Dr. Brendan Murphy:

I thank the chairman and members of the committee for the invitation to attend this meeting to discuss the financial statements of Cork Institute of Technology, CIT, for 2015 and the KPMG reports conducted into anonymous allegations made in 2014. I am joined by the vice president for finance and administration, Mr. Paul Gallagher. Given that it is our first appearance before the committee, perhaps I could outline what CIT is all about. It is one of the largest, most progressive and successful institutes of technology in the country with approximately 11,000 higher education students, 3,000 craft and junior music students and a staff of 1,400. It operates on four major sites in Cork city and county. CIT’s Bishopstown campus comprises 38 ha, including major sports facilities, research centres and the Rubicon innovation centre. The CIT Crawford College of Art and Design and the CIT Cork School of Music are both based in the city centre, and the National Maritime College of Ireland is based in Ringaskiddy, County Cork, close to the naval base in Haulbowline. CIT is a major national provider of STEM education and research. Its annual income and expenditure is approximately €100 million and research activity constitutes 20% of its total budget. CIT, in partnership with IT Tralee, has successfully completed three of the four stages of technological university designation.

CIT enjoys a national and international reputation for the quality of its education and research and the professional capabilities of its graduates. It leads Irish higher education in the recognition of work-based learning and prior learning and the development of joint degrees, which is done in conjunction with UCC and universities in Europe. The quality of its education programmes and research is overseen by Quality and Qualifications Ireland, QQI. Its governance is provided by its governing body and through its three committees: audit, finance and strategic development. Its internal audit, while tendered for on a sectoral basis, operates on an independent basis in each institution. It operates under the Institutes of Technology Acts 1992 to 2006 and the HEA has a regulatory oversight of the institutes of technology.

Higher education in Ireland has been operating in a very challenging financial environment since 2008, with significantly increased higher education student numbers, reduced staff numbers and reduced State funding. Even though CIT has continued to be successful in this period, it is not immune to these financial challenges as may be seen in our 2015 financial statements. CIT incurred deficits in the academic years 2013 to 2014 and 2014 to 2015. I apologise because the figure of €126 given in the briefing in this regard should read €126,000. The representatives of the Comptroller and Auditor General will be glad to know that we both agree that the deficit was €1.2 million rather than €1,216. It is amazing that one can read something and miss a vital detail. A break-even position was recorded in the 2015 to 2016 academic year and, following an extensive review and planning process in conjunction with a HEA process, forecasts for the next four years demonstrate the ability of the institute to remain in a sustainable financial position. The forecast for the academic year 2016 to 2017 is in line with expectations.

The reason for the deficits in the academic years 2013 to 2014 and 2014 to 2015 relate, in the main, to the STEM and apprenticeship areas. In terms of STEM, the funding model has negatively impacted on the weighting of funding in this area following the introduction of the flat-rate student contribution of €3,000 per annum. In terms of apprenticeship, CIT had approximately 100 staff working in this area in 2008 and carried the cost of maintaining these staff during a period of collapse in provision. Fortunately, the area of apprenticeship is now experiencing significant growth and is contributing directly to the recovery in CIT’s financial position.

CIT has always been prompt in the submission of its financial statements to the Comptroller and Auditor General for audit. With a year end of 31 August and deadline for submission of 31 December, CIT has consistently submitted its accounts in late October or November. CIT's last set of financial statements for the year ended 31 August 2016 are expected to be signed off by the Comptroller and Auditor General this month. No outstanding issues of a high rating are expected.

The committee has indicated that it wishes to revisit the issue of the KPMG report. This report relates to two anonymous letters received by the Comptroller and Auditor General in 2014 in regard to CIT. As for the first anonymous letter received in March 2014, a total of 175 allegations were made. Many of these were grossly defamatory. The anonymous letter was referred by the chairman of governing body to the audit committee, which was authorised by governing body to obtain independent legal advice. Based on this advice, the audit committee, again with the agreement of governing body and via the independent legal advisers Arthur Cox, tendered for and engaged KPMG to carry out an independent review of the allegations.

KPMG’s engagement was structured on a phased approach to ensure that the audit committee could retain oversight of the investigation while ensuring KPMG had sufficient freedom to complete its work. KPMG’s remit was to investigate the allegations as presented and was not limited to the handling of the process by CIT. Indeed, KPMG noted in its report that it did not note any material limitations of scope as part of the review which prevented it from completing the scope of work as set out.

The phased approach included a review of the anonymous letters and management responses; a corporate governance review and review of internal policies and procedures and CIT’s compliance; a review of expenditure documentation in CIT and its subsidiaries; consideration of whether each allegation had been addressed; and production of a comprehensive report of findings.

The results of the KPMG review were as follows: 32 of the allegations contained insufficient evidence to allow further review; 35 were responded to sufficiently at the outset by CIT management and no further action was deemed necessary; 52 were deemed repetitious to other allegations in the same letter; and 56 allegations were identified for additional information and documentation. This was facilitated and of those 56 allegations, 47 were deemed to require no further action as they had been adequately addressed by the institute; three were considered to contain no evidence and therefore needed no further action; and six allegations were deemed repetitious to other allegations and required no further action.

In respect of the second anonymous letter received in December 2014, another 21 allegations were made. Again, many of these appeared to be grossly defamatory and all were considered by the audit committee of CIT. The audit committee engaged KPMG to carry out a further independent review, which determined that two of the allegations had been previously addressed by KPMG and did not require any further action; three were sufficiently addressed at the outset by CIT management and no further action was deemed necessary; one was deemed repetitious to previous allegations; and 15 of the allegations were identified for additional information and documentation. This was facilitated and those 15 allegations were then deemed to require no further action as the allegations had been adequately addressed by the institute.

In summary, the outcome of the KPMG independent reviews was that of a total of 196 allegations, 35 were deemed to have insufficient evidence to allow further review, 102 were deemed to require no further action as the allegations had been adequately addressed by the institute and 59 were deemed repetitious to other allegations and required no further action.

The governing body received updates from the audit committee during the process. A final report issued from the audit committee was considered by the governing body at its meeting on 26 March 2015. It concluded that after two intensive external investigations, all individuals and-or agencies identified within the letters had carried out their professional duties highly diligently and with total integrity. The governing body concluded that no further response or action was required from the institute’s executive.

During the course of the extensive KPMG reviews, a small number of issues were found aside from the 196 allegations contained in the anonymous letters. As is the case with any audit report, these matters and management responses were considered by the audit committee and controls were changed or strengthened as appropriate. A full copy of the audit committee’s final report to the governing body and the KPMG reports have been provided to the HEA, the Department of Education and Skills and the Comptroller and Auditor General. The chair of the governing body also provided the HEA with a full written account of the process undertaken to address the matter. The matter was also addressed at a meeting of the Committee of Public Accounts on 10 December 2015 and extracts from the relevant statements of the Comptroller and Auditor General, the HEA and the Department of Education and Skills are attached in the appendix provided today. All attest to the satisfactory manner in which CIT dealt with the matter.

We remain at the disposal of the committee to answer any questions it may have on these and other matters.