Oireachtas Joint and Select Committees
Thursday, 25 January 2018
Public Accounts Committee
Business of Committee
We are joined from the Comptroller and Auditor General’s office by Mr. Séamus McCarthy as permanent witness to the committee and he is accompanied today Ms Patricia Devlin, senior auditor. Apologies have been received from Deputy Marc MacSharry.
Are the minutes of the meeting of 18 January agreed? Agreed. Are there any matters arising? One issue arises regarding the periodic report we published this week, namely, our recommendation that the implications of the review to reopen Garda stations be considered in the context of the 2018 Estimates process. I propose that we write to the Joint Committee on Justice and Equality forwarding a copy of the report and drawing its attention to the recommendation for its consideration as part of the Estimates process for the Department of Justice and Equality. I expect the Estimates will be discussed at the joint committee next month. Is that agreed? Agreed. While we do not generally submit our reports to other committees, the report included a specific recommendation relevant to the joint committee. The report has also been circulated to all the relevant bodies and parent Departments.
There are three categories of correspondence. The first is briefing documents and opening statements. Nos. 1030 and 1039 are a briefing and opening statement, respectively, from Mr John O'Sullivan, chief executive and commissioner of the Valuation Office for today’s meeting. Is it agreed that we note and publish them? Agreed.
The second category is correspondence from Accounting Officers or Ministers or both and follow-up to committee meetings and other items for publishing. No. 986, which was held over from last week, is from the Health Service Executive. It provides a substantial amount of information related to the HSE-commissioned Deloitte report on the cost of care incurred by the service provider in the Grace case. Is it agreed to note the correspondence? Agreed. Do we need to forward it to the commission?
We will note it and forward it to the commission for its consideration. I do not propose that we open new ground on the Grace case given that the commission is up and running. Is that agreed? Agreed. Members are, however, free to discuss the correspondence, although the committee will not do so formally.
I propose that we send the documentation to the commission in case it is not aware of some of the information provided. As I stated, once the correspondence has been noted, members are free to follow up on any issues that may arise in a manner that they believe to be appropriate. The committee will hand over the issue to the commission as I do not believe we should start addressing new issues related to the Grace case.
One of our concerns related to how the report was processed, the relationship between the Health Service Executive and Deloitte and whether the report was influenced by engagements between the HSE and Deloitte or was genuinely independent. According to the correspondence, a request was made to tone down certain aspects of the report. The purpose of commissioning an independent report is to ensure there is an equality of power between the persons who may blow the whistle and the relevant organisation. This is demonstrated in some of the correspondence. If we are to have confidence that independent reports into the HSE or any other organisation are genuinely independent, this will be an issue. Some of the correspondence certainly reinforces that view in mind. This is an issue.
I propose that, in addition to sending the correspondence, we send a transcript of this part of our meeting in order that the Deputy's views are conveyed directly to the commission. We will send the transcript when it is received in the coming days. We have stated several times that none of the members accepts that this was an independent report. It was a report commissioned and paid for by the Health Service Executive, which also set its terms of reference. The HSE simply outsourced a project to Deloitte. No one on this committee would suggest it was independent. It was carried out on behalf of the HSE, rather than being independent of the HSE.
My concern is whether the report fully reflects the position. While I will not discuss in detail individual items of correspondence, one of them indicates there are two similar cases in litigation. As we discussed last week, the HSE is moving towards an open disclosure approach. I do not know if this issue falls into that category. It is frustrating that money that could be spent on services is being spent on legal fees when matters are brought through a legal process. I do not know whether value for money will be delivered in this case but the correspondence identifies two similar cases. If that is correct, I would be concerned that someone who is a ward of court will be in exactly the same position as Grace until such time as court approval is secured for the services he or she may have. This may well delay some of the services the individual in question needs. Some of this may fall within the remit of the commission. However, if there is litigation involved, it may also be a matter that the committee must examine from a value for money perspective.
As a result of last week's meeting, at which we discussed the State Claims Agency and the cost of legal fees, we are in the process of writing to the HSE to seek a progress report on the implications of its open disclosure procedure and how the procedure is working out. When we receive correspondence on the matter from the HSE, we will have a basis on which to follow through on the points made by Deputy Catherine Murphy. We have sought information on this policy from the HSE as a result of last week's meeting.
The Chairman's proposal to send the correspondence and transcript to the commission is correct because I do not believe the committee can do more on this issue. Which part of the transcript will be sent to the commission? Deputy Catherine Murphy raised an issue regarding an independent report and the Chairman responded with words to the effect that none of us believes it was independent. Mr. Tony O'Brien, the director general of the HSE, informed the committee that it was an independent report.
This is important because Mr. O'Brien, as the person in charge of the Health Service Executive, told the committee that it was an independent report, he had taken a hands-off approach to the report and he had no dealings in respect of it. It has since transpired, however, that his organisation had a large number of dealings on the report. I understand there are 409 pages showing emails and contacts.
Deputy Catherine Murphy also raised the issue of an imbalance of power. If the transcript of our discussion on the Grace case is to be submitted to the commission, it must be noted that this matter came before the committee as a result of the persistence of the whistleblowers who have suffered. They had to find a value for money angle to bring this case before this committee and its predecessor, which did great work under the former Chairman. While the Health Service Executive repeatedly contacted Deloitte, the service provider is not allowed to do likewise. A serious question mark arises regarding the independence of the Deloitte report and any other report commissioned or produced in this manner.
