COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 22 Jun 2017

University College Cork and University of Limerick: Financial Statements

Professor Patrick O'Shea (President, University College Cork) and Professor Desmond Fitzgerald (President, University of Limerick) called and examined.

Chairman

We are now back in public session. In the context of our examination of financial statements in the education sector, this meeting is a follow-up meeting relating to certain matters. The meeting will be divided into two sessions. Session A will deal with matters relating to the University of Limerick, UL, and University College Cork, UCC. Session B will deal with matters relating to the Dublin Institute of Technology, DIT, and the financial statement of Cork Institute of Technology, CIT and certain matters relating to its 2014 and subsequent accounts. Representatives of the Higher Education Authority, HEA, and the Department of Education and Skills will be with us for both sessions. We are joined by Dr. Graham Love and Mr. Andrew Brownlee from the HEA and by Dr. Tony Gaynor and Ms Deirdre McDonald, principal officers, from the Department. The main witness for this session from UL is the president, Professor Desmond Fitzgerald. We are also joined by Dr. Richard Thorn who has been appointed to conduct an independent review of certain matters at the university. In fairness to Dr. Thorn, we do not want to cut across his independent work or in any way influence it. He is here as a courtesy to this committee and we thank him for being present. The committee will be making some remarks for Dr. Thorn to take on board but he is not answerable to the committee in respect of the work he is about to carry out in the time ahead. We are also joined by Professor Patrick O'Shea, president of UCC, Mr. Diarmuid Collins, bursar and chief financial officer, Mr. Cormac McSweeney, finance officer and Mr. Michael Farrell, corporate secretary.

I remind members, witnesses and those in the Visitors Gallery that all mobile phones must be switched off. It is not enough to switch them to airplane mode because they still interfere with the communications and recording system. I wish to advise that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. The witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.

Members of the committee are reminded of the provisions of Standing Order 186 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits or objectives of such policies. They are also reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

We will begin with a brief opening statement from Professor O'Shea of UCC.

Professor Patrick O'Shea

Tá an-áthas orm bheith ar ais arís anseo chun leanúint ar aghaidh leis an bplé a thosnaigh muid cúpla seachtain nó cúpla mí ó shin. Ar dtús, le cead, ba mhaith liom ráiteas a dhéanamh faoin gcomhpháirtíocht idir an ollscoil i gCorcaigh agus Foras Bainistíochta na hÉireann.

The Irish Management Institute, IMI, is Ireland's only executive education provider to be globally ranked by the Financial Times for customised executive education. It is ranked in 54th position globally, 25th in Europe and 9th in the whole of the UK and Ireland. The shared ambition of UCC and the IMI is to advance education by raising the standard of management in Ireland and by enabling organisations and individuals to fulfil their potential through world-class executive education. Partnering with UCC, the institute's future growth will be supported by research-led insight and expertise from within the university as well as the IMI's corporate membership community which together will continue to serve as the bedrock that connects the IMI to the needs of Irish organisations.

Our joint ambition stretches beyond Ireland's shores. The IMI and the Cork University Business School will forge significant international alliances and relationships with global reach. This, combined with the institute's global ranking, offers a unique value proposition that can consistently deliver distinctive world-class executive education to Irish and international students. The acquisition of the IMI by UCC is a great investment for the university, the institute, our students and the people of Ireland. The relationship has evolved over eight years and in the period 2011 to 2016, it took the form of an alliance, which was launched by the then Taoiseach, Deputy Enda Kenny, in 2011. During that period, the governing body of the university considered the possibility of a formal acquisition of the institute on several occasions. However, the body decided not to proceed until it was satisfied that the conditions deemed necessary for long-term success were fulfilled. In January 2015, the governing body, based on extensive information and due diligence, approved the acquisition of IMI, subject to a set of conditions to be met in advance of the completion of the transaction. These conditions related to the absence of pension liabilities, the general financial position of the institute, settlement of any outstanding cases and approval by the Competition Authority of the transaction.

The acquisition was completed in November 2016 and is a complex and detailed arrangement which took several years to negotiate. Both organisations persisted over those years because they fully believed in the benefits for UCC, the IMI itself and for Ireland. We have outlined these benefits and other aspects in the papers that have been provided to the committee.

The value of the Irish Management Institute nationally and its significance to the business community has been recognised by the Government. At the launch of the alliance in 2011, the Taoiseach noted that the development was significant and welcome for its potential to greatly improve the capacity of Ireland's companies to compete internationally. Similarly, the Tánaiste, at the launch of the merger in January, emphasised the need for Ireland to have the capacity to develop the requisite calibre of business leaders to guarantee long-term economic success. The university shares these views and believes that this acquisition will be of real benefit to University College Cork, the Irish Management Institute and the State as a whole.

In summary, I would like to put the following on the record. No taxpayer or Exchequer funds of any kind were used by the university to acquire the Irish Management Institute. The acquisition is totally aligned with the university's strategic objectives and national priorities for lifelong learning. In my own career I have been associated with many universities, including the University of California, Duke University and the University of Maryland. All are institutions that operate to the highest standards of governance. In my short time at University College Cork, I can assure the committee that UCC also operates to those very high standards of governance and accountability and that this acquisition was fully compliant with those standards and with the Government's framework within which the university operates, and specifically with the powers of the university under the Universities Act 1997 and the powers vested in the governing body under that Act. The acquisition by University College Cork was fully disclosed to the Higher Education Authority in advance of the transaction close. The Higher Education Authority fully supported the transaction and recognised the benefits it would bring for students and business education in Ireland.

I wish to assure the members that University College Cork has not misled the committee with regard to the acquisition. Additional information was sought by the committee following our previous appearance in March. This was provided on 13 April and 9 May. We have also provided the committee today with supporting appendices and schedules. These will provide additional reassurance on the transaction.

I am accompanied today by the bursar and chief financial officer, Mr. Diarmuid Collins, the corporate secretary, Mr. Michael Farrell, and the finance officer, Mr. Cormac McSweeney. My colleagues and I are happy to address any questions that the committee may have on the IMI transaction.

Chairman

We are also joined by Dr. Des Fitzgerald, the new President of the University of Limerick. He is especially welcome here today at his first appearance at the Committee of Public Accounts in his new role in the University of Limerick. He is attending on his own here today and we appreciate his attendance. I invite him to make a brief opening statement.

Professor Desmond Fitzgerald

I thank the Chairman. I will not read out the document I sent in but I will briefly say that I am here today to acknowledge that we have a responsibility as a public body to ensure that we spend money properly and transparently. I acknowledge that I now take responsibility for many of the issues that arose within the university before I took up the post. I will now outline some of the things we have done to address some of these issues.

Before I start I would just like to say that the University of Limerick is an outstanding institution with great staff and students. One of my keen objectives as we go through this process is to make sure that the reputation and credibility of the institution is preserved. Since taking office I have taken a number of measures to address some of the issues. Among the things that I am very keen to ensure we do properly is our duty of care to those staff members who have been caught up in the issues in question, particularly the whistleblowers who have currently either been put on paid leave or have left the institution.

The other thing I am keen to address is the issue of severance payments, particularly with regard to the information that has been given to this committee, to the Comptroller and Auditor General and to the Department of Education and Skills. I have to say at this early point that we are continuing to collect and analyse the information. I would say, however, that I think the severance agreements made were unacceptably high.

I will outline some of the things we have been doing since I took up office. As the committee is aware, one measure was to initially call for an independent review of the University of Limerick. Richard Thorn has been appointed to that role and we have given him every assistance that we can. Within the institution we have appointed Professor Mary O'Sullivan to provide direct liaison with Dr. Thorn. We have also been undergoing a review of the structure of the senior management team and there is currently an ongoing restructuring of that team, looking carefully at the finance department and at human resources in particular. The audit and risk committee also initiated an internal review of some of the matters raised both by RTE and by the PAC, particularly looking at conflicts of interest, the issue of people going out of the university to take degrees elsewhere, and the matter of the severance payments.

To conclude, I want to be clear that I am determined to take whatever action is necessary once the review has been completed. I believe that this is on course for the end of September. As I mentioned earlier, I am particularly concerned with protecting the reputation of the institution. It has terrific support from its staff and students and from the community. They have worked hard in the past to ensure the establishment of a university for Limerick and for the mid-west region. It is very important for all of us that at the end of this process the university is put on a firm footing to further develop its academic programmes to provide education, training and research in the region.

Chairman

I thank the witness. The first speaker indicated is Deputy Cullinane, who has 20 minutes. We are then into ten-minute slots for the remaining speakers because we have two sessions to cover today. Some of the questions may be addressed to individual witnesses, some may be to all of the witnesses together. We just have to see how the session goes. Different members will have different priorities.

Deputy David Cullinane

Could the Chairman inform me when I am halfway through my allocated time? I want to split it equally between both institutions if I can. I would first like to ask Professors O'Shea and Fitzgerald if they saw the "RTE Investigates" programme that was aired after the last PAC hearing at which Professor O'Shea was present. Have they seen the programme or are they aware of its contents?

Professor Patrick O'Shea

I am aware of the contents but I have not seen it. I was at another event that evening.

Professor Desmond Fitzgerald

I saw the programme.

Deputy David Cullinane

Did Mr. Collins see the programme?

Mr. Diarmuid Collins

I did.

Deputy David Cullinane

In their view, were Mr. Collins and Professor O'Shea truthful in the answers that they gave at their last appearance before the Committee of Public Accounts?

Does Professor O'Shea believe he was truthful?

Professor Patrick O'Shea

I believe I was.

Deputy David Cullinane

Does Mr. Collins believe he was truthful and factual in the information he gave?

Mr. Diarmuid Collins

Yes.

Deputy David Cullinane

Does Professor Fitzgerald believe the representatives of his organisation who were here were truthful?

Professor Desmond Fitzgerald

I think they were incomplete in the answers that they gave, particularly in reference to the severance agreements.

Deputy David Cullinane

Who specifically gave incomplete information when he or she was a witness before this committee?

Professor Desmond Fitzgerald

Our finance director.

Deputy David Cullinane

The finance director.

Professor Desmond Fitzgerald

But I understand that the record was corrected afterwards.

Deputy David Cullinane

Notwithstanding the record being corrected, Professor Fitzgerald is now the Accounting Officer, so if his finance director came before the Committee of Public Accounts and gave incomplete information what sanction was in place? What has Professor Fitzgerald done since then? What contact has he had with that individual?

Professor Desmond Fitzgerald

I met with the individual the following day and initiated an internal audit with the audit committee. I will not rush to judgment on what has happened because given that there is concern about the information that has been provided to public bodies and given that we need to have complete clarity on what has been said and done within the institution I am determined to get the information - to get it independently - to review the information and then to take whatever appropriate steps are required.

Deputy David Cullinane

I thank Professor Fitzgerald. Could I just note as well, a Chathaoirligh, that it was you who said, on the same programme that there was a severe lack of corporate governance shown by these governing bodies of these organisations and when they did come before us - which was a number of institutes – they did not tell the full truth. They were your words, Chairman. A number of allegations have been made by the programme as well that we did not get full information. That is what we need to examine here today with Professor O'Shea, Mr. Collins and Professor Fitzgerald. Professor Fitzgerald has at least acknowledged that incomplete information was given by representatives of his organisation and I thank him for that.

I will start with Professor O'Shea. In his opening statement he said no taxpayer or Exchequer funds of any kind were used by the university to acquire the IMI. Was any taxpayer money used or any funds from his organisation used to pay for or discharge borrowings, working capital or liabilities?

Professor Patrick O'Shea

I will let my colleague answer that.

Deputy David Cullinane

I ask Professor O'Shea to answer it first.

Professor Patrick O'Shea

My understanding is "No". My colleague can give the Deputy details on that.

Mr. Diarmuid Collins

We supplied some supporting schedules and I hope they are available to the committee. Schedule 3, which is a transaction overview, sets out the transaction itself. It is included in the papers. It addresses in particular the points that the programme made and the points that we made at the last session here on 30 March. We purchased the IMI Sandyford campus, just over 13 acres. That was based on a professional valuation. The sum of €20 million was used. We advised the committee at the last meeting and subsequently in writing to follow up that it was funded via borrowings so again there was no public moneys involved. No Exchequer moneys were provided to UCC for us to acquire that asset.

The third bullet point is consistent with what we said previously, and there is supporting documentation in our papers under Schedule A confirming that. IMI, with that €20 million discharged two charges that were on that campus. The charges in effect were mortgages. The IMI had developed a residential aspect to its offering that had been supported and financed by AIB, so with an element of our €20 million proceeds with which we bought the campus the mortgage was released, discharged and paid back.

In 2012 – this is a key point – because when we looked to acquire the IMI previously the existence back then of a pension liability prevented us going ahead. We did not want to take on a pension liability of a private entity and we paused at that time. We continued with the alliance and revisited it when that was resolved. It was resolved in 2012. That is confirmed in the documentation attached in the accounts in the report we got from Mercer's pension expertise and in our due diligence with PwC. That charge was also paid with the €20 million from UCC.

Deputy David Cullinane

In terms of the €20 million that was funded via borrowings, who borrowed the €20 million?

Mr. Diarmuid Collins

UCC borrowed €20 million.

Deputy David Cullinane

UCC is a taxpayer-funded organisation.

Mr. Diarmuid Collins

Over the years our funding sources have diversified. At this stage the majority of our income comes from non-Exchequer sources.

Deputy David Cullinane

I am not asking that. I will put this to Professor O'Shea as he is the Accounting Officer in his organisation. Is he telling me that his organisation borrowed €20 million to purchase the 13 acres?

Professor Patrick O'Shea

That is correct.

Deputy David Cullinane

Who then would underwrite those borrowings?

Mr. Diarmuid Collins

In terms of the borrowing framework – the model of borrowing that we work with in the borrowing framework model allows the university to borrow for organisations or entities that are themselves self-sustaining.

Deputy David Cullinane

With respect, I understand that. We have very limited time. My question is that when an institute which is funded by the taxpayer borrows €20 million, who underwrites the borrowing?

Mr. Diarmuid Collins

The university.

Deputy David Cullinane

If there was a difficulty in repaying that it would be taxpayers who would have to fund it. Is that not correct?

Mr. Diarmuid Collins

Yes. We have acquired an asset.

Deputy David Cullinane

The taxpayer then underwrote borrowings for the purchase of IMI.

Mr. Diarmuid Collins

No, it was the university itself.

Deputy David Cullinane

The university is funded by taxpayers.

Mr. Diarmuid Collins

It is part funded by taxpayers at this stage. The bulk of our money-----

Deputy David Cullinane

In the main it is funded by taxpayers.

Mr. Diarmuid Collins

No, not in the main. In the main it is funded by non-taxpayers at this stage. That is the reality of the level of funding support we receive from the State today. It has dropped since 2008 to 2009 from approximately 70% to below 50% currently.

Deputy David Cullinane

Does the rest of money come from student contributions and so on?

Mr. Diarmuid Collins

The rest comes from students themselves, the research industry, international students, commercial income and so forth. The university underpins the borrowings. We leased the campus back. The asset was leased back to IMI, so now we in UCC have the asset and it is leased back to IMI. The lease payment, the income we get in UCC then goes to pay the borrowing that we have back to Ulster Bank. We bought the campus and leased it back and the lease payment from IMI into UCC, which is new income that we have never got before, goes to service those borrowings.

For us, if we compare where we are now and where we were before the acquisition, the university has an asset that is appreciating - 13 acres at a cost of €20 million. That is the reality. Other recent sales of assets adjacent to Sandyford show it is worth arguably more than that. So we have an asset that is appreciating. We have a business that provides executive communication that we did not have before, and we have a better ability to deliver on lifelong learning, which was one of the key objectives set out for the university in the Universities Act. Our ability to do that now, in particular in the business space, is far better enhanced.

Deputy David Cullinane

With respect to Mr. Collins, I do not think we need that level of information. I have enough on the matter at this point.

I will move on to questions to Dr. Love. Is it the case that the HEA instructed UCC to postpone the IMI takeover at some point?

Dr. Graham Love

There was, yes.

Deputy David Cullinane

Could Dr. Love explain why that instruction was given?

Dr. Graham Love

If I could summarise it very quickly, I will explain that in fact we had done the due diligence on this deal and approved it. If I could hold our hands up and say, we had not processed the paperwork sufficiently on time that weekend that was covered in the RTE documentary to effectively hand over and approve it. Our interim chief executive, Anne Looney, did so over the weekend with the then president of UCC, such that the paperwork was completed early that Monday morning. We were in a position to say the deal was good. We had not concluded the paperwork and we put our hands up on that front, but in fact we were satisfied the deal was okay.

Deputy David Cullinane

Was it just an administrative issue that arose rather than the actual liabilities?

Dr. Graham Love

That is correct.

Chairman

The ten minutes are up.

Deputy David Cullinane

I have one final question for Mr. Collins on the pension liabilities. Did he say UCC did not have any pension liabilities it would have to pay in respect of the IMI?

