Oireachtas Joint and Select Committees
Thursday, 8 February 2018
Public Accounts Committee
Business of Committee
We are joined by Mr. Seamus McCarthy, permanent witness to the committee, who is accompanied by Ms Paula O'Connor, senior auditor in the Office of the Comptroller and Auditor General. Apologies have been received from Deputy McDonald.
Are the minutes of our meeting of 1 February agreed? Agreed.
Next on our agenda is an issue that I wish to discuss arising from the minutes. Representatives from the National Shared Services Office appeared before us last week. It is the body that manages the payroll and pension payments of what we all understood to be the majority of the public service, excluding HSE staff, gardaí and teachers. The figure cited in the relevant chapter regarding non-returned salary overpayments to public servants was €4.6 million. That is the figure we all saw - and by which we went - in the chapter when the Comptroller and Auditor General's report was published last year. Towards the end of that meeting, I asked about the up-to-date figure for the end of 2017. Matters became vague at that point. The witnesses told us that new organisations had come in during 2017 and that the figures for the end of 2016 would not be comparable with those for the end of 2017.
When I consulted the Comptroller and Auditor General, we established that the Department of Employment Affairs and Social Protection had not been under the National Shared Services Office in 2016 but that it was in 2017 and had had a significant influence on the €4.6 million figure. I asked the Comptroller and Auditor General to prepare a chart for us showing the total figure of uncollected salary overpayments across all Departments at year-end.
He went through the 900 pages of his appropriation accounts report and at the end of every Vote he came up with the figures, which were scattered throughout the 900 pages of his report. A document was submitted to us yesterday. I asked that it be circulated yesterday evening because I only saw it yesterday and it is highly relevant. In addition, I asked him about the other Votes that were not intended to be under the National Shared Services Office, which mainly included teachers and the Garda Síochána.
The position now is that there are overpayments reported in the appropriation accounts for Votes which the National Shared Services Office provide, namely, human resources, payroll and pensions administration. The actual figure on the schedule submitted to us across all Departments is €7.5 million. They are the public Departments. We were talking about €4.6 million, but in addition to that-----
Yes, across Departments. In addition to that, because I was conscious of the fact that the Department of Education and Skills, the teachers, and the Garda Síochána were not included in that figure, I asked the Comptroller and Auditor General about it. He said that in regard to the Garda Síochána, prisons, education and Army pensions, there is another €8 million in uncollected overpayments in respect of salaries and pensions in those Departments. The total figure on the schedule we got last night now comes to €15.633 million of uncollected overpayments of salaries and pensions across all Departments. That is three times higher than the figure we spent several hours discussing last week. Everything that was said here last week was correct and accurate. All I am saying is that it just was not the full picture. There was nothing said that was not accurate. It twigged with me at the end of the meeting that there was probably a lot not in here, so the €15.633 figure is the full picture and that schedule has been supplied to members today.
I want to go through the key figures in that schedule that were not discussed the last day. The reason I am doing it is because it is totally relevant to last week's meeting. The Comptroller and Auditor General will come back with an exact report. The first one I want to highlight is the Office of the Revenue Commissioners where there are uncollected overpayments of €1.512 million in respect of 1,000 people, which is an average of €1,414 per person.
Just let me finish putting the facts on the record and we will discuss it then because the full picture did not emerge the last day.
We then have the Department of Employment Affairs and Social Protection, which has €3.2 million in uncollected overpayments. That is an average of €2,177 per person. The total figure for the Garda Síochána supplied by the Comptroller and Auditor General last night is €1.8 million, which is an average of €1,711 per case. The figure for the Department of Education and Skills, which deals with teachers' and non-teachers' pay and pensions, is €5.7 million but I do not have the figure for the exact number of people involved.
In addition to that €15.633 million, I do not see the Health Service Executive, HSE, mentioned, which accounts for one third of the public service. The figure is probably over €20 million. We will first write to the HSE for the equivalent figures. I will call Deputy Kelly shortly, but will the Comptroller and Auditor General explain the reason the HSE is under the Department of Health and that Department does not include the HSE overpayments? It appears that other agencies under Departments are not included either. This €15.633 million figure is three times higher than the one we discussed here last week, but it excludes over 110,000-----
Mr. Seamus McCarthy:
When it had a Vote the HSE would have been required to disclose that figure.
The HSE figure, which is 110,000 public servants, is not captured here at all. The first thing we will do today is write to the HSE for the overpayments figure for 2016 and 2017 in respect of all HSE staff. I have no doubt that will bring up the figure. Members will understand that I decided to follow this up as a result.
I compliment the Chairman on a very good piece of work because we were getting a bigger picture seeing the overall pie. To try to fill out the pie even more, where does this leave us as regards Haddington Road agreement back payments? Are they included or not included in this figure? Do they have to be included on top of this across the board? Where are we in that regard?
No. Generally, these are people who were on sick leave. It took a fortnight for the paperwork to come through and they were paid for two weeks they should not have been paid for or holidays that were taken without being properly notified and there was a catch-up. It is those type of issues. The Haddington Road agreement and those type of agreements are not connected with this at all. This is strictly about overpayments. It is not that we want to be hard on the public servants. It is not fair on the public servants to come back to them after a period-----
I am not sure if it is in this report as I have not read the note from the Comptroller and Auditor General's office and if it is in it, that is fine, but is it possible to get a breakdown of the Departments and agencies that are covered by the National Shared Services Office and those that are not? In terms of the ones that are not, some of them jump out at me in terms of the size of the overpayments, which are quite big. The Chairman said the HSE is one of those, but are there others? First and foremost, to get a complete picture we need to get the information from every Department.
-----but the big areas not included, and we went through this, are the HSE, local authorities, the Department of Education and Skills, the Garda Síochána and the Army. They are the big areas, and the Oireachtas.