The transcript of our comments will be communicated or forwarded to the commission with the documentation we have received. It will then be up to the commission if it wishes to take the matter further.
No. 1,000, dated 28 December 2017, is from Mr. Neil McDermott of the Higher Education Authority and contains information on expenditure on consultants and legal firms by third level institutions.
We have also received correspondence, dated 23 January last, from Mr. McDermott confirming that the HEA has no objections to the committee publishing the previous items. This was before us last week - the level of payments and engagements to the various consultants - and committee members were surprised at how much was involved. We had been asked by the HEA not to publish it. We did not accept the rationale for that. It has now come back stating that it has no objections to the committee publishing and we will note and publish this. Deputy Cullinane indicated he wants to speak on it.
I want to relate this to the previous topic. The Chairman finished by stating that none of us in this committee would accept that the Deloitte report into the HEA was truly independent and other members have spoken about the process. That process is used repeatedly, not only by the HEA but by other organisations. At what point do we stop, reflect and look at what level of independence there is when these type of issues arise? I am not persuaded, for all sorts of different reasons which we do not have the time to go into today, that many of the reports which have come before us were truly independent.
On this issue of the information we received, it would be useful for us to look into the education sphere, particularly the third level sphere, at the amount spent on auditing, consultancy fees, legal fees, reporting, independent reports or otherwise, and then conduct a mapping exercise in terms of which organisations and companies provide the service because we have seen audit companies conducting so-called independent reports into organisations from which they have already received funding to audit. The function of such companies, as auditors, is to make sure that everything is okay. If they were the auditors, how can they go in and be truly independent and try to find mistakes? It is rife with all sorts of conflicts of interest.
Surely the HEA has a role in the significant amount of money that is spent on legal, consultancy and reporting. There is a massive issue here in terms of governance. I do not know how much the HEA costs the State but I would imagine it is a great deal and it has a large staff.
I want the committee to come back to this. I would imagine that more of these roles could be fulfilled in-house. Is it too quick to outsource much of this at a cost to the State? That, in my view, is clearly under our remit because it relates to value for money. It relates to whether or not we have good governance procedures within the third level sector and the HEA and whether the HEA is doing its job.
I propose that we look at that. Some of this information is relevant and maybe I will write to the clerk to the committee and look for a more detailed breakdown. There is the auditing, which is the internal audit, and the statutory auditing, which needs to be done by the HEA, and then by the constituent colleges. The total expenditure by all the third level institutions, the HEA and the Department of Education and Skills on auditing, consultancy and legal is significant.
It would be a good piece of work for us. There may be lessons to be learnt and recommendations to be made in terms of how we improve, save money, and get better governance and more independent reporting out of it.
We are agreed on that. We will certainly return to this topic, in particular, as part of our review of the education sector. Deputy Cullinane will send in a note suggesting how we might go about it. I understand Deputy Kelly has requested additional information on the same topic as well. If both Deputies send in their views, we will discuss it again. It is an issue that will certainly raise its head. I was shocked at the scale of the fees that are being paid right across the board. That information is now being published. The next item is No. 1047 from Deputy Kelly in connection with the topic to which I referred. That is noted.
Correspondence Nos. 1008 and 1024, held over from the previous meeting, is from the Minister for Public Expenditure and Reform, Deputy Paschal Donohoe, providing minutes of the Committee of Public Accounts report on the examination of financial statements in the third level education sector and on the report on the examination of matters relating to financial procedures at the Garda Training College. The essence of what happened here is that we issued two reports in July last, one on the third level education sector in which there were approximately 40 recommendations and the function of the Department of Public Expenditure and Reform is to reply to this committee on its agreement or otherwise with the 40 recommendations in our report. That is now back before us for consideration as to whether or not we accept what follow through needs to happen. Similarly, there were approximately ten recommendations in our report on Templemore. We have a separate item back from the same Minister on that issue.
I will start with the report on the financial statements. There is a lot of information in it. This issue is not yet closed. Our first report and the reports of the Comptroller and Auditor General highlighted the timeliness of reporting and many issues. We have essentially started the ball rolling and the matter is by no means concluded. I suggest we conduct a brief run through these. It is the job of the Committee of Public Accounts to see what the Department has said.
Document No. 1008 is in the name of Mr. Robert Watts, forwarded by the Department of Public Expenditure and Reform, in response to our report on the third level education sector. The first topic is a very serious one. As Chairman, I am taken aback by the response of the Department. It is wholly unacceptable. It accepts most of the recommendations but we have to test what it will do about them. It is an extensive document, all of which we will not read in public, but I want to highlight the following issue. The first recommendation in our report was:
The Committee recommends that the Higher Education Authority puts a system in place to monitor and quantify research and administration resources by both the Irish and EU taxpayer which are consumed by institutions in developing commercial Intellectual Property projects. This is necessary in order to eliminate the current lack of financial information and facilitate an assessment with regard to value for money.