Mr. Diarmuid Collins

That is correct. Pension liabilities with the IMI were resolved in 2012 when the IMI entered into an arrangement with its pension trustees in 2012. The trustees took on future ongoing pension liabilities and in return the IMI gave them a charge.

Deputy David Cullinane

Are there any future pension liabilities for which UCC will incur a cost?

Mr. Diarmuid Collins

No. Future pension liabilities are now the responsibility of the IMI pension trustees.

Deputy David Cullinane

What about the €1.4 million pension for the former CEO, Barry Kenny? Who is liable for that? This was a brand new agreement which was built into the UCC deal as part of a High Court settlement. Is that correct?

Mr. Michael Farrell

It was a settlement between the individual concerned and the IMI.

Deputy David Cullinane

Was it a brand new agreement?

Mr. Michael Farrell

It is a brand new agreement in the sense that it was a High Court settlement in 2016 but it is a continuation of an agreement put in place in 2004.

Deputy David Cullinane

Who is liable for that?

Mr. Michael Farrell

The IMI.

Deputy David Cullinane

UCC is not liable.

Mr. Michael Farrell

UCC is not liable.

Deputy David Cullinane

A UCC statement, possibly issued by Mr. O'Shea, in response to the "RTE Investigates" programme said that the PAC did not request any advance briefing on IMI and that, furthermore, it was impossible in the course of the ten minutes allocated to give full detail of a complex transaction. Who wrote that?

Professor Patrick O'Shea

That was written by us.

Deputy David Cullinane

Saying it was difficult to give full detail suggests that full detail was not given.

Mr. Michael Farrell

There was pressure to finalise the process on the weekend mentioned by the CEO of the HEA. A total of 40 documents were concluded on the Monday morning of 21 November when this was completed. That is the complexity to which we were referring and there was no advance notice. The control of the company was signed over from the members of the IMI to UCC, there was an asset purchase and a lot of legal documentation was negotiated over a two-year period. It was difficult to get across the complexity of that in the space of ten minutes. It does not mean anything inaccurate was said.

Mr. Cormac McSweeney

We are focusing on the 2013-14 accounts but my transaction only concluded in 2016. We did not anticipate it coming up on the day.

Deputy David Cullinane

Did the Comptroller and Auditor General see the "RTE Investigates" programme?

Mr. Seamus McCarthy

I did.

Deputy David Cullinane

Was he concerned about severance payments? They would have been disclosed to his office in the past but those of people being rehired to do consultancy work would not necessarily be disclosed. Was he aware of that?

Mr. Seamus McCarthy

No, I was not aware of that.

Deputy David Cullinane

What did the organisation make him aware of?

Mr. Seamus McCarthy

We produced a special report on severance payments, which was completed in December 2015 and was examined by the committee last year. One of the chapters deals with discretionary severance payments and we referred to two which subsequently came into the public domain, namely, the University of Limerick severance cases. We represented our understanding gained from the university on the nature of the severance payments. We understood the information we had was complete.

Deputy David Cullinane

Was it complete?

Mr. Seamus McCarthy

We are pursuing further inquiries with the University of Limerick and I do not want to prejudge.

Deputy David Cullinane

Mr. McCarthy was certainly not given information-----

Mr. Seamus McCarthy

I certainly have concerns that it may not have been complete.

Deputy David Cullinane

Can Professor Fitzgerald respond to that?

Professor Desmond Fitzgerald

I am in the same position, in that I am collecting the information through the internal audit which is being performed by Deloitte. They are an external firm but our internal auditors. I am unhappy with the scale of the severances and, in particular, the fact that the consultancy arrangements were part of them.

Deputy David Cullinane

Given the responses of Mr. McCarthy and Professor Fitzgerald, we will have to come back to the issue. I accept that examinations are being carried out in the institute and in the Office of the Comptroller and Auditor General but these issues were raised and we wanted to deal with them today. If we are not in a position to do so, we will have to come back to them.

Mr. Fitzgerald will understand that there is a Government pay policy, codes of conduct and procurement rules which organisations have to live up to. Is he satisfied that those arrangements were followed by his organisation?

Professor Desmond Fitzgerald

I am not, but I am not in a position just yet to go into any detail on that. We are still collecting the information, both through the internal auditor and the external review. I do not want to rush to judgment but I would like to have the information so that I can decide on what happened and base any answer on that.

Deputy David Cullinane

My final question relates to the management of conflicts of interest, one of the issues we have raised generically for all the institutes. A number of examples have been brought to our attention, one of which relates to Mr. John Field. Who is Mr. John Field?

Professor Desmond Fitzgerald

He is the head of finance.

Deputy David Cullinane

This is the same individual with whom Professor Fitzgerald has to have a conversation after the "RTE Investigates" programme. Is he one of the people who would have signed off on a statement of compliance for procurement and other functions on behalf of the governing authority?

Professor Desmond Fitzgerald

He set up the procurement process in the institution and my understanding is that these procurements would not have come to the attention of the governing authority.

Deputy David Cullinane

Is Professor Fitzgerald aware of a company called Maverick Communications International Ltd?

Professor Desmond Fitzgerald

I am.

Deputy David Cullinane

Is he aware that Mr. Field was a shareholder?

Professor Desmond Fitzgerald

I am aware of that.

Deputy David Cullinane

Is he aware that he failed to disclose that?

Professor Desmond Fitzgerald

I am aware of that.

Deputy David Cullinane

In light of that, and the fact that the company competed for tenders and sold more than €200,000 of business to the University of Limerick, what action has Professor Fitzgerald taken?

Professor Desmond Fitzgerald

I am looking at the issue of conflict of interest through the internal auditor.

Deputy David Cullinane

Is this also part of an examination?

Professor Desmond Fitzgerald

It is.

Deputy David Cullinane

Who is Mr. Tommy Foy?

Professor Desmond Fitzgerald

He is head of human resources.

Deputy David Cullinane

He is also a director.

Professor Desmond Fitzgerald

He is a director.

Deputy David Cullinane

He contacted a number of shops to get quotes for engraved Cross pens and watches for people who retired, at a cost of €69,800. Is that correct?

Professor Desmond Fitzgerald

Yes.

Deputy David Cullinane

There were a further €42,000 of customised silver medallions for retirees.

Professor Desmond Fitzgerald

That is correct.

Deputy David Cullinane

There was €110,000 worth of business to one shop. Is that correct?

Professor Desmond Fitzgerald

My understanding from the auditors is that it was €91,000.

Deputy David Cullinane

Who owns the shop in question?

Professor Desmond Fitzgerald

It is owned by one of the members of the governing authority, Mr. Tadhg Kearney.

Deputy David Cullinane

What is his role?

Professor Desmond Fitzgerald

He is a member of the governing authority.

Deputy David Cullinane

Did he declare any conflict of interest?

Professor Desmond Fitzgerald

He did not.

Deputy David Cullinane

Would you expect him to do so?

Professor Desmond Fitzgerald

I have looked at the policy relating to conflicts of interest in the governing authority and the approach has been that it is up to the individual to declare conflicts of interest. In my mind we need to have a good look at governance within the institution, such as the area of conflicts of interest. It is not about whether an individual thinks there is a conflict of interest but what a third party would think was one.

Deputy David Cullinane

This is a problem we will have to come back to. If Accounting Officers come in here and say it is up to the individuals involved, that does not cut it.

Professor Desmond Fitzgerald

That is not what I said. I said there is a review of governance, which has been initiated by the governing authority. This is one of the issues we will look at very carefully.

Deputy David Cullinane

I am asking Professor Fitzgerald now because he was aware of it. He is before the Committee of Public Accounts and is an Accounting Officer. Whatever his view, or that of the individual concerned, I believe there was a conflict of interest that should have been declared. Now that he has been made aware of it, what course of action has Professor Fitzgerald taken and what action will he take to examine whether conflicts of interest were properly dealt with in this instance?

Professor Desmond Fitzgerald

The governing authority has initiated a review of governance in the institution and that will include conflicts of interest.

Deputy David Cullinane

That is generic. I am talking specifically-----

Professor Desmond Fitzgerald

That would include a conflict of interest.

Deputy David Cullinane

-----in relation to this potential breach of conflict of interest, if there was a breach. What is the witness specifically going to do about that issue? I am not asking about a generic review of conflicts of interest. We are aware now of a specific issue.

Professor Desmond Fitzgerald

I am sorry. I thought I had answered the question earlier on-----

Deputy David Cullinane

The witness might answer it again for me.

Professor Desmond Fitzgerald

As part of the internal audit going on at the moment, there are three elements to it. As I mentioned earlier on, one of them is conflict of interest, particularly incidences that came up in the RTE programme.

Deputy David Cullinane

Would this be one of them?

Professor Desmond Fitzgerald

This is one of them.

Deputy David Cullinane

It is one of them. Okay. I thank the witness.

Chairman

The next speaker is Deputy Bobby Aylward.

Deputy Bobby Aylward

I welcome the witnesses back for the second time. The RTE programme has put a different light on the evidence that was given the last time when the questions were asked.

I am going to start with UCC. I will ask some of the questions that Deputy Cullinane asked already, but I have them made out in order so I am not going to change them. I am going to stick to them. The PAC was told that the IMI was not in deficit. The financial statement for the IMI the year ending 31 December 2015 stated it was in a deficit to the tune of more than €900,000. Was UCC aware of the deadline and what way did this influence the sale price?

Mr. Diarmuid Collins

When we are assessing an acquisition, we are really looking at the balance sheet position, which is a position that the IMI has incurred since inception in 1953. At that stage, we assess how the balance impacts UCC and the future beyond that. In the 2015 accounts, the IMI had a deficit. In 2014, there was a surplus. In 2013, there was a surplus. Accounts for 2016 are not completed yet. The key point is that the price we paid for the campus asset, which is 13 acres of an asset, was based on our independent valuation that was prepared for us by Lisney. It valued the campus-----

Deputy Bobby Aylward

Is this charge to the campus now going forward?

Mr. Diarmuid Collins

We bought the campus. UCC bought the 13 acres. That cost €20 million. The price we paid was linked to the value of the campus at that point in time. In assets, the buildings were valued and we paid €20 million for those.

Deputy Bobby Aylward

How was this deal advantageous to UCC? I should have asked the two questions together. How was it advantageous in terms of property value in circumstances in which it was contractually obliged to use the full value of the campus plus the additional costs to release the charges in favour of the bank and the pension trustees? Those two questions should have been asked together in the beginning.

Mr. Diarmuid Collins

In appendix 1 of our document, we have set out a range of benefits for the transaction as we would see it for Ireland and for UCC. The key benefits for us in UCC are that we are developing and investing in a business school. UCC has not had an arm of executive education to date. It will have after the acquisition of IMI. We will now have an element of our offering that is executive. We will have undergraduate, postgraduate and executive education. That was a gap in our offering in business education. It allows us to meet one of the objectives of the Universities Act. It positions us better to take in international students. The Minister launched a document back at the beginning of the year targeting an increase of 25% in international students over the next three years. Having the IMI helps us better meet those targets. As I said, it will give us the offering of executive education. One of the key things for us is that the IMI, with its membership organisation, the level of members, council members-----

Deputy Bobby Aylward

I cannot let the witness go on too long. I have a lot of questions to ask. Long-winded answers-----

Mr. Diarmuid Collins

It is important. It allows us-----

Deputy Bobby Aylward

I have only ten minutes. I will be-----

Mr. Diarmuid Collins

Yes. Apologies. I have just one final point on that. It allows us to get insights into better and more curricula so that our students are better equipped in the future to meet the global needs going forward.

Deputy Bobby Aylward

The PAC was told the last day that UCC paid exactly €20 million for the IMI. The IMI needed €21.8 million. Therefore, there was a difference of €1.8 million. I have a breakdown here. There is €8.1 million to AIB, €13.3 million to set its contractual commitment to defined benefit pensions, and €400,000 to pay the pension trustees. What specific campus upgrading works required €1.8 million in order to begin with work in autumn 2016? Has work started, been tendered or agreed? If so, when did this happen? I will ask the three questions again. How was the €1.8 million figure for the campus upgrade arrived at and when was it agreed? How did the IMI have access to €1.8 million when UCC repeatedly told the PAC that it required money for working capital?

Mr. Diarmuid Collins

In the papers we have given the committee, there are appendices that set out the transaction pension issues and so forth. There are also some supporting documents. Included in those is document A5, which is a schedule of the planned capital investment refurbishment programme in the IMI. The €1.8 million will be spent on exterior works on the car park, lighting, access - I am not going to go through all of it - classroom upgrades, interior upgrades, WiFi upgrades that are needed, online learning platforms, ceiling tiles, bathrooms and roofing. The IMI has a planned programme of investment by which to spend that post-acquisition.

To go back to the point of how the IMI settled and discharged the two charges over the campus, as the Deputy mentioned, UCC paid €20 million. Therefore, the IMI had that €20 million. If we look at the IMI's 2015 accounts, the IMI itself had its own cash. As an entity, by the time the transaction was completed, the IMI had about €1.7 million to €1.8 million of its own cash itself. Between the IMI's own cash resources and the €20 million it got from UCC, it was able to discharge the two liabilities or charges - the AIB one the Deputy mentioned and the charge that was given to the pension trustees, as well as the €400,000 that was for professional fees. That did include an element of contingency and not all of it was needed in the end. The money we gave and the IMI's own cash resources were able to pay those moneys. The investment is set out in document A5. It was also the intention and view of UCC, once we required the asset - remember that it is our asset as we bought it and are leasing it back - that it was probably a bit tired and needed investment. The IMI would not have had the resources to invest in it over the years. It was always our intention to refresh that asset. The planned investment is €2.5 million over two years, €1.8 million in year one-----

Deputy Bobby Aylward

I am coming to this question now.

Mr. Diarmuid Collins

Okay. Then the balance would be in year two-----

Mr. Cormac McSweeney

The IMI is now part of UCC so public procurement rules apply as well. We are just starting that process in terms of engagement.

Deputy Bobby Aylward

Will there be a cost to the taxpayer? Like the witness said, the money was borrowed to pay off the debt. UCC told the HEA that it was self-financing. This meant that it did not have to go through the approval process set out in the borrowing framework. How much of these lease payments will the IMI pay to UCC each year? On what basis were these lease payments calculated? Are they on commercial terms? How will the IMI afford lease payments of at least €1.7 million a year, and up to €2.7 million depending on the allowances they are egging on for, given that its largest ever operating profit was less than €1 million? It had a combined operating loss over the last decade of €10 million. That is interesting. It would not service its existing loan or pay its settlements to the pension fund. What contingency has UCC in place to repay the loan if the IMI is not able to generate the consistent profit necessary? Has the UCC agreed to subsidise or pay the IMI for any services or contribution towards this cost as part of its ongoing activities? They are important questions. I ask that they be answered.

Mr. Diarmuid Collins

Okay. I will try to address those now. As part of our assessment of the IMI, we would have undertaken a full due diligence assessment of that. We looked at the IMI and lifted the bonnet on its performance, as such. I am not saying that those issues did not concern us, but we were addressing them to ensure they would not come back to bite us post-acquisition. So our-----

Deputy Bobby Aylward

What guarantee does UCC have of that?

Mr. Diarmuid Collins

We have an independent assessment looking at the IMI. At this stage, one of the key risk mitigation aspects of a governing board decision was to acquire the asset of IMI. I am not saying that we were taking a punt. We totally believe in the IMI and that it will be a success. It is on an upward trend. When it resolved its pension liability back in 2012, for the IMI, that was really the path to sustainability. It no longer had that liability on its balance sheet. It was on an upward trajectory since then, back growing revenues and back in profits. The market for executive education is predicted to grow by €20 million to €25 million and the IMI has the greatest market share. The key assurance-----

Deputy Bobby Aylward

For the last ten years, the figures did not lie. The figures are there for the last ten years for the IMI. There was the €10 million. Those figures do not lie.

Mr. Diarmuid Collins

It was for the governing body. Our assessment was to assure the governing body and UCC that the investment would pay off and, were it not to pay off, that we have some fallback. With the purchase of the 13 acre campus, UCC now owns an asset that is appreciating. We know from further down the road that sites such as one in Donnybrook recently sold for some €107 million for an asset half the size. Our site was €20 million and is an asset that is appreciating. Were there to be some hiccup along the road in the future a part sale of a piece of that campus could be sold or further leased on to recover any investment or downside that we could make. This asset gives us, in our view, a real mitigation of any risk going forward.

Deputy Bobby Aylward

Could I ask how there is no risk for the taxpayer in general when we are looking at a pension debt of €21.8 million, plus transfers, from the balance sheet of a private limited company to the balance sheet of a university?

Mr Diarmuid Collins

The loan to AIB was paid off. IMI's loan is gone from its balance sheet. The loan or charge of the pensions' trustees was also paid off. When we consolidate IMI, it is now debt-free. It does not have a loan. It has its operating position without a loan. Instead, UCC has borrowings. We borrowed to buy that campus.

