Mr. Seamus McCarthy:

As the members are aware, the Higher Education Authority is the statutory planning and policy development body for higher education and research in Ireland. It is the primary funding authority for the universities, teacher training colleges, institutes of technology and a number of other designated education bodies. The HEA dispersed over €1.1 billion in grants in 2014. The majority of its income comes directly from Vote 26 - Education and Skills.

I have issued a clear audit opinion in respect of the HEA's 2014 financial statements. However, as in previous years, the audit certificate draws attention to the HEA's practice of funding certain universities for notional employer pension contributions in respect of members of pay-as-you-go pension schemes. As a result, they are funded approximately 15% above the level actually required to pay the related staff members. The HEA allows those universities to retain both the notional employer and actual employee pension contributions and to account for them in what are called pension control accounts. The accumulated funds are recognised in the university accounts as sums due to the HEA. The balances held in the five universities concerned in respect of pay-as-you-go model pension schemes stood at €159 million at 30 September 2014, up from €125 million at end-September 2013.

The universities also record amounts due from the HEA in relation to pension payments already made under separate, closed pension schemes. The result has been net underfunding for pension expenditure in some universities and net overfunding in others. When we raised this matter first in 2012, the HEA stated that the pension control accounts mechanism was a short-term one. I understand that steps are now being taken to bring the pension funding more into line with expenditure.

Apart from providing funding for the third level sector, the HEA carries out an oversight and regulatory role in respect of higher education institutions. My office is currently undertaking an examination of that function. At a high level, the examination is considering the role and responsibilities of the HEA with regard to governance in the sector and the adequacy of systems it has put in place to achieve its objectives. Progress on that examination has been delayed by an unavoidable change in personnel on the examination team but I hope to finalise the report on the examination early in 2016.

I turn now to the Galway-Mayo Institute of Technology financial statements for 2012-2013. The consolidated income and expenditure account for the Galway-Mayo Institute of Technology shows an operating deficit of almost €1.3 million for the year ended 31 August 2013, compared to a deficit of €200,000 in the previous year. The institute’s income for the 2012-13 financial year was €56.2 million, with the largest amount, €25.3 million, coming in the form of grants from the HEA. A further €19.2 million related to tuition fees, including student contributions. Other significant sources of income include research grants of €2.4 million and retained employee pension contributions of €2.2 million. Since institute of technology pensions are paid centrally, the latter is, effectively, a further State grant. The institute incurred expenditure of €57.6 million in the year, with staff pay costs accounting for nearly €42 million, or 72% of the total. The institute’s financial statements for the year ended 31 August 2013 received an unqualified audit opinion. However, the audit certificate draws attention to a disclosure in the accounts concerning the high costs of an investigation into the manner in which the institute dealt with a case of plagiarism that occurred in 2009. At 31 August 2013, the aggregate cost of the investigation stood at €436,000, of which nearly €187,000 had been incurred in the year of account.

Issues around the process for consideration of a proposal to establish a technological university for the south east, through a merger of Waterford Institute of Technology and Carlow Institute of Technology, have arisen at committee meetings on a number of occasions. Progress on the proposed merger is reviewed by my office each year in the context of the audit of the financial statements of the two institutes. I have no observation to make at this time on the report that is before the committee today.