Oireachtas Joint and Select Committees
Thursday, 27 September 2012
Public Accounts Committee
Special Report No. 78 of the Comptroller and Auditor General: Matters Arising out of Education Audits
10:20 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I advise witnesses that they are protected by absolute privilege in respect of the evidence they give to the committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or make charges against a Member of either House, a person outside the Houses, or an official by name or in such a way as to make him or her identifiable.
Members are reminded of the provision within Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policy or policies.
As we are to hear a number of opening statements today, I suggest that the sequence be as follows: UCD, Trinity College, DCU and Waterford Institute of Technology. I welcome all the witnesses. I call on Dr. Hugh Brady, president of UCD, to introduce his officials.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I call on Dr. Patrick Prendergast, provost of Trinity College, to introduce his officials.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I call on Professor Brian MacCraith, president of DCU, to introduce his officials.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I call on Dr. Ruaidhrí Neavyn, president of Waterford Institute of Technology, to introduce his officials.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I welcome Mr. Ned Costello, chief executive of the Irish Universities Association. I invite Mr. Seamus McCarthy, Comptroller and Auditor General, to introduce Special Report 78: Matters Arising out of Education Audits.
Mr. Seamus McCarthy:
My office carries out audits of the annual financial statements of seven universities, 14 institutes of technology and six other third level education institutions. That work provides an overview of financial management and propriety issues across the third level education sector and allows us to identify issues that are common across a number of institutions and matters in individual institutions that are exceptional or unexpected. Special Report No. 78 was compiled to draw attention to a range of matters of potential sector-wide interest.
The third level sector as a whole receives State grants amounting to about €1.4 billion per year. This includes current, capital and research grant funding provided by the Higher Education Authority and the Department of Education and Skills. Grants in lieu of undergraduate student fees are part of this total. Further substantial State project funding for many of the institutions is provided in the form of research grants from public bodies such as Science Foundation Ireland and Enterprise Ireland.
At the end of the academic year 2011, it is estimated that the total cash to hand across universities and institutes was in excess of €700 million, held in commercial bank accounts. In addition to student fees paid in advance of the start of the academic year, these balances included substantial research project funding received in advance and held as deferred income. In responding to the report, the Higher Education Authority, HEA, pointed out that it has taken action to slow down payments in respect of its grant funding to take account of the institutions' cashflows at particular times of the year. The report concludes that it may be worthwhile reviewing the State's wider treasury management policy and considering the merits of providing for a sweeping up of surplus funding in third level institutions and other State bodies. Part of the balances held by institutions relate to advances of banking concession fees and pension related reserves.
Access to sizeable student and staff populations on campus represents a commercial opportunity for third level institutions. Most institutions receive concession fees from commercial banks in return for the right to deliver banking services on campus. The amount received across the sector averages around €10 million per year, often received in the form of lump sums for five or even ten year contracts. In most cases, the institutions assign revenue from the bank concessions for a range of current and future development activities, but the audits found situations where concession income was transferred directly to subsidiary companies and to restricted reserves rather than being accrued as annual income. The report concludes that there would be merit in a review of the application of such concession income across the sector to ensure there is an agreed State policy covering its use in accordance with wider education objectives.
Funded pension schemes in five universities closed to new entrants in 2005. From then on, new staff joined a university pay-as-you-go model pension scheme. Up to 2005, the HEA had included an additional 15% of salary costs in the annual core funding provided to the universities to fund the employer contributions to the pension funds. The normal practice in respect of pay-as-you-go model schemes is that employer contributions are not made, but the HEA continued to pay the additional 15% in respect of staff covered by the model schemes, which it asked the universities to hold in separate pension funds. At the end of September 2010, the funds held an estimated €46 million. The HEA pointed out that, separately, the universities were owed almost €12 million in respect of pension payments under the closed pension schemes, so it estimated the net surplus on pensions was around €34 million. The report concluded that this represents an advance of funding in excess of current requirements.
An employment control framework for the higher education sector was introduced in July 2009, replacing a blanket Government moratorium on all recruitment and promotion imposed across the public sector in March 2009. The framework restricted each institution in relation to the number of core staff employed in each grade up to 31 December 2010. Overall, the restrictions resulted in a reduction in staff numbers within the third level education sector by an estimated 7.3% between the end of 2008 and the end of 2010. This exceeded the target reduction of 6%. Over the same period, full-time student numbers increased by an estimated 10.5%.
After the moratorium and framework were imposed, Trinity College Dublin informed the HEA that it proposed to promote 27 academic staff following an internal promotion process.
The Higher Education Authority, HEA, advised the university that the employment control framework monitoring committee considered that it would be acting outside the framework in making those appointments and that financial penalties in the form of a reduced recurrent grant in 2011 could apply as a result. The university proceeded with the promotions with effect from 1 January 2011. Up to the time our report was completed, no penalties had been imposed on the university. The HEA will be able to advise the committee on the action taken subsequently.
Many third level education institutions have established subsidiary companies, which typically provide campus services such as catering, accommodation and sporting facilities. Universities produce consolidated financial statements incorporating the results of subsidiary companies, but some institutes of technology with subsidiaries do not. To ensure transparency and comparability, it would be desirable for institutions to adopt a consistent approach to reporting the results of subsidiaries. When the report was being completed, the HEA advised that work was under way to update the codes of governance for higher education bodies, including provisions in respect of the governance of subsidiaries. Specific issues were noted in respect of subsidiaries in Waterford Institute of Technology and Dublin City University. At Waterford Institute of Technology, a wide range of campus services is provided by a group of companies but the results are not consolidated in the financial statements of the institute. The HEA has requested the institute to review the position and submit proposals for any necessary changes in corporate governance. At Dublin City University, DCU, the results of 11 subsidiary companies are included in consolidated financial statements. Three DCU subsidiaries, including the company that runs the Helix arts centre, had accumulated substantial losses by September 2009. The balance sheets of two of the subsidiaries were repaired at September 2010 through capital contributions from DCU totalling €9.8 million. The university has committed to providing €100,000 per annum for 19 years to meet a funding shortfall for the other subsidiary, and I understand an annual grant of €500,000 is being paid to the Helix centre company. The presidents will be in a position to update the committee on the financial positions of the subsidiaries and any ongoing subsidies.
Foundations often are established with the aim of raising philanthropic funding for the associated third level institutions, and some universities have received very substantial philanthropic funding through their foundations. However, given the lack of discretionary income available to foundations, it is common practice for the institutions to provide funding or other support to their respective foundations to meet running costs. In some cases, the foundations have not succeeded in raising any significant funds. For example, Waterford Institute of Technology transferred a total of €550,000 to its foundation, which was spent in less than two years without significant donations being raised. Mary Immaculate College, Limerick transferred a total of €3.84 million to its foundation, including bank concession fee funds, for the acquisition of property along the college perimeter, even though the foundation was not set up as a property holding company. It would be desirable to ensure transfers from third level institutions to foundations are reported in a transparent manner and occur only on the basis of a demonstrated business case. The audit of the 2009-10 financial statements found breaches of procedures and lack of economy in transactions administered through the president's office in Waterford Institute of Technology. The chairman of the institute's governing authority commissioned an in-depth investigation of non-pay expenses in that office over the period 2004 to 2011. This found there were a number of instances of non-compliance with institute policies and procedures, including with regard to the procurement of taxi and public relations, PR, services, as well as expenses relating to travel and hospitality. The report concludes that the institute, the HEA and the Department of Education and Skills had taken appropriate steps after the matters surfaced.
The final matter to which I wish to refer relates to an update on the issue of remuneration of senior staff of universities in excess of ministerially approved levels. The fact there were such payments was reported upon in an earlier special report and most of the payments had ceased. However, there was disagreement about the amounts involved and whether and how recoupment would be effected. The Department and the HEA sought to carry out an exercise on a case-by-case basis relating to a five and a half year period to identify the amounts involved, in advance of deciding on what action to take on recoupment. My office agreed to assist by carrying out a validation process of the estimates, including advising on the design of the data-gathering methodology and sample-based testing of the completeness and accuracy of the returns. The estimates produced in most cases tested were found to be correct. The overall estimate amounted to a total of the order of €8 million. The highest amounts of remuneration in excess of ministerially approved levels were in UCD, UCC and Trinity. The verification testing found a number of cases in some universities where there was uncertainty about the approved level of remuneration and these were referred back to the HEA for further review and investigation. The chief executive of the HEA will be able to inform the committee of the results of its further deliberations on those cases when he appears next week. That probably is sufficient to outline what is in the report.
10:30 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank Mr. McCarthy. We now turn to the opening statements and I call on Dr. Hugh Brady of UCD.
Dr. Hugh Brady:
I thank the Chairman. UCD welcomes the opportunity to discuss with the Committee of Public Accounts the issues raised in the Comptroller and Auditor General report, Matters Arising out of Education Audits, dated February 2012. By way of background I will provide some facts and figures on UCD and refer members to our briefing paper, which I hope they all have received. UCD is Ireland’s largest comprehensive, research intensive university and ranks among Europe’s top universities in the world rankings. Some indicators of UCD’s scale of activity for the 2011-12 year include the total number of students being approximately 25,000, of whom approximately 18,000 are undergraduates and 7,000 are postgraduates. Moreover, of the total student body, approximately 5,000 are international students. In addition, UCD delivers courses to more than 4,000 students at overseas locations, including Spain, Sri Lanka, Malaysia, Hong Kong, Singapore and China.
Between 2004 and 2009, UCD undertook a major change programme with the goals of enhancing the quality of its educational programmes, growing its research base, enhancing its international footprint, growing its non-Exchequer income streams and developing its campus infrastructure. During this period, the following fundamental changes were delivered, namely, the restructuring of UCD’s academic units from 11 faculties and 85 departments to five colleges and 35 schools, the complete reform of the undergraduate curriculum with the introduction of the modular, semesterised, credit-based UCD Horizons curriculum, reversal of the trend in CAO first preferences and consolidation of UCD’s position as leader in first preferences, and the formation of graduate schools to support the largest postgraduate cohort in Ireland. In addition, there has been major growth in international students such that UCD now hosts one third of all Ireland’s full degree international students.
There was a trebling of research income, a major growth in research outputs of various types, expansion of incubation facilities and innovation services and the establishment of the alliance in innovation between Trinity and UCD. Moreover, there was completion of a new campus development plan and the launch of a capital programme of €300 million, of which 62% is funded from non-Exchequer sources. When one uses industry norms, that will create approximately 2,000 construction related jobs. We also expanded the university’s global footprint and overseas income.
Over the past three years, the university has for the most part maintained the quality of its education and research programmes through changes and efficiencies, thereby absorbing a cut in State income of €58 million or 28%. Moreover, with 10% fewer staff, including 17% fewer core-funded staff, it accommodated 10% more students. The financial profile is also presented in our briefing paper. We have an annual turnover of €411 million, of which €227 million is Exchequer funding and €184 million or 45% is non-Exchequer income. The university has produced a modest surplus in each of the past three years.
As for the issues raised in the Comptroller and Auditor General's report, with regard to cash balances, UCD’s operational cash balances, as at 30 September 2011, were within the recommended sectoral norms. In respect of bank concessions, UCD generates €62 million in commercial income per annum. The university’s bank concession income has been used to fund the capital development programme and capital projects on the Belfield campus, which, as I stated, amount to more than €300 million in total, of which 62% is non-Exchequer funding, thereby creating approximately 2,000 jobs. As for pension related reserves, the pension issues raised in the report are sectoral in nature and UCD has been compliant with the instructions of the HEA at all times with regard to the pension scheme.
University College Dublin, UCD, has fully complied with all of the provisions of the various employment control frameworks which have been applied to the sector and achieved all of the targeted reductions in core-funded staff numbers which have been imposed. In the past three years UCD has provided funding for UCD Foundation for running costs of €3.9 million, while UCD has received gifts and pledges of over €40 million. When benchmarked against other national charities and equivalent UK institutions, this cost-income ratio rates UCD Foundation as among the best in the class. The main projects to benefit from this fund-raising have been the Science Centre and the Sutherland School of Law, as well as funding for academic posts and student supports.
With regard to higher responsibility allowances for academic staff, UCD notes the conclusions in report No. 78 on the issue of senior staff remuneration. UCD has confirmed to the Higher Education Authority, HEA, that it will co-operate fully in the steps regarding the reallocation of the moneys in question as set out in the report and as recently advised by the authority with the approval of the relevant Ministers. It should be noted the allowances in question were halted by UCD in 2009. However, we wish to reiterate the context in which these allowances had been paid in the period in question and the problems that their cessation has caused.
These allowances were not gratuitous payments to staff but were paid in respect of specific roles such as dean, head of school and college principal which involve significant leadership and management responsibilities over and above the normal academic duties and which are not covered by national salary scales. In many cases, these duties involved specific objectives relating to the generation of non-Exchequer income for the university, a process which led to a substantial increase in such income in the relevant years. This income now stands at some €184 million, which represents 45% of UCD’s total revenue. This has contributed to a significant offsetting of the reduction in Exchequer funding in the period in question. Most of these categories of allowances predated the 1997 Act and the approval provisions which it contains. Furthermore, the principle of allowances for management posts was acknowledged as recently as 2008 by report No. 43 of the review body on higher pay and management allowances have been approved by the HEA in other institutions. Allowances of this nature for the functions in question such heads of school, college principal and dean, are the international norm in higher education, the market in which UCD competes in staff recruitment. In the absence of a prescribed form for seeking or granting approval, UCD notified the HEA annually from 1999 of the detail of these allowances and regularly sought approval. UCD’s legal advice was to the effect that approval by acquiescence had developed over this period of seven years. When the HEA indicated that it had a problem with these allowances and requested that UCD cease payment, we engaged constructively with it between 2006 and 2008 to work through the contractual issues associated with each of these allowances such that we were able to cease all such allowances by April 2009. The constructive nature of UCD’s approach was acknowledged by the HEA chairman in writing as late as July 2008. Again, I stress that all of these allowances had ceased by April 2009 and that UCD has indicated its willingness to co-operate with the resolution mechanism put in place by the HEA that will result in specific funds being allocated for student services over and above the normal allocation. I must stress, however, that, without these incentives, it is becoming increasingly difficult to persuade staff to take on these important leadership and management roles, thereby compromising both the university’s international competitiveness and revenue generating capacity.