Deputy Bobby Aylward

Has UCC taken over that debt?

Mr. Diarmuid Collins

We have our own loan but it is serviced. The repayment we must make on that loan is serviced by income we get from IMI into us. This is new income from leasing the campus back to it. We have a payment going out to the bank that we make, but in turn we get income from IMI to make that payment via the lease.

Deputy Bobby Aylward

Does it cover all costs?

Mr. Diarmuid Collins

It covers the lease and accreditation charges. We accredit IMI's programmes and we charge them for that. It covers the lease payment back to the bank. This is on commercial terms.

Chairman

Time please Deputy, we agreed to ten-minute slots.

Deputy Bobby Aylward

Can I ask the representatives from the Higher Education Authority, HEA, if they are happy with this arrangement?

Dr. Graham Love

Yes.

Deputy Bobby Aylward

Is the HEA happy that everything is above board?

Dr. Graham Love

We did due diligence of it and approved it with regard to section 8 of the Universities Act etc. that weekend in November.

Deputy Bobby Aylward

Will the Chairman let me know how much time I have left?

Chairman

One minute.

Deputy Bobby Aylward

I want to ask a question of the representatives from University of Limerick. At our last committee meeting I asked a question and I was not satisfied with the answer I got. Two professors were sent on a sabbatical - I think it was to Australia, I do not have the details in front of me - and it cost a lot of money. I asked a question about this. I was told that they went to do a degree course or something. It was extravagant money. Two people were released from their jobs in the university and sent to Australia, which was paid for by the University of Limerick. I thought this was the strangest arrangement I ever saw and with the costs involved, I thought it was jobs for the boys or money for the boys. Is it a normal arrangement in universities to send off two people, to pay for their costs, to cover all the costs and give them funding to get further education, in Australia of all places? There was not much further one could have sent them. Is that normal practice and is this still ongoing practice at the University of Limerick? Incidentally, the RTE programme did not take that too lightly when they showed that.

Professor Desmond Fitzgerald

There are two different issues there. The first issue is that on RTE they spoke about two people who were sent on externally delivered, continuing education programmes.

Deputy Bobby Aylward

Nice words.

Professor Desmond Fitzgerald

The second issue, which was brought up by the Deputy at the meeting, was on academic staff who take sabbaticals. This is quite common in the system throughout the world, not just within Ireland. People periodically go on sabbatical. It means they leave their posts to go and work in another institution or research in education. It would be expected that they would bring back new skills to their universities.

Deputy Bobby Aylward

I have no problem with the sabbatical. I am talking about the payment to send the two people abroad. I am sorry that I do not have the figures. I had them in front of me at the last meeting but not today. I was more than surprised when I saw the costs of this. Would it be normal practice and would it be good governance by the university to send people abroad in this way? Experience and further education would be gained and they would bring it back but is this normal practice? Should those people not go on their own if they want to further their education? Should they not go under their own power and not have the university and the taxpayers of the State subsidising it? I find it strange.

Chairman

Time please Deputy.

Professor Desmond Fitzgerald

Normally, the cost would be defrayed by the university through one mechanism or another.

Deputy Bobby Aylward

Is the provision available to every professor and teacher in the university to take a sabbatical and that the university will cover their costs for 12 months, for whatever course they want to go on and their costs be covered by the university? Is it open to everyone in the university?

Professor Desmond Fitzgerald

It is open to all academic staff and it is normal practice, not just in the University of Limerick, and not just in Ireland but throughout the world.

Deputy Bobby Aylward

Does Professor Fitzgerald believe this to be good governance?

Professor Desmond Fitzgerald

I think it is important that the academic staff would renew their expertise from time to time. The reason the sabbatical system is in place is to make sure they do re-skill from time to time.

Deputy Bobby Aylward

Does the university have to get personnel in to replace these people while they are gone?

Professor Desmond Fitzgerald

I am sorry?

Deputy Bobby Aylward

Does the university have to get personnel in to replace these people while they are gone on the 12-month sabbatical?

Professor Desmond Fitzgerald

No. Normally it is organised within the department between the other staff. In some cases some staff will be brought in to cover the sabbatical. I do not have the details of the dates that the Deputy-----

Deputy Bobby Aylward

At more cost to the university?

Professor Desmond Fitzgerald

It is a cost to the university but it is of value to the university to have people going on sabbatical and bringing back their skills. I would defend that as a really important aspect of educational institutes.

Deputy Bobby Aylward

Is the HEA happy that this is good practice?

Chairman

The witness will please address the questioner through the Chairman.

Dr. Graham Love

Yes. It is international practice. In order for universities to keep their staff skills upgraded, this practice of sabbaticals is used often and we support it.

Deputy Bobby Aylward

The full cost?

Dr. Graham Love

As the president has said, in some cases the costs are shared among existing staff and sometimes additional staff are brought in to backfill the positions. For students to get the best teaching and the best research it is essential that the staff would take sabbaticals and, for example, when they go to Australia they would perhaps acquire a new technique in a given scientific discipline, form new networks or learn new-----

Deputy Bobby Aylward

I am not questioning that, I am querying the payment for it and the costs associated with it.

Chairman

There is a cost, but there is a value as well.

Deputy Mary Lou McDonald

Go raibh maith agat. Cuirim fáilte roimh na finnéithe uilig. At the outset I believe the use of sabbaticals is essential. I thought I would say the good stuff before I get stuck in to the more difficult pieces.

I want to talk with Professor Fitzgerald and Dr. Thorn. I thank them for their attendance and I also welcome Professor O'Shea and the other representatives. I am not going to get through everything in ten minutes so I am assuming I will have an opportunity to come in again.

I congratulate Professor Fitzgerald and wish him luck in his role. I wish him well. I want to clear up one issue on Mr. Tadhg Kearney. He has a jeweller's shop in Limerick city, which is fairly well known. Is Mr. Kearney still on the governing authority?

Professor Desmond Fitzgerald

He is.

Deputy Mary Lou McDonald

Mr. Tommy Foy organised the purchase of Cross pens, Bulova watches - I presume they are fancy watches, I have no idea but it sounds impressive - and medallions. Not meat, rather commemorative medallions. There has been a debate here around conflicts of interest, the stating of conflicts of interests and the policy thereon. Is Professor Fitzgerald asking the committee to believe that Tommy Foy and others on the governing authority did not know that Mr. Kearney operated a jeweller's shop in the middle of Limerick city?

Professor Desmond Fitzgerald

No, they did know he had a jeweller's in Limerick city.

Deputy Mary Lou McDonald

They did not know?

Professor Desmond Fitzgerald

They did know but it is my understanding that the members of the governing authority were not involved in the decision.

Deputy Mary Lou McDonald

Okay. I want to make this point, if I might be so bold; the university has taken a battering-----

Professor Desmond Fitzgerald

It has.

Deputy Mary Lou McDonald

-----and its reputation is critically compromised.

The institute stands accused of bullying, of marginalisation, of victimisation, of malpractice and of misleading this committee. Professor Fitzgerald stated that his colleague, Mr. Field, gave incomplete evidence. That is not what he did. Mr. Field deliberately misled the committee. I am in a position to say this because, as it happens, I was the person who put the question in respect of severance to him. I do not feel that he was incomplete in the response he gave to me. I believe that he misled me and, more importantly, misled the committee.

Not alone that, we also know that Mr. Foy, to whom I have already referred, misled the Department. We know, courtesy of RTE Investigates, that HR director Tommy Foy, in respect of excessive severance payments, spoke of two individuals who I have no option but to name. They have been named publicly - Mr. Fox and Mr. Coughlan. He spun a yarn to the Department saying that these additional moneys were good value, based on legal advice and to avoid a potential dismissal. He told them a story about conflicts and relationships breaking down, which both of these individuals categorically refute. It is pretty serious, is it not?

Professor Desmond Fitzgerald

Should I answer at this point?

Deputy Mary Lou McDonald

Please do.

Professor Desmond Fitzgerald

I am not minimising all the things that have happened and the seriousness of it. As I said earlier, the Deputy is correct. I am very concerned about the damage it is doing to the reputation of the institution.

I am determined to get all of the information. I am not rushing to judgment at present. I did say that the information that has been provided was, "at best", is what I said, incomplete. I am particularly concerned about what information was given to the HSE, the Comptroller and Auditor General and the Committee of Public Accounts. I certainly would not-----

Deputy Mary Lou McDonald

Okay. I appreciate all of that concern but time is limited.

Professor Desmond Fitzgerald

I would not endorse that these organisations would be misled.

Deputy Mary Lou McDonald

Has Mr. Foy been disciplined for any of these matters?

Professor Desmond Fitzgerald

No one has been disciplined. As I said, what we are doing at the moment-----

Deputy Mary Lou McDonald

Why not?

Professor Desmond Fitzgerald

Because we are collecting the information through the internal audit and the external review. I can say, right now, I will have no hesitation in taking action once we have had a proper analysis of the information and once I have had the opportunity to make a judgment as to what actually happened.

Deputy Mary Lou McDonald

"University of Limerick whistleblowers reach two years under suspension", is the headline of an article dated 12 June 2017, written by Ms Anne Sheridan and appearing in the Limerick Leader. Just to let the Chairman know, he is quoted in this matter. It strikes me that there is a world of a difference in the experience of the two whistleblowers, the two women who came forward and whose evidence is actually very upsetting. It was seen on RTE. I am sure Professor Fitzgerald saw it. I have no reason to believe that he was anything but moved by what they had to say. They are suspended. Their lives have been turned topsy-turvy, their reputations traduced, their health impinged upon, because of this experience, for coming forward in good faith, and yet the HR director, Tommy Foy, who misled the Department, is still in situ.

Professor Desmond Fitzgerald

Should I respond? I do not endorse what happened to the two individuals and I would certainly not have treated them or any other member of staff in that way.

Deputy Mary Lou McDonald

Okay, we will take that as read. What about Mr. Foy?

Professor Desmond Fitzgerald

The same applies to Mr. Foy. Due process will be followed. The information will be collected.

Deputy Mary Lou McDonald

Has the fact that he misled the Department been put to Mr. Foy? Is there an official procedure under way? This, obviously, is a disciplinary matter, is it not?

Professor Desmond Fitzgerald

Depending on what information we collect through the internal audit, then at that point the issue will be addressed with Mr. Foy.

Deputy Mary Lou McDonald

The RTE programme was aired. This and other matters have been aired in the public domain. Professor Fitzgerald is in charge. He has a duty of care for the staff, the students and the reputation and standing of the institutions. Is Professor Fitzgerald seriously telling me that Mr. Foy toddled into work the following day or the following week and nobody pulled him and asked, "Tommy, what is going on?"

Professor Desmond Fitzgerald

I have sat down-----

Deputy Mary Lou McDonald

Is Professor Fitzgerald trying to tell me that it has taken this length of time to find the paperwork concerned with this specific incident of where the Department was misled?

Professor Desmond Fitzgerald

I have talked to Mr. Foy. He feels that he has not done anything wrong and so what I am doing at the moment is collecting the information. It is an extensive history. It is going back some years. As I have said earlier, I have just started in the institution. My goal at the moment is to collect the information and make sure that we have-----

Deputy Mary Lou McDonald

Maybe the Department of Education and Skills can help Professor Fitzgerald. Can the Department briefly confirm the report that was carried on RTE that the Department was misled in respect of these individuals?

Mr. Tony Gaynor

We have communicated with UL on three occasions since the Committee of Public Accounts meeting of 30 March because the information that emerged at that meeting was at variance with information that had been supplied to the Department by UL.

Chairman

Would Mr. Gaynor say that slowly so that everybody picks it up?

Mr. Tony Gaynor

The Department contacted UL after the Committee of Public Accounts meeting on 30 March because information that was supplied at that meeting by UL conflicted with information that was previously supplied to the Department.

Chairman

By UL?

Mr. Tony Gaynor

Yes.

Deputy Mary Lou McDonald

Can we have copies of that correspondence?

Mr. Tony Gaynor

I am sure we can make that available.

Deputy Mary Lou McDonald

That would be helpful. I do not know whether is it possible to do it in the course of this morning.

I have made the point. I am most unhappy with that. It is not that I want Mr. Foy's rights to be trampled upon. I accept he is as entitled to due process as anybody else but I am shocked, and the contrast could not be more stark. These women are two years into their suspension.

Chairman

Time.

Deputy Mary Lou McDonald

The other matter of-----

Professor Desmond Fitzgerald

What has happened to the two is terrible. They did not receive a duty of care. I would not use that as a way of-----

Deputy Mary Lou McDonald

Can I, just for the record, make it clear that I am not proposing that we use the treatment of those whistleblowers as any kind of benchmark to be visited on anyone else? That is entirely not my point. Professor Fitzgerald knows the point I am making. When staff, particularly in very senior positions, are found - it is not a question of a mistake or messing up - to have deliberately misled anybody, but particularly a Department, I would have thought there are consequences for them, that there are procedures to deal with that and one is not left weeks or months on an audit where it gets consumed into some kind of paper trail. I have made that point.

Not alone that, the Comptroller and Auditor General was misled, or is that too strong a word, Mr. McCarthy?

Mr. Seamus McCarthy

We did not have complete information. I do not want to arrive at any conclusion before I complete a process.

Deputy Mary Lou McDonald

Okay. I understand, in Mr. McCarthy's position, it would be so. For the Comptroller and Auditor General to state that the office did not have complete information is, in and of itself, a very significant statement. Is Mr. McCarthy in a position to tell us who, either by name or position, left him with the incomplete information?

Mr. Seamus McCarthy

I would prefer not to say at the moment. There were a number of communications. I want to check all of it and I do not want to particularise one individual.

Deputy Mary Lou McDonald

Fair enough. Let me make this point. Suffice to say the Comptroller and Auditor General was not communicating with somebody who had just come in on a lowly lecturing teaching post.

Mr. Seamus McCarthy

No, no. Absolutely not. This was at a senior level.

Deputy Mary Lou McDonald

The Comptroller and Auditor General is in communication with the trusted senior levels of management in the college-----

Mr. Seamus McCarthy

The senior level, absolutely.

Deputy Mary Lou McDonald

-----who left him with incomplete information.

Mr. Seamus McCarthy

That is correct.

Chairman

We have to move on. We are on time.

Deputy Mary Lou McDonald

How this is all shaping up is that the committee was misled, deceived or whatever, as was the Department. The Comptroller and Auditor General was left with incomplete information. That is quite something. That is truly something. I will come back in later. I have more questions for Professor Fitzgerald.

Chairman

I will call Deputy Connolly. I am sure Dr. Thorn is taking full note of what is being said here. He will look at the transcript. As Chairman of the committee, it is an extraordinarily disturbing situation, which the Committee of Public Accounts will have to deal with in its own way, that information provided by a third level institution, the University of Limerick, is contradicted by information the same institution provided to the Department of Education and Skills. The Comptroller and Auditor General has also stated that he has not received complete information on these issues either. It is a wholly unsatisfactory response from the University of Limerick. Professor Fitzgerald is inheriting quite a situation. We hope to assist him in any way we can in our strong recommendations when we come to publish our report in the coming weeks.

Deputy Catherine Connolly

I thank the Chairman. He might tell me when I have five minutes left. I am indicating that I would like to come back in. I have a number of questions, so I would like to put my name down to return to the discussion. First, cuirim céad míle fáilte roimh na finnéithe go léir. Deirim i gcónaí gur iontach an áis a bheith anseo agus ceisteanna a chur. Tá díomá orm maidir leis na freagraí, go háirithe maidir leis an chruinniú deireanach. I welcome all the witnesses. I will not waste any more time on niceties, but I will certainly be polite. I welcome Professor Fitzgerald and his detailed statement. It is the first time we have had someone before the committee who has given a detailed statement of what he or she has found and what he or she is going to do. Perhaps it is because he is new. If he does what he has said, it will perhaps be a turning point for the third level institutions. I will wait and see, but I certainly welcome the seven pages and what he has identified. With regard to the University of Limerick, UL, although feelings do not really have a place at this committee, on a human level, what was Professor Fitzgerald's feeling when he watched the RTE programme?

Professor Desmond Fitzgerald

What was my reaction to it?

Deputy Catherine Connolly

Yes.

Professor Desmond Fitzgerald

As I have said before-----

Deputy Catherine Connolly

Was he appalled?

Professor Desmond Fitzgerald

The accusations and allegations were appalling. Yes.

Deputy Catherine Connolly

Was he shocked?

Professor Desmond Fitzgerald

I was shocked and surprised.

Deputy Catherine Connolly

Did he have any idea that it was so bad before he took up his position?

Professor Desmond Fitzgerald

No, I did not. I should say that even though all this has come out since I took up the offer, I have great enthusiasm for the institution. That has not diminished at all.

