Mr. John Treacy:

I thank the Chairman. I am joined today by my colleagues, Kieran Mulvey, chairman, Mary Dorgan, who is chair of our audit and risk committee, and Colm McGinty, director of strategic programmes.

Sport Ireland appeared before this committee on Wednesday, 3 April, where we gave a comprehensive account of our dealings with the Football Association of Ireland, including our funding to the organisation and the control mechanisms and management arrangements relating to this grant funding. Today, we will take the opportunity to provide the committee with an update on developments since Sport Ireland last appeared, including the significant decision of the board of Sport Ireland to suspend and withhold funding to the FAI.

Before continuing, I would like to give Sport Ireland's view on the meeting of the committee with representatives of the FAI on Tuesday last. Sport Ireland had the expectation that the FAI would engage with this committee in an open and transparent manner on all relevant issues and answer the committee's key questions as directly and straightforwardly as possible. The FAI delegation chose not to answer important questions, which was extremely disappointing. Nevertheless, through the committee hearing, Sport Ireland learned some information that we did not previously know from correspondence and meetings with the FAI. This new information gives an insight into the corporate governance practices in operation within the FAI.

We now understand the following. Not only was Sport Ireland not notified of a material deterioration in the FAI financial position in 2017, it appears that the board of the FAI was similarly not notified. That such a serious financial situation existed and was not reported to the FAI board is concerning from an internal financial control and general governance perspective.

The events of 2017, as described by the FAI, give rise to serious concerns on the FAI board's application of its governance and oversight role as required under Sport Ireland's terms and conditions of grant approval. As a State body that invests substantial funds in the FAI, Sport Ireland is also very concerned about the FAI's adherence to appropriate internal financial and management control procedures during this period.

Following the meeting of 3 April of this committee, Sport Ireland again wrote to the president of the FAI on 4 April seeking a response on behalf of the board of the FAI. A copy of this letter has been provided to the committee. On the afternoon of Friday, 5 April, I received a call from the president of the FAI seeking a meeting with them that evening. Sport Ireland agreed and a constructive meeting with the president and two members of the board of the FAI took place at Sport Ireland offices that evening, with Sport Ireland represented by the chairman, myself as the chief executive, and Colm McGinty.

At that meeting, the president of the FAI provided to Sport Ireland a written response to our letter of 4 April. A copy of this letter has also been provided to the committee. At the meeting, the contents of the letter were discussed at length and the following actions agreed: the outcome of the Grant Thornton ongoing internal review of the association's book will be provided to Sport Ireland; the terms of reference of the review by Mazars will be provided to Sport Ireland once they are finalised; Sport Ireland will be consulted by Mazars as part of the review process; Mazars' full and final report will be provided to us in a timely manner; the review by consultants Jonathan Hall Associates will be provided to Sport Ireland; and the FAI will discuss the composition of the new governance review group with Sport Ireland.

Sport Ireland issued a formal response to this letter on Thursday, 11 April. A copy of this letter has been provided to the committee.

As outlined to the committee on 3 April, the Sport Ireland Act confers considerable authority in Sport Ireland. That is reinforced by our responsibility in investing substantial amounts of public funding into sport. As a statutory agency, we seek to develop strong sporting organisations and recognise the considerable public interest in a successful Irish sports sector. That said, we are also mindful of the limits of Sport Ireland's legal powers and we respect the autonomy of the national governing bodies of sport.

Sport Ireland is responsible for the investment of public money in sport and, subsequently, oversight and accountability of this investment.

All procedures and interactions with the national governing bodies reflect this responsibility.

At our meeting on Tuesday, 9 April, the board of Sport Ireland unanimously made the decision to suspend and withhold funding to the FAI. This decision followed a lengthy discussion by the board on the €100,000 loan and related matters. The suspension and withholding of funding to the NGB is not a decision that the board of Sport Ireland takes lightly. It is typically an intervention of last resort, and is only ever used very reluctantly. Sport Ireland is acutely aware that this action causes uncertainty and disruption to the delivery of very important strategic programmes. However, Sport Ireland is ultimately responsible for the security and accountability of approximately €2.9 million in public funding invested in the FAI.

