE and the CRC were faced with a particular dilemma. I deliberately set a deadline of 31 March because it was in the interests of the CRC to have me there for the shortest period possible.

Deputy Shane Ross

There are dozens of mediation experts and High Court judges hanging out of the rafters looking for jobs such as this. The Government can find them at the drop of a hat and I would have thought it would have been better for the credibility of the findings if the person charged with making findings about the HSE has not been in its pay. Why did Mr. Cregan not speak to any of the former directors?

Mr. John Cregan

I took a decision. I was appointed in December and began to work through various issues in January. I had clear terms of reference and was able to conduct the business I had to do with the assistance of the staff on the basis of the documentation available. I respected the decision of the board members to resign and left it at that. Mr. Goulding was particularly helpful in working with members of the company in making appointments to the new board.

Deputy Shane Ross

Mr. Cregan had to have the old members. Did he discuss the issues involved with Mr. Goulding?

Mr. John Cregan

I was able to do what I had to do with the staff and records I had available to me, except in one area, as I stated in the report. CRC Medical Devices did not have a board and although I contacted the company secretary and directors to assist in the orderly wind-up of the company, I received no assistance and neither has the new board.

Deputy Shane Ross

Are there directors of CRC Medical Devices?

Mr. John Cregan

There are purported former directors.

Deputy Shane Ross

What does that mean?

Mr. John Cregan

While CRC Medical Devices is not under section 38, there is an obligation under company law to have a minimum of two company directors in place.

Deputy Shane Ross

Can we return to that issue in one minute? It is separate and very worrying.

Mr. John Cregan

I sought co-operation and assistance and I did not get any.

Deputy Shane Ross

Is that still the case?

Mr. John Cregan

Yes.

Deputy Shane Ross

What is Mr. Timmins doing about CRC Medical Devices? He is reviewing the deal. What does that mean?

Mr. Kieran Timmins

It is very hard for me to comment on a company that is removed, two entities away from me. CRC Medical Devices is owned 100% by friends and supporters. What I understand from my colleague, Mr. Quinn, who is chair of the friends and supporters, is that they are in the process of appointing their own directors to the company so that they can achieve an orderly wind-down of the company.

Deputy Shane Ross

We will come to that because it is shambles. Nobody seems to be in charge there. There are no directors and nobody knows what was the deal. Part of the company is in wind-down, assets have been sold off for unknown sums with no explanation why the company has been losing money for a long time. Perhaps I will ask Mr. Goulding about that later.

I have a question for Ms McGuinness before I come back to Mr. Cregan. The HSE's case appears to be that it did not know what was going on in terms of funding of the CRC. In other words, it did not know about the existence of the Friends and Supporters of the CRC-----

Ms Laverne McGuinness

"No" is the answer to that-----

Deputy Shane Ross

Did the HSE even know about its existence?

Ms Laverne McGuinness

"No" is the answer in relation to the amount of funds that the friends and supporters have. It is one of the recommendations that there would be transparency around various funds being held and that is being implemented by the new board. As I understand it - perhaps Mr. Cregan will give the full finite detail on it - the friends and supporters transferred money on a needs basis. It was done separately. They did not hold any of that full funding so that there was full visibility in relation to that. I do not know whether Mr. Cregan can------

Mr. John Cregan

I say in the report that the HSE did not appear to be aware of-----

Deputy Shane Ross

I know but I want that confirmed by its officials. They knew about the existence of it.

Ms Laverne McGuinness

When I say we knew about the existence of it, service level arrangements exist. As a number of people have said, these organisations to a large extent have an independence about them.

Deputy Shane Ross

Did the HSE know about its existence or not?

Ms Laverne McGuinness

We did not know about the existence of the funds in relation to it.

Deputy Shane Ross

Did the HSE know about the existence of the company?

Ms Laverne McGuinness

No, they did not appear to know about it.

Deputy Shane Ross

That is pretty bad if the HSE did not know about the existence of the company. That company was co-funding the CRC, which the HSE was funding to the extent of approximately €16 million a year.

Ms Laverne McGuinness

One of the recommendations is that there would be one manager for the totality of the activities being funded through the CRC. As the Deputy will be aware, the CRC has a number of separate areas so individual managers would have looked at individual parts-----

Deputy Shane Ross

I know what the solution is but I am talking about what happened.

Ms Laverne McGuinness

From this, there has been significant learning that the individual pieces were being funded separately - so there should be one manager who has full oversight of that - it certainly would appear from the information we have available to us that they were not aware of the funding that was there in relation to the friends and supporters. They would have been aware that there was fund-raising going on but they would not have been aware of the amount involved-----

Deputy Shane Ross

I am a little staggered by this. The HSE was giving the CRC €16 million on average a year but it knew it was getting funds elsewhere and the CRC was never asked by the HSE what funds were available to it elsewhere or where they were coming from.

Ms Laverne McGuinness

The service level arrangement was not in place at the beginning of 2009 and we said that in our previous attendance here. A new service level arrangement to strengthen the governance and funding provided to section 38s was only introduced in its infancy towards the end of 2009 and has been worked on ever since. In 2010 or 2011, an additional amendment was made to it that any funding that comes from other sources should be identifiable. That would not have appeared in 2009 when the initial discussions took place.

Deputy Shane Ross

In 2009, Mr. Peelo said to HSE officials - I think Ms McGuinness was present - that the CRC was funding the additional €136,000 of Mr. Kiely's salary. Did she not ask how much money the organisation had and where it was coming from? There could have been €100 million there. They had approximately €14 million at the time.

Ms Laverne McGuinness

First, we were not aware of any fund, which was accumulating an amount. Second, the other organisations we fund in a similar situation do not have access to such funds. They would not have a level of funding of that nature. One would expect that if they were to fund from their own sources, they would generate savings or suppress a post to make good the shortfall. We were certainly at that time focused on the level of funding we were providing from the public pot, which was €16 million at the time.

Deputy Shane Ross

But the HSE knew there was money there.

Ms Laverne McGuinness

No.

Deputy Shane Ross

Mr. Goulding's statement says there was a joint venture with the HSE.

Ms Laverne McGuinness

They did not. I have the letter in front of me and I am quiet happy to read it into the record. I read it in the last day. I do not accept at any time that there was any fund mentioned at all and I would like the Deputy to read the letter, which I have previously given to the committee, and what it says and the follow-up.

This letter is dated April 2009 to Mr. Des Peelo regarding remuneration of senior staff. It is a short letter but it is important.

As you may be aware, the HSE were requested by the Secretary General of the Department of Health and Children to collect detailed information on the pay and non-pay expenditure of voluntary organisations providing services to people with disabilities. The information requested included the number of staff at each grade or level within the organisation and the full remuneration available to each grade or position. I wish to acknowledge the co-operation of the management of the Central Remedial Clinic (CRC) in providing the information in respect of your organisation...

Following analysis of the detailed information supplied by all organisations, the remuneration of a number of senior staff in CRC, as reported, would appear to be significantly out of line with the norms for the sector taking into account the size and the budget of the organisations.

[I then list a number of the posts: Deputy CEO, head of human resources, manager of clinical services, manager of services for adults, manager of IT and manager for capital development and special projects]

I am sure you will appreciate that in the current economic climate, and with the level of pressure on public services due to the restrictions on the availability of funding, the remuneration of senior executives is attracting increased and critical scrutiny. Notwithstanding that CRC has access to funding separate to the funding provided by the HSE, the HSE, as a majority funder, has a responsibility to ensure good governance and accountability in the organisations.

To this end, I am requesting that the Board immediately review and take steps to significantly reduce the level of remuneration for senior management and staff in the CRC, in line with norms of the organisation. I would be grateful if you [could let me have that information.]

Deputy Shane Ross

But Ms McGuinness did not ask how much money the CRC had buried away.

Ms Laverne McGuinness

That would not have appeared, as has been said, on the face of the financial-----

Deputy Shane Ross

When I began examining this issue, as Ms McGuinness will be aware, it did not take me more than 20 minutes to find out about the Friends and Supporters of the CRC and it did not take me more than ten seconds to see that they had €14 million on hand. I cannot understand why the HSE did not know about this or did not ask about this and when the CRC was requesting funding, presumably by filling in a form or matching criteria every year, why the HSE did not ask what other funds the organisation had elsewhere before making a decision. Mr. Cregan's finding was specific that the purpose of the Friends and Supporters of the CRC was to maximise what they got out of the HSE. In other words, it was to hide money in order that the CRC could request more money from the executive. Is it not correct that the HSE should have been able to say, "No, you have money elsewhere"?

Ms Laverne McGuinness

The Deputy asked about the funding. The funding is provided on a yearly basis and it is not built up based on a level of service which is why the new governance arrangements were introduced as part of the service level arrangement. There was a new service level arrangement so that we would see the levels of activity to provide for the level of funding. The arrangement sets out that a copy of the audited accounts would be provided to the area manager and the financial accounts would have been submitted.

It is my understanding that the transparency in relation to the funds held in those accounts certainly was not visible. We certainly have taken on board a recommendation that further financial scrutiny needs to be given to those accounts even though they would have been looked at by people with expertise in finance. They need to be further scrutinised. That is the learning that I accept needs to take place as a result of the findings in this report, but there was no knowledge of the extent of the funds, I can say that.

Deputy Shane Ross

The HSE did not know about the company either.

Ms Laverne McGuinness

No.

Deputy Shane Ross

I think it should have done probably, but if that will not happen again, it is an improvement.

It seems that the HSE was kept in the dark according to Mr. Cregan's report about pretty well everything that is material to the discussion we are having today - perhaps Ms McGuinness might correct me. It was kept in the dark about the extent of Mr. Kiely's pay for several years. It was kept in the dark about the level of pay generally where top-ups were happening. It was kept in the dark specifically about Mr. Kiely's pay-off. It was kept in the dark about his successor's appointment and the pay he was getting. Would that be correct in all cases?

Ms Laverne McGuinness

That would be correct. In relation to the appointment, as the Deputy knows, there is significant correspondence and engagement that went back and forth to try to unravel how that appointment actually took place because as part of the service level arrangement it is required to seek permission. It knew that was the case. It did not do that. The process that we would have - the transparent process for recruitment - did not happen. Then there was an issue in relation to the salary. It appeared it was paying a salary which was in excess of that which was agreed now. In 2009, as we said, it was very clear at that time. It said it had contractual commitments to the now previous CEO which had to be honoured, but that at a time when a new CEO was going to be brought on board or be replaced, first, that it would advise us and seek our permission for that and, second, that it would bring it into line with pay. I have the backing documentation which will verify that.

Deputy Shane Ross

I ask Mr. Goulding to comment on that. The HSE is claiming that the board, of which he was chairman, did not inform it of what was happening in terms of Mr. Kiely's package, Mr. Conlan's appointment, Mr. Kiely's pay, pay generally, and the Friends and Supporters of the Central Remedial Clinic.

Mr. Hamilton Goulding

There are a few different ones there. In relation to pay generally, we believe those levels were declared to HSE and known. The only instances I have of that were in 2009 when they were declared in detail and again in 2012. I cannot verify it, but I believe there was another correspondence in between that. Certainly in 2009 and 2012, which were actually the same basically, apart from two retirements - they referred to the same people so my understanding is that it was informed.

As far as Mr. Kiely's retirement package is concerned, I am not aware of a requirement to report such a termination agreement. I have never heard of a request coming in for that or a procedure by which retiring people should have their terms reported to the HSE.

Deputy Shane Ross

There was a confidentiality clause, was there not?

Mr. Hamilton Goulding

There was, yes.

Deputy Shane Ross

Did that include not telling the HSE as well?

Mr. Hamilton Goulding

I believe is does. A confidentiality clause, as I understand it, means it is confidential and it is not to be revealed to anybody, but I also understand, when the Deputy is talking about that particular issue, why people have queried that that was a strange thing to put in. My understanding is that when lawyers write voluntary severance packages, that is purely a routine matter. It was not an unusual thing to come in. I said: "Why is this there?" They said: "That's always there." The terms of that, as I understood it, mean that when one is told something is confidential, as far as I would understand that, it would mean that one would not reveal it to anybody.

Deputy Shane Ross

Can we come back to that later because it is a big issue?

Mr. Hamilton Goulding

Yes. The next thing is the Conlan appointment. As I have said, in that case the board felt that of all the responsibilities, duties and obligations it had from a statutory point of view, the appointment of its chief executive was the most important - pretty well - decision that it would ever make. The CRC had had in its 63 years only four previous chief executives. They had all been spectacularly successful. The board felt this was really the most supremely important thing that it wanted to do independently. It was looking at sort of a conflict there between its statutory obligations to make an appointment and an agreement that I acknowledged to have had with the HSE to share in that process.

Yes, I am afraid I am putting my hands up here. We thought that of the two which one has supremacy and we actually delayed the decision for a long time. It was terribly important in our mind to get an excellent chief executive officer. We delayed the decision for a long time about how to go about it in relation to the HSE. In the end we decided that - to be honest, rightly or wrongly - there was a level of distrust of HSE administration. We thought it was an unwieldy and bureaucratic organisation. Specifically, we feared that if we involved it in this process - maybe I should not say that - we feared that it would cause first of all a delay, leaving us with a lame duck chief executive - Mr. Kiely having decided to go. Second, in the knowledge that the HSE had a lot of staff it wanted to redeploy, we actually feared that it might try to impose somebody on us. Rightly or wrongly, those were the kinds of views expressed. We boldly neglected the procedure that we-----

Deputy Shane Ross

The board was in blatant breach in that case.

Mr. Hamilton Goulding

In that case we made the independent choice to appoint Mr. Conlan.

Deputy Shane Ross

That was in clear breach of the CRC's agreement with the HSE. There is no argument about it, is there? The CRC did not inform it.

Mr. Hamilton Goulding

We did not tell it.

Deputy Shane Ross

That kind of breach, keeping the HSE, the CRC's main funders, in the dark, is a finding of Mr. Cregan's report which Mr. Goulding disputes. Does he accept that as a fair comment?

Mr. Hamilton Goulding

Just in that particular instance, I believe that is a fair comment.

Deputy Shane Ross

Was there a culture of secrecy in the board?

Mr. Hamilton Goulding

No, really not.

Deputy Shane Ross

Mr. Goulding came in as chairman in 2010, is that so?

Mr. Hamilton Goulding

Correct.

Deputy Shane Ross

At that time he did not know what the chief executive was paid.

Mr. Hamilton Goulding

That is correct.

Deputy Shane Ross

Why not?

Mr. Hamilton Goulding

I will tell the Deputy why not. It is what certainly would now be seen as a governance failure. I think it is something that was a common enough occurrence in boards because of our national reluctance to discuss individual wages openly, there was a remuneration committee which determined the wages of executives. The remuneration committee did that and then found the level of remuneration, came back to the board and said, "We've sorted out the remuneration of XYZ" without actually specifying what that level was. So that was the situation, undesirable as it seems now. Indeed, to some extent, the members of a non-executive board would not always be expected to know the salary level of every person within the organisation. So consequently-----

Deputy Shane Ross

This is the chief executive.

Mr. Hamilton Goulding

Yes, this is the chief executive. The fact was that this was not known to a lot of the members. Indeed, as soon as I found it out, it shocked me quite severely. I had thought his level of pay would probably be about half what it turned out to be. As soon as I discovered it, I set in train some action to have it reviewed. Eventually the end of that process led to his departure.

Deputy Shane Ross

Mr. Goulding was on the board for many years.

Mr. Hamilton Goulding

Yes, I was.

Deputy Shane Ross

Dating back to 1991 he has been associated with it.

Mr. Hamilton Goulding

Yes.

Deputy Shane Ross

I do not doubt his motivation. I know very well his motivation and his family ties. For 20 years he was associated with the clinic. It seems utterly extraordinary that he could be on the board and not ask, with nobody else presumably ever asking, what the chief executive was paid. I kind of understand why the HSE did not hear about it, if they will not even tell their own board. Why is it such a secret? It was secret because it was so much.

Mr. Hamilton Goulding

It should not be a secret. From my personal point of view all I would say is that those on the board and those on the committee for remuneration were highly qualified people in the financial world.

Deputy Shane Ross

Who was on the remuneration committee at the time?

Mr. Hamilton Goulding

To go back to where Mr. Kiely's big salary came from, it was Professor Tom Murphy who was president of UCD at the time and probably Mr. O'Grady - I do not want to get it wrong because I am not certain-----

Deputy Shane Ross

Who was on it when Mr. Goulding came in 2010?

Mr. Hamilton Goulding

They were very eminent people who were qualified in the financial world. My unfortunate position is I do not have training and qualifications in finance and commerce, but others on the board did and, to be honest, I had great respect for their expertise. My assumption was that all was in order. Let me point out because it is very important to do so that while we look on these salaries as anomalies, the CRC's budgetary performance, efficiency and excellence in its international standing were supremely good. Within this we have the difficulty of a small number of individuals on high salaries. The board's objective, in the big sense, is to provide the best service for disabled people in Ireland and to do so very efficiently. We still believe we did so. This large achievement is universally recognised and accredited by client satisfaction surveys. The performance at the clinic has many good features to which I could point. To say these efficiencies are completely spoiled by one or two anomalies within them is a little unfair. That the senior salaries were not fully known to the board was an error of governance. Prior to the old board going we introduced new governance procedures which would have put an end to it. It was unsatisfactory and has come to an end. We hope this is the end of it.

Chairman

I remind Deputy Shane Ross of the time available to him.

Deputy Shane Ross

I will be finished in a few minutes. Why did Mr. Goulding resign?

Mr. Hamilton Goulding

I have just said so - we resigned because we were pushed. That is how we saw it. Mr. Nugent, the then chairman, was called to HSE headquarters. I met him as he came out of the meeting with three officers of the HSE. He was told bluntly that if the whole board did not go, HSE funding would cease. Whether this threat could have been carried out I do not know, but it would have been irresponsible of us to challenge it. I saw the look on his face and he told me it was over, that the board had to go or the funding would be pulled. The popular perception appears to be that we ran away after making a right mess of the place. That is not the case.

Deputy Shane Ross

Will Mr. Goulding deal with the pay-off pension package for Mr. Kiely, which is a matter of huge interest and dispute. Mr. Goulding negotiated it.

Mr. Hamilton Goulding

That is not quite correct. I spoke privately to Mr. Kiely about the terms of reference and what might be acceptable. I told him that if he could give me a proposal which looked in any way reasonable, I could bring it to the remuneration committee and the board.

Deputy Shane Ross

What happened after this?

Mr. Hamilton Goulding

It was considered first by the remuneration committee and, secondly-----

Deputy Shane Ross

He brought a proposal.

Mr. Hamilton Goulding

The value of the chief executive's continuation in the excellent performance of his duties was balanced against the possible risks of getting into a conflict with him, or a situation involving constructive dismissal which was a big risk about which I had been warned, and it was decided in the end to go with the package, expensive though it was. It must be remembered that when one buys somebody out of employment, the package will always be related to salary. If one has a high salary, one will have a high settlement. The other side is if one has a high settlement and value, one will have very high savings.

Deputy Shane Ross

I am trying to establish what happened. Mr. Goulding told Mr. Kiely to bring a proposal.

Mr. Hamilton Goulding

Yes.

Deputy Shane Ross

He brought a proposal.

Mr. Hamilton Goulding

Correct.

Deputy Shane Ross

Whom did Mr. Goulding get to check it independently?

Mr. Hamilton Goulding

Mr. Nugent and Mr.Martin, the remuneration committee members.

Deputy Shane Ross

Mr. Kiely brought it to Mr. Goulding who gave it to Mr. Nugent and Mr. Martin to examine and they stated it was fine.

Mr. Hamilton Goulding

Yes. We looked at independent pension advice from Mercers.

Deputy Shane Ross

Did Mercers send Mr. Goulding something which stated this was okay? Is there documentation to back this up?

Mr. Hamilton Goulding

No, they sent a document relating to all aspects of his pension. To be honest, I am neither an accountant nor a pensions expert, but there was a document from Mercers which outlined the realities of his pension and the options that might attach to it.