Can we get the ones the Comptroller and Auditor General does not have and that we do not have because one of the ones we do not have is the figure for the HSE, and we are writing to it? Are there others we need to write to? That is my point.
I am looking at the figure for the Department of Education and Skills. The focus at the last meeting was on the Department of Employment Affairs and Social Protection, which was €3.2 million. The figure for the Department of Education and Skills is €5.7 million, which is more. For all we know, the figure for the HSE could be greater again.
Mr. Seamus McCarthy:
The point of the chapter was to draw attention specifically to the shared services and where there were difficulties. In terms of what happened, essentially we extended the chain for giving instructions for what is the appropriate pay. The National Shared Services Office has two wings to it. One is the human resources, HR, and pension administration function and then there is the actual payment function. Some organisations are managed by the National Shared Services Office in terms of a HR and pension administration function, but not all of their payroll is included. The Department of Employment Affairs and Social Protection, DEASP, is the big one in that regard, and it has substantial overpayments.
A further complication is that the HR function being done by the National Shared Services Office on behalf of DEASP identified some overpayments.
There is a figure within the €4.5 million relating to the Department of Employment Affairs and Social Protection, but that is not only for overpayments but the closing off of cases. One of the recommendations in the Chapter was that there needed to be better reconciliation and better presentation of information in the appropriation accounts, identifying how much of the payroll overpayments are related to the national shared services office, how much is being managed directly by the Department and the total figure. For those that are engaged with national shared services the total is €7.5 million, as mentioned in the Chapter. There are other Votes, including An Garda Síochána, the Prison Service, Army Pensions and the Policing Authority, that do not have any engagement with national shared services. The Department of Education and Skills is in a half-way house position in that its employees' HR and payroll is within national shared services but the teachers and school staff payroll is managed directly by the Department.
There are a number of Departments and agencies that come within the remit of the national shared services office. We have the global figure for the Departments in terms of overpayments but that figure may not be the full figure because there may be agencies and organisations that are funded by the Departments in respect of which there may also be overpayments. There are also Departments that are not covered by the national shared services office. We need to try to capture the full figure. I understand the Comptroller and Auditor General's point it may be difficult to do that, but that is the job of the committee. If we want the full figure we should get it. There might be a bit of work involved in getting it but it is not impossible to do it.
I am not suggesting it is for Mr. McCarthy to do it. If the committee is to examine this issue we need the full picture in terms of the Departments, agencies and organisations that are covered by shared services and those that are not. The Department Accounting Officers can get that information for us. It may take some time to get the information but it is for the committee to ensure we get it.
I thank Mr. McCarthy for following up on the matter but there are a number of issues arising. The purpose of shared services was to achieve a cost saving and greater efficiency but, based on what we are hearing, that is being only partially achieved. It is supposed to be a shared services system but when one drills down into it in some cases it is and in others it is not. Last week, when we asked what organisations were covered we were told all Departments are covered and that the Oireachtas is the only organisation outside of it but there are other layers within the Departments that are not covered. For example, the Department of Justice and Equality is covered but An Garda Síochána and Army Pensions are not; the Department of Health might be covered but the HSE is not, and the Department of Education and Skills is covered but teachers and third level institutions are not. This tells us something about the shared services system, irrespective of the overpayments. Why did we set up this service and then not use it? It is not only the Oireachtas but many other organisations and agencies that are not covered. We need further information in regard to the move to shared services from a value for money perspective.
The Chairman mentioned that we do not have the full picture. Everybody could come before the committee and tell us only part of the story but what we need is the full picture. There are issues arising out of last weeks' meeting that we now need to interrogate further on the basis of the information that has been uncovered, which is frustrating for the committee. Are the underpayments visible in the Votes?
Mr. Seamus McCarthy:
Yes. One of my objectives in doing the Chapter was to surface this issue. The figure for the Department of Education and Skills is substantial. We have reported previously on overpayments to teachers. The point was made last week that in a large payroll administration there will be overpayments from time to time. It is not news that there is some level of overpayment in any organisation. The difficulty was that with the introduction of shared services there appeared to be an increase across the board in the overpayments that were being recorded. That is why I decided to focus on what was happening in national shared services. The framework that we were using for analysing it could be used by any of the State bodies, including the HSE or the Department of Education and Skills in regard to the teachers' payroll, to review their own systems and to identify ways that they could prevent overpayments occurring so that the minimum necessary amount of overpayment is incurred.
Mr. Seamus McCarthy:
Almost all of the target groups to be brought within national shared services are in now, particularly now that the Department of Employment Affairs and Social Protection is under the remit. There is, perhaps, a case for An Garda Síochána, the Prison Service and Army Pensions being brought in but I do not know of any plan in that regard. The Department of Defence payroll, which includes the Defence Forces, is within national shared services but Army Pensions is not, which seems a bit unusual but there are obviously reasons for it.
I thank Mr. McCarthy for following up on this matter. To be fair to the officials that were here last week, they were very clear on what they are doing. They were asked a lot of questions around the effectiveness of the Act. I cannot recall the amount that was mentioned in regard to putting the system in place but I think it was €41 million. They made it very clear that the only organisation not within the service was Tithe an Oireachtas. When I asked why that was the case they said that they are working within what was identified in the scoping exercise. Am I correct that the decision making process in relation to this lies with the Department of Public Expenditure and Reform?
The officials who appeared before us last week did their best to explain all of this. I accept there are serious questions in regard to value for money but in regard to the organisations they made it very clear which organisations are in and which organisations are not. They also told us, as repeated today by the Comptroller and Auditor General, that sometimes payroll, pensions and human resources are included and other times they are not. The question we need answered is on what basis were these organisations, as opposed to those being highlighted today, included in the scoping exercise but that is not a reflection on the officials who appeared before us last week.
