JOINT COMMITTEE ON TRANSPORT díospóireacht -
Tuesday, 27 Oct 2009

Procurement and Internal Controls Investigation: Discussion with Iarnród Éireann.

Chairman

I remind the delegates that members of the committee have absolute privilege but this same privilege does not apply to witnesses appearing before the committee. I remind members of the long-standing parliamentary practice that they should not comment on, criticise or make charges against any person outside the House or an official either by name or in such way as to make him or her identifiable.

I welcome Dr. John Lynch, chairman of CIE, Mr. Dick Fearn, chief executive, Iarnród Éireann, Mr. Barry Kenny, corporate communications manager and Mr. Ronan Gill, commercial manager. I propose to take a short presentation which will be followed by questions and answers. Before inviting the presentation I will allow Deputy Fergus O'Dowd to ask one question in regard to the Malahide——

Deputy Thomas P. Broughan

Before we start, we had a discussion in private session about the lateness of this report. This is a very unusual meeting in that the committee is meeting and yet the majority of committee members do not have a copy of the Baker Tilly report in front of them. On a number of occasions in recent weeks I requested a copy of the report. In a reply to a parliamentary question on 20 October, the Minister for Transport, Deputy Noel Dempsey, indicated that he was sending the report to the Oireachtas Library. I subsequently asked in the Oireachtas Library each day for a copy of the report. I understand that late on Friday afternoon on a bank holiday weekend it was placed in the Library which placed us at a grave disadvantage given the unusual timing of this meeting today. The reality is that I got a copy of the report at approximately 11.30 a.m. I understand that only two or three copies exist. We have three copies on the table but the majority of Deputies and Senators do not have a copy of the report. Given the circumstances, I propose this meeting be deferred until we have had an opportunity to properly prepare to ask the necessary questions arising from this very important report.

Deputy Fergus O’Dowd

On 12 October I sent an e-mail to Mr. Barry Kenny requesting a copy of the report referred to in the Sunday Independent in an article written by Senator Shane Ross. The reply states:

The Baker Tilly report is an internal report commissioned by Iarnród Éireann. The report itself contains material which is both commercially sensitive and the subject of legal proceedings. As a result I regret that we cannot issue this report externally.

That is a disgraceful lack of accountability from Iarnród Éireann. I agree that placing this report in the Oireachtas Library on a Friday evening, after 6 p.m., meant it was unavailable to all of us. I was in the Oireachtas Library this morning at 9 a.m. and I got a copy at about 11 a.m. as others did. It is not acceptable that a company which receives so much funding from the taxpayer and has to be accountable to the Oireachtas, can treat us in such a cavalier manner. It is a disgraceful, unashamed reply from Iarnród Éireann that it is none of our business. It is all of our business. The taxpayer subsidises the companies by more than €300 million per annum and that does not include the billions of euro spent on railway safety and so on. The way in which we have been treated as a committee is a disgrace. I do not believe we will reach finality on this report today.

Deputy Timmy Dooley

I am amazed at the necessity to get the retaliation in first. I would have thought, since we are gathered here for a meeting, the minimum one would expect is that the guests be given an opportunity to explain what is a very serious issue. Then we might have an opportunity to question them on the basis of that. I accept there is a difficulty in people not having adequate information in advance. However, I am sure the Chairman will facilitate members if there is a necessity for a second or subsequent meeting on this issue. For those of us who made an effort to be present, I strongly suggest the meeting be allowed to proceed.

Chairman

We are going ahead. Obviously, we will have a further opportunity. It was intended to have CIE appear before the committee on a general corporate governance agenda in any event. I suggest we go ahead and hear the response to the request we made for an explanation of what is contained in this report and give an opportunity to members to respond. Certainly we can return to the issue and invite CIE and Iarnród Éireann officials to appear before the committee again.

Deputy Michael Kennedy

I concur with Deputy Dooley. Before getting to the subject of today's meeting I suggest Dr. John Lynch make a statement on the current works on the Malahide viaduct, the progress made and when he expects it to open. That would be very useful information for thousands of commuters from Dublin North, Meath and Louth.

Chairman

Deputy O'Dowd wished to ask a question on the viaduct, so we will take his question and then proceed.

Deputy Thomas P. Broughan

May I ask a question before we leave this point? I am a member of the Committee of Public Accounts. This meeting is a little similar to a meeting of the Committee of Public Accounts as it relates to a commercial semi-State body. It would be normal practice — and Deputy Dooley might not be aware of that — for the committee to have received an in-depth report from the Comptroller and Auditor General about the subject matter, so that we could make a decision.

My problem is that the Minister for Transport, Deputy Dempsey, had this report, and he certainly had it on 20 October and he proceeded to put it into the Library late on Friday evening. That is the problem. I have no problem with the company. The Minister and the Secretary General of the Department of Transport need to be brought before this committee to explain the reason they acted in a gravely discourteous way to the committee.

Deputy Fergus O’Dowd

Absolutely.

Chairman

We can ask the Department the reason the report was not made available in the Library until late on Friday afternoon. Now I will take the question on the viaduct.

Deputy Fergus O’Dowd

I have a question on the evidence given by Iarnród Eireann previously on the Malahide incident.

Iarnród Éireann was the first to state that this could have been a very serious accident where hundreds of people would have died in upwards of three metres of water.

The evidence given in the media and before the committee was that the line was walked three times per week. I am not referring to the special visit by an engineer, which was the first time in two years that an engineer walked the line. When was the line last walked? As I understand it, there is a requirement that the continuous weld of rail had to be walked three times per week, on every Monday, Wednesday and Friday. What is the position regarding that?

Mr. Dick Fearn

The internal inquiry into the Malahide viaduct incident is well under way and tomorrow the board of Iarnród Éireann is due to hear a first draft report from the inquiry panel. I understand that a bit of information that has come out of that inquiry is that the actual walking of the line by the track patrolman was done ten days prior to the actual accident. A track patrolman did not walk the viaduct during that week, however——

Deputy Fergus O’Dowd

——or during the previous week.

Mr. Dick Fearn

There was a walk ten days prior to the accident, so that was during the previous week.

Deputy Fergus O’Dowd

A spokesperson from Iarnród Éireann told us that it was walked three times per week and that was not the truth.

Mr. Dick Fearn

We gave that information. To the best of our knowledge at the time, it was based on the planned patrolman walking roster. Remember the inquiry had barely started and we were able to advise the panel that we had launched an internal inquiry, but out of internal inquiries all the details come. What we confirmed, however, and it has been further confirmed by the inquiry is that an automatic track recording vehicle, which is a very much more intensive and accurate scientific recording of the track did occur over the viaduct just one day before the accident and gave a very clean recording of the track. The track patrolling walking and the automatic train recording vehicle are all about looking at track. We know that the track itself had no part to play in the cause of this incident. We know that the track recording vehicle, which ran over the line, just one day before the incident recorded a very clean situation. Had the track been walked on the previous day, the track patrolman would not have identified any issues.

Deputy Fergus O’Dowd

I do not accept that. Neither of us can say that. What we can say with certainty is that it was not walked. The safety requirement was that it would be walked and it was not. I find it utterly unacceptable that Iarnród Éireann said it was when it was not. The engineer who went out to look at it walked on the track and did not take a boat to look at the structure, which was what the issue was about. I find it incredible and unacceptable. The Iarnród Éireann inquiry, the Railway Safety Commission inquiry, and the Department inquiry are the three ongoing inquiries. All of them are taking place in private and we do not know what else is coming out of it. If there is any issue such as track investigation, walking tracks or examination of structures over water that can apply now, they should be in the domain notwithstanding the fact that the inquiry must finish.

Chairman

I am not going to allow a full discussion on this. I will allow one quick question from Deputy Broughan.

Deputy Thomas P. Broughan

Iarnród Éireann has given the date of 16 November for restarting services on the Belfast line. I note it has stated that would be subject to various safety stress tests, etc. How firm is that date? Can we expect to have that line open again for people travelling to and from Balbriggan, Drogheda and, above all, Belfast? The committee has received some good reports on the work that has been proceeding.

Dr. John Lynch

Yes, the date is firm. There is only one condition and that relates to the Railway Safety Commission. Normally after we do all the work the Railway Safety Commission will come along and examine to see if it is happy. We requested the Department to get its consultants, WS Atkins, to sit in the same offices as our consultants so that we are not waiting at the end. We finish everything off and then a consultant comes to examine everything for the Railway Safety Commission. As they are in the same office, we do not expect any delays. We are fairly firm. Obviously it is conditional on the Railway Safety Commission. However, it would have very little excuse in so far as its people have been sitting cheek by jowl with our engineers.

Chairman

We will move on to the Baker Tilly Ryan Glennon report. I ask Dr. Lynch to give his presentation.

Dr. John Lynch

I thank the Chairman and members of the committee for the invitation to attend the committee to discuss these issues from Iarnród Éireann's procurement and control investigations. In the opening statement I wish to set out an overview of CIE and Iarnród Éireann capital and infrastructure activities; a summary of the issues that led to the commissioning of the investigation into Iarnród Éireann procurement; and a summary of the course of action taken by Iarnród Éireann.

Regarding the overview, CIE is not a company as is the common perception. Everybody thinks there is a CIE, but, as I will explain in a few minutes, it is a holding company for a number of operating companies. It takes its policy from its sole shareholder, the Minister for Transport. As members will appreciate, in any commercial business, control of pricing policy and costs are essential. However, in public transport, control of pricing rests with the Minister. Regarding costs, 75% of all our costs consist of oil and wages. As will be appreciated, we cannot control oil prices, which of course we hedge. Regarding wages, we are subject to national wage agreements. Given all these factors, in recent years we have been concentrating on productivity.

I will explain the structure of the CIE group of companies. It consists of a holding company, CIE, and three operating companies, Iarnród Éireann, Dublin Bus and Bus Éireann. They were set up in 1987 by statute. The total number of employees is 11,300. The holding company is concerned primarily with pensions, legal, property and computer services. It is not concerned with the normal functional aspects one would get in a company but it does monitor capital expenditure, cash flow and the strategies of the subsidiaries. It has a finance and audit committee.