UCD's financial statements and audits are up to date. Copies of the audited financial statements are available on the UCD website.
10:40 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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May we publish Dr. Brady’s opening statement?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I call on Dr. Prendergast to make his opening statement.
Dr. Patrick Prendergast:
In my inaugural address as incoming provost just over one year ago, I stated I wanted to be held accountable. I welcome this opportunity to answer questions the committee may have. Before doing so, it would be useful to give some context regarding Trinity College Dublin, TCD. Points of detail on the Comptroller and Auditor General’s report are addressed in the briefing paper previously submitted.
The college educates 17,000 students, 12,000 undergraduates and 5,000 postgraduates. We draw students from every county in Ireland, North and South, and all of our students are part of a vibrant university in the heart of the capital city. Trinity College's mission is to excel in education and research by advancing knowledge and using that knowledge for the benefit of all. Our education is research-led, with students working alongside their professors giving able students an internationally competitive educational experience. Widening access to this quality education has long been a key priority for the college. This year we will be celebrating the 20th year anniversary of our Trinity access programmes which enable students from non-traditional groups, under-represented in higher education, to go to university. Up to 19% of our students enter through these routes.
Trinity College's reputation is recognised internationally. It is the only Irish university in the top 100 world universities and ranks 20th in Europe. A global university cannot ignore these rankings which measure the provision of a high quality education, impact of research, the employability of graduates globally and international reputation. The current economic environment poses significant challenges to all Irish universities to maintain or improve the quality of education they offer and compete globally. Trinity College's annual expenditure is of the order of €320 million. Approximately one half of its income derives from non-Exchequer sources, mainly student fees, EU and industrial research contracts, commercial and philanthropic activities, and is used to support the college's academic goals. For example, the income from the bank concession enabled the college to create 40 new non-Exchequer lectureships which support both teaching and research and assist in maintaining the college's ranking.
Trinity College has recently launched its global relations strategy which will increase the number of international students but will also develop academic linkages with leading universities worldwide. In line with the Government’s policy, it aims to contribute significantly to develop Ireland as a global education hub. These are just some key points about Trinity College which may assist in today's discussion.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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May we publish Dr. Prendergast’s opening statement?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I now call on Professor Brian MacCraith.
Professor Brian MacCraith:
I became the third president of Dublin City University, DCU, in July 2010. Just 23 years old, DCU is a young and ambitious university. In its short life, it has grown significantly in scale and impact, with a student population of 11,500 and a ranking in the top 50 young universities in the world, that is, those under 50 years old. It has a well established reputation for both high quality research and innovation and proactive engagement with enterprise.
In achieving this level of success, we believe in operating to high standards of corporate governance. Despite the recession and the significant reductions in Exchequer funding in the past five years, DCU has achieved balanced budgets in each of these years. It is useful to note that it receives its funding from various sources, with 62% coming from the Exchequer and 38% from non-Exchequer sources.
Report No. 78 made several observations concerning DCU subsidiary companies. DCU Commercial Limited has 11 subsidiary companies, the primary objective of which is to generate income to support the university in delivering its strategic mission. The companies mainly provide facilities and services for the campus and some, owing to the nature of their activities, will not make significant surpluses. Nevertheless, by 30 September 2012, the group will have generated surpluses of €21 million, with €3 million being generated in the past five difficult years. These funds have been used to support the university and some of the subsidiary companies, especially at an early stage in their development.
Report No. 78 makes specific reference to three of the subsidiaries. First, the Helix, established in 2002, is a top class performing arts and conferencing centre which brings thousands of people to the DCU campus each year. It is at the heart of student life on campus and provides a wide range of facilities for the university and the local community, in a particularly deprived area. It incurred significant losses in its early years.
Given the importance of the Helix and its particular value to DCU, it has been supported by the other commercial companies and the university. Its balance sheet was repaired in September 2010 through a capital contribution of €7.4 million from subsidiary company profits, as approved by the governing authority of the university.
The DCU Ryan Academy for Entrepreneurship is a leading supporter of entrepreneurship and innovation in Ireland and a key element of DCU's strategy as a university enterprise. Owing to the nation of its activities, it will never make significant surpluses. In 2011 we negotiated philanthropic support for a four year period which will enable it to break even each year in that period. It runs many successful programmes, one of which, the propeller programme, created 49 new jobs through start-ups in the past year and a half.
Invent DCU, the third element of our strategy in innovation, was built at a cost of just under €7 million. It is our innovation and enterprise centre and plays a key role in our innovation strategy. A fund-raising campaign successfully raised 72% of the overall cost, which obviated the need to resort to bank borrowings. The balance of the funding is being made up by a contribution from DCU Commercial Limited revenues at a rate of €100,000 per annum for 19 years.
Report No. 78 highlights payments to university staff in excess of those approved by the Minister. Arising from organisational restructuring to take account of our rapid growth, allowances of just over €53,000 in total were paid over a 6.5 year period, between 2005 and 2011, to senior staff who undertook significant additional duties. All such allowances were terminated by us in September 2011. The HEA has also proposed a resolution of this issue which we fully accept. After consultation with the Students Union, DCU has agreed to allocate 50% of the amount to additional student services in the area of counselling, while the other 50% will be deducted from our future funding.
10:50 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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May we publish the statement?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I call on Dr. Ruaidhrí Neavyn of Waterford Institute of Technology.
Dr. Ruaidhrí Neavyn:
Waterford Institute of Technology welcomes the opportunity to advise the Committee of Public Accounts on matters referred to in the Comptroller and Auditor General's report. The institute accepts the conclusions of the report. I would like to concentrate on the changes the institute has put in place to deal with the matters raised and emphasise the priority it has given to this task.
Regarding expenses incurred by the office of the president, the institute's governing body commissioned Deloitte to carry out a review of non-pay expenses incurred by the office. It is acknowledged by the institute, the Comptroller and Auditor General and Deloitte that breaches of procedure did occur. However, such breaches were confined to the office of the president, as a further review of internal financial controls across the institute did not identify issues which caused concern for the audit committee. Since these matters were brought to light, enhanced control procedures have been put in place, which include the following: travel and related expenditure in respect of the president’s office is pre-approved; all expenditure in respect of the office is co-authorised; the governing body regularly reviews all expenditure incurred by the office; consultancy costs have been significantly reduced; WIT corporate cards have been withdrawn; procedures and policies in respect of procurement, travel and hospitality have been reviewed and revised, where necessary; and additional control procedures have been implemented in respect of purchase order approvals. Further, I advise members that a legal case is pending between the former president and the institute.
Regarding non-academic services, in 1990 the institute's board of management established a committee to create student services that could not otherwise be provided. The model was largely based on similar models within the university sector and proved very successful with a wide range of excellent student services being developed. The committee subsequently established a company structure. Funding from student capitation revenue was transferred to provide necessary student services. The committee annually informed the institute's governing body of its financial results and development plans.
Following consideration of the Comptroller and Auditor General's report and the HEA's request to consolidate the financial transactions of the companies, the institute's governing body has now commenced this process. The actions taken to date include the secondment of the institute's finance manager to oversee the consolidation process; the commissioning of Grant Thornton to review diverse campus services, its activities, financial controls and governance since its establishment with a view to providing recommendations on how best to proceed; communication with WIT and diverse campus services staff of the decision to proceed with implementing the Grant Thornton recommendations; review of the financial, human resources and legal arrangements of the companies; liaison with legal advisers on the potential implications of consolidation, including the legal basis for consolidation, company structures and employee status. The institute is in regular contact with the HEA on this matter and has been providing it with updates throughout the process.
Regarding financial transactions with foundations, the institute established a foundation in 2005 at a time when other higher education institutions were generating substantial philanthropic income. Senior institute management was confident that a foundation would do likewise for WIT. It was planned that any income generated would be ring-fenced to support a number of scholarship, student support and capital development initiatives. As stated in the Comptroller and Auditor General's report, "The Foundation has not been successful in that it failed to raise ... significant funds for the Institute and its activities have since ceased". The company was wound up in 2011. Although the project had merit, it was of a different time and the subsequent economic downturn meant that the foundation ultimately did not succeed. The Comptroller and Auditor General's report acknowledges the circumstances prevailing at the time.
I reassure members that all issues raised in the Comptroller and Auditor General's report are being addressed and continue to be monitored on an ongoing basis.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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May we publish Dr. Neavyn's statement?
Derek Nolan (Galway West, Labour)
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I welcome the university and institute of technology heads and thank them for coming. Before I start the questioning, I acknowledge that the environment in which they all operate has changed dramatically in recent years. According to the figures, their budgets and staff levels have reduced dramatically, while their student numbers have risen significantly. They are to be commended, therefore, for maintaining their levels of educational achievement throughout this period. There are a number of issues which have come up in the report, which is why they have been asked to come forward. I note that my alma mater, NUI Galway, has escaped being sanctioned or called. I can only assume that it has a good reputation.
I want to start with the issue of the 27 staff promotions at Trinity College. According to the report, a decision was made in 2008 to start looking at internal promotions. That process was brought to a conclusion in 2009 and those to be promoted were identified. The HEA states the employment control framework in place at the time prevented such a course being taken; nevertheless, a decision was still made to go ahead with the promotion of 27 staff, albeit at a later time in 2011. The HEA has disagreed with the provost's assessment that this was permissible, yet the provost states he went ahead with the promotions in good faith. On what basis did he act in good faith in making the decision to go ahead?
Dr. Patrick Prendergast:
I thank the Deputy for his questions. It is not exactly accurate to describe it in the way he has. When we met the HEA on 16 June 2010, we told it that we had these 27 staff who had been involved in the process for a year and a half and that we wanted to proceed with the promotions at the expiry of the employment control framework, which was due to expire at the end of that year - in other words, December 2010. The HEA's view was it was not unreasonable to proceed with the promotions on 1 January 2011, as there was no employment control framework in place at the time. We had to make the decision and communicated with the staff members whom we were going to promote at the expiry of the employment control framework. It turned out subsequently - I suppose nobody, neither the HEA nor any others, was to know this - that, after we had made the decision and written to the staff concerned that they were to be promoted on 1 January 2011, a new employment control framework was supposed to be put in place. It was, in fact, put in place in March 2011. However, we could not reverse the decision taken. We had to go ahead and promote the staff concerned because we had said we were going to do this. We had a commitment to them. We promoted them in January 2011, three months ahead of the putting in place of the new employment control framework in March. If one likes, we were three months out of sync, but it was not purposely done on our part. We proceeded in good faith with the promotions because there was no employment control framework in place on the date we had selected for the promotions.
Derek Nolan (Galway West, Labour)
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The employment control framework was due to expire at the end of 2010 and we are talking about a period in the middle of 2010.
The employment control framework was brought in to deal with significant issues in the State finances. Surely, in the middle of 2010, when the State finances were deteriorating further and the economic crisis was on everyone's mind, it was not unforeseeable that there might be a new employment control framework for 2011?
11:00 am
Derek Nolan (Galway West, Labour)
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It is a back-and-forth process. According to the Comptroller and Auditor General's report, there were meetings between representatives of Trinity and the HEA, with correspondence in July 2010 from the HEA to the university stating that the operation of internal promotion schemes was not permissible under the framework, and the monitoring committee considered that the university would be acting outside the terms of the framework in making those promotional appointments. It asked the university to withdraw the promotions until further notice and stated that if it proceeded, financial penalties in the form of a reduced 2011 current grant for the university would apply. At the time the decisions were being made there was a clear conflict with the HEA about what was happening.
Dr. Patrick Prendergast:
Not really, as the letter also states that the HEA recognised that it might not be contractually possible to reverse from commitments made and, if so, punitive financial action would be taken. The HEA recognised that it may not have been possible not to proceed with the promotions, as we had committed to the staff involved. The promotions cost €34,000 in the three months before the new employment control framework came into operation in March. The HEA has proposed how to resolve this, together with the issue of allowances, and we have agreed to accept the HEA's proposed resolution.
Derek Nolan (Galway West, Labour)
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What is that resolution?
Dr. Patrick Prendergast:
The money is to be used for student services, in agreement with the students' union and the HEA. Like our colleagues in DCU and UCD, we will agree with the HEA to use that money for those student services. We will take our medicine on this, so to speak, recognising that a bona fide misunderstanding occurred. We had the promotions three months ahead of when the new employment control framework would have allowed it.
Derek Nolan (Galway West, Labour)
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The issue is that the university was penalised, with the HEA providing the sanctions. It came to the conclusion that the university's actions were outside the framework. There is the issue of the three-month period, which cannot be divorced from the reality at the time, which was that the State was experiencing severe economic changes, with budgets reducing. It would have been very obvious that on the expiry of the employment control framework, another one would be put in place.
Much of what we deal with here relates to corporate governance. The cost of €32,000 is not the issue but rather that the HEA decided that, on this issue of corporate governance, the university stepped outside the bounds of what it is permitted to do, promoting 27 staff against the HEA's wishes and recommendations. It is more the principle of the matter as opposed to the financial cost. I am happy to take the witness's word that he was acting on bona fides. Nevertheless, the university engaged in a promotion practice during a period when an employment control framework was in place, with a view to promoting people at the end when it should have been clear that another framework was coming down the line.
Dr. Patrick Prendergast:
We found a way to resolve the issue. We started this promotions process in 2008, before the control framework's formulation. We had a commitment to these staff to bring the promotions process to a conclusion one way or another. These people applied in 2008 and after a rigorous review process which is very difficult to get through, a number of people were identified for promotion. It was more than two years later, in January 2011, before these promotions were made so nothing was done precipitously or wilfully in an attempt to breach the employment control framework.