What we need to know is who set up the scoping exercise, what was the purpose of it, the outcome of it, if there will be a review of it and will it be expanded to include all organisations and, also, is it appropriate that all of the organisations be brought within shared services taking into account all of the problems that have been identified? These are the questions for the committee. We should not be focused on the overpayments, although they are serious.
We made it very clear last week that we knew that the HSE and teachers are not included in the figures provided. I forgot to mention that the local authorities are also not included.
They took the view that there might be a risk to the State to have all 300,000 public servants paid through one centre. It is probably no harm not to have everything under the one. That is probably a strategic issue. In everything that was said the last day, there may have been an impression as people dipped in and out of the meeting. Those who were here understood there are lots of areas outside, but the casual viewer would have thought national shared services covered all government. They are doing their job.
I will include that as well. The point is that perhaps we should have started at the beginning of the previous meeting with the overall picture and then homed in, rather than homing in first and then realising the overall picture. We have more or less thrashed it out now.
Yes. We have thrashed it out and that is why I want to reach to some conclusion. The witnesses who appeared before us last week were very clear on the job they have to do, how long they have to do it and what organisations it covers. I do not think that is an issue at all. The figures we are discussing across the board are disproportionate in light of the Haddington Road agreement, which I have already stated. That also needs to be reflected. There is a time lag.
Is would be worthwhile for the committee, based on what we have thrashed out here, to compile a short report outlining the full pie, of which this was a significant segment, showing the remainder of the parts in order to allow for some form of public discourse on it, particularly within the four walls of Leinster House. Obviously, I do not think there is awareness of the full picture.
We will write to the Department of Public Expenditure and Reform in the meantime. We are writing to the HSE because of the scale just to get its numbers. It is something the Comptroller and Auditor General covers in his annual audit. Having looked through the 40 Votes the Comptroller and Auditor General highlighted in the schedule, I found it troubling that there were 1,068 Revenue cases but that repayment plans are only in place for 391 of these. For the Department of Employment Affairs and Social Protection, there are 1,511 cases but only 385 repayment plans in place. For the Garda Síochána, there are 195 individual cases but only 27 repayment plans. My real concern is that they were sitting there with no plans in place to tidy the matter up.
If we cover this as a chapter in the periodic report, there are two separate issues. There is the overall figure for overpayment captured across the entire public service and State agencies; and there is process as to why some are and some are not under the National Shared Services Office. There could be logic, for example with Garda and Army pensions, as to why they are not covered. Before we report on it, we will need to have officials from the Department of Public Expenditure and Reform appear before the committee to explain what scoping exercise they did and the rationale for the inclusion or non-inclusion of some so that we are informed. We are not informed and it would not be fair for us to report on it.
I accept that there will always be overpayments, time lags and all sorts of other issues. Humanity needs to be shown in all of this. It is very difficult not to highlight the difference between genuine mistakes being made and, for example, the bus shelter advertising campaign relating to the Department of Employment Affairs and Social Protection. There is a big contrast to be made.
Mr. Seamus McCarthy:
I have drawn attention every year to an issue with welfare overpayments. I also felt it appropriate to draw attention to salary and pension overpayments where I saw that the problem appeared to be getting bigger. I felt it was important to get on record some kind of overview of the matter, why it might be getting worse and what controls were being exercised to try to deal with it.
We have agreed what we are doing there.
We have reached the final item arising from the minutes. We will hold this one over. We also asked the Comptroller and Auditor General to give us a report on the compliance with public procurement. It became crystal clear at last week's meeting that when the Comptroller and Auditor General highlights €500,000 or €1 million of services. It follows on from the Deputy's question about the way the renewal of the Garda Síochána contract was rolled over without competitive tendering, as mentioned the last day. We asked the Comptroller and Auditor General as we had not seen that as referred to in the report.
On that procurement, the Comptroller and Auditor General explained that he only reviews it on a sample basis. What we see reported here each week in accounts is only a sample. There is a big issue to come return to there. The organisation will need to include, somewhere in its financial statement, the total relating to non-compliant procurement and not just the sample the Comptroller and Auditor General picks up. That is because the sample he picks up could sometimes reflect the full problem or it could be only a fraction of the problem. We will come back to that because we have spent enough time on the minutes. However, it is a big issue.
Mr. Seamus McCarthy:
Speaking from memory, based on Circular 40/02, in Vote accounting there is a requirement that organisations list the contracts they have that are not procured by competitive means. They are required to tell me and the Department of Public Expenditure and Reform. They are also required to disclose that in their statement on internal financial control. We look to see that they do that. It does not mean that sometimes when we take a sample of procurements we do not find some things that are not on that list. My recollection is that the Accenture contract has been disclosed. It is included in the appropriation account of An Garda Síochána in the statement of internal financial control. I am open to correction on that, because-----
Can we get some clarity on that? This issue was raised here previously and in the Dáil. I raised it by means of parliamentary questions a long time ago. It was raised at this committee; it was raised by Deputy MacSharry more than by me. We need to get clarity on this. Given what we now know, somewhere here there is an issue with the term and length of these contracts and the non-procurement of them. We need to get to the bottom of it because the value of these contracts is huge. If these have not been put out to tender properly, obviously we will need to deal with it in here. I think we need to deal with that as a matter of urgency. It also needs to be reflected on our work schedule.
Mr. Seamus McCarthy:
Lest anybody think I am complacent about it, disclosing non-competitive procurement is not the end of the story; it is the beginning of it. Not only does one have to disclose it, one has to explain it and then it is open to the committee or my office to interrogate the entity about why this has happened. In that note I have tried to set out for the committee the sorts of explanations that are provided. While there is plausibility about them, certain tests must be applied. For example, there are expectations that if one says it is the only supplier that could have provided, it is one's obligation to prove that.
That is Vote by Vote, which will be a great help. We are covering ground that is not always obvious until we tease it out.
The next item on the agenda is correspondence received. In category A we have Nos. 1061 and 1066 received from the Department of Rural and Community Development, providing a briefing document and the opening statement for today’s meeting. We will note these.