There are normally 12 board members, four of whom are worker directors, as per the legislation. Board members are nominated by the Minister. There is also a sub-committee to assist the board with property developments such as that at Spencer Dock. Each of the operating companies, Iarnród Éireann, Dublin Bus and Bus Éireann, is concerned with devising its own strategy, which must be approved by the holding company, and implementing its marketing, finance, operating and human resource plans. Each has its own board, safety committee and audit advisory committee. Iarnród Éireann also has a rail maintenance committee. There has been some decentralisation of the maintenance function, to Drogheda and Portlaoise, with further such decentralisation proposed. The holding company also has a signalling committee and an operations and new works committee.

In other words, every aspect of Iarnród Éireann's operations is subject to serious scrutiny. It presided over a capital spend of €2.86 billion in the period 2000 to 2008, involving an unprecedented expansion of trains, tracks and stations and increased services and productivity. This expansion involved considerable board and management effort. One cannot move from a capital spend of €16 million, which was the figure for the period from 1987 to 1999, to €2.86 billion without instituting new management, structures, staff and technology.

Iarnród Éireann is not the company that has been portrayed as rife with backhanders and graft. There will invariably be personnel problems in any company of this size but the reality is that despite intensive investigation by Iarnród Éireann, Baker Tilly Ryan Glennon and the Garda, only three people were found to be involved. Three out of 11,300 hardly warrants headlines referring to graft and extensive backhanders. To claim that the company is rife with backhanders, collusion and fraud is clearly inaccurate, grossly insulting and a serious misrepresentation of a workforce that has proved itself to be honest, dedicated and hardworking.

We acknowledge that the report points to problems unrelated to fraud arising from weaknesses in procurement. However, the accusations of widespread fraud are such that it is important for me to place them in context to defend the good name of Iarnród Éireann employees. In this context, I draw members' attention to a report from the European Commission dated May 2009 which found that procedures within Iarnród Éireann for preparing, checking and submitting grant claims to the Department were excellent and monitoring procedures good, and which noted with approval the numerous reports prepared on a regular basis to "compare actual expenditure against that planned".

Each of the operating companies has its own non-executive board and worker directors. Our model of a holding company with operating subsidiaries is not unique. It resembles some commercial companies, particularly older ones such as the Hanson Trust, with a very small head office staff complement monitoring mainly capital and cash flow, and with responsibility for planning, organising, controlling, motivating and implementing left to the operating companies. This model has been extremely successful in the past ten years, with massive capital expenditure coming in on time and on budget. In terms of service delivery to customers, particularly in the case of rail services, a comparison with the United Kingdom suggests we do not have much to worry about.

We have used the concept of small advisory committees with outside expertise to ensure the shareholder obtains the maximum return. None of the companies is involved in any expenses except in respect to the business. There is only one credit card in CIE and two in Iarnród Éireann. Advertising agencies are tendered in each company with an outside panel recommending the agency. In Iarnród Éireann 1.3% of revenue is spent on advertising, which is not unusual. It varies from between 1% and 5%. Board attendance is very high, with one exception, and that has been rectified. I hope that gives a flavour of the way CIE and Iarnród Éireann operate.

It is important to emphasise that the issues which were the subject of the investigation were identified internally and investigated by Iarnród Éireann. We addressed specifically the dealing of the three individuals found to have engaged in fraudulent behaviour. We advised the Garda. Iarnród Éireann carried out further investigations following the commissioning of the Baker Tilly Ryan Glennon, BTRG, report. They were addressed by a series of action plans. We continue to address implementation of the action plans. The man responsible for that, Mr. Ronan Gill, is here. He would be delighted to explain to the committee the actions we are taking. I will hand over to Mr. Fearn to take the next section.

Mr. Dick Fearn

I will address the issues that led to commissioning of the investigation. In Iarnród Éireann we have a cost audit and efficiency unit that was established to identify areas where cost savings could be achieved. The unit became concerned about a number of issues in 2005 in the course of a routine review in our North Wall infrastructure depot. Further investigation was carried out and, together with the Garda, this lead to the identification of illegal sales of redundant railway materials, including sleepers, rails and other disused equipment. It was also established in that inquiry that an individual employee was in collusion with a contractor, and that a company had overstated works for soil removal on a specific project in that area.

Those instances were addressed and resulted in the dismissal of three employees. Iarnród Éireann's cost audit and efficiency unit, and the CIÉ internal audit department had identified that processes and compliance in procurement and internal controls required strengthening, as those had resulted in costs to Iarnród Éireann. Actions were immediately taken to address those issues.

To further assist management, we engaged the services of Baker Tilly Ryan Glennon, BTRG. Its remit was to review procurement and internal controls and establish if there were any further specific instances of concern, and to examine whether there had been other occasions of wrongdoing and to recommend any further actions to be taken.

It is important to stress that the BTRG report did not identify any further instances of fraud or improper behaviour over and above those that we had identified and of which we had advised them. It made a series of recommendations on processes and compliance that supported the actions already under way. A detailed implementation plan was put together and is being implemented. Much of the plan has already been implemented. As Dr. Lynch indicated, Ronan Gill has been very much responsible for driving that plan and he will be able to answer specific questions on it if required.

The total cost to Iarnród Éireann from fraudulent activity by individual employees comes to €665,807, of which €100,000 was repaid by one individual. The areas of fraudulent activity are set out in the statement. They involved collusion with a plant hire contractor involving more than €271,000; the misappropriation of track materials involving more than €363,000; and invoices for work that was not done, amounting to more than €30,000.

I very much accept that any loss due to fraud is a matter of extreme concern, but in light of the exaggerated claims as to the extent of the fraud, this needs to be viewed in the context of our spend on external vendors of more than €800 million in the infrastructural divisions in question during the period under review, which is the period since January 2004.

In addition, loss occurred in other areas. One such area was the removal of soil from the docklands project site involving contractors as distinct from employees. This matter is still under investigation by the Garda in terms of further action. There was also the matter of two EU grant aids forgone. Dr. Lynch read an extract from another report, which indicates the strength of our arrangements for grant aid. We did not claim the grant aid of more than €517,000 for one aspect of the Westport line resignalling or more than €273,000 for an aspect of the Rosslare line resignalling because we found from our research that we did not have the right data to satisfy the grant claims procedures. Loss also occurred due to non-compliance with framework agreements. We had some agreements in place and we did not use them. The total cost of that ultimately was more than €777,000. Non-compliance relates to individuals — I am not referring to the fraudulent issues involving the three individuals — seeking to simplify the process for themselves. That is not right or good and we have put in place new procedures to stop that happening. It was not an example of the dishonesty or fraudulent activity of members of our staff, rather it was a question of people trying to simplify the process and not following the procedures. The procedures have been toughened considerably to ensure that cannot happen.

Prior to the commissioning of the Baker Tilly Ryan Glennon report, actions were already under way, and Baker Tilly Ryan Glennon acknowledges on several occasions in the report that we were already implementing issues and it supported that recommendation. The issues related to stock, plant hire, procurement and organisational change. These are the four main areas on which the action plan concentrates. Reports are produced across all divisions. Iarnród Éireann's audit review group examines these at every meeting. CIE's internal audit department also reports to the CIE audit committee and monitors the progress we are making.

In the civil engineering and new works divisions the majority of action areas have been completed, which Mr. Gill will explain if members wish him to do so. Good progress is being made on all the issues, including those in the signalling and telegraph department. That is an outline of the action plan and the report. I will ask Dr. Lynch to summarise the presentation.

Dr. John Lynch

Iarnród Éireann, not Baker Tilly Ryan Glennon, identified these issues and took the necessary steps to address them. We were in the process of addressing specific wrongdoings, systems and processes and we continue to be vigilant. We commissioned Baker Tilly Ryan Glennon to ascertain whether our systems were sufficiently robust. We did this to ensure we deliver value for money, to protect our reputation and to defend the good name of our workforce. The actions of a tiny minority cannot and should not take from the good name of the rest of the workforce.

Senator Shane Ross

I thank the witnesses from CIE for appearing before the committee. I am probably one of the few people who has read this report — I got the full report from the Oireachtas Library on Friday night — and its findings are devastating. I do not know the number of pages in the report because it is not paginated. It details a litany of woes within Iarnród Éireann. It finds collusion. It finds a lack of documentation. It speaks of theft. I counted 19 times the words "fraud" or "fraudulent" used. It speaks about all sorts of malpractices which are endemic in CIE. There is no doubt from reading that report what is going on here. This is a semi-State company which is completely out of control. It is not just a matter of sleepers going missing. This is an indictment of a procurement procedure which is completely and utterly chaotic. I challenge anybody to read this report and not to agree with those findings. This report covers the period from 2004 only, but it is quite obvious this was going on for a long time before that and that it was not stopped.

Perhaps the Chairman would allow me to ask a few questions and then come back because I have so many to ask it would be unfair to other members of the committee. Before I get into any great detail, I understand a steering committee was set up to interface with Baker Tilly. Who was on that steering committee?

Mr. Dick Fearn

I, as chief executive, chaired the steering committee. I had my director of human resources, Mr. John Keenan, and my chief financial officer with me on the committee. My current chief financial officer, Mr. Aidan Cronin, arrived as a new member of staff during this work. A previous financial officer was covering.

Senator Shane Ross

To whom did Mr. Fearn report? Mr. Fearn is not on the board of Iarnród Éireann, is he?

Mr. Dick Fearn

No. I attend all the boards and report to the board.

Senator Shane Ross

To whom did Mr. Fearn report about that?

Mr. Dick Fearn

We reported to the audit review group of Iarnród Éireann which is chaired by one of the board members.

Senator Shane Ross

Who is that?

Mr. Dick Fearn

Mr. Pat Faulkner.

Deputy Fergus O’Dowd

Is it Mr. Paul Kiely?

