Mr. Seamus McCarthy:

The Higher Education Authority is the statutory planning and policy development body for higher education and research in Ireland. In addition, it is the primary funding authority for Irish universities, institutes of technology, teacher training colleges and a number of other designated education bodies. Approximately 90% of the HEA's income in 2016 came directly from Vote 26, Education and Skills, with the balance, largely consisting of research funding, from Vote 32, Jobs, Enterprise and Innovation. The HEA had gross expenditure of €1.15 billion in 2016. The bulk of this comprised grants to higher education bodies for specified purposes, including current spending, research, and capital project funding. I issued a clear audit opinion in respect of the HEA's 2016 financial statements.

In 2015 and 2016, UCC recognised total income of €346 million. The university reported a modest surplus for the year of €562,000. As in prior years, my audit opinion in respect of the UCC financial statements was qualified in respect of the recognition of a portion of the future pension funding receivable from the State. The root of the issue is that UCC awards professional added years for pension purposes to certain academic staff members on a different basis to that approved by the Ministers for Education and Skills and Finance under relevant legislation enacted in 2009. As at 30 September 2016, the university was in disagreement with the Department of Education and Skills as to where responsibility lies for pension liabilities relating to transferred-in service. The university estimated the total future cost of the disputed pension benefits at €15.7 million and included this amount in its deferred pension funding asset. I concluded that the recognition of the €15.7 million asset as at the end of September 2016 was not in accordance with applicable accounting standards because of the disagreement with the Department at that date.

An agreement was subsequently reached between the university and the Higher Education Authority, HEA, on shared funding of the disputed future liabilities. This will be reflected in future financial statements.

The audit certificate draws attention to the non-consolidation of the results of Cork University Foundation DAC on the basis that the foundation is not controlled by the university. On 30 September 2016 the foundation had accumulated reserves of €4.1 million. Note 31 to the consolidated financial statements provides information on transactions between the university and the foundation. Members will recall that the university has recently informed the committee of its intention to provide a full set of the foundation's financial statements, with the consolidated financial statements in future years.

The audit certificate also draws attention to disclosures in the university's statement of governance and internal control of instances of non-compliance with national procurement guidelines. Reported non-compliant procurement to the value of €4.4 million comprised €3.9 million of spending identified by the university as being non-compliant and a further €500,000 identified through audit testing.

The financial statements for Cork Institute of Technology, CIT, for the year ending 31 August 2016 indicate that consolidated income for the year amounted to nearly €100 million. State grant funding accounted for over €38 million of this figure. The other major sources of income were tuition fees and research grants. Expenditure in the year was just over €99 million, nearly 70% of which was accounted for by staff costs. The net result for the year was a surplus of €721,000. Members will recall that there are two public private partnership, PPP, arrangements in place for buildings used by Cork Institute of Technology, namely, the Cork School of Music and the National Maritime College of Ireland. The annual payments made to the two PPP companies are a direct charge on Vote 26. They do not pass through the accounts of CIT.

My audit opinion for 2015-16 was unqualified. However, the audit certificate draws attention to the fact that the institute did not provide for accrued pension liabilities under either the single public service pension scheme or the education sector superannuation scheme 2015. The same was true of all other institutes of technology for 2015-16. The audit certificate also notes that the Department of Education and Skills sought legal advice on the matter. In October 2017 my office wrote to the presidents of all of the institutes of technology recommending that they commence accounting for pension liabilities in their financial statements for 2016-17. I understand the Technological Higher Education Association, the representative body for institutes of technology, has procured the services of an actuary to carry out the necessary calculations. It is expected that all 2016-17 financial statements will account in full for pension liabilities.