Category B is correspondence from Accounting Officers or Ministers, follow-up to Committee of Public Account meetings and other items for publishing. I will deal with a group of correspondence which feeds into the committee's work on corporation tax. Nos. 974, 980, 1003, 1004, 1025, 1026, 1028 and 1035 to 1037, inclusive, are correspondence from dates in December and January from the following multinational companies to which we wrote: J.P. Morgan, Citibank, Apple, Ryanair, Kerry Group, Glanbia, Pfizer, GlaxoSmithKline, Google and Cement Roadstone. We invited all these companies to meet with the committee on a voluntary basis to help us in our examination of the chapter in the Comptroller and Auditor General's 2016 annual report on corporation tax. All but GlaxoSmithKline declined the invitation with many companies stating they would not be in a position to provide the assistance required. We will note and publish all the letters.
I have picked out relevant paragraphs in some of them. J.P. Morgan said it had an average corporation tax of 13% and 12.2% on taxable profits in 2014 and 2015. That is what it says in its letter.
Citibank said its tax affairs are fully compliant. It goes on to say it is following the OECD discussion on the BEPS project.
In its letter to us, Apple said:
Thank for [the] letter of November 23, 2017. We acknowledge and fully respect the role of the Committee and its current focus and we thank you for inviting us to address your members. As you know, both Ireland and Apple have appealed the European Commission's decision alleging State aid. While that legal process and appeal is ongoing, we are constrained from commenting and therefore will not be in a position to send a representative to the Committee.
I am just putting that on the record. We made clear in our letter to Apple that we would not discuss the merits of that case but it referenced the case as its reason for not wanting to come.
Ryanair wrote back and said it had an extensive programme with union recognition and does not have the management resources available to come in and talk to us.
Kerry Group said it is a large company but is not in a position to attend.
Glanbia has sent a detailed, helpful letter to our committee in our consideration of the matter. It gives an example of how a large multinational, which Glanbia is, interacts with the Revenue Commissioners. I ask people to read that letter. It highlights what it considers the excellent Revenue online service. It says it is part of the large cases division. It highlights the fact there is a nominated person in the Revenue to deal with all of Glanbia's affairs, which it finds most helpful. The letter is from Siobhán Talbot, who is the group managing director. Talking about the way it deals with Revenue, she says: "In fact we consider that this should be part of Ireland's offering to attract foreign direct investment i.e. make it known that Ireland has a best-in-class tax administration including both efficient online systems (e.g. ROS) and availability of senior revenue personnel to resolve technical issues promptly and efficiently." That is praise of the Revenue Commissioners from Glanbia. She says from her dealings with other countries, the Irish Revenue is top of the class. We want to say that. She has given us useful information that we will consider as part of our report.
Pfizer has written to us. It said "Pfizer appreciates Ireland's commitment to the 12.5% corporate income tax rate." It thinks that is quite important.
GlaxoSmithKline wrote to us and discussed its availability to come in.
Google said it is not in a position to attend.
Cement Roadstone said it is part of the Revenue's large case division and has direct dealings with the Revenue, which it highlights in a positive way.
Some of them have replied with particular comments that we will take on board. Deputy Cullinane had asked about that. We discussed GlaxoSmithKline briefly in private session last week. I thank it for its acceptance of the invitation and for making contact with the secretariat to make the necessary arrangements. While it is an offer we may take up at some point in the future, in our current examination it would not be representative of the multinational sector to only have one company in. I propose we write to GlaxoSmithKline to thank it and formally communicate our decision. We will agree not to invite it in at this time. We are not saying we will not invite it in but just not immediately.
There are a couple of letters there. We will be holding a private session next week with Brian Keegan, the director of Chartered Accountants Ireland, who will give a briefing to the committee on this area and it will be followed by public engagement with Mr. Keegan on the morning of 22 February. Mr. Keegan has considerable expertise in this field and he will assist the committee and the public in our understanding by way of that attendance at the public meeting. We will be completing our examination of that topic with a further engagement from the Department of Finance and the Revenue Commissioners on the afternoon of 22 February. We will have an impartial expert here on the morning and a wrap-up session with Revenue and the Department of Finance to deal with the issues that will emerge in the public briefing session.
There has been a spotlight on Ireland for some time now in terms of corporation tax. Some of it is good and some of it not so good in terms of the perception of how corporation tax is applied in Ireland. We have the European Commission's judgment on Apple. Generally there has been what I would regard as a very negative interpretation of how the Irish tax code applies to multinationals. I have my own concerns as a citizen and a public representative. We were trying to establish as a Committee for Public Accounts how multinationals see our tax code, how they interact with it and Revenue so we can learn from it and do a report on the back of it. It is disappointing that all but one have not taken up the opportunity to come before the committee. I do not know whether that says more about them or us; I would say it says more about them. We should commend the one company that was in a position to come to us. Notwithstanding the companies sending us information that may or may not be useful to us, what we were looking for was these companies to come. We cannot compel them. Their attendance was requested on a voluntary basis to help us understand how they interact with the tax code as an organisation. These companies make a lot of money here. They are very profitable companies. Some of their interactions with the tax code can cost the taxpayer money. In my view, we had a duty to follow up on it and I commend the Chairman for taking it on as an initiative. We cannot compel them to come. It says something about the multinationals that operate here that they were not prepared to come before the Committee of Public Accounts to help us understand how they, as companies, interact with the tax code. It is not good from their perspective and I want to put that on the record. I commend GlaxoSmithKline as the one company that was prepared to come in and talk to us. It should also be noted that many of the companies that have refused to come before the Committee of Public Accounts appeared before similar committees in Wales, England, the US and other parts of Europe. They have form in attending similar committees in different countries but were not in a position to come to this committee in this State. People can make up their own minds on that when they consider it is the one country in which they would not attend at the committee despite the controversy around how multinationals operate here. It speaks volumes for them and it is disappointing that they have decided not to take the opportunity to come before us.
