Oireachtas Joint and Select Committees
Thursday, 21 February 2019
Public Accounts Committee
Kildare and Wicklow Education and Training Board: Financial Statements 2015
In this session we are dealing with the 2015 financial statements of Kildare and Wicklow Education and Training Board. In the afternoon we will look at housing issues in connection with the appropriation account of the Department of Housing, Planning and Local Government when we will be joined by representatives of the Irish Council for Social Housing and the approved housing body interim regulatory committee. First, we will examine the 2015 financial statements of Kildare and Wicklow Education and Training Board, as well as the supplementary report of the Comptroller and Auditor General and the Thorn report on that ETB. It is very unusual for us to look at accounts that are more than three years old. We have been in correspondence with the Department of Education and Skills which has stated sets of accounts and the report have been sent to An Garda Síochána for its attention. I understand an investigation is ongoing. It is appropriate, therefore, that we proceed in a manner which will not undermine the investigation in any way. I ask for the co-operation of members and witnesses in that regard. The reports in their entirety have been referred to An Garda Síochána for investigation. What is being investigated by it is not for discussion here. I, therefore, ask members not to ask anything about the Garda investigation. Even if pressed, the witnesses are not to answer questions on matters subject to Garda investigation and should not feel pressurised to do so. I will intervene to make sure nothing happens here to compromise the investigation or proceedings that may follow from it. I will not allow the Committee of Public Accounts to compromise such proceedings. We will have to be quite strict in that regard, but I believe everybody understands the seriousness of the matter.
We are joined from the Department of Education and Skills by Mr. Seán Ó Foghlú, Secretary General; Mr. Hubert Loftus, Mr. Gary O Doherty, Ms Martina Mannion, and Mr. Phil O'Flaherty. From Kildare and Wicklow Education and Training Board we are joined by Mr. Noel Merrick, chairperson; Dr. Rory O'Toole, director of schools; Mr. Joe Kelly, director of organisation support and development; Ms Caitriona Murphy, director of further education and training; and Dr Deirdre Keyes, chief executive.
I remind members, witnesses and those in the Visitors Gallery to turn off all mobile phones fully. Merely leaving them in silent mode will not prevent them from interfering with the recording and broadcasting systems.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. That sentence could not be more significant. They have absolute privilege which is not to be abused. That is very relevant in the light of the Garda investigation. Nobody should attempt to abuse the privilege attached to proceedings in the Oireachtas. If witnesses are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. Again, I stress the importance of that sentence. I am not talking about names being mentioned, but I cannot allow lines of questioning that seek to identify a person or an organisation. We cannot go there. It is a standing rule, but we must be absolute and strict in applying it today.
Members are reminded of the provisions of Standing Order 186 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policy or policies. While we expect witnesses to answer questions put by the committee clearly and with candour, they can and should expect to be treated fairly and with respect and consideration at all times, in accordance with the witness protocol.
We will now hear opening statements from the Comptroller and Auditor General, Mr. Ó Foghlú, and Dr. Keyes.
Mr. Seamus McCarthy:
As members will recall, I have outlined to the committee on a number of occasions the broad events that gave rise to the delay in carrying out and completing the audit of the financial statements for Kildare and Wicklow Education and Training Board for 2015. In the end, we were only able to complete the work in December last year. I have prepared a supplementary report on the relevant events, in addition to the normal format audit opinion, as provided for in section 7(4) of the Comptroller and Auditor General (Amendment) Act 1993.
The report deals with serious lapses in controls over procurement of a number of capital projects and certain other expenses in KWETB during 2015. In that year, the ETB had receipts of over €111 million and expenditure of €109 million.
Some further context may be helpful to the committee. Members will recall that the ETBs were established in July 2013, usually involving the amalgamation of two, and in some cases three, of the previous vocational education committees, VECs. In addition, they took over the operation of training centres from the then FÁS. The first period of account for the boards covered 18 months to the end of 2014, but there were delays in agreeing the format of accounts, a matter that was not settled until around October 2015. In addition, new boards were appointed following the local elections held in May 2014 and there were further delays in some boards in appointing audit, risk and finance committees. A new code of practice for governance of the ETBs was only issued in March 2015. The combined result was a sector-wide delay in completion of the first cycle of audited financial statements, with knock-on delays for the 2015 statements.
We commenced the audit of the 2015 financial statements in January 2017. In the course of the audit testing, audit team members identified concerns about certain procurements, project cost overruns and propriety matters. A formal query on these matters was issued to the then chief executive of KWETB in June 2017. The information and supporting documentation provided by KWETB in response to the audit query were assessed as being inadequate. This was unsatisfactory, and so those matters of concern were brought directly to the attention first of the then chair and vice chair of the board and the chair of the audit committee of KWETB and, shortly thereafter, to the attention of the Department of Education and Skills. The audit of the 2015 financial statements was suspended pending the outcome of any action the board or the Department might take.
In October 2017, the Minister appointed a statutory inspector to investigate the matters raised from the audit and some other matters that the Department had been separately pursuing with KWETB. Arising from that inspection, a number of issues have been referred to An Garda Síochána and the Minister has issued a statutory direction to the board about the implementation of a corporate governance action plan developed on foot of the statutory inspector's report.
We recommenced the audit process in April 2018 and reissued the audit query. Fresh responses to the questions we raised were provided by the new chief executive, and these are reflected in the supplementary report and the statement on internal control.
Given the ongoing Garda investigation