Derek Nolan (Galway West, Labour)
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Were the staff informed of the promotions after the HEA had expressed reservations?
Dr. Patrick Prendergast:
No. The reason we had the meeting with the representatives of the HEA on 16 June 2010 was to resolve the promotions issue at the final university council meeting of that academic year. At that meeting the HEA's view was that it was not unreasonable for the college to proceed with promotions, and staff were informed that they would be promoted. It was after this that we received the letter referred to by the Deputy indicating that if we could not reverse these promotions, action would be taken.
Derek Nolan (Galway West, Labour)
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From that reading, it seems that the HEA acted entirely unfairly in sanctioning the university.
Dr. Patrick Prendergast:
We want to put the matter behind us and get on with looking to the future. We have taken our medicine; we could get into an argument but we should deal with the issue and move on. At that time the entire sector was in a discussion with the HEA regarding clarity on promotions in the context of the employment control framework, so there was much discussion taking place. It was not clear whether these promotions were the kind not permitted under the control framework in any case.
Derek Nolan (Galway West, Labour)
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The issue is whether the promotions were done correctly and in accordance with good corporate governance and Government and HEA guidelines. The HEA has decided they were not carried out correctly. Dr. Prendergast has indicated he does not want an argument but it is important this is resolved and does not happen again in future. If there is a genuine dispute between Trinity College and the HEA, it is not in order for us to ignore it. We must know what happened and it must be clear it will not happen again. It is quite a serious issue when public money has been expended in this way.
The HEA and Trinity College should come to some kind of understanding and at least agree what happened. This is something deemed worthy enough to bring the witnesses before this committee so we must ensure it does not happen again.
Derek Nolan (Galway West, Labour)
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The second issue I wish to deal with takes in the expenses in Waterford Institute of Technology. I had heard anecdotal reports and seen reports in the media but reading about the scale of the issue, it seems extraordinary. It was almost like a fiefdom was operated in the office of the president with unqualified power and ability to spend money. It showed flagrant disregard for any kind of system of financial control. I appreciate that we are talking about the president's predecessor. I understand that many changes have taken place since the incumbent came to office, with many reports being done to identify exactly what happened. What steps have been taken to ensure this will remain an isolated event?
Dr. Ruaidhrí Neavyn:
I will deal with that matter.
I confirm that we fully accept the findings of the Comptroller and Auditor General's report. In our opening statement there is a list of the actions taken to ensure this does not recur, particularly in relation to the preapproval of expenditure, co-authorisation of expenditure and a review of expenditure in the office of the president. We have significantly reduced the cost from a peak value of almost €630,000 to a figure of €180,000 in the current year.
In terms of the control procedures we have put in place, we have also put in place additional control procedures and had a further review of the internal financial controls across the entire institute and it did not identify any further issue of concerns to the audit committee. That, again, was provided through our internal audit service. I hope that provides the answer to the Deputy's question.
11:10 am
Derek Nolan (Galway West, Labour)
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The report shows that non-pay expenditure in the office of the president rose dramatically in the period from 2004, when it stood at €348,000, to a peak in 2008 of €634,000, an increase of 80% to 90%. Was there not a red light flashing for the financial controller asking why expenditure was skyrocketing at such a pace?
Dr. Ruaidhrí Neavyn:
To be fair, the Deputy has hit the nail on the head. The one item that could rectify these issues in the future is the presence of a disclosure policy or some form of whistleblower provision to enable people to take action. I can confirm that concerns were voiced over the expenditure, but the Deputy has correctly pointed out that it was incurred in the most senior office of the institute, for which the appeals mechanism was lacking in terms of any form of additional disclosure policy or whistleblower provision for those operating at a lower level within the organisation to actually express his or her concerns. I suppose there would be an automatic assumption that the chief office of the institute and the chief officer of the institute would be the guardians of the procedures and controls that should be in place to control expenditure in all offices of the institute. However, concerns were raised, but they were not acted on by the office of the president.
Derek Nolan (Galway West, Labour)
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What was the nature of the concerns raised?
Derek Nolan (Galway West, Labour)
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Why were they not acted on? How did they manifest themselves and what happened as a result?
Derek Nolan (Galway West, Labour)
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Who raised the concerns?
Derek Nolan (Galway West, Labour)
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However, they were not dealt with. Why were they not dealt with?
Derek Nolan (Galway West, Labour)
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Therefore, the concerns would not have been brought to the attention of the board or the governing authority of Waterford Institute of Technology.
Derek Nolan (Galway West, Labour)
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Therefore, the concerns about the president's expenditure were raised with the president.
Dr. Ruaidhrí Neavyn:
The concerns about the expenditure incurred were raised through the appropriate mechanism at the time - the chief officer of the institute. I suppose the further actions were not taken because, obviously, there was no confidential route for these matters to be dealt with. That is the issue we are trying to raise here. Obviously, one is dealing with the most senior office and concerns about it; that creates difficulties in terms of how the matter is going to be dealt with in a confidential basis to ensure protection for those who raise concerns. That is the single largest contributing issue.
Derek Nolan (Galway West, Labour)
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I presume there was a chief financial officer in place at the time.
Derek Nolan (Galway West, Labour)
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What was that person's take on what was happening?
Derek Nolan (Galway West, Labour)
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Did they also raise these issues with the president?
Derek Nolan (Galway West, Labour)
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Therefore, was the issue that there was no place other than the office of the president to go with the concerns raised?
Derek Nolan (Galway West, Labour)
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What happened to the previous holder of the office of president? Where is he now?
Derek Nolan (Galway West, Labour)
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Much of the expenditure incurred was unvouched. One of the auditors' reports stated the president had indicated that he had not sought preapproval of travel expenses as required under the travel policy, although he said he would normally seek informal approval, for example, from the chairman. How does this stand up? Is it accurate?
Derek Nolan (Galway West, Labour)
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Was the chairman contacted and asked?
Derek Nolan (Galway West, Labour)
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Did anybody do so?
Derek Nolan (Galway West, Labour)
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That is serious. It comes down to the issue of corporate governance in Waterford Institute of Technology.
Derek Nolan (Galway West, Labour)
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The former president said he would obtain informal approval from the chairman. What is being portrayed - possibly, rightly - is that the previous president was to blame. The question is whether there were wider governance issues. If the former president said he had contacted the chairman and obtained preapproval from the chairman, the least one would expect is that the chairman would have been contacted to verify if that was true.
Derek Nolan (Galway West, Labour)
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Therefore, there was contact.
Derek Nolan (Galway West, Labour)
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Is there any suggestion or evidence of misappropriation of funds from the office?
Dr. Ruaidhrí Neavyn:
There is no evidence to confirm the misappropriation of funds. I believe in the report there was reference to two items of a personal nature drawn down on the credit card, the cost of which had actually been reimbursed to the institute. Therefore, we have no evidence that there was personal benefit.
Derek Nolan (Galway West, Labour)
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Was the cost reimbursed before or after this issue became public?
Derek Nolan (Galway West, Labour)
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There was an €8,000 contribution to the Waterford Spraoi Festival, a payment of €40,000 to Pauline Bewick to cover expenses incurred in cataloguing the Bewick collection, the purchase of a Bewick painting and so on, and a considerable amount spent on taxis. Did Dr. Neavyn get a taxi here today?
Derek Nolan (Galway West, Labour)
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It is something that has become associated with Waterford Institute of Technology. Dr. Neavyn is confident that none of the money was misappropriated. A considerable amount of money was spent on public relations - approximately €500,000. Is Dr. Neavyn confident that the services for which the institute paid were actually provided?
Dr. Ruaidhrí Neavyn:
To be fair, we can certainly point to activities in which the public relations bodies and groups were engaged and this can be accounted for. The issue is whether we needed to continue that level of service. We have since reduced it substantially. In fact, consultancy costs associated with the office of president have been reduced from €102,000 to €25,000 since 2006.
Derek Nolan (Galway West, Labour)
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Does the institute still maintain the services of these public relations companies?
Derek Nolan (Galway West, Labour)
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Is Dr. Neavyn satisfied that the institute is tendering because many of the contracts were not put out to tender? Is he confident that all significant contracts are put out to tender?
Derek Nolan (Galway West, Labour)
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I have read either in one of the reports or in the media that the former president is involved in litigation with the institute of technology. Is that correct?
Derek Nolan (Galway West, Labour)
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Is the institute defending it?
Derek Nolan (Galway West, Labour)
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I will not go into it because it is probably inappropriate to raise the matter in public session.
Derek Nolan (Galway West, Labour)
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On the issue of staff remuneration and the payment of allowances in excess of those prescribed, the report shows there was a sum of almost €8 million paid to senior university staff in excess remuneration. I will ask Dr. Brady about this as UCD had the highest figure at €3.6 million. At any time was the university aware that it was paying in excess of what it ought to have been paying?
Dr. Hugh Brady:
Not between 1999 and 2006. The Act introduced a different mechanism - a requirement to seek approval by the Minister. The problem was that no mechanism to seek approval was put in place at the time. For that reason, from 1999 the university provided the HEA on an annual basis details of all such allowances and regularly requested approval.
There was a series of correspondence over that period, usually either apologising for the delay or seeking additional information from us. It was not until almost seven years later that there was any indication the HEA had a problem with this. Then there was one particular letter which essentially said that the HEA thought these higher responsibility allowances should be approached in the context of section 25 of the Act. That was the first indication and we began a series of discussions and engagement, both written and oral, with the HEA. Obviously, we made the point that these posts were the norm in international higher education. The basic problem is that one has salary scales up to and including professor and one has set salary scales at, for example, the president's level, but what one does not have is set salary scales for heads of departments and schools, deans and college principals. That could have been dealt with in two ways. In many universities across the world, it is dealt with by simply recognising that it is a different job and carries a different salary. We took the approach that it is better for this to be an allowance because those individuals will then move back into their regular academic job after the completion of their post as, for example, dean, and will not have a long-term pension liability. Rather than have a separate scale, the university's approach was to have an allowance and recognise the different nature and the added responsibility of that job but then the individual-----
11:20 am
Derek Nolan (Galway West, Labour)
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Would it not be the case that if someone took on this extra responsibility, he or she would give up another? For example, if he or she was dean, he or she stopped lecturing to some extent.
Dr. Hugh Brady:
That is the issue. The role of head of a large college or school is a very different animal. In many cases, it involves the management of budgets of €20 million, €30 million or €40 million and between 2,000 and 3,000 students in certain cases. It is a very different role where we set those individual targets in terms of CAO first preferences, total number of students recruited, international student recruitment and revenues and, in particular, postgraduate student recruitment because that carries on exchequer revenues. There are very significant external relations, fund-raising and international dimensions to it. The issue is that the roles are fundamentally different from the roles they came from.
Derek Nolan (Galway West, Labour)
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Dr. Brady said that for seven years, UCD sought approval for the allowances every year from the HEA and the HEA never clarified the issue.
Dr. Hugh Brady:
To be fair to the HEA, it did respond but the matter was never clarified. There was correspondence relating to June 2001 acknowledging that we had sent in the schedule and telling us that the Department regretted the delay in approving the allowances. In 2005, we were told by the HEA that it now required more detail on the rationale and justification for these allowances and it would discuss the university's submission with the Department and revert to us. As I mentioned, in 2006, there was a change in tone and we were told that it was necessary to continue the allowances in accordance with section 25.
Derek Nolan (Galway West, Labour)
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From what Dr. Brady has told us, there was definitely a question mark over the allowances. It was not the case that the HEA was not responding. It was saying that the matter needed to be clarified and looked at. It was not sanctioning them. The very fact that the university wrote asking for approval also implies that there was a question mark over their legitimacy at the time. It implies that the university was, to some extent, aware that these allowances were somehow impermissible.
Derek Nolan (Galway West, Labour)
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Absolutely.
Dr. Hugh Brady:
Those posts and, in many cases, the allowances and categories of allowances existed before 1997. What changed matters was the Act and the requirement for ministerial approval. No mechanism was put in place for seeking that approval. In the absence of that, we wrote in, but we still had to run the university and we needed and still need those individuals to do this.
Derek Nolan (Galway West, Labour)
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When did the university seek legal advice as to the allowances' legality?
Derek Nolan (Galway West, Labour)
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No one is questioning the roles or has ever said the roles are inappropriate. What is being said is that paying them an allowance without undertaking the role was the issue. So the question of whether they have them in other universities around the world is irrelevant. The fact is that UCD had the roles but decided to remunerate them. It was the fact that they were remunerated that was in question not the fact that they existed. The university obviously got quite a fright in 2006 when this stricter line came in and sought legal advice. What is the status now with regard to the HEA? Are all UCD staff fully compliant with the requirements?
Dr. Hugh Brady:
All of those higher responsibility allowances have gone since 2009. Essentially, between 2006 and 2009, we entered into a discussion with the HEA and while it undoubtedly would have liked us to stop everything immediately, legal advice looks both ways. One is consent by acquiescence, but, more importantly, we were then faced with staff who had contractual agreement giving them allowances. That is where there might have been a difference in emphasis. The HEA would have liked us to bring down the hammer on all of them. We argued that we should take a more measured view of this and work through each of them. In certain cases, therefore, there were individuals who had a contractual allowance where they retired and we dealt with the roles, while we stopped others. In respect of the resolution mechanism, during that period we, with our students' union, submitted a proposal to the HEA whereby the disputed amount would be put aside for new student services, in other words, into student supports over and above what we currently invest in them. The resolution that has been suggested by the HEA is a slight tweak of that and we are happy with that and have indicated as such to the authority.
Derek Nolan (Galway West, Labour)
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Did the university lose any staff as a result of that?
Derek Nolan (Galway West, Labour)
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The university informed people that the allowances were being stopped and people said goodbye, they were off.
Derek Nolan (Galway West, Labour)
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Is that directly attributable to this decision?
