Mr. Seamus McCarthy:

My opening comments will set the context for the examination of the education and training boards, ETBs. Under the Education and Training Boards Act 2013, the 33 vocational education committees, VECs, were dissolved on 30 June 2013 and all their assets, liabilities and approximately 13,000 staff were transferred to 16 new education and training boards which were established on 1 July 2013. Most of the ETBs were formed through the amalgamation of two, or in some cases three, adjoining former VECs.

The ETBs manage and operate second level schools, further education colleges and a small number of community national schools. They are also responsible for a range of adult and further education centres in line with their predecessor VECs. In addition, 19 former FÁS training centres were transferred to the ETBs in 2014. This involved the transfer of around 800 staff to the ETBs from SOLAS, which had taken on FÁS’s training responsibilities. In 2016, the combined payments of the 16 ETBs were just under €2 billion. The primary source of funding for the ETBs is the Vote for education and skills, with expenditure from a number of different subheads. SOLAS, which itself is funded from the Vote and from the national training fund managed by the Department, also provides significant funding to the ETBs.

The Minister for Education and Skills is responsible under the Education and Training Boards Act for setting the financial reporting framework for the ETBs. The Act specifies that draft financial statements are to be presented for audit by 1 April following the period of account. Timely production of audited financial statements has been a challenge for many of the ETBs from the outset. The first period of account for ETBs was the 18 month period from July 2013 to the end of 2014. In April 2015, the Department established a working group to develop the format for the financial statements. The group completed its work in October 2015. While audit work was progressed as far as practicable on an interim basis, the initial audits could not be completed until final form statements were available. Other causes of delays in one or more of the ETBs were the incompatibility of financial management systems when amalgamating some former VECs, challenges arising from the integration of the training centres, which also had a different financial management framework, and the impact in some ETBs of the moratorium on recruitment on their capacity to generate financial statements and to service the demands of the audit. The combination of challenges resulted in only seven of the 16 ETBs being in a position to present their first financial statements before the end of 2015. One ETB, Mayo, Sligo and Leitrim, is only now in a position to complete its first financial statements.

As I outlined in my special report published last week, some progress was made by the ETBs in advancing the timeliness of financial statement production for 2015. As a result, 11 of the 16 had 2015 financial statements ready for presentation by the end of 2016. In the two cases of Limerick and Clare ETB and Mayo, Sligo Leitrim ETB, there continue to be problems in producing accounts and back-up to a standard that is sufficient for audit purposes. We are working with those ETBs to bring the outstanding audits to completion as soon as possible. In three cases, matters which came to light during audits of draft 2015 financial statements have required further inquiries and explanations and this has resulted in protracted audits. The table on the next page of my written submission and which can be put up on the screen now aims to summarise the position, as of last Friday, in relation to the audit and presentation of ETB 2015 financial statements. Some key points for committee members to note are as follows. Only Kilkenny and Carlow ETB met the statutory date for presentation of draft 2015 financial statements. For Limerick and Clare ETB, the audit was only able to commence on site around July 2017. We expect to complete that audit by the end of this year. For Mayo, Sligo and Leitrim ETB, we received draft 2015 financial statements only in July 2017. We are currently working on both the 2013-14 and 2015 audits and expect to complete the process for 2013-14 by the end of the year and for 2015 in the first quarter of 2018. For a number of ETBs, we were able to complete the 2015 audit process from commencement on site to my clearance of the file for signing in a timeframe of six to 12 weeks. By comparison, however, in the case of Louth-Meath ETB, the audit process has already continued for more than 15 months. We understand the ETB is in contact with the Department and SOLAS about certain issues we raised and we now expect to be able to complete that audit early in the new year.

We have prepared a similar table to give an overview of progress to date in relation to the production of audited 2016 financial statements. Again, I ask for that to be brought up on screen. The table gives the picture as of last Friday as to where we are with the individual audits. The table indicates that a number of ETBs have moved closer to meeting the statutory submission date for their draft financial statements. Already for 2016, three ETBs have audited financial statements while two more will be completed in the next few days. We expect that the financial statements of six further ETBs will be signed off by the end of the year. That leaves five ETBs which are likely to be in an arrears position for 2016 at the end of 2017.

My office recognised early on that there were significant challenges for the Department and ETBs in putting in place effective accounting and financial reporting systems for the sector. Our main focus has, naturally, been on the format of financial statements and advancing the timeliness of certification of financial statements. We were represented on the financial reporting working group for the sector and we are in regular contact with the Department about the current status of audits within the sector and to discuss any emerging sectoral issues or concerns. We also meet with ETB senior managers as a group in ETB Ireland forums. Members may wish to note that the reform process for the ETBs is still ongoing. During 2016, the corporate structure of most of the ETBs was enhanced with the appointment of three new senior posts at director level. The directors have responsibility for specific broad areas, including further education, organisation support and development, and schools. In line with the Government's public service reform plan, a number of back office functions in ETBs are planned to move to a shared services model. The first function to be transferred is payroll and this is expected to happen over the next six months. The Secretary General will be able to provide the committee with an update on progress of these reforms. I will introduce the blocks for each of the ETBs as it is called.