Deputy Shane Ross

Mr. Goulding took this to the board which stated it was okay. This was Mr. Kiely's proposal. Was it amended in any way?

Mr. Hamilton Goulding

It was not. The Deputy will ask why Mr. Kiely was not pushed a little harder. In the discussions I had with him it was clear to me that the priority in his mind, as it is with people approaching their 60s, above all things was that having worked for such a very long time in the CRC to protect his pension. One possible solution was a pay reduction, but the reduction in this case would have had to have been so enormous that it would have decimated his pension value which was dependent on his final years of salary. That is why it did not work. He was determined to defend his pension. I had thought I had found the boundary of what he would find acceptable. I thought he had the easy option of staying in position for another six and a half years and be paid the €2.1 million. I have since been advised by a very distinguished lawyer that I could not have told him the pay level was very uncomfortable and would not do him or the clinic any good because it would have led to a constructive dismissal case. I was advised to tread carefully. I felt the boundary had been reached where I felt there was no slack and it was take it or leave it and that if he left it, he would stay.

Deputy Shane Ross

To be honest, it sounds to me-----

Mr. Hamilton Goulding

It is uncomfortable.

Deputy Shane Ross

-----a little more like he wrote his own cheque. The background to this - Mr. Goulding can correct me if I am wrong - is that the pension fund had to be topped up. A €3 million loan had to be sought from the friends and supporters to the CRC pension fund.

Mr. Hamilton Goulding

Not quite, the €3 million was given from the friends and supporters to the CRC which then gave a loan to the pension fund.

Deputy Shane Ross

I am sorry; it was a loan from the friends and supporters to the CRC.

Mr. Hamilton Goulding

If the Deputy says so.

Deputy Shane Ross

It is in the accounts; it is a loan from one to the other. It was then transferred somehow from the CRC to the pension fund. This loan was taken out specifically from the friends and supporters to top up the pension fund for Mr. Kiely.

Mr. Hamilton Goulding

No.

Deputy Shane Ross

There is a clause somewhere which states there was a need for a top-up because of one person receiving special treatment.

Mr. Hamilton Goulding

Does the Deputy think one person's special treatment required €3 million?

Deputy Shane Ross

No, but it required it to be done for this purpose.

Mr. Hamilton Goulding

No. In common with, as I understand it, most defined benefit pension schemes in the country, this pension fund was not meeting the minimum funding requirement.

Deputy Shane Ross

Correct.

Mr. Hamilton Goulding

Therefore, as with so many companies - I am sure the Deputy can name lots of them about which I do not know - a payment had to be made to prop up the fund. The actuaries involved in this pension fund gave us advice that in their opinion by 2017 the fund would be back in full compliance with the funding requirement and that, therefore, a loan was required to cover the deficit. The loan was given in the full expectation, on the advice of the actuaries, that it would be fully returnable in 2016 or 2017 - I believe it was 2017. It was simply to cover a very common problem. As far as I understand it, it certainly did not relate to one person.

Deputy Shane Ross

That is my understanding. Will Mr. Cregan help us on this issue?

Mr. John Cregan

The advice to the CRC was that the pension fund was in trouble and would require a lump sum payment. As the Deputy stated, the Friends and Supporters of the Central Remedial Clinic gave a soft loan to the CRC, which paid that money into the pension fund. The money is in that fund and will not come back to the CRC.

Deputy Shane Ross

No, it is not. Mr. Goulding stated that the CRC used a small portion of its independent funds to achieve this settlement. This is €3 million.

Mr. Hamilton Goulding

No.

Deputy Shane Ross

Is that not right?

Chairman

Mr. Cregan might explain.

Mr. John Cregan

The funding proposal that was made, which included the €3 million payment, included a clause to the effect that one person would be allowed to retire aged 62 years. No early retirement facility was generally available for CRC employees in the CRC plan. That facility was made for the chief executive. A certain cost - not the €3 million - was built into the €3 million to meet that facility being made available to the chief executive.

Deputy Shane Ross

It was not all of the €3 million, but it specifically had to be done to facilitate Mr. Kiely's deal.

Mr. Hamilton Goulding

I do not think so. I am actually surprised to hear what Mr. Cregan is saying, but I do not doubt that he is correct.

Deputy Shane Ross

I am sure he is right. Mr. Hamilton is kind of-----

Mr. Hamilton Goulding

My understanding is that this was a payment paid into the general scheme, which was seriously in deficit, as were many others. I am afraid that I did not realise, recall or ever know that part of this was for a special arrangement for Mr. Kiely.

Deputy Shane Ross

Should Mr. Goulding not have known? Was Mr. Goulding not on both boards?

Mr. Hamilton Goulding

Yes.

Deputy Shane Ross

Should Mr. Goulding not have known?

Mr. Hamilton Goulding

I was not able to know everything, I am sorry. I was a non-executive member of the board.

Deputy Shane Ross

It is important.

Mr. Hamilton Goulding

Yes.

Deputy Shane Ross

Had Mr. Goulding known, would he not have said, "No"?

Mr. Hamilton Goulding

We really do not know what numbers we are talking about.

Deputy Shane Ross

We are talking about €3 million.

Mr. Hamilton Goulding

No, we are talking about €3 million to preserve the fund and support the pensions of all those people working in the clinic. We are not talking about €3 million to prop up Mr. Kiely. It is an extraordinary allegation that, all of a sudden, we added €3 million to Mr. Kiely's settlement. That is news to me.

Deputy Shane Ross

No, I am not making that allegation at all. According to Mr. Goulding's statement, the CRC used a small portion of its independent funds to achieve the settlement. It used other parts of its independent funds to achieve the settlement as well. There was €700,000 elsewhere with Mr. Kiely. There was the payoff and other money that came in before then from the Friends and Supporters of the Central Remedial Clinic. We also have €3 million given by the Friends and Supporters of the Central Remedial Clinic to the CRC for the latter's pension. Whether it was for Mr. Kiely or not, I do not know, but was it not a misuse of the funds?

Mr. Hamilton Goulding

It is not a misuse of the funds to support a pension fund for the retirement of one's employees.

Deputy Shane Ross

From people who pay money to charity to pay an exorbitant pension, a lot of it for one man?

Mr. Hamilton Goulding

Tell me this - what does one do with one of the many pension funds in this country that are not in compliance with the minimum funding standard?

Deputy Shane Ross

I can tell Mr. Goulding what one does not do-----

Mr. Hamilton Goulding

One finds money to put into it.

Deputy Shane Ross

No.

Mr. Hamilton Goulding

One does.

Deputy Shane Ross

One makes a settlement.

Mr. Hamilton Goulding

Yes.

Deputy Shane Ross

That is what people do all of the time, but they do not put their hands-----

Mr. Hamilton Goulding

They make a funding plan.

Deputy Shane Ross

-----into the pockets of people who are making donations into boxes for clients of the CRC.

Mr. Hamilton Goulding

Indeed, one does not put one's hand into other people's pockets. Can the Deputy tell me what money from voluntary donations came from the Friends and Supporters of the Central Remedial Clinic? If he does not know, I will tell him - none.

Deputy Shane Ross

No money from voluntary donations.

Mr. Hamilton Goulding

No.

Deputy Shane Ross

It came from the Care Trust.

Mr. Hamilton Goulding

Yes.

Deputy Shane Ross

From where did the Care Trust get its money?

Mr. Hamilton Goulding

It did not come from the collections. The Care Trust gets its money from a commercial lottery operation and a-----

Deputy Shane Ross

From a lottery.

Mr. Hamilton Goulding

Yes.

Deputy Shane Ross

It is a charity.

Mr. Hamilton Goulding

Yes, an element of that-----

Deputy Shane Ross

Those are charitable funds.

Mr. Hamilton Goulding

When one runs a lottery, people buy lottery tickets. They do that for two reasons. Undoubtedly, one of the reasons is the good cause to which the money is going, just as with the national lottery. The other reason is effectively gambling. I do not know what proportions the Deputy wishes to assign to these. Also in that account was €2.46 million of investment income. The clinic had the ability to make these settlements. I do not know what proportion of the €3 million Deputy Ross believes went to Mr. Kiely, but the clinic had the ability to do this without recourse to public or voluntarily given funds. It had the resources to do that.

Deputy Shane Ross

Yes, but-----

Chairman

I ask the Deputy to conclude.

Deputy Shane Ross

May I revert?

Chairman

Indeed.

Deputy Shane Ross

I want to return to that issue later. May I ask a further question, as I want to flag the issue?

Chairman

Go ahead.

Deputy Shane Ross

It is about the medical devices company. What was the deal on the sale of CRC Medical Devices?

Mr. Hamilton Goulding

Not all assets of the company were sold to the new buyer. The company was going to be wound up. The final disposition of the assets - those sold, those unsold and the price given for them - was in the hands of Mr. Conlan when I last heard. I am afraid that, when I last heard, the situation was unresolved.

Deputy Shane Ross

For how much were the assets sold?

Mr. Hamilton Goulding

I do not have that number in front of me. I do not know.

Deputy Shane Ross

Was Mr. Goulding not the chairman of the board?

Mr. Hamilton Goulding

I was on the board.

Deputy Shane Ross

Mr. Goulding knows what it was sold for if he was on the board.

Mr. Hamilton Goulding

I actually do not recall, unfortunately. I will revert to the Deputy on that matter.

Deputy Shane Ross

Was it a nominal sum?

Mr. Hamilton Goulding

I do not want to get an-----

Chairman

Mr. Goulding does not know the detail just yet. We can revert to Mr. Cregan and, perhaps, Ms McGuinness on it. I just want to go on to Deputy-----

Deputy Shane Ross

I do not believe Mr. Cregan knows.

Mr. Hamilton Goulding

He might know more about it.

Mr. John Cregan

No.

Deputy Shane Ross

He does not.

Chairman

I want to call Deputy O'Donnell.

Deputy Shane Ross

I am sorry.

Chairman

We will revert to this issue.

Deputy Kieran O'Donnell

I welcome the witnesses. I have read the report, which is 146 pages in length and very comprehensive. This is nothing personal, as our job is to peruse. In general terms, the report highlights the features. Mr. Cregan sent us a letter in January, which I assume he stands over, and the report is consistent with that letter. It is unusual that he did not interview the directors, although he made contact with Mr. Goulding. At board level, the companies had common directors for a significant period. At the CRC, the Friends and Supporters of the Central Remedial Clinic and CRC Medical Devices, the common directors were Mr. Goulding and Mr. Nugent. In addition, Mr. Kiely was company secretary for all three before being replaced by Mr. Conlan, although the latter would dispute some of this, in respect of the CRC and the Friends and Supporters of the Central Remedial Clinic. Mr. Cregan has dealt with the issue, but interviews should have been done.

Mr. Cregan was unable to locate the files of two senior executives.

Mr. John Cregan

Two chief executives.

Deputy Kieran O'Donnell

Those were Mr. Kiely and Mr. Conlan.

Mr. John Cregan

Yes.

Deputy Kieran O'Donnell

Did Mr. Cregan ever reach a conclusion as to why he could not find those reports?

Mr. John Cregan

They were not there.

Deputy Kieran O'Donnell

Were they ever there?

Mr. John Cregan

Yes. I know from the previous audit that files had been examined, so there is a record of the files being there.

Deputy Kieran O'Donnell

Did Mr. Cregan consider making contact with those former CEOs regarding their files?

Mr. John Cregan

I did not, but even today I noticed a report in a newspaper of Mr. Conlan stating that he was not in possession of any file, paper or other documentation.

Deputy Kieran O'Donnell

Mr. Cregan also stated that there was proper financial-----

Mr. John Cregan

Regarding the questioning of former directors, sometimes things speak for themselves. I felt that the documents answered the questions that I had.

Deputy Kieran O'Donnell

Okay. Mr. Cregan referred to there being proper financial systems, but there appears to have been a major absence of documentation in respect of inter-company transfers. Mr. Goulding can correct me if I am wrong but, under the original structure, the CRC held the shares in the Care Trust before they were transferred to the Friends and Supporters of the Central Remedial Clinic.

CRC Medical Devices, which was originally held by CRC, also subsequently transferred to the Friends and Supporters of the Central Remedial Clinic. Given the transfer by the Friends and Supporters of the Central Remedial Clinic of approximately €1.4 million in respect of a settlement package for Mr. Kiely, does Mr. Cregan still stand over that there are proper financial systems in place?

Mr. John Cregan

I believe there are sound financial systems in place in respect of CRC. However, the narrative on board decisions in relation to what I would term big ticket items was poor. It is important there is full disclosure of board documentation in relation to these transactions. The record shows that a board decision had been made to pay "X". That is properly recorded and the amount has been paid. CRC is audited annually and its accounts are presented annually. The auditors who conduct the audit are from a reputable firm and have never identified any problems in relation to the systems in place. I did not make my earlier statement lightly. I am satisfied that there are good systems in place. However, I am unhappy that the records of the board, in relation in particular to the Friends and Supporters of the Central Remedial Clinic, are not adequate enough to fully inform anybody looking at the transactions of the basis for them.

Deputy Kieran O'Donnell

Is Mr. Cregan satisfied with the structure of the group - which comprises the Central Remedial Clinic as a stand-alone entity with the Friends and Supporters of CRC being a 50% shareholder in the Care Trust and a 100% shareholder in CRC Medical Devices - which was established to circumvent the HSE being made aware of moneys?

Mr. John Cregan

Based on what Mr. Timmins, the new chairman of the CRC, said this morning, that structure will change in the future in the sense that Friends and Supporters of the Central Remedial Clinic will be wound up and the money from the Care Trust will go directly to CRC. I have also stated in my report that any investment in a company is risky and that people must be careful if funds are raised through charities not to risk those funds in ventures.

Deputy Kieran O'Donnell

Reference is made on page 55 of the report to the company purpose and the memorandum and articles of association for the CRC and Friends and Supporters of the Central Remedial Clinic. It is fair to say that the €700,000 transferred from the Friends and Supporters of the Central Remedial Clinic to CRC in respect of settlement fell outside the terms of its memorandum and articles of association and the memorandum and articles of association for the CRC.

Mr. John Cregan

There are a number of factors here. Under the memorandum and articles of association of the Care Trust, money raised through the lottery by the Care Trust is for the benefit of CRC, Rehab and the Mater Hospital. That money is paid into the Friends and Supporters of the Central Remedial Clinic but not withstanding the memorandum and articles of association of Friends and Supporters of the Central Remedial Clinic, that money can only be used for the benefit of the CRC. The money was transferred by way of a donation from the Friends and Supporters of the Central Remedial Clinic to the CRC so ultimately the CRC got the €700,000. It is a moot point whether the amount was paid but the transaction was regular in the sense that the money raised by the Care Trust was paid into the Friends and Supporters of the Central Remedial Clinic and subsequently transferred to the CRC.

Deputy Kieran O'Donnell

I was struck by Mr. Goulding's opening statement. CRC does fantastic work. I have reviewed the original memorandum and articles of association of the CRC, of which Mr. Goulding's mother was the founding member. I want to divorce the work done by CRC and its staff and users of the facility from the structures. Mr. Goulding asked earlier why he is here today. The HSE is the custodian of taxpayers' money, €16 million of which is paid annually to the CRC. Mr. Goulding is here today so that the committee can question him in regard to whether funding provided by the HSE to the CRC is being properly spent on behalf of the taxpayer and in regard to CRC's adherence to section 38 provisions.

Mr. Hamilton Goulding

Yes.

Deputy Kieran O'Donnell

I was struck by Mr. Goulding's statement that he first shook a collection box for CRC at the age of 15 on the streets of various towns around Ireland. The Friends and Supporters of the Central Remedial Clinic raise approximately €1.4 million per annum through the Care Trust. This money is raised through the sale of tickets countrywide. The people who purchase the tickets expect that the money will be used for services for people on the ground. For how many years has Mr. Goulding been chairman and a member of the board of CRC and a board member of Friends and Supporters of the Central Remedial Clinic?

Mr. Hamilton Goulding

I do not know exactly.

Deputy Kieran O'Donnell

For how long has Mr. Goulding been chairman of the board?

Mr. Hamilton Goulding

Three years.

Deputy Kieran O'Donnell

Prior to that Mr. Goulding would have been a member of the board?

Mr. Hamilton Goulding

Yes, for a long time - perhaps, 15 years.

Deputy Kieran O'Donnell

How can the board of CRC stand over the taking from Friends and Supporters of the Central Remedial Clinic of half of the income raised from people countrywide for charitable purposes for use as payment of a settlement or pay-off for a former CEO? How can the board stand over that the same CEO implemented cuts under Financial Emergency Measures in the Public Interest legislation in respect of ordinary rank and file workers within CRC and did not apply them to himself?

The CRC, in terms of the work done by the Goulding family and Mr. Goulding's mother as the founding member, will continue. I appreciate the work being done by the CRC.

I really appreciate the work but as a board, how can it stand over this? There is €12 million in the friends and supporters bank account at any one time and the ordinary person may see it as nothing more than a lucky dip or slush fund for looking after the upper echelons and management in the Central Remedial Clinic, CRC.

Mr. Hamilton Goulding

The simple answer for giving this large amount of money to Mr. Kiely is that we felt the alternative would cost more. There was a legal compulsion for us to do it if we wanted him to leave. If he did not leave and we continued under present arrangements, as we were legally compelled to do by contract, it would have cost us more. That is the simple answer and it is backed up by much legal advice. As I stated, I do not like the idea at all and it is an uncomfortable notion. When it comes to the idea of hiding funds or having slush funds, the board would have three objectives or duties. One is to maintain, sustain and protect services for people getting an existing service in the CRC. The second is to retain the ability to bring people who are not receiving service into the net and expand the scope, geographically and functionally, of the clinic. That is very important and we can only do that if we have a capital fund. The third objective is to keep a reserve in these times of rapidly diminishing State funding for obvious reasons. It was only prudent for the CRC to keep a certain reserve of money to offset future anticipated reductions. One of the problems in speaking about capital funding is that in the health service the physical disability sector tends to be the poor relation, as other elements are seen as more urgent and immediate in the acute care area.

Deputy Kieran O'Donnell

With due respect, the money raised by friends and supporters was for capital projects.

Mr. Hamilton Goulding

Correct.

Deputy Kieran O'Donnell

Of that, €750,000 was used for a settlement. With the benefit of hindsight and considering the e-mails between Mr. Goulding and Mr. Kiely. I want to take away the personalities from those documents, and to put it in lay terms, it seems Mr. Kiely was able to come up with his own dowry without having to provide for it. Should Mr. Kiely have come up with his own package or should the CRC have brought in an independent person to do it? If Mr. Kiely had stayed on board, the terms of the Haddington Road agreement would have kicked in. It was indicated that the process cost the CRC €151,000. How does the board stand over the fact that the chief executive officer did not take the cuts from the financial emergency measures in the public interest legislation, although he was imposing it down the line on people with no say? Many of those people were probably under financial pressure.

Mr. Hamilton Goulding

I am sure there was much financial pressure throughout the system. We are back to the same issue of the division between the private part of people's income given to them by the clinic and the overall contract of employment. It keeps coming back to this, I am afraid. I do not like it either.

Deputy Kieran O'Donnell

I want Mr. Goulding to deal specifically with the issue of Mr. Kiely effectively coming up with his own dowry. Why did the CRC not bring in an independent party to adjudicate on his package. It appears Mr. Goulding sent an e-mail indicating that it would be extremely important that the board would sign off on the package, and that the board rubber-stamped it.

Mr. Hamilton Goulding

I did not know when I passed it to the remuneration committee and the board whether it would be acceptable. I deemed it something that could be put up for consideration, although I was on unfamiliar territory, having not arranged anybody's pension or departure arrangements before. The proposal was put forward and could have been queried. The board could have gone on bickering with Mr. Kiely for a long time and possibly got a certain reduction in the package but it was quite clear that this was the kind of level of remuneration that was going to have to be given to the man or he would have stayed on. The other issue very much in our mind was that if we got into a dispute scenario, we would probably have had to pay him approximately the same amount, with legal fees on top of that if we got into difficulty.