Mr. Dick Fearn

No. Mr. Paul Kiely is the chair of the CIE audit committee. I was going to go on to say we also gave reports at every meeting, once this was going on, to the audit committee of CIE. Both boards' audit committees were reported to by me personally.

Senator Shane Ross

Iarnród Éireann has what it calls an audit review group, which is an audit committee.

Mr. Dick Fearn

The audit review group reports to the Iarnród Éireann board, and then the audit committee to the CIE board, which is the same thing.

Senator Shane Ross

Did Mr. Fearn report to the boards of both companies or only to the audit committees?

Mr. Dick Fearn

I personally did not. The report was done, I am sure, by the chair of those committees.

Senator Shane Ross

It was what?

Mr. Dick Fearn

The chairman of those committees would be responsible to the board.

Senator Shane Ross

Did the chairman of those committees report to the board?

Mr. Dick Fearn

I understand they did.

Senator Shane Ross

On all occasions.

Mr. Dick Fearn

I understand so.

Senator Shane Ross

Therefore, the board was aware of what was going on in Baker Tilly at all times.

Dr. John Lynch

The board was aware through the finance and audit committee.

Senator Shane Ross

Therefore, both boards were in touch at all times with that. When did they get the Baker Tilly report?

Dr. John Lynch

When it came out.

Mr. Dick Fearn

As far as the Iarnród Éireann audit group was concerned, it was very much a part of the process. There was an interim report in January 2008 and then there was a subsequent final report in June 2008. During that period the Iarnród Éireann audit review group was hearing about the issues arising from the report and the action plans being developed, and the audit review group at every single meeting since then has requested a report on the actions and what is actually happening.

As far as the CIE audit committee was concerned, I was required — I think it was at the September 2008 meeting — to give a full summary to the committee of what had come out of the Baker Tilly report and, again, to advise on the action plans that we are taking.

Senator Shane Ross

Both boards got the Baker Tilly report in June 2008, is that correct? If we have board members in before the committee, that is what they will tell us.

Dr. John Lynch

The finance and audit committee of the CIE board would have got it a little later because the Iarnród Éireann one was digesting it at the particular time.

Senator Shane Ross

When did the full board of both companies get it?

Dr. John Lynch

Probably four, five or six months afterwards.

Senator Shane Ross

Why did it take so long?

Dr. John Lynch

They were digesting the report in——

Senator Shane Ross

Why did they need to digest the report? Why was it not just given to them?

Dr. John Lynch

Because the Iarnród Éireann committee was investigating it in detail.

Senator Shane Ross

As the full report was out in June, why could it not be given to both boards in June?

Dr. John Lynch

It was not.

Senator Shane Ross

Why not?

Dr. John Lynch

Because, as I said, the Iarnród Éireann audit review group was digesting it to see just how serious it was.

Senator Shane Ross

But this was very serious, as they could tell from the interim reports and the drafts they were receiving. Is it correct that the full board got it in the end?

Dr. John Lynch

Yes.

Senator Shane Ross

Why did it not go to the Minister?

Dr. John Lynch

Ministers decide policy. If I was to go to the Minister with every single conceivable problem I have, I would never leave his office.

Senator Shane Ross

This is not a minor matter. It is serious.

Dr. John Lynch

With all due respect, the Senator is the very one who noted that the Baker Tilly report stated the cost was €9 million. We have said today that €660,000 that was defrauded. It is a serious amount of money but it is not €9 million.

Senator Shane Ross

I will come to that in a minute. How much did the report cost in total, by the way?

Mr. Dick Fearn

I do not have that figure in front of me. Three or four companies were approached and Baker Tilly won it by competitive tender.

Dr. John Lynch

The figure was roughly €50,000. Excuse me, I am told the figure is €450,000.

Senator Shane Ross

Dr. Lynch said €50,000.

Dr. John Lynch

It was €450,000.

Senator Shane Ross

So this is a minor matter that cost €450,000 — a report that cost €450,000 — and Dr. Lynch does not bring it to the attention of the Minister. The Minister does not even know it is happening, and when it is reported, he does not know the results because it is a minor matter. This is not a detail.

Dr. John Lynch

With due respect to the Senator, we have already said there was an expenditure of €800,000, which this report showed. We found out there were difficulties and we proceeded to tell the Garda and to put in place procedures. We then proceeded to let go three people and we brought in Baker Tilly. During all that time, why would I tell a Minister about that? It is a normal management function.

Senator Shane Ross

If Dr. Lynch is prepared to spend €500,000 on an investigation, he must think there is something serious going on.

Dr. John Lynch

I would like to come back to the Senator with regard to that figure.

Senator Shane Ross

Is it right or wrong?

Dr. John Lynch

I do not know.

Senator Shane Ross

To begin with, Dr. Lynch said it was €50,000. When he was prompted, he said it was €500,000.

Dr. John Lynch

The answer is that I do not know.

Senator Shane Ross

Mr. Fearn said he did not know.

Dr. John Lynch

I was prompted. I do not know. We will check it out before we leave.

Senator Shane Ross

It is astonishing. I have never heard of a report costing that much.

Dr. John Lynch

Were we worried? We were worried enough to bring in someone to check to see that the systems we were putting in place were strong enough. We do not like anyone taking money——

Senator Shane Ross

Are there any other reports going on around CIE which cost €500,000 and which Dr. Lynch does not bother to tell the Minister about?

Dr. John Lynch

No, not to my knowledge.

Senator Shane Ross

I will move on to the audit committee. Mr. Fearn reported to the audit committee of CIE.

Mr. Dick Fearn

I did.

Senator Shane Ross

Who was on that audit committee?

Mr. Dick Fearn

I cannot remember the names off the top of my head. The CIE audit committee was chaired by Mr. Paul Kiely. I would have to ask my colleagues whether they know the names of the other members. The Iarnród Éireann review group is chaired by Mr. Pat Faulkner, who is a board member of Iarnród Éireann. Mr. Kiely is a board member of CIE. I would have reported to them.

Dr. John Lynch

The members of the audit committee were Mr. Paul Kiely, Mr. Neil Ormond and Ms Mary Canniffe, although she has since been replaced by Mr. Dermot Killen.

Senator Shane Ross

During that period, the board committee had two places vacant for six months. Is that correct?

Dr. John Lynch

Yes.

Senator Shane Ross

Why?

Dr. John Lynch

There are two reasons. We did not have a full board and we were waiting for additional members. Five board members cannot sit on this committee, namely, the four worker directors and myself. We had a board of ten, which is not a full board. However, at no stage did we not have a quorum.

Senator Shane Ross

The board had a quorum but for six months there were only two members on the audit committee. Is that correct?

Dr. John Lynch

That is true.

Senator Shane Ross

During this vital period.

Dr. John Lynch

The quorum is two. We always had a quorum so there was never a problem with meetings being called to examine this issue.

Senator Shane Ross

I am sure there was not. What does Mr. Paul Kiely do to merit being chairman of such a large audit committee?

Dr. John Lynch

He is an accountant and chief executive of the Central Remedial Clinic.

Senator Shane Ross

Is he an accountant like Bertie Ahern was an accountant or is he a real accountant? He is a friend of Deputy Ahern.

Dr. John Lynch

I do not know.

Senator Shane Ross

What qualifications does he have?

Dr. John Lynch

As far as I know he is a CCA.

Senator Shane Ross

He is also chairman of the remuneration committee and the finance committee.

Dr. John Lynch

The finance and audit committee, yes.

Senator Shane Ross

He is chairman of three committees, according to the annual report.

Dr. John Lynch

Yes.

Senator Shane Ross

We now have an audit committee of two people, down to half its size.

Dr. John Lynch

We had a quorum. In my position, if the Minister does not appoint people I have a difficulty because I am looking for four people with expertise in finance that we cannot always get. Five people have gone because the worker directors and I cannot sit on the committee. If people with expertise come on board, they cannot be appointed automatically because they must get a feel for the place.

Senator Shane Ross

Do they get a fee for being on the committee?

Dr. John Lynch

No.

Senator Shane Ross

Going on to the terms of reference of this company, Baker Tilly Ryan Glennon, the report finds a figure of €2.4 million for the loss, or was it €2.6 million?

Dr. John Lynch

It depends on whether you are talking about €2.4 million or €2.6 million with regard to actual loss. As Mr. Fearn read it out, €668,000 is the loss, of which we have recovered €100,000. The rest is due to procurement. That is a loss to the Exchequer in the way that people carried out procurement. It is not the same as someone putting his hand in your pocket and taking the money.

Senator Shane Ross

There was a figure of €2.6 million average loss.

Dr. John Lynch

Loss is the wrong word.

Senator Shane Ross

Actual loss, it is in a column in the report. It is the right word.

Mr. Dick Fearn

If we add up the total areas I described in my opening statement, they add up to that figure of €2.6 million.

Senator Shane Ross

That was the actual loss as declared. Baker Tilly Ryan Glennon says its terms of reference were changed. It sought guidance on terms of reference and came to Mr. Fearn.

Mr. Dick Fearn

Yes.

Senator Shane Ross

The company got a bit of a shock when it was told the terms of reference were to find only actual loss.

Mr. Dick Fearn

It did not get a shock, it got a clarification. It asked for clarification because we gave it two tasks, as the committee knows from having seen the report. It did systems work for us, which was about looking at where the system was not right and what was needed to put it right. It did a thorough report on that and that was the first report that came out in January 2008.

The second major task was to look for actual loss. We wanted the company, as forensic accountants, to go through a huge number of activities within the infrastructure function looking for actual loss. What we did not ask it to do, which I had to clarify, was to make assumptions on other areas they had not identified. We asked the company, as was clearly written in the terms of reference, to comment on potential future risk areas. Part of our action plan is to deal with areas of risk. I clarified that we wanted what we set out at the beginning. It is stated in the report that we wanted the systems report and the actual loss. We did not want assumptions because that is not a basis for going forward. To enable us to take determined action we needed to know about actual events and the clarification was provided for that purpose.