Dr. Hugh Brady:
It was certainly a major component of their decision. Again, we need to look at those individuals. We are competing with some of the best universities in the world for the best international talent and they would see us being criticised for what they would see as being normal practice.
Derek Nolan (Galway West, Labour)
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How would the salaries for those individuals compare with international standards? Would they not be generally higher? Have there not been reports showing that Irish universities' pay is quite healthy?
Dr. Hugh Brady:
Irish university pay is quite healthy but there is no flexibility built in to incentivise performance. Now we essentially have no scale. We have the principle of allowances or a different salary for senior managers being recognised in a review body report in 2008, but the reality is that we cannot gain approval for them.
Derek Nolan (Galway West, Labour)
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How many people has UCD lost as a result?
Dr. Hugh Brady:
It would not be fair of me to name the individuals but, unfortunately, there have been high profile individuals who have left senior positions and have spoken about their experience or written about it in our national press or, even more worryingly, the international press. That is one of the issues going back to the Deputy's previous conversation with the provost of Trinity College. We appreciate the responsibility we have to ensure our corporate governance structures are in place. At the same time, we play on an international stage and are seeking the best international talent and to keep the best Irish staff here. They know what the environment and ecosystem is like in other jurisdictions. It is a difficult issue and it is a balancing act. The university sector is working with the HEA to look at a broader remuneration framework that is fit for purpose.
Derek Nolan (Galway West, Labour)
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Is Dr. Brady saying the university balances its corporate governance responsibilities with its need to be internationally competitive?
Derek Nolan (Galway West, Labour)
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I think Dr. Brady said that.
Derek Nolan (Galway West, Labour)
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Dr. Brady then said it was a balancing act.
11:30 am
Derek Nolan (Galway West, Labour)
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If the balance changes we will have Dr. Brady back again.
Kieran O'Donnell (Limerick City, Fine Gael)
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I welcome the witnesses. I wish to ask Dr. Neavyn about Waterford Institute of Technology. When reading the Deloitte & Touche report, which catalogues the expenditure, one must question how it was allowed to continue for so long. When did the chief financial officer first raise his concerns? I did not hear the date.
Kieran O'Donnell (Limerick City, Fine Gael)
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However, the rate of non-pay expenditure in 2004 was approximately €350,000, it was more than €600,000 in 2005 and 2006, and in 2007 it was €583,000. It peaked in 2008 at €635,000 and subsequently reduced in 2009 and 2010. It is clear something was amiss. Dr. Neavyn stated discussions on the issue took place with the chairman of the board. The Deloitte & Touche report mentions the former president, Professor Byrne, had sought approval of travel expenses from the chairman of the board. What explanation did the chairman of the board give for this?
Dr. Ruaidhrí Neavyn:
Elements of the response of the then chairman of the board forms part of the second report commissioned by Deloitte & Touche. We have been advised not to make any comment on the contents of this report as it may form an integral part of the defence in a case being taken against us by the former president. Comments were made in the interview on expenditure but, if the Deputy does not mind, it is a sensitive legal issue.
Kieran O'Donnell (Limerick City, Fine Gael)
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Is the chief financial officer at the time still in the role?
Kieran O'Donnell (Limerick City, Fine Gael)
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Did he bring his concerns about the issue to the board at the time?
Kieran O'Donnell (Limerick City, Fine Gael)
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Did he bring it to the attention of any other member of the management team at the time?
Kieran O'Donnell (Limerick City, Fine Gael)
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Did he raise it with the chairman of the board at the time?
Kieran O'Donnell (Limerick City, Fine Gael)
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This is with regard to expenditure by the president.
Kieran O'Donnell (Limerick City, Fine Gael)
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How much of the money has been sought from and repaid by the former president?
Dr. Ruaidhrí Neavyn:
The payments made were for services provided for the office. We have not yet identified any instances of these payments being a direct benefit to the individual concerned. They were for services such as gift items and taxi and other travel expenses, so we have not yet sought any reimbursement.
Kieran O'Donnell (Limerick City, Fine Gael)
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I did a quick calculation and well in excess of €670,000 worth of items never went to tender. During the period, €276,000 was given to Bracken Public Relations Limited for publicity. A total of €250,000 was given for marketing on demand professional fees. A total of €14,000 was given to Professor John Davies. Interestingly and most peculiarly, I note the former president stated much of the travel expenses had to do with taking taxis to meetings in discreet locations. One taxi company run by Martin and Eleanor Power received €126,000 during the period and no invoice details were provided, according to the Deloitte & Touche report.
A total of €134,000 was spent on fine arts, with €48,000 going to Pauline Bewick and €62,000 spent on the papers of Thomas Wise. Almost €20,000 was spent on flowers and bouquets. On what exactly was this money spent? Bell Airways received €4,200 to charter a plane from Waterford to Dublin in 2007. How did these contribute to education? Dr. Neavyn tells me the chief financial officer raised concerns about this as far back as 2001 but it was left to run unabated over a seven year period. This was taxpayers' money. Over the period the Arlington Lodge received €73,000. Once again the former president mentioned a discreet environment. I would have thought his office was a discreet environment.
I note Dr. Neavyn has not taken up appointments on many subsidiary companies. The Deloitte & Touche report did not deal with control as it only examined expenditure. How is the expenditure of this €3.6 million related to the furtherance of education and proper use of taxpayers' money? This committee examines the best value for the taxpayer. The report is confined to a seven year period so we do not have figures for 2001 to 2003. It beggars belief that this type of money was thrown around. One of the public relations companies has been reappointed after a tender process. Which company is it? When was it appointed? Was it prior to the resignation of the former president?
Let us deal in pounds, shillings and pence rather than having an abstract discussion. Will Dr. Neavyn explain how the institute of technology could justify allowing these payments to run unabated? I find it extraordinary that the chief financial officer at the time, Mr. McFeely, is in the role today. I would also like to hear his thoughts on this. How did he bring it the attention of the president at the time? To whom else did he speak? How was it allowed to continue? It is clear Mr. McFeely had major concerns. Did he speak to any individuals on the board or to the chairman of the board? Let us get to the bottom of this. How much have the reports cost? We have the Deloitte & Touche report and the Grant Thornton report. How much taxpayers' money has been expended on these two reports?
Dr. Ruaidhrí Neavyn:
The institute fully accepts the findings and it would be hard to justify all of the categories of expenditure in the list outlined by Deputy O'Donnell. Deloitte & Touche performed a review to categorise the expenditure and the Deputy has quoted from this report. In the second report we performed a more detailed review of the expenditure which occurred in a shorter time period, particularly focused on unvouched categories. I hope this will give us a more detailed analysis.
Kieran O'Donnell (Limerick City, Fine Gael)
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Does Dr Neavyn have this report?
Kieran O'Donnell (Limerick City, Fine Gael)
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Will it be published?
Dr. Ruaidhrí Neavyn:
The advice we have been given is that the report may form part of the defence in a legal case being taken by the former president against the institute.
As an institute, we have made significant corrections and changes in expenditure in the office of the president and all other categories. Expenditure has been reduced from a peak of €635,000 per annum in 2006 to €180,000 so far this year.
11:40 am
Kieran O'Donnell (Limerick City, Fine Gael)
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To how much?
Kieran O'Donnell (Limerick City, Fine Gael)
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What were the flowers used for? I am intrigued. I buy flowers for my wife from time to time. Apart from that-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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A romantic.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It does not come across.
Kieran O'Donnell (Limerick City, Fine Gael)
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The expense in this case was €18,000. Issues arise, reports are produced and everything vanishes into the ether, but the taxpayer picks up the tab. A quick calculation shows that approximately €2.2 million in excess of the €180,000 was expended in the eight-year period. How much was spent in the 2001-03 period? We have not got to the heart of the matter.
Dr. Neavyn must view this situation historically, but Mr. McFeely was the man who stepped up to the mark and stated that he had issues with this level of expenditure. How did Mr. McFeely bring the situation to the attention of the people with whom he spoke and why was it allowed to run unabated? His opinions are critical at this juncture.
Kieran O'Donnell (Limerick City, Fine Gael)
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Was Mr. McFeely present during the previous presidency?
Kieran O'Donnell (Limerick City, Fine Gael)
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What were the procedures prior to Professor Byrne’s presidency?
Kieran O'Donnell (Limerick City, Fine Gael)
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Did Mr. McFeely approve all expenditure in the president’s office?
Kieran O'Donnell (Limerick City, Fine Gael)
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What was it approximately?
Kieran O'Donnell (Limerick City, Fine Gael)
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Per annum.
Kieran O'Donnell (Limerick City, Fine Gael)
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The figure was €30,000 in 2002 or so and increased to €635,000 in 2008.
Kieran O'Donnell (Limerick City, Fine Gael)
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Why was Mr. McFeely uncomfortable?
Kieran O'Donnell (Limerick City, Fine Gael)
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Why not?
Kieran O'Donnell (Limerick City, Fine Gael)
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Was it the size of the claims or the lack of paperwork? What were Mr. McFeely’s concerns as an accountant?
Kieran O'Donnell (Limerick City, Fine Gael)
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Was Professor Byrne ignoring Mr. McFeely’s advice on following procedures?
Kieran O'Donnell (Limerick City, Fine Gael)
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Was he ignoring Mr. McFeely’s advice? Had WIT specific procedures at the time?
Kieran O'Donnell (Limerick City, Fine Gael)
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Effectively, Professor Byrne ignored it. Mr. McFeely raised his concerns with Professor Byrne.
Kieran O'Donnell (Limerick City, Fine Gael)
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Did Mr. McFeely seek external advice?
Mr. Tony McFeely:
External and internal. The view at the time was that he was a new president and needed to be given a chance. We were progressing a number of significant initiatives. While my unease continued, I was conscious of the advice received and we managed as best we could. Issues, including with procurement, were brought to his attention over the years.
Kieran O'Donnell (Limerick City, Fine Gael)
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The situation reached the point at which Mr. McFeely raised his concerns with Professor Byrne. With whom else in the management team did Mr. McFeely raise those concerns?
Kieran O'Donnell (Limerick City, Fine Gael)
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All other members?
Kieran O'Donnell (Limerick City, Fine Gael)
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Did Mr. McFeely speak with the chair of the board?
Kieran O'Donnell (Limerick City, Fine Gael)
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Was anyone on the board aware of the situation at the time?
Kieran O'Donnell (Limerick City, Fine Gael)
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A number of board members were aware of Mr. McFeely’s concerns.
Kieran O'Donnell (Limerick City, Fine Gael)
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When was the point reached at which Professor Byrne for all intents and purposes rode roughshod over WIT’s procedures? It was bordering on a dictatorship. He was not complying with the rules of the institute over which he governed.
Who signed off on the expense claims submitted to Mr. McFeely? How were they paid?
Kieran O'Donnell (Limerick City, Fine Gael)
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At what level was that member of senior management?
Kieran O'Donnell (Limerick City, Fine Gael)
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Was that person entitled to approve the president’s expenditure under WIT’s guidelines?
Kieran O'Donnell (Limerick City, Fine Gael)
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Who would have made the decision on whether he was entitled?
Kieran O'Donnell (Limerick City, Fine Gael)
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The president dictated how his expenses were to be paid. What happened when Mr. McFeely took back the role of approving his expenses in 2008?
Mr. Tony McFeely:
The level of travel expenditure had dropped by that stage and there was not a significant level of travel. I checked. He was more adherent to policies, but issues remained. The pre-approval process was ineffective. In many instances, I was approving after the fact when it was difficult to do much about it despite my concerns. This is really as much as I wanted to say.
Kieran O'Donnell (Limerick City, Fine Gael)
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What Mr. McFeely has told us is appalling. In 2000, approximately €30,000 was incurred in expenditure. The previous president adhered to the guidelines. A new president was appointed. Mr. McFeely was not satisfied with the documentation. The Deloitte report has revealed that much of that documentation was not backed up. The expenditure was signed off on by another member of management under Professor Byrne’s direction. This situation continued for at least eight years prior to Mr. McFeely becoming involved again.
The figures for 2008, 2009 and 2010 are €635,000, €390,000 and €455,000, respectively. They were still exceptionally high. There is an issue with double-claiming and I do not accept that the amounts owed to the taxpayer are small. The Deloitte report was published under freedom of information provisions. The Grant Thornton report must also be published. This is a matter of public interest. It does a disservice to the entire education system, including WIT, which is a tremendous institute. The truth needs to come out.
I am shocked that, despite members of the board and management team, including Mr. McFeely, being aware of the issue, it was not stopped. There was a problem with the institute’s governance, given the proposition that a president could use €3.6 million as a personal slush fund.
This is beyond comprehension. It is important this matter is rectified and that any money owed to the taxpayer would be pursued with vigour. While much good work is being done, everything done must be in the interests of the taxpayer. What happened in this instance over many years is completely unacceptable. I ask Dr. Neavyn to give an assurance to this committee and the public that there will be no cover-ups and that this matter will be pursued in the interests of the taxpayer and students and staff of WIT. This is incredible and appalling. I want an assurance that this matter will be pursued with vigour and that any money owed to the taxpayer will be pursued. Dr. Neavyn might, when giving that assurance, tell the committee whether Bracken Public Relations Limited or Brance Nolan Limited were reappointed under the tender system and whether that appointment was made before or after Professor Byrne ceased to be president of the institute.
11:50 am
Kieran O'Donnell (Limerick City, Fine Gael)
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And that the money will be recovered.
Dr. Ruaidhrí Neavyn:
Yes. To be fair to the institute, it, too, was shocked by this matter. It is dealing with it and has commissioned a report on the matter, which, I accept, must be independent and external, as is evident in respect of report number one. We are vigorously pursuing and examining the expenditure in relation to these categories and will seek repayment of funding found to have been misappropriated.
Kieran O'Donnell (Limerick City, Fine Gael)
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Why did Mr. McFeely feel he was not in a position in 2001, when Professor Byrne commenced his position as president of the institute, to go to the chairman of the board of governors to voice his concerns?