We started with Waterford. The president of Waterford Institute of Technology came in here and stated that this was about the spin-off companies from intellectual property. He stated its value and that it was great value for the taxpayer, and the amount the taxpayer received from disposing of its relatively significant shareholding when the spin-off company was set up down to the small percent that is left today. He stated we got great value for money and he was able to tell us how much was achieved by the taxpayer. I asked what was the cost to the taxpayer of setting up this company and the research and he did not know, so he was bluffing us at best. I have to say that we took him up on it, asking how he could make a statement that the taxpayer got value for money when he had no concept of the cost that the taxpayer had invested in a State asset. This is essentially about selling State assets and only knowing the price one achieved with no idea of the cost, that is, what the taxpayer invested.
It is the only recommendation of the 41 the Minister has not accepted. I am shocked at this reply. He states that it is a complex area. I will read one or two paragraphs only. The Committee of Public Accounts cannot possibly accept this reply. That is all I am saying. The Minister states: "It is...difficult to quantify the exact amount of exchequer funding in research and administration that is allocated within the [higher education institutions] HEIs on commercialising Intellectual Property projects, given the multiplicity of funding streams and national and international collaborative research options available." That is exactly what we said - we need to know this. He then went on to say that the HEA provides funding, Science Foundation Ireland provides funding, Enterprise Ireland provides funding, the Horizon 2000 programme from the EU provides funding in some of these cases, Teagasc provides funding in some cases and the Health and Research Board provides funding in other cases. Clearly, that is what we want. We want to know the total funding that goes into these companies from the taxpayer.
In the Minister's final comment on our request that this information be assembled, he states:
This complex research funding environment, added to the overlap between teaching and research activities within institutions, means that it is not feasible to ascertain the specific attribution of all the relevant activities and costs that contributed in some way to the commercialisation of a particular piece of research. However, the steps outlined above will ensure there is greater awareness of the scale of activity and provide for greater monitoring of developments of the sector on a system wide basis.
The Minister is saying it is not feasible for the Department of Public Expenditure and Reform to have a system in place to establish the amount that goes into these companies before they are sold off.
I will throw this open for comment, but first I will make two points. The Revenue Commissioners have been before the committee and a figure of €600 million is given as the tax credit allowed against corporation tax. All of the people who apply for that tax credit are able to account, to the penny and the euro and subject to audit, in order to claim this allowance. If the taxpayer wants to claim research tax credits he or she has to prove it and have it verified. If the taxpayer, however, is putting money into research and development it is too complex to even add it up. This is utterly unacceptable. This approach is one hundred years out of date.
My second point is that the committee will write to the Department to seek any information on any spin-off projects that are currently being considered for 2018. The committee has no option but to ask that any further spin-off of State assets is held off until we know how much the taxpayer has invested in those companies before we sell them off. I am not against the principle of it but we cannot sell State assets on the blind without knowing the value of what we are selling. It is inconceivable that the Department of Public Expenditure and Reform could send such a letter to the Committee of Public Accounts.
The committee knows that I have been raising this issue for some time. I also brought the Waterford Institute of Technology issue to the attention of the Committee of Public Accounts and we had a very robust exchange with the president of WIT. I researched the matter when I was looking at the WIT situation and while there is a national policy to govern intellectual property it is actually quite loose. It struck me that there was an attitude from the Higher Education Authority, HEA, and the Department that the committee did not understand the world of intellectual property and how it works, that we should be hands-off, that it was all very complex - which it may be - and that somehow we were against commercialising intellectual property by simply asking questions about whether the taxpayer was getting value for money. I was disappointed with that response initially but because we were diligent and we pursued and pressed the matter there are now two reports pending. We should try to get those reports in to the committee as soon as possible. This will underpin our approach because the reports have analysed the issue. One is a global look by the HEA at how intellectual property is governed and managed. While there is a national policy every institute of technology and university has its own policy and there are clear differences. We saw this when some of the heads of institutes and universities came to the committee and they had different views on how it all works. The policies for each institute are different and vary according to the institute; some are better at managing conflicts of interest, some are better at getting a higher stake for the State and so on. This is obvious. That is the global report. There is also the report into WIT, which funnily enough the HEA legal department has been looking at since before Christmas. I am not sure why there is a delay. The report has been with the HEA for nearly two months. We need this report published and we need it before the committee, as well as the global report.
I do not accept the Minister's response because I believe it is feasible to give us the spend, as accurately as they possibly can. Obviously, it is a complex matter because there are many stakeholders: Enterprise Ireland, Science Foundation Ireland, the HEA and European funding. There is an awful lot of funding and because there are a lot of funding streams, let us call a spade a spade, we know there are individuals within colleges, institutes of technology and universities - including very senior people who are paid by the taxpayer - who personally benefit from this. I am not saying it is wrong, but because there is a lot of money attached to intellectual property for institutes and for individuals, along with a huge amount of State investment, I am suspicious and concerned about why we are getting the response we have got from the Department of Public Expenditure and Reform. The Department of Education and Skills and the HEA were also pushing us back a bit on the matter. We need to look at it. The source will be the two reports, which the committee needs to look at. I am not letting the issue go. I say this only because I am interested in getting value for money for taxpayers. I have no difficulty with commercialising intellectual property. It is of huge benefit to the State and it has been of huge benefit to the south-east with regards to the WIT research. There are massive benefits but it has to be a level playing field, it has to be fair and the taxpayer has to be protected. We have to be able to do our job to analyse whether there is value for money.