Deputy Catherine Connolly

I understand that. Professor Fitzgerald has spoken about preserving reputation. I believe that reputation is earned, just like respect is earned. I welcome without hesitation what Professor Fitzgerald has said, but preserving the reputation of the university is immaterial to me at the moment given what has been highlighted. I have had the privilege of going to university. I regard it as a privilege. It is very important for Limerick and the area, but reputation is earned and it is earned by a university that is open and accountable with money which primarily comes from the taxpayer. I see Professor O'Shea nodding. I am worried and very concerned about the general comment that this is not public money. We have been through this with An Garda Síochána. The universities get substantial public moneys. They are co-mingled with other moneys which, it seems, are separate from the student foundations and trusts, which are not open and accountable. We will be coming back to trusts and foundations that are not consolidated with accounts. Generally speaking, the presidents, who all happen to be male, feel that these should not be subjected to public scrutiny at this committee and that the charities are the appropriate thing. I will come back to that. What strikes me, and it has already been said by one or two of my colleagues, is the matter of whistleblowers, what they have gone through and what has been said about them. One of them, who featured on the television programme, said that she just cried and cried, knowing it was a whitewash. The contrast is stark, is it not?

Professor Desmond Fitzgerald

As I said, I do not think the way they have been treated and left on suspension for the past few years is acceptable.

Deputy Catherine Connolly

We are left struggling to ask questions. The wonderful, and I say this publicly, Comptroller and Auditor General and all his staff are also struggling. RTE is also trying to help uncover these matters. Would Professor Fitzgerald agree this should not have to happen and that we would not need this tortuous process and "RTE Investigates" to highlight problems if an institution were functioning properly?

Professor Desmond Fitzgerald

I do not think that is the way things should be dealt with.

Deputy Catherine Connolly

What is the governing body and the governing authority of UL doing?

Professor Desmond Fitzgerald

The governing authority was unaware of much of this, which raises a question of its own. It has been quite shocked by what it has heard. It has instigated a number of actions, such as the internal review of the institution. It has also had the internal auditors look at some of the specific issues which have been raised. I do not believe for a moment that the governing authority is, as it were, sitting on its hands about this. It is being very proactive in trying to understand what happened. We are very early in the review process. One of the things we are looking at, and at which I know Dr. Thorn is looking, is what the governing authority knew and what decisions it made, dating back to 2006.

Deputy Catherine Connolly

That was what I was going to come back to in this regard. I certainly would not agree that the governing authority is not sitting on its hands. Two of the members identified in the programme are on the governing body. Is that not correct? Two members, Mr. Kearney and Mr. Foy, are on it.

Professor Desmond Fitzgerald

Three people were identified in the programme. Mr. Foy and Mr. Rockett have stepped aside from the governing authority while this process is ongoing.

Deputy Catherine Connolly

I am glad to hear they have stepped aside, but my question was whether they are on the governing body, or were until they stepped aside. Was it two or three of them?

Professor Desmond Fitzgerald

They are on the governing authority, that is correct.

Deputy Catherine Connolly

It was just two.

Professor Desmond Fitzgerald

It was those two. Mr. Kearney was also mentioned in the RTE programme and he is on the governing authority.

Deputy Catherine Connolly

How many people who are on the governing authority were mentioned in the programme?

Professor Desmond Fitzgerald

In the larger programme and other things that have arisen, there were four people mentioned who are on the governing authority.

Deputy Catherine Connolly

Four people on the authority were mentioned in the programme.

Professor Desmond Fitzgerald

That is correct.

Deputy Catherine Connolly

Their names were mentioned publicly.

Professor Desmond Fitzgerald

They were mentioned publicly.

Deputy Catherine Connolly

Will Professor Fitzgerald mention them please? I do not normally mention names but I want to get my head around this. In any event, the names are in the public domain because they have been mentioned on RTE.

Professor Desmond Fitzgerald

I hope I get these correct: Mr. Bobby O'Connor, Mr. John Field, Mr. Tadhg Kearney and Dr. Pat Rockett.

Deputy Catherine Connolly

Mr. Field is on the governing body as well, is he?

Dr. Richard Thorn

Mr. Field is on the governing authority, yes.

Deputy Catherine Connolly

What is the overall complement of the governing body?

Professor Desmond Fitzgerald

It comprises 32 people.

Deputy Catherine Connolly

Of those 32 people, four were mentioned on the programme and Professor Fitzgerald is saying the governing body was not aware of any of this.

Professor Desmond Fitzgerald

I was saying that in respect of the formal minutes at which I have looked. Decisions on procurement and employment issues would have been made outside of the governing authority. The authority was aware of the case of persons B and C, because that matter was brought to it by the president from time to time throughout the year, until the time the previous president left.

Deputy Catherine Connolly

I will leave that matter and come to Dr. Thorn and Mr. Love. Is Dr. Thorn happy with the terms of reference? I know they have been given to him. Is that not correct? His report is to be completed by September, is it not?

Dr. Richard Thorn

I am happy with the terms of reference. They give me the latitude to investigate the things I believe to be important and see what patterns there are. The report is due at the end of September, yes.

Deputy Catherine Connolly

Will Dr. Thorn be covering the governing body in that report?

Dr. Richard Thorn

Yes.

Deputy Catherine Connolly

In respect of-----

Chairman

Seven of the Deputy's minutes have passed.

Deputy Catherine Connolly

The Chairman was to tell me when five were gone.

Chairman

I know.

Deputy Catherine Connolly

I will have to come back to Mr. Love. I am going over to the University College Cork. Cuirim fáilte rompu. Is iontach an Ghaeilge a chloisteáil. To return to the Irish Management Institute, IMI, I believe Mr. Collins spoke about the seven minute limit on radio or television. We do not restrict witnesses to seven minutes; we are restricted to seven minutes. That is the first thing. There is a little imbalance here, and it is against members of the committee.

The time available to members to ask questions is restricted, whereas witnesses' time is not restricted, subject to the Chair's ruling.

Let me get my head around this. The Irish Management Institute was in trouble for a long time and could not meet its debts for a number of reasons. I could say bad management was the reason but we will leave that for the moment. Is it correct that the IMI overextended itself in residential property?

Mr. Diarmuid Collins

I will take the Deputy through it.

Deputy Catherine Connolly

No, I do not want Mr. Collins to take me through it. I have two minutes and I want answers.

Mr. Diarmuid Collins

The IMI had pressures during the recession.

Deputy Catherine Connolly

Did it overextend itself in residential property?

Mr. Diarmuid Collins

No.

Deputy Catherine Connolly

Did it get involved in the residential sector?

Mr. Diarmuid Collins

It did develop a 55-bed residential arm to its campus. That was an arm for it to sell overnight programmes or programmes beyond one day. It has that facility there. However, that would not have been a key factor in the pressures it might have been under back during the-----

Deputy Catherine Connolly

It did not overextend itself on residential property outside of that.

Mr. Diarmuid Collins

No.

Deputy Catherine Connolly

The IMI was in financial trouble and the bank was about to foreclose on it. Is that not correct?

Mr. Diarmuid Collins

No, that is not correct.

Deputy Catherine Connolly

It was said on the previous occasion that the IMI was in trouble with a loan and had a time limit.

Mr. Diarmuid Collins

No, it had----

Deputy Catherine Connolly

I will leave that question for a moment. Mr. Collins answered "No" and I will come back to that answer.

The IMI was in trouble in any event and we also have University College Cork. Let me get this clear because I looked over Deputy Cullinane's very careful questioning. The entity known as the Irish Management Institute had nothing to do with University College Cork except that it had been working in collaboration with UCC over the years providing joint courses and accreditation. UCC made a decision to acquire or take over the IMI and did so at no cost. Is that correct?

Mr. Diarmuid Collins

The IMI company cost nothing.

Deputy Catherine Connolly

I asked a very clear question. Is it correct that UCC took over the IMI at no cost?

Mr. Diarmuid Collins

Yes.

Deputy Catherine Connolly

Did all of the board members of the IMI retire, resign or move aside?

Mr. Michael Farrell

The majority of them did.

Deputy Catherine Connolly

Who remained on the board?

Mr. Diarmuid Collins

I will have a look.

Deputy Catherine Connolly

The witness can revert to me on that when I contribute for a second time. When UCC took over the IMI at no cost, it took over everything. Is that right?

Mr. Diarmuid Collins

That is correct.

Deputy Catherine Connolly

UCC also took over the IMI's liabilities at that point.

Mr. Diarmuid Collins

Yes, one takes the company assets and liabilities.

Deputy Catherine Connolly

UCC took over the IMI as it stood, as a company.

Mr. Diarmuid Collins

As a company.

Deputy Catherine Connolly

For nothing.

Mr. Diarmuid Collins

Yes.

Deputy Catherine Connolly

University College Cork now owns the IMI, which is a subsidiary of UCC. The witness will come back to me with information on what directors remained on the IMI board. UCC then purchased 13 acres of land from its own subsidiary-----

Mr. Diarmuid Collins

Correct.

Deputy Catherine Connolly

-----and paid its own subsidiary €20 million. Is that right?

Mr. Diarmuid Collins

That is correct.

Deputy Catherine Connolly

The subsidiary is in a position to deal with the legacy pension, although different terminology is used. The liability that arose as a result of doing away with the pension legacy became a charge on the land. It is now clear that UCC took over the IMI at no cost and then paid the IMI, its own company, €20 million for 13 acres of land. The company, which is owned by UCC, could then pay off the loan or charge, which is clearly to do with the pension liability. Is that right?

Mr. Diarmuid Collins

There were two-----

Deputy Catherine Connolly

No, please, I heard it all and my question is whether one charge was to do with the pension liability.

Mr. Diarmuid Collins

It was a mortgage. It had to pay it back.

Deputy Catherine Connolly

It was to do with the pension liability.

Mr. Diarmuid Collins

If one were to strip it all back, as the Deputy is doing, the pension trustees owned an element of the campus so we bought the campus and they got paid as a result of that.

Deputy Catherine Connolly

No, the IMI did a deal with the trustees back in 2012 and as a result of doing that deal, there was a charge on the property. That charge arose directly from the pension liability.

Mr. Diarmuid Collins

That is correct.

Deputy Catherine Connolly

Therefore, UCC took on a company that it says had no pension liability when it actually did have a pension liability. Mr. Collins just used different language for this. It was a charge in relation to having no future liability on it. There is no problem if Mr. Collins disagrees with me. That is that issue. A separate loan was also discharged.

Mr. Diarmuid Collins

There are two loans.

Deputy Catherine Connolly

Both were discharged from the €20 million. Is that right?

Mr. Diarmuid Collins

Yes. To explain quickly - I will not delay the Deputy - Appendix 4 in the documents sets it out. If the Deputy goes to schedule B, which is the important schedule, she will see B.2, the Mercer assessment.

Deputy Catherine Connolly

Yes, I have read all that.

Mr. Diarmuid Collins

The Deputy can see B.2.

Deputy Catherine Connolly

I have read it all.

Mr. Diarmuid Collins

The point is that this is Mercer expert pension advisers confirming to UCC the defined benefit obligation has been removed so there is no longer an FRS 17 pension liability.

Deputy Catherine Connolly

That is on the basis of a charge on the property.

Mr. Diarmuid Collins

Yes, but the liability was €43 million. That is removed and there is a charge in place on the property.

Deputy Catherine Connolly

What was the charge for?

Mr. Diarmuid Collins

The charge was linked to the valuation of the property, less debt. In the end, the charge - given the amount we paid - was €13 million.

Deputy Catherine Connolly

A sum of €13 million was paid over for that charge.

Mr. Diarmuid Collins

It was paid over for the release of that charge. So, €43 million of a pension liability was removed and in turn the charge was settled in 2013.

Deputy Catherine Connolly

We will come back to the witness. He might note the imbalance of power so that when he goes away and says he is under pressure for time, he certainly is not. Members are happy to stay here all day to allow the witnesses to give proper answers. It is we who are restricted.

Chairman

I call Deputy Alan Kelly.

Deputy Alan Kelly

If Deputy Connolly wants to tease out that issue, she can have a minute of my time.

Deputy Catherine Connolly

No, I will comply with the rules in order that we all know where we stand.

Chairman

We are now in ten-minute slots and there will be second slots, if required.

Deputy Alan Kelly

I will restrict my questions to UCC and I would appreciate if the president would answer them. If he needs to confer with any of his colleagues, he should please do so. I forgot my UCC pen today but I will probably get another one.

Deputy Mary Lou McDonald

Deputy Kelly cannot accept a gift from a witness. He would have to declare it to SIPO.

Deputy Alan Kelly

Where did the governing body of UCC meet last week?

Mr. Michael Farrell

In the IMI conference centre.

Deputy Alan Kelly

How many people were at the meeting?

Mr. Michael Farrell

I do not remember off the top of my head. My colleague, the secretary-----

Deputy Alan Kelly

How much did it cost?

Mr. Michael Farrell

I do not have an exact figure yet.

Deputy Alan Kelly

I presume the majority of the members had to travel from Cork.

Mr. Michael Farrell

A fair majority of them did, yes.

Deputy Alan Kelly

Why was a board meeting held in Dublin?

Mr. Michael Farrell

We were requested by the governing body to organise the meeting in the IMI because it has been dealing with the transaction over the last number of years and at no stage had its members visited the campus or seen the facilities.

Deputy Alan Kelly

Mr. Farrell might come back to us on the breakdown of the costs. While I respect the fact that the President of UCC, Professor O'Shea, is not long in the door, unfortunately the buck stops with him.

Professor Patrick O'Shea

I understand.

Deputy Alan Kelly

What was the motivation behind spending such a large amount on the IMI? I listened to the earlier questioning and I will try not to overlap with it. Everyone knew the IMI was a basket case in the sense that it was in serious trouble financially. What competition did UCC have in buying the IMI? If it was such a good acquisition, who else was UCC competing with to buy it?

Professor Patrick O'Shea

As has been said earlier, the IMI encountered some difficulties during the downturn but had returned to profitability. In addition, prior to the acquisition it had made extensive efforts to reduce its cost basis, the cost of doing-----

Deputy Alan Kelly

I am not being rude but as Deputy Connolly stated, we are caught for time. I ask Professor O'Shea to answer the question, please.

Professor Patrick O'Shea

My colleagues can give the Deputy details.

Deputy Alan Kelly

I want Professor O'Shea to give me the details.

Professor Patrick O'Shea

On the transaction?

Deputy Alan Kelly

No, I asked a specific question and I ask Professor O'Shea to answer it, please.

Professor Patrick O'Shea

Could the Deputy repeat the question?

Deputy Alan Kelly

If it saves time, the witnesses should take notes when I ask questions as I do not have time to repeat myself. I asked who UCC was in competition with to buy the IMI? Was it in competition with anyone?

Professor Patrick O'Shea

My understanding is there were other institutions interested but that is not information that I am-----

Deputy Alan Kelly

There were other institutions. What types of institutions? Were any of the Dublin universities trying to buy the IMI? That is what I am trying to find out given that the IMI is on their doorstep.

Professor Patrick O'Shea

We do not know specifically and I would not like to mislead.

Deputy Alan Kelly

I am just asking a general question. Were third level institutions in Dublin trying to buy the IMI given that it is on their doorstep?

Professor Patrick O'Shea

It is quite possible, yes, that other institutions were in discussions.

Deputy Alan Kelly

I am not asking Professor O'Shea to name them but surely he would know if UCC was in competition with institutions in Dublin. It is a "Yes" or "No" answer. It is not a big deal but I would like to know the answer.

Mr. Michael Farrell

It is a private company. If it was not forwarding or supplying the information to us, then how would we know?

Deputy Alan Kelly

I understand. The knowledge that there are multiple bidders on a house will have an impact on the amount one is willing to pay. If nobody else was bidding on the IMI, surely that would have impacted on the bid of €21 million put forward?

Mr. Michael Farrell

If there were multiple bidders on a house, how would one know who the other bidders were?

Deputy Alan Kelly

I did not ask that. I do not know if there is a failure on my side or on Mr. Farrell's but I did not ask him to name anyone. I asked him to verify if he thought there were other third level institutions in the Dublin area bidding against his organisation for the IMI? It is a "Yes" or "No" answer. If it is "No", fine. Just tell us one way or the other.

Mr. Michael Farrell

We understood there were but we have no idea who they were.

Deputy Alan Kelly

I did not ask Mr. Farrell who they were but he understood there were other bidders. I asked him a very simple question so there is no point in one casting one's eyes to heaven. The alternative would have been to invest €21 million in the business school in Cork. I take an interest in UCC because I am a double graduate from there, I met my wife there and I made lots of friends there.

Deputy Catherine Connolly

God help them.

Deputy Alan Kelly

Thanks.

Deputy Catherine Connolly

I am joking.

Deputy Alan Kelly

I got it. I was alarmed when the Forfás report some years ago claimed that the business school in UCC was the worst in the country, effectively, and that is why I am breaking it down. In terms of putting €21 million into the IMI, which is a basket case, or spending the money on building up the business school in Cork, why was the decision made not to put it into Cork?

Mr. Diarmuid Collins

I might comment on that.

Deputy Alan Kelly

I specifically ask the president of UCC to answer my question.