Deputy Kieran O'Donnell

Did the board at the time seek legal counsel advice at any stage about Mr. Kiely's entitlement to retain that level of salary and get that type of remuneration package?

Mr. Hamilton Goulding

Although they were not giving official legal advice, the board has two lawyers, a former governor of the Central Bank, very prominent business people and others with a great level of experience. All of them asserted, in my understanding, that the position was very clear. It does not take much expertise to discover that if somebody is employed for 37 years and if the performance has been exemplary, with no query about the way in which he or she has done a duty, that person would have the right to continue in that employment, or if it is required that he or she leaves, the person should get an appropriate agreed settlement. I agree it is a shocking amount of money.

Deputy Kieran O'Donnell

The problem is the €700,000 could have been used for front-line services. The memorandums and articles of the friends and supporter fund indicates it should be to "erect building structures, train nurses, educate and generally assist." It is also to "provide home help for disabled persons". A €700,000 settlement, without seeking proper legal advice, does not meet the terms of the memorandums and articles of that fund. Ultimately, the CRC was set up to look after disabled people. Money was raised by ordinary people with a box but it has not ended up in its proper place. There was €12 million in a fund which is effectively for capital projects and the occasional revenue project, which appears to have been nothing more than settlement for a former CEO. Was the moral dilemma of Mr. Kiely imposing FEMPI cuts on the rest of the staff discussed? These affected ordinary people such as nurses, carers and attendants.

Mr. Hamilton Goulding

Mr. Kiely did not impose cuts, as they were part of the national process.

Deputy Kieran O'Donnell

In his role as CEO he imposed FEMPI cuts across the board, but only for half his own income, despite what the HSE said he should do. I contend that at that time the board had a fiduciary duty to seek legal advice. What appears to have happened, and these things do happen, is that it became too cosy. It happens over time. Effectively, and this is not a personal issue, Mr. Kiely was judge and jury over his own settlement package. Would that be fair comment?

Mr. Hamilton Goulding

I really do not think so. I think there was enough objectivity among the board. While there was admiration and respect for Mr. Kiely and the way in which he performed his duties, I do not believe any of us thought that we should load him up with an extra €100,000 here, there and anywhere, where we did not have to. I felt that the boundary of what he was going to accept had been reached. He is a very determined individual and is very aware of his rights and able to protect them. He had an understanding of his rights and we believed that it would not have taken a lot of pushing to get us into a difficult situation with him.

Deputy Kieran O'Donnell

Was he a very dominant figure at the board?

Mr. Hamilton Goulding

He was a powerful figure at the board. One would not say he was dominant. He was kept under control, but he was-----

Deputy Kieran O'Donnell

Did he get his own way at the board?

Mr. Hamilton Goulding

Not if it was not relevant. He did not get his own way, but much of the time he spoke a lot of good sense which was accepted. He was a much respected man on the board, but that does not mean that the board never contradicted his ideas or challenged him.

Deputy Kieran O'Donnell

In hindsight, should the board have sought independent advice when it was arranging his settlement package?

Mr. Hamilton Goulding

Frankly, I thought the expertise involved in considering that was sound and very skilled, but perhaps an extra level of surveillance of it might have added some benefit. I really cannot say.

Deputy Kieran O'Donnell

With regard to the medical devices company, and this is not a criticism of the report, but Ms McGuinness in her opening statement omitted to make reference to it in related undertakings and was not aware of the funds being accumulated by the Friends and Supporters of the CRC. The HSE is involved in capital projects with the CRC; they are funded out of Friends and Supporters of the CRC funds. I contend the HSE should have known. The HSE funds the revenue side of those projects and it is a partner in some of those projects. I want to be fair. I contend that Ms McGuinness should have known.

Ms Laverne McGuinness

There are two separate streams of funding, capital funding and revenue funding. With regard to the funds being used as outlined in Mr. Cregan's report, that fund was being used for revenue purposes.

Deputy Kieran O'Donnell

That is not the point. If I am providing revenue funding for the operational costs of a business, the first thing I will ask is, "How did you fund it? Where did the funding come from?"

Ms Laverne McGuinness

I will ask Mr. Cregan to respond on that.

Mr. John Cregan

One of the issues that was apparent when I started to look at the fund-raising was that there are two streams of fund-raising. One is an internal fund-raising department, which did things such as the Santa bear appeal. Many people would not have been aware of Friends and Supporters of the CRC and would have assumed that all the charitable funds raised were coming through the internal fund-raising mechanism. There was that confusion.

Deputy Kieran O'Donnell

For the ordinary person looking at this, it would strike them as unusual, perhaps incredible, that the HSE would not have been aware of a related company having funds of €12 million which were funding capital projects for which the HSE was funding the operational costs.

Mr. John Cregan

All I am saying is that there were two streams of fund-raising. Most members of the public would know about the internal fund-raising activity through things such as golf classics and the other activities. They would not have been aware of the Friends and Supporters of the CRC and the money available from that.

Deputy Kieran O'Donnell

Who would not have been aware? The HSE?

Mr. John Cregan

No, the general public. The HSE can speak for itself. However, I think there was confusion, even in the mind of the HSE.

Deputy Kieran O'Donnell

I am looking at it now with the report. Ms McGuinness has stated the HSE was not aware of the funds in the Friends and Supporters of the CRC.

Ms Laverne McGuinness

Yes. With regard to the funds of the Friends and Supporters of the CRC, I said that we were not aware of the level of funding being used for revenue purposes in the revenue. The extra amounts being paid were revenue funds. The capital fund is separate. I am not sure what was known about it in respect of the capital fund, so I will have to clarify that. I was speaking particularly with regard to the revenue funds. I can refer back to the Deputy with clarity on that.

Deputy Kieran O'Donnell

I wish to conclude with the medical devices. Mr. Cregan said in page 58 of his report with regard to repayment of €550,000 in 2013, that the Friends and Supporters of the CRC made a payment of €550,000 in 2013 to CRC on behalf of CRC Medical Devices "on foot of this undertaking", and that this amount was in settlement of all funds advanced to the CRC Medical Devices by CRC. The impression would be given that the moneys put into CRC Medical Devices came from Friends and Supporters of the CRC. Initially, the medical devices company was a 100% subsidiary of CRC. I suspect that the CRC provided it with funding and when that was proving to be difficult the company was transferred to be 100% held by the Friends and Supporters of the CRC, where the pool of funds was. Effectively, it was out of sight and out of mind in terms of the HSE. Could Mr. Goulding say how the set up for the medical devices company came about? How was it that €550,000 was owed to the CRC, which was repaid in 2013 by the Friends and Supporters of the CRC?

Mr. Hamilton Goulding

A letter of comfort was issued annually by the CRC to the medical devices company in order to keep it trading as a viable company. It is an unhappy story that the medical devices of a company-----

Deputy Kieran O'Donnell

Did the CRC, the main company, provide the medical devices company, which was a private operation, with €550,000?

Mr. Hamilton Goulding

My recollection is that it came from the Friends and Supporters of the CRC. I am sorry I cannot answer that question. I do not have the information. Mr. Cregan will probably know.

Mr. John Cregan

Originally the money was paid by the CRC and then it was recouped by the CRC from the Friends and Supporters of the CRC. The sequence of events the Deputy has outlined is correct.

Deputy Kieran O'Donnell

Does Mr. Cregan not find that a little unorthodox?

Mr. John Cregan

I have said it was unsatisfactory.

Deputy Kieran O'Donnell

Does Mr. Cregan know at this point what loss will be incurred by the overall group for the medical devices company?

Mr. John Cregan

I think I say on the same page that the total liabilities are not yet known, but I do not think they will be substantial.

Deputy Kieran O'Donnell

I have a question for Mr. Timmins in light of what he has seen regarding the settlement that was paid.

What does the board intend to do with the payment or settlement that was out of line with the HSE guidelines? What does it intend to do with the medical devices company?

Mr. Kieran Timmins

With regard to Mr. Kiely's settlement, what I have said and what we intend doing is, we have to look at the settlement. It is complex in how it was calculated. We have touched on that this morning, as has the Deputy. We have to look at that, we have to look at where FEMPI was implemented and where it was not, how the final salary was calculated, how the pension was calculated. When we have all of those issues before the board we will consider it before making contact with Mr. Kiely. It is our intention to make contact with Mr. Kiely. We do not see the point in making contact with Mr. Kiely until we have all the facts in front of us.

Deputy Kieran O'Donnell

When does the CRC expect to be in that position?

Mr. Kieran Timmins

It is difficult to say but it is in the short-term rather than the long-term. Our remuneration committee is looking at the calculations at the moment. We are in the process of appointing legal representation on foot of the board. I would imagine it will be measured in months rather than days.

Chairman

At an advanced stage, I ask Mr. Timmins to inform us of the progress.

Mr. Kieran Timmins

I would be more than happy to.

Deputy Kieran O'Donnell

The CRC does outstanding work. The abiding thing to remember is that the work done by the staff and the service users continues. Outstanding work was done by Hamilton Goulding's mother to establish the CRC. Clearly, on reflection, there was serious remiss in terms of the use of the funding collected in order to be used for front-line services. That funding was used, in my view, for a use that it was not intended for when people throughout the country donated their money. One must practice what one's preaches. For the ordinary people who work in the CRC that does not appear to have been the case. It is very important, in future, that we do not have organisations with separate fund-raising arms. We must have transparancy.

Deputy Mary Lou McDonald

Go raibh maith agat, a Chathaoirligh, agus fáilte uilig anseo inniú.

I shall start with Mr. Cregan and commend him on his expeditious and thorough work. We would share some of his concerns such as the preferability of having an independent entity carry out the work. That point has been made so I will not labour it. Nonetheless, I acknowledge his report and the timeliness of its production. However, his criticisms of the HSE are more implicit than explicit in his work. Before we turn to the CRC, people looking on will say that substantial amounts of money were going to the clinic and to other section 38 organisations, and the HSE was asleep at the wheel for a long time. Is that a fair comment, Mr. Cregan?

Mr. John Cregan

In the final page of my report I said that this was a series of skirmishes between the HSE and the CRC. It took a long time to get to a situation where there was absolute clarity in terms of all the issues facing the CRC and the related undertakings.

In regard to the HSE, I commented on how we got to the stage where an interim administrator was appointed. I think, and I have said it already, it would have been preferable for two directors to work with the HSE in terms of establishing where we were.

Deputy Mary Lou McDonald

That is what I am trying to get from Mr. Cregan. In light of fairness and trying to resolve the issues that we have examined at committee, is it fair to say that at least some responsibility for these matters rests with the HSE?

Mr. John Cregan

What I say, in regard to the HSE, is that the service arrangements do not take into account the need to look at financial statements and scrutinise those statements. If that had been done we might not be here today.

Deputy Mary Lou McDonald

Was that a significant flaw in the HSE's procedures?

Mr. John Cregan

Yes. I would have said that there was a number of, or multiple if one likes, service arrangements. It would, and I have recommended it to the HSE, have been preferable, rather than a number of people dealing with the CRC, that there would be a single designated manager who would manage the relationship. I think it would work better that way. They are the kinds of criticisms that I had with it.

Deputy Mary Lou McDonald

Was the HSE assertive enough in its dealings with the clinic? I picked up, from the trail of correspondence, that at times some of Mr. Cregan's colleagues in the HSE, in fact his colleague seated beside him, Ms McGuinness, was essentially being told to get lost by the clinic. Perhaps that is rather crude but that would certainly have been the message I took from some of the letters emanating from the clinic. Was the HSE assertive enough?

Mr. John Cregan

I would say that the HSE, in 2009, reached an agreement with the CRC. I think they may have given the benefit of the doubt to the CRC that the CRC would live up to that agreement. As events-----

Deputy Mary Lou McDonald

Was that wise in hindsight?

Mr. John Cregan

The HSE was dealing with an independent board who were working in the interest of the CRC. I think it would be reasonable to expect that they would live up to the agreement that they entered into. It is always easier to-----

Deputy Mary Lou McDonald

The problem is that they did not.

Mr. John Cregan

I know they did not and that is why we are here today.

Deputy Mary Lou McDonald

Does Mr. Cregan agree with me that it is not sufficient? Although one would like to make the assumption of goodwill and so on, does he agree that it is not safe to assume, simply on the basis of goodwill, that people, as he put it, live up to these agreements and that there has to be more rigorous enforcement? Is that not a key learning point?

Mr. John Cregan

It is a learning point. The HSE, itself, has learned that the system of service arrangement and governance has to be strengthened. I understand some changes have been made, in 2014, to address that. There is a greater understanding or acknowledgement by the HSE that when people are under pressure they may not live up to a particular agreement.

Deputy Mary Lou McDonald

It was asserted here today that there was no understanding, at board level, that either all employees or some employees were public servants. Mr. Cregan has been through the documentation, paper and records associated with the clinic. Was there an understanding that people were public servants?

Mr. John Cregan

There was. I think Deputy O'Donnell alluded to the fact that everybody at the CRC has a contract. I do not believe that just because somebody is an executive, and on a higher rater of pay, that they are exempt from general public pay policy.

Deputy Mary Lou McDonald

I appreciate that.

Mr. John Cregan

That is where----

Deputy Mary Lou McDonald

I endorse that view. Presumably, when FEMPI cuts were to be made, there was a discussion or discussions within the clinic.

Mr. John Cregan

I have no evidence of that.

Deputy Mary Lou McDonald

Mr. Cregan has no evidence of discussion on that. However, there is, evidence of Mr. Kiely, the former CEO, implementing those cuts.

Mr. John Cregan

Yes.

Deputy Mary Lou McDonald

Is Mr. Cregan saying to me, having looked at the minutes of the board, which he has clearly done, that there was never a discussion around that?

Mr. John Cregan

I have never seen a discussion.

Deputy Mary Lou McDonald

No discussion at all.

Mr. John Cregan

I have seen references in that something would be submitted to the remuneration committee. I have said in the report that I do not have all the papers in regard to the remuneration committee, in particular. Mr. Kiely - I have said it in the report - was the author of the report to the remuneration committee.

Deputy Mary Lou McDonald

Was that in respect of FEMPI?

Mr. John Cregan

In respect of FEMPI.

Deputy Mary Lou McDonald

Mr. Kiely penned the report which went straight to the remuneration committee but it did not go through the board.

Mr. John Cregan

It may have been included in the e-mail which says, "[Y]ou know I have sent this to the remuneration committee and we assume that they will approve it".

Deputy Mary Lou McDonald

Mr. Cregan made what I believe are three fairly damning findings on the Central Remedial Clinic, goodwill or no goodwill, which raise serious questions. May I check with him if I am correct in stating that his finding was that, first, there was a deliberate and artificial split in salary, in other words, there was a deliberate strategy to evade public sector pay cuts?

Mr. John Cregan

I said that.

Deputy Mary Lou McDonald

That is Mr. Cregan's finding. Second, there was knowingly a disregard of the terms of the service level agreement in respect of the appointment of the new CEO, Mr. Conlan.

Mr. John Cregan

Yes.

Deputy Mary Lou McDonald

I think that is accepted. Third, as I understand it, Mr. Cregan asserts that friends and supporters of CRC was contrived in a way that was almost to keep its revenue stream out of sight of the HSE and therefore maximise the level of State funding to the clinic. Is that correct?

Mr. John Cregan

I have looked at all the minutes and I cannot see any other reason for the friends and supporters other than to accumulate the money from the care trust.

Deputy Mary Lou McDonald

And out of sight of the HSE. Mr. Cregan studied the minutes and discussions, and what I am trying to establish is whether that was explicitly stated and whether there were conversations stating that this was the most efficient way to do things to maximise the clinic's State stream of income.

Mr. John Cregan

I have used the phrase in the report that the inference I have drawn is that this was used to protect the CRC from HSE cuts.

Deputy Mary Lou McDonald

I thank Mr. Cregan. Will Mr. Cregan explain to me his recommendation as regards the red-circling of certain salaries that are clearly still out of kilter with public sector pay policy? How many people are involved and, briefly, why has he arrived at that finding?

Mr. John Cregan

I have defined in my report that in the case of the Central Remedial Clinic the purpose of the recommended red-circling - it is not forever, it is-----

Deputy Mary Lou McDonald

It is until 2015?

Mr. John Cregan

Yes - is to allow the clinic to address the case of the people involved, which is fewer than a handful.

Deputy Mary Lou McDonald

Why would it take until 2015 to do that? There are only a small number of people so why could it not be sorted out now?

Mr. John Cregan

There are contractual arrangements for people in place until 2015. Some of the contracts end in 2015.

Deputy Mary Lou McDonald

Is is Mr. Cregan's argument that it is the path of least resistance?

Mr. John Cregan

No. I have said that it is open to the board to take a much more radical approach, but that is the minimum. Originally I wanted to give the board some chance, given all the issues it would face, to start work on this and come up with a conclusion.

Deputy Mary Lou McDonald

Although Mr. Cregan has carried out his work very diligently, I think he has agreed with me that he is part of the HSE apparatus that was not as assertive or vigilant as it might have been in respect of the breaches of public pay policy in the CRC and bringing it into line with public pay. Why is he, as a representative of the funder and the statutory agency that is the guardian of public money, not recommending the more radical course?

Mr. John Cregan

Is that a question for me?

Deputy Mary Lou McDonald

Yes, but if Mr. Cregan cannot answer it on behalf of the HSE, I will ask Ms McGuinness.

Mr. John Cregan

I have set out why I have talked about 2015, given that there is a new board in place. The Croke Park and Haddington Road agreements have been fully applied to the salaries of the staff, but in terms of reducing the salaries further to HSE norms, there will have to be some negotiation with the people concerned.

Deputy Mary Lou McDonald

I thank Mr. Cregan.

Mr. John Cregan

Somebody quoted what I said earlier, that there is a risk in unilaterally cutting salaries in the sense that one does not want to have a legal issue and to be unable to demonstrate that one has negotiated a revised salary.

Deputy Mary Lou McDonald

The big difficulty with that is that whatever the legal niceties, the vast majority of people who work in the clinic, contract or no contract, had their salaries cut by way of emergency legislation.

Mr. John Cregan

Everybody at the moment, including these executives, have had the approved salary cut in line with the financial emergency measures in the public interest, FEMPI legislation. There is no dispute about that at this stage. To get the salaries from that level to within HSE norms will have to be a matter for negotiation.

Deputy Mary Lou McDonald

Every other employee has no option, as there is no opt-out in terms of staying within the salary norms. As Mr. Cregan knows, and he has put it very succinctly in his report, under public pay policy a section 38 organisation is not entitled to pay remuneration above a rate as reduced in accordance with that policy or any general agreement on pay. In other words, the organisation does not have the discretion and one cannot have an arrangement like Lanigan's Ball where one can step in and step out of public pay policy.

Mr. John Cregan

They cannot and I have said so.

Deputy Mary Lou McDonald

Is it not really important that we hammer that message home? With a view to rebuilding confidence in the CRC and every other section 38 organisation, there is no option. It is not à la carte and one does not apply public pay policy willy-nilly or in a preferential manner. The policy is the policy, regardless of whether one is the CEO, the nurse or the carer. It does not matter as all the staff are public servants. Can we all agree that is the position?

Mr. John Cregan

I have said that.

Deputy Mary Lou McDonald

I know Mr Cregan has said that. I wish both Mr. Timmins and Ms Manahan good luck in their respective roles. May I ask them to confirm that they understand that all employees, including Ms Manahan in her role as CEO, are in fact public servants and are bound by public sector pay policy, standards and norms?

Mr. Kieran Timmins

Yes.

Ms Stephanie Manahan

Yes, absolutely.

Deputy Mary Lou McDonald

Excellent. I thank the witnesses. I thought Mr. Goulding sounded a bit offended in his opening statement abut the fact that we are here. He went off script and wondered out loud why we are all here. I presume that was just a throwaway comment and I should not read too much of significance into it. I am sure he understands why we are here.

Mr. Hamilton Goulding

I do understand why we are here.

Deputy Mary Lou McDonald

Excellent. There was a deliberate contrivance to avoid cuts in pay for the chosen few in CRC. That was not very honourable. I am assuming, given Mr. Goulding's background and clear attachment to the CRC, that he operates on the basis of equality for employees of that clinic and he does not work to the notion that some are more equal than others.