I was going to make a very similar point. It has not just been picked out of thin air. The request came on foot of a chapter in the Comptroller and Auditor General's report and its purpose was to better understand the interaction. It means we have to assume things because we do not have available information that we can draw from through engagement with the companies. It means our assumptions may or may not be right. It is actually quite useful for us to know what their engagement is like with Revenue. There could have been other things we could have found out that would give a better public understanding, as well as a better understanding for the committee of how this works. The fact the sustainability of corporate taxes has been highlighted is important for us because understanding what exactly is going on might inform future policy.
That may or may not be to the advantage of some multinationals in the future so it is disappointing.
Did some give a reasonable explanation as they saw fit? I missed out on the Kerry Group. The Chairman might come back. I am just making my point and I will not take up too much time. Could the Chairman tell me what the Kerry Group said? Again, it has been put in perspective. This arose from the Comptroller and Auditor General's report regarding corporation tax and what appeared to be a huge variation in the level of tax collected. Arising from that variation, we were looking to engage with multinationals. A thumbs up to a committee is not a good way to deal with a public accounts committee. It is literally a thumbs up. If companies are proudly paying their taxes, as we all must, they should have no fear of coming before us. Some of them might have written very positive letters and told us that but it would be nice to hear that and engage with them. GlaxoSmithKline is one exception and has been rightly praised. I visited Cardiff with a member of the committee and we know well that they appeared before the committees in England. I cannot remember whether it was England or Wales. Perhaps they did not like the experience there.
What I was told there was that what had come out with regard to Ireland was seriously questionable. I do not want to repeat that as gospel. That was what was said to us, so serious questions must be asked. I would have thought that at the very least, those companies associated with Ireland, although they are much bigger, like Cement Roadstone, would proudly come before us. Mr. Ryanair has an opinion on me as a cyclist and on lots of things and I would have thought he would have jumped, or maybe flown, at the opportunity to speak to us here about tax matters. The way the Chairman phrased it was very general. We were not going into specifics so I must say that I am really disappointed. I suppose it is pointless to ask them to reflect - multinationals do not seem to reflect - and come back to us but for the record, this is a golden opportunity to come before us.
For the record, the Kerry Group said that "in relation to the subject matter of your invitation, we do not believe we have anything specific to add to your enquiries in relation to the Irish Revenue Commissioners administration of corporate tax." The letter goes on to say that the Kerry Group had a diary problem. The Kerry Group is saying it believes it has nothing to add.
Somebody suggested that American Chamber Of Commerce Ireland. I do not know because we do not want to just get a PR job here. Somebody mentioned that name to me. Can we note and publish the letters? We are writing to GlaxoSmithKline as indicated. There will be a private briefing session next week for the benefit of members but we will then have a public session. I understand that we will have a briefing document from Brian Keegan from Chartered Accountants Ireland either today or the next day. As soon as that comes in, it will be circulated so people will have had an opportunity to go through his topics. The secretariat and I met with him to give him a briefing regarding what we were looking for and he will send information based on that. People will be able to put any other questions to him in the private session. We can then go through it in public. He will be impartial. As a result of that public meeting on 22 February, we will want to meet again with the Department of Finance and Revenue. That is agreed.
No. 1059 is correspondence from Mr Ciarán Breen, director of the National Treasury Management Agency, NTMA, dated 31 January 2018, providing a response to queries on management of claims by the State Claims Agency and the principle of open disclosure. This is something to which we should return when the NTMA appears before us with its financial statements, which it normally has in the first half of the year. This is a very important letter because according to the NTMA, the estimated liability at the end of 2017 was €2.662 billion. It is overwhelming.
I want to highlight a few items in Mr. Breen's letter because it is an issue about which everyone talks. First of all, he is very critical of the legal profession representing clients. This letter says that sometimes things take time but that this can happen where the settlement demands made by the plaintiff's lawyers are significantly overstated. Mr. Breen goes on to say that the State Claims Agency has direct experience where solicitors acting on behalf of plaintiffs have originally demanded a multiple of two or three times the figure they eventually settled for.
He instances one case where a claim was put in for €26 million in compensation and settled for €12 million. He goes on to say that there are occasions where faced with the individual plaintiff's law firm whose settlement demands were excessive, the only way the State Claims Agency can discharge its duty to the taxpayer is to take the case to court. He is quite scathing about certain members of the legal profession. He does not name them.
He goes on to talk about the Legal Services Regulation Act 2016, which provides for the making of regulations to introduce pre-action protocols. They have not been implemented. The letter states that the State Claims Agency has on its own initiative pioneered the introduction of interim payments in the form of periodic payment orders in 74 cases since 2010 but that out of the 74 cases, 15 plaintiffs did not proceed with them after a short period of time and asked for their lump sum because of the lack of a legislative basis backing up periodic payment orders system.
Mr. Breen highlighted the fact that most of the claims involving almost €2 billion are in respect of clinical negligence claims while the others are general claims and that a total of 9,956 claims were active at the end of 2017 totalling €2.662 billion. There are 2,976 clinical cases with an average estimate of €666,000 to deal with each of them based on its figures.
Mr. Breen then goes on to the issue of open disclosure. I just stopped reading at this stage. The letter states that there were reports in 2008, 2009 and 2013; a review in 2014; and training for staff in 2015. On and on it goes. We have not seen any result from open disclosure yet. I am highlighting those points because it would take too long to read the letter and just noting and publishing it would not do the public a service because it needs to know the extent of involvement.