I agree with Deputy Cullinane's comments about the response the committee received, especially from the Department in question. The education sector requires significant investment. This is a potential source of investment. These universities and institutes of technology are a research and development tool but there is a cost to that research and development, in the same way there is a cost to companies when they do their own research and development. By not counting that cost it means we have absolutely no way of knowing if we are getting value for money or not.
There is also the potential for reputational damage in the future to companies that are spin-out companies if this matter keeps coming back. It is, therefore, right on a number of levels that we continue on to get to a process and a system where we can actually count what the investment is so we can measure whether it offers value for money.
I support what has been said. We have also raised this matter as it has come up repeatedly and as we have seen spin-off companies. In our ignorance we have learned. We tried to ask questions on the commercialisation of intellectual property. Deputy Cullinane has said that he has nothing against that. Personally, at this point I would like an absolute explanation for the ordinary person as to what we are talking about before I express an opinion on whether it is good, bad or indifferent. What is the commercialisation of intellectual property? What is there back from that process for the public institution that is funded with public funds? What is the process and who is pushing it? What is the return from that process? We are still in an era where asking questions about institutions is frowned upon.
Lately the Kerry babies tribunal's findings have been in the spotlight. This is relevant to this matter because it was never discussed in the Dáil. The report into that case was never discussed in the Dáil in the 1980s. We are now in the 21st century and have moved to a point where we actually discuss things but it is considered taboo to talk about this matter of intellectual property. There is an attitude of "we know best" and "they are anti commercialisation of intellectual property", with no questions allowed. Nothing has changed since the Kerry babies tribunal, just the subject. The subject in this case is the commercialisation of intellectual property and spin-off companies, about which we should not ask questions. We had the seven magnificent men in to the committee from the seven institutions all with varying opinions but with the same theme of "we know best". There is absolutely no openness and accountability around what percentage the university was getting back and so on.
I thank the Chairman for sticking with this. We might have slightly different opinions on it but the issue for the Committee of Public Accounts is value for money. Based on what has come before the committee I cannot say that we are getting value for money. I cannot stand over it without coming back and looking at the situation. It is public property and public universities that are funded with public money. The president of NUI Galway retired lately and his parting shot was twofold. One was on gender and the second was that he thought third-level fees should be doubled. He was one of seven people who were reluctant to answer questions on what money was being made from intellectual property. This is a source of return for the university so more people can participate in third-level education and so we do not need to charge fees. It is hugely significant but the first issue is to break the taboo around what the process is and ask what is there for the ordinary people, the citizens and residents of the State.
Perhaps the Comptroller and Auditor General could explain if this is primarily an issue for third-level institutions or does it affect other sectors. Will he give some of his observations to assist the committee?
Mr. Seamus McCarthy:
A couple of things occur to me. It is a little bit surprising to hear it said that it would be difficult to understand the State's investment in particular lines of research because all of the accounting is done on a project basis.
There might be issues around the attribution of overheads or the like, but it should be possible to take a good stab at determining the level of State investment in any individual line of research that gives rise directly to a spin-out. Maybe a distinction is being made between having a project on the one hand and, on the other, applying other processes and bringing other individuals in to market it to investors and so on. However, that should not be beyond the bounds of possibility of designing systems. As mentioned, any commercial research that is undertaken by companies will have accounting that allows them to know what the costs and benefits are. I would be reluctant to see the State sector saying that it cannot do that from an accounting point of view. It has to be possible.
The Department of Public Expenditure and Reform's statement that doing this would be too complex and infeasible is damaging to the public sector. If any business gave that answer, it would not remain in existence for long. We reject the notion that it is too complex.
We only have one issue to decide. Obviously, we will take this matter up. We will probably revert straight to the Department. We want the list of all of the spin-out companies. When its Accounting Officer is before us, this will likely be a specific item for discussion. It was mentioned that two reports are in train. We want them to be submitted to the committee as quickly as possible. There may be nothing wrong and the State could be getting good value, but it is also possible that the State is losing a fortune. That is my concern. No one can say one way or the other.
When I spoke to Dr. Love last week, he stated that the HEA's report on commercialising intellectual property was imminent. Indeed, it was due to be published this week. It may be published tomorrow or early next week. We will have it. We can then request the additional information on live and spin-out companies that may be in play in third level institutions. That information might be difficult to get in the short term, but not too difficult. Once the report is published, I recommend that we start by inviting the Accounting Officer of the Department of Public Expenditure and Reform, the HEA and the Secretary General of the Department of Education and Skills as soon as possible. They are the people to whom I wish to put questions in respect of this report. That will give us an opportunity to get some answers. This process could be-----
We will agree to that and move on. That was just the first, but main, recommendation that we needed to discuss because it was the only one that was not accepted. We will write back to the Department saying that we reject the notion that "it is not feasible to ascertain the specific attribution of all of the relevant activities and costs". It is not beyond the ability of the public service to do that. We will ask it to reconsider. We will also put it on notice that we want a copy of the reports that are in the final preparation stage and that its Accounting Officer, the HEA and the Department of Education and Skills will be appearing before us to discuss the matter shortly.
