Mr. Seamus McCarthy:

I propose to recap briefly on the sector-wide issues I outlined at last week's meeting, but I will refer first to the Higher Education Authority's financial statements for 2011, which are also included in the agenda for today.

The HEA is the statutory planning policy development and advisory body for higher education and research in Ireland. It is also the primary State funding authority for the universities, institutes of technology and certain other designated higher education institutions. The authority's expenditure and disbursements to higher education institutions in 2011 amounted to a total of €1.37 billion. Recurrent grants to institutions accounted for €1.2 billion, or approximately 88% of the total expenditure. Other significant distributions related to capital grants of some €48 million and research grants amounting to €95 million. It should be noted that the Department of Education and Skills also disburses capital grants to the institutes of technology.

The HEA received a clear audit opinion in respect of the 2011 financial statements. However, the certificate draws attention to the existence of balances held in the pension control accounts in five of the universities, which they treat as liabilities due to the authority. The background to the accounts is dealt with in the special report.

The pension control balances contribute to the large cash balances of over €700 million held by the institutions, at the end of the academic year 2011, in commercial bank accounts, which are dealt with in the special report. It 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. The HEA informed us that it was taking steps to slow the flow of funding to the institutions around the year end. Last week, Deputy Fleming asked if we could get an update to 2012. The end of year for the universities was 30 September, so it was not feasible to have something ready for the Deputy. However, I will provide an update as soon as possible.

Control over remuneration levels and employee numbers are matters shared between the authority and the Department. Both were involved in oversight of the employment control framework for the higher education sector introduced in July 2009 and updated on a number of occasions thereafter. 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. Over the same period, full-time student numbers increased by an estimated 10.5%. Only one of the institutions concerned, Trinity College Dublin, was identified as not having kept within the terms of the framework.

Rates of remuneration of staff of universities are subject to the approval of the Minister under the terms of the Universities Act 1997. The fact that there were payments in excess of the approved levels for many senior staff was reported upon in an earlier special report. I outlined last week the exercise undertaken by the Department and the HEA to identify the amounts involved over the period June 2005 to February 2011, to provide them with the basis for deciding what action to take on recoupment.

A validation procedure undertaken by staff in my office found that the excess payments amounted to a total of the order of €8 million but there were some cases where there was uncertainty or dispute about the approved level of remuneration. I understand the chief executive of the authority has provided the committee with an update on the final amounts in respect of which recoupment action is proposed.

Another issue raised in the report related to the non-consolidation in the annual financial statements of the results of subsidiary companies of some institutes of technology. This reduces the comparability of accounts across the sector. The HEA has indicated that all institutes that have subsidiaries will be required to prepare consolidated financial statements for financial years from 2012-13 on. The report also drew attention to a number of situations where subsidiaries were in receipt of significant funding from their parent institutions to meet accumulated deficits and where there were transfers from institutions to fundraising foundations, which are accounted for as stand-alone entities whose results are not consolidated. The report noted that the HEA has been engaged in updating the codes of governance for higher education bodies. We understand that the codes will include revised provisions in respect of the governance of subsidiaries. Changes in the code may also be relevant in respect of other matters reported on in the special report, such as remuneration of presidents of institutions and expenses payments.