Mr. Seamus McCarthy:

The financial statements before the committee for UCC today relate to the academic year 2013 to 2014. The University College Cork financial statements before the committee today relate to the financial year ending on 30 September 2014. In that year, UCC recognised income of just over €340 million. Academic fee income totalling €120 million represented over one third of the total, of that, some €43 million was received directly from the HEA. In addition, recurrent State grant funding from the HEA totalled €47 million; and State funding for pensions amounting to €55 million was also recognised. Research grants coming from State bodies, the European Union and industry totalled €79 million.

The percentage distribution of income is included in my written submission. The university’s total expenditure in 2013/14 was over €345 million, with pay and pension costs accounting for nearly 74% of that figure. The result for the year was a deficit of almost €5 million.

My audit opinion in respect of the UCC financial statements is qualified in two respects. First, in regard to the recognition of some of the future pension funding receivable from the state and second, in relation to the non-consolidation of the UCC trust fund into the accounts of the university.

On future pension funding, the university has been in dispute with the Department of Education and Skills about one element of its pension funding. The college agreed, for pension purposes, to award what are referred to as "professional added years" to certain staff recruited from elsewhere in the public sector. The Department of Education and Skills has told the university that it will not meet that liability in its funding of the university. Following the settlement of a legal case taken against the college by one retired staff member, the cost of the professional added years for transferred-in service was fully borne by the university from its non-Exchequer funding.

At the end of the 2013 to 2014 period, UCC estimated the total future cost of the disputed pension benefits at €14.3 million, and included this amount in its deferred pension funding asset. I concluded that the recognition of the €14.3 million asset is not in accordance with applicable accounting standards. I understand that contacts are ongoing between UCC and the Department to resolve this issue. The president will be able to update the committee on any developments in that regard.

The second aspect of my qualified audit opinion relates to the failure to consolidate the results of the UCC trust fund into the accounts of the university. The audit concluded that consolidation was required on the basis of evidence gathered of the university’s ability to control the financial and operating polices of the trust fund. The accumulated reserves of the trust fund stood at €12 million on 30 September 2014. The university has now indicated its intention to consolidate the results of the trust fund in its 2015 to 2016 accounts.

The audit certificate also draws attention to the non-consolidation of the results of Cork University Foundation Limited on the basis that the foundation is not controlled by the university. The foundation’s main purpose is to provide financial and other support to assist the university in delivering on its strategic goals. It had accumulated reserves of €5.5 million at 30 September 2014. The foundation is identified as a related party in the university’s accounts and some information is provided in note 28 on transactions between the university and the foundation.

The audit certificate also draws attention to disclosures in the university’s accounts regarding specific instances of non-compliance with national procurement guidelines. The audit identified payments totalling €616,000 made to eight suppliers during the year in respect of goods and services that had not been subject to competitive public procurement.

My recent special report on financial reporting in the public sector indicates that UCC was one of four universities that had not completed their financial reporting for 2013 to 2014 by the end of 2015. UCC was the last of these audits to be certified, in December 2016, which was almost 27 months after the end of the period of account. I am glad to report that some progress has been made with the 2014 to 2015 financial statements and I have just signed off on that audit. The financial statements will now need to be finalised by UCC’s audit committee and governing body, and I expect that the process will be completed by the end of April this year.