Kieran O'Donnell (Limerick City, Fine Gael)
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Why?
Kieran O'Donnell (Limerick City, Fine Gael)
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Am I correct that Mr. McFeely refused to sign the expense claims?
Kieran O'Donnell (Limerick City, Fine Gael)
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Professor Byrne then got another member of staff to sign them. Is Mr. McFeely at liberty to name that member of staff?
Kieran O'Donnell (Limerick City, Fine Gael)
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It was a senior member of staff.
Kieran O'Donnell (Limerick City, Fine Gael)
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The expense claims were signed off on by the same person in all the years concerned.
Kieran O'Donnell (Limerick City, Fine Gael)
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Okay. Many of the travel expense claims were unvouched and there were a lack of invoices in that regard.
Kieran O'Donnell (Limerick City, Fine Gael)
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Yes.
Kieran O'Donnell (Limerick City, Fine Gael)
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Did situations arise whereby subsistence claims were submitted at the same time as the institute was incurring expenditure directly in respect of hotel accommodation?
Mr. Tony McFeely:
That did happen, as highlighted by the Comptroller and Auditor General. That matter was addressed and resolved and the moneys were repaid. We have controls in place in that regard. We regularly check expenses in respect of all members of staff. There was one instance where what was mentioned by the Deputy happened. When it was brought to our attention by the auditors, the money was reclaimed.
Kieran O'Donnell (Limerick City, Fine Gael)
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In hindsight, what would Mr. McFeely have done differently?
Kieran O'Donnell (Limerick City, Fine Gael)
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I accept that.
I have a final question for the witness from DCU. A recurring issue of concern is that of the subsidiary companies. The WIT falls into this category also. Subsidiary companies appear to be funded by the colleges, yet that funding is not incorporated into their accounts. I note also that in the case of WIT in particular, the former president was on the board of its subsidiary company. Mr. McFeely chose not to take up a position on the board. Major issues of corporate governance arise in this regard. That Mr. McFeely is not on the board is to be welcomed.
With regard to DCU, reference was made to the Helix and so on. What level of funding has been put into the Helix and other operations in terms of subsidisation of these ventures and how is this justified?
Kieran O'Donnell (Limerick City, Fine Gael)
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Okay. That would not have been the case with WIT.
Professor Brian MacCraith:
They are in the case of DCU. The objective of the DCU commercial suite of companies is to generate non-Exchequer income profits to enable the university to deliver on its strategic intent. That is their function. In terms of the Helix, since 2008 there has been a subvention of €500,000 per annum of non-Exchequer funds from the university to the Helix. The university does not inject income into any of the other subsidiaries. The rationale for this is twofold. One is the actual financial benefit we get from having the Helix for running events, including graduations and so on, in respect of which we obtain lower rates. The net value to us is of the order of €200,000. We have brought this to the attention of the governing authority. More significantly, the role of the Helix is way beyond its financial value. The footfall it brings to campus is approximately 250,000 per annum. In terms of promotion of the university, that is significant. The Deputy may be aware of the region in which DCU is located. The community engagement aspect of the Helix is enormous. I could on go.
Kieran O'Donnell (Limerick City, Fine Gael)
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That is fine.
Kieran O'Donnell (Limerick City, Fine Gael)
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In regard to WIT, Professor Byrne was a member of the board of the subsidiary company, DTS. Did he receive a salary and expenses from that company?
Kieran O'Donnell (Limerick City, Fine Gael)
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What level of funding would have been put into this particular subsidiary company by WIT down through the years?
Kieran O'Donnell (Limerick City, Fine Gael)
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Where did the profits earned by that company go?
Kieran O'Donnell (Limerick City, Fine Gael)
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That is fine.
Kieran O'Donnell (Limerick City, Fine Gael)
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I will finish up on this point, which I cannot emphasise enough. WIT needs to get to the bottom of this matter. It needs to be made public in order that the academic reputation of WIT is restored. I welcome that Mr. McFeely is here today, which brought clarity to the situation. What happened during the ten year period in question is unbelievable. It should never have happened and must be corrected in the interests of the taxpayer.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Perhaps Dr. Neavyn will tell the committee what company was responsible for auditing the accounts between 2001 and 2011.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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In terms of the audit, what happens within the institute? Who presents the accounts to whom?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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In terms of the institute's internal audit, were none of Mr. McFeely's concerns highlighted in the context of good governance and how the institute is operated?
The institute spent a significant amount of money on taxi fares, flowers, marketing, hospitality and so on. How is it that all the tendering processes were ignored and this was accepted in the context of the audit and internal audit committee?
12:00 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Aside from Mr. McFeely's concerns, I am interested in the concerns expressed directly to the president. Were those concerns not expressed to anyone else in-house? Were the financial reports for each of those years signed off by the audit committee before going anywhere else for examination? All of these problems involving scandalous use of taxpayers' money and the concerns around them seem to have been kept in-house. Is that correct? Should people besides Mr. McFeely have looked at the processes, governance issues and expenditure? Did such people not take the time to look at the accounts? Did no one cry "stop" in that place or understand their responsibilities? Were the accounts just signed off as a matter of form?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Who signed off on the internal audit?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I do not necessarily want the name. I am curious because the accounts went to an internal audit committee and it did not see it fit to raise the issues that concerned Mr. McFeely or did not see them. The committee did not see the lack of due process or procedure around the purchase of all of these listed goods and services. As members of such a committee, the people involved over that number of years would have had a responsibility to look at the accounts and not sign off if there was a concern, as there was from Mr. McFeely. It would seem that the accounts were signed off each and every year by the audit committee with no investigation. Will the witness confirm that?
Did Mr. McFeely put any sort of note on the accounts regarding the issues? Would it not have been proper procedure in examining accounts to put a footnote regarding some of the expense items if it was felt that these were out of kilter with the normal expenditure incurred by an institute's activity? Did the audit committee sign off every year and did it see any note or reference to Mr. McFeely's concerns?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Where did the accounts go from there?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What did the governing body do with them? Did they just accept the accounts as signed?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Who was that?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The audit committee and governing body signed off and accepted the accounts over those years and not a single question was asked of the president with regard to those accounts. Is that correct?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The entire system would seem to be guilty of negligence, at least, in terms of how affairs were conducted and the accounts were examined.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. McFeely stated they were made aware of the issues. He may have made them aware in an informal way.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Did no one have the bottle to raise the question?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What is a "confidential" basis? Is it hush-hush? He was spending a fortune.
Dr. Ruaidhrí Neavyn:
I cannot answer that question on behalf of those individuals. It is a matter of grave concern for the institute and it is dealing with the matter. The first task was to tackle the level of expenditure and the second was to review the expenditure and get to the root of the problem.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I will move to a slightly different topic and address my questions to Dr. Prendergast from Trinity College Dublin. A large section of the report is about the employment control framework, so will he give us a pen picture of that? In the note presented to the committee, the income for the year is €320 million. How much of that goes on staff? What is the average staff cost in Trinity?
Seán Fleming (Laois-Offaly, Fianna Fail)
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The notes indicate that there was income of €320 million, with 1,365 academic staff and 1,474 non-academic staff. The total staff is 2,839.
Seán Fleming (Laois-Offaly, Fianna Fail)
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That would equate to an average cost per person of approximately €75,000.
Seán Fleming (Laois-Offaly, Fianna Fail)
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It would be helpful in order to get a picture of where we are going. We are dealing with the minutiae of 27 staff here and there with allowances, but it is important to know where we are starting. The average is approximately €76,435. That includes senior academic posts down to the people lower down.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I understand that but those are the full-time posts. The witness has indicated that he does not understand what figure I am using but I am using the one read out to us an hour ago.
Seán Fleming (Laois-Offaly, Fianna Fail)
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It came from the briefing note. I am just asking for context. The college educates 17,000 students and employs 2,839 full-time equivalent staff, of whom 1,365 are academic, with the remainder being library, technical, administrative and support staff. This is the information provided by the witnesses to us. We just want a picture of Trinity before delving into specific employment. The average cost per whole-time staff member in Trinity is €76,436.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Could the witness explain that as we are confused?
12:10 pm
Seán Fleming (Laois-Offaly, Fianna Fail)
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It is the total college.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I am not distinguishing the source of income between State grants, grants in lieu of fees, State-funded research, deferred capital income, student fees, non-State funded or commercial income. The income figure for the year the witness has given is €320 million. There are 2,839 whole-time equivalent staff. That translates to €76,436 average staff cost. Can the witness break that down? What is the average staff cost for academic staff versus the non-academic staff? I am sure the people who work in the canteen or the library are not all getting €76,000. We are looking at a special report on the finances dealing with employment and we are even having trouble establishing-----
Dr. Patrick Prendergast:
No, we can establish the figure the Deputy wants. I cannot even work my phone so I do not have a calculator to calculate anything. I do not really know what figure the Deputy wants. If the Deputy wants a figure, we have to take time to calculate it so we know we are working from the right figure. Let us say the €75,000 is right-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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It is €76,436, and I am not saying: "Let us say." It is the figure of €320 million which the witness gave us and the staff figure of 2,839. One divided into the other gives a total of €76,000.
Seán Fleming (Laois-Offaly, Fianna Fail)
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It is the Comptroller and Auditor General's briefing document presented to the committee for its meeting on 27 September. It has six pages. The last sentence of the six page briefing note submitted to us states that Trinity College will be happy to elaborate on any of the issues in the Comptroller and Auditor General's report. I am asking a basic question, which is the average staff cost of academic staff versus others. It is disappointing that an organisation does not know its staff costs. One could not run a business if one did not know what one's staff costs are. I mentioned all the figures, and they are not my figures.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Yes, the witness told me it is €217 million. What is the breakdown of that between academic and non-academic staff?
Seán Fleming (Laois-Offaly, Fianna Fail)
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That is fine.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The information requested can be given to the clerk to the committee.
Seán Fleming (Laois-Offaly, Fianna Fail)
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The witness should provide as much detail as possible on that in terms of how the institution chooses to break down the academic and non-academic staff according to the different grades. There was a specific breakdown in the briefing note to the committee of the non-academic staff between library, technical, administrative and support services. Perhaps the witness would give us the breakdown based on the headings provided to us.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Okay. The other issue I wish to raise is cash balances across all the colleges. People will be surprised to read in page 13 of the Comptroller and Auditor General's special report of the net cash balances in the universities and institutes of technology. At the end of 2010 there was €573 million in cash sitting in the bank. At the end of the 2011 academic year there was €706 million cash in the bank. That is an increase of €133 million in cash sitting in the third level institutions' bank accounts. I am not directing this specifically to Trinity College. It is an increase of 23%. As a member of this committee I will be asking the Accounting Officer of the Department of Education and Skills how he was able to preside over increasing cash balances in the third level institutions' bank accounts when we were making cuts to special needs assistants, increasing pupil-teacher ratios, cutting back on capital expenditure and cutting DEIS schools. It utterly defies all logic. Chairman, I ask you to write to the Accounting Officer of that Department to explain how he can preside over those cash balances while savage cuts are being made in education that affect special needs assistants, disadvantaged schools, pupil-teacher ratios, school transport and so forth. We are accumulating millions in increases in the cash balances of the third level institutions. It will not happen next year. It might be happening in 2012 but it will not happen in 2013. As a public representative, I cannot stand over going back to my constituents and telling them there is €750 million in cash sitting in the universities' bank accounts.
The gentleman from UCD skipped the figure earlier when referring in his opening statement to the current cash balance. He said it is within the agreed parameters. He did everything except give us the figure. What is the current cash balance or the most recent cash balance?
Seán Fleming (Laois-Offaly, Fianna Fail)
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What is it-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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If the witness will bear with me, I will come to that recommended cash balance because I do not accept that recommendation for a minute. I do not believe this committee will accept it either by the time we are finished considering it. We will come to that report shortly because it is referred to again at the bottom of page 13. We have representatives of the best third level institutions in the country before us so can anyone tell us if those cash balances are netted off by EUROSTAT in our national debt figures? Would any of the witnesses know that, although that is not their specific job? Some of the witnesses must know something about statistics and national finance. Can anybody help me on the issue of whether the cash balances are netted off? The institutions get questionnaires on their cash balances each month or each quarter from the Department of Finance. Presumably they are not, so it is a bit of a reserve.
Local authorities are circulated with questionnaires on their cash balances on a quarterly basis at least. Their cash balances and overdrafts, as the case may be, and the balance on their development levy funds are taken into account in the overall national debt. I am sure there is hardly a local authority in the country that is not overdrawn, yet institutions under the remit of the Department of Education and Skills have €750 million sitting in bank accounts. It is extraordinary. The public will not want that to continue.
With regard to the cash balances, would the institutions have much investment in shares, bonds or other commercial investments separate from the cash? I will start with UCD.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Were they in bank shares-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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-----or in cash?
Seán Fleming (Laois-Offaly, Fianna Fail)
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The Higher Education Authority, HEA, produced a report some years. It is stated at the end of page 13 that the report of the working group recommended that third level institutions should have between 45 and 60 day's income in cash to enable them to respond to opportunities and risk in many of their day-to-day activities. We accept it is good to have a cash balance. However, the overall figure announced by the Comptroller and Auditor General in his opening remarks this morning and in the first page of his report is that the sector received €1.45 billion in funding from the HEA. We now find the institutions have in excess of €700 million in cash balances, which is 50% of their annual income and appears to be much more than 45 to 60 days income.
It is closer to six months' cashflow sitting in the bank. Maybe the Comptroller and Auditor General might clarify that.
12:20 pm
Mr. Seamus McCarthy:
The figure I gave was actually the transfer from the State to the universities. It is not their total turnover for the year. In terms of the 45 to 60 days, it is their total income for the year that is relevant and not just the State element of it. That is my interpretation of that.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Just so we all understand, there is €700 million in the bank. In the sector, what percentage – a ballpark figure – of the total income would be State income and student income as opposed to commercial income? Would it be one third of the total income?