Deputy Cullinane has already referred to the next recommendation. Before recommendation No. 28 on page 3, the minute states that the HEA and Knowledge Transfer Ireland, KTI, are producing a report that was due to be completed in December. I presume that this is the report that is still uncompleted. We need it urgently.
The Department of Education and Skills accepts our recommendation No. 28. The HEA was to write to third level institutions in the fourth quarter of 2017 to remind them of their legislative obligations under SIPO. We want to see a copy of that letter and verify that it was sent.
Regarding recommendation No. 29, the minute refers to the report that was to have been ready in December. Once again, we want to see a copy of it as quickly as possible.
On recommendation No. 34, the minute states that there must be compliance with national procurement guidelines. An issue that is relevant to the Comptroller and Auditor General arose at our previous meeting. We asked for measures to ensure that procurement was in line with the national guidelines. The minute reads:
All HEIs [higher education institutions] under the remit of the HEA are required to comply with national procurement guidelines. As part of the HEIs [sic] annual governance reporting to the HEA, HEIs must [certify] any non-compliance in respect of procurement and explain the actions taken to achieve compliance. In his annual certification of institutions' financial statements, the C&AG also draws attention to any instances of non-compliance.
Mr. McCarthy has told the committee that he sometimes only analyses compliance with procurement guidelines on a sample basis.
I will ask Mr. McCarthy a question. When he reports to us on his audit of annual accounts and finds that there may be a problem with non-compliance with procurement guidelines, we get a commentary on that. What happens afterwards?
Mr. Seamus McCarthy:
We will also have raised the matter with management in the organisation. Management will usually indicate the steps that it will take to try to reduce any non-compliance with procurement guidelines. In fairness to public bodies, we have been raising this issue for three or four years and there has been an improvement. More framework agreements with the Office of Government Procurement, OGP, are also coming on stream. Many organisations have been saying that they did not have competitive procurement processes and that they rolled over contracts because they were waiting for OGP framework agreements to be put in place. It is a slow process, but there has been progress. We need to keep the pressure on for the time being.
-----of non-compliance. My point was more directed at organisations of that scale, with hundreds of millions, if not billions, of euro of taxpayers' money. What happens if an organisation does not change? What sanctions are there? If the Comptroller and Auditor General is raising this matter and working with management but non-compliance keeps repeating every year, what-----
We are coming to that matter. Some of the other recommendations touch on non-compliance and the Department has responded and outlined what it proposes to do, including a financial penalty. What the Deputy and Mr. McCarthy have been discussing will be discussed shortly.
Recommendation No. 35 related to Dundalk Institute of Technology's overseas contract, which has been put out to public tender. Recommendation No. 42 has been accepted. It concerns producing the accounts for annual audits more quickly. Substantial progress has been made on that. We are all singing from the same hymn sheet. The next recommendation deals with what we were discussing.
Recommendation No. 43 was referred to a few times in the report from the Department of Public Expenditure and Reform, DPER. Our recommendation states:
It is the view of the Committee that penalties in relation to funding should be implemented by the Higher Education Authority where institutions fail to present accounts within 6 months of the financial year end.
The Department accepts this. The minute goes on to state on page 6:
The Minister is further informed by that Department that a proposal is being considered, as part of a review of the grant funding model [- this concerns the education sector team -] to impose a financial penalty for serious breaches of [corporate] governance compliance, including failure to provide timely and accurate submission of [accounts]; unsanctioned payments to staff; false financial, statistical or governance reporting; and wilful breaches of the relevant codes of governance.
I think procurement will come into that. The Department is stating it is now looking at having some financial penalty in place where there are breaches of governance by any of the funded organisations. That rolls into the question Deputy Cullinane raised. This has worked in the HSE, as we were told at a previous meeting when Tony O'Brien was before the committee. The section 38 and section 39 organisations were told that unless and until they have their financial accounts in on time, there will be a withdrawal or withholding of funding. This has brought a remarkable improvement in these organisations turning around their financial statements and in their accountability, and the Department of Public Expenditure and Reform now thinks the same can happen here. The Department seems to be following the recommendation, so that is that point covered. We will watch that because the Department is only in the process of following the recommendation. Generally, the Department accepts all of what we are saying and it is moving to implement it.
I want to highlight another recommendation, unless members want to discuss any others. I am moving on to recommendation No. 73 on the bottom of page 9 and the top of page 10. It concerns approval of "a value for money based business case in respect of proposals for significant outlays" by third level institutions such as UCC. We were speaking about the purchase of the Irish Management Institute. I just want an information note on this. The first paragraph proper of page 10 states - some people will find this interesting and some will find it boring:
With respect to Universities more generally, historically they were classified as privately controlled non-profit institutions in the National Accounts. In 2012 the CSO reclassified the universities as market producers meaning they were classified to the non-financial corporations sector rather than the non-profit sector. Currently the universities are classified outside Government on the basis that they are (a) privately controlled and (b) market producers. Therefore, the requirement to ensure accountability in respect of the use of public funds must be balanced with the autonomy of [the higher education institution] to make decisions on expenditure.
