Mr. Seamus McCarthy:

The appropriation account for Defence recorded gross expenditure of over €670 million in 2015. Salaries and allowances for Defence Force personnel, including civilian support staff serving with the military, accounted for 67% of the expenditure. At the end of the year, just under 10,000 full-time equivalent personnel were employed and remunerated from Vote 36, including just under 9,200 Defence Force personnel. Expenditure of just over €176 million was incurred on equipment, supplies and other operational costs of the Defence Forces. Administration costs for the Department of just over €21 million were incurred in the year. The diagram which members can see now on the screen gives an indication of the relative amounts of expenditure in 2015. In contrast to other large Votes, the Defence Vote is presented as a single programme. The detail of spending in note 3 of the account is much the same as that always presented in the past, with the focus on spending by input type. Most other Votes have moved to output-based accounting, reporting costs for output programmes. As a result, the Vote account does not give a picture of the costs of particular services provided by the Defence Forces, such as peacekeeping or aid to the civil power.

The appropriation account for Vote 35, Army Pensions, recorded gross expenditure of €227 million in 2015. Over 99% of the expenditure related to payment of pensions and gratuities to former members of the Defence Forces or to surviving dependants. At the end of the year, just over 12,000 pensions were in payment. The two appropriation accounts associated with the Defence Forces received clear audit opinions in respect of 2015.

Chapter 8 of the report on the accounts of the public services 2015 concerns the circumstances that gave rise to a decision in August 2014 to dispose of the Air Corps' Gulfstream IV jet. The 14-seater jet was used in the past to provide air transport for the President, members of the Government and accompanying officials undertaking official engagements at home and abroad. The Air Corps now provides a more limited service using its remaining seven-seater Learjet 45 aircraft. The Gulfstream jet had been in service since 1992. The total cost of acquiring the aircraft was approximately €45 million. It was sold in January 2015 for €418,000. I asked for an examination of the transaction because of the unusual circumstances in which it occurred and the accounting adjustments it entailed.

Following a ministerial direction in 2010, an annual total maintenance cost of €400,000 was deemed by the Department to represent the upper limit that should be incurred on the Gulfstream jet. Costs significantly in excess of this threshold were incurred in 2013 due to necessary repairs and to treat corrosion. A memorandum to Government in July 2014 noted that the aircraft would require an overhaul of both engines by 2018-2019 at an estimated cost of €2.5 million and that retention of the aircraft beyond that date would be unsustainable given its age. Government approval was obtained for increased maintenance expenditure in 2014, up to a total of €750,000, including a provision of €250,000 for an overhaul of the landing gear during the annual maintenance to be carried out by Gulfstream in the USA.

Significant additional repairs were identified during the inspection in July-early August 2014, which increased the total estimated cost for repairs and maintenance on the jet to €1.34 million. On foot of the escalating costs, the Department sought the views of senior officials within the Air Corps who, while noting the age of the aircraft and the risk of further corrosion or fatigue issues, recommended that it should be repaired and returned to service. Informal contact was also made by the Department with an Irish aviation consultant company at this time, which advised that an immediate sale of the jet would probably yield less than €750,000 at the prevailing exchange rates. Gulfstream advised the Department that estimated additional costs to put the aircraft into a serviceable condition prior to a sale would bring the maintenance bill for the year to €1.8 million. In mid-August 2014, the Minister directed that no further work should be carried out on the aircraft and it should be disposed of for the best possible price. The Department considered the most viable option at that point was to dispose of the aircraft for salvage and that a public tender competition or auction was not possible because the jet was in a stripped down state in the Gulfstream facility where very high standards of security apply. Prospective buyers in a sales competition would not have been allowed access to view the aircraft at those premises.

In early December 2014, the Department received a letter, via Gulfstream, from a USA based company who offered €418,000 to purchase the aircraft "as seen". This offer was accepted by the Department in January 2015. The Air Corps also had 87 spare parts for the jet in stock with an original acquisition cost of €1.4 million. At the end of October 2014, the Air Corps estimated the value of the parts was €405,000. Ultimately, the parts were sold to the purchaser of the aircraft for €53,000 in February 2015. The amounts received and the losses on disposal were reflected in the 2015 appropriation account. I understand the purchaser has further invested in the jet and has returned it to use. In the absence of a competitive sales process for the Gulfstream jet and the spare parts, it is difficult to conclude whether best value was obtained by the Department.

An inter-departmental group has been charged with preparing a report for submission to Government on the future provision of the ministerial air transport service. The Accounting Officer will be able to update the committee in that regard.