Mr. Seamus McCarthy:

As members will recall, I have outlined to the committee on a number of occasions the broad events that gave rise to the delay in carrying out and completing the audit of the financial statements for Kildare and Wicklow Education and Training Board for 2015. In the end, we were only able to complete the work in December last year. I have prepared a supplementary report on the relevant events, in addition to the normal format audit opinion, as provided for in section 7(4) of the Comptroller and Auditor General (Amendment) Act 1993.

The report deals with serious lapses in controls over procurement of a number of capital projects and certain other expenses in KWETB during 2015. In that year, the ETB had receipts of over €111 million and expenditure of €109 million.

Some further context may be helpful to the committee. Members will recall that the ETBs were established in July 2013, usually involving the amalgamation of two, and in some cases three, of the previous vocational education committees, VECs. In addition, they took over the operation of training centres from the then FÁS. The first period of account for the boards covered 18 months to the end of 2014, but there were delays in agreeing the format of accounts, a matter that was not settled until around October 2015. In addition, new boards were appointed following the local elections held in May 2014 and there were further delays in some boards in appointing audit, risk and finance committees. A new code of practice for governance of the ETBs was only issued in March 2015. The combined result was a sector-wide delay in completion of the first cycle of audited financial statements, with knock-on delays for the 2015 statements.

We commenced the audit of the 2015 financial statements in January 2017. In the course of the audit testing, audit team members identified concerns about certain procurements, project cost overruns and propriety matters. A formal query on these matters was issued to the then chief executive of KWETB in June 2017. The information and supporting documentation provided by KWETB in response to the audit query were assessed as being inadequate. This was unsatisfactory, and so those matters of concern were brought directly to the attention first of the then chair and vice chair of the board and the chair of the audit committee of KWETB and, shortly thereafter, to the attention of the Department of Education and Skills. The audit of the 2015 financial statements was suspended pending the outcome of any action the board or the Department might take.

In October 2017, the Minister appointed a statutory inspector to investigate the matters raised from the audit and some other matters that the Department had been separately pursuing with KWETB. Arising from that inspection, a number of issues have been referred to An Garda Síochána and the Minister has issued a statutory direction to the board about the implementation of a corporate governance action plan developed on foot of the statutory inspector's report.

We recommenced the audit process in April 2018 and reissued the audit query. Fresh responses to the questions we raised were provided by the new chief executive, and these are reflected in the supplementary report and the statement on internal control.

Given the ongoing Garda investigation, I do not propose to recite the details of the specific instances of concern picked up by the audit. More generally, the report concludes that the board was unable to challenge the KWETB executive in an effective way during 2015. Underlying causes for this include incomplete information being provided to the board, delay in the establishment and functioning of statutory sub-committees and a lack of internal audit resources. An effective process for review of internal controls was not in place. Steps are being taken by KWETB to address these weaknesses.

It may also be useful to consider whether there are lessons to be learned generally for the ETB sector as a whole. For example, while a key function of the boards of ETBs is oversight of their executives, they are heavily dependent on the same executives in the exercise of that function. It may be worth considering whether, and to what extent, boards should have operational independence of the executives. The committee will recall in recent months noting that, in issuing their 2017 financial statements, boards across the sector were critical of the level of resources available for internal audit and of the adequacy of the financial management systems they inherited from their predecessor VECs and with which they continue to operate.