In the course of the board’s discussion, it was noted that in the FAI’s written opening statement submitted to this committee ahead of last week’s hearing, the association acknowledged that clause 4.3 of the further reporting section of Sport Ireland’s terms and conditions of grant approval was not met. This relates to 2017, whereby the FAI did not notify Sport Ireland of any material deterioration in its financial position. Notwithstanding some positive steps taken by the FAI in the preceding days, it has been acknowledged by the association that it was in breach of clause 4.3. For the committee’s reference, clause 4.3 states: "In addition each organisation undertakes to notify Sport Ireland in writing without delay in the event of any material deterioration in its financial position or of any other matter which may jeopardise the organisation’s overall financial viability and/or its ability to comply with its commitments in the Approved Submission, and thereafter to provide Sport Ireland with such information and documentation as Sport Ireland may request in connection with the relevant matter and any steps being taken to rectify it."

In light of this clear acknowledgement, the board of Sport Ireland made the decision to suspend and withhold funding to the FAI in accordance with clause 1.1 of Sport Ireland's terms and conditions of grant approval. In making this significant decision, the board of Sport Ireland is aware that 50% of the youth field sport funding has been paid to the FAI in 2019. The next payment to the FAI is due in the third quarter of this year. The board of Sport Ireland, in its deliberations to suspend and withhold funding outlined above, was of the clear view that this interim period should be used by the FAI to take whatever actions are required to enable Sport Ireland to restore funding.

On the limited number of occasions in the past when Sport Ireland has had concerns about governance and financial controls and has acted to suspend and withhold funding to a sporting body, I will outline the process followed. First, an audit of the sporting body’s governance and financial control is undertaken. Second, a liaison process is established with the sporting body to closely monitor, verify and support the NGB's implementation of the audit recommendations to verify compliance with the terms and conditions of grant approval. Third, the liaison process is overseen by Sport Ireland’s audit and risk committee, with periodic updates and recommendations made to the board. Fourth, grant funding is withheld until sufficient progress has been made on implementing the audit recommendations, and governance and financial control issues have been progressed. Fifth, once progress is made on implementing the audit recommendations, and assurance is received of the effectiveness of governance and financial controls, staggered payments are generally made to the NGB in question.

Sport Ireland will follow this established process with the FAI, as it has in the past with other NGBs when similar situations have arisen. Sport Ireland's audit and risk committee will meet on 18 April and will discuss the specific requirements, from a governance and financial control perspective that will be required of the FAI. The audit and risk committee is also scheduled to meet again in May and will review FAI progress. The executive of Sport Ireland, with the oversight of our audit and risk committee and the board, will continue to liaise with and meet with the FAI to progress all important matters.

The board of Sport Ireland has agreed to review the decision when it is satisfied that the FAI has addressed its current governance and financial issues. Important steps in that regard include but are not limited to the completion of the Mazars review and adoption of its recommendations by the FAI, as well as the completion of the Grant Thornton review and adoption of corrective actions by the FAI.

Depending on what emerges from the Mazars and Grant Thornton reviews, we will also consider a full audit of the FAI by Sport Ireland’s appointed auditors, as per Sport Ireland’s terms and conditions of grant approval. Last night we agreed with the FAI that a full audit would be carried out. The scope will be defined by Sport Ireland’s audit and risk committee. It will be set with reference to our satisfaction with the scope and findings of the Mazars review. In the light of the acknowledgement by the FAI that there was a breach of the terms and conditions, the audit will be as broad and extensive as necessary to satisfy Sport Ireland that the FAI is compliant with our terms and conditions of grant approval, including that its internal financial controls and management, as well as its general governance, are of sufficient standard in order to restore funding. The specific mechanisms to satisfy Sport Ireland on the effectiveness of the FAI’s governance and systems of internal financial control will be proportionate to the significant level of Sport Ireland;s investment in the organisation. Our specific requirements will be informed by the response of the FAI during the liaison process.

Sport Ireland is also cognisant of the FAI’s engagement with the Office of the Director of Corporate Enforcement in its particular inquiries which we understand are substantial. We will continue to observe this process closely and with keen interest.

On the next steps to be taken, Sport Ireland has accepted the FAI’s offer of engagement on the composition of its new governance review group, to include a majority of external members, as well as to assist in identifying its external chairperson. Sport Ireland has identified a potential candidate, Aidan Horan, a director of the Institute of Public Administration. It has been agreed with the FAI that he will take up the role. The terms of reference of the group will be agreed with Sport Ireland and finalised by the group once it is established.

Noting the FAI board’s ability to appoint an independent person-----