Professor Patrick O'Shea

For UCC, the acquisition of the IMI will serve as a catalyst to develop its new business school. The IMI offers programmes that are not currently offered in UCC's portfolio. I mean, we are happy to-----

Deputy Alan Kelly

Why did UCC not build up the business school in Cork?

Professor Patrick O'Shea

Because we wanted to have national reach, not just simply Cork. We wanted to be able to bring Cork education to Dublin and Dublin education to Cork.

Deputy Alan Kelly

Addressing and building up the business school is the right thing to do.

Professor Patrick O'Shea

Right.

Deputy Alan Kelly

I, as somebody who takes a keen interest in UCC, said so on the previous occasion on which the witnesses were here. I want to know, for the people of Cork, the people of the area, the people involved in the college and the staff - many of whom are brilliant individuals - why did UCC not decide to build up the school in Cork?

Professor Patrick O'Shea

Because there was already a fully-functioning highly-ranked institution in Dublin. As I said in my opening statement, the IMI is Ireland's only ranked institution in terms of customised executive education. It is ranked No. 9 in the UK so it is a unique national asset that really-----

Deputy Alan Kelly

Can Professor O'Shea see how strange this looks to the people who work in UCC? Can he see how embarrassing the situation is for them? Can he see how they were underwhelmed, to say the least, at the decision not to invest the funding in the business school in Cork.

Professor Patrick O'Shea

I do not believe that the people at UCC were underwhelmed. We have also invested in Cork. We will bring IMI programmes down to Cork as well.

Deputy Alan Kelly

I know but there is a concern there. To me, it is incredible how much money has been spent on the premises at Lapp's Quay. I would not say that property management is UCC's strongest suit, to be honest. I have witnessed the evolution of UCC and I admire some of the stuff that has happened in respect of the campus. The latter is now very concise, to be fair, and it is unique in that. However, some of the property transactions that have taken place over the years were questionable. I hate to think that UCC is in any way into property speculation. Can I have an absolute assurance that not a single square metre of the property that was owned by the IMI will be sold off in the future?

Professor Patrick O'Shea

We have no plans to sell any property associated with the IMI.

Deputy Alan Kelly

Absolutely none?

Professor Patrick O'Shea

We have no plans.

Deputy Alan Kelly

That is good to hear. Again, how much was paid by UCC to the IMI for the property?

Professor Patrick O'Shea

It was €20 million.

Deputy Alan Kelly

Is it €21 million or €20 million?

Professor Patrick O'Shea

Twenty.

Deputy Alan Kelly

How much was paid to individual shareholders of the IMI by UCC?

Professor Patrick O'Shea

Colleagues? Nothing.

Deputy Alan Kelly

I am just clearing this up.

Professor Patrick O'Shea

Yes.

Deputy Alan Kelly

How much of the €20 million was used to repay the original loan from AIB to the IMI?

Mr. Diarmuid Collins

Of the €20 million, €8.1 million went to pay the loan from AIB.

Deputy Alan Kelly

How much surplus was generated by the IMI because UCC purchased the property?

Mr. Diarmuid Collins

Sorry, I missed that.

Deputy Alan Kelly

I ask that the president answer the following question. How much surplus was generated by the IMI on foot of UCC purchasing the property?

Professor Patrick O'Shea

The €20 million was not sufficient for the IMI to completely discharge its debts.

Deputy Alan Kelly

How much is left?

Professor Patrick O'Shea

My colleagues, again, can give the Deputy the precise figure.

Mr. Diarmuid Collins

Yes. There was €1.4 million left to go after the €20 million. The IMI used its own cash resources, along with the €20 million, to discharge the two charges on its campus - one for AIB and one, as we spoke earlier-----

Deputy Alan Kelly

How much were those two charges?

Mr. Diarmuid Collins

It was €8.1 million and €13.2 million was the charge from the pension-----

Deputy Alan Kelly

How did the IMI discharge the rest of it?

Mr. Diarmuid Collins

It used its own cash as well. It had its own cash resources along with the €20 million.

Deputy Alan Kelly

How much was in the cash resources when UCC bought the IMI?

Mr. Diarmuid Collins

The cash, around September - it closed in November - it was approximately €1.7 million at the time.

Deputy Alan Kelly

What rent is being paid by the IMI to UCC or is rent being paid?

Mr. Diarmuid Collins

Yes. The lease income is between €600,000 and €700,000 per annum. In addition, the IMI will provide UCC with accreditation income and we also get a share of joint programme income. So, where we have-----

Deputy Alan Kelly

How much?

Mr. Diarmuid Collins

It is close to €1 million all in.

Deputy Alan Kelly

Through the Chair, will Mr. Collins do us a favour and send us in a spreadsheet outlining all of that?

Mr. Diarmuid Collins

Yes, those three. Yes, I will.

Deputy Alan Kelly

I shall ask my last couple of questions.

Chairman

Ten minutes have elapsed.

Deputy Alan Kelly

What is the term of the loan from the new bank and will Mr. Collins identify that bank?

Mr. Diarmuid Collins

Ulster Bank and 20 years.

Deputy Alan Kelly

Ulster Bank.

Mr. Diarmuid Collins

Twenty years.

Deputy Alan Kelly

To facilitate the purchase of the IMI property, what is the term of the loan?

Mr. Diarmuid Collins

Twenty years.

Professor Patrick O'Shea

It is 20 years.

Deputy Alan Kelly

What is the repayment amount?

Mr. Diarmuid Collins

Does the Deputy mean the interest rate?

Deputy Alan Kelly

Yes.

Mr. Diarmuid Collins

The interest rate is just over or about 1.55%.

Deputy Alan Kelly

Do the witnesses think they negotiated that deal well?

Mr. Diarmuid Collins

We did, yes.

Professor Patrick O'Shea

We went to the market.

Mr. Diarmuid Collins

We went to the market.

Professor Patrick O'Shea

We went to the market and got three quotes.

Deputy Alan Kelly

Earlier, the president of UCC said that no public funds were used in the acquisition of the IMI but, effectively, it is financed. There is a debt as a result that now must be paid over 20 years at this interest rate.

Mr. Diarmuid Collins

Yes.

Deputy Alan Kelly

If no public funds were used, then who will pay back the debt?

Mr. Diarmuid Collins

UCC. That borrowings - the €20 million from Ulster Bank----

Deputy Alan Kelly

Who funds UCC?

Mr. Diarmuid Collins

Yes, it is on UCC's balance sheet.

Deputy Alan Kelly

Who funds UCC?

Mr. Diarmuid Collins

We have multiple funding sources.

Deputy Alan Kelly

Who is UCC's main funding source?

Mr. Diarmuid Collins

The main source? We have the taxpayer. We accept that.

Deputy Alan Kelly

Yes.

Mr. Diarmuid Collins

We have the taxpayer, I said.

Deputy Alan Kelly

Who is going to pay back the loan?

Mr. Diarmuid Collins

It is UCC's obligation to-----

Deputy Alan Kelly

Who is going to pay back the loan? UCC is going to pay it back.

Mr. Diarmuid Collins

UCC.

Deputy Alan Kelly

Can the president of UCC tell me who will pay back the loan?

Professor Patrick O'Shea

UCC will pay back the loan based on-----

Deputy Alan Kelly

What percentage of UCC's funding is provided by the taxpayer?

Professor Patrick O'Shea

Approximately 47%.

Mr. Diarmuid Collins

Yes, 47%.

Deputy Alan Kelly

My questions are for the president of UCC. Is it 47%?

Professor Patrick O'Shea

It is 47%.

Deputy Alan Kelly

Approximately half of the university's funding is from the taxpayer. The loan will be paid back by UCC so the taxpayer will have to fund 47% -let us say 50% -of that.

Mr. Diarmuid Collins

No.

Professor Patrick O'Shea

No.

Deputy Alan Kelly

Why?

Professor Patrick O'Shea

This is funded by the revenue generated by the IMI.

Deputy Alan Kelly

Ultimately, this all goes into the pot. Let us look at a pie chart on how the college is funded. The witnesses have said that 47% of it is funded by the taxpayer. Is that right? The totality of the college.

Professor Patrick O'Shea

Right.

Deputy Alan Kelly

Let us not split hairs and get down to Bauhaus basic financial management. UCC will pay back a loan over 20 years for this and 47% of the funding that goes into UCC comes from the taxpayer. Proportionality shows that 47% of this loan will be paid by the taxpayer.

Mr. Diarmuid Collins

No.

Professor Patrick O'Shea

No, that is not correct.

Mr. Cormac McSweeney

The construct of the arrangement is that the new income from the IMI is paying back the mortgage that UCC has taken out.

Deputy Alan Kelly

But it all goes into the one pot. Can the witnesses not follow what I have said?

Mr. Cormac McSweeney

But it is new income-----

Professor Patrick O'Shea

That is correct.

Mr. Cormac McSweeney

-----that we never had before, that is funding it.

Deputy Alan Kelly

Fine. Ultimately, what I am driving at here is the statement made by the president of UCC at the beginning that no public funds were used in this matter. Let us consider the pot of money that this college has with 47%, including IMI as part of the family. Ultimately, the taxpayer will end up funding 47% of the loan.

Professor Patrick O'Shea

That is not correct. As I said, the funds come from IMI.

Deputy Alan Kelly

I might ask questions to the HEA. Why is the HEA board left without so many board members over the last six months? It is absolutely incredible. How can the audit committee of the board operate when there are so few members ? Was the HEA not concerned, and did it not challenge the Minister as regards this?

Dr. Graham Love

We were short by six members.

Deputy Alan Kelly

Why were those positions not filled?

Dr. Graham Love

There was a delay in filling some of them, but - and I will ask my colleagues from the Department to support me on this - the Minister was looking at reappointing some, not all, of the members. Two have been recommended to Government for reappointment and two have just been through the Public Appointments Service for recruitment. In the interim we have had 12 members, so we have had a fully functioning board, to reassure the committee.

Deputy Alan Kelly

Can the witness's colleague answer the question?

Mr. Tony Gaynor

My understanding is that the HEA board has been operating very effectively.

Deputy Alan Kelly

That is not my understanding.

Mr. Tony Gaynor

That is our understanding. The Minister has reappointed two members of the board in addition to-----

Deputy Alan Kelly

Why was there such a gap in filling these positions? Why did it take so long, and how can the Committee of Public Accounts have confidence that a board that does not have its full membership and to which the Minister has not bothered to make appointments is doing its job properly, given the fact that universities and third level institutions are demanding more taxpayers' money despite all the revelations of recent times? The Minister could not be bothered to appoint people to fill the board and to have the specialist in the audit committee, among other vacancies.

Mr. Tony Gaynor

We have not had an indication that the absence of members on the board has impacted on overall governance performance.

Deputy Alan Kelly

I have asked the question-----

Chairman

The point is well made.

Deputy Catherine Murphy

I would like to start with the University of Limerick and wish Professor Fitzgerald well. He has only recently taken up the position. I will try to avoid going over ground that other people have covered.

Mr. Tadhg Kearney was on the governing body. The witness has told us that the purchases were not considered by the governing body, but that the governing body was looking at the finances and that the purchases would have formed part of the finances. At what point would Mr. Kearney have had to declare a conflict of interest?

Professor Desmond Fitzgerald

At the moment the mechanism for declaration is that if someone in the institution, including in the governing authority, feels they have a conflict of interest they need to declare it. Not declaring a conflict of interest indicates that there is no conflict.

Deputy Catherine Murphy

I presume the university has a risk register. Are conflicts of interest included on that?

Professor Desmond Fitzgerald

I cannot answer that at the moment.

Deputy Catherine Murphy

I concur with what was said in the witness's opening statement that there has been a very good indicator of where the university is going and what the problems are. The witness talks about university governance and that an audit of institutional governance is going to be carried out. Will culture be included in that, as well as checks and balances?

Professor Desmond Fitzgerald

The terms of reference are very broad. I cannot immediately say that culture is a part of that. We did get external advice from someone who is an expert in this in order to be able to provide the range of things that will be addressed by the review. The review will be conducted outside the university. It is a good point and is something that I can bring back to the review.

Deputy Catherine Murphy

It is not a box ticking exercise when it comes to ethics.

Professor Desmond Fitzgerald

Ethics will be a key issue within the review.

Deputy Catherine Murphy

That is part of what I mean by culture.

Chairman

Mr. Love has indicated that he wants to come in.

Dr. Graham Love

Culture is part of the terms of reference for Dr. Thorn.

Deputy Catherine Murphy

On the "Prime Time" programme the universities were shown to have been very precious. Perhaps that is not quite the word, but they really want to maintain their independence. On some level I can understand that, but it does not mean that they are above scrutiny. One of the things that jumped out to me on the "Prime Time" report which I had been aware of to some extent was the degree to which the University of Limerick almost went to war with the Limerick Leader. The Committee of Public Accounts has a role in oversight, but so do the media. Does the witness know how much money was spent on that, and what led to the decision to do that instead of addressing the issues? Shooting the messengers appears to have been the tactic.

Professor Desmond Fitzgerald

It was the wrong decision and I would not have done that. I do not have the exact figure but I can provide it. It is around €60,000. I am not sure what led to that decision. The decision was wrong. I believe that the institution felt under pressure. It took some time to convince the institution that it should withdraw the suit, and at that stage they realised that it was a bad decision.

Deputy Catherine Murphy

It is a David versus Goliath affair, when we consider that the Limerick Leader is a relatively small title and compare the resources available to UL. I am glad to hear the witness say that he would not have taken that approach, and that is certainly something that should be reviewed or included in the future. The issues should be dealt with rather than the messenger.

On the last occasion that the witness was before the committee we spoke about the IMI. The Committee of Public Accounts sits in public and what is said here is on the record. Language is very important. The impression was given that, "we took something over at no cost". It is really important when witnesses come in here that that kind of thing is qualified upfront and that the members do not have to piece it together later. It gives the impression that something is being handed over for nothing, when in fact there was a very significant liability here in terms of pension costs. That undermines the credibility of what is said here, and we have to go back subsequently and piece things together. Would the witness accept that he should have approached this matter differently on the last occasion?

Professor Patrick O'Shea

It is important for us to develop trust, and that is based on accountability and accomplishment. We agree with that. We made no attempt to mislead the committee, and we have responded to the committee fully, both in writing and here, to fully explain and elaborate on the statements that were made at the last meeting. I agree that it is always helpful to provide as much information as possible, but when one is speaking extemporaneously it is difficult. I do not think that anything untrue was said, but we have elaborated and given more information as requested. We have been open and honest and there was no attempt to mislead the committee.

Deputy Catherine Murphy

When we have to extract information it feels as if we are not being given the picture and that we have to paint the picture ourselves from the details that we extract.

The approach was bad. People are losing faith in institutions, whether it is the Garda Síochána, religious organisations or the likes of the banks, and the universities sector has certainly played a role in undermining public trust. One of the things all of these have in common is that they were previously regarded as institutions which could have been trusted. Rebuilding that trust will be important for all of the witnesses who come before us. They should be very cognisant of that when they come before us in future. I will leave it at that.

Chairman

All the members have indicated for the first round. We will be coming back to second speakers. Before we move on to that, I want to take up the issue of the cost. I have difficulty with what I am hearing and I want to tease it out. Instead of looking at it from the bottom up, we will start from the top. Are the liabilities of UCC on the State's balance sheet?

Professor Patrick O'Shea

The accounts of IMI will be-----

Chairman

No, UCC.

Mr. Diarmuid Collins

According to my understanding of the way the universities sector is funded, which the HEA might confirm, borrowings are excluded and are off the State balance sheet.

Mr. Andrew Brownlee

I understand that the liabilities of universities are off the State balance sheet. I think it is under review by EUROSTAT who kind of make the-----

Chairman

Could Mr. Brownlee just say that about EUROSTAT again?

Mr. Andrew Brownlee

It is under review by EUROSTAT. EUROSTAT is the European body which decides what can be on or off the State's balance sheet. I understand the accounts of universities are currently off-balance sheet.

Chairman

In Ireland.

Mr. Andrew Brownlee

Yes.

Chairman

Is the Department of that view also? That is the current understanding of the situation. That is important. Had they been on the State's balance sheet, it would have changed it.

Deputy Bobby Aylward

Do we know the borrowings of every university? Is that public knowledge?

Chairman

It is. Their consolidated accounts have been presented to us. A few phrases have been used in the course of this morning's meeting in particular. IMI is a 100%-owned subsidiary of UCC. It is part of the college. While it has a separate legal identity, it is part of UCC. If anything goes wrong there, is it ultimately UCC's problem because it is 100% the parent company. Is that agreed? Yes, we are agreed on that. In effect, it is part of the UCC consolidated group. The phrase "new income" was used several times this morning in relation to the income from IMI. The income is from the university to the university, however, and I have difficulty. In the consolidated accounts, it is not as if IMI has one set of income and UCC has another. In the consolidated accounts, is that money flowing from one part of the group to the other part deconstructed or taken out? Can the Comptroller and Auditor General say?