We want a note from the CSO spelling out what that is all about because I think there is talk about universities going-----
-----back onto the State balance sheet because of the nature of their funding. The exact same discussion is taking place in respect of all the approved housing bodies. At the moment they are the panacea for everything because they are off balance sheet. The CSO says, "Hold on, that classification has been re-examined." We therefore want a note from the CSO about these things so we can-----
Yes. The reason for that is that if 50% of their funding comes from the private sector, probably through private funding from outside the State sector, they are in the private business of providing services in the private sector. The big universities in England, for example, would receive much more in private income than in State income. Perhaps ours was a European approach to universities. The CSO is now looking at this again as most of the institutions in Ireland - the universities and the third level institutions - are substantially funded by the State. That is why the CSO is looking at this reclassification. I am just throwing in as a by-the-way the comment that the approved housing bodies are in the same category. The CSO's note will be useful to have.
The line stating that "the requirement to ensure accountability in respect of the use of public funds must be balanced with the autonomy of HEIs" is a very polite way of telling us that we do not really have the right to ask some of the questions we want to ask.
It is similar, but one cannot even put it on the same scale because the vast majority of RTÉ's funding does come from the State. We had a discussion with some of them on these foundations, and whatever about those being foundations, here we are talking about the actual universities and institutes themselves. It is interesting that the paragraph from which I quoted comes at a time when, probably for the first time, we as a committee are putting a real, sharp spotlight on the third level sector. There were many issues that came out of that which, I imagine, rattled some within the sector. We could see that even when some of the Accounting Officers came before us. They were uncomfortable with some of the questions that were raised. Let us be clear that the spotlight we put on the third level sector led to a number of reports by the HEA and the Department that would not have been carried out otherwise. I do not like the line I quoted. It is very clever in how it is framed, but any time I see the word "balance" in the context of accountability, especially as a member of the Committee of Public Accounts, I become deeply suspicious.
I remember having an engagement with the guy from the HEA on whether it was likely that third level institutions would go on the national balance sheet. He said it had been looked at several times, that it had not happened to date and that, from memory - I could be wrong - there was not an expectation that it would happen. If it does, it obviously brings into sharp focus the very first item about income, assets and liabilities. I am just curious as to whether work has been done to quantify whether it would end up being a significant liability on the State in terms of-----
It does, and that is why this is a timely and important question and why I have homed in on this paragraph.
In response to recommendation No. 89, it is stated that a review of the practice in respect of sabbatical leave is to be commenced in the fourth quarter of 2017. We want a copy of the circular referred to in the response to recommendation No. 95.
The response to recommendation No. 101 states:
The codes of governance for the higher education sector are in the process of being updated to take account of the provisions of the Code of Practice for the Governance of State Bodies, 2016 and should be finalised by the end of 2017.
We want a copy of that. When we are told something is going to happen, we want to check that it actually does.
Finally, I refer to the response to recommendation No. 128, which refers to a "reporting template for the 2016/17 academic year that recently issued to the higher education sector". We just want a copy of that because when they say they agree with us, that is fine, but we want to check that.
I know we have another minute to discuss Templemore but I think we can move through it very quickly. I have had a quick look at it. This is document No. 1024. This will be a quick run through, I think. Recommendation No. 37 has been accepted. I think we will ask for just a general update on the recommendations in the interim report. The Department states that the the committee overseeing the matter has met 18 times since January 2017 and that the vast majority of the recommendations have been implemented. Recommendation No. 38 was accepted. Regarding recommendation No. 39, there are one or two points to which I want to draw members' attention. I am on page 4. Our recommendation states:
The Committee recommends absolute clarity on a reporting framework to bring significant issues to the attention of relevant parties such as the Comptroller and Auditor General (C&AG), the Policing Authority and the Minister for Justice and Equality. The matter of what constitutes a "significant issue" [should] be communicated clearly.
Obviously there was an issue in Templemore that was not communicated to the Comptroller and Auditor General as part of one of the audits and we felt it was significant. There was another issue where some people may or may not have felt the Garda Commissioner should have informed the Minister about a particular matter regarding Templemore. The last paragraph states that a communication protocol between the Department of Justice and Equality and An Garda Síochána is also being developed as part of the revised governance framework, and the timeframe for completion was the end of 2017. We wish to see that document. They appear to be responding on the issue of when the Garda Commissioner is to raise a red flag with the Comptroller and Auditor General or the Minister, as the case may be, and they say the timeframe for completing that protocol was the end of last year. We want to see a copy of it and when we get it people will be free to examine it.
In recommendation No. 41 on page 7, we talked about the independence of the Garda Síochána internal audit service and they accept that. They say in the last paragraph on page 7 that the Minister was informed that in December 2016 An Garda Síochána contracted external consultants to conduct a review of the Garda Síochána internal audit section against international professional practice frameworks to identify the opportunities to enhance the internal audit process and to provide recommendations to improve efficiencies and effectiveness. This review was completed in March 2017. I do not think that was brought to our attention during the course of our discussion on Templemore. In any event we want a copy of that report. That goes without saying. That addresses one of our specific recommendations.
Much of the next page is about procurement training for the Garda. We are told that is happening. Regarding returns of information to the Standards in Public Office Commission, SIPO, they say only one has not been verified or returned because the particular person is on extended sick leave. Everybody else at work has completed all the documentation and confirmed with SIPO.
