Professor Willie Donnelly:

I welcome this opportunity to update the committee regarding matters raised at previous meetings and issues reported in the financial statement of the institute for the year ending 31 August 2013. The briefing document supplied to the committee last week presents a detailed response to the various matters reported in the 2013 financial statements.

I propose in my opening statement to concentrate on two major issues that have been the subject of considerable comment at recent meetings of the committee. These are progress in respect of the relationship between Waterford Institute of Technology and Diverse Campus Services Limited, DCS, including on the implementation of the recommendations of the Quigley report, and the status of the Carriganore sports campus development. I will make particular reference to the contents of three separate but related reports, those being, Special Report No. 78 of the Comptroller and Auditor General: Matters Arising out of Educational Audits, which was issued in February 2012; the Grant Thornton report published in June 2012 on behalf of the governing body of the institute; and the Quigley report, which was issued in June 2013 to the Minister for Education and Skills. These reports focused on the relationship between WIT and DCS, the company providing canteen and other services on campus.

Briefly, report No. 78 reads, "The patterns of interaction between WIT and a range of companies that provide services (canteen, residences, recreation facilities, retail outlet and sports hall) on campus suggest that the related activities are part of the normal services typically provided on the campuses of third level institutions and that they should be included in consolidated accounts produced by the Institute." WIT accepted and agreed with this recommendation. Indeed, at the time of the Comptroller and Auditor General's report, WIT's governing body had already commenced a review of WIT and DCS's relationship and commissioned a report from Grant Thornton. The Grant Thornton report was presented to the governing body in June 2012 and recommended that DCS and its subsidiary companies should be restructured under new management as subsidiary companies of WIT. The institute also accepted the recommendations included in the above reports and set about incorporating the DCS companies within WIT and consolidating their accounts within the WIT accounts.

This was overtaken by the appointment in November 2012 of Mr. Dermot Quigley by the Minister for Education and Skills as an inspector under section 20 of the Institutes of Technology Acts to review the relationship between WIT and these companies. The institute welcomed Mr. Quigley's recommendations, which were published in June 2013. His report points to aspects of the relationship between WIT and DCS that could be considered "inappropriate" in so far as they "had adverse effects on governance at the Institute and on the management of its financial affairs".

I am pleased to report that the institute has addressed the key issues raised in Special Report No. 78. The institute has also implemented the recommendations of the Quigley report and full details of their implementation are contained in the briefing documentation supplied to the committee. Specifically, the governance and internal control environments in the DCS group have been addressed. The DCS board has been reconfigured with appointments of representatives from the governing body, institute staff and an external chair. The code of governance for the institutes of technology has been implemented by DCS as far as is practical. These new structures reinforce the alignment of the vision and purpose of the DCS companies with the institutional strategy and the needs of the student community. The process of ensuring that alignment into the future is ongoing. The consolidation of the financial accounts of DCS and WIT has been completed within the 2014 financial statements, which are under audit, as mentioned in the briefing documentation.

I will turn my attention to the status of the Carriganore sports complex development. The key factors that led to the failure to complete the complex were the overdependence of DCS on financial support from WIT, DCS's increasing loan repayments and falling revenue, and the impact of the economic downturn on the institute's financial position. It would have been logical for DCS and WIT to re-evaluate the economic viability of phase 3 of Carriganore, in particular given that phases 1 and 2 entailed an integrated building that did not require phase 3. The sensible conclusion would have been not to have proceeded with phase 3 of the sports complex. This point was noted by Mr. Quigley, who stated it was unfortunate that a decision was made to continue with this phase.

The commencement of phase 3 created major pressure on the institute’s resources. Notwithstanding its decreasing financial resources, the institute made every effort to support the continued development of Carriganore, specifically through the transfer of €6.1 million from the institute to DCS during 2012. By the end of 2012, however, WIT and DCS did not have access to additional financial resources to invest in the sports campus. In addition, WIT's end-of-year accounts were showing a financial deficit. The institute was forced to terminate works on the complex and secure an unfinished building. This resulted in a cost for exiting the project and inevitably a cost for restarting the project at a later stage.

Following the Quigley report, the Department of Education and Skills made some funds available to the institute. These were sufficient to pay the outstanding costs for the Manor Village student accommodation complex, which was another DCS project. However, the residue was not sufficient to cover the cost of reopening and completing phase 3 of Carriganore.

I was appointed president in April 2015. Since then, I have focused on ensuring sufficient funds are available to complete and open the sports complex. Following further engagement with the Department of Education and Skills, sufficient funds have been made available to complete the building. I am pleased that a sustainable repayment schedule for all moneys due to the Department is in place. I am also engaging with the HEA in developing a three-year strategy to restore the institute's financial independence on an ongoing sustainable basis and to focus our resources on the continued education and economic development of the south east.

Regarding the consolidation of companies and associated matters, the institute has responded fully to the concerns raised by the Comptroller and Auditor General in Special Report No. 78 and has implemented the majority of the recommendations of the Quigley report. The future strategic development of DCS is aligned with the institute's strategic priorities. The company's financial and governance structures are also aligned with best practice. The role of the governing body from a governance, oversight and reporting perspective in respect of the subsidiaries is clear. All projects now have a robust and sustainable financial plan in place that will realise significant assets for the institute, the region of Waterford and the State.