Mr. Seamus McCarthy

Certainly, inter-company transfers would be netted.

Chairman

They would be netted off.

Mr. Seamus McCarthy

Yes.

Chairman

When it comes to UCC's consolidated accounts, this movement of funds from the subsidiary in one part of the group to another is netted out of the accounts because it is internal within the group to start with. UCC says it has a new source of income, but it is moving from one part of the group to the other. The extra money is generated by the activities of IMI.

Mr. Cormac McSweeney

Before we acquired it, we never had it, so it is new in that regard.

Mr. Diarmuid Collins

We are only getting that income post-acquisition. We have never had it. We have new income post-acquisition in the group.

Chairman

In the group, based on-----

Mr. Diarmuid Collins

In the group. We have new borrowings.

Chairman

-----its continuous-----

Mr. Diarmuid Collins

Yes.

Chairman

I want to tease this out so that we are clear when we come to our report. What caused confusion the last day was that when Deputy Cullinane and I both asked what it cost, Mr. Collins used the word "nothing".

Mr. Diarmuid Collins

Because-----

Chairman

That throws the public. I want to tease that out. UCC seems to have distinguished here today between the assets, as in the 13 acres for which the money was paid, and the IMI as a company, which cost the university nothing.

Mr. Diarmuid Collins

That is correct. The IMI is a company-----

Chairman

There was splitting of hairs, to use that phrase. When people talked about the IMI, the public's understanding was technically the company and the campus. However, Mr. Collins is saying the company cost nothing but the campus cost €20 million. What was in the company if there was none of these assets?

Mr. Diarmuid Collins

It has the brand, reputation, intellectual property and market share.

Chairman

In other words, the university is telling us that IMI has done a Clerys job. It has taken all the assets out of the company and left the name. That is actually what the witnesses are telling me. The Irish Management Institute has done what I would call "a Clerys job" here. The wealth and assets of the organisation were taken to one side and the company was just a name. It is just like Clerys. Do the witnesses get the point I am making? I do not want them to comment on Clerys. We are making a comment. It seems to be that sort of issue of taking the assets out of the company and just leaving the company. Hence, Mr. Collins can say UCC bought the company for nothing because there was nothing to buy there besides the name. That was disconcerting to everybody watching. They could not rationalise what was being said because UCC knew the hairs it was splitting and did not make that clear. We have a better understanding of this idea that UCC says the IMI cost the taxpayer nothing. Of course the company cost nothing because there was nothing there. However, somebody had to raise a loan.

I come back then to the situation of the public funding. We are told UCC is down to 47% of income coming from public sources. Is that according to the most recent figures? It is generally in that bracket. The last figures available, which I have just seen on the website as the meeting was progressing, are from the 2014 accounts. I just Googled it and I did not see the 2015 accounts. It is just for example because the witnesses came in to discuss the 2014 accounts.

Mr. Cormac McSweeney

That is correct but the 2015 accounts are also up.

Chairman

The accounts state that the State grant from the Department was €47 million and that €43 million of academic fees came through the HEA's student fee provision. Research was a significant source of income but State and semi-State companies provided €55 million of that. The EU provided €13 million of that. I am going from the university's accounts here. That is €158 million, or in the region of 50% of UCC's income. As such, it is substantially funded directly by the State. The witnesses are saying it might now be 40%. Ultimately, what troubles us a little - and we are trying to get to the bottom of the actual cost - relates to page 19 of the document presented here, in Appendix 9, namely the last paragraph, which is boxed. We will get it on the screen there now. We are back to this issue of saying no Exchequer moneys were used in the acquisition. We accept that. It was bank money that was used to acquire it. If something goes wrong, however, it could ultimately fall back to the college to pay for it. On day one, the bank paid for it, but if things do not work out, it could fall back to UCC. I am just looking.

I will read to the witnesses the last paragraph in their own note that they provided to us. It is not on screen. It states:

The university has acquired an appreciating asset. Were UCC to consider at some stage in future recovering its investment, recent land sales adjacent to IMI would suggest that any future sale of the campus would yield a return to UCC in excess of the amount paid.

We now hear the university justifying the price it paid on the basis that: "Sure, we are going to have a property boom. Values are going to go up." That is UCC's Appendix 9 to us today. When Deputy Alan Kelly asked, UCC said it had no intention, but in its documentary evidence, it is a consideration because it has highlighted in a big, black box what would happen at some stage in the future if UCC were to consider it. As such, it is a possibility.

They have somewhat hedged this €20 million cost against the fact that the properties will rise in value anyway. Do the witnesses not see how we find that a little disconcerting for a third level college? It has taken over the Irish Management Institute with the underlying assumption that if things go wrong there will be something of a property boom and it can dispose of the assets if necessary. Do they not see how that appears?

Mr. Diarmuid Collins

Our intention is that the IMI will be a success. All the indicators we have - our market assessment, its market share and its upturn in performance - show it is not a basket case. It is improving revenue and bottom line profit. As part of the governing body decision to invest in the IMI, acquire the campus and invest €20 million, it wanted to have, as part of a risk assessment and risk mitigation, some comfort that were it to go wrong, we would have an option to recover that investment. That is one of the reasons UCC bought the campus. It now has the asset; the IMI does not. It is the UCC governing body's future call and decision either to invest in that asset again or divest from it were the IMI in UCC not to be a success. As part of the formal consideration of the impact of an acquisition in our accounts, we have to get a fair value assessment of the asset post-acquisition and we know from that market value assessment that the value today is greater than what we paid.

Chairman

Why then did the college just not buy the company title of IMI in its own right and leave whoever owned the 13 acres to take the risk on the market value of that property to clear the other debts? Given that one was separated why did it need to get into the property hedging business, as I would call it? Why did it not just leave the property? It did not need it. It could have acquired the name and the brand.

Mr. Diarmuid Collins

We could have.

Chairman

Talk us through why it decided to get into the property side of it.

Mr. Diarmuid Collins

We could have got the company. It would still be zero-----

Chairman

For nothing.

Mr. Diarmuid Collins

-----because the assets and liabilities would still be matching up. It still had the campus. It would still have had those borrowings to discharge. Those borrowings had to be discharged one way or the other. It had to pay back AIB and the pension trustee charge ultimately had to be paid. It was much cheaper for UCC to borrow that money. We can get long-term finance compared to what a private company can get and we can get it at a cheaper rate to buy that campus and discharge those borrowings.

Deputy David Cullinane

The witness is telling us that the reason UCC bought it was to allow IMI to discharge that liability.

Mr. Diarmuid Collins

No.

Deputy David Cullinane

The witness just said that.

Mr. Diarmuid Collins

It was part of the risk mitigation for us. We bought the campus.

Deputy David Cullinane

The witness was asked what the rationale was for UCC buying the property. The witness said that the IMI had to discharge liabilities. One way of discharging its liabilities was to sell the asset. UCC then helped the organisation discharge its liability by purchasing the site, which was what the witness was asked when he was last before the committee. I asked him again today. He said that no money from UCC was spent to discharge liabilities. To me, that does not chime with what he has just said.

Mr. Diarmuid Collins

On the last day we were asked specifically if there were pension liabilities discharged. There were none.

Deputy David Cullinane

It was not pension liabilities but all liabilities.

Mr. Diarmuid Collins

No.

Deputy David Cullinane

With respect, this morning I put specific questions to the witness and he was again clear that there were no IMI liabilities.

Chairman

Mr. Collins interpreted it as pensions only, but the question was not about that.

Deputy David Cullinane

I am talking about this morning. The witness was very clear that there were no pension liabilities. I asked if there were capital liabilities and the witness said there were none.

Mr. Diarmuid Collins

It is clear in our documentation and even in the letter we sent to the committee on 13 April after our session. It is repeated again in Appendix 3. It is clear that we paid the €20 million to buy the campus. The IMI in turn used that to discharge the borrowings it had with AIB and with the pension trustees.

Deputy David Cullinane

With respect, that is not clear from what the witness said this morning and it is not clear from what he said on the last occasion.

Deputy Catherine Connolly

Will Mr. Collins talk us through the purchase of the company for nothing and the timespan? The company was acquired for nothing. UCC acquired the company with all its liabilities.

Chairman

It acquired the assets separately.

Deputy Catherine Connolly

Is it correct that UCC acquired the company with all its liabilities? I will intervene again later but perhaps, Chairman, you could talk Mr. Collins through it so we can get a time line.

Chairman

I presume Mr. Collins considered the option of buying the company and the brand and then leasing the premises for the purposes of courses without taking on the capital commitment. Explain it for Deputy Connolly.

Mr. Diarmuid Collins

Yes, I will explain. It is important. The governing body wanted the risk mitigation assessed, so that if we were spending €20 million we would want the asset in return.

Chairman

Why did UCC want to spend €20 million when it could have got the brand for nothing and lease the premises?

Mr. Diarmuid Collins

Even if that was the case post-acquisition, those liabilities in IMI would have to be paid back in time.

Deputy David Cullinane

That is their problem.

Mr. Diarmuid Collins

The IMI's charge to the pension trustee would also have to be paid in time.

Chairman

UCC effectively came in as a banking intermediary for the property debt and pension debt. It is all hinging on the value of assets and property. It was possible for it to get IMI as a company and a brand and even continue to use the premises on a lease basis without this €20 million relating to the property. However, because it had liabilities, UCC came in as a financier to clear its debts. UCC also got the assets. Then it hedged it all whereby if something goes wrong, there would be something of a property boom to cover UCC.

Deputy Catherine Murphy

Did the IMI dictate the terms?

Mr. Diarmuid Collins

No. We would have got a market valuation of what the campus was worth and that was the price we paid for the campus.

Deputy Catherine Murphy

UCC did not have to do this.

Deputy Bobby Aylward

It sounds more like an amalgamation than a takeover and that UCC's name is being used because IMI was not viable by itself. It had debts and a bad history over ten years. Then UCC came in and it appears that UCC's name is being used to get better deals with banks and to run IMI separately. IMI is now a subsidiary of UCC.

Chairman

One hundred percent.

Deputy Bobby Aylward

Is it self-sufficient now?

Chairman

Yes.

Deputy Bobby Aylward

Does it have its own board and management?

Mr. Diarmuid Collins

Yes.

Deputy Bobby Aylward

Does UCC have control over it?

Chairman

How many UCC people are on the board of this subsidiary?

Mr. Michael Farrell

There are 11 members of the board. It is in Appendix 10. The president of UCC appoints six of the 11 members.

Chairman

It has majority control.

Deputy David Cullinane

May I ask another question for the purpose of clarity?

Chairman

I suggest that we finish this session at voting time in the House. We have to deal with two other institutions.

Deputy David Cullinane

It is an important point.

Deputy Mary Lou McDonald

I am anxious to get back in.

Chairman

Can we do five minute slots?

Deputy Mary Lou McDonald

I need more than five minutes.

Chairman

If you do, we will see how we are on the time.

Deputy David Cullinane

I wish to deal with one quick point to bookend this conversation.

Chairman

I will call Deputy McDonald next.

Deputy David Cullinane

It is a quick question for Mr. Collins. Was it a condition of purchasing the brand name that UCC would purchase the property? When UCC purchased the brand name was that conditional on UCC purchasing the site?

Mr. Michael Farrell

We did not purchase the brand name. We got control of the company for-----

Deputy David Cullinane

Mr. Farrell understands what I am saying. I am putting the question to Mr. Collins because we were told that the site was separate. Mr. Collins said that UCC bought the company for nothing and then he said that it paid €20 million to buy the property which was used to off-set the liability. Was that a condition of buying the company?

Mr. Diarmuid Collins

It was all part of the one overall transaction.

Deputy David Cullinane

It was a condition.

Mr. Diarmuid Collins

I would not say it was a condition. It was part of the one transaction.

Deputy David Cullinane

It either was or was not a condition. If UCC did not buy the asset, would IMI have allowed UCC to buy the company?

Mr. Diarmuid Collins

It might have.

Deputy David Cullinane

However, the witness does not know that.

Chairman

I will call Deputy McDonald. After that, I will call Deputies Connolly, Aylward and Catherine Murphy. I ask them to be quick.

Deputy Mary Lou McDonald

We will be quick, but questions need to be asked.

Chairman

Yes, and if we do not get to finish, we do not get to finish.

Deputy Mary Lou McDonald

Yes, and I am not sure that I will be able to do this in ten minutes, but I will do my best. I have looked at Professor Fitzgerald's CV. How does he describe himself? Is he a scientist?

Professor Desmond Fitzgerald

I trained as a cardiologist.

Deputy Mary Lou McDonald

Is Dr. Love a scientist as well?

Dr. Graham Love

Yes.

Deputy Mary Lou McDonald

I am surrounded by the scientific community. It is Dr. Thorn and Professor Fitzgerald? I apologise for getting the title wrong. I am pleased that the witnesses are here because it is important that as a committee and as a sector that we begin to look forward rather than going over the entrails of the past. As the witnesses will be aware, this is round three for the University of Limerick regarding very serious allegations brought forward by whistleblowers, with perhaps the most serious allegation being that there was a whitewash. That is the essence of what the whistleblowers assert. As we now know, they have been suspended for two years. I want to talk to Dr. Thorn about his role and so on. Our time is limited so I am sure he will assist and we will try to be brief in our interactions.

Could Dr. Thorn tell me who approached him and appointed him to take on this review?

Dr. Richard Thorn

I was requested by the Department of Education and Skills to consider being involved in this piece of work, presumably based on my institutional experience.

Deputy Mary Lou McDonald

We will come to that in a moment. I have scanned Dr. Thorn's CV, which is impressive.

Dr. Richard Thorn

The HEA is the commissioning authority.

Deputy Mary Lou McDonald

The HEA is the commissioning authority. How did this happen? Did Dr. Love approach Dr. Thorn directly, personally?

Dr. Richard Thorn

The Department approached me to see if I was available.

Deputy Mary Lou McDonald

Who in the Department?

Dr. Richard Thorn

The deputy secretary general, Ms Mary Doyle, approached me to see if I was available. I said yes in principle, subject to terms of reference and so on. Those were agreed with the Higher Education Authority on 23 May.

Deputy Mary Lou McDonald

What happened next?

Dr. Richard Thorn

On 23 May we agreed a process and a timeline.

Deputy Mary Lou McDonald

Who is "we"?

Dr. Richard Thorn

In conjunction with the Higher Education Authority.

Deputy Mary Lou McDonald

And with Dr. Love?

Dr. Richard Thorn

Yes, and Mr. Brownlee.

Deputy Mary Lou McDonald

Is Mr. Brownlee also a scientist?

Mr. Andrew Brownlee

No.

Dr. Richard Thorn

I should also say I hold a master's degree in management, as well.

Deputy Mary Lou McDonald

I saw that. And Dr. Thorn is a Trinity graduate.

Dr. Richard Thorn

And IPA.

Deputy Mary Lou McDonald

No, I have read it all. Let me cut to the chase. First, I want to know if Dr. Thorn and Dr. Love know each other very well? Have they had numerous professional dealings? Are the two on boards together?

Dr. Graham Love

To assuage any concerns, I have not been a practicing scientist for 20 years.

Deputy Mary Lou McDonald

It does not matter, once a scientist, always a scientist. What, if any, is Dr. Thorn's previous relationship with the University of Limerick?

Dr. Richard Thorn

During the early part of this decade, I did some research work with a small research team from the University of Limerick. We set up some software systems to deal with lifelong learning. I have no professional involvement other than that. For about a year during the late noughties, I was on the board of a college which I think has become part of UL, St. Patrick's College Maynooth. I left that when I was doing some work with the HEA and there was a potential conflict of interest. Other than that I know a number of people, and that is about it.

Deputy Mary Lou McDonald

Professor Fitzgerald's predecessor, Professor Don Barry was a mathematician. I do not know why I am putting that on the record.

Dr. Richard Thorn

I am a geologist, for what it is worth.

Deputy Mary Lou McDonald

What I want to know is how well would Dr. Thorn have known Professor Barry.

Dr. Richard Thorn

I would not have known him at all. I might have been in his company on one or two occasions at HEA meetings.

Deputy Mary Lou McDonald

So Dr. Thorn had no personal or professional relationship with him.

Dr. Richard Thorn

No.

Deputy Mary Lou McDonald

Dr. Thorn might wonder why I am pursuing this line of questioning. I will state it very directly. If there is anything in Dr. Thorn's professional dealings that compromises his willingness or ability to look at all these matters dispassionately and thoroughly, then we have a problem. It would be a problem in any scenario but it is a much bigger problem because the nub of the accusation against the university and its processes is one of whitewash, but Dr. Thorn has told me that is not the case and I take him at his word in that. I ask because the questions had to be asked rather than to cast an aspersion on his character. I want Dr. Thorn to understand that.

If Dr. Thorn recalls, I quoted from an article in the Limerick Leader earlier regarding the whistleblowers and the length of their suspension. The Chairman is quoted in it and so too is Dr. Thorn, where he says that he will not be seeking to speak to Professor Don Barry, the previous president of the University of Limerick.