Senator Shane Ross

The consultants say they were asked to assess the loss to the organisation from the bridges and came up with a figure of €2.6 million.

Mr. Dick Fearn

That is in the various categories set out in my statement.

Senator Shane Ross

In one of their drafts they came up with a figure of €8.6 million and that is when the terms of reference were changed. They arrived at an assessment of historic loss, which they understood was within their brief. Why were the terms of reference changed after they came up with a loss of €8.6 million?

Mr. Dick Fearn

That is not correct. No historic loss was identified on top of the final figure. We asked them to identify the actual loss. The €8.6 million in the draft was not an actual historic loss but a "guesstimate", based on what the losses would have been if the issues had occurred elsewhere. We told them that this was not satisfactory because we were paying a great deal of money for them to come up with the actual loss. Accordingly, they identified the specific issues and the resultant figure is shown in the final report.

Senator Shane Ross

I understand what Mr. Fearn is saying but in May 2008 they came up with a figure of €8.7 million. For some reason they were told that the extra €6.2 million was not within their terms of reference.

Mr. Dick Fearn

That is because it was not substantiated.

Senator Shane Ross

It was a very serious and extremely respectable estimate of historic loss and a very useful piece of information because it told the company what the consultants thought it had lost in that period. Iarnród Éireann should welcome such information. They said they could prove that, all things being equal, those were the losses that could be expected. I am worried about why those figures disappeared between the draft and final report. The figure tells the company what is happening behind the tests they carried out but Iarnród Éireann told them not to produce it.

Mr. Dick Fearn

That is not correct. They could not substantiate the figure. We worked extremely closely with them and I chaired the steering group which met them. If they had been able to substantiate a figure of €8.6 million or €8.7 million it would have been in the final report. The figure could not be substantiated and my role as chief executive is to take action on what has happened and to put in place processes to stop it happening again. The difference between the figure which was substantiated and the figure Senator Ross quotes arose because it was based on such an event happening elsewhere. I asked them to identify an actual figure based on that approach. We did not rush them for the information and they worked on it for a long time but were unable to provide one. I owe it to my employees and to the board to deal with facts and not supposition. It would be completely inappropriate for supposition to be in the final report.

Senator Shane Ross

They asked Mr. Fearn for projected expenditure at that stage, and he would not give it to them.

Mr. Dick Fearn

As Senator Ross is aware our capital programme has to be authorised by the Government and as we work through our programmes that figure changes. I was constantly trying to focus their minds on what is actually happening. That was the issue.

Chairman

I am going to let Deputy Broughan and Deputy O'Dowd in and we shall let Senator Ross back in again. Unfortunately, I have to return to the NAMA committee. With the agreement of the committee, I shall ask the Vice Chairman, Deputy Paul Connaughton, to take over the Chair. Is that agreed? Agreed.

Deputy Paul Connaughton took the Chair.

Deputy Thomas P. Broughan

I thank the Chairman. To take the actual report we have in front of us——

Senator Shane Ross

I should like, perhaps, to finish one point, for the benefit of all those other people here, Vice Chairman. That €6 million has been absolutely buried and was never meant to come into the public arena. It has only come out now at this particular time. It was kept under wraps. It was never meant to emerge because it told what was really happening. The reason that it was not completely substantiated was partly this. If one reads the report one will find it. There is so much lack of documentation in these contracts, and here we are talking about all other vendors — the €6 million figure for contracts having gone wonky, and money lost on contracts. There was so much documentation missing in the CIE offices and its contractual and procurement department that, of course, they could not possibly produce evidence for it because there was none. CIE and this report is riddled with lack of evidence, that is the problem. The evidence has been destroyed or is not there, in many cases.

Mr. Dick Fearn

I do not accept that. They were given open access to all the information we have. If they were able to substantiate any of it with good grounds, they would have done so. They were not doing so, but simply extrapolating a figure across a wider level of activity. That is all they were doing and this was not within their remit.

Deputy Thomas P. Broughan

I should like to return to the report as we have it. We only had a short opportunity to read it, in my case just 40 minutes before the start of this meeting. I should like to address some of the points that jump out from what we actually know about the €2.6 million. I shall just ask, first, about those three officials or workers who were dismissed. How many people has the Garda pursued? Have there been any prosecutions? As regards the three persons concerned, did this all relate to the North Wall situation, the removal of materials, sleepers and so on, State-owned assets from that location? What rank did the persons who were dismissed hold within the company?

Mr. Dick Fearn

The three individuals were all involved in the North Wall area. Two of them were purely involved in the misappropriation of materials. One of them was involved with the misappropriation of materials and also in collusion with a contractor. My understanding is that charges were brought in two cases by the Garda. I cannot yet confirm whether that is the case as regards the third.

In terms of their positions in the company, one was a supervisor with significant responsibilities and the other two were colleagues in the teams of workers in the front line.

Deputy Thomas P. Broughan

Have the prosecutions taken place now and have any sanctions been introduced through the Department of Justice, Equality and Law Reform for those former workers?

Mr. Dick Fearn

I understand two have taken place. I cannot confirm the third at present from the information in front of me. All three were dismissed from Iarnród Éireann.

Deputy Thomas P. Broughan

In regard to the collusion incident in the North Wall, in preparation for the new station, and the contract, was that specific contractor a former employee of CIE or of any of the CIE companies?

Mr. Dick Fearn

No.

Deputy Thomas P. Broughan

Were any of the contractors used, certainly before 2000 in different types of reconstructions of the company, in the various maintenance and new works programmes former employees of the companies?

Mr. Dick Fearn

No, not in this area. There is a contractor that undertakes a tamping for us, that is, when we relay track there are machines that go over it. That contractor had a number of employees, including an individual who was the main operator of that company and is a former Iarnród Éireann employee. I should state that none of the items in the Baker Tilly report goes anywhere near that work.

Deputy Thomas P. Broughan

Does Mr. Fearn agree that the essence of this report is about procurement in the company? Obviously, the report refers to some dangers for the company as being super-critical. Would it have been a point of grave concern that, perhaps, past employees and companies which had an association with the company might have been favoured in the procurement process as it existed?

Mr. Dick Fearn

No, because in the area of general procurement none of the companies involves employees. There is one company which is specialist. It has employees who drive the complicated yellow plant on the track which does the automatic track maintenance work. It has a specialist team of people and we know about them because they have had former experience with us. In the general contracting area, such as plant hire etc., none of those companies, of which there are many in the marketplace, and we have open competitions between them, is in any way linked to our business.

Deputy Thomas P. Broughan

I thank the chief executive. On the core part of the report, its summary and recommendations, does Mr. Fearn agree that, as my colleague said, it is devastating in regard to procurement? Some of the comments on procurement include reference to ongoing maintenance and new works, widespread ongoing non-compliance with procurement procedures, symptomatic of a more fundamental system deficiency and the need for a fundamental redesign of the procurement function. It goes on as follows: circumvention of procurement policies and procedures, people taking advantage of weak internal controls, lack of trained staff, absence of controls in procurement department, particularly for smaller procurement items, incorrect documentation used in procurement transactions — Mr. Fearn said that was in respect of people trying to get the job moving and so on — non-compliance with procedure, no company records on file, what suppliers originally requested "a request for quotation" describing the work, were not available, no supporting documentation in respect of plant hire and labour transactions, generic invoices which did not seem to refer to specific jobs, problems with budgeting within the infrastructure maintenance, no supporting coding structure for track expenditure activity, problems with the cost analysis and the WBS codes, lack of traceability, lack of a field key, that is, where one can link the project to the actual work being carried on, and absence of comprehensive reports, relevant reports and information available, monitoring and framework agreements.

I ask specifically about framework agreements which we have had with other State bodies in the past. Does Mr. Fearn agree that the basic critique of these consultants is damning for the procurement that existed at that time? I deplore, as do many members of this committee, the appalling neglect and vandalism of our railways by Dr. Todd Andrews and people in the 1960s and 1970s, when the railway system was effectively wrecked.

Members may be aware that in a 20-year period not a single carriage was added to the rolling stock of the DART system, which could have been the start of a metro for Dublin. There was an appalling lack of investment in the system up to the year 2000, yet suddenly Iarnród Éireann was given responsibility for €2.3 billion and was in a position to provide 150 new carriages. Given that Iarnród Éireann, a tiny neglected sleepy railway company, was now becoming a company managing a modern railway system for a modern front rank State, why did it not identify the need for procedures to take it from the 19th century into the modern era? I remember meeting management in the office in Connolly Station, which was redolent of the 1920s. Is it conceivable that the procedures dated from the 1920s and 1930s instead of 21st century systems? In view of the major investment in new works why was the procurement system not brought up to date by linking it to information technology with continuous real time information for senior staff and accountants? Is that not the real problem?

Mr. Dick Fearn

I would like to respond to some of those points, but I would like to bring in my colleague, Mr. Gill to articulate some of the specific actions we have taken. As Dr. Lynch mentioned, we commissioned this report because we identified from the investigations that our team and our internal audit were doing, areas of non-compliance. This report was not imposed on the company, it was commissioned so that management could see what needed to be done to improve the procedures and processes in the procurement area. It was a determined effort by the company over several years to deal with this issue. It is appropriate for management to say that it identified problem areas and did something about them, as any good management team should do.

Deputy Thomas P. Broughan

When Mr. Fearn came from British Rail, did he realise that procurement systems in Iarnród Éireann were so bad?

Mr. Dick Fearn

That is not my field of expertise. My first appointment was as chief operating officer, and I did not have the same level of involvement in this area as I do since my appointment as chief executive in January 2006. When I became chief executive and became aware of the issues that were being highlighted from internal audit reviews, I was determined as chief executive to ensure that we should take action. That is what we have done. It would be appropriate for the committee to hear a few of the actions we have taken and I will ask Mr. Gill to demonstrate the very forceful action we have taken on areas highlighted by Deputy Broughan.