Seán Fleming (Laois-Offaly, Fianna Fail)
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Trinity College would probably be high up.
Mr. Seamus McCarthy:
-----was showing that it was 55% State funding. I think that includes research funding, which would not be included in this €1.5 billion. I think the Deputy’s point is that €700 million is half of the State grant. It would possibly be a quarter, of the total turnover, so it represents three months.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Okay. We were given the briefing note for UCD of its income. Direct Exchequer funding, State grants, grants in lieu of fees, State-funded research, deferred capital and the student fees amounts to 80% of its total income. Commercial income is 15% and non-State funded research programmes is 5%. From the taxpayer-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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No, I am including the student fees. We will call the paying public-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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Some of those would be fees from private sources.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Okay. All I am saying is that €700 million is an excessive figure and, in the run up to the Estimates for the coming year, that figure should be looked at more closely. As that figure is a year out of date, and given the recent audit, is there any way we could get a pen picture of the current position through the Office of the Comptroller and Auditor General?
Seán Fleming (Laois-Offaly, Fianna Fail)
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In regard to the cash balances, I find it extraordinary that the universities are so well off while the primary and secondary schools are experiencing such cuts. I know they will say they have had cuts, reductions in salaries, reductions in grant support and that student numbers have gone up. That is fine but that cash balance would be the envy of most other State organisations.
Dr. Hugh Brady:
We would also say that the cash balances are primarily as a result of timing, so this is committed money. I refer to the recommendation from the Donnelly report, to which the Deputy referred, which is also based on international norms where universities recommend 45 to 60 days of cash – that is just for day-to-day purposes. On top of that there is a lumpiness which comes with funding issues. One gets a research grant up front, whether from the State, from the Wellcome Trust or from the European Union, and one gets draw down of loan funding for capital projects and of philanthropic money but this is committed money. This is not money slushing around-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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I know it will all be spent in the coming months. I accept that.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I have no doubt it will all be spent, but I am just saying that so many other State organisations are suffering from cashflow difficulties and paying interest whereas the universities are sitting on this, even though it is only temporary.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Okay.
Paschal Donohoe (Dublin Central, Fine Gael)
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I want to go back to that point to allow Dr. Brady to elaborate, because it is an important one on which to be clear from the point of view of people looking at this. There is a difference between having an amount of money in a bank account which is uncommitted, in particular an amount of money which is so large, and an amount of money of which use will be made in the short term to fund the college. Will Dr. Brady elaborate on the point he made in response to Deputy Fleming?
Dr. Hugh Brady:
The reason we have a positive cash balance is that, for example, we get the grant in lieu of student fees and the registration charge in September. One has those up front for the year. Most of the research funding from the various agencies, whether from State agencies, such as Science Foundation Ireland, from the European Union, the Wellcome Trust, etc, is paid up front. If, for example, we draw down EIB loans for capital projects, which are backed by, for instance, philanthropic donations, that money could be on balance up front.
One is getting student rents and deposits and ancillary non-Exchequer income up front - although that is now paid twice and we are looking at getting students to pay it three times over the year - but, historically, that has been paid in one lump sum up front. One gets one's money up front but all of that is committed.
Paschal Donohoe (Dublin Central, Fine Gael)
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It is important to be clear about it. The amount of money we are talking about here is not surplus money.
Paschal Donohoe (Dublin Central, Fine Gael)
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This is money that comes in in a variety of different ways and different commitments exist on which that money must be spent. That is correct.
Paschal Donohoe (Dublin Central, Fine Gael)
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I just want to be clear on that. Do similar arrangements exist in DCU?
Professor Brian MacCraith:
Absolutely, and I am quite happy to clarify. For example, cash in the bank for us at the moment would be €32 million but I can say straightaway that €16 million of that has come in in the past month from student fees. This will be spent. If I look through cash at hand and commitments, we would have a net debt position. If one takes one of the major investments of the State in terms of research for the universities – the programme for research in third level institutions – the actual payment out to universities, where we have already committed to build research centres, will be staggered over the coming years. The only way we can move forward is with these sorts of amount. To reinforce Deputy Donohoe's point, these are not surpluses but are fully committed.
We have met the NTMA to see if we are getting the best rates of interest for these. It clarified to us that it could not match what we are doing, which is with Bank of Ireland and AIB. For example, in the past year, we would have made just over €400,000 in interest which we used to balance the books for the university itself. If one took that away, it is another cut to the universities in terms of trying to balance their books and that is increasingly difficult for us.
Paschal Donohoe (Dublin Central, Fine Gael)
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Deputy Fleming made a useful suggestion that it would be helpful to understand where those figures stand in terms of our national accounts overall and how they are registered. I just wanted to clarify the discussion which ensued earlier.
The Comptroller and Auditor General's report must be seen in the context of the report done in September 2010, which was special report No. 73, and I want to touch on some of the points raised in it. However, before I do so, I want to come back to the issue Deputy O’Donnell raised in regard to WIT. Did Dr. Neavyn use the phrase "discreet locations" for some of the money used?
Kieran O'Donnell (Limerick City, Fine Gael)
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It was mentioned in the Deloitte report. I mentioned it in the context of questioning.
Paschal Donohoe (Dublin Central, Fine Gael)
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Do we know what was going on at those locations?
Dr. Ruaidhrí Neavyn:
Again, I stress that the person who is best placed to answer those questions is the former post holder. I have not had the chance to have communication with that individual in regard to all the activities conducted during his term in office. However, I understand they were meetings he would have been having with individuals in regard to matters he felt were relevant to pursing his work but I have not had the chance to have that discussion with him. The institute is currently in legal dispute with the former president.
Paschal Donohoe (Dublin Central, Fine Gael)
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Okay.
Paschal Donohoe (Dublin Central, Fine Gael)
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That leads on to my next question: what is happening now as a result of the revelations in front of us?
Dr. Ruaidhrí Neavyn:
If I could just recap, we have taken a large number of measures to deal with this and, to be fair to the governing body, it was swift in its action once the matter was raised with it in terms of the commissioning of the reports from Deloitte, the independent reports in terms of the outturn of the expenditure. We have obviously reviewed all the expenditure of the office of the president.
All travel is pre-approved and all expenditure of the office of the president is co-authorised. All expenditure in the office of the president is reviewed by the governing body of the institution to ensure it is appropriate. On top of that, we have reviewed the travel and hospitality policies and withdrawn all corporate cards and introduced additional internal financial controls to strengthen the process to ensure all expenditure is in line with appropriate Government policy.
12:30 pm
Paschal Donohoe (Dublin Central, Fine Gael)
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Has there been any change in the nature of the governing body or its composition since these revelations?
Dr. Ruairdhí Neavyn:
As the revelations emerged, a new chairman came in so, to be fair to the new chairman, he was very active in dealing with this matter. There would also have been a change in membership of the governing body in the last two and a half years because the cycle of new governing bodies commenced about two or two and a half years ago so there would be many new members on it. The governing body is extremely proactive on this matter and has taken all necessary steps to ensure we can review the level of expenditure and the reason for it.
Paschal Donohoe (Dublin Central, Fine Gael)
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What about within the senior management team?
Dr. Ruairdhí Neavyn:
A number of new appointments have been made within the senior management team. Heads of school positions have been filled having been left vacant for a number of years. A new president - myself - has been appointed. In total there are five new members on the senior management team.
Paschal Donohoe (Dublin Central, Fine Gael)
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How do you respond to the point Deputy McGuinness made that a number of other entities and individuals were aware of what was going on? Across a ten year period, no one ever said "Stop".
Paschal Donohoe (Dublin Central, Fine Gael)
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Sorry; I want to withdraw that statement, because Mr. McFeely did, and I should have acknowledged that in what I said. Why were there not more people like Mr. McFeely? I am glad I was pulled up on that because I want to apologise to Mr. McFeely for the statement I made because he clearly did. My question is why was he on his own.
Paschal Donohoe (Dublin Central, Fine Gael)
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When will we know? How will we know?
Dr. Ruairdhí Neavyn:
We are investigating the matter now but it is taking a lot of time. I only took up my appointment in early February and have had to deal with a large number of legacy issues, as is clear from the report. The most important thing was to get the expenditure under control; that was my essential priority in the first few months I was in office. Following on from that I had to review expenditure and deal with the legal cases pending while ensuring the management team structures were appropriate and the proper procedures are in place to deal with expenditure in the institute.
Paschal Donohoe (Dublin Central, Fine Gael)
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I will leave it at that. You have come into a new role and are having to deal with these issues. We will look to him to see a resolution of this. I also acknowledge Mr. McFeely's role in this but I reiterate the point made by colleagues. I am concerned about the performance of the individual who instigated the behaviour that is of concern and equally why, with the exception of Mr. McFeely raising the issue, it continued for a decade. Those are the two issues the public want to see explored.
I want to go back to the earlier report in September 2010. While I do not wish to land additional material on top of Dr. Neavyn, although I am sure he is well able to respond to it, one of the issues noted in the earlier report from the Comptroller and Auditor General was that evaluation of teaching and programme quality was not mandatory. The Comptroller and Auditor General observed in many cases that recommendations at Department level had been executed but those at faculty and university levels had not. He then urged that there should be a quick and visible response from the university leadership following an external review on the issue of the quality of university courses and how they are evaluated. Could Dr. Prendergast respond to that point? How is Trinity responding to an observation like that on the quality of courses at the moment?
Dr. Patrick Prendergast:
Trinity College takes the quality of what it offers in its courses extremely seriously. Course reviews are mandatory in Trinity College. Student questionnaires are not mandatory but if they are not used, another method to assess students' feelings about the course must be used, such as focus groups. We have made it mandatory, although it was not done specifically in response to that document; it was an ongoing process within the college anyway to make student assessment of courses mandatory. That is now the case in the entire college. That information is fed back to the lecturers and to those to whom the lecturers report to ensure action is taken to continually improve the quality of courses. All our courses are subject to external examiner annual reviews by experts from abroad to monitor course quality and ensure they reach the standard expected and the desired learning outcomes that have been set and that the students have every right to expect. There is a lot going on.
Paschal Donohoe (Dublin Central, Fine Gael)
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Professor MacCraith gave me a sense of what is happening within DCU on that point.
Professor Brian MacCraith:
Like our colleagues, we take the quality of what we offer to our students very seriously. There are full institutional reviews by an international body every few years, faculty reviews and departmental or school reviews, along with an annual programme review for every degree programme, and in the last year every module has been surveyed for every student taking it and we get full feedback and act upon it. It is absolutely taken seriously and fed back into the system so we can take account of it. We also have a rolling programme of teaching quality reviews, with peer to peer assessment of teaching quality. A quality culture exists across the organisation and is fully embraced at every level right up to senior management. Every external body that comes in to review a unit or programme meets me and I give feedback and it then goes to executive for action. Quality is essential and embraced fully by the university.
Paschal Donohoe (Dublin Central, Fine Gael)
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I would like to go on to another observation made in the report, on page 43, on the measuring of staff time as part of a revised costing model. The point the report made was that a new system was brought in to better allocate funding from the Exchequer to universities. It wanted to come up with a way to understand the use of staff time and the resulting outputs. One of the observations in the conclusion is that a fundamental building block within the model is staff time, particularly how it is allocated. The report states that in early 2009, the staff representative bodies recommended their members should not engage or co-operate with data collection. It went on to state that the inclusion of actual hours worked in the form would facilitate the evaluation of the contribution of individual academics. Where does that stand now?
Professor Hugh Brady:
If the Deputy is asking what the institutions have delivered in the last three years, we have absorbed in our case approximately €6 million in cuts, with a 10% cut in staff and a 10% increase in student numbers. We have managed that through a variety of mechanisms, including to the engagement of staff with the full economic costing of activities. There is full engagement under the Croke Park agreement with that activity. There is also a new academic contract that allows greater flexibility.
There is university-wide use of workload models, which is probably the most useful tool we have. We do not need to compare how many practicals lecturer one is supervising compared to lecturer two. What we want to know is how each programme, school and college is doing and whether it has set out targets for student recruitment, student quality, international student recruitment, revenues associated with this such as research income and so on. There is a sweep of activities on which we need each of the academic units to deliver. We use the academic workload model to determine the distribution of that work within the particular college. If somebody in our business school is less research - active, he or she is likely to do twice as much teaching as somebody engaged in research. Since the report was published there has been very significant progress and staff engagement on these issues. This may have been facilitated by the Croke Park agreement.
12:40 pm
Paschal Donohoe (Dublin Central, Fine Gael)
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One of the points Dr. Brady made earlier concerned the challenge of attracting and retaining staff of international calibre owing to current pay levels. In preparing for this meeting I looked at a report by the HEA that was part of its correspondence to the committee in November 2010. It was in response to our request for help in understanding the comparative levels of pay between professors across countries. The following information was provided in that report. In Ireland the starting point on the salary scale for university professors was €113,000, rising to €145,000, depending on levels of performance. In the United Kingdom the starting salary was €67,000, rising to €124,000. In the United States the starting salary was €79,000 but it rose considerably. The information contained in the document appears to contradict the point Dr. Brady makes on the underpayment of academics and the ability to attract and retain them in Ireland.
Dr. Hugh Brady:
That data and the reports I have seen refer to a comparison of pay scales for lecturers, senior lecturers, associate professors and professors across the jurisdictions. There is one exclusion. Australia, a country that appears to pay more, is not included, and it is a continent to which we are losing people.
My previous remarks related to individuals, not individuals at professorial level and below but to the academic middle management layer, the individuals we want to step up to serve as heads of school, heads of department and programme deans. We have a system where the average salary by comparison with that in the United Knigdom is very favourable, but what we lack is flexibility to incentivise individuals for superb performance or to step up to the major leadership roles. It is the inflexibility of our system that is at issue.