Dr. Richard Thorn

I do not think that I said that. I said I had not made up my mind.

Deputy Mary Lou McDonald

Okay. I need to talk to Dr. Thorn and he needs to talk to us about that. Why would there be any question mark over whether or not to speak to the previous president?

Dr. Richard Thorn

There is not a question mark. To date, we have been gathering substantial amounts of information. That information has been analysed. We are in the process this week, in fact tomorrow, of determining who we want to speak with. We have already offered invitations to around 25 people who have made submissions and on the basis of our work tomorrow I will make a determination about who else I want to speak with. It is quite probable and possible that I will want to speak with Professor Barry.

Deputy Mary Lou McDonald

Would it not be absolutely necessary for Dr. Thorn to speak to him? He is examining things such as governance, culture, the turn of events, HR processes. It is a fairly extensive piece of work that is being carried out so how on earth could there have been a question in Dr. Thorn's mind over whether or not he would speak to Professor Barry?

Dr. Richard Thorn

For the simple reason that I want to examine all the documentation and make my decision on the basis of that.

Deputy Mary Lou McDonald

I will be direct with Dr. Thorn. When I read that, it really troubled me that Dr. Thorn was wondering if he would or would not speak to Professor Barry. The article in question is much more definitive. It says that he would not be looking to speak to him. When I went and had a look at Dr. Thorn's profile and saw that he had had an involvement with a college associated with the university, that troubled me even more. I cannot speak on their behalf, but if I was one of the whistleblowers who had been through the experience that they have been through, I would want to know who Dr. Thorn is and would want to be satisfied about his bona fides and his objectivity and absolute impartiality. I would be concerned on that score. I want to give Dr. Thorn the opportunity to place on record his absolute impartiality, objectivity and the fact that there are no conflicts of interest in carrying out his task, for the whistleblowers in particular but also for the staff and students of Limerick and the greater region. I would be obliged if he would do that.

Dr. Richard Thorn

I can confirm that I have no conflict of interest that would in any way prejudge or influence my impartiality.

Chairman

The Deputy has two minutes left.

Deputy Mary Lou McDonald

Does Dr. Thorn propose to speak to the whistleblowers?

Dr. Richard Thorn

Absolutely. We have had about 25 submissions including many people who have made disclosures and some who have not made disclosures but have come forward. Invitations have been extended to all of those and to individuals within UL who have been named. Meetings have been set up for the middle three weeks in July.

Deputy Mary Lou McDonald

Will this process act as a break in any other processes such as the kind of issues I raised with Professor Fitzgerald earlier, where there might be a disciplinary matter that needs to be attended to?

Dr. Richard Thorn

Professor Fitzgerald and I have already discussed this and I have indicated clearly to him that if there are breaches of the UL internal code of discipline and so on, that I will not stop him or suggest that they be halted while the review is ongoing.

Deputy Mary Lou McDonald

Will Dr. Thorn be reporting to Dr. Love?

Dr. Graham Love

Yes, he will report to us on 30 September.

Deputy Mary Lou McDonald

It is important that we have an understanding as to what happens to that report then. Typically, this committee ends up dealing retrospectively with a mess and this is one hell of a mess in Limerick.

It is important that Dr. Thorn is present and that we can get ahead of this issue. In addition to the Department and HEA, I would like Dr. Thorn to report back here also. Is that possible? Is Dr. Thorn amenable to that?

Dr. Graham Love

I believe they would be, yes.

Deputy Mary Lou McDonald

Is that acceptable from the Department's point of view because we will have to see what it comes up with?

Mr. Tony Gaynor

Yes.

Deputy Mary Lou McDonald

Professor Fitzgerald is a fresh pair of legs for this task. The objective is to definitively deal with everything from start to finish, including the fact that two employees are currently on extended suspensions.

Professor Desmond Fitzgerald

That is correct.

Deputy Mary Lou McDonald

Has Professor Fitzgerald met the whistleblowers?

Professor Desmond Fitzgerald

I have not. What I asked for was an independent review and, in the process, the opportunity for the whistleblowers to speak to the review team, particularly to Dr. Thorn, was made available to them. That was done through the HEA. All I have done so far is that when people have contacted me, I have indicated that they should contact Dr. Thorn. We have waived any confidentiality or any possibility that the university would penalise anybody on foot of that. We are trying to make it as open and independent as possible and give them every opportunity to speak freely to the review team.

Chairman

I have to move on. The Deputy's time is up.

Deputy Mary Lou McDonald

Professor Fitzgerald will appreciate there is a huge reluctance among people within the university to come forward.

Professor Desmond Fitzgerald

Yes, and that is why, when I spoke to Dr. Thorn, I made sure that we would waive all confidentiality conditions and not penalise anybody for coming forward. The reason for calling for the independent review is that I was concerned that the institution could not do it on its own.

Deputy Catherine Connolly

It was stated earlier that the Department was misled on the severance packages.

Mr. Tony Gaynor

I did not say "misled"; I said there were conflicts in some of the correspondence.

Deputy Catherine Connolly

I will change that. It appears the Department was misled. Officials were told the packages were extremely beneficial because of potential legal and employment issues and because there were performance issues. They were told they were good deals on legal advice.

Mr. Tony Gaynor

That is correct.

Deputy Catherine Connolly

Who told the Department that?

Mr. Tony Gaynor

I do not have the correspondence to hand but I understand we are getting that now.

Deputy Catherine Connolly

Is that what the officials were told?

Mr. Tony Gaynor

Yes.

Deputy Catherine Connolly

I refer to the television programme in which Mr. Field said it was good practice. Is it correct that he is on the board of governors?

Mr. Tony Gaynor

Yes.

Deputy Catherine Connolly

He said the only thing that was wrong was they did not have prior approval from the Department. It is pretty serious not to secure prior approval. In addition to providing information that would appear to be misleading, the amounts were way in excess of the limits that had been set.

Mr. Tony Gaynor

We had concerns over the validity on which the settlements were calculated and also in respect of the re-engagement of certain individuals.

Deputy Catherine Connolly

That is fine.

I would like to move to on Mr. Collins and Professor O'Shea. I would like to ask questions later about the Irish marine and energy research cluster and guidelines for employment for staff.

UCC acquired the IMI for nothing. In reply to Deputy Cullinane at the previous meeting, it was stated that all the directors left and UCC became the sole owner.

Mr. Michael Farrell

We said that some of the directors who were there previously remained because some of the directors are nominated by the council of the IMI.

Deputy Catherine Connolly

That was not said. The following was stated, "We did not buy the company, rather we bought the asset". This is true but UCC acquired the company. We were not told that the college acquired the company and became the sole member and owner. Did the directors of the company stay on?

Mr. Michael Farrell

Of the new board, five of them were on the board previously and one of the previous directors was appointed chairman by the president of the university.

Deputy Catherine Connolly

That is 11. Which five were on the board previously? I refer to page 20.

Mr. Michael Farrell

It is six if the chairman is included. John Campion, Pat McGrath, Michael McNicholas, John Murphy, Terence O'Rourke and Fiona Tierney.

Deputy Catherine Connolly

Is Ger O'Mahoney, managing director of PwC, gone off it?

Mr. Michael Farrell

No, he is new. Everybody else is new.

Deputy Catherine Connolly

UCC acquired the company and everything attaching to it, including liabilities.

Mr. Michael Farrell

Could I just respond to that?

Deputy Catherine Connolly

Mr. Farrell can do so in the Chairman's time shortly. If he does not agree with my question, he can say that. Is it correct that UCC acquired the company, including all its assets and liabilities?

Mr. Diarmuid Collins

That is correct. We acquired the company.

Deputy Catherine Connolly

At what point did UCC acquire the company?

Mr. Diarmuid Collins

This is guided by all the due diligence we got from mergers and acquisitions. The whole acquisition took place almost simultaneously.

Deputy Catherine Connolly

On what date?

Mr. Diarmuid Collins

21 November.

Deputy Catherine Connolly

On 21 November, UCC took over IMI with its debts.

Mr. Diarmuid Collins

With its assets and liabilities. The company has both an asset and liabilities.

Deputy Catherine Connolly

On the same day, the company UCC has just taken over, and which Mr. Collins referred to as part of the family, purchased IMI for €20 million

Mr. Diarmuid Collins

No, the company owned a number of assets. One of the assets was the Sandyford campus. UCC bought the campus from IMI and leased it back to the company.

Deputy Catherine Connolly

Are the other assets still there?

Mr. Diarmuid Collins

Other assets would be their debtors, cash. All the other assets remain.

Deputy Catherine Connolly

This all happened on the same day. UCC, using its own fully held subsidiary company, purchased the 13 acres and leased it back.

Mr. Diarmuid Collins

That is correct.

Deputy Catherine Connolly

That was funded by an Ulster Bank loan.

Mr. Diarmuid Collins

Correct. They, in turn, pay us income to pay back-----

Deputy Catherine Connolly

I got all that. Mr. Collins has outlined that. Was a business case presented for this?

Mr. Diarmuid Collins

Yes, there was a full assessment-----

Deputy Catherine Connolly

Can that be furnished to the committee?

Mr. Diarmuid Collins

Yes.

Deputy Catherine Connolly

UCC got a loan and Mr. Collins said no taxpayer's money was used. It is disingenuous to say that. I will take back the word "disingenuous" because that is upsetting Mr. Collins. I will stick to the facts. The university got a loan from Ulster Bank but it got that on the basis that it is a public body. It is a recognised university that is 50% funded by the taxpayer. In the past, the taxpayer provided even more funding. On the basis of its record and on the basis of public money, the university is able to secure loans. Is that correct?

Mr. Diarmuid Collins

That is one basis but a bank giving a loan for this would have to ensure that the repayment facility is there, one way or the other, to repay that loan.

Deputy Catherine Connolly

Mr. Collins will give us that in the business case

Mr. Diarmuid Collins

We will give the committee that.

Deputy Catherine Connolly

At the previous hearing, the figure of €20 million was mentioned. The additional amount in excess of €1 million for furnishing was never mentioned. It did not surface anywhere.

Mr. Diarmuid Collins

It needs to be remembered that when we spoke on 30 March and followed up in the letter in April, the €20 million was the price paid for the asset. It is in the documentation as part of the conveyancing-----

Deputy Catherine Connolly

Mr. Collins did not mention the €1 million-odd. I want to know-----

Mr. Diarmuid Collins

It was not part of the acquisition price.

Deputy Catherine Connolly

When did UCC hand over that money? I understand this is in the IMI accounts.

Mr. Diarmuid Collins

Yes.

Deputy Catherine Connolly

When was it handed over?

Mr. Diarmuid Collins

At the same time.

Deputy Catherine Connolly

Conveniently, what the IMI owes is roughly the €20 million plus the €1 million-odd that UCC has lodged to that account. Am I wrong again? God, I am not doing well here, am I?

Mr. Cormac McSweeney

The extra €1.3 million was funded out of the IMI's own cash reserves, which existed before we ever transferred the €1.8 million.

Deputy Catherine Connolly

I hear Mr. McSweeney telling me that, but conveniently, is that not the amount of money for the refurbishment sitting in that account as well?

Mr. Cormac McSweeney

We are committing €2.5 million towards the refurbishment; it is just that €1.8 million has been transferred so far.

Deputy Catherine Connolly

What has been given so far?

Mr. Cormac McSweeney

€1.8 million.

Deputy Catherine Connolly

However, no work has been done, and that €1.8 million has been-----

Mr. Cormac McSweeney

We only took over the business in November, as we have alluded to in the appendices. We have a set plan of works that has only just been established for our director of estates. That is now obliged to go through public procurement to initiate some of that work. There has been a lag, but the anticipation is that the works will start very soon.

Deputy Catherine Connolly

Why did UCC not hold onto that money until the works were ready to be carried out and the tendering process completed? Why did UCC transfer that money into the IMI account?

Mr. Michael Farrell

It did so because these are small works. They would be in a position to undertake immediately-----

Deputy Catherine Connolly

Then UCC should have just given the money for the small works. Why did it give hundreds of thousands of euro upfront?

Mr. Diarmuid Collins

We have to remember that since acquisition, it is now UCC's asset. We are now investing in UCC's asset.

Deputy Catherine Connolly

Honestly-----

Mr. Diarmuid Collins

We bought the asset.

Deputy Catherine Connolly

This hand buys, this hand gives. There are transfers back and forth. Honestly, why would UCC give €1 million-odd except for the fact that UCC and IMI are one and the same?

Mr. Michael Farrell

We own the property and agreed to invest-----

Deputy Catherine Connolly

Why was the money not left sitting in the UCC account? No work has been done except minor works. Why was it necessary to put the money into the IMI?

Mr. Diarmuid Collins

It was part of a commitment given that UCC would refurbish and enhance the campus.

Deputy Catherine Connolly

I have no problem with the commitment; I am asking why UCC is making a payment upfront before any work is done.

Mr. Diarmuid Collins

That was part of the merger agreement with the IMI-----

Deputy Catherine Connolly

Why?

Mr. Diarmuid Collins

-----as part of the acquisition.

Deputy Catherine Connolly

Why?

Mr. Diarmuid Collins

It showed real commitment-----

Chairman

A phone is ringing at one side of the room, near one of the microphones.

Mr. Diarmuid Collins

It showed commitment that we were going to enhance the asset.

Deputy Catherine Connolly

That does not make sense but I will leave it. Is my time nearly up?

Chairman

The Deputy is on the button.

Deputy Catherine Connolly

I understand UCC is the main actor in this wonderful Irish Maritime and Energy Resource Cluster. I know other stakeholders are involved, but UCC is the main administrator of it. I have a very specific question about this. If the witnesses cannot answer me, that is okay; I just ask that they come back to me. An external review was carried out, I understand, in May 2016. Are the witnesses familiar with that?

Professor Patrick O'Shea

Yes.

Deputy Catherine Connolly

An external review was carried out of this Irish Maritime and Energy Resource Cluster. Is that available?

Professor Patrick O'Shea

I will get back to the Deputy on that.

Deputy Catherine Connolly

Professor O'Shea will check whether it is available, and if it is-----

Professor Patrick O'Shea

Exactly.

Deputy Catherine Connolly

That is point No. 1. Point No. 2: have changes been carried out as a result of the May 2016 review?

Professor Patrick O'Shea

Yes, and we can get back to the Deputy on that.

Deputy Catherine Connolly

Can Professor O'Shea outline the changes for me?

Professor Patrick O'Shea

May I get back to the Deputy?

Deputy Catherine Connolly

There was an internal audit. What happens with that? Following that review, I understand there was an internal audit of this organisation, or this entity. Has that gone up to the board of governors? Will you set out in writing for us whether that has happened?

Professor Patrick O'Shea

Yes. We can let the Deputy know about that.

Deputy Catherine Connolly

I will tell the witnesses why I am asking this. We are sick, sore and tired sitting here trying to extract information. That is one question to which I want a simple reply. Finally on this, I presume - and again, the witnesses are going to give me reassurance - that UCC complies fully with all the Government guidelines, procedures, rules and regulations for staff appointments. The witnesses are nodding. Representatives of every institution have nodded, as the representative of UL nodded earlier about issues prior to his time. I have his opening statement. The witnesses have given me reassurance that in respect of employment matters, the guidelines are always complied with. My question, then, is this: has anybody been employed outside of those procedures at senior level without the permission of the Department?

Mr. Michael Farrell

We have governing body regulations controlling the appointment of every category of staff in the university, including contracts under the year. Those regulations are always complied with for all appointments.

Deputy Catherine Connolly

Mr. Farrell tells me UCC complies with the regulations. I understand that if there is an exception, it needs prior permission from the Department. Has UCC gone outside in the last couple of years to employ senior people without the Department's permission?

Mr. Michael Farrell

Where we need permission from the HEA is in respect of people who stay on 20% of the time post-retirement. Under the employment control framework as it now works, we do not need specific approval for particular appointments. We fill our positions using governing body regulations. The Universities Act requires us to fill them under a statute or a regulation. We have regulations covering every kind of appointment, and they are followed.

Deputy Catherine Connolly

Have they been complied with in the case of the organisation I have mentioned or anybody employed out of it?

Mr. Michael Farrell

Which organisation?

Deputy Catherine Connolly

The Irish Maritime and Energy Resource Cluster.

Mr. Michael Farrell

They are research appointments. We have separate regulations on them. We would have to check-----

Deputy Catherine Connolly

That is okay. I understand. Mr. Farrell will come back on all those issues.

Chairman

He will do so by next Wednesday. That is in one week's time. Is it possible to do this within a week? Our committee will be issuing a report in the coming weeks. We will start to consider the drafting of our report next week, the Dáil recess is coming up soon and we have a report to do on the Garda Síochána, so we want to complete this work fairly promptly.

Deputy Aylward is next, but we are probably heading into the voting-----

Deputy Bobby Aylward

We will keep going as long as we can. I have quick questions to ask Professor Fitzgerald. What is the current status of the two whistleblowers who highlighted this thing? I know they are on suspended leave. Are they being paid by the university while on suspended leave?