Mr. Ronan Gill

I joined the infrastructure department in September 2006 and was asked by the then chief financial officer to review the systems that were in place. We instituted immediately an invoice verification process and over the course of several months brought forward a proposal to re-engineer the purchase to pay process that deals with services, that would cover the area of contract labour and plant hire. We brought that forward in March 2007, which essentially put in place a number of gateways in terms of the procurement process. When a transaction started from an order, to the plant hire coming on site, to its verification, to receipting of the time sheets and ultimately to its payment, there were a number of gateways put in place. When I joined the company in 1998, about 12 years ago, there was carbon paper in the journals, but things have come a long way since then. SAP was introduced in 2000. One of the functions in SAP allowed us to re-engineer the service entry process for plant hire during 2007 and the system went live in quarter four of 2007. Many of the issues were dealt with in the Baker Tilly Ryan Glennon report. My primary focus was on the first half of the report, which has, I believe, 140 recommendations in total. Those recommendations would have been integrated into work programmes we would have put together on the basis of our own internal work and work that was being done by group internal audit. Group internal audit did a plant hire review and published a very critical report in, I believe, the middle of 2007. We took that on board. There were 33 specific recommendations we needed to deal with and we went through that process in terms of bringing in procurement, engineering and financial controls around the entire plant hire process. We have had a number of follow up audits from group internal audit since then. Some of the reports have been better than others in terms of the feedback. We are not fully there yet, but we are making steady progress in terms of closing out the recommendations.

The Baker Tilly Ryan Glennon report recommendations are very clear and unambiguous. We would have integrated those within our own processes and we are moving that along in all areas of the business. One of the values of having SAP is that it works across a number of discrete business units. So there is a commonality of standards, whether it be in the signalling, electrical and telecommunications area, whether it be in infrastructure maintenance or whether it be in new works. Much work has been done in terms of putting in place systems and controls. We report on those to the audit review group approximately on a quarterly basis.

Deputy Thomas P. Broughan

Obviously the report refers to the assessment of future risk. It is striking that it states it is not possible to quantify future loss. I presume because of what has happened in the past and has been reported it is super critical. Would Mr. Gill agree?

Mr. Ronan Gill

Section 2 of the report deals with quantified loss and identifies specific losses regarding stock loss and contractor collusion. It also investigated procurement loss, which is not a loss of economic value. We were in breach of technical procurement rules. That did not represent a loss of value to the company. There is a degree of apples and oranges in the €2.6 million.

Deputy Thomas P. Broughan

The final draft states that it is impossible to assess the full extent of actual loss through breach of procedure because of the lack of information.

Mr. Ronan Gill

I accept that. I am an accountant by profession. My job is to put in place systems and controls that minimise the risk of loss going undetected. They are not there to stop the loss absolutely. I can minimise the risk by putting in place a number of gateways and management routines, which routinely look at individuals, as was requested in the report. We have gone through that process of reconfiguring the WBS codes and the field keys so that we can pick up by name compliance or non-compliances. At the start of this process there would have been a perception that non-compliance would be at the front line.

When one gets into it, non-compliance can arise at the front line or more frequently in the back office. If individuals are not available to do what they should do on a particular day through illness or whatever, there will be a non-compliance in a 24-hour a day railway. That is a fact of life. However, we can see what the non-compliance is and we can see particularly if there is persistent non-compliance by an individual. That is a key control measure would be looking at. It is completely different to say there is a risk of loss than to say that a particular individual created a loss. I am trying to put in place a depersonalised system which effectively protects individuals. That is how we have brought this through the business.

Generally speaking individuals are not interested in undermining the railway. In my experience with them, most of these people are lifers. I have only been in the place for 12 years; they have been in it for much longer than I have. They want systems that protect the individual and they can demonstrate that they are following a system that ensures we get value for money. Where the system broke down — it broke down regarding EU procurement rules — it is not clear that we did not get value for money. We would strongly contend that we did.

Deputy Thomas P. Broughan

However, the company lost the grants.

Deputy Fergus O’Dowd

The problem is that the Houses of the Oireachtas, Iarnród Éireann and CIE are now on trial in terms of public opinion. The Oireachtas, through this committee, requested a copy of the Baker Tilly Ryan Glennon report and members are frustrated that it was denied to us. The Minister had it lodged in the Oireachtas Library at the very last moment, with the result that nobody here had time to read it in full before today's meeting, apart from Senator Ross who, as far as I understand, obtained a copy a little earlier on Friday. Thus, we are frustrated in our efforts to make the delegates accountable to the public for what has happened in Iarnród Éireann.

The only way to ensure that the company is accountable to the Oireachtas is to make all such reports subject to freedom of information provisions and to make it a requirement that we receive comprehensive responses to parliamentary questions. We are not interested in the minutiae of which particular trains were late on a particular day, but there must be accountability in regard to policy and financial issues. It is absolutely essential that the Oireachtas has access to that type of information in respect of Iarnród Éireann, CIE, FÁS, Dublin Bus, Bus Éireann and all the various quangos in operation. They must be accountable to us and we must hold them accountable. The delegates' credibility must be in question following their performance today. We were not given the full facts about the most serious accident to occur in many years. We were not told that the railway was not walked. This is an absolute indictment of the company in terms of its lack of accountability.

The Baker Tilly Ryan Glennon report includes the statement: "We have not quantified the scale of unidentified loss as we are informed it is beyond our term of reference." There is also a reference in this context to "a risk template for all vendors". In other words, it was included within the €450,000 fee to the consultants that they should review this issue of unidentified loss. It seems clear that they wanted to investigate the matter but were instructed not to do so. That is a critical issue. The report goes on to say in regard to the financial loss for all vendors that there was a high risk in respect of the actual cost of known or suspected fraud, the loss of value added opportunities and economies and the potential clawback of grant aid.

This represents an absolute indictment of Iarnród Éireann, notwithstanding the fact that concerns were initially raised by the internal audit committee. I accept that the vast majority of employees are decent people but there is no doubt that there are crooks among them. The report points to the evidence that some employees took advantage of "weak internal controls" and that they manipulated transactions in order to keep them within their procurement authority, thus enabling them to appoint their chosen contractors. As the report states, apart from the "obvious serious risk" this practice created for "potential collusion with the vendor", it also resulted in loss of grant aid to the company as a consequence of the "failure to employ proper procurement policies as required under EU law". Yet Mr. Gill has told us that Iarnród Éireann did not lose money as a result of a failure to adhere to European Union procedures or at least that he doubted it could have done so.

Looking at specific details of the report's findings offers further cause for concern. In the case of plant hire, for example, there was evidence of price rigging, bid tampering, poor value for money, price changes after vendors were awarded contracts, risk of fraud exposures and so on. It seems that what has been going on at Iarnród Éireann is similar to what happened in Soviet Russia or East Germany, with a minority abusing its position and abusing the public purse. Another damning detail is the reference to the confusion over the number of access points to the Portlaoise facility. When the consultants asked members of staff whether there are one two or three entrances to the Portlaoise yard, they received differing responses. The consultants subsequently found, on visiting the premises, that there are two gates with security and a third, of which few staff were aware, with no security. Some 40% of the company's equipment is stored in that premises. What the hell was going on?

The inescapable conclusion is that there is a complete lack of transparency and accountability from Iarnród Éireann. These issues have only come to the attention of the committee because Senator Ross put the public on notice that this report existed. That report was made available to us only at the last moment, affording none of us the opportunity to examine it fully before the meeting. We are entitled to hold the delegates accountable for these issues. The report states that no clear procurement was in operation, there was insufficient co-ordination between companies, divisions and business units, and insufficient leverage of spending across companies and divisions. That is unacceptable.

When can the chairman come back to us with a template for change? The Minister, Deputy Dempsey, and the political system will have to come back with a template for change in terms of accountability to the Oireachtas, forcing the company to give us those reports which we sought under freedom of information and in reply to parliamentary questions. What evidence of real change is there within the company?

Mr. Dick Fearn

First of all, one would not appoint a company such as that just to do a whitewash job and tell us everything was grand when it was not.

Deputy Fergus O’Dowd

It was not allowed to do the job it wanted to do. It was not a whitewash, the company's terms of reference did not allow it to investigate certain areas. It was told that.

Mr. Dick Fearn

Its terms of reference were——

Senator Shane Ross

It was you guys who whitewashed the report.

Mr. Dick Fearn

Not at all.

Senator Shane Ross

That is what happened. They did not whitewash it, you did. You did not allow the draft report to be issued.

Mr. Dick Fearn

Through the Chair, it is quite the opposite. This is a thorough report and the terms of reference require——

Deputy Fergus O’Dowd

The report stated that it had gone beyond its terms of references. That was in the summary of what——

Mr. Dick Fearn

It was not. The terms of reference at the outset and the terms of reference at the end clarified the issue about actual loss. What we also wanted in this report and got in detail was all the issues in regard to our processes and procedures. We have acted on the recommendations on those processes and procedures. Mr. Gill cited a few examples earlier. We could talk all afternoon about further examples of where we have made fundamental change as a result of the inquiry, which we initiated and commissioned Baker Tilly Ryan Glennon to do for us. The reason we wanted——

Deputy Fergus O’Dowd

Will Mr. Fearn answer one question relating to page ten of appendix two? It is stated there that, "We have not quantified the scale of unidentified loss as we were informed that it is beyond our terms of references". Will Mr. Fearn explain that to me?

Mr. Dick Fearn

Yes. Because what happened, as Senator Ross identified earlier, is that there was an earlier draft report which we did not accept.

Deputy Fergus O’Dowd

Hold on a second. We did not see that draft.

Mr. Dick Fearn

Can I please answer the question the Deputy has asked me?

Deputy Fergus O’Dowd

No. The point is we did not see that draft. This is the final report and I assume nobody could see that draft report, not even Senator Ross.

Senator Shane Ross

The draft was buried because its figures were inconvenient.

Deputy Fergus O’Dowd

It was bloody well buried.