I raised this last week or the week before because I do not think I have ever seen a situation where people have come out of a court having settled and talked about the payment securing the future of a child. There is a crossover between inadequate public services and the cases that are taken. It is almost a self-fulfilling prophecy when one has that kind of contingent liability. When one looks at the case where the plaintiff settled for €12 million having originally sought €26 million and one looks at the contingent liability, one can see that built into that will be the kind of costs about which we are talking, which are legal costs, that would be more properly spent on services. If there was open disclosure, probably a very sizeable amount of that would be very significantly reduced and we might avoid the trauma of people having to spend years in the courts. We need to do a piece of work on this. It is too big an issue to just leave to a very good and full response from the NTMA. It is as much about process as it is about value for money. Given that it is the dominant one, I suspect we will probably need to get in the Department of Health with regard to moving to the open disclosure approach.
It is not enough just to look at the financial side of it. It is a change in behaviour that must be driven which will reduce the cost and produce a better outcome.
I thank the Deputy for bringing it to our attention. I read it briefly. It is something to which we should return. Costs in the legal profession are one thing, but the second matter is the open disclosure. We have raised it repeatedly and Mr. O'Brien raised it as an important issue that would help reduce costs. Enough has been said, but we should return to it. We need guidance from you, Chairman, as to when.
We have not seen any results from the open disclosure policy yet. The figures are going up. When we have representatives of the NTMA here, which will be scheduled close to the summer recess, we will invite the HSE. We might have just one session on that because we will have other NTMA business. However, the State Claims Agency and the HSE must be in the one room on that occasion.
The next correspondence is No. 1063 from Mr. Martin Shanahan, CEO of the Industrial Development Authority Ireland providing a response to a request from the committee for information relating to the verification of job creation and employment levels for its client companies. That had arrived shortly before we issued our interim report which made a recommendation on that. He refers to that in the final paragraph. In due course we will get a detailed response from the Department of Public Expenditure and Reform in respect of our report. Can we note this? We will get a response to our periodic report, which contained that recommendation. He refers to the costs and benefits and say the figures are reasonably accurate. His point of view is how more accurate they will get if one installs a very complicated process. We will examine that when we get the response from the Department of Public Expenditure and Reform.
The next correspondence is No. 1048 from Ms Laura Burke, director general of the Environmental Protection Agency, EPA, providing a response to the committee's request for an explanatory note on an item received by the committee from the Irish Environmental Forum. The correspondence from the EPA refers to a report by the European Environmental Agency in 2011 and other matters including the review of the EPA initiated in 2010.
That is correspondence I asked to be held over on the last occasion. I have read it since. There is an answer from the EPA. The person who wrote the letter in the first place is not happy, but we should leave it for the moment and I will return to it in due course. We will deal with the correspondence which I have read.
However, we will forward this to the organisation that contacted us.
The next correspondence is No. 1060 from Mr. John McCarthy, Secretary General of the Department of Housing, Planning and Local Government, dated 31 January 2018, in reply to a matter raised by an individual alleging waste of public moneys by Dublin City Council regarding the digging of bore holes on private property. The individual is in dispute with the local authority but has declined to participate in mediation. I propose we forward a copy of the correspondence to him and communicate that our consideration of the matter is now closed. Is that agreed? Agreed.
No. 1062 is from Ms Orla O'Connor, director of the National Women's Council of Ireland, dated 1 February 2018 relating to a committee query on whether the National Women’s Council had used public funding to fund a pro-choice campaign. Ms O'Connor states that no public funding was used for this purpose. I propose we send a copy of this to the individual who raised the matter. Is that agreed? Agreed.
Yes, and we will forward the reply we received from the National Women's Council to the person who contacted us on the matter in the first instance.
No. 1064 is from Seán Ó Foghlú, Secretary General of the Department of Education and Skills, regarding issues raised by the committee relating to the Kildare and Wicklow Education and Training Board and possible safety issues at St. Conleth’s College. I thank Mr. Ó Foghlú for a very comprehensive note. It appears that the matter is getting serious attention from the Department. We will note that and forward it to the person who wrote to us in the first place.
We have also received correspondence, No. 1057C, from an individual and I have asked the clerk not to circulate it. It is a copy of correspondence that was sent to the Minister for Communications, Climate Action and Environment, Deputy Naughten, claiming mistreatment by Electric Ireland. It is not directed to us. The item contains a considerable amount of personal and private information and is not a matter within our remit. It is not personal or private for the Minister but for the individual concerned. Can I get the committee’s agreement that we do not circulate the item and take no further action? If any member wishes to examine the item, they should contact the clerk. However, it is not a matter for the committee so we will not circulate or publish it. Is that agreed? Agreed.
The next item is statements and accounts received since the last meeting. It is a long list of 36 in all. They are the Royal Irish Academy of Music - clear audit opinion; Institute of Technology Blanchardstown - clear audit opinion except for the normal comment relating to future pension benefits; and clear audit opinions from Limerick Greyhound Racing Track Limited; Shelbourne Greyhound Stadium; Youghal Greyhound Racing Company; Waterford Greyhound Race Company; Abargrove Limited, which is Bord na gCon's food and beverages operation; Kingdom Greyhound Racing Company for the two years 2015 and 2016; and Clonmel Greyhound Race Company. The accounts for Dublin Greyhound and Sports Association are for the two years, 2015 and 2016. In the 2016 account, attention is drawn to the disclosure in the financial statements that the company has ceased trading and the financial statements are prepared on a non-going concern basis. The directors are engaged in a process of selling Harold’s Cross stadium to the Department of Education and Skills. The sales proceeds are expected to exceed the net liabilities of the company. We were told earlier that the Valuation Office will be involved in setting the fair value of the transfer, not independent auctioneers. The Valuation Office has a role in valuing property transfers from one Government organisation to another.