Mr. Hamilton Goulding

No, I do not. The idea that there was a contrivance to separate salaries in order to protect some people from pay cuts that others would be receiving is really quite wrong. The separation simply started when the new scales were introduced in 2009 and there was obviously a separation then because some of the salaries which were contracted were being paid by the HSE and the balance was then outstanding. We come back to the point about a contractual obligation, that a company that has a contract with an employee cannot unilaterally diminish the income without being legally liable. From that point onwards, once one does not have one body paying everything, one automatically has separation. To say that the separation was made with a view to making in the future some special protections is not correct.

Deputy Mary Lou McDonald

Did Mr. Goulding up the ante and pay more to Mr. Kiely to compensate him for losses on the State end of salary?

Mr. Hamilton Goulding

No.

Deputy Mary Lou McDonald

No?

Mr. Hamilton Goulding

No.

Deputy Mary Lou McDonald

So Mr. Goulding rejects Mr. Cregan's finding?

Mr. Hamilton Goulding

As I recall, and I am sure I am right, there was no review of Mr. Kiely's salary, certainly in my memory and certainly going back to the time when his salary reached its present abnormally high level, I think in 1997. From then on it went up through the boom years with benchmarking and public pay rounds. His pay was never reviewed and was never increased. I am sure of that.

Deputy Mary Lou McDonald

Does Mr. Goulding reject Mr. Cregan's finding or assertion that there was a contrivance to protect-----

Mr. Hamilton Goulding

I do. To my knowledge, there really was no such-----

Deputy Mary Lou McDonald

Can I ask Mr. Cregan how he reacts to that?

Mr. John Cregan

I said in my report that there was a split between the HSE-approved component of the salaries and the private CRC component of the salaries. I went on to say that the most egregious aspect of the whole affair was that the public sector pay cuts were not applied to the private CRC component of the salaries. Given that the individual is getting just one salary, as far as I am concerned there is no mechanism for any employer to avoid not applying the full public sector cut to the whole salary.

Deputy Mary Lou McDonald

Does Mr. Goulding see the point in what Mr. Cregan has said?

Mr. Hamilton Goulding

I see what he is saying. It seems to be completely at odds with the idea, as stated elsewhere, that an employer cannot unilaterally impose a reduction on-----

Deputy Mary Lou McDonald

Hang on a second-----

Mr. Hamilton Goulding

I am still puzzled about why there are 58 other people in section 38 organisations that the HSE-----

Deputy Mary Lou McDonald

Mr. Goulding does not need to worry about those others.

Mr. Hamilton Goulding

I am worried because it creates an example and a reason.

Deputy Mary Lou McDonald

No. I assume Mr. Goulding read page 10 of the report, which states that "under public pay policy, a Section 38 organisation is not entitled to pay remuneration above a rate as reduced".

Mr. Hamilton Goulding

I did.

Deputy Mary Lou McDonald

Does he understand that-----

Mr. Hamilton Goulding

I do.

Deputy Mary Lou McDonald

-----that is the position?

Mr. Hamilton Goulding

It is, yes. It is quite clear that both the HSE and the CRC understood after the 2009 meeting, at which this was agreed by Mr. Peelo, that the CRC would independently fund the missing part of the salaries from that point on. The HSE was very pleased with this arrangement. Surely it was understood then that this was going to happen.

Deputy Mary Lou McDonald

That is contested, of course, on the far side. I do not have the time to adjudicate between-----

Mr. Hamilton Goulding

That continued and was reasserted in May 2012.

Deputy Mary Lou McDonald

Does Mr. Goulding accept now, even if it was not accepted in the past, that a section 38 organisation does not have the authority to make it up as it goes along?

Mr. Hamilton Goulding

I accept that is the rule now, but it is not what is actually pertaining throughout the sector.

Deputy Mary Lou McDonald

Right. Can Mr. Goulding confirm that he accepted earlier that the CRC knowingly disregarded the terms of the service level agreement when it appointed Mr. Conlon to that job?

Mr. Hamilton Goulding

Sure. Okay.

Deputy Mary Lou McDonald

Mr. Goulding made an interesting comment about the heavy hand of the HSE mucking things up and perhaps foisting some inadequate soul on the operation. I assume he has no such reservations about Ms Manahan, who has now taken on the role. She came through the appropriate procedure. I am sure she is a very fine individual and more than well qualified for the role. It was not such a disaster after all.

Mr. Hamilton Goulding

Indeed it was not.

Deputy Mary Lou McDonald

Mr. Goulding's anxieties were entirely misplaced. Does he agree now that transparent ways of recruiting to senior roles are actually a good idea?

Mr. Hamilton Goulding

In that case, we were looking at an unknown scenario. When we were facing into something that had to be done, we wanted it to be done in the best way. We were trying to choose the influences that would make us achieve the best result. We did not know what those external influences might be. We were trying to narrow it down to something we could control. Of course it could have been the case that many other suitable people could have come into the picture. I am glad that one such person has come into the picture in this case.

Deputy Mary Lou McDonald

I do not mean to detract from the excellence of the work that is done at the clinic or, on a personal level, from the considerable contribution of Mr. Goulding's family when I say that one of the difficulties the public may have had with the operation of the clinic was the sense that, in some ways, it was almost regarded as a personal fiefdom by some people. I am sure Mr. Goulding, who would not have been unique in showing an interest in who got to where, etc., would not share that view. The culture I am talking about is very negative in any organisation.

Mr. Hamilton Goulding

I will say what should have happened. There should have been more rotation of board members. I think this happens on many boards. The members who retired every three years kept getting re-elected. I think the board should have refreshed itself. We did take on two new members in the last year prior to our departure. It was our ambition to focus on that and try to make some more changes. When people get stuck for too long, it is-----

Deputy Mary Lou McDonald

I presume Mr. Goulding's involvement with the clinic will not end now. I presume he will have some ongoing relationship with it. Perhaps he will serve on the board again at some future date.

Mr. Hamilton Goulding

I do not know. It depends whether I am invited to do so. If I am seen as being disparaged or associated with the disaster, perhaps they will no longer want me. That is to be looked at in the future. Perhaps Mr. Timmins will make a judgment on it.

Deputy Mary Lou McDonald

In light of that, I assume Mr. Goulding now recognises and accepts that public pay policies and standard procedures for recruitment to senior positions have to be respected.

Mr. Hamilton Goulding

They should be respected unless there is a legal impediment to so doing. At all times, my understanding was that there was a legal impediment. Deputy McDonald asked whether more radical action should have been taken. If that had happened, we might have ended up going to court or costing the organisation more money in compensation. That is the problem. I agree with the Deputy.

Deputy Mary Lou McDonald

There was no legal impediment in terms of the recruitment of the CEO. Is there anything Mr. Goulding would like to say while he is before this committee? I am thinking particularly of the other employees of the clinic who have come through all of this. Is there anything Mr. Goulding wants to say to them about this entire debacle?

Mr. Hamilton Goulding

Yes, it is a terrible thing that hangs over me that it was during my time of chairmanship that this damage to the clinic took place. As I have said, it leaves me with a lot of sorrow and regret. It has been a terribly difficult time for everybody. The clinic always had a powerful and unique spirit of harmony, co-operation, positivity and energy. That applied to the staff, the users and the families. The reputational damage that has been done is very bad because it affects the feelings and the morale of those working there. I know it will be undone.

The other thing I would like to mention is the clinic's financial position. It started out completely voluntarily for the first 30 years or so, before State funding came in to a huge extent. As a result of the financial restrictions we are in, State funding is reducing again. The further reductions that are coming this year unfortunately mean there will be a need for the clinic to strengthen and perhaps establish new independent revenue streams to allow it to have capital projects and indeed to supplement revenue. The new board will have to work very hard to repair the hurt feelings and morale of those involved and the financial damage that has been done. It is very regrettable.

Deputy Mary Lou McDonald

Would Mr. Goulding like to apologise for the mistakes he made on his watch?

Mr. Hamilton Goulding

I made an apology in my statement. When one makes an apology, one needs to be sure of exactly what one has done wrong. When I look back at the circumstances and the options I faced, I still have a little difficulty in ascertaining what I could have done differently. There are a few things. I am not perfect. The board was not perfect. I am very sorry that this happened. I wish I could have done better.

Chairman

I thank Deputy McDonald. I call Deputy Dowds.

Deputy Robert Dowds

I thank the Chair. I welcome all of our witnesses. I have a personal connection with the CRC, having worked as a teacher in Scoil Mochua for over ten years. I have a particular personal angle on this. Before I ask about the relationship between the CRC and the HSE, I would like to commend Mr. Cregan on the work he has done in his report. It is appreciated by me and by the staff members and parents with whom I have been in contact. I would also like to wish Ms Manahan and Mr. Timmins well in their new leadership roles in the organisation. It is important to mention that despite its problems, the CRC has continued to do exemplary work throughout this difficult period. I think I am right in saying that until recent times, the HSE had a pretty hands-off approach to the running of the CRC. Even since 2009, the HSE has been slow enough in getting the CRC's financial affairs and salaries in order. Would Ms McGuinness agree with that?

Ms Laverne McGuinness

There are a number of points to be made. In 2009, at the time when we wrote requesting details of the individual salaries on foot of a letter from the Secretary General, it was the first time we received or indeed requested visibility in respect of the salaries of the individuals there at higher levels. It is also important to note that at the time, there was no service level arrangement with these organisations. The HSE had been established in 2005. Funding arrangements were organised in a different way. It was an inherited position from former health boards. Late in 2009, a service level arrangement was developed. The agencies were consulted. It took a long time to develop it. It was an extensive document but it was the main tool used to manage the relationship at an area level with the organisations. However, it did not fully reflect the meetings with the organisations.

We have learned that the service level arrangement needs to be improved. Some areas should have been included in it but were not. Mr. Cregan has alluded to the piece regarding the requirement for greater financial scrutiny of the financial accounts. The piece with regard to public pay policy was only inserted into the service level arrangement in 2010 to 2011 so it was not legally contractual. We have since worked on a revised service level arrangement. We have certainly taken what we have learned from the CRC into account. There is now a centralised unit looking at service level arrangements and there will be one manager responsible for the management of the totality of all the funding streams, be they to the CRC or otherwise. In 2014, we introduced a compliance statement. This statement puts in place and strengthens a relationship with the chairs of the various boards. Heretofore, the engagement has been with the CEOs and the executives so the relationship is with the chairs of the boards. We met each section 38 agency in December. A compliance statement and a code of good practice on how boards should operate were produced. This has begun and we have that back at this point in time.

Deputy Robert Dowds

Could we come up to the present? Ms McGuinness is probably the best person to answer this question but I would be interested in hearing Ms Manahan's comments as well. My question concerns the relationship between the CRC and the HSE, particularly in respect of the provision of clinical services. To what extent will the CRC have an independent hand and to what extent will it have to bow whatever direction is coming from the HSE?

Ms Laverne McGuinness

I will answer the question in general but I might ask Mr. Healy who is our national director for social care and who deals specifically with disability and national policy to reply.

Mr. Pat Healy

Given the circumstances in the CRC, the director general has written to the organisation and advised it that I will link with it and will be available to it as a support over the coming period. Obviously, the service arrangements and engagement take place at a local level and that will continue. In answer to the Deputy's question, the voluntary and independent nature of the organisations will be respected. We will work with organisations in terms of implementation of policy, be it around changes we are introducing around the value for money reform within the service, the 0-18 programme, New Directions or any national policies so that they will implement that in line with policy. We will do that on the basis of consultation and engagement. The intention would be that the CRC and all voluntary organisations would work with the HSE in implementing policies like that.

Deputy Robert Dowds

I asked this question for a specific reason. Last night, I was at a meeting of parents of children in Scoil Mochua in Clondalkin and parents of service users on that site. As Ms Manahan knows, an application to build a new school has been made. It is being held up because of information requested by the HSE. I would like to be corrected if I am wrong but my understanding is that the HSE is consolidating disability services in certain locations in south west Dublin. This may well be a constraint in terms of the school getting permission to proceed because it must be a joint effort. Part of the building is a school under Department of Education and Skills funding while the other part is clinical services which clearly come under the remit of the HSE in terms of funding. To what extent will the CRC be able to make decisions there? The very existence of the school in that location is related to the provision of clinical services.

Mr. Pat Healy

I can reassure the Deputy that the HSE would not engage in a way that would impact negatively on a capital development like a school or a continuation of development or expansion of a special school.

Deputy Robert Dowds

I understand that the two must go hand in hand.

Mr. Pat Healy

I was not aware of the meeting last night but such meetings are happening around the country as we start to implement the 0-18 programme. What is happening in the Dublin west area is that the CRC, Stewarts Hospital, Enable Ireland and the HSE are all providing services to children in one form or another. The implementation of that programme is commencing and I imagine that the Deputy is hearing some of the feedback from that. Any implementation of that will be done in a co-ordinated way. There is a local implementation group that is representative of all stakeholders. A subgroup of that includes parents. I understand that a meeting with parents was held in the Dublin west area but was poorly attended. I have asked that we ensure that more comprehensive communication takes place so that people are fully engaged. That is part of what we will be doing in any change like that. Anything we do should not negatively impact on any capital investment that might be taking place.

Deputy Robert Dowds

So Mr. Healy is saying that clinical services can still be offered on that site?

Mr. Pat Healy

Absolutely. It is about how the HSE, Stewarts Hospital, the CRC and Enable Ireland working with the Department of Education and Skills to co-ordinate the delivery of services in the future so that we have a co-ordinated assessment and intervention for children, it should not matter what school they attend or where they live and there is a standardised assessment process. We commissioned the National Disability Authority, NDA, to do work for us. It has provided a research resource. When we work in this way, we get a better outcome for children and a better use of resources. I fully accept that it must be done-----

Deputy Robert Dowds

Could I suggest that the HSE urgently contacts the school and parents because the group of people yesterday was very worried?

Mr. Pat Healy

We will do that.

Deputy Robert Dowds

E-mails they sent to the HSE have not been replied to.

Mr. Pat Healy

We will take that up.

Deputy Robert Dowds

It is one thing to say that the HSE will take it on board but I want to be assured that the parents and the school will be responded to as rapidly as possible because they sit there in a situation of uncertainty. I would be interested in hearing Ms Manahan's comment on this issue.

Mr. Pat Healy

We will ensure that whatever communication needs to happen will happen. I have also said that there is a local implementation group in which two parents' representatives are participating. Each local implementation group is required to have a subgroup of parents. The parents themselves select the representatives that sit on the local implementation group. The Deputy can take it that from our perspective in social care, the effective communication of this is a fundamental part of the change we are implementing.

Deputy Robert Dowds

The reason I am quizzing Mr. Healy so aggressively is that two senior members of the staff from the CRC were at this meeting.

They were not able to answer people's questions on that issue because of not having clear direction from the HSE.

Mr. Pat Healy

We will certainly address that issue and make it clear to-----

Deputy Robert Dowds

Can Mr. Healy please send me copies of the communication? I would be interested in Ms Manahan's comment on this issue.

Mr. Pat Healy

We can do that.

Chairman

May we have the copies mentioned by Mr. Healy? In regard to the e-mails referred to Deputy Dowds that were not responded to, can we have an assurance that a response will issue to those people?

Deputy Robert Dowds

One of the things we need to understand, and this applies to the whole work of the CRC and other organisations that deal with people with a disability, is that it is exceedingly difficult for parents to engage in public meetings. The people who went to those meetings yesterday had great difficulty in getting there. That is an issue that is not sufficiently appreciated by any of us, even by myself, even though I have worked closely with people like that over ten years.

Ms Stephanie Manahan

I thank Deputy Dowds. As the Deputy is aware I have been in the post for four weeks. During those four weeks I visited the school three times. The chairman and one other member of the board accompanied me on one of those visits. The CRC is very committed - certainly I am - and I know the board is very committed to the schools and the excellent service those schools provide. I look forward to working closely with Mr. Pat Healy's office to ensure the school is very involved and engaged in the process. To date there have been a number of meetings at which senior CRC staff have been represented. Certainly as one of my priorities, I need to brief myself to see how the progress of the 0-18 piece is being rolled out across the different areas in which the CRC is involved. I stress that is one of my priorities.

Deputy Robert Dowds

May I come back to this point as I have to report back to people? I can assure them that the HSE will co-operate with the school in Scoil Mochua to ensure clinical services will continue to be provided at the site and, in their application for a new building, that the HSE and the Department of Education and Skills will work together towards bringing that to fruition if it is the decision of the Department of Education and Skills that a new school needs to be constructed.

Mr. Pat Healy

There will be no difficulty with us in terms of the capital and in working with the CRC and the other agencies. There will be a necessity to implement the national policy around the 0-18 programme. Therefore, there will be some changes in how services are delivered but that should not negatively impact and should be of benefit. National research shows that where a joined-up approach is implemented, there is a better result for children, which is what we are after. There will be some impact in respect of how services are delivered, but this will not have a detrimental impact on the school, its operation and its capital funding.

Deputy Robert Dowds

Will children attending the school or visiting from outside still be able to go to that site for their general clinical services?

Mr. Pat Healy

I do not know the detail of the children attending. Certainly there would be no reason those who currently attend would not continue to attend. The issue is about how we utilise best the therapy resources available at the CRC, Stewarts Hospital, Enable Ireland and within the HSE itself in order that there is an equitable distribution of that resource to the benefit of children in the area. This is about maximising the outcomes for the children. We would absolutely support that.

Deputy Robert Dowds

Given that they have severe physical disability, moving them off site is a major difficulty. One of the great fortunes of both the school in Clondalkin and in Clontarf is that the clinical services are provided on the same site as the school so it is easy to move from one to the other.

Mr. Pat Healy

If the Deputy has the e-mails to which he referred, I will follow those up.

Deputy Robert Dowds

If Mr. Healy can give me his contact details, I will see that they are sent to him. Turning to some of the historical issues in the CRC, how is the money in Friends and Supporters of the CRC going to be dealt with? First, what is the extent of the money? Will it remain as a separate fund long-term or will it come under the general spend of the CRC? Can Mr. Cregan or Mr. Timmins illuminate what will happen to that money and how much is still in place?

Mr. Kieran Timmins

In Mr. Cregan's report it is stated that at the end of 2013 there was approximately €12.9 million in the fund. That will vary from month to month, depending on the drawdowns and what projects are involved. Two projects that have been identified and pencilled in are the clinical services at the Scoil Mochua site for approximately €6 million and the Swords day centre for €3 million, both of which are capital projects. The fund is intended primarily as a capital project, so we will be looking at some of the other areas. Ms Stephanie Manahan mentioned that I visited with her Scoil Mochua a week or so ago. I have also visited all the other sites in Dublin and I can see there is a need for capital expenditure in many sites, not just at Scoil Mochua. The intention is that it is primarily a capital fund.

Deputy Robert Dowds

I apologise for cutting across Mr. Timmins, but this goes back to my original question regarding the relationship between CRC and the HSE. Does the HSE have to approve that funding or is there-----

Mr. Kieran Timmins

Like any major funder, one would always sit down and discuss the issue with the main funder. For example, if I wish to proceed with a capital project, one portion of the project would be the capital part and another portion would come under ongoing expenses, for which we would seek funding from the HSE. There is no point in our board building a big facility unless we understand that we have ongoing support for it going forward. To that extent, we would engage with the HSE and discuss it with it. For example, the Swords project will be a joint project. As Mr. Pat Healy said, the HSE does not stop us doing capital projects but given that we are funded by the HSE, we would have to discuss and debate with it on an ongoing basis.

Deputy Robert Dowds

Is Mr. Healy happy with those two projects, the Swords project and Scoil Mochua?

Mr. Pat Healy

We have been collaborating on both of those. We have had some discussions. We do not have the details but we will engage on them. Many of the funds raised through fund-raising are for capital, refurbishment or extension works. Using that type of funding for staffing purposes and revenue will have to be looked at more carefully because one is making a long-term revenue commitment based on fund-raising. Often we would come to an agreement with an organisation to target a waiting list initiative or short-term initiative where staff would be used to support front-line initiatives. That is something we would agree with the CRC and the Department of Public Expenditure and Reform because commitments to permanent full-time employment have to be dealt with carefully and approved because permanent streams of funding need to be available for those.