Paschal Donohoe (Dublin Central, Fine Gael)
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Let me restate the point. Is Dr. Brady saying it is a difficulty for the people below that tier?
Paschal Donohoe (Dublin Central, Fine Gael)
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Above that tier.
Dr. Hugh Brady:
Let us take the cases of persons who are good professors in their discipline and at the top of the scale on a salary of €140,000 a year. The issue arises where one wants that individual to step up to serve as head of the medical school or the business school, where he or she is moving from being an expert and responsible for teaching and researching in his or her discipline or programme to managing a unit with a turnover of €30 million to €40 million. He or she must manage a unit where one has set very aggressive targets, particularly in the current climate, to increase international student recruitment, yet in the current climate, since the withdrawal of allowances, we have zero ways of incentivising such a person.
Paschal Donohoe (Dublin Central, Fine Gael)
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Dr. Brady is contending that the difficulty does not arise with average wage levels but with the ability to be flexible at individual level.
Paschal Donohoe (Dublin Central, Fine Gael)
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I note Dr. Prendergast was nodding when Dr. Brady was making that point.
John Deasy (Waterford, Fine Gael)
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Why was Dr. Prendergast nodding?
Paschal Donohoe (Dublin Central, Fine Gael)
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Deputy John Deasy has taken the words out of my mouth.
Paschal Donohoe (Dublin Central, Fine Gael)
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I was speaking about the difference between average levels of pay and the ability to deliver individual contracts to people identified to step up to the next level or who should be retained. Is that an issue that also confronts Dr. Prendergast?
Dr. Patrick Prendergast:
Obviously, the fact that I was nodding indicates that naturally I agree with the points Dr. Brady is making. It is an issue that there are no differentiated pay rates. Every professor is on a standard pay scale. Deputy Paschal Donohoe read out the standard pay scales which are set by the Government, not by universities. It would be better if we had an environment in which flexibility was introduced, whereby we could reward those performing more high level management roles. This could be done within the same funding envelope. We are not saying we need more to do this, but the constraints and inflexibilities in the system do not provide for the best remuneration environment we could have in the university sector.
Paschal Donohoe (Dublin Central, Fine Gael)
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Dr. Prendergast has made the argument for more flexibility in making choices in respect of the total amount allocated, as this would allow him to make different choices in retaining people and encouraging others to come to Ireland.
Paschal Donohoe (Dublin Central, Fine Gael)
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I wish to raise one other issue, that of discretionary pension awards. In chapter 5 of the university report the issue of pension top-ups attracted media attention. There was evidence that some of the universities were topping up the pensions of staff as they decided to leave. The Department has indicated that work is under way in each university to identify all sets of circumstances where there is de facto entitlement. The point the report was making was that people who had been operating in a particular pension scheme for a period of time had built an expectation that when they came to retire, they would be able to claim the full amount and that the college was operating within that environment. Where do they stand? Is that practice still continuing?
Dr. Hugh Brady:
Since the State took over the pensions plan, responsibility for approval of so-called added years rests with the State. It should be noted that if one looks at academic retirements in UCD, the Department of Finance has approved the granting of added years in the manner it was previously done in all but one case. I think the only difference is that the State is making the determination.
Paschal Donohoe (Dublin Central, Fine Gael)
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That is still happening as people look to retire?
Dr. Hugh Brady:
Yes. There are certain terms and conditions with regard to the pensions plan. As the Deputy stated, there was an expectation among staff members as to what their entitlements would be. When the State took over the pensions plan, one of the agreements was that the entitlements of staff would be the same.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I remind the Deputy of the time allocated to him.
Paschal Donohoe (Dublin Central, Fine Gael)
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I will conclude, Chairman, but, first, I request an update on pension entitlements from the position which obtained when the report was published in 2010. I would like to know how the scheme is operating now, given that the Department of Finance has joint responsibility for it. There are examples given in the report that show that in one university nine staff had retired in 2008, with the number of added years granted ranging from two to the maximum award of ten.
Could we get a report or an update through the Comptroller and Auditor General on the extent of that practice at the moment?
12:50 pm
Paschal Donohoe (Dublin Central, Fine Gael)
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Okay.
Paschal Donohoe (Dublin Central, Fine Gael)
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Representatives of the Higher Education Authority will be in attendance next week. I will raise it then.
John Deasy (Waterford, Fine Gael)
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It is fair to say that the committee has a clear picture of what happened in Waterford Institute of Technology over the past 12 years or so. It is a pretty disturbing picture. It is valuable that Mr. McFeely is here to explain what occurred. I need to go back on this. Maybe I am flogging a dead horse or going back over old ground in taking up the issue that has been raised by the Chairman and Deputy Donohoe. It is clear - it has been stated - that Mr. McFeely said "No" in 2001. He would not sign off on the expenses or authorise those expenses. He informed members of the board privately of his concerns. In the subsequent ten years, did anyone on the audit committee, the board, the governing body or the senior management team raise these issues? Were they raised by anyone other than Mr. McFeely?
Mr. Tony McFeely:
I would say these issues were never raised officially in a formal setting. As I said in response to a question asked by Deputy O'Donnell earlier, I raised them with the current chairman after his appointment in early 2011. I went to him on a confidential basis. I felt comfortable in advising him of my concerns at that stage.
John Deasy (Waterford, Fine Gael)
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It strikes me that the members of the board, rather than Mr. McFeely or Dr. Neavyn, should be here. I do not know if others feel the same way. It is comforting to know that one individual said "No" or "Stop". It seems extraordinary that nobody else did so. One has to assume that members of the board and others knew what was going on but said nothing over that ten-year period. I find that extraordinary. I would like to ask about the lack of a formal tendering process in four or five cases. I refer to specific examples like Bracken PR, Marketing on Demand, taxi services, Professor John Davies and Arlington Lodge. I do not know if there was a tendering process in the case of Carr Communications, which has also been mentioned. What should have been the process within Waterford Institute of Technology? Was it a requirement of the college's guidelines that a formal tendering process should have been adhered to and followed? How was that departed from?
Mr. Tony McFeely:
There would normally be an expectation that public relations services, for example, would exceed the threshold of €25,000. When we went to tender towards the end of the former president's term of office, it resulted in the appointment of Carr Communications. At the same time, the existing providers continued to be contracted even though they were no longer part of that tender.
John Deasy (Waterford, Fine Gael)
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As these other companies were appointed, did anyone at board level ask the obvious questions about the tendering process? Did they ask where the tendering process was, or whether the guidelines were followed? Did anyone raise this issue?
Mr. Tony McFeely:
At a detailed level, the board would not have been as familiar with that as we were. The finance department raised those matters with the president's office. It raised the fact that we had more than one PR company following the tender process, from which one company emerged. These issues were raised.
John Deasy (Waterford, Fine Gael)
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What was the response from the president when they were raised? I am sorry for going over old ground. What was his response when the specific issue of the tendering process, as far as these companies were concerned, was raised?
John Deasy (Waterford, Fine Gael)
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He had a relationship with some of them.
John Deasy (Waterford, Fine Gael)
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Was it known at board level in the audit committee that an adherence to the very basic guidelines with regard to formal tendering was not in existence? Was it the case that there was an acceptance that this was the way it was being done? It seems to be the case that the guidelines were flouted and disregarded at board level. That is why I said earlier that Mr. McFeely and Dr. Neavyn might not be the most appropriate people to ask these questions of. We should really be putting these questions to certain other people.
Dr. Ruaidhrí Neavyn:
The membership of governing bodies of institutes of technology and other State bodies tends to be voluntary in nature. The members in question rely on the integrity of the most senior officer in the relevant institute to guide them on what is appropriate and what is not. That reflects the position with regard to the relationship between the office of the president of an institute and the governing body or audit committee of the institute. I suppose that is why I said in my opening statement that the lack of a disclosure policy, or some form of whistleblower mechanism, to enable people to speak freely or to raise these matters with governing bodies, which are largely voluntary, is a major omission. I understand that procedures are coming forward in that regard specifically for the area of education.
John Deasy (Waterford, Fine Gael)
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That is fair enough. I would like to ask a question about something that was raised in the report. I am asking to satisfy my personal curiosity.
John Deasy (Waterford, Fine Gael)
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I refer to a charter flight with Bell Airways from Waterford to Dublin which cost €4,200. For whom was this flight chartered?
John Deasy (Waterford, Fine Gael)
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It was for Jim Port.
John Deasy (Waterford, Fine Gael)
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Has Dr. Neavyn ever questioned that, or gone into it himself?
John Deasy (Waterford, Fine Gael)
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Has he questioned why this was necessary?
John Deasy (Waterford, Fine Gael)
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Fair enough.
Dr. Ruaidhrí Neavyn:
It is a large-scale problem over a large-scale time period. I completely accept what the Deputies have said. We need to get to the root cause of the problem, understand exactly what is going on and ensure there is proper accountability in relation to this matter. It will take time.
John Deasy (Waterford, Fine Gael)
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That is fair enough. There is nobody here who does not understand the kind of disturbing legacy Dr. Neavyn has inherited and what he is trying to do to deal with it. I think that is fair enough. It seems extraordinary to an outsider. I do the journey every week. It is 120 miles. Has anyone questioned why it was necessary to charter a flight for an official in the Department of Education and Science for €4,000?
John Deasy (Waterford, Fine Gael)
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Sorry, it was Mr. Port, who was-----
John Deasy (Waterford, Fine Gael)
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I understand. Has anyone questioned why that happened?
John Deasy (Waterford, Fine Gael)
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Has he been asked?
John Deasy (Waterford, Fine Gael)
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That is fair enough. I wonder if Mr. Port has been asked why it was necessary.
John Deasy (Waterford, Fine Gael)
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That is fine. Mr. McFeely obviously signed off on that.
Mr. Tony McFeely:
As the president has said, he was in Waterford for a relatively short period of time to carry out a review. It was my understanding that the flight in question, or the aeroplane in question, was made available to him for his use and that it would not be charged to the institute.
It was a major surprise when I learned subsequently that the bill had come to the college for payment. We were under the impression initially that an aeroplane had been placed at his disposal because there had been an exceptional set of circumstances which required him to travel to Dublin urgently.
1:00 pm
John Deasy (Waterford, Fine Gael)
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He requested the aeroplane?
John Deasy (Waterford, Fine Gael)
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There was only one flight. Is that correct?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Was it a return flight?
John Deasy (Waterford, Fine Gael)
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It was one way. I thank both Mr. McFeely and Dr. Neavyn.
To change the subject, a report commissioned by the Higher Education Authority has featured prominently in the media in recent days. While I have not read it, I have read some of the media coverage of the reaction to its findings. In politics, it is said one should not ask a question if one does not know the answer to it. One could turn those words around in this case and say one should not commission a report unless one knows what its findings will be. The reaction of the Higher Education Authority since the publication of the report has been interesting, to say the least, because it appears from the outside as if the authority is distancing itself from the findings.
Fortunately, the report in question is not all bad news because, having examined the potential for establishing a technological university on a shared campus, the authors have proposed Waterford Institute of Technology and another institute of technology as the proposed locations for the university. As everyone will be aware, however, the report also recommends the merger of Trinity College Dublin and University College Dublin. I ask Dr. Prendergast to outline his response to that recommendation.
John Deasy (Waterford, Fine Gael)
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It should be made clear that the universities were not consulted in any way.
Dr. Patrick Prendergast:
No, absolutely not. There is a process ongoing in Irish higher education. As the Deputy will be aware, we have the Hunt report, the national strategy for higher education, which makes some recommendations. The universities were asked to submit documents on how they could work together, for example, through clustering and so forth, to pursue this national strategy. We then have this report from the international panel with its various recommendations. The Minister has stated its recommendations do not accord with Government policy. I do not believe it is to the advantage of the higher education system to merge Trinity College and University College Dublin and I am glad the proposal is not Government policy. Again, it is very hard to know what to say when I and no one else present have read the report in question.
John Deasy (Waterford, Fine Gael)
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That is fair enough.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Deputy should raise the issue with representatives of the Higher Education Authority when they appear before us next week.
John Deasy (Waterford, Fine Gael)
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I am interested in ascertaining the opinions of the delegates on the report. Does anyone wish to respond?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I do not see anyone nodding.
John Deasy (Waterford, Fine Gael)
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To play devil's advocate, we all read newspaper reports on the dearth of graduates in information technology. This lack of graduates is becoming a problem with technology firms considering Ireland as a place in which to invest and establish operations. The report by the international panel is a radical departure, especially the proposal to merge UCD and Trinity College. Do we need radicalism in third level education? Our higher education institutions compete for funding and reputation. Are they engaged in the type of joined-up thinking required to address issues such as the lack of graduates in the IT area?
Dr. Patrick Prendergast:
Irish higher education institutions are performing exceptionally well for the funding they receive. Even at the height of the boom in 2008, funding per student in Irish universities was not at OECD levels. The staff to student ratio in Trinity College is higher than 20 students per staff member, which is much higher than international norms. The University of Edinburgh, the university against which we often benchmark Trinity College, has closer to 12 students per staff member. We are performing to deliver high quality higher education and conduct research that benefits society and develops the knowledge economy. Trinity College collaborates closely with many universities in the higher education system, including University College Dublin. For example, we do so very effectively through the TCD-UCD innovation academy. As well as partnerships with a name attached to them, as it were, academic staff in both institutions are collaborating in many areas where it makes sense to do so and delivers benefits to students.
Professor Brian MacCraith:
I agree with Dr. Prendergast. In the past week I saw a World Bank report on the density of high performing universities per head of tertiary level population which showed that Ireland came first in the world in this regard. All seven Irish universities ranked in the top 500 in the world.