There was a clear audit opinion in the following sets of accounts: Cork Greyhound Race Company; Galway Greyhound Stadium; Commission for Railway Regulation; National Economic and Social Development Office; Tote Ireland, which is the Horse Racing Ireland totaliser operation; Cork Racecourse; Fairyhouse Club; HRI Racecourses, which is the holding company and does not trade; Irish Thoroughbred Marketing, which promotes Irish horse breeding; Leopardstown Club; Navan Races; Tipperary Race Company; Tote Arena; Irish Water Safety; Charities Regulatory Authority; and Charity Funds, which are the funds of charities held in trust by the Charities Regulator. The fund is valued at €3.7 million. They are all clear audited opinions and there is a great deal from the horse and greyhound industry.
Mr. Seamus McCarthy:
They are essentially funds that charities have submitted to the Charities Regulatory Authority to invest and protect for them for a period. They are available to the charities. It is a system which is long established. It used to be the charitable donations and bequests fund. This one is in a wind down situation. There are no new funds going into it so these are the residual amounts that are available to specific charities. They are their funds.
The number of greyhound stadiums, Tote Ireland and the horse racing bodies is noticeable. It jumps from the page. There are many small, or relatively small, amounts of money as well.
What kind of capacity does that take up in the Office of the Comptroller and Auditor General?
Mr. Seamus McCarthy:
What one has here are the accounts of the subsidiary companies of Horse Racing Ireland and Bord na gCon. We audit them on a group basis. While there are separate certificates, the audit is approached in a comprehensive way. Each body is audited and they are quite substantial audits. Off the top of my head, I cannot say how many staff days we put into it, but certainly we are probably looking at a half a whole-time equivalent person in a year each for Horse Racing Ireland and Bord na gCon.
I wanted to raise a couple of issues relating to the third level sector. We have put quite a spotlight on this sector and published a report. Subsequently, we had a number of independent - I use that word advisedly - examinations into a number of issues. Outstanding is the Thorn review in Limerick. We have subsequently received new information that was on the front pages of some newspapers at the weekend that the university, potentially, misled the Committee of Public Accounts and the Office of the Comptroller and Auditor General. I want to hear from the comptroller if that is a fact. I do not always believe what I see in the newspapers but I want it clarified at least.
We have two reports which are still outstanding from the HEA on spin-out companies and intellectual property. We were told that the global one looking at policy, governance and whether changes needed to be made was to be published in January but we are now into February and it has not happened. The report on Waterford IT has been with legal advisers since last December and has still not been published. We are waiting for these reports so that the committee can do its work.
There seems to be a lot there but, looking at the work programme, none of it is scheduled up to April. Funding in the third level sector was described as the "wild west" by a committee member before and we were trying to establish whether that was the case, whether good governance was in place and whether improvements could be made. We have done a report, but that was only the start of our work. There are a lot of reports and information we need from the HEA and that is not even to get onto the education and training board for Kildare-Wicklow, which falls under remit of the Department of Education and Skills. We need to give that some attention.
My second point on the work programme is that I have consistently asked for RTÉ to come before the committee. We have just spent the last 15 minutes talking about multinationals that are not compelled to come before the committee. We asked them to do so and they have refused. We have not asked RTÉ to come before the committee even though €170 million of taxpayers' money is given to it. It is one third of the line Department's funding, but the Accounting Officer was not even able to answer basic questions on it when he was before us. I have specific concerns about allegations of bogus self-employment. I have met senior staff in RTÉ who are concerned and persons from a trade union representing journalists to discuss this issue, which appears to be a problem within the organisation.
There is another issue I want the committee to raise which has implications for Revenue. While they are not doing anything wrong, senior broadcasters in RTÉ are availing of the opportunity which is available to them to set up companies into which their salaries, or fees, are paid. That was previously the case with hospital consultants and we dealt with it. That process allows those broadcasters to reduce the amount of tax they pay. They do not pay PAYE or PRSI but rather corporation tax. We saw problems in relation to hospital consultants. Are there similar problems here? I cannot say and I am not making any allegations. It is certainly worth examining as is bogus self-employment.
Another issue people have relates to the €170 million, which was established to be the majority of the money. I ask that this be prioritised. I have raised it gently in the past and I am being a bit more assertive on this occasion. It is important and the issues need to be examined.
On the third level sector, I cannot understand why the reports have still not been published by the HEA. I am getting a little exasperated that we are getting letters from it, including letters sent to me personally from the head of the HEA, stating the reports would be published in January. In fact, they were originally supposed to be published last October but were delayed. While legal may be looking at some elements of some of them, two or three months is an extraordinary amount of time for them to be in the hands of legal within the HEA. Can we follow those up again? Once we know where they are at, we need to come back next week and put a focus on it.
I want to hear from the Office of the Comptroller and Auditor General specifically whether it was misled by the University of Limerick rather than to take that second or third hand from a newspaper.
I will be brief as Deputy Cullinane has more or less listed the issues I have. Our work programme needs to change a little bit. A lot of things are too pushed out. Getting on to the universities and colleges, I have serious concerns about the evidence given here by the HEA and the manner in which that was done. I also have concerns about the way reports and investigations are being done. Timelines are not being met. Why is that? It compounds the issues we reported on in our initial report on the third level sector. There are various reports and we need the Comptroller and Auditor General to verify whether they are accurate. There are other reports on private consultants which are also of concern. We still have outstanding questions regarding a number of universities and colleges. I have continuously raised issues on CIT to which I have not received full answers. UCC is signing a major contract to sponsor a concert hall in Cork and it is frightening to think it has not learned any lessons. The whole issue on third level colleges is to get the answers we were promised and finding out if further information was kept from the committee and, possibly, the Comptroller and Auditor General and dealing with all of that. We need to wrap that up in a nice bow in the committee, not let it drift further.
Through various forums and in the Dáil, I raised the following matter a long time ago and it has now been followed up by others. I refer to evidence given here by An Garda Síochána on IT contracts. I have read the transcript of the evidence a number of times and it raises serious concerns. We spoke about this earlier. The Comptroller and Auditor General referenced Accenture and the contracts there. It is obvious that this did not transpire or come out through this forum notwithstanding very detailed questions, most of which, I note, were from Deputy MacSharry. We have to get to the bottom of this soon because it is a very serious issue.
