Mr. Seamus McCarthy:

Let me contribute on the point that Deputy Collins raised. The statement on internal financial control or, in the case of institutes of technology, the statement of internal control, specifically addresses the system of control in operation. We do not formally audit to the point of establishing every statement is absolutely true and founded on evidence but we do look at the statement to ensure that the review of internal controls has actually been carried out and reported. Normally, it is reported, in the first instance, to the audit committee but it must also be reviewed by the board or governing authority of the entity. We also expect that it is done in a timely way. The operation of controls in a particular year needs to be addressed within that year or very shortly after the end of the year. Thus, the assurance is in place when the financial statements are actually presented. There is a question of resources. We have not sought to take on that function in addition to what we already do.

Not only in the third level sector, but across the public sector, the system of control is actually in place and operating. We report on the audit certificate in relation to financial statements where we find that the review of internal controls has not been carried out or that it has not been carried out in a timely way. The Deputy's point is that there needs to be a review. We look to see that that review is carried out.

With the exception of Dublin Institute of Technology, all the institutes of technology use the common contract in relation to internal audit function. Therefore, there is an external auditor carrying out that review of controls. In reality, it should cover the operation of all of the main controls that operate within a public sector body.

I have a couple of comments reflecting on some aspects of the discussion that has already taken place. Confidential disclosure and appropriate procedures in public sector bodies are important. I can say that nothing was brought to the attention of the auditors over many years in relation to questions of extravagance or non-competitive procurement in Waterford Institute of Technology. The bodies we audit know that we would be very quick to investigate if we had any inkling that there was a problem of that kind.

On non-competitive procurement, we test within the entities we audit whether procurement has been as a result of competitive procedures. We would have carried that out every year in Waterford's case but we did not come across any significant number of instances where that was happening. Departments, including the Department of Education and Skills, are required to report to us annually if there have been any instances of non-competitive procurement over a threshold of €25,000. That is not an obligation of other public bodies as a direction of the Department of Public Expenditure and Reform.

It might be one of the areas on which the committee might like to reflect and make a suggestion.

There is a structure and template in place for the financial statements of the institutes of technology which all of them follow. We feed back to the Higher Education Authority, HEA, on the financial statements. One of the issues we have raised and will raise again is that within the analysis of operating expenditure, the level of detail provided may not be optimal. There might be a basis for specifying certain categories of expenditure such as publicity, public relations and so forth. There is a category in the last set of audited financial statements from Waterford Institute of Technology titled “Other Expenses” which came to €4 million, a substantial item. In fact, it was the largest item in the listing of €18 million worth of expenditure items. This can be examined with a suggestion that there might be a more detailed analysis.

At central level, we could compare the financial statements of one institute of technology with another. The point has been made about the uniqueness of the company structures and their operations within Waterford Institute of Technology. As a result, the financial statements for this institute are quite different to those from all the other institutes. That is why we were concerned at the size of transfers from the institute to the companies. The level of detail of how that money was applied was not the same as in other institutions.

We also have a concern around the governance of companies that operate as subsidiaries or independent entities, as well as their compliance with competitive procurement and general procurement rules. Due to the uniqueness of Waterford Institute of Technology, we wanted to draw attention to the fact that these companies were consolidated into the financial statements and the governance rules that applied would be similar to those in other public sector bodies.