Mr. Dick Fearn

It is not a case of it being buried, it was not correct.

Dr. John Lynch

Through the Chair, can we tone things down a bit? Someone wants to give an answer and we would be obliged if the answer could be provided.

Vice Chairman

In fairness, bona fide questions are being asked and they should be answered.

Deputy Timmy Dooley

With respect, they are playing to the cameras.

Dr. John Lynch

We are trying to answer but we are not getting an opportunity.

Deputy Timmy Dooley

They are trying to get on "Six One" news. They are doing well in that regard.

Vice Chairman

I am not stopping anyone from answering questions, but I will not——

Dr. John Lynch

Mr. Fearn has been interrupted three times when he has endeavoured to answer.

Vice Chairman

——stop anyone from asking questions either.

Deputy Fergus O’Dowd

How could the company say that it was outside its terms of reference unless it asked to put it in?

Mr. Dick Fearn

The terms of reference were clear at the outset. The company asked me for clarification. In terms of loss we wanted actual loss. We gave the company time to go through all the information and we briefed all the managers to make sure they had access to any information they needed. What we did not want, because we can do it ourselves, is to just make assumptions and judgments on what it might be. What we wanted was fact. We wanted firm recommendations on systems that we could change. We got that, and we have changed those systems. We wanted firm information on actual loss. We got that in part, but when the figure was produced in a draft report that was not substantiated I asked the company to substantiate it. It could not do that. I replied that it must meet my terms of reference, namely, actual loss. I clarified that and it wrote the clarification in the report. That was perfectly reasonable. If one employs somebody to do something, one wants them to answer the question asked.

Vice Chairman

I call Deputy Dooley.

Deputy Fergus O’Dowd

I have one last point.

Vice Chairman

Deputy Dooley.

Deputy Fergus O’Dowd

Assuming no one saw the draft at all, what does the sentence mean that "it is beyond our terms of reference", other than that it asked to put it in?

Mr. Dick Fearn

Because it was not part of the company's terms of reference. It was never in the terms of reference to make some kind of judgment to look at a multiplier effect. That was not what I sought. What I was focusing on was the actual loss.

Deputy Fergus O’Dowd

This goes to the heart of what was going on.

Chairman

I call Deputy Dooley, to be followed by Senator Donohoe.

Deputy Timmy Dooley

I will make a few points and put some questions on foot of them. Clearly, the delegates identified the problem. They acted on it and sought a review of the information or fraud that was known to have taken place. They sought the assistance of an external consultancy to identify the weaknesses in the organisation's procedures. I have not had an opportunity to read the report but I assume it contains conclusions detailing requirements or directions to the witnesses to strengthen their procurement procedures and make them more robust. Have they had an opportunity to act on those to date?

Mr. Dick Fearn

Yes, very substantially. In that context, I will comment on the organisation and Mr. Gill might comment further on it. Organisationally, a colleague, who has an overview of our process across the company, reports to our chief financial officer. In each of the functional areas — Mr. Gill, as commercial manager in the civil engineering function is a good example in this respect — a controlling officer ensures there is compliance. Mr. Gill will speak more about that.

Mr. Ronan Gill

Baker Tilly Ryan Glennon made a large number of recommendations on a number of areas. There are 109 recommendations related to procurement, plant hire and contracted labour services and approximately 30 recommendations related to stock. We had several audit reports, prior to this report, that informed our management action plans in these areas. We took on board the recommendations in the Baker Tilly Ryan Glennon report and integrated them into our responses.

In terms of organisational change, quite a number of recommendations relate to upskilling within the procurement process, leaving aside the higher level, and to ensuring that we are able to do data mining through SAP to pick up trends across various activities. One of the criticisms was that it was difficult to ascertain the spending by an individual across a project, whether it be a capital, maintenance or renewals project. We have put considerable work into addressing this. We will not be able to retrieve the necessary information unless data is input in a structured form. We have put such a structure in place. People have been briefed on the various information fields and the information to be put into each field. If such information is not input, that amounts to non-compliance. At present, there are instances of non-compliance, which are technical in nature, because individuals have not filled in forms correctly, and we are addressing that issue. In other cases, there is substantial non-compliance where, because of some event, we did not follow our procedures. We also check through that area.

In terms of organisational change, we have put in people at the front-line who have SAP expertise in terms of data mining. We have also used GITT or group information technology to redesign our procurement databases. One of the criticisms made previously was that, within the business units, we had done it ourselves as an end user of computing type activity. We have now brought on computer experts to structure those databases to ensure that they are more appropriate to a range of activities. That system has gone through one major rewrite, which was launched in September 2008. It is now in its second version, the launch date for which is January 2010, in line with our next procurement cycle.

In terms of plant hire, we have gone through a process of invoice verification. We trace invoices on a routine basis from order through to delivery through to payment to make sure the system requirements are routinely being met. We have put in place a spot-checking regime, which helps us overcome the risk involved with phantom invoicing in terms of invoices being created for work that was not done. We select randomly on a weekly basis a transaction across the network and a number of individuals would be involved, a technical person who would know what he or she is checking, and a person from the administrative side, who would know the back office system and who would check that what we had ordered is on site and is being used to do what we want it to do on that date. In moving on we had an issue in terms of moving away from individual ordering of transactions into trying to package the work into bigger groups to get better value for money. Within the business the terms used for that would be mini-tender for packaging up an amount of work as against an individual transaction which would be a one-off service entry.

We are tracking the value of spend against each procurement mode to try to increase the value coming through on the mini-tender process, and it is increasing progressively. Much of that involves educating people on an alternative approach to doing business. People who have always done their business in a particular way must be educated in better ways. We are seeing procurement benefits against that. On rates that one quotes from this time last year, one gets a better rate now on the market.

There were 30 recommendations in the area of stock. The Baker Tilly Ryan Glennon report noted that stock control in our largest area in Portlaoise was very good and the areas which were weakest would have been around line-side stock across the entire 2,000 km of network in the 25 different permanent way inspectors divisions.

We have put in place several changes to our systems to bring people along with us and improve our rates of compliance. Stock accuracy levels have consistently improved. We have independent cycle counting and we are now reconciling items taken out of the ground. One of their key recommendations related to what was happening to the material taken up if we were putting new material in the ground.

Deputy Timmy Dooley

To conclude on two points, there has been a substantial change as a result of the Baker Tilly Ryan Glennon report. Is it Iarnród Éireann's intention to conduct a further review of the change that has already been initiated by Baker Tilly Ryan Glennon?

I make a point on the draft interim report to the steering committee of 31 January 2008. I note the report states that based on their findings to date, it is considered that the level of work required to fully address the terms of reference as drafted could involve a considerable degree of additional time and resources. That is a fairly standard line in most consultants' reports that I have seen or in which I have been involved. I could imagine on another occasion, had this report ran more considerably, and they had not identified some of the misgivings to the extent that has been noted, we would berate Iarnród Éireann for extending the scope or allowing the scope of a consultants' report to creep to the extent that it might. There is a balance to be struck in involving consultants while keeping within basic parameters so that one does not overspend on consultants. It has been a criticism of Departments and State agencies that they rely too heavily on external consultants. This would point me in a direction that would suggest there was an effort — I do not want in any way to malign the work of the consultants — to extend the scope at an early stage here, and perhaps Mr. Fearn would comment on that.

On the investigation of the three persons with whom Iarnród Éireann originally found a problem, Mr. Fearn spoke of a Garda investigation. He stated that approximately €100,000 had been recouped from one individual. There are other individuals and there are other contractors. Is it possible for the company to seek to take a civil action in the event that there are moneys available? Clearly, it is not worth chasing something that cannot be delivered.

In what way did the company deal with the pension entitlement of the individuals concerned? Was it possible to remove those in line with established procedures in State companies? It is just a question, and there may be a confidentiality issue involved.

Mr. Dick Fearn

The first issue is the further scope. We recognise it is necessary to audit ourselves as we go through this implementation. The CIE group has an internal audit capability and it is auditing us, and will continue to do so, on our implementation. Mr. Gill explained earlier that this has already happened. Some of the actions taken have been already audited to see if we are making progress, and that will definitely carry on. It is important that it does so because there is no point in us thinking we have now got everything right without having justification for saying that. That is where the internal audit will come in. That is the most cost-effective way for us to continue to do that.

These actions are not so that we can tick the box, move away and say it is all sorted now. There will always be new areas. With the nature of our business and investment, there will always be new areas where we will need to ensure we are on top of our game. We will definitely keep that going.

With regard to the actions taken, the Deputy asked specifically whether there is any scope for civil actions. I mentioned earlier and repeat that the Garda is still investigating at least one area which particularly involves the activities of contractors. Obviously, we cannot comment further on that as it is a matter for the Garda. The internal CIE solicitor's office is still giving us advice as to whether there will be a civil case, depending on the outcome of the Garda investigation. Potentially, there could be a civil case, but we will very much take the lead initially from what arises from the Garda investigation.

I will have to come back to the committee with regard to question on the pensions of the individuals dismissed.

Senator Paschal Donohoe

Like the rest of my colleagues, I have had an opportunity to read the report, albeit quickly. It is shocking. What shocked me more has been the presentation of the report here today. I want to quote the concluding line of Dr. Lynch's testimony, where he stated: "The actions of a tiny minority cannot and should not take away from the good name of the rest of the workforce." That is because the majority of this testimony focuses in on the fraud allegations that have been much discussed at this meeting. However, the majority of this report is not about fraud but about the general procurement practices and strategy within the company for which the witnesses are responsible.

It is the strategy by which goods are bought and the price paid for them is set. That is a management environment for which the board is responsible. The fraud example, which formed the majority of testimony, was only a small example of the total amount of research that took place for this report and the total number of points that were covered off. This is a procurement report that led to a fraud conclusion, not a fraud report.