I support Deputy Cullinane on the issues with regard to RTÉ. It is very much in the public interest that we deal with those. I put the matters in the order I have referred to them; the third level sector, the Garda IT issue, which is very specific and may take half a day not a full one, and I would like to see RTÉ on our work programme at some stage.
I have listened to the discussion this morning. On top of that, we are talking about bringing in RTÉ and all these sectors. I have nothing against bringing in any of these things, but sometimes we need to focus on what our job is on the PAC. There is aggressive tax playing going on in agencies which is fully legal. I remember when the head of the Revenue Commissioners appeared before the finance committee and came here the next day. We asked him about company structures being set up and he said the Revenue is very clear that it never looks through the eyes of a company onto its employees. That has never happened. If we want to get to a stage where-----
It has never looked through the eyes of the company. In other words, if someone sets up a company structure with only one client, the idea behind which is to minimise a person's tax liability, the Revenue considers that to be perfectly legal as long as the law is complied with regarding expenses and salaries.
What they are doing is perfectly legal. At times we think we should change the law if it is believed what is going on is not acceptable. If, like me, someone has a strong social conscience, he or she might be concerned that this is State money going into RTÉ or these agencies, but the point I am making is that what they are doing is fully legal. What many of the multinational companies do is also legal. We have heard this morning about overpayments and that we have to get value for money, but the head of Revenue is telling us that a presenter in RTÉ whose only client is RTÉ can set up a company to be paid on his or her own behalf in order to plan his or her income and that it is perfectly legal to do so. We have to be clear - that is the reality under the tax code. Perhaps there are other ways in which we might progress and we should change many of these things. That is a point worth making. Our job is to highlight where the State is not receiving value for money and go through Votes forensically, at which we have been doing a great job. Sometimes, however, there are laws which have to be changed and there are great arguments for so doing.
We always expected that we would have to come back to the university sector and there is now far more reason to do so. There is a new independent report which I believe was carried out by Crowe Howarth, at which we need to look. We need to include the issue in the work programme. I had intended to address some of the issues raised by the whistleblowers about the Thorn report and with which they were not happy. It would be kind to the Higher Education Authority to state it was less than impressive when its representatives were before the committee. The very fact that we are still waiting for some significant responses is very disappointing. I hope to see that issue included in the work programme soon.
On Deputy Peter Burke's point, I do not disagree that some of the things being done are fully legal, but they are only fully legal for a certain portion of the population. It is very useful for us to understand what is going on in what could be described as bogus self-employment. If everybody were to do that, we would not be here because there would be no money to run services. We need to understand this. I see absolutely no reason we would not look at the issue in the same way as we try to look at the issue of corporation tax, that is, by looking at one particular organisation, in this case the national broadcaster, in order to gain an understanding. The issue is not unique to one sector. As has been said, we saw it in the case of doctors.
I do not think we would be doing our job if we did not examine any organisation on which €170 million of taxpayers' money is being spent. We ahad a very extensive discussion about recognising the independence of RTÉ. It is the national broadcaster and none of us wants to ask questions about the type of programmes it produces and why. That is entirely a matter for it. There is, however, merit in the committee looking at these issues - there are two separate issues - because there are potential implications for Revenue. The first is that of bogus self-employment. This is where casual work and short-term contracts are being offered to workers when permanent contracts were once in place. That is becoming more of the norm than the exception in RTÉ. The concern is being expressed by staff within the company. It is a separate issue from the other point about whether persons on high salaries are setting up companies. I have made the point that this is a perfectly legal structure, but the point has also been made that persons on a salary of €30,000 or €40,000 a year are not in a position to set up such companies. They are for those on big salaries. Whether they are hospital consultants or presenters in RTÉ on six-figure salaries, the reality is that it is happening and legal, but there is a cost to the Exchequer. We cannot assume that because something happened in one area it happened in another, but we did see in the case of hospital consultants all sorts of expenses being claimed which potentially should not have been claimed and further reduced their tax liabilities. We have a responsibility on behalf of taxpayers to probe this area to ensure there is value for money if we are the ones who are signing off on it.
There are many other related issues. Under no circumstances do I want to interfere with the independence of the national broadcaster, but there are genuine issues to be addressed. Just in case the Comptroller and Auditor General forgets, I ask him to also make note of the specific issue at the University of Limerick.
We will wrap up as we have had a discussion and next Thursday we will come back with a revised work programme. We will try to tighten it and ncorporate some of the other items mentioned. It might result in having to have a full-day session - morning and afternoon - on some Thursdays to get through the issues members have raised, in addition to the basic work we have to do each year on the Comptroller and Auditor General's report. I would prefer to have a long session on a Thursday, rather than bring members in on a Tuesday and a Thursday, but that is a choice for the committee to make. As I said, we will come back next week with proposals for a revised work programme.
Mr. Seamus McCarthy:
On the issue raised by Deputy David Cullinane in respect of the University of Limerick, he will recall that Dr. Thorn carried out an investigation into certain matters which was broad-ranging. There was also an internal audit carried out which had been commissioned by the university. It made findings which are of very considerable concern to me. My recollection from correspondence discussed at previous meetings is that the committee already has a copy of the internal audit report, in which the matter is included. My office is examining the issues involved as we did have concerns. I expect to report specifically on that matter, but I want to be very careful about it because there may be questions of individual rather than organisational responsibility. I am taking it very seriously. As I understand it, however, the committee already has a copy of the document.
We will come back next week with a revised work programme. There is one small item to which I want to refer under the heading of "any other business". It will only take a moment to deal with it. It concerns the Courts Service and use of the poor box. I have received some telephone calls on the issue. Does it come within the remit of the committee?