Mr. Seán Ó Foghlú:

I thank the committee for the invitation to attend. I will shorten my opening statement as I go. I am joined by colleagues who have already been introduced. My opening statement will focus on two areas, those being, the background to the circumstances of this audit report and the Thorn investigation, and the supports and oversight arrangements that the Department has put in place to support the sector in implementing good governance practices.

I advised the committee by way of correspondence in September 2018 that the Department was in receipt of the final report from Dr. Thorn, which was published last September. I also advised the committee of directions issued to the ETB.

When we received from the Comptroller and Auditor General the 2015 financial statements and this audit report on 15 January, we considered them and arranged for the laying of them before the Houses of the Oireachtas on 13 February. The Department intends to co-operate fully with the committee on issues contained with the report while also recognising, as the Chair has indicated, the ongoing investigation by An Garda Síochána. We trust that the committee understands that, while our commitment and willingness to be open and transparent on all matters relating to the issues, including the publication of the Dr. Thorn report in September, are clear, we are also required to give careful consideration to public engagement on the issues.

I wish to be clear - the issues that arise in KWETB are of serious concern to the Department. The responses that the Department received at the time of our initial engagement with the ETB in 2017 pointed to ineffective governance and accountability, particularly in respect of the use of public resources. For that reason, the Minister appointed an independent investigator under the Education and Training Boards Act 2013, signalling that this was something that we considered warranted a serious response from the Department and that, when conducted under the legislation that created the ETBs, also permitted the Minister to take necessary action and direct the ETB to take appropriate steps to rectify any issue of concern that may have been found.

The investigator was given terms of reference by the Department to investigate all matters relating to issues of concern. These broad terms of reference allowed the investigator to review any other matter that came to his attention in the course of the investigation.

Dr. Thorn made a number of findings. The committee will be aware that his report is included in an appendix to the Comptroller and Auditor General's report. In summary, Dr. Thorn found that, regarding the ETB's governance procedures, adequate arrangements to manage procurement and conflicts of interest were in place according to documented procedures. On an operative basis, however, the implementation of procurement processes and management of projects in several instances was found to be flawed or suboptimal. He further found that the board of the ETB should have been more proactive in ensuring oversight of its management of projects.

The Department issued his report to the board of the ETB. The board fully accepted the findings and set out an action plan. The Minister, acting under his powers by virtue of section 41 of the ETB Act, issued directions with which the board was required to comply. These directions included a request for the board to review the initial action plan presented to the Department in light of Dr. Thorn's findings and to implement a final action plan, to be agreed with the Department. The board was also required to review the measures in place in the ETB to prevent conflicts of interest and inappropriate interventions in processes relating to procurement, contract and project management, and to provide mandatory governance training to new and existing board members. The board was also required to conduct a self-evaluation with appropriately qualified external input and to provide regular updates to the Department.

Having actively engaged with KWETB since the Thorn report, the Department is aware that the board, the new chief executive and the executive staff are adopting a pro-active approach to improving governance arrangements and addressing matters of concern. The ETB has provided the Department and, I understand, the committee with an update on its corporate governance programme, which incorporates the updated action plan. This identifies a robust programme covering not just the directions issued by the Minister, but other governance matters considered by the board to support good governance. The ETB has indicated to the Department its intention to revise this plan further to take account of the recommendations of the Comptroller and Auditor General's report and the revised code of governance for the ETBs, which was updated and issued in January.

Regarding supports and oversight arrangements for the sector as a whole, the ETB sector has undergone significant reforms in recent years. The decisions to move from 33 VECs to 16 ETBs, to incorporate new responsibilities for training provision and to establish SOLAS have seen unprecedented change, with consequential structures and support mechanisms needed to support them. These changes include: a legislative reform programme; a governance reform programme; the placing of internal audit on a statutory basis; and the establishment of Education and Training Boards Ireland, ETBI, as the national representative body for the sector, which plays a critical role in the Department's reform programme for ETBs and the development and implementation of sectoral policies and arrangements for ETBs.

Another important change is the way in which the ETBs prepare financial statements. They are now on a calendar-year basis and use a common and agreed template to ensure consistency of reporting and layout in that presentation. The Department acknowledges that there had been delays in ETBs submitting their financial statements ahead of statutory deadlines, and significant progress has been made in recent years. In the case of ETBs the statutory deadline for accounts is 1 April. All ETBs submitted their draft statements for 2017 by that date in 2018. In respect of 2018, the Department has been engaging closely with the sector to continue to impress upon it the need for continued compliance regarding the submission and the monitoring of progress. The progress made since the establishment of the ETBs can also be assessed by the average time it took them to submit their accounts to the Comptroller and Auditor General, which has reduced significantly.