I had a some time to consider the second report, which concerns the forensic investigation. There are a number of points that have not yet arisen in the discussion which are worth emphasising. I have three questions for Mr. Gill. One point that has already been made is that the report considers, based on its findings, that the procurement controls in place are inadequate and capable of very significant improvement. When the consultants went to evaluate this risk, the first issue considered was financial risk, a category which includes general account management concerns, tax obligations, remuneration and budgetary requirements. It also includes actual or suspected fraud. The likelihood or probability that the consultants give to this financial risk occurring is that it was almost certain it was occurring. The impact of this is termed "super-critical". I have read many reports such as this but to see financial risk as being almost certain and the potential impact described as super-critical is shocking.

My colleagues have pointed to the fact that it is difficult to put a value on some of the practices detailed in the report. Page ten of the second report attempts to at least create a framework within which we can examine these figures. It states that it is in the higher volume, lower value area of transactions where there is most concern. This is highlighted in the executive summary, which notes that the level of annual spend involved in this category is in the region of €40 million to €50 million per annum. Where the report examines the costs involved in an organisation with weak internal controls, it make two points. The report states that the consultants would consider an empirical evidence benchmark of a 5% measure to be a representative estimate of loss arising to an organisation with weak internal controls. It then states that depending on the state of internal controls in an organisation, the impact of greater risk of non-compliance or collusion can increase as much as by a further 2.5% to 5% of total expenditure. We have between 7.5% and 10% risk of total expenditure and the total expenditure across this period for the company's own figures is €1.1 billion. Although the figure of €2.6 million in fraud is of concern, or even the €8.6 million in fraud that Senator Ross points to, the overall picture in the report is of an organisation that has weak procurement procedures. In the staff survey contained in the report, it is clear there is awareness of what the SAP procedure is, it is just not implemented.

I have three questions I would like Mr. Gill to answer, and I would appreciate any comments he has on the points I have already made. The report recommends that the risk of loss to the company is supra-critical, requiring immediate action to restructure the procurement function within the areas under review, with priority to signals and infrastructure maintenance divisions. Has that restructuring happened?

Mr. Dick Fearn

Yes.

Senator Paschal Donohoe

When did that happen?

Mr. Dick Fearn

It happened in the second half of 2008, after we received this report and we took a decision to put firmer arrangements in place for procurement. Mr. Gill's appointment as commercial manager was part of that process. We also have a manager working for the chief financial officer who takes an overview across the company of our processes and procedures to ensure compliance for each of the functions, infrastructure, signalling, track and so on, along with the mechanical engineering function, which was not the subject of this report but which is an important function. We have strengthened the procurement area significantly.

We have taken the systems element into account. The Senator mentioned that the bulk of the report is about systems; the fraud element is a much smaller area. We recognised that and straight away, the systems element came out in the interim report in January 2008. We recognised that was the area where we needed to act in a determined way. Mr. Gill went through some of the specific areas in detail that are a manifestation of those changes we have made.

Senator Paschal Donohoe

On that point, Mr. Ronan Gill has stated that internal audits have taken place since the report was presented to the board. How many? What was the risk assessment in those audits?

Mr. Ronan Gill

For plant hire, the initial audit was in June 2007. There were follow-up audits since then. The first was in November 2007, and the second was in August 2008. A third is ongoing.

Senator Paschal Donohoe

The report was presented to the board in July 2008.

Mr. Ronan Gill

The group internal audit report?

Senator Paschal Donohoe

This report before us?

Mr. Ronan Gill

The Baker Tilly Ryan Glennon report, yes.

Senator Paschal Donohoe

Since then, there was an audit in August 2008 and one other that is taking place. What were the results of the August 2008 audit?

Mr. Ronan Gill

The audit found that the action plan that had been put in place since the group internal audit report of 2007 was progressing well. The main area where further progress was required at that point was in terms of our plant hire database and its configuration to deal with a number of weaknesses that had been identified within it. That process has been completed and, as I told Deputy Dooley, another version is currently being worked on to go live simultaneously with the new procurement process.

Mr. Barry Kenny

I will answer one question put by Senator Donohoe. The report states that the weak controls existed in the higher volume-lower value areas, accounting for between €40 million and €50 million. One cannot extrapolate from that to include the large spend in the capital programmes as 80% of the spend is in the lower volume-higher value area and the report found the controls to be strong in those areas.

Senator Paschal Donohoe

Mr. Kenny is right to clarify that point. My main point is that we have been focusing, understandably, on fraud but the procurement implications are far bigger. Even 10% of €40 million or €50 million is a huge figure.

Deputy Michael Kennedy

Deputy Dooley asked many of the questions I intended to put. Were the three employees dismissed immediately or were they given notice of termination of contract? Did they admit fraud? It was said that there were two Garda prosecutions and a third was pending. One of the persons concerned was a supervisor and the other two were in less significant roles. Which of the three is yet to be determined by the gardaí?

Does the chief accountant now have a computer reference for every single procurement area — purchases, sales, etc. — to track the transactions? The fraud was identified in 2005, when Baker Tilly was called in. On what date did Iarnród Éireann receive Baker Tilly's interim report and what action did it take before receiving the full report in 2008?

There is obviously a good deal of intra-group business among Iarnród Éireann, Dublin Bus, Bus Éireann and the subsidiaries. What level of procurement operates in that process?

Deputy Frank Feighan

Having read the report I am shocked. It is like something handed to a Minister to tell him or her how good everything is in the country. It is quite clear there are many problems and that Mr. Fearn has a difficult job to do. On his appointment three and a half years ago he came into a viper's nest. I do not believe that Iarnród Éireann or CIE were run as efficiently as their equivalents in the United Kingdom. Over the years he has put in place improved systems and I congratulate him on that. Passenger numbers have increased by 44% and the workforce has been reduced by 25%. In my area, services on the Sligo line have been introduced and it is clear that, with investment, people will use the rail service. Those are certainly aspects of Irish Rail that I would welcome.

Mr. Fearn says this has been delivered through approximately €3 billion in capital investment — with the best on-budget performance of any major recipient of capital funding in the State. What exactly was the company benchmarking against? Was it the HSE or were the comparisons being made with private companies? There was €3 billion on the table and it looked as if it went for the best of everything. Mr. Fearn is saying the company went from being the worst in Europe to the best. Perhaps at the time costs could have been saved. It just seems that a lump of money was available, so it was a matter of using it. I see there were 100 perfectly good mark 3 passenger carriages which were in service over 20 years. The same type of carriages are being refitted in the United Kingdom, after 25 years of use, as part of a mid-life rebuild programme, yet we are scrapping them. Could they not have been kept within the system and replacement costs availed of? It seems to be a case of using the taxpayers' €3 billion and going for the best. I do not believe enough was done to perhaps save the Irish taxpayers' money, while I realise much of the capital came from Europe.

Compared to British Rail, say, does Mr. Fearn believe political appointment to boards is the right way to do business or should this be examined all around the country? Perhaps he might explain how precisely British Rail is run. I want to address just one aspect as regards the terms of reference, namely, the repayment of €100,000 paid by one individual. To me it appears that the company is making great play of this fact. I wonder, if some individual was prepared to pay €100,000, what the extent of the actual graft was. How was that paid back? Did he or she get a receipt, or how was the figure of €100,000 determined? It is an enormous figure for any individual to repay, so perhaps Mr. Fearn might elaborate on that.

I suspect the company has come a long way over the years. However, this is its way of doing business. It probably is a good deal better than most, but even if it is happy with its performance relative to the other semi-State companies in the country, I do not believe these norms would be acceptable in the private sector. This report seems to me to be a cover-up in some ways.

Vice Chairman

Before Mr. Fearn responds I have two or three questions from my perspective, and he can wrap up then.

There is no evidence from the report that the recommended number of quotations, as set out in the policy and procurement manual, had been obtained or that a value for money exercise had occurred prior to the contractor being selected. I thought that this should be an elementary matter of business, regardless of the company. Take for instance someone who applies for a disability grant to install a small toilet in the home. He or she must get two or more quotations, for something that will cost only €10,000 or €11,000. That has been a standard practice in most local authorities all over Ireland for years. How could a fundamental matter such as that have slipped anybody's mind at the level Mr. Fearn operates?

He mentioned something about a western railway in so far as the EU money was concerned. Will Mr. Fearn please come back to this? I presume he was referring to the fact that a particular part of the railway network was to be part funded under EU funding arrangements. Did Mr. Fearn say that the European Union money was never actually drawn down? If that is the case, where did the replacement money come from? Was the project ever replaced? That is a fundamental matter, whatever is in the Baker Tilly report. Many people want to know what happened to the project. Did it continue and, if so, who funded it once we had forfeited the EU element of the funding?

Mr. Fearn said there were occasions when, during the tendering procedures, many of those who provided the service simplified the procedures. I assume they did that because it suited them financially to do so. Why would they otherwise want to do so? What was the rationale? It was not in accordance with the specifications so to whose advantage was the simplification of the procedures?

Deputy Frank Feighan

As happened with FÁS, was any remuneration given to the three people who were dismissed?

Mr. Dick Fearn

I will deal with the questions as well as I can and may ask Mr. Gill to come in on one area. Deputies Kennedy and Feighan asked about the three individuals who were dismissed. Two were dismissed very quickly. The other was temporarily reinstated on appeal but, when further information came to light, he was finally dismissed, again in a relatively short time after the incident. There was no money or fees paid to them at all. A proper process has to be followed and any company has to have disciplinary procedures. Ours are agreed with the trade unions and were implemented in full.

Deputy Kennedy also asked about the process, which Mr. Gill will answer.

Deputy Michael Kennedy

Is there a computer programme to track orders until the cheque is written or the cash comes in?

Mr. Ronan Gill

Yes. We took on board some of the recommendations of Baker Tilly on aligning budgets to individuals, making it possible to track the total expenditure of a line manager over a number of aggregated budget headings and specific to particular vendors.