Deputy Robert Dowds

Mr. John Cregan rightly made severe criticism of some of the previous board's activities. I understand that an organisation called Boardmatch Ireland helped set up the new board. How were people chosen and how is it intended to renew the board as time goes on?

Mr. John Cregan

The first press release by the HSE indicated that Boardmatch Ireland would be engaged to assist in the process. It was advertised on the website.

Any opportunity I got, I told people the board of management was assisting in the process. The skills of the individual candidates matching the requirements of the organisation were assessed and ultimately, the appointments were made by the members of the company. As I said, this involved arranging with the members of the company that resolutions be passed appointing those people. The process is not yet complete. As Mr. Timmins said, there will be further vacancies and rotations and there will be constant updating of the skills of board members from now on.

Deputy Robert Dowds

I may have missed this in the report, but how long will people serve on the board before being replaced?

Mr. Kieran Timmins

That is a matter we are looking at currently. The modern standard is a three-year or four-year term, with a maximum of two terms and we are considering that.

Deputy Robert Dowds

How long would a term be?

Mr. Kieran Timmins

It would be three or four years. Therefore, I do not envisage anybody being on the board for any longer than a maximum of nine years. A working group is looking at this issue and the maximum may be less than that. It certainly will not be more.

Deputy Robert Dowds

Does everybody serve in a voluntary capacity? Do they get expenses for attending meetings?

Mr. Kieran Timmins

Nobody receives any remuneration and nobody receives expenses apart from out of pocket expenses.

Deputy Robert Dowds

If somebody had to travel from Galway to attend a meeting, would he receive the cost of that travel?

Mr. Kieran Timmins

If the member submitted a claim, we would submit it to the audit committee to be signed off, provided it was a proper documented out of pocket expense.

Deputy Robert Dowds

I very much wish Mr. Timmins well in his work.

Chairman

The Deputy is out of time.

Deputy Robert Dowds

I will finish on this. I am aware Mr. Goulding objected to the term "top-ups", but it is a term used generally. I will not go into the situation regarding Mr. Kiely's salary again, but how many people are still getting these "top-ups"?

Mr. Kieran Timmins

To clarify, as I see it the term "top-up" is being used interchangeably in three areas. First is in the case of allowances, which may or not be approved by the HSE, such as allowances to people moving up to carry out a role above their normal role. Second is the payment or top-up above the pay agreed for a particular role and third is related to the full implementation of the FEMPI legislation. As of today, there are six people still in that category, but I am open to correction by Ms Manahan on that.

Deputy Robert Dowds

Are they the six most senior positions, other than Ms Manahan's where there is clearly no top-up payment?

Ms Stephanie Manahan

Yes, they would be six people in senior management roles within the organisation.

Deputy Robert Dowds

Have they been asked to give up that extra remuneration?

Mr. Kieran Timmins

I will refer back to my opening statement. We are looking at these allowances and at whether they are sustainable. In the period of the interim administrator, one of the members requested the FEMPI provisions be backdated in full. Since then, two additional members have come to us and requested that be done also.

Deputy Robert Dowds

Does that bring us down to four people or does it bring us up to eight?

Mr. Kieran Timmins

Yes, in terms of FEMPI. However, until we understand the findings of the committee that is looking at this area, I cannot say whether four or six who have given us the amount required by the FEMPI legislation. There are other arrangements in place and I need to go through them. However, I would point out that three people have come to us voluntarily to say a certain portion of the allowance should be taken back.

Deputy Robert Dowds

Is that three of the six mentioned or does it raise the number to nine?

Mr. Kieran Timmins

Yes.

Deputy Robert Dowds

Therefore, three people have voluntarily agreed to some change in their remuneration, even if that is not exactly what the HSE would insist on.

Mr. Kieran Timmins

I cannot comment definitively on it until I see the facts, but I wanted to highlight the fact that three people came voluntarily to us.

Deputy Robert Dowds

Does Mr. Timmins feel the rest must be let sit as it is until the contracts work out?

Mr. Kieran Timmins

I am not making a definitive statement on that until such time as I see those facts.

Deputy Robert Dowds

Basically, legal advice is required on that.

Mr. Kieran Timmins

Basically, I need to look at each of the contracts, understand each of the allowances and, perhaps, take legal advice. Ms Manahan and I may need to sit down to talk to the people involved.

Deputy Robert Dowds

How long is it expected to take for this to be worked out?

Mr. Kieran Timmins

We have been given until 2015 to sort out the issues, primarily because some of the issues will go away in 2015. It is a priority of the board to work on this and we are not going to just sit and wait until 2015. We are working actively working on the issue.

Deputy Robert Dowds

I have no doubt Mr. Timmins understands the issue puts a bad taste in people's mouths in regard to an organisation in which people want to have full confidence and to respect, and with good reason.

Mr. Kieran Timmins

Absolutely. I am 100% behind that commitment. I must look at the implications and at the organisation in terms of these people's position in it. This will take time, but we are committed to doing it.

Chairman

The Deputy should conclude now.

Deputy Robert Dowds

I wish Mr. Timmins and Ms Manahan well in their new roles.

Chairman

A number of other Deputies have indicated they wish to contribute, but I suggest we take a 15 minute break first.

Sitting suspended at 1.20 p.m. and resumed at 1.45 p.m.

Deputy Simon Harris took the Chair.

Deputy John Deasy

I welcome the deputation. I intend to come at this a little differently because the subject matter has been dealt with comprehensively by members. I will give the deputation my take on what has happened here, why we are in this room and how the position has evolved in recent months. Furthermore, I will ask some questions with regard to public pay policy.

There seems to be almost an attitude or truism that public pay policy is always correct, but it is not always correct. Mistakes can be made when public pay policy is formulated. I will be asking the HSE how it formulated public pay policy in this regard because I believe, as a result of the disorganisation of the HSE and its dereliction of responsibility when it came to the policing of this particular area, that as a consequence of the way public pay policy was formulated and the way the HSE dealt with the section 38 organisations, they were forced into doing it. I am not so sure whether there has been a debate with regard to appropriate levels of pay when it comes to the health sector organisations that receive public moneys.

Ms McGuinness has made clear the genesis of the entire relationship between section 38 organisations and indicated it did not really kick off until 2009 and that the contractual arrangements finished in 2010 or 2011. I believe the HSE knew very well what the levels of pay were for chief executives and senior staff in many of these organisations and did not do anything about it. In many cases the organisations resisted giving that information. They took the view that they were independent and, in some cases, they did not believe that imparting that information to the HSE was reasonable, and they were wrong. However, in many cases, even when financial statements were imparted by those organisations to the HSE, no analysis was ever done by the HSE. We have seen this again and again throughout the entire affair.

One question in particular needs to be asked and this is the element that has never got a scintilla of debate in recent months. Does paying someone very well in organisations that receive public funding eventually lead to savings or lesser amounts of public moneys being expended in the long run?

I believe we have arrived at this point artificially. I am not using the Central Remedial Clinic as the example. The CRC is a charitable organisation. When I asked Mr. Kiely about where his pension was funded from, this entire episode kicked off. However, there is another question at issue. Let us separate the fact that the CRC is a charitable organisation - we must be very careful about that element of it - from how chief executives are funded within the sector. There is another issue at stake to which the HSE must respond but in respect of which it has never responded. It is an issue that has never been debated and I believe it is a realistic issue that needs to be aired.

Everything has changed since the banking crisis. People's perception of those on high salaries has changed. There is almost a perception in this room that anyone who makes over €100,000 a year has questions to answer. They do not. In some cases benefits accrue from those on higher pay in an organisation because of their skill sets, experience or management ability. I am not so sure the Health Service Executive has taken that into account. I think it was railroaded into this public policy because it was embarrassed by the fact that it had not policed this area properly for many years. It should respond to this. I ask Mr. Goulding for his opinion.

Ireland is not the only country having this debate. One only has to search on Google to find that chief executive officers of organisations such as Memorial Sloan Kettering in New York make millions of dollars. Some individuals involved there make complaints because the fund-raising arm is very active and question whether people should be so highly paid, while ordinary individuals fund-raise. These are legitimate questions. I suspect, however, that we have moved in the other direction. It is not the case that public pay policy is always correct and one can make the case sometimes that people deserve to be very well paid if they bring long-term benefits to an organisation. That has been forgotten in this argument.

Ms Laverne McGuinness

The HSE does not set public pay policy and the pay policy for the health service. It is set by the Government and the Departments of Public Expenditure and Reform and Health. The HSE’s role, as the Deputy rightly articulated it, is to implement public pay policy. I tried to explain its genesis. In 2009 we were asked to establish the individual pay rates for those working in the disability sector - the Deputy is correct about this - and to implement them. The Financial Emergency Measures in the Public Interest Act 2013, FEMPI, brought forward another piece. It was revealed at the time that there were people who were employed under contracts with different rates of pay than those sought in order to be aligned with public pay policy. The HSE and the health service are not involved in setting public pay-----

Deputy John Deasy

I do not agree with that for one second; I think the HSE is very much involved and always has been. The Minister for Public Expenditure and Reform signs on the dotted line. The HSE is asked for its input and knowledge when a policy is formulated. If Ms McGuinness is telling me the HSE has nothing to do with public pay policy for section 38 organisations and in this area, I do not believe it. Strictly speaking, the HSE can hide behind this.

Ms Laverne McGuinness

I am not hiding behind anything. I am saying that in respect of public pay policy, we receive a copy of what is known as the consolidated pay scale setting out the scales. They do not specify, for example, the CEOs of particular disability organisations. They have particular grades. Our colleagues from the Department of Public Expenditure and Reform will be able to speak about it. We have tried to get an independent assessment of what is the correct rate of pay for individual organisations not specifically referred to on the consolidated pay scales. The indicators usually taken into account are budget, scope, scale, complexity and diversity of services. We have to seek the advice and authorisation of the Department of Health on what we pay. That is the public pay policy we must implement. We are obliged to implement public pay policy.

Deputy John Deasy

Is there any circumstance in which Ms McGuinness could see somebody being paid over the odds with regard to public pay policy that would have a benefit for an organisation or the health care sector? She should not run around that question. Is there such a circumstance?

Deputy John McGuinness resumed the Chair.

Ms Laverne McGuinness

I am not running around it. There are circumstances in which a business case needs to be put forward to set out why a particular individual may need to be paid a certain amount in order to attract somebody to a particular post. In some cases we are having difficulty in recruiting to various posts. That is my opinion; that is not public pay policy. As a public servant, I have to implement public pay policy.

The Deputy is correct in his observations about governance. All of this came to light as a result of Enron, as the Deputy will know from his Google search. It is not unique to the health sector, or other sectors. Pay is being examined because of the austerity facing several organisations and because of the Enron crash. When the crisis happened, the question was asked why the people in question were being paid so much.

Deputy John Deasy

There is a danger that we have regressed to a situation where it is only appropriate to pay an individual who is incredibly skilled and suited to an organisation a certain amount and that a pay level above and beyond that figure is not being tolerated. Negative results accrue from this. That is not taken into consideration. Mr. Goulding has made it very clear that there was no contrivance to avoid public pay policy, but some of these organisations - not the Central Remedial Clinic - knew very well what the limits were and felt that in some cases individuals who had that skills set or management ability needed to be paid more. Somebody might make the case that if one paid an individual €1 million, that might make it possible to save €2 million down the road. That element of the debate does not take place.

Ms Laverne McGuinness

This is not particular to the CRC, but as Mr. Goulding said, the contract with the chief executive predated any policy on public pay being implemented across the sector. Now that it is there, however, and we are mandated to implement it across the sector, its application in retrospect is an issue. The Deputy’s observations on whether it is better to pay somebody more to have a better job done and achieve greater savings do not come into the context of public sector pay.

Deputy John Deasy

I think the HSE knew very well for years what people were being paid and there are people in it who would make the same argument as me. It has been railroaded into this because it was not doing its job. There is a danger for the health sector and those organisations, including section 38 organisations, that this is too confined. I believe in the free market, even when it involves individuals, and that paying someone over the odds can benefit an organisation. This is fair game for the Committee of Public Accounts and very one-sided. There needs to be a debate about it.

Mr. Peter Brazel

As Ms McGuinness said, pay policy and pay rates are set by the Departments of Health and Public Expenditure and Reform. In response to the Deputy’s comment on whether we get pay policy right all the time, the majority of those in the public service take issue with current pay policy, but it is the policy. There are two elements.

Deputy John Deasy

I am interested in pay policy.

Mr. Peter Brazel

There are two elements, one of which is the financial emergency measures. That is the law and applies to public servants' remuneration and public service bodies and must be applied equally to everyone working in each public service organisation.

In regard to looking at particular cases or particular areas where there might be a skills shortage or whatever, there is provision, as my colleague said, for a business case to be made. That is not to say such a case will be accepted or that there are not extraordinary pressures on the pay bill which would make it very difficult to deal with, but those cases can be made and are, on occasion, sanctioned appropriately. There is the process of make a business case and then submission to the Department of Health and ultimately the Department of Public Expenditure and Reform.

Deputy John Deasy

It seems to me there is an element of fiscal political correctness creeping into the debate around these issues. It is important to bear in mind that we arrived here artificially. In other countries, they look at the issue pragmatically. It happens all the time that consideration is given to the fact that where a large salary is given, the individual in receipt of it should have the ability to save money for an organisation in the long run. What has happened here to a certain extent is that we have arrived at this situation because the HSE was forced into it and because this committee did its job. The sector was not being policed properly by the HSE. There is a danger now, however, that organisations in the health sector generally may lose out because good people with the right skills will not be interested in taking up positions at the level of pay that is presented to them. I hear it again and again at this committee, not just in regard to the health sector but also, for instance, in the case of NAMA, that organisations are finding they cannot hire or retain staff. There is a politically correct attitude out there that nobody should be paid over a certain amount and if a person is earning €100,000, he or she might be a bad person or have questions to answer. It is a narrow view. I understand exceptions can be made within public policy, but I do not see that happening.

Mr. Peter Brazel

It really is a policy question the Deputy is touching upon.

Deputy John Deasy

I acknowledged that at the outset.

Mr. Peter Brazel

The only response I would make, and I am speaking from memory, is that there was one reference in the internal audit report that precipitated this process to the effect that the current pay regime did not reflect the complexity of the individual organisations. That is far as I can go.

Deputy John Deasy

This entire thing is slightly disingenuous. Mr. Goulding has explained that Mr. Kiely's pay was set at a particular level and he did not receive any increases. It was a case of the benchmarking system that was in place at a time when people had different perceptions when it came to pay and salaries. I am not using CRC as the example for the policy argument; charities are different and there is a sensitivity there that needs to be accepted and appreciated, with people fund-raising and so on. However, there is a larger issue that is essentially to do with political correctness. It is a valid concern. Perhaps Mr. Goulding will comment on that?

Mr. Hamilton Goulding

It is an interesting angle from which to come at the issue. I set in train the course of events that ended in the departure of Mr. Kiely, of whom I had a sort of split view. From one perspective I admired him greatly because of his capability. I am sure he saved the clinic an awful lot of money, undoubtedly many times more than what he was paid. He had extraordinary anticipation and initiative. On many occasions when an issue was brought to the board, by the time someone had asked him a question about it he could say he had already fixed it last week. On the one hand, his performance was extraordinarily good. I had a different view, however, in regard to his salary. In my view, people's salaries should be paid, first of all, on the basis of their performance - that is obvious - and, second and to some extent, the ability of their employer to pay. In this case, the overriding factor was the sector we were in, namely, the charitable sector. As the Deputy said, popular opinion, with some good reason, does not like and will not tolerate the payment of very high salaries in that sector.

The successes of the clinic have been acknowledged by everybody here. Those types of successes do not come without sound management from the top, good guidelines and good executive control. The CRC managed its budgets perfectly for many years. In fact, it hardly ever ran an annual deficit of more than a minute amount and never, as many other organisations did, ran cumulative deficits. The cost of the senior management group we are talking about was €1.82 million in 2004 but had reduced to €914,000 in 2012. In other words, the cost of senior management at the clinic halved in that period. By that time, moreover, the CEO had taken on the duties and responsibilities of two, possibly three, other people. He was, in effect, doing three and maybe even four jobs.

The international standing of the clinic was widely recognised as delivering a service that was as good as any, not just in Ireland or the UK but throughout Europe and beyond. The clinic did not achieve what it did by not going beyond the Irish Sea. We attended conferences elsewhere and hosted them here in Ireland. The last one we organised was attended by people from 30 different countries, including Australia, India and South America. In the course of those conferences attendees saw that the treatments, techniques and equipment being used in the CRC for the benefit of Irish people with disabilities were as good as anywhere in the world. In 2012, the CRC undertook a customer satisfaction survey, the results of which were phenomenally good. There were criticisms, of course, as there always will be, but many of the categories scored in the 90s for positive feedback.

I am making all these points in order to highlight that much of the excellence of the clinic, as with any organisation, comes from the top and is a consequence of the way in which it is managed. If we had been engaged in an industrial production type of activity where we were in business for profit, it might not have been unreasonable to suggest that Mr. Kiely should get a pay rise. The reason I personally thought his salary was completely inappropriate was that we are a charity organisation, not because we are publicly funded.

Deputy John Deasy

I agree with that.

Mr. Hamilton Goulding

In fact, much of the clinic's funding comes from voluntary sources. It is a hard one to judge. A good person can perform to such a level that he or she will completely recoup the costs he or she is incurring.

Deputy John Deasy

I agree with that based on the disparity within the charitable sector; one has to separate that out. However, as far as the other issue is concerned - and this is addressed to all the delegates - by limiting pay, notwithstanding the business case exceptions, the question must be asked as to whether we are damaging or weakening the sector by kowtowing to political considerations. The HSE needs to take that on board. Within the sector and within the HSE itself, there are individuals who hold the view that this policy does not make sense for some individuals and organisations.

Ms Laverne McGuinness

There is a sizing exercise under way in regard to the sector, particularly in respect of disability. My colleague, Mr. Healy, might comment on that.

Mr. Pat Healy

One of the issues that emerged in the course of our analysis of all of this is that perhaps the greatest challenge for the disability sector in particular and social care generally is the issue of the comparative pay of senior management in the organisations. One can have an organisation the size of the CRC, which is a €15 million or €16 million organisation, where the CEO is being paid substantially more than others who might be running a €100 million plus organisation of much greater complexity. Part of the challenge for us is to devise what we have termed a sizing model, that is, a basis upon which a reasonable and appropriate scale is set for different sizes of organisations. One looks at the disability sector and compares it with, say, hospital groups, where the new CEOs might be running €700 million organisations.

Deputy John Deasy

If Mr. Healy finds one organisation where that is the case, I could find another where it is not.

Mr. Pat Healy

There is a sense in the sector that there must be a fair and reasonable public pay position on this and we have spoken to those in the sector on this matter. Many of these voluntary organisations are large and have charitable status, which adds another dimension. This is not only a matter of salaries, it is a question of what is required in terms of governance, quality, service, expectations and management of services. Very capable people are required to run these organisations and it is necessary to set an appropriate scale across social care and the hospital system.

Deputy John Deasy

People within organisations may have a different view on this. This is what happened in some cases where the HSE was not taken seriously on public pay issues. It was felt that an organisation should hire a particular person at a certain level so that it could benefit. In many cases this was done out of a sense of care for the organisation in question. There were good reasons for this and cases can be made in such circumstances. We all accept this, including Mr. Brazel and Ms McGuinness. Cases can be made but this fact is not being entertained in this political environment and this is a mistake in some cases.

Chairman

I want to clarify a point relating to correspondence from 2009 and a board that was in place at the HSE.

Ms Laverne McGuinness

The Chairman refers to the HSE board.

Chairman

Did that board have an audit committee?