In more recent times the Department has focused on practical arrangements which support good governance in the sector, including the planned roll-out of shared payroll and financial services, the creation of a dedicated public service reform function in ETBI, putting in place a national procurement policy for the sector and enhancing supports on building and capital projects.

Regarding payroll and financial services, work is under way to move the ETB payroll and finance systems to a shared services model. When the VECs were first amalgamated, work was undertaken to merge and stabilise existing payroll and finance systems in the newly established ETBs and to implement some interim projects to support them in the introduction of shared services. In tandem, business cases were prepared and signed off to support the investment required in implementing new payroll and finance shared services systems in the sector. The procurement phase for the payroll project was completed in 2018. Procurement for the ETB finance project is under way. The roll-out of the payroll project will commence in the second quarter of 2019 and is to be completed over the next two years. It is envisaged that the roll-out of the finance project will commence in 2020 and conclude the following year.

A reform function was established in ETBI in September 2010 with procurement as one of its key initiatives. Furthermore, a legal services unit based in ETBI was established in 2016. The unit has developed a legal services framework for the ETB sector in conjunction with the Office of Government Procurement, OGP. The unit has resolved approximately 130 queries from ETBs and has developed a log of legal queries which enables the provision of management information.

The ETB sector continues to have high levels of participation in national contracts and frameworks. In addition to individual ETBs utilising OGP contracts and frameworks, the sector has developed ETB-specific frameworks.

As for governance and compliance, a national procurement policy for ETBs was put in place in 2018. In addition, this year will see the roll-out of a new corporate procurement plan template for ETBs and the development of a sectoral multi-annual procurement plan, which will help identify goods and services that require public procurement due to aggregation thresholds. Upskilling of staff across the ETB sector is also being supported.

Another key area is better governance in capital and building projects. Better lead-in periods are important in the context of ensuring projects are delivered in a manner that is fully compliant with Department requirements. The summer works scheme is one example of this, and better lead-in times are now being provided.

The Department has established supports for the sector. The Department's technical guidance documents and design team procedures provide ETBs with clear guidance on how school building projects should be designed and delivered, including in respect of procurement; the Department's planning and building unit provides designated contact points to provide support, guidance and advice to ETBs; and the Department is facilitating ETBs with access to project managers.

Regarding control procedures, prior to a major project being devolved to an ETB, a service level agreement is put in place between the Department and the ETB. This agreement sets out in detail the governance arrangements for the project. As part of these arrangements, at least two separate meetings must take place between the Department, the ETB and their design teams. Through these meetings, and at other key decision points, both administrative and technical staff within the Department review the progress of the project. Under the service level agreement, SLA, the ETB is required to submit monthly project progress reports to the Department which must bring to the Department's attention any issues that have arisen with the project. The Department also sets limits for the ETB and its design team in respect of change orders. The final account for the project must also be sent to the Department to ensure that the final cost is in line with the tender outcome.

As for smaller-scale projects, new enhanced project control procedures were introduced in May 2016. These procedures require two additional interactions with the Department during project delivery. The first is a requirement to seek approval to lodge planning permission, and the second is a requirement to seek approval to place a contract for construction. These additional interactions with the ETBs provide additional oversight and assurance that individual projects are delivered in accordance with the project brief. Further strengthening of these procedures took place from January 2018 with the submission of tender reports for smaller-scale projects together with itemised pricing documents.

The Department carries out an annual programme of compliance checks among schools and ETBs of around 120 devolved projects. This involves visits to schools and ETBs and the checking of supporting documentation. While these checks can identify issues with individual projects, the overall feedback on compliance is positive. The outcome from this is made available to the Comptroller and Auditor General.

Change is ongoing and will take a number of years to embed; the new ETBs continue to develop as single entities, adapting organisational structures and practices accordingly and developing their response to their new responsibility for training. There is a demanding reform programme that is bringing measurable benefits to the sector and at the end of which we expect to have robust structures that will enable ETBs and SOLAS to benefit from the economies of scale generated by the reform programme and to deliver top-class education and training services to the public.

We also have a robust governance regime, which helps to support ETBs to embed good governance practice in the sector. However, we are conscious that, notwithstanding having codes, policies and tools to support good governance, both the Thorn and Comptroller and Auditor General reports provide broader lessons for the sector and the Department, particularly in areas of procurement and governance. We remain open and willing to learn from these issues and to adapt and enhance our existing reform and governance measures.

I am happy to answer any questions from the committee on matters arising.