Professor Desmond Fitzgerald

They are being paid by the university.

Deputy Bobby Aylward

They have been on suspended leave for two years. What will their status be when this report that UL is bringing forward is concluded, which, hopefully, will be in September? Will they be reinstated?

Professor Desmond Fitzgerald

I have said that I will engage with them sympathetically and see how we would bring them back into the workforce.

Deputy Bobby Aylward

Will there be recognition of what they did and what they disclosed about the governance of the University of Limerick? Will there be compensation of some form for stress and strain and-----

Professor Desmond Fitzgerald

I cannot say that.

Deputy Bobby Aylward

-----I suppose, abuse in one way of them?

Professor Desmond Fitzgerald

I cannot say that at the moment. As I said, I will be very sympathetic to them. I want to bring this to a rapid conclusion.

Deputy Bobby Aylward

Is their employment status guaranteed or is it subject to the result of this inquiry?

Professor Desmond Fitzgerald

I am not going to engage with them until the inquiry is finished because a major element of Dr. Thorn's inquiry is the manner in which these whistleblowers have been treated.

Deputy Bobby Aylward

As a newcomer coming in from the outside, does Professor Fitzgerald have respect for the whistleblowers and does he admire what they did in bringing this situation to a head?

Professor Desmond Fitzgerald

I think the whistleblowers and the person referred to as "A" have done an important service in bringing some of the issues to public attention and to the attention of the university.

Deputy Bobby Aylward

I am probably asking him a hypothetical question but does Professor Fitzgerald think his board in general would recognise the same and give a similar comment to Professor Fitzgerald's?

Professor Desmond Fitzgerald

I have not addressed the matter with the board yet. What I have told the board is that we will go through this process of the review and that the recommendations of the review would be implemented, including any recommendations concerning the whistleblowers.

Deputy Bobby Aylward

When does Professor Fitzgerald think the review of the inquiry will finally be brought to fruition? When does he hope to have the whole thing sorted?

Professor Desmond Fitzgerald

The target from the outset was the end of September and I do not think that has changed.

Chairman

I thank Deputy Aylward.

Deputy Bobby Aylward

I have a few more questions. I have five minutes, have I not?

Chairman

Yes.

Deputy Bobby Aylward

I want to come back to UCC. What business was the IMI involved with over the years until UCC took it over? What was its main business and why was UCC interested in taking it over? I want to get to the bottom of this. Why did UCC look towards the IMI and seek to take it over by amalgamation?

Mr. Diarmuid Collins

The IMI was involved in executive education, that is, education for people already in the workplace, primarily executive programmes. We did not have that offering as part of our business school. It is a gap in what we provide. We are obliged under the Universities Act to retrain and reskill and deliver lifelong learning, and in the area of business we did not have that offering. The IMI now allows us to make that offering.

It delivers programmes for multinationals, Irish and overseas companies and small businesses on developing leadership, management and provides executive education in Ireland and abroad.

Deputy Bobby Aylward

As a business, it did not seem to be very profitable, if one looks back on the accounts over the last ten years. What is going to change, now that-----

Mr. Diarmuid Collins

I would not agree that it was not profitable. Our assessment, and this was confirmed by our own external advisers, was that it had revenue growth, and the settlement of its pension liabilities with the pension trustees in 2012 put it on a path to sustainability. Since then, its revenue and profits have been growing. It was profitable in 2013 and 2014. We are expecting to see a profit for 2016 and again this year.

Deputy Bobby Aylward

When Mr. Collins says profit, what kind of profit is he talking about?

Mr. Diarmuid Collins

The profit was more than €1 million in 2013 and an amount greater than that in 2014.

Deputy Bobby Aylward

Will the profits that it is hoped will be generated in the future be absorbed into the accounts of UCC?

Mr. Diarmuid Collins

There have been conversations here previously about consolidation. These were a subsidiary and they will be fully consolidated in the accounts of UCC. When the Comptroller and Auditor General is auditing UCC, he will also be auditing the accounts of the IMI.

Deputy Bobby Aylward

If everything goes according to plan, this could be a big gain for UCC and for the future of education in Cork.

Mr. Diarmuid Collins

We would hope that it will be a success into the future.

Mr. Cormac McSweeney

It fits with the competency objectives in the business school, which has the highest number of business undergraduates in the country and the second highest number of taught postgraduates. The school now has an executive education arm it can draw on as well, so in terms of strategic ambition, it is very important to UCC.

Deputy Bobby Aylward

Why did the witnesses say that if things did not work out, UCC could sell off some of the land assets?

Mr. Diarmuid Collins

As part of our normal risk management, we would ensure-----

Deputy Bobby Aylward

That is just in there as cover.

Mr. Diarmuid Collins

For the governing body, it was a fail-safe in order that if things were not a success, we would have that option.

Deputy Bobby Aylward

What is on the 13 acres of land in Sandyford at the moment?

Mr. Diarmuid Collins

The IMI buildings in which the various programmes are delivered.

Deputy Bobby Aylward

Are the 13 acres fully utilised?

Mr. Diarmuid Collins

Yes, they are fully utilised. The residential arm of the institute is also there, which allows students to stay overnight. Some of the programmes are delivered over more than one day and students can stay overnight. That residency element is part of the institute too.

Mr. Cormac McSweeney

Conferences are also hosted there, as part of the offering.

Deputy Bobby Aylward

What land would UCC be selling off if there was a problem?

Mr. Diarmuid Collins

We have not considered that yet.

Deputy Bobby Aylward

I have one last question on the €1.4 million contribution to the pension for a former CEO and the High Court case that was taken against the IMI. What is the situation in that regard? If that money has not been paid, has UCC and the IMI agreed to the payment of this pension, valued at €1.4 million over the lifetime of the arrangement?

Mr. Michael Farrell

That was a High Court action taken by a private individual who worked for a private company. The individual was not a public servant and was not in receipt of any public funds or any public payment or pension. Beyond that basic information, we cannot go too far because we are party to a confidentiality agreement in relation to that settlement. However, the payment that has been made has been long-standing. It was a prerequisite of UCC's governing body's approval of the acquisition that the legal case be settled. The university would not take on the IMI if there were any outstanding legal cases. That legal case was settled and the payment that continues to be made to the person concerned is from IMI revenue.

Deputy Bobby Aylward

The IMI refers to it as a pension liability but UCC has not listed it as such. Why is there a discrepancy between the two bodies?

Mr. Diarmuid Collins

They are the IMI's own accounts and are the accounts of the institute before we acquired it. We are happy that it is in our schedules and appendices that the pension liability is removed from the IMI, as confirmed by Mercer and PricewaterhouseCoopers. In the case of this individual, he will still get his pension from the pension trustees into the future. This is a separate payment that is paid by the IMI. It is not a pension in so far as it is not linked to the performance of the pension asset and it is not paid by the pension trustees but by the IMI. We do not know what the performance of the pension asset will be, but were that asset to go into decline, this individual would still get paid that separate payment. It is a separate payment beyond what is paid by the pension trustees and the pension trustees have been totally removed from the IMI since 2012, which we confirmed-----

Deputy Bobby Aylward

I have just one more question. When was the first time UCC received communications from "RTE Investigates" regarding the IMI's financial statements? When did RTE first contact the university? When did the university become aware that RTE was investigating third level institutions?

Mr. Michael Farrell

We got a series of freedom of information requests at the end of last year and the beginning of 2017 from "RTE Investigates".

Deputy Bobby Aylward

Were the witnesses shocked by what was revealed in the RTE programme?

Mr. Michael Farrell

In relation to UCC?

Deputy Bobby Aylward

Yes.

Mr. Michael Farrell

No.

Deputy Bobby Aylward

No?

Mr. Michael Farrell

In relation to the programme itself, we are not satisfied-----

Deputy Bobby Aylward

I presume all the witnesses saw it-----

Mr. Michael Farrell

We are not satisfied with the way the university was portrayed in the programme and we have submitted a complaint to RTE in that regard.

Deputy Bobby Aylward

UCC has complaints about the way the university was portrayed in the programme.

Mr. Michael Farrell

Yes, we do.

Deputy Bobby Aylward

My last question is for the witnesses from the Department. Was the Department aware of the arrangements whereby a contractual pension liability was transferred to a bank debt on the balance sheet of UCC?

Mr. Tony Gaynor

The Department was satisfied with the due diligence that was undertaken in relation to the proposal.

Deputy Bobby Aylward

It accepted it as presented. Is that right?

Mr. Tony Gaynor

We were satisfied with the deal that was proposed.

Chairman

Deputy Catherine Murphy is next. All the votes to be taken in the Dáil today will be walk through votes because certain Ministers of State have not been reallocated their seats in the Chamber yet so the electronic system cannot be used. In that context, we will try to finish in the next few minutes because a number of votes are due to be called soon. It would be great if we could finish this session before the votes in order that we can move on to the next session when we resume our meeting.

Deputy Catherine Murphy

We have just been given a document from the Department of Education and Skills about re-engagement of staff, which was something that featured in the "RTE Investigates" programme. The programme revealed that certain people were re-engaged by the University of Limerick the day after they retired. The timing raised questions. The university has accepted that these matters need to be investigated and that an independent review is now warranted. There are very clear rules about this and the rules were breached. What are the consequences for breaching the rules? Unless there consequences, behaviour tends to be repeated and people will tend to breach or break the rules. Are there consequences here?

Mr. Tony Gaynor

We do not have in front of us the document that members have, but the Department was querying some of the issues around those payments and was not satisfied with some of the information it was getting. The decision was taken then that the issue of the severance payments would be tied in with the review that is being undertaken by Dr. Thorn. We will have to await the outcome of that review and its findings with regard to the severance payments.

Deputy Catherine Murphy

Generally, are there consequences?

Mr. Tony Gaynor

Under the financial emergency measures in the public interest, FEMPI, legislation, there is a provision that allows the Minister for Public Expenditure and Reform to recoup unauthorised allowances or unsanctioned moneys that are paid by institutions. There is a power there under the FEMPI legislation.

Deputy Catherine Murphy

Does the Department press that? Has it pressed that?

Mr. Tony Gaynor

To my knowledge, we have not used it yet.

Deputy Catherine Murphy

Is it something to which consideration would be given?

Mr. Tony Gaynor

We will have to see the outcome of the review first.

Chairman

The Higher Education Authority, HEA, wants to come in on that topic.

Mr. Andrew Brownlee

On the question of recouping unauthorised allowances, we have in the past put in place arrangements to do that with the universities regarding previous unsanctioned payments. We have done it in the past. The other thing we are doing, in the context of the ongoing review of our funding allocation model, is looking at building in a penalty system with regard to governance compliance issues.

Chairman

The HEA recoups from the institutions rather than from the individuals. Is that right?

Mr. Andrew Brownlee

Yes.

Chairman

Is it then left to the institutions and the individuals to sort it out?

Mr. Andrew Brownlee

Absolutely.

Deputy Catherine Murphy

Mr. Brownlee spoke about EUROSTAT looking at the universities. What prompted that? Is that something that was reviewed before?

Mr. Andrew Brownlee

It is an ongoing process of review. I understand that EUROSTAT does this every five years. It looks not just at the universities but at the whole State balance sheet, what should be in and what should be out. It is a standard-----

Deputy Catherine Murphy

Do we know what the combined liability of the universities is?

Mr. Andrew Brownlee

I can get that information for the Deputy. I do not have it to hand today.

Deputy Catherine Murphy

I would appreciate that. Turning to UCC, Professor O'Shea was at pains to say on several occasions that public funding was less than 50% and that the majority of funding was not coming from the public purse.

UCC has picked us up on that a few times and I understand there is an issue with the funding of third level, but we will leave that aside. Would the campus exist without the public purse?

Professor Patrick O'Shea

No. We apply the same accountability, procurement and accounting standards to all of the financing that we get.

Deputy Catherine Murphy

What proportion of the campus has been constructed? Presumably, most of it was constructed using public funds. Is that the case?

Professor Patrick O'Shea

Obviously, I cannot give the Deputy details off the top of my head.

Deputy Catherine Murphy

It would be fair to say that it was.

Professor Patrick O'Shea

I presume so.

Deputy Catherine Murphy

It is not the only consideration and a range of other aspects of a university have value, including knowledge, reputation, etc., but the campus would not have been built without the investment from the public purse.

I will keep my next question as short as possible. It relates to the IMI and the pension liability. How many people were involved?

Professor Patrick O'Shea

I will have to defer to my colleagues.

Mr. Diarmuid Collins

Approximately 34 people were in the closed pension scheme that was taken on by the trustees.

Deputy Catherine Murphy

Were those people who had already retired or-----

Mr. Diarmuid Collins

They were people who had retired as well as a few - one or two - staff members in the IMI.

Deputy Catherine Murphy

What type of pension scheme was it?

Mr. Diarmuid Collins

It was a defined benefit pension scheme. It has closed. Anyone employed since then has been in a defined contribution scheme.

Deputy Catherine Murphy

How are those future pension liabilities funded?

Mr. Diarmuid Collins

The defined contribution scheme depends on the performance of the fund itself. There is no call on the university for that.

Deputy Catherine Murphy

When did the separation between the IMI and its assets and liabilities occur?

Mr. Diarmuid Collins

I went through the outline of the transaction. That all happened on 21 November 2016. On that day, the company was acquired and the asset was purchased and leased back in the same transaction.

Deputy Catherine Murphy

It was not separated before that.

Mr. Diarmuid Collins

No.

Deputy Catherine Murphy

I will leave it at that.

Deputy Mary Lou McDonald

I invite Dr. Thorn to confirm whether he will interview and speak to Professor Don Barry, former president of the University of Limerick, as part of his investigation.

Dr. Richard Thorn

Yes.

Deputy Mary Lou McDonald

I thank Dr. Thorn. He is examining many dimensions and it is a substantial job of work that he has undertaken. What qualifies him to investigate allegations of fraud, which is what this amounts to in respect of bogus expenses claims?

Dr. Richard Thorn

The investigation is wide-ranging. There is a particular concern that there are organisational cultural issues. It is within that context that the overall investigation is taking place. I have extensive experience on the governance and leadership-management sides.

Deputy Mary Lou McDonald

I recognise that.

Dr. Richard Thorn

If there are technical issues to do with those matters, I will be seeking the support and advice of the HEA.

Deputy Mary Lou McDonald

There will be matters that are technical in nature and potentially relate to fraudulent claims.

Dr. Richard Thorn

I do not want to prejudge fraud or otherwise. Where there are technical issues in respect of which I do not believe I have expertise, I will be asking for assistance.

Deputy Mary Lou McDonald

Has that been factored into the HEA's plans?

Dr. Graham Love

If Dr. Thorn needs it, we will assist and provide it.

Deputy Mary Lou McDonald

Provide technical expertise. In other words, Dr. Thorn will not draft a report that shows conspicuous absences within his investigation.

Dr. Richard Thorn

No.

Deputy Mary Lou McDonald

I wish to ask Professor O'Shea about Professor Emeritus Connell Fanning and the Keynes Centre. We do not have time to get into it, but a question was asked of UCC and Professor Fanning about the centre's output. Is it a separate institute?

Professor Patrick O'Shea

Yes. We will be conducting a review of it in the autumn.

Deputy Mary Lou McDonald

It was an unanswered question in our programme. Could we have some detail of that?

Professor Patrick O'Shea

Yes. We will be conducting a review, but I am unsure of the precise date.

Chairman

We will suspend until 2.30 p.m. because the Dáil is voting. Actually, I am sorry, Mr. Farrell is indicating.

Mr. Michael Farrell

May I make a brief comment before we finish?

Chairman

Yes.

Mr. Michael Farrell

If I correctly interpreted some comments that were made at the outset about governance and governing bodies, I would not like it sitting on the record that anything done in respect of the IMI and its acquisition was outside of the Universities Act or the powers of UCC's governing body. The decisions taken by the governing body were completely in line with the legislation. It conducted extensive due diligence, set extremely stringent conditions for the acquisition of the IMI and risk managed the process throughout the period.

Chairman

Is Mr. Farrell concerned that something might have been said?

Mr. Michael Farrell

I am concerned that the comments about governance in universities might extend to governance in UCC, which is exemplary governance from where I am sitting.

Chairman

The essence of today was to tease out matters. At the previous meeting, the phrase used was essentially "We bought it for nothing". No one present got that. That was the phrase that people believed could not be left to lie without the relevant details being teased out. We have done a bit of that today. I am being upfront. It was that phrase that prompted some of our questions.

We will suspend. I thank the witnesses for their attendance. Those from UL and UCC are free to leave. The Cork and Dublin institutes of technology will be before us at 2.30 p.m. All of the witnesses will take their seats, but we will start with the Dublin Institute of Technology, DIT, because some of its delegates have flight arrangements. We want to get the DIT people away first, but both groups will attend the same session.

The witnesses withdrew.

Sitting suspended at 1.17 p.m. and resumed at 2.30 p.m.