As regards consolidation, the Minister is actively and aggressively implementing the Hunt report. Much has happened in the past year separately from the international panel report to which the Deputy refers and which I have not yet seen either. For example, Dublin City University has formed a major, deep partnership with NUI Maynooth and the Royal College of Surgeons. Launched by the Taoiseach in June 2012, this three year partnership will be a significant vehicle for DCU in terms of academic programmes, research, internationalisation and other activities. In parallel, an international panel which, in contrast to the other international panel that produced the recent report, consulted all the institutions involved, made a recommendation in the area of teacher education where close to 20 locations were providing approximately 40 programmes. Its recommendation to reduce the number of teacher education institutions to six is being actively implemented, with St. Patrick's College, Drumcondra, the Mater Dei Institute of Education and the Church of Ireland College of Education all moving into Dublin City University. This is a radical and highly significant development. There is a great deal happening, therefore, and it is being embraced by the system.
John Deasy (Waterford, Fine Gael)
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I have spoken to Dr. Neavyn about the collaboration between RTE and the institutes of technology. Will he outline how this partnership will take shape in the case of Waterford Institute of Technology? Very little detail has emerged on the physical shape of this collaboration and the courses the institutes propose to build around the presence of the national broadcaster. What discussions have the institutes held in this regard?
Dr. Ruaidhrí Neavyn:
The discussions commenced before the summer and were very encouraging from our perspective. We were in contact with RTE on the proviso of developing a collaborative relationship between the institutes and the national broadcaster. It was communicated to Waterford Institute of Technology that RTE was reviewing its regional services and we saw an opportunity to create a joint partnership between the two organisations - this is being replicated in other institutes of technology - to provide joint services for the delivery of media elements. Waterford Institute of Technology runs courses with media and communications elements and courses with a large telecommunications or electronics component. The presence of radio and television studios is not uncommon on the sites of institutes of technology and we believed sharing such facilities between two State agencies would be a good approach to take. In addition, we believe it is important to share expertise. Social media and new technologies in media and broadcasting techniques will be best advanced or developed in the environment of a student centre and certain advantages can be obtained from such an arrangement. The project will involve shared services and new technologies in media. Waterford Institute of Technology has a proud and strong record in that regard, for example, in the Telecommunications Software & Systems Group, TSSG, a research group based in our Carriganore campus. The interaction between RTE and the institute will help to evolve and develop our existing courses in the media and communications area. That is the position in a nutshell. We also have a strong link with Nemeton which is based in Waterford.
Kieran O'Donnell (Limerick City, Fine Gael)
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I asked previously about the amount being spent on the reports by Deloitte and Grant Thornton. Will Mr. Neavyn provide the figure?
Kieran O'Donnell (Limerick City, Fine Gael)
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How is it split between the two companies?
1:10 pm
Kieran O'Donnell (Limerick City, Fine Gael)
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In summary, having listened to all of the proceedings today, what happened in WIT prior to Dr. Neavyn taking over from the former president, Professor Byrne, has echoes of the Rody Molloy FÁS scandal, where there was abuse of taxpayers' money. I thank Mr. McFeely for being here today. That is extremely important in terms of public confidence in the education area and the spending of taxpayers' money. However, this issue appears to bear the hallmarks of a FÁS, Rody Molloy, scandal mark two. It is vital this is sorted quickly and that the taxpayers' money involved is recovered post haste. This should never happen again.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I have one final question relating to WIT which I should have asked earlier. Was it the Office of the Comptroller and Auditor General that conducted the annual audit or was it a private audit? I know Mr. McCarthy was not in charge during 2006, 2007, 2008 and 2009, but what did his office's audit uncover or did it uncover these issues? After its audit, did the office write directly to the board about matters uncovered? What was the response of the board?
We asked these same questions on a previous occasion in the case of FÁS and we asked for copies of the correspondence that would have issued after the audit bringing matters to the attention of the board. I understand the comptroller will say the office did not have the authority to provide them on its own, but FÁS gave permission for the correspondence from the Office of the Comptroller and Auditor General and any responses to be issued to us. Were these issues dealt with year on year in the office's report? If not, is the office satisfied in hindsight with the robustness of the audits? I ask that the Office of the Comptroller and Auditor General and Waterford Institute of Technology provide to us any correspondence bringing issues to the attention of the board as a result of the audit.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Before I allow in the Comptroller and Auditor General, I would like to ensure we deal completely with this issue. I asked a question relating to the preparation of the accounts and the involvement of the audit committee and before seeking other comments at the end of this meeting, I would have asked the same question as Deputy Fleming has asked in order to complete the circle. The Office of the Comptroller and Auditor General would have received all of the accounts and the information from the institute. What happened thereafter and, in the context of that audit, why is it that the poor procedures, lack of good governance and so on were not discovered?
Kieran O'Donnell (Limerick City, Fine Gael)
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Before we continue, can we take it that Dr. Neavyn and his companions will come back before the committee again?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I will address that before we finish.
Kieran O'Donnell (Limerick City, Fine Gael)
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It is important they do.
Mr. Seamus McCarthy:
If I can make an observation, the analysis in the Deloitte report and the highlighting of the expenses in the office of the president are not something that is seen on the face of the financial statements. Therefore, it is not obvious that there has been a large increase there. Perhaps Mr. McFeely-----
Kieran O'Donnell (Limerick City, Fine Gael)
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Is there no line-by-line itemisation for the office of the president?
Mr. Seamus McCarthy:
No. What typically appears is "promotions budget" or "travel and subsistence budget". However, those elements would be picked up by the various cost centres in the line itemisation. Looking at the face of the accounts, one does not see that. One is also looking at the non-pay expense, as I understand it. There would be pay expenses as well so one would not even see the extreme of the trend if one looked at the overall budget for the president's office.
Kieran O'Donnell (Limerick City, Fine Gael)
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Yes.
Mr. Seamus McCarthy:
Deputy O'Donnell has mentioned FÁS. One of the things we recognised after the issues were raised with FÁS was that we needed to change what we were doing with regard to propriety matters and in 2009 we developed a programme of work that focuses more on propriety issues, such as expenses, remuneration of chief executives and so on. Another response since then has been the further development and revision of the code of practice for the governance of State bodies to require the disclosure in financial statements of the remuneration of chief executives and of the expenses they incur. Had those things been in place, we might have picked on the issue sooner.
In fairness to Mr. McFeely, I would make the point that we began to apply our new programme with the 2009 audits, which we carried out in 2010. Mr. McFeely and WIT have traditionally been one of the first to produce draft financial statements. We would have been carrying out our audit of the 2008-09 financial statements at the time we were developing the propriety framework. Therefore, we were not focusing on those issues during the audit and would not have found or picked up on them. We would, of course, have drawn the institute's attention to anything we found in our management letter. In our 2010 propriety work, we picked up on some of the issues and these were mentioned in the management letter.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I am disappointed to have to say this, but while I understand it was some years ago, I am very disappointed that the audits conducted by the Office of the Comptroller and Auditor General in 2006, 2007 and 2008 did not pick up on these issues.
We have Waterford Institute of Technology here today to answer questions on what went on in those years. Now, however, we find that the taxpayers' watchdog audited the accounts, but did not pick up on what was going on. That is serious. I understand that Mr. McCarthy has said that following the 2009 audit they started developing a programme to catch these issues. However, this committee must ask what has not been picked up last year and this year or what will not be picked up next year and whether a programme will be developed to pick up on those things in five years time when the Committee of Public Accounts of the next Dáil is examining these issues. Will they say then, "We used not look at those things in those years, but we have now developed a programme for them"?
Public confidence in the annual audit process of the Office of the Comptroller and Auditor General has been dented somewhat by this. I am happy the office has done a special report and has caught up on these issues, although late in the day. However, we and the public generally take some comfort from the fact that the office conducts an audit and finds no major issues, but now, three or four years after the audit, we are told the office did not look specifically at the issues but now as a result of what happened with FÁS, it is looking at them. It will be something else in another couple of years. Where does Mr. McCarthy think the risks are for the audits just completed and published in the report today? Perhaps he did not have a programme to examine specific issues he may feel in three years time he should have examined. My confidence in the office is dented somewhat now as a result of what I have heard here today.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I mean historically, of course. I hope the Comptroller and Auditor General gets my point.
Mr. Seamus McCarthy:
The Deputy raises a good point. The danger is that one is always fighting the last war in one's approach to current issues. We try to identify the key risks that arise with regard to any entity we audit and try to put the emphasis on what we see as those key risks. In the period the Deputy speaks of, my recollection is that the expenditure in Waterford Institute of Technology would have been approximately €80 million to €90 million euro per year. We would have focused on the bulk of the spending, on pay areas and so on.
The lesson we have learned from the FÁS experience - and other Deputies made this point - is that there is a question of confidence around public bodies and that we must address that in the audit. That is the reason that since 2009, we have been putting more emphasis in our audit on those areas of propriety, such as travel and subsistence, remuneration and payments in excess of entitlement, an issue we reported on previously with regard to the universities. However, the resource required to bring out the level of detail that has been brought out by Deloitte and Grant Thornton is a level of resource we do not have. One can drill down in considerable detail and generally come back with some concerns.
Sample-based auditing is not going to catch everything. One would hope that it would catch a significant amount and give one enough pointers to where one might need to redirect or refocus attention. The point about Waterford is that in the testing we did in areas like procurement, travel and subsistence over the years, we picked up relatively little because, as I understand it, the issues were specifically confined to the president's office. In general, the institute is well run, with good controls in place. That was our conclusion over the years.
1:20 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I raised the question because expenditure started at €30,000, which was a reasonable amount, but it travelled some distance to €180,000 and from there to €635,000. That is such an exceptional difference over the years that, in my view, someone should have picked up on it. I cannot accept the explanation given by the governing bodies that some of the auditing committees are voluntary. If a person is appointed to a committee of that kind and has a job to do, whether voluntary or otherwise, he or she has a responsibility to carry out that job to the finest level of detail. That is the reality of a position on an auditing committee. At a previous meeting, this committee heard from an official in the Department of Environment, Heritage and Local Government who was not quite sure if he was a director of a particular company or not, when Deputy Fleming raised the matter with him. There are many issues of concern with regard to people's participation on these committees and governing bodies. The people involved really need to know exactly what they are getting into.
Was Dr. Jim Port employed by the institute or the Department of Education and Skills?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. McFeely, did Dr. Port not see anything wrong with being flown from Waterford to Dublin?
Mr. Tony McFeely:
He was advised that he had to get to Dublin fairly quickly to meet some senior officials, as I understand it, and the only way to get there at that stage was via the chartered flight. That is the explanation we got and we were under the impression that the cost of that flight would be borne by a third party.
John Deasy (Waterford, Fine Gael)
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I want to make a comment, which is not directed at anyone here. We are all busy people but what we are hearing is extraordinary. It is extraordinary that anyone who is contracted by the Department of Education and Skills would put himself or herself into that position. We are all busy and often in a rush to get somewhere and I just do not understand this at all.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is there a timeframe for the court case or the legal proceedings referred to earlier?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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In that context, Mr. Neavyn was questioned about another report but that will not be available until after those proceedings conclude. I accept that but given what we have heard today, there is further work to be done with regard to our understanding of what happened. Perhaps after the court case, at a time acceptable to Dr. Neavyn, he could come before this committee again and explain the rest of this saga to us. We have a number of other contributors to deal with at this meeting so I suggest that we come back to this-----
John Deasy (Waterford, Fine Gael)
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Could I also suggest that the committee ask Dr. Jim Port why he did what he did?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Department of Education and Skills will be before the committee next week so we can pose that question again, directly to Dr. Port.
John Deasy (Waterford, Fine Gael)
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The question needs to be asked.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Finally, various pieces of information were requested by Deputy Fleming and others and I ask the contributors to ensure that they are sent to the committee clerk as soon as possible. I refer to information on employment numbers, various grades and so forth. Due to the fact that we are not completing our deliberations on special report No. 78, we will not dispose of it today. We have a scheduled meeting with the Higher Education Authority and the Department of Education and Skills and we can continue our examination of it at that meeting next Thursday.
The clerk has just reminded me that under the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act we will be writing to the former president, who has been named extensively here today, regarding a right of reply.
Kieran O'Donnell (Limerick City, Fine Gael)
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I suggest that not only should we write to him concerning a right of reply but we should also invite him to come before the committee to give his viewpoint on the matter, although he may not wish to.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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He is involved in a court case. We will explain the right to reply and send him the information from this meeting.
Paschal Donohoe (Dublin Central, Fine Gael)
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What is the nature of the court case in question?
Paschal Donohoe (Dublin Central, Fine Gael)
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It is about his retention in that post.
Paschal Donohoe (Dublin Central, Fine Gael)
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I think we all feel that the issue regarding the flight is bonkers and we must get an explanation next week. Also, in the interests of fairness, at this point we do not have evidence to prove that the person for whom the flight was procured requested it.
Paschal Donohoe (Dublin Central, Fine Gael)
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We do not have evidence that Dr. Jim Port requested that flight. We know a flight was taken. At our meeting next week with the Higher Education Authority and the Department of Education and Skills, we can explore how it was that somebody who was in a hurry to go 120 miles ended up on a plane funded by the taxpayer.
John Deasy (Waterford, Fine Gael)
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He was an employee of the Department of Education and Skills.
Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, and his flight was paid for by the taxpayer. We will explore that but at this point, in fairness to him – because he is not here – we are not saying that he requested it.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will accept that point.
Paschal Donohoe (Dublin Central, Fine Gael)
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I feel it is important.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is the point made by Deputy Donohoe.
Paschal Donohoe (Dublin Central, Fine Gael)
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I wanted to make that point because the individual is not here.
John Deasy (Waterford, Fine Gael)
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Did Dr. Neavyn say that the Department requested it?
Kieran O'Donnell (Limerick City, Fine Gael)
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Who requested it then?
Paschal Donohoe (Dublin Central, Fine Gael)
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So the flight was booked through the president’s office.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It was a transport offer provided to Dr. Port, who had to get back to Dublin.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It was a great offer. It could not be missed. It is a bit like the advertisement for the lottery with the little woman in it.
I thank the witnesses for attending the meeting.