Those are my observations on that. I hope I have covered the ground for the committee. There are only one or two points to be followed up in that regard. That was the longest part of the correspondence.
Correspondence No. 1034 is from Mr. Derek Moran, Secretary General of the Department of Finance, providing up-to-date information following our meeting on 14 December last regarding promissory notes and NAMA's loans value. Mr. Moran also includes, on a confidential basis, a copy of the letter engaging KPMG as special liquidator and an update on the situation relating to related costs. Can we note and agree to publish the material, except for the letter of engagement as requested by the Department? Members are free to raise any matter in that at a later date. Is that agreed? Agreed. We are not publishing that letter, as requested.
Correspondence No. 1040 is from Mr. John McKeon, Secretary General of the Department of Employment Affairs and Social Protection, providing a follow upto our meeting with the Department in December. A number of items are included in the documentation. We note that. Members can read and study it and if there is information of interest to any member please use it in any way you see fit.
In category C correspondence, No. 1010C is carried over from last week. This is from Senator Rose Conway-Walsh and it is a copy of a report compiled by Deputies Denise Mitchell and John Brady entitled "Job Path Exposed". It is a Sinn Féin policy document. The Senator asks the committee to examine the matter considering the ongoing spending in the area. However, given that our remit is to look back, it may be more appropriate for the sectoral committee. There is a review of JobPath. There are two companies involved. We are seeking information on the commercial sensitivity issue but the policy of how that is working is a matter for the sectoral committee. However, we are still following the commercial aspects of the topic we spoke about in respect of the two private providers for the JobPath programme. Is that okay?
The sectoral committee should follow up on that. Is that agreed? Agreed. Perhaps it was sent to that committee anyway. If it was not, we will forward it to the committee.
Correspondence No. 1027 is from Professor Richard Thorn providing an update on the Kildare and Wicklow Education and Training Board investigation. He expects to complete his report by the end of the month. We note that. He has agreed to appear before the committee after that. He said we can discuss other items with him as well, such as Limerick and so forth.
Correspondence No. 1031 is from Deputy Mary Lou Macdonald asking that the University of Limerick internal review be put on the work programme. We will include that for consideration on our work programme. We will note that.
Correspondence No. 1032 is from the National Anglers Representative Association and the Trout Anglers Federation of Ireland regarding how angling funding applications are allocated and the oversight of fisheries development projects. This seems to be a policy matter but we can seek a response from Inland Fisheries Ireland and the Department of Communications, Climate Action and Environment. Rather than just referring it to the other committee, we will write directly to the two organisations and we will issue the response when we get it.
I support writing to the two organisations. I read through it and it appears that one of the concerns being brought to our attention is that money is being spent by the CEO of IFI without the approval of the board. Obviously, that is just an allegation, so that is probably the specific question we should ask. That appears to be the substance of what is there.
Correspondence No. 1033 is from the president of NUI Galway providing a note on the non-competitive procurement of €600,000 worth of goods and services and steps being taken to prevent non-compliance in the future. Can we note and publish this?
Guím gach rath ar an uachtarán nua, an tOllamh Ciarán Ó hÓgartaigh. Tá ceist agam maidir le uimhir a trí. The letter puts in perspective that the non-compliance for procurement is a small percentage of the overall budget. I acknowledge that. However, with regard to the explanations given, one is to do with rankings. It is number three in the explanation for procurement non-compliance in respect of supplier and the non-compliant amount, which is relatively small at €24,000. They have to give an explanation for why. The explanation here is that this is a sole supplier. They cannot get anybody else. This is the company to develop the university rankings so the university pays that company.
This is a unique supply of information and therefore cannot be provided by any other supplier. It says that the sole source process is now complete and has been approved and signed off. Does that mean that is the end of that company? It got a special company to analyse data to tell the university where it was in the world rankings, so when the headlines state that it is in a certain position in the rankings it is due to a company?
Mr. Seamus McCarthy:
It is the only source of this kind of service. That would be the test that we would expect them to demonstrate to us. If one does not have competitive procurement on the basis that this is the sole supplier, one must be able to demonstrate that it is a sole supplier. It goes back to Dundalk Institute of Technology and the idea that "we have been working with somebody for 15 years and they are the only people who can provide this service to us". Now it has demonstrated that it can run a competition in that situation.
I am happy it is being followed up. I wished to highlight it. I do not expect the Comptroller and Auditor General to comment on this - he has made a comment about value for money - but it seems incredible that the university would pay a private company taxpayers' money to access data to tell it where it is in the world rankings and then champion those rankings. However, there is only one company. Anyway, it is something I might return to.
That is fine.
The next item is No. 1042, correspondence from Deputy Catherine Murphy. Since she is not here, she has asked us to hold that over until next week. Correspondence No. 1043 is from an individual who has made a disclosure under the Protected Disclosures Act to the Minister for Education and Skills. The person is employed in the Institute of Technology in Tallaght. The person believes they have been bullied and victimised and have raised issues in regard to the Protected Disclosures Act itself. This is one of over 30 pieces of correspondence from the same individual since January. I have asked the clerk not to circulate this documentation. As the disclosure has been made to the Minister, I believe that process needs to be completed. Furthermore, the committee does not involve itself in individual cases relating to a person's employment. I propose that we write to the individual accordingly and I seek agreement on the committee not to circulate the items. Is that agreed? Agreed.