Ms Laverne McGuinness

Yes. Service level arrangements were completed for the first time at the end of 2009 and introduced in 2010. The board initiated the service level arrangement process but it took quite a period to correct.

Chairman

I merely wanted to confirm there was a board. Was there a remuneration committee?

Ms Laverne McGuinness

There was a remuneration committee.

Chairman

Who was chairman of the audit committee during that period?

Ms Laverne McGuinness

I believe it was Professor Niamh Brennan. I can check with the board secretary at the time.

Chairman

Who was chairman of the remuneration committee during that period?

Ms Laverne McGuinness

The chairman of the remuneration committee was Dr. Donal de Buitléir.

Chairman

How many members of staff are in the internal audit section of the HSE?

Ms Laverne McGuinness

I am not sure. I will have to inform the Chairman later.

Chairman

Could there be ten or 20 members of staff there? Perhaps there are 50. I am asking for a rough figure.

Ms Laverne McGuinness

There are around 40 whole-time equivalent staff members in the internal audit section.

Chairman

We will say there are 50 employees in the section. Do they prepare accounts for the Comptroller and Auditor General?

Ms Laverne McGuinness

There is a director of finance and the finance department prepares accounts for the Comptroller and Auditor General.

Chairman

Where does the director of finance get his information?

Ms Laverne McGuinness

The director of finance, now chief financial officer, CFO, gets information from our financial system. The CFO heads a finance department and employees from that department work in various areas across the HSE. The information they garner is entered in some 57 general ledger systems that are not all consolidated. At this point the information is brought together and accounts are prepared.

Chairman

There are 50 employees in the internal audit section of the HSE. How many are in the finance section?

Ms Laverne McGuinness

Taking processing into account, there are around 450 to 500 members of staff there.

Chairman

Does that include both the audit section and the finance section?

Ms Laverne McGuinness

I will have to check the figures for accuracy.

Chairman

The point is that roughly 500 people work in this area. Nobody in that section, even when the board was there, raised the issue relating to arrangements for section 38 and 39 agencies. From the start of the HSE in 2005, some 500 people were employed to examine financial figures and nobody examined the section 38 and section 39 matters.

Ms Laverne McGuinness

I will have to get information relating to the period prior to 2009 later but after that point, sets of annual financial statements were submitted from various agencies to local health offices. This occurred prior to 2009 also.

Chairman

Nobody took control of this. The discussion this morning has seen a great deal of doublespeak and double standards. The issue of taking a radical approach was raised earlier but, when it comes to red circles, the HSE will not follow its own stance on the CRC. We have not received section 38 reports yet but it seems the salaries that are out of kilter with regard to section 38 will be red-circled.

Someone inquired as to why we are here today. We are here because Deputy Ross raised the issue of accounts at the CRC. We are not here because the HSE or any of its 500 financial staff discovered what happened. After all of the bluster, the HSE now suggests contracts are in place, and if they are contested, most will have to be red-circled. The audit committee did not do its job properly during the relevant period. If it had done its job, would it have discovered prior to 2009 the issues with which we are now dealing?

Ms Laverne McGuinness

The Chairman raised a number of points. On section 38 and section 39 agencies, they are listed, along with the funding they receive, in our financial statements every year. The amount they are paid is published in a schedule of financial statements in the annual report. On the audit committee, an internal audit was carried out on section 38 agencies and the CRC. Such audits were carried out on a rotating basis on various agencies through 2010 and 2011.

The Chairman correctly points out that the HSE was set up in 2005 but these agencies were funded through a different mechanism prior to that. This arrangement was consolidated for the first time towards the end of 2009 when there was a new service level arrangement. It took almost two years to conclude discussions with the people involved. This was a first measure to achieve transparency and accountability in each organisation on what the funds handed over were used for and the service provided.

Chairman

Did the audit committee raise a flag on these issues?

Ms Laverne McGuinness

Various internal audit reports raised a number of issues but I would have to go back through them to find the individual reports on each agency. The internal audit section has examined many section 38 agencies.

Chairman

Did the audit committee raise any issues on the CRC from 2005?

Ms Laverne McGuinness

I will have to check the minutes as I cannot confirm.

Chairman

If so, the HSE did nothing about it.

That is what I find frustrating about this matter. The HSE knew that it was allocating substantial funds, but it did not follow the money. Now that this has been discovered on foot of hearings held by the committee, it is trying to apply salary scales retrospectively. At the same time and within its own organisation, it is willing to red circle these salary scales. On the previous occasion on which its representatives came before the committee, we discovered that one postholder in Limerick was being paid privately at a rate of €258,000 when the actual salary scale was somewhere in the region of €112,000. The HSE is doing things that it expects others not to do. That is what I find frustrating. The letter from Mr. Peelo to the HSE in 2009 states quite clearly, "Notwithstanding that CRC has access to funding separate to the funding provided by the HSE...". This means that the HSE knew there was a fund in existence, but it never inquired as to the amount of money contained in it.

Ms Laverne McGuinness

Mr. Cregan will deal with that matter. We knew that there would be charitable collections, but we assumed that this would all have been transparent within the accounts of the CRC and that the money would be used for various works. We were not aware of the particular funds or-----

Chairman

If the audit committee or officials of the HSE had gone to the bother of finding out, matters would have been different. Accounting and audit committees and individual accountants and auditors do not assume, rather, I presume, they act on fact. Perhaps there is too much of a presumption on the part of the HSE, which is why this double standard is being applied all over the place.

Ms Laverne McGuinness

The Chairman's points are valid. We had said that while service level arrangements and annual financial statements were looked at by accountants, the level of scrutiny to be applied had to be augmented. This has actually been incorporated in the service level arrangements in the level of scrutiny to be applied to them. New arrangements are going to be in place in that regard.

Chairman

When he wrote back to the HSE on 17 November 2009, Mr. Peelo stated, "'We undertake that the CRC as a voluntary organisation will itself fund the excess of salaries concerned as identified by the HSE, with effect from the 1st of June, 2010." My belief is that the HSE knew about all of this all along and that it turned a blind eye to it. That is what the correspondence indicates to me. There was an audit committee in existence under this board until the recent establishment of the directorate and it should also have known the position. That committee was negligent in its duties. Does the directorate have the same responsibilities as a board? Are there audit and remuneration committees in place?

Ms Laverne McGuinness

There is an audit committee in place and it is chaired by an independent accountant. The audit committee meets frequently, as set down. As previously stated, there was no knowledge of and there was no level of transparency around the amount of money contained in the Friends and Supporters of the CRC fund. That was not known; neither was it divulged. It was not part of the-----

Chairman

The HSE never inquired about the position. The way Ms McGuinness outlines it it appears that the organisation refused to divulge the relevant information. When did the HSE ask it to provide information and when did it refuse?

Ms Laverne McGuinness

Our experience with the other organisations was related to funds we were able to see as part of the accounts. Perhaps Mr. Healy might comment further.

Chairman

It is not that the organisation did not divulge the information on the amount of money contained in the Friends and Supporters of the CRC fund, no one asked for it. There were millions of euro contained in the fund and no one inquired about it.

Ms Laverne McGuinness

That is correct.

Chairman

If one is allocating money to fund particular projects or extending a loan, surely one will inquire about how much money the person involved already has in his or her possession. The HSE should have inquired about where the money it had allocated was going and how much was contained in the Friends and Supporters of the CRC fund. There is an acknowledgement that there was a separate fund, but it seems nobody from the HSE asked about it.

Mr. Pat Healy

Let me clarify how these types of fund were managed generally across the disability sector. Many of the hundreds of organisations we resource have individual collections as part of their operations. The CRC collected money through voluntary fund-raising, etc. and Mr. Cregan made reference to its Santa Bear Appeal in that regard. It would have been similar to many other organisations and we would have seen the money involved in accounts. When the HSE came to an understanding with the CRC on an initiative in Waterford which we funded jointly, it put up money from its capital fund and the CRC contributed from its own resources. The assumption was that the money was coming from that resource. What we were not aware of was the existence of the larger Friends and Supporters of the CRC fund.

Chairman

It is stated there was access to separate funding.

Mr. Pat Healy

Those funds were separate from the day-to-day running costs of the organisation. They were kept separately.

Chairman

On foot of the extent of the extra funds required to pay people, etc., the HSE would have known that the amounts involved were substantially greater than what might have been collected in buckets.

Mr. Pat Healy

Many organisations throughout the country, including St. Michael's House, the COPE Foundation and the Brothers of Charity, carry out fund-raising in respect of refurbishments, extensions and works of that nature, This would form part of the accounts in many cases. The issue identified by Deputy Shane Ross and the committee in general is that a more forensic analysis of the accounts may have highlighted this. Under the procedures which obtained in 2009, accounts were reviewed principally to see if the funding we provided was reflected in them and to establish that it was a going concern. In addition, the auditor's notes were required. If there had been a more forensic analysis of the accounts, clearly it might have identified what has emerged. That is what will happen in the future.

Chairman

I do not think it takes a forensic examination. All one need do is inquire of the person or organisation seeking €16 million a year how much money he, she or it already possesses. That is nothing but common sense.

Mr. Seamus McCarthy

Let me make a couple of points. It would not be normal for an audit committee such as the one in the HSE to look in detail at the financial statements of an individual grantee. The role of the audit committee is to ensure there is adequate financial and performance reporting in respect of the entire body of grantees. Around 2006 my office reported on the systems in place in the health boards - as they were before the HSE was established and with the establishment of the HSE - the adequacy of supervision and the oversight of grantees. One of the matters we identified was that there was not adequate financial reporting and that there was not adequate analysis within the HSE. Steps were taken after this to improve the position. To my thinking, that is really where the impetus originated from for the development of the service level agreements. It took some time to put them in place. As Mr. Healy outlined, there are still problems regarding the receipt of financial statements from grantees and the analysis and following up of these statements. When the financial statements for the HSE for 2013 were presented to the committee, one of the issues highlighted in my certificate was the HSE's own recognition that more needed to be done in the oversight of grant-aided bodies. The normal thing one expects with a set of financial statements when one examines them is that if there are donations, they are identified separately in the statements. What one might not be sure of is from where these donations came or the route through which they came. There is a difference between section 38 bodies and other organisations in receipt of substantial amounts of public funding in that they are not required to comply with the code of practice for the governance of State bodies.

Some of the things that specifically are not required of them would be such matters as confirmation by the chair to the relevant Minister that public pay policy is being observed, and that the remuneration and terms and conditions of chief officers be disclosed in the financial statements. That is something I suggested the committee might like to consider suggesting to the HSE: that the fundamental requirements that are imposed on semi-state bodies also be applied to the section 38 agencies in future.

Chairman

Would Mr. McCarthy not recommend that?

Mr. Seamus McCarthy

I certainly would recommend it.

Chairman

But Mr. McCarthy said we should recommend it. He is the Comptroller and Auditor General. Would he not tell them they should do it?

Mr. Seamus McCarthy

It is a policy matter, ultimately, whether they do that or not, but certainly that level of disclosure in the financial statement would be useful.

Chairman

Did the Comptroller and Auditor General not tell them that already?

Mr. Seamus McCarthy

We have certainly recommended to them that they need to ensure that they have financial statements.

Chairman

What was their response?

Mr. Seamus McCarthy

There is agreement that this is required, and steps will be taken to implement it.

Chairman

Will the Comptroller and Auditor General keep an eye on them?

Mr. Seamus McCarthy

Yes, absolutely.

Ms Laverne McGuinness

The suggestion has been introduced as part of the annual compliance statement process that we have in place since January 2014, whereby the chairman of the board and another director sign off on eight key points - financials, procurement and risk, among others. We have copies of the list for the committee if members wish to have them.

Chairman

What Mr. McCarthy said does not excuse the audit committee because it did not oversee the proper level of transparency and accountability that was required.

Mr. Seamus McCarthy

It is not a question of excusing the audit committee. I just wanted to make it clear that the audit committee in the normal way would not have been expected to see the financial statements of the Central Remedial Clinic.

Chairman

Mr. McCarthy is not forgiving them. We must be absolutely clear about that.

Mr. Seamus McCarthy

No. There is a requirement.

Deputy Simon Harris

The HSE witnesses are all very welcome. I congratulate Mr. Timmins and Ms Manahan on their respective appointments. I thank Mr. Goulding very much for being present. It is a testament to his character that he has turned up. I have never met him before. It gives me an indication of how important the CRC and its work is to him and his family.

It is also important to note, in the context of the chairman’s interaction with the HSE, that one of the reasons there are organisations such as the CRC is the holistic failure of the State - all of us collectively - to provide disability services. Had it not been for Mr. Goulding’s mother and many others like her, many people in this country would have grown up without services.

To link that back to the point made by the Chairman - that this cannot all be blamed on the HSE because the problems predate its existence - the situation in this country is that we all thought the only role of successive Governments, the HSE, and the Department of Health was to write cheques and hand them over to service providers. As the Chairman outlined, there has not been a greater level of forensic work and the linkage that is required for governance. I note the progress that has been made in a short time. I hope the new measures that have been put in place signal the beginning of a new culture in terms of the relationship between section 38 agencies and the HSE.

I note the comments of either Ms McGuinness or Mr. Cregan, in his report, that the HSE did not have any concerns about the quality or quantum of services provided by the staff. I can only imagine how difficult recent months have been for Mr. Timmins, Ms Manahan and many of the front-line staff and employees who are providing excellent services. It is important and welcome that the report made such a finding.

I wish to refer to how we got to this point. At this stage the debate has moved beyond the CRC. I hope our exchange can be more focused on the lessons we can learn in terms of section 38 agencies and the need for the HSE to interact with them for the benefit of both the taxpayer, which is the purpose of the committee, and service users.

I have heard the arguments on Mr. Kiely’s remuneration package. I have no doubt that, as Mr. Goulding has said, he genuinely believed a good financial deal had been achieved for the clinic. I have heard his rationale and I am struck by the genuine nature of his belief. I do not necessarily agree with the actions taken by him and the board. I am confused as to why there was not greater interaction with the main funder, the HSE, on the issue, but I believe the motive was good. However, where I get more confused and more concerned is on the appointment of the next CEO. That is the area I wish to explore. One could quite correctly say the CRC was contractually obligated to pay Mr. Kiely the sum of money, although people might consider it obscene or abnormal. But when it got to the appointment of Mr. Conlan, it seems at that stage there was blatant disregard for what had been agreed. My understanding from the correspondence trail was that there was an agreement between the CRC and the HSE that when the situation with Paul Kiely was resolved and the next appointment was made, the rules would be obeyed and the CRC would stick to the pay scales and consult the HSE. I wonder why that did not happen.

Mr. Hamilton Goulding

Looking at the issue from the internal point of view, it is almost surprising that we are talking about it, because in the year leading up to this the cost of the senior management team had been reduced by approximately €340,000. At the time of Mr. Kiely’s retirement, another person also left, so one had two people leaving and the total value of their salaries amounted to approximately €340,000. That was on top of the saving from that group of another €350,000. We were looking at a situation in which the management group costs that had existed at the same time the previous year had gone down by about €700,000, and we were replacing that with a cost of €125,000. We thought to ourselves, just looking at it in isolation, that it was a fantastic result. We thought it also brought us quite substantially along the road towards compliance with the approved pay scales. We did not think we would get there in one jump.

When we were considering the appointment of a new chief executive - the problem has been resolved now and there was a solution, but it did not seem viable to us at the time - we did not wish to invite somebody to take a job in which the top six subordinate people of whom the person would have charge were paid 30% more than the new chief executive. We would have been asking the person to take a job at less than the salary earned by the people he or she would supervise.

Our first interest was in seeing if we could get a candidate from within the company. That was ruled out, effectively, because one would have had to ask someone to apply for the job of chief executive but tell him or her it would involve a pay cut. That is where we were coming from. As I said previously, there was a poor performance in terms of liaison with the HSE. That is really the reason we got a bit blinkered and said we had to get a really good person. We knew we had overstepped the mark a bit. I was very conscious of that and I said we needed to try to patch it up a little bit. We did have a meeting in September of that year with three officers from the HSE and we were told that was pretty bad stuff, but it accepted that the result was very good and it was considered that we should put the situation behind us. Effectively, although we had clearly transgressed, it seemed to us that we had got a good result. We got a man of extraordinary experience whom everyone agreed was suitable and we thought that the situation had been resolved. It is not a perfect story, but that is what happened.

Deputy Simon Harris

Much of what Mr. Goulding said sounds logical. Staff costs had been saved and because of that it was decided that the CRC could afford to pay the new chief executive a little bit more; otherwise, people at a subordinate level would have earned more than him. That is fine except for the fact that there is a chain of correspondence, some of it directly from Mr. Goulding on 27 October 2011, when he as chairman wrote to the HSE and said “As and when the position of chief executive is to be replaced through retirement or resignation, the CRC will arrange that the provisions set out are included in all future relevant contracts.” He then informed the board on 7 November that CRC would comply with the HSE requests on any future appointment. Then the correspondence just stopped. Mr. Goulding had agreed both through correspondence and with the board that a certain chain of actions would take place.

We then have Appendix 24, which is an e-mail from Mr. Goulding to Paul Kiely, Brian Conlan and Jim Nugent. Some of the language in it is concerning. On page 64, he refers to how he will deal with the Health Service Executive, HSE, in regard to Paul's replacement. One line states:

If we just sit tight it is inevitable that they will react fairly soon, and come looking for details and explanations which will already have put us at a disadvantage.

He further states: "... we have taken the initiative and have more control of the discussions ...". Mr. Goulding goes on to state there are three matters he wishes to raise with the HSE. The third point states: "That we can, by use of our independent funding, augment the salary above their standard rate." I am interested in first on the specific level regarding the CRC and then on a broader level in terms of what happened with the relationship between the CRC and the HSE that we have a situation where Mr. Goulding, as chairman, is writing letters to his colleagues on the board to the effect that they must be careful these guys do not put us at a disadvantage, that they have to take the initiative or they will come cracking down on them while still asking if he can further augment the salary. It is completely at variance with the public messages he had been corresponding with the HSE.

Mr. Hamilton Goulding

Yes, it is. I suppose it is a mindset that had developed, rightly or wrongly, and some of it wrongly, of suspicion and distrust of some aspects of the HSE. I have to put my hands up on that one and as I said, we knew we had gone a bit far on it. I have said I regret some things, and that is one of them.

Deputy Simon Harris

I appreciate that, and I will not push it much more because Mr. Goulding is a private citizen. He has come before the Committee of Public Accounts and co-operated with us. I genuinely admire and appreciate that, and the fact that Mr. Goulding has put his hands up, so to speak, in terms of errors. My view on this, and Mr. Goulding may or may not wish to comment, is that he had a board of people who were well-meaning individuals, from my experience and reading, and I will not cast aspersions on the ability of the former chief executive because Mr. Goulding told me, and he had many more dealings with him than I did, he did a good job but it seems as if the board was taken hostage at the end by a man who constantly stated in his e-mails to Mr. Goulding and others that he did not want to embarrass the CRC, that he wanted an exit strategy and referred to "my package". The tone I and others get from reading the e-mails between Mr. Goulding and Mr. Kiely is of an individual who, albeit his legal entitlement, will not budge and has a board of well-meaning individuals over a barrel. That is not to say, and Mr. Goulding has already acknowledged, that things could not have been done differently, but that is my take on it for what it is worth. Mr. Goulding might wish to comment on that.

Mr. Hamilton Goulding

It is hard to reconcile. I was always looking at a situation to try to find something that is fair to Kiely in the light of his entitlements and fair to the clinic. To say he was pushing us around all the time is too strong. He was a strong character, as I have said, a man very well aware of his rights and a man about whom I felt if he was pushed very hard, or even not very hard, we were near the boundary of things getting more difficult and possibly more expensive. That is all I have to say really.