Mr. Dick Fearn

There was a question on intra-company business, to which I will return. Deputy Feighan asked about the cost of our investment and, while he acknowledged that much of our investment has benefitted customers, he wondered if we had done too much. In particular he asked about the mark 3 carriages which are being refurbished in the UK. Our mark 3 carriages are already well over 20 years old and are typically depreciated over 20 or 25 years. They are close to the end of their useful life unless one spends a lot of money on refurbishment. However, a mark 3 carriage in itself is inert and needs something to pull it, a locomotive. That is a very traditional way of doing things because, given the relatively short distances we have in Ireland, it means uncoupling the locomotive and putting it to the other end. Therefore, extra staff are needed to do that.

With modern rolling stock technology, however, the engine power is under the carriage. All the new carriages we have procured, from CAF in Spain and Mitsui, Rotem in the Far East, all have their engines underneath. This is a much more cost-effective way to run our rail network, so it was a very business-based decision. Rather than spending money on expending the life of something that would cost a great deal to run in the future, we decided it was better to buy new equipment to the modern level of technology with much lower running costs. That is exactly what we have done, and it was the correct decision.

The Deputy asked how I would compare this to British Rail. British Rail was privatised in 1996, but not very well; it became a plethora of many different companies. However, many good people have emerged from that organisation and are now doing different things. At least two of them are helping us on our board. In particular, we have Mr. Cliff Perry, who was the final head of the research centre at Derby, a very technically competent officer. He is a member of the Iarnród Éireann board and gives us great advice on spending our money sensibly in technical areas. We also have Mr. Phil Gaffney, who was the chief executive of Hong Kong Metro before he retired to come and live in west Cork a few years ago. Mr. Gaffney has fantastic experience of running such an intensive railway as the Hong Kong Metro. He gives us great advice on matters such as signalling safety, how our signal systems work and so on.

I came from the UK. I was privileged to have been appointed as chief executive, after I had been with the company for a couple of years. I have found it to be the best opportunity I have ever had in my life, but I am supported by a very strong board, with a great deal of expertise on it from elsewhere in the world. We have used that expertise and I have tried to drive the company in a way that would be beneficial to all our customers and to the State for many years to come. There were issues to be dealt with as identified in the Baker Tilly report, and I have dealt with them. We have commissioned a report and dealt with the issues. We have been very determined in doing so.

The Vice Chairman asked how some of those non-compliance issues came about. The colleagues who were trying to simplify things and in doing so became non-compliant were not doing so for their own financial benefit. There is no evidence, other than in three individual cases, to suggest they were. They were trying to speed matters up to make life easier for themselves.

The Deputy, I am sure, will appreciate that sometimes rules and procedures can be more time-consuming than a quicker way. That is not to say that they were right. They were wrong, and we are taking very tough action to ensure, as Mr. Gill explained earlier in some detail, that we stop this type of short-circuiting going on.

Vice Chairman

What happened?

Mr. Dick Fearn

Sometimes we had quotations from suppliers and the individuals concerned were re-using old quotations. That is not right, we are not trying to defend it and we believe that ——

Vice Chairman

It is an age old business concept, however, is it not?

Mr. Dick Fearn

I am sure it is something we would all expect to see happen. We had identified features in some early work, as referred to earlier by Mr. Gill, before Baker Tilly. Then, with the endorsement of Baker Tilly, we recognised that this was happening and that we had to stop it. However, it was not happening, except in three individual cases, for personal financial gain, and there is no evidence at all to suggest that it was.

The Vice Chairman also asked about the Westport line and I will explain that, if I may. Two resignalling schemes were going on at the time. One was on the Westport line and the other on the Rosslare line. For efficiency purposes we took away the old signalling, which was very manually intensive, and installed new computer-controlled signalling from our central signalling centre. It is a very effective, safe and state-of-the-art system. It needs radio masts as radio-controlled communications are a key part of the system. We did not adhere to the detail of the EU grant system in respect of those masts. We had checked the specifications very thoroughly and Dr. Lynch quoted from a report for the Department of Transport which stated that we were ruthless in checking we had done something properly before we submitted anything for a grant. Having not done it properly in the case of the Westport and Rosslare lines, however, we did not apply for EU grants. The schemes were completed and came in within budget but we were not able to make a claim to the EU.

Vice Chairman

For what amount would the EU claim have been?

Mr. Dick Fearn

The EU claim would have been for €517,900 for the Westport line and €273,300 for Rosslare.

Senator John Ellis

Have all the recommendations of the Baker Tilly report been implemented in respect of procurement procedures?

Mr. Dick Fearn

A very large percentage have been implemented.

Mr. Ronan Gill

The recommendations are all in the process of being implemented. Under our proposals for organisational change we summarised the recommendations into five areas. Four are fully closed out and one is still in progress. There were 140 recommendations in total and some duplication among them. There were six key recommendations relating to plant hire and five have been fully closed out while one is still in progress. The recommendation still in progress will be a continuous task as it involves moving the method of procurement into a mini-tender. Nine recommendations were made in respect of stocks, seven of which have been completely closed out while the remaining two are in progress. Six recommendations were made relating to procurement and five have been fully closed out while the other, which is related to the recommendation on plant hire, is being progressed.

Senator John Ellis

Some people have said that confined tendering applies in respect of some organisations, one of which is Iarnród Éireann. I do not say this is true but am merely citing what has been said. In the future, will the tendering system be open to anybody who wants to tender, provided they can provide the necessary bonds and have the equipment?

Mr. Ronan Gill

Yes.

Senator John Ellis

It will be an open tender system. Will Iarnród Éireann be in a position to notify those who are unsuccessful of the tender prices that have been accepted? That may be a loaded question but I ask because, in many cases, people are not given a transparent account of why a tender was accepted.

Mr. Dick Fearn

I am not sure it is normal in any business environment to reveal prices because it can affect future bidding.

Senator John Ellis

Is it not likely to be of benefit to future bidding?

Mr. Dick Fearn

In certain markets it can be but it may not be in others. If there is downward pressure it can be helpful but it can be very unhelpful if there is upward pressure. In order to improve transparency, however, we bring in unsuccessful tenderers to give them feedback. If a tenderer was way off in terms of price but otherwise would have been acceptable we would openly tell it. If a tenderer was close on price but way off on some other category we would also let it know. It is in our interests for people to want to tender for our business because that is how we get the best prices. We want, therefore, to be completely transparent.

Senator John Ellis

It was said earlier that the redundant rolling stock was not going to be refurbished. What has been done with it? Has it been sold or put up for tender?

Mr. Dick Fearn

The underground stock is a mixed bag. Some is well beyond its useful life and is tendered for scrap. People in certain areas of the world may be prepared to buy from us and there will be tenders if that is the case. Most people would have to change their gauge because not many countries run on a gauge of 5 ft. 3 in.

Vice Chairman

I am bringing the proceedings to a close but Deputy Thomas Byrne will be allowed to ask a question, as he has been present throughout the meeting.

Senator Shane Ross

I want the joint committee to ask these gentlemen to come back at some point because we have many more questions to ask them. I ask that we invite Baker Tilly, the CIE board and the auditors.

Deputy Thomas P. Broughan

We must not forget the Minister for Transport.

Vice Chairman

I agree. I thank Dr. Lynch and his colleagues for coming. I am sure we will have the pleasure of their company in the future.

Deputy Thomas Byrne

This committee held a discussion in February 2008 about the price of tickets between Drogheda and Dublin, Laytown and Dublin and Balbriggan and Dublin. It is not proposed to increase the price of an annual ticket from Balbriggan next year but it is proposed to increase the price from Laytown by 9.9%. Is that the case? If it is, it seems to fly in the face of commitments given to this committee last year.

Mr. Dick Fearn

We have made no proposals for differential price increases of that nature.

Vice Chairman

A final question will be asked by Deputy Broughan.

Deputy Thomas P. Broughan

Some of my councillor colleagues in Wexford and Waterford have e-mailed and telephoned me on numerous occasions about the Waterford-Rosslare link. I asked the chief executive about that issue. The link is part of the western rail corridor and an important development. The patronage was low and there was an argument for reducing the service to a tiny carriage but the western corridor link to Rosslare was supposed to be fundamental.

What happens to old sleepers, such as those in the North Wall or Portlaoise?

Deputy Fergus O’Dowd

They become Senators.

Deputy Thomas P. Broughan

If one sees sleepers for sale, such as in a garden centre or the walkways to Portmarnock beach, might they be CIE sleepers?

Vice Chairman

They are not cheap wherever they come from.

Mr. Dick Fearn

The first question was on the Waterford to Rosslare line. It is the most lightly used of all the lines on the network. It has survived to this day because of sugar beet, for which there was a major terminal at Wellington Bridge. For five months of the year the sugar beet campaign kept the line alive but when manufacturing ceased the traffic ceased, leaving the line between Waterford and Rosslare with very light usage. A small number of commuters travel to Waterford on one train in the morning and return in the evening. With such light use we have to look at our options.

One of the options that is seriously being looked at is whether any benefit can be gained from the line being further used for heritage purposes. Across the UK, with which I am familiar, there are many lines that run through attractive areas which have perhaps lost their original role but have survived by becoming tourist attractions. We know at least a couple of organisations that are interested in talking to us about how they could adopt the Waterford-Rosslare line for heritage purposes. We are fostering that conversation and have already advised the Minister of that possibility and we are looking at whether that can happen.

Deputy Thomas P. Broughan

Will Mr. Fearn send us a note on that issue?

Mr. Dick Fearn

I will. So far as old wooden railway sleepers are concerned, certainly those in Ireland are contaminated with creosote. That is a serious matter. In modern society we are not allowed to dispose loosely onto the open market of things that are contaminated in that way. We have found a disposal route where a contractor takes them from us and then they are burned in a safe manner. The sleepers that one sometimes see in garden centres are not CIE sleepers, but sleepers that have been procured. Recently I had correspondence from a Deputy, whose name escapes me, and I had to confirm that this particular garden centre had acquired them from a supplier in the UK and that they were not from Ireland.

Vice Chairman

I thank the witnesses.

The joint committee adjourned at 4.30 p.m. until 2 p.m. on Wednesday, 4 November 2009.