Professor Willie Donnelly:

Chairman, for the record, Ms Kathryn Kiely has been replaced by Dr. Peter McLoughlin.

I welcome the opportunity to address the committee on behalf of the institute and to address matters relating to the institute’s accounts. I wish to begin by setting my remarks in context.

The institute’s current situation needs to be considered in the context, first of all, of demonstrable under-investment in the third level sector over a decade or more and, moreover, inequalities in the ways funding is distributed between institutes of technology, IoTs, and universities. Some aspects of that are outlined in our briefing document but in summary, between 2008 and 2015, State investment in the IoT sector in general dropped by 50% while student numbers increased by 30%.

As we saw in our briefing, our mission is to serve our students, the citizens and the communities of the south east and our social, industrial, cultural and commercial partners and stakeholders - regional, national and international. Since its foundation in 1970, the institute has responded proactively to the region’s needs and with huge success, evolving from a provider of vocational training programmes to a research-led, internationally respected educational institution.

In the past ten years, the institute has successfully attracted over €135 million in competitively sourced research funding from various sources. We have been instrumental in attracting knowledge intensive industries to the south east region and Waterford Institute of Technology, WIT, has been vital to job creation and regional development. Since 2008, WIT has signed 34 licences and been involved in the spin out of ten companies resulting in the creation of more than 600 high impact jobs in Waterford. Enterprise Ireland, in a statement to the Committee of Public Accounts on 31 January 2013, stated: "Waterford is a shining example of how co-locating the incubation centre with the institute has led to the establishment of a software industry that probably should not have existed in Waterford.".

The institute has played a pivotal role in the transformation of Waterford city as a leading high impact digital and advanced manufacturing economy. A key example of this is FeedHenry, a spin out of Waterford Institute of Technology, which created 50 jobs. It was recently acquired by Red Hat. Red Hat announced an investment of €12.7 million in a new project which will create an additional 60 jobs, going some way to address the unemployment deficit in the city.

At the same time, the institute's record in promoting regional access and participation is also extremely strong. Approximately half of our undergraduate intake is from sources other than the leaving certificate student cohort. Over one third of our full-time learners come from target socioeconomic groups, approximately 10% of our students are registered with our disability office and almost 3,400 students at the institute are currently receiving some form of grant.

WIT's current situation must be set in the context of these efforts to address regional need while at the same time bearing catastrophic funding cuts. The success we have had over many years in the research domain and in access give just two examples of the hard work of our management and staff in the interests of the region despite the restrictions imposed on the institute.

I turn now to addressing the items specifically referred to in the committee's correspondence. In respect of the institute's 2013-14 financial statements, the delay was, first, as a result of the institute complying with a request from the Comptroller and Auditor General to carry out a substantial policy change which required a full review of research income and a change in the policy relating to the recognition of research overheads, a change that was requested across all third level institutions. Second, 2013-14 was the first year the institute was required to consolidate the financial activities of the subsidiary companies which were the subject of the Quigley report, issued in June 2013 by the Minister for Education and Skills.

For the year ending 2013-14 the institute's financial statements, before consolidation, record a surplus of €1.168 million compared to a deficit in the prior year of €306,000. General expenditure in the year increased by 0.9%, largely due to increases in utility costs. However, State recurrent grant fell by €2.78 million compared to the previous year, that is 9%. Some of this deficit was offset by an increase in student contribution and tuition fees particularly as non-EU fees increased by €1.55 million.

Also in that financial year, the subsidiary companies reported an annual financial profit of €1.096 million. However, the consolidation required the alignment of policies in relation to the treatment of assets, deferred capital grants and reserves, both recurrent and capital, and this necessitated a transfer of €26.936 million from revenue reserves to capital reserves, hence creating the deficit the committee has just heard about.

In the year prior to consolidation we moved the financial year end of the subsidiary companies to 31 August rather than 30 June, in order to bring the financial year end in line with the institute's. A consequence of this approach is that comparative 12 month figures for the year ending 31 August 2013 were not available to include in the consolidated income and expenditure account.

The overall financial position of the institute remains difficult; funding levels have not yet been fully restored to the third level sector as highlighted by the financial review published by the Higher Education Authority, HEA, in October 2016. That report indicates that the future sustainability of the institute of technology, IoT, sector is under threat and that there is a "critical need for investment in order for the sector to survive and flourish". The WIT executive is focused on addressing matters associated with the financial situation that are within its control.

As reflected in the higher education sector systems performance 2014-2016, the institute places a high degree of emphasis on good practice, corporate governance and internal audit. The audit committee was reconstituted and greatly strengthened in December 2013, following the recommendations of the Quigley report; the detail is included in our briefing statement. It was an administrative error that the report mentioned in PAC's correspondence was not furnished to the governing body in the year ending 31 August 2013 within the acceptable timeframe. However, the records and minutes held in the institute confirm that the governing body was, and remains, fully apprised of the work of the audit committee.

Finally, with regard to the technological university process, WIT remains committed to the provision of enhanced educational opportunities and an enhanced innovation and development infrastructure for the south east. This is needed by the people of the south east and demanded by all our stakeholders. The technological universities legislation currently under consideration will enable the provision of that enhanced higher education infrastructure. In this context, we continue to engage with our colleagues in IT Carlow to explore the potential to create that new entity.

The institute made a successful application for funding, with our partner, IT Carlow, in support of the engagement process to the HEA and the agreed project plan for this will see the institute complete the commencement and activation phases of the process by the end of 2017. Currently a memorandum of understanding, MOU, between the organisations is being finalised. The organisations have identified members to participate on a joint steering committee to advance the process.