Deputy Simon Harris

I thank Mr. Goulding. I have a few questions for the HSE. I regret the fact that the entire discussion about section 38 and section 39 agencies has become dominated by two organisations, the CRC and Rehab. That is not to say that I do not believe our actions were correct; I believe they were. Both organisations needed serious examination but there are many more, and we have to be very careful that we do not end up having a situation where we exhaust one organisation while letting others off the hook, for want of a better phrase. We have had a number of larger organisations and a number of hospitals where significant concerns have been expressed by many members of this committee, and indeed by the HSE, with regard to their own practices, for example, the interpretation of the consultants' contract in St. Vincent's hospital, which seems to be unique, if not bizarre, and which Ms McGuinness's director general has told me clearly he does not accept as correct. In that hospital also we have had a very unique and interesting relationship between public and private, with public buildings mortgaged for the development of private entities. We have had concerns about the national maternity hospital and some potential linkages with private business there, and salary levels. I understand 1 July, which is only two days ago, was the date by which the HSE had informed this committee that it hoped to have resolutions to some of these matters in terms of bringing organisations into compliance. Is Ms McGuinness in a position to cast any light on it today?

Ms Laverne McGuinness

I can cast some light on it on the proviso that it is not completed. I will give the Deputy what I have if he accepts it on the basis that it is interim information.

Deputy Simon Harris

Absolutely, yes.

Ms Laverne McGuinness

It is just a validation and verification. The details were required back by our human resources, HR, directorate on 1 July, which is only the day before yesterday, so what I have is very interim and some of the numbers in it could change.

To recap on the posts over the past number of months, we have been working with the section 38 agencies to get details of where salaries are over and beyond what has been set as public pay policy for their respective grade at this point in time. We have done a full assessment. We have asked for all the details from each of the individual organisations. The HSE then set up a review panel internally consisting of a number of senior management teams to go through the documentation submitted by each of those organisations. Organisations were asked at the time whether there were contractual obligations, the form the contract took, and if there was a business case to be put forward - all the various documentation.

At a high level, 202 business cases were received from the organisations across the sector and 143 of those were received in respect of senior managers, that is, those managers above grade 8 level. Fifty-nine in respect of the salary level below grade 8 level were received.

The internal review panel met in April and a period of three months was given to come into compliance with public pay policy or else to produce whatever necessary documentation they felt did not help them to do that. In terms of where we are at a high level in that regard, 43 of those payments have ceased in total. We have had confirmation back that they have ceased in total and withdrawn payments of that nature.

Deputy Kieran O'Donnell

Forty-three of the 143 or 43-----

Ms Laverne McGuinness

Yes, 43 of the 143. We have business cases which clearly set out contractual obligations, and they are seeking red circling now. As I said, this information is pretty raw; it is only from the day before yesterday. That will have to be assembled, gone through again and submitted, if relevant, to the Department of Health and the Department of Public Expenditure and Reform. They would have substantive documentation attaching to them with regard to their legal contracts.

Some of the agencies are in a separate process. For example, the CRC is in a separate process, so we are leaving it aside. About 18 of those are indicating that they have contractual commitments, obligations and legal contracts but we have not seen them. That is roughly where it is at at this point in time.

Deputy Simon Harris

In case I missed it, how many business cases and people are seeking red circling?

Ms Laverne McGuinness

Sixty, where they have contractual obligations, are seeking red circling, and documentation has been submitted with those business cases, and the binding contracts from preliminary observations.

Deputy Simon Harris

Where does the process go now?

Ms Laverne McGuinness

As I said, that was the day before yesterday. Those 60 will be gone through again in finite detail. The process is that there will be an engagement and discussion with the Department of Health and the Department of Public Expenditure and Reform, potentially with regard to some of those, and legal advice may have to be taken on some of them as well. Our director of HR is on leave at the moment but we do not have any more information that I can give the Deputy but we will provide it to the committee when we have. I just brought that as an interim measure knowing that-----

Deputy Simon Harris

I appreciate Ms McGuinness making that available so quickly. Excuse me for being pedantic but Ms McGuinness has indicated 43 where the payments have ceased in total and 60 of the 143 business cases came with the documentation. Can I have the breakdown of the other 40?

Ms Laverne McGuinness

There is 143 all together. I will give the Deputy each of the individual ones. Forty-three have ceased in full.

Three are in a category relating to what the HSE knows as the "one person one salary" principle. An example would be when there is an outside arrangement, perhaps for lecturing, under a different contract and three of them are in a particular piece there. As I stated, 60 are those for which there are contractual obligations, red circling is being sought and the documentation has been submitted. Obviously, were this to proceed, it would be personal to the post holder and would change in the case of anybody new. Eighteen have indicated contractual entitlements but the HSE is awaiting the documentation to be submitted in those cases. They currently have not fulfilled and submitted the legal contracts in this regard. Seven were working with agencies to achieve compliance, and as some were in partial compliance, we are working with them to see if we can get full compliance on that. We are awaiting responses from four agencies on their actions to reach compliance and are stating this also is part of the compliance policy and statement. We have eight in a separate process, one of which is the Central Remedial Clinic, CRC - this not to single out the CRC, as it has legitimate reasons in this respect - and that brings us up to 143 cases.

Deputy Simon Harris

While these are raw data, that is fine and I thank Ms McGuinness.

My final question is to Mr. Kieran Timmins and Ms Stephanie Manahan and is in respect of the CRC's own structures. I have read the curricula vitae or the biographies of the CRC's new board it sent to the committee, including that of Ms Manahan herself. It appears as though the CRC certainly has a robust, credible and diverse group of people on its board and I wish all of them the very best of luck. While I am aware the CRC is reviewing its memorandum, that this is raw and it is only coming to terms with all of this now, the witnesses might indicate how they envisage the structuring of the board, what lessons can be learnt from the past with regard to the relationship with the HSE, term limits, annual general meetings and, in an issue we discussed with the representatives of the previous board, involvement with the service users, as well as possible representation for them.

Mr. Kieran Timmins

As I stated, we have a working group that is looking at that. As to how we do some of this, this will be my personal opinion rather than agreed policy.

Deputy Simon Harris

Sure.

Mr. Kieran Timmins

We have said there will be term limits, possibly of three or four years. There will be a number of terms that can be served, possibly two or three terms. We continue to examine the skill sets on the board and where there are gaps, we will add additional areas. We are looking at the membership and, as the Deputy is aware, a company limited by guarantee must have seven members. We are a little bit light on that at present and I wish to echo what Mr. John Cregan said regarding the co-operation of the existing members in terms of doing that. In particular, Mr. Goulding has been very helpful in reaching out to the other members and trying to get that. Consequently, we are looking at that. We are looking at how we will get parents and clients involved. We think they need input into the board and whether that input is part of a group, part of bringing some people onto some committees, whether they are part of the board itself or of the membership are all in the mix in respect of what is being examined. We will seek input in this regard from the various stakeholders.

I am trying to remember for what else the Deputy asked.

Deputy Simon Harris

The only other point, which is broader than the CRC, concerns the relationship the CRC will have with the HSE in future, as well as the understanding that there very much is a partnership here and it is not the case that if a question is asked by the HSE, it is rude or something.

Mr. Kieran Timmins

Absolutely. The HSE is a major funder of the CRC, and last year 83% of funding for the CRC came directly from the HSE. Consequently, it is a major stakeholder and therefore a major partner in the process. We intend to keep that relationship very strong and professional. Again, the HSE has been helpful in terms of moving things along in the last while and it is very open to what we are doing.

Deputy Áine Collins

The witnesses are all welcome this afternoon. In particular, I thank Mr. Hamilton Goulding for his attendance and for being so open and honest. I wish him the best of luck in whatever ventures to which he goes. I also wish Mr. Timmins and Ms Manahan the best of luck in the CRC, and it is to be hoped this episode can soon be put behind us all. I wish to ask Mr. John Cregan a question on the issue of Paul Kiely and the manner in which it was dealt. Now that Mr. Cregan has been in the CRC and has concluded his administration, how would he have dealt with it?

Mr. John Cregan

In terms of the severance?

Deputy Áine Collins

In respect of the severance pay and the obligation to reduce his salary from €240,000 to €86,000 after 25 years of service.

Mr. John Cregan

What I have said echoes something Mr. Goulding has stated, which is one must look for an arrangement that is fair to the CRC and to Mr. Kiely, who was chief executive for nearly 28 years. However, I do say the Haddington Road agreement was going to be implemented on 1 July and I felt the board would then be in a stronger position to do a better deal. I felt that the salary was overstated in terms of his pension arrangements and that this salary should have been reduced.

Deputy Áine Collins

Yes, but in light of legal contracts-----

Mr. John Cregan

There are two things. One is the actual salary per se but there was no legal impediment to Mr. Kiely's salary being reduced in line with public pay policy. That is the point I have made there. It was not reduced in the case of approximately half of his salary. That would have made a difference, and had the Haddington Road agreement been implemented, it would have reduced the salary by nearly €50,000.

Deputy Áine Collins

Yes, but getting to the salary recommended by the HSE would have reduced it again. Moreover, in line with the fact that the employment arrangement was with the CRC, as opposed to the HSE-----

Mr. John Cregan

I do not comment on that. What I say is there was an opportunity to reduce the salary in the light of the financial emergency measures in the public interest, FEMPI, legislation, and the Croke Park and Haddington Road agreements, but that was not done. Had that been done, significant savings would have been made to both the CRC and the pension fund.

Deputy Áine Collins

I accept that public pay must be reduced across all the organisations and so on. However, does Mr. Cregan not think it would make far more sense for the HSE to work with these organisations and their boards to try to help them get to a stage where this can happen?

Mr. John Cregan

I think that is being done. In the case of the CRC, the HSE was not told that the termination package was going to be put in place and, consequently, it had no input.

Deputy Áine Collins

Had the HSE engaged with the CRC beforehand, as in appointing someone to help the clinic to manage the process that needed to be reached?

Mr. John Cregan

My experience, in terms of section 38 organisations, is that if the organisation wants help, it will get help from the HSE.

Deputy Áine Collins

That is not what I asked. My point is that all of this happened in 2009. I accept that what happened before then was all different. However, the HSE was put in place and a big change happened in 2009 in respect of how these organisations were to be run and what their public pay, which was to be brought into line, was to be. However it appears as though this decision was made and the section 38 organisations have been left to deal with this on their own. I accept the majority of their money comes from the public purse but they are separate legal entities.

Mr. John Cregan

I will just comment on the CRC. A commitment was given by the CRC in 2009, following discussions with the HSE, that it would comply when the next chief executive officer position was to be filled. That was the commitment given and that was accepted by the HSE.

Deputy Áine Collins

I accept that.

Mr. John Cregan

I am not trying to defend the HSE or anything in this regard but I have laid out the facts as I have found them.

Deputy Áine Collins

I accept that and I accept it was unfortunate that this did not happen. However, I am trying to get to an overall point with regard to what we are trying to do here. The section 38 organisations per se do a great deal of good work on the ground and the people they help, as well as their families, probably are the most vulnerable in society. I accept a stage must be reached where public pay policy is implemented and, regardless of whether they are right or wrong, if the rates as designed reflect the policy, this is what must be implemented.

I am very concerned about the way the HSE is approaching this. They could be a lot more helpful with the boards and with those who are trying to run these organisations. As I understand it, the boards are all voluntary. From the point of view of public opinion, I cannot understand why the HSE has not appointed a HR expert - I am sure it has plenty of them - to sit down with those involved, come up with options, and help them implement a process so that everybody can get back to the job that he or she is employed to do.

Mr. John Cregan

My take on it is that the CRC was maintaining a very independent line. It did not seek help. It did not ask for help from the HSE. The opposite was the case.

Deputy Áine Collins

I accept that it did not seek help.

Mr. John Cregan

I do not want to comment or get into a conflict, as I said earlier, but I am quite clear that it was not a case of the HSE refusing to help or the CRC seeking assistance and not getting any.

Deputy Áine Collins

With all due respect, I was not for a minute saying that. My point is that Mr. Cregan is implementing the policy that has been designed, and it is his job to do that, but in order to get to where we all need to get to on this - I understand from what Ms McGuinness stated earlier that another 60 of them are still outside of where they need to be - it seems that these organisations should get HR help and legal advice. It would be fair for the HSE to provide that, and it should have done so. Whether they asked for it is irrelevant. The HSE is the body in charge of them. It is the body that pays them. It is asking them to change their policies and their employment contracts with their employees even though they have a separate employment contract from that of the HSE. It is not as straightforward as we would all like it to be.

Mr. John Cregan

In fairness, there are two matters here: one is getting the salary down to the HSE norm and the other is the application of the cuts. In the report, I have been silent in terms of the salary and getting it down to the norm. I have not commented on that. However, what I have commented on is the application of the public sector pay cuts. That is they only issue I have dealt with.

Deputy Áine Collins

I accept that. I asked Mr. Cregan about getting it down to the norms, because that is really where we all need to get to.

Mr. John Cregan

It was going to get down to the norm when the next CEO appointment was made. The agreement that had been made in 2009 in relation to that was not-----

Deputy Áine Collins

When there was a new replacement?

Mr. John Cregan

Yes.

Deputy Áine Collins

I accept that.

Mr. John Cregan

That was the agreement.

Deputy Áine Collins

I am talking about it in general.

Mr. John Cregan

I am sorry. I will let Ms McGuinness comment.

Ms Laverne McGuinness

Maybe I will come in now. There are a number of pieces. We are working with the agencies to see how we can get them to come into compliance. That is the process I was actually outlining there regarding our engagement with the section 38 agencies. There are 143. That was the process I went through.

Deputy Áine Collins

Would Ms McGuinness explain the process?

Ms Laverne McGuinness

The process is-----

Deputy Áine Collins

On the last occasion, the HSE was asked to fill out various forms and we were waiting for them all to come back.

Ms Laverne McGuinness

That has been done. That is what I was trying to outline a while ago.

Each of those individual agencies has been met and it is not just a case of form filling or being sent out forms. Each of the agencies has an individual relationship with an area manager. What we are saying, however, is that it should be one area manager responsible for the totality of a particular organisation, and if an organisation has three or four branches, there should be just one manager who can take the totality of it.

We are working with the agencies to see how can they reach compliance, and that is where they have sent in some of those business cases that I outlined. There are 60 business cases, setting out that there are legal contractual obligations and seeking red circling. We are going to work through with the agencies, and, indeed, discuss with our Department of Health and the Department of Public Expenditure and Reform colleagues, after we filter through them again, what the solution is in that regard. Also, it is very difficult to get compliance overnight, as the committee will be aware. That is what the Deputy is saying - we must work through them.

As well as the normal interaction that we would have with the area manager through the service level arrangement, we also have put additional governance arrangements in place with the boards, because it was primarily between the executives before. We meet the chairs of the boards themselves twice a year now in the disability sector. One of those meetings is attended by the director of social care.

As well as trying to develop a relationship, we are also trying to provide knowledge as to the latest best practice in relation to governance. We last met on 20 June. We had a specialist in the field to talk about the experiences, and there was a question and answer session in order to help them. We have also asked that an audit be done on their compliance to assist them with the process. We are there to help them in order to commit to compliance, so it is not as contentious a relationship as it might seem through correspondence. The correspondence then relates to when we are not getting the information or not getting the required level of documentation that we need in order to assure ourselves that what should be being paid is being paid.

Deputy Áine Collins

I accept that. There is a lot more that could have been done-----

Ms Laverne McGuinness

I am still working on that.

Deputy Áine Collins

-----that would be an awful lot simpler. Ms McGuinness talks about accounts and not getting information. In the service level agreement, why does the HSE not design a particular template of accounts that would provide it with all the information it needs at the end of the year and also a template on what the governance of all these organisations should be? That would clean up so much of this.

Ms Laverne McGuinness

It might be of assistance to Deputy Áine Collins if we gave her a copy of the annual compliance terms, because they do that. It is a two-page document and we ask for sign-off on the financial accounts and procurement to show that all is as it should be. It is a two-pager. If it is not, the body must explain why it is not and how it will come into compliance. We have simplified that - very much so - as part of our new arrangements to apply-----

Deputy Áine Collins

Does the HSE provide a chart of accounts for organisations to fill in in a particular way?

Ms Laverne McGuinness

Not a chart of accounts because, in relation to the actual financial accounts themselves, each organisation is audited independently. That is part of their ethos and their culture. Their accounts are prepared separately by their own staff and, indeed, by their own auditors and financial accountants. That would not be within our remit to dictate. However, we have asked that the specifics be given by the auditors of those accounts so that we can visibly see, and they will form an opinion in relation to pay policy and give us some assurances in that regard.

Deputy Áine Collins

While I accept that they all have their own audit because they are separate legal entities and that the audited accounts will be done in a particular way which is within auditing standards, surely it would be simple to provide a chart of accounts that HSE needed information on. It would get bank balances and all the other information that the HSE would need. Such a chart would be simple to design, would give the HSE the information it requires and would be part of their service level agreement and compliance statement at the end of every year. Bodies would also have to design policies and governance that the HSE requires - for example, that the term of a board can only be three years, five years or whatever. When that was done, they would have to sign off on all of it.

Ms Laverne McGuinness

That is actually what is in here. It might help if I go through some of the headings.

The first page of the annual compliance statement that applies to section 38 agencies sets out the reason for it and its implementation, and how it will actually apply. The next page contains the boards compliance statement. That is the statement that has to be filled in. Then, part 2 sets out board and corporate governance requirements. That is setting out the various committees that should be in place for boards as best practice, the terms over which they should serve and how to go about the appointment of directors, the remunerations committee and the audit committee. That is best practice in relation to corporate governance, which we have set out now for the first time for the boards as part of this overall compliance statement.

As the committee will be aware, corporate governance is a whole evolving area. It continues to evolve and get better each year. This is in line with what is current best practice. We have gone through that in detail with the chairs of the boards and taken their feedback. We have arrived at this, which we have agreed to sign up to for the 2014 accounts and, indeed, in retrospect, for 2013, recognising that it would not be possible for all bodies to be in compliance in 2013.

This has simplified it somewhat. In fact, it was very much welcomed by a lot of the boards and chairmen, and the code of practice is in it.

Deputy Áine Collins

I thank Ms McGuinness.

Chairman

I will check one other matter in relation to Central Remedial Clinic Medical Devices Limited with Mr. Cregan. It is 100% owned by Friends and Supporters of the Central Remedial Clinic Limited. What is the issue in relation to the non-co-operation of individuals there? Did I hear Mr. Cregan say that earlier on?

Mr. John Cregan

All the directors of the CRC and Friends and Supporters of the CRC resigned, and those who were on the board of CRC Medical Devices resigned at the same time, on 13 December. I was not appointed as an interim administrator for CRC Medical Devices.

Legally, however, the company is obliged to have at least a minimum of two directors. Therefore, all the directors cannot walk away from the company. I asked that they be written to and reminded of their responsibilities. The company secretary gave me back a legal response asking that all future correspondence be referred to his solicitor. As far as I know-----

Chairman

Who is the secretary?

Mr. John Cregan

Mr. Conlan. As far as I know, the new board has not received any co-operation or response from the directors. The new board of Friends and Supporters of the CRC is now taking legal advice as to how to resolve the situation.

Chairman

Who are the former directors?

Mr. John Cregan

I do not have the information here.

Chairman

Could people turn off their mobile phones?

Mr. John Cregan

Mr. Goulding, Mr. Brady and Mr. Nugent.

Chairman

Has Mr. Cregan had any correspondence back from Mr. Conlan’s solicitor in relation to this?

Mr. John Cregan

No.

Chairman

Would Mr. Goulding like to comment on that?

Mr. Hamilton Goulding

I was a former director of that company, yes. At the time of our resigning from the CRC – I resigned from all the boards together – I was not aware, I confess, of the requirement for two directors to remain there. I have not had correspondence since, however. Clearly, it needs some attention. I had one letter from a company of auditors asking me whether I was a director. In fact, I was forwarded the letter from Mr. Conlan in which he was not providing information that had been asked for. I acknowledged the correspondence and stated I had resigned, as I had. I have heard no more since. Clearly, that is something that needs some attention.

Chairman

Is it a legal obligation on at least two of the directors who resigned to stay in place? Now that they have resigned, can that be reversed?

Mr. John Cregan

The Companies Registration Office, for instance, will not accept all the resignations of directors. It insisted that there have to be two, by law.

Mr. Hamilton Goulding

If that is the case, does it mean some of the former directors of the CRC are, in fact, still directors?