No. 1044 is correspondence from an individual copying the committee in relation to Garda Síochána Ombudsman Commission, GSOC, and the High Court order. There are a number of other items from the individual with the clerk. This is before the courts and it is not a matter for this committee. I propose that we note the item and I seek agreement of the committee not to circulate the item. We were only sent a copy. We are on a list of people getting copies of the documentation. It is not a matter for us. It is before the court. We can agree not to circulate that documentation. Is that agreed? Agreed.
The next item is No. 1045, correspondence dated 23 January from Mr. Marty Whelan of the Health Information and Quality Authority, HIQA, suggesting a correction to our periodic report which was published on Tuesday. We can deal with this. It is coming up on screen. Members will see the paragraph HIQA wishes to change. The correspondence states that from an initial quick read of our report, it was noticed that there was an error of fact on page 25 of the report in paragraph D19, where the report states "and also contracted a private public relations firm." HIQA states this is incorrect and that it has not engaged a private public relations firm. It would appreciate if this could be corrected a soon as possible.
Our report refers to a private public relations firm. We will go back to the transcript of the committee meeting with HIQA. I will read the transcript now. It is in front of members. Deputy Marc MacSharry stated that a total of €12,560 was spent on media monitoring and asked if that was done by a public relations firm or if it was internal. Mr. Phelim Quinn from HIQA stated:
[It] is a procured service that feeds information to us. Even in terms of business intelligence for the organisation, we find that information contained within the media can direct us in some instances to areas where there may be risks within the...
Deputy MacSharry asked if it was a private sector public relations firm which gives HIQA a booklet, or whatever it is, every week. Mr. Quinn stated that it was a daily feed. Deputy MacSharry asked if it was a clippings type of service that was external. Mr. Quinn replied, "Yes". Deputy MacSharry then asked what public relations company it was. The HIQA spokesperson said it was a company called Kantar.
We put on the record that it was a public relations company. HIQA gave us the name of the company. Our report is based on the wording as given in public evidence. It is a minor point as to whether it is a media monitoring company or a public relations company.
We are not changing the report. However, we will note and publish his correspondence. I delighted people are reading our report so closely. It is a very small point. We will publish his request but we are not changing the report. Our report was based on what was said in the transcript. There was an opportunity for this to be highlighted when the transcript-----
That can be a blessing or otherwise. That is the end of that correspondence. We thank HIQA for being so specific in its correspondence with us.
The next item is statements of accounts received since the last meeting. Six accounts are coming up on screen now. The first one is the Leopardstown Park Hospital board, which has a clear audited opinion; and the National Gallery of Ireland, a qualified audited opinion as the National Gallery does not recognise heritage assets in the financial statement. It is a bit like what we mentioned before, that we do not put the roadway infrastructure on our national balance sheet. We put any borrowings. However, proper accounting should say that it should value its heritage assets and include it as an asset on the State balance sheet. It is not done. We note that.
Does Mr. McCarthy want to comment? That has to be highlighted.
Mr. Seamus McCarthy:
Not particularly. There is a significant challenge there. Many of the heritage assets, the paintings, that are in the National Gallery are many years in State ownership. Valuing the back catalogue is difficult. Specifically, around 2011, there was a change in accounting policy that any acquisitions should be either recorded on the balance sheet at cost or valuation, if they were donations. There have been significant donations to the National Gallery.
Mr. McCarthy has explained the issue and we can understand. The main thing is that it is in a secure place. That is all I will say about it.
The next item is the Economic and Social Research Institute, which has a clear audited opinion; Údarás na Gaeltachta, which has a clear audited opinion; and the credit institution eligible liabilities guarantee scheme account. It had a turnover of €47.2 million and a clear audited opinion, except attention is drawn to note six in the account which is the additional receipt of €14 million from a credit institution following the identification by it of net underpayment in respect of previous years. Why did the credit institution eligible liabilities guarantee scheme not spot that underpayment?
Mr. Seamus McCarthy:
The fees paid by the individual banks are calculated by the individual banks and checked by their auditors. Over the years, the institution concerned had been remitting fees and the Department was accepting the certification of those. It is Bank of Ireland. When it was leaving the scheme, it did a look back exercise, with the assistance of its auditors. A number of discrepancies were found. However, the net amount was an additional €14 million owed to the State and the bank paid that.
That is fine. The last account is the National Concert Hall, which has a clear audited opinion, except attention is drawn to the note in the financial statement regarding the deferred retirement benefit funding. The funding issue with pensions occurs in many State organisations. Am I right?
That is down the road. Let us hope that the National Concert Hall continues to be there and it is never an issue. That was the final item in respect of accounts.
I turn to the work programme. I think we have circulated a revised work programme. There is nothing special on it. We circulated it last week. We will keep it on the agenda. If anybody has anything to raise, he or she should raise it next week. There is nothing special. We will fill in a few gaps down the road. We will publish the work programme now. One or two items are subject to confirmation of people's availability to attend.
I will ask members to deal with two items in private session now before we go into public session because they will only take a few minutes before the witnesses come in instead of having to deal with them later. Before we go into private session-----