Mr. John Cregan

Alternative arrangements-----

Mr. Hamilton Goulding

So the resignations are accepted?

Mr. John Cregan

In the case of CRC.

Mr. Hamilton Goulding

Why would that be different?

Mr. John Cregan

There are different articles.

Chairman

Does Mr. Goulding think there could be a resolution to the problem associated with all the directors having resigned and CRC's requirement that at least two transfer over?

Mr. Hamilton Goulding

I think there would have to be. The best thing would be to enter into discussions with whoever is relevant.

Mr. John Cregan

Mr. Quinn is the new chairman of the Friends and Supporters of the CRC. He probably would be anxious to hear from those concerned.

Mr. Hamilton Goulding

I was not aware of this problem but I will certainly take action on that and speak to the two other former directors and Mr. Quinn to see if we can have a resolution to that.

Chairman

For clarity, is Mr. Conlan, through his solicitor, refusing to co-operate or just taking legal advice?

Mr. John Cregan

He is maintaining that he is not even the company secretary.

Chairman

Is he registered as the company secretary?

Mr. John Cregan

Yes.

Chairman

Has Mr. Cregan provided the documentation to him?

Mr. John Cregan

Yes.

Chairman

Where stands the correspondence, then?

Mr. John Cregan

I am no longer involved. Really, Mr. Tom Quinn, the chairman of Friends and Supporters of the CRC, is trying to resolve the issue. That is why it would be helpful for Mr. Goulding to contact Mr. Quinn.

Chairman

He is quite prepared to do that. Someone should write again to Mr. Conlan asking him to co-operate in order to transfer the responsibility and obligation of the company to someone else. What we will do is send him a transcript of the discussion on this subject at today's hearing. He should be asked to co-operate.

Deputy Shane Ross

I would like to come in on the CRC Medical Devices issue, which needs tidying up very badly. It seems the board is stuck on it. It says it is going to review it, which means it does not really know what to do. Is that not correct? There is nobody to talk to. We do not know who the secretary is and Mr. Conlan is refusing to communicate. Mr. Goulding got a letter - we all have a copy of it - on 24 April asking him to revert to the auditors. He did not reply, but it does not say-----

Chairman

There is a copy of the reply.

Deputy Shane Ross

I am sorry; we have a copy of the reply. It does not say there is any more information coming. Is there anything in there that Mr. Cregan can tell us about this company? It seems everyone just wants to drop it like a hot brick. The directors seemed very happy to go and Mr. Conlan has written saying he does not want to know anything about it, that he is not there any more and that one should talk to somebody else. Mr. Cregan says that in the event of non-co-operation there would be a very difficult situation. We are now in that situation. The company lost an awful lot of money every year and nobody is telling us anything about it, how or where it lost its money and who is responsible for it. All we get from Mr. Cregan's report about it is the bare fact that the company is fully owned by Friends and Supporters of the CRC. Is it not correct that at least one person employed by CRC had a CRC Medical Devices credit card? How could that be? Could Mr. Cregan explain that to us? What happened?

Mr. John Cregan

I feel reluctant to go beyond what has been said because it is one of the areas in respect of which I do not really have all the documentation. I was not appointed to be the interim administrator for CRC Medical Devices. I took the initiative in writing to the directors because I was concerned that CRC Medical Devices would incur losses or liabilities that would ultimately fall on Friends and Supporters of the CRC and be a drain on the resources available to CRC.

Deputy Shane Ross

This is what has happened. It has happened every year, has it not?

Mr. John Cregan

Yes. That was my motivation in trying to resolve it. I referred in the report to the desire to have the company wound up in an orderly manner and to establish the final liability.

Deputy Shane Ross

Did Mr. Cregan get any idea from his research - I hate to use the word "investigations" - as to what the losses were in 2013, for instance?

Mr. John Cregan

No, because the accounts have not been prepared for 2013.

Deputy Shane Ross

It is now July.

Mr. John Cregan

This is part of the problem in terms of accessing records and being clear on the agreement that was made in relation to the sale of the company assets.

Deputy Shane Ross

From the very little we know about CRC Medical Devices, we realise it lost money for reasons we have not a clue about because we do not know anything about it. It submits only very short accounts to the Companies Registration Office. We know the company was spending money like water and that it was extravagant. All we seem to know is that CRC charged it for management fees or expertise in the initial stages. There was some strange inter-company transaction that Mr. Cregan does not know about. We know about the credit cards. We also know - this surprises me - that the auditors wrote to Mr. Brian Conlan on 6 February.

It does tell us a little bit about what happened in the deal. It is a strange deal that nobody will talk about, which is very odd, although Mr. Goulding has promised to give us some details about it. There is just one thing that struck me - I think the assets were transferred to MMS Medical and all the rubbish, basically all the debt, seems to have been underwritten by Friends and Supporters. Is that not correct, Mr. Cregan? In fact, trade in the assets has gone to the buying company.

Mr. John Cregan

I am reluctant to say too much about it because I am not absolutely clear myself on what the deal was.

Deputy Shane Ross

No.

Mr. John Cregan

In a general way, the company assets were sold and there are some liabilities that have to be certified.

Deputy Shane Ross

Does Mr. Cregan know how much was paid for the assets?

Mr. John Cregan

I think there were to be a number of payments over 18 months or two years.

Deputy Shane Ross

How many and how much, that Mr. Cregan knows of?

Mr. John Cregan

I understand the initial payment was €50,000 and I think that was paid.

Deputy Shane Ross

Did Mr. Cregan say it was a one-off payment?

Mr. John Cregan

I think it was €50,000 to be paid at some stage late in 2013, but I am speaking without full knowledge of the actual agreement, or being clear myself of what the final agreement was. The key person there is Mr. Conlan.

Deputy Shane Ross

Mr. Conlan knows about it. We did ask him about it the last time he was in, from memory, and he was not very forthcoming. So a sum of money was paid for the assets and basically the trading book.

Mr. John Cregan

Yes.

Deputy Shane Ross

Then on the other side, all the debt is left with the tab to be picked up by the friends and supporters, is that right?

Mr. John Cregan

That is it.

Deputy Shane Ross

A pretty good deal for MMS, is it not?

Mr. John Cregan

Sorry, I am saying "Yes", but I am not absolutely certain of all the details. I am speaking about a company that I do not really have any involvement with.

Deputy Shane Ross

I know Mr. Cregan does not have an involvement but he has some knowledge.

Mr. John Cregan

I have some knowledge, but not definitive.

Deputy Shane Ross

Okay. It says in that letter: "We note in the final signed agreement details of the transport of four motor vehicles." That is quite a lot. It goes on to say: "To date, the Mercedes Sprinter van, an 08 number, has not been transferred." Were they driving around in purchased Mercedes vans?

Mr. John Cregan

There were some vans. The Deputy is asking me questions now, but I am really at a disadvantage because I have no involvement with the company and I do not know all the details.

Deputy Shane Ross

That is fair enough. Maybe Mr. Goulding could give us some idea of the shape of that deal and how it was negotiated.

Mr. Hamilton Goulding

I actually cannot.

Deputy Shane Ross

Mr. Goulding was the chairman.

Mr. Hamilton Goulding

I can give the Deputy an account of the business and its rationale, where it came from and how its demise came about.

Deputy Shane Ross

Could Mr. Goulding give us some idea of that because it is really quite a mystery?

Mr. Hamilton Goulding

The situation came about with the fitting of prosthetic devices, seating devices, wheelchairs, et cetera. Purchasing equipment for disabled people is not like buying a pair of shoes; it involves a lot of specialised assessment and modification of the devices themselves. The CRC was spending a lot of time doing this with specialised staff in the seating department. Agents would come in selling these devices and effectively used the labour of the CRC to make the assessment and decide which device was being used. A lot of time and effort was made by clinic staff. The transaction would then take place and the agent for the goods would achieve the sale and go away.

Looking at this, we realised that it was strongly related to the core business. It happened that, effectively, we were doing a lot of work and somebody else was making a profit as a result of it. The idea therefore was to let us become an agent for these items and thus get some recompense for the work that was going into it. That is how that business started.

At that time - this was just before the downturn - there was a big turnover of those types of items. There was a large list of people who had been approved by the HSE for getting one of these devices. With the downturn, however, while people had been approved they were then told that although we had approved them we could not go ahead with that sale. The volume of those items being sold and used absolutely plummeted. Just like many a business that was set up in the times of economic prosperity, it bit the dust in a big way.

On a number of occasions at board meetings we summoned in the executive team who, I must say, always impressed me very much. At that time, Mr. Paul Kiely was keeping a weekly or fortnightly eye on it, getting briefings all the time. Cost cutting took place; there were no luxury items and certainly no wastage that I ever saw. Gradually, the market disappeared and the business went into loss. Looking back, we should have wound up that operation much earlier but having risked money from the charity we were still reluctant. This happens when something is going down; when does one stop? We really hated the idea of making a loss for the clinic. I know this got to Mr. Kiely personally, and it got to all of us, that we would hate to preside over a situation where we went into a venture that would not work and we would have to admit it. We let it run a little bit too long and the losses accumulated. Then a deal was finally opened up.

The trouble is that I am not well prepared in terms of accounts and numbers. It is a long time ago and my recollection is not good. I can obviously look into this and find more details for the Deputy. I would be willing to do that except that I have no documentation now. It needs to be resolved. At the last meeting we had it was taken over very much by Mr. Conlan. The last time we looked at it he gave us a briefing on it. He said he was hoping that at the end of the process he was going through that we would get to a situation of nearly balancing any exposure or losses to the clinic.

Things have sort of disappeared into the ether now. I regret to have to say this but I simply do not have, either on paper or in my head, sufficient information to answer the Deputy's questions here today.

Deputy Shane Ross

That is fine. Maybe Mr. Goulding could let us have them.

Mr. Hamilton Goulding

I am quite sure of the genuine, honourable intention that there was a good opportunity within the range of the clinic's expertise. It was a good idea at the time but like many things at that time the market went out from under it. I would be happy to try to come back to the Deputy with some details, but I am sorry I cannot provide more at this moment.

Deputy Shane Ross

That is fine. If Mr. Goulding could let us have more details that may be useful.

Mr. Hamilton Goulding

Yes.

Deputy Shane Ross

Was the sale put out to tender?

Mr. Hamilton Goulding

It is a very small market. I am sorry to digress but it may explain this credit card thing, which I am not certain about. There was a proposed partnership with a company in Germany. A gentleman came from Germany and I recall his briefing to us. In light of that, there was some idea that perhaps this guy had such ideas that the company may be able to revive itself. We had two interested parties, put it that way. It was not advertised for general tender but there were at least two parties, and possibly three, who were taking an interest in this as a possible sale.

Deputy Shane Ross

So there was some competitive bidding.

Mr. Hamilton Goulding

There was, yes.

Deputy Shane Ross

Fine. I think that is all, Chairman. As far as I am concerned, it is finished.

Chairman

I intend to wind up now. I know Deputy O'Donnell has a quick question. To clarify a point raised, Mr. Cregan said some senior managers at CRC did play a role in CRC Medical Devices. Are they still available within CRC? Are they still working with medical devices? Have they given Mr. Cregan any information or assistance? Are there files there from their work?

Mr. John Cregan

As Mr. Goulding has said, the original idea for CRC Medical Devices was the output of the staff at CRC. There was-----

Chairman

Did senior managers have a role?

Mr. John Cregan

They were involved in establishing it.

Chairman

Are they still with CRC?

Mr. John Cregan

As far as I know, some of them are.

Chairman

Would they not have been able to help Mr. Cregan with information?

Mr. John Cregan

No.

Chairman

No they would not, or-----

Mr. John Cregan

I do not have a role in relation to CRC Medical Devices. All I have said is what the background to the company was and what the state of the company was, but other than that I do not really have an involvement.

Chairman

No, but there is some information there should someone want to thread that together.

Mr. John Cregan

The key person in relation to the agreement for the sale of the company and where the company is now is the company secretary.

Chairman

That is Mr. Conlan. What we will do as a result of this part of today's hearing is send Mr. Conlan and, perhaps, his solicitor the transcript of the meeting and insist on a reply to the issues raised. He asked what other issues we might like to speak to him about. We may still be interested in speaking to him after discussing as a committee the outcome of today's hearing. We will certainly write to him.

A last item in relation to this involves the fact that Mr. Conlan's and Mr. Kiely's files were missing. However, some files were there as they are referred to in a report. They were there at some stage, therefore.

Mr. John Cregan

That would be Mr. Kiely. Mr. Conlan was only appointed on 1 July. He was there for a much shorter period.

Chairman

Would the auditors have that information?

Mr. John Cregan

No. I asked the auditors if they had reviewed the CEO's files as part of their routine audit. It was not part of the routine, but I understand that - I speak from memory here - at one stage the audit involved a sample of employees. As far as I know, Mr. Kiely's was one of the sample files selected in a previous audit.

Chairman

Where would that file have gone from the audit? The auditors selected the file.

Mr. John Cregan

I presume it was returned to the CEO's office.

Chairman

What were the auditors' comments on the file after the audit?

Mr. John Cregan

I think there were no comments. Sorry, I have never seen the file so I do not know what the comments were if there were any.

Chairman

I mean the comments of the auditors - if they said anything about the content.

Mr. John Cregan

No.

Deputy Kieran O'Donnell

When was the audit conducted?

Mr. John Cregan

As far as I know, it was the audit of 2012. I am speaking from memory. One of the issues was that there was a separate payroll and files were kept in the CEO's office. All those files are now transferred to the HR department. In future, the HR department in the CRC will hold all personnel files.

Chairman

All those files were there with the exception of Mr. Conlan's and Mr. Kiely's.

Mr. John Cregan

Yes.

Chairman

Perhaps, we will ask Mr. Conlan if he knows anything about it.

Mr. John Cregan

As I have said already, he said in a public statement yesterday that he has no files or documentation.

Chairman

I refer Ms McGuinness to the new directorate. When she was appointed, she seemed to have been given a wide range of responsibilities for the efficiency and effectiveness of the administration of the health services from a finance point of view. I was reading this in the course of some Googling I was doing.

Ms Laverne McGuinness

On the structure of the new directorate, we have a chief financial officer who deals with finances. Performance management of the system in relation to the directorate with regard to the services delivered under the entirety of service planning is what is part of my brief.

Chairman

Does Ms McGuinness deal with procurement and HR-----

Ms Laverne McGuinness

No.

Chairman

-----overview?

Ms Laverne McGuinness

Sorry, I certainly have an overview in relation to HR. We have a national planning and performance assurance group that has been set up as part of the overall directorate. Certainly, I have an overview in relation to HR in terms of the number of employees. We have a HR directorate, however, with specific delegated responsibility for the HR function. It is the same with finance. We have a CFO with responsibility for the finance function. I have an overview of the performance.

Chairman

Has the audit committee of the directorate flagged anything of concern for Ms McGuinness?

Ms Laverne McGuinness

There are lots of issues. The audit committee was established recently. It was set up in January and we have met about four times to date. We have gone through the annual financial statements. There is an audit charter which sets out what the role and responsibilities are and there is a work plan. We get the internal audit reports. A significant number of issues have been flagged as part of internal audit, but the CRC is not part of that at this time. There are 4,000 service-level arrangements in place.

Chairman

Have any other major issues been flagged in the context of the work with the auditors?

Ms Laverne McGuinness

Certainly, issues have been flagged where we need to make improvements. The effectiveness of the internal control has been flagged regarding areas which require improvement. That has been set out among areas to be improved as part of the work plan. We have matters there which we can furnish to the committee. The Comptroller and Auditor General has been represented at each of the audit committee meetings we have attended by the person with responsibility for our accounts in that office as much of the work of the audit committee this year has involved going through the detail of our annual report and annual financial statements which must be signed off at the end of March. They have been gone through forensically by the chair of the audit committee who is independent. There are things we must improve and we know that.

Chairman

Is there such a thing as a fixed asset register?

Ms Laverne McGuinness

There is a fixed asset register.

Deputy Kieran O'Donnell

I raise a local issue for Limerick, which involves the accident and emergency department at University Hospital Limerick in Dooradoyle and the speed at which it will be completed. Mr. O'Brien attended here three or four weeks ago and committed to reverting to us. I have written since. Can Ms McGuinness see what can be done to speed up the process?

Ms Laverne McGuinness

I will come back to the Deputy on that.

Deputy Kieran O'Donnell

When is it expected that the audit of CRC Medical Devices will be concluded? I ask Mr. Cregan.

Mr. John Cregan

The auditors are there. The issues for them are whether the company will be wound up and whether there will be one set of accounts produced not just for 2013 but to the date of the winding up. I think the process is ongoing but I do not have up-to-date knowledge.

Deputy Kieran O'Donnell

Mr. Cregan might keep the committee informed.

Chairman

On that, is there a guarantee from F&S for CRC Medical Devices?

Deputy Kieran O'Donnell

There was one put in place.

Chairman

If the guarantee was withdrawn, would CRC Medical Devices have to be wound up as it would not be a going concern?

Mr. John Cregan

The approach is that it should be a voluntary winding up.

Chairman

If it was not to continue to be a-----

Mr. John Cregan

I am not a legal person. It is 100% owned by F&S which would make it difficult for F&S to just walk away from it.

Deputy Kieran O'Donnell

It appears that F&S is providing a guarantee in respect of a loan provided by the CRC to CRC Medical Devices. The issue is that the CRC was exposed in terms of CRC Medical Devices. Therein lies the unanswered question. Does Mr. Goulding know how it was funded from day one and what type of funds were used? Was it public or private funding? That appears to be where the guarantee is. Therein lies the unsolved riddle. It comes back, once again, to the impact on frontline services provided by the CRC.

Ms Laverne McGuinness

I note to Deputy O'Donnell that the director general has referred his correspondence to the CEO of University Hospital Limerick to come back to the Deputy with a response. I will follow up on it again.

Deputy Kieran O'Donnell

I am more interested in the estates position within the Department, apart from the CEO. I thank Mr. Goulding for attending.

Mr. Hamilton Goulding

I thank the Deputy.

Deputy Kieran O'Donnell

Something positive will come out of this. The fantastic work Mr. Goulding's mother and family did in establishing the CRC and the work on the ground of the service will stand the test of time.

Mr. Hamilton Goulding

I am sure it will and I am sure those in the clinic will bounce back quickly.

Deputy Kieran O'Donnell

However, we have issues to deal with.

Deputy Shane Ross

I follow what Deputy O'Donnell said about Mr. Goulding whom I have known for a long time. I thank him very much for attending. It is brave.

It must have been a difficult and embarrassing time for Mr. Goulding, particularly because of his family connection with the body, to see it fall from grace in such a manner. I know he accepts some responsibility for it. The fact he attended the committee today and was prepared to answer our questions, particularly when he had the option of taking a different road which some of his colleagues have taken, will stand to his credit. As Deputy O’Donnell said already, Mr. Goulding’s family have been stalwarts to the Central Remedial Clinic, CRC, and stars in setting it up and keeping it going. I am glad he will assist the committee, the new board, and the Health Service Executive, HSE, in the future of the CRC. While we have been critical of the mistakes that Mr. Goulding made, we should acknowledge the fact he gave the committee, in stark contrast to others involved, some very honest replies.

Mr. Hamilton Goulding

I thank the Deputy and appreciate his remarks.

Chairman

Mr. Kieran Timmins said he will keep the committee informed of some of the outstanding matters with which he is dealing. I wish him and Ms Stephanie Manahan every success in their work. I thank officials from the HSE and the Department of Public Expenditure and Reform for attending today’s meeting. I also thank Mr. Goulding for attending today. It is an example to others when witnesses co-operate and the full story is told. When errors are admitted, progress can be made. Mr. Goulding’s help with the remaining outstanding issues such as medical devices will be greatly appreciated.

The committee is grateful for Mr. Goulding’s attendance and contribution to today’s hearing.

Mr. Hamilton Goulding

I thank the Chairman.

The witnesses withdrew.

The committee adjourned at 3.45 p.m. until 10 a.m. on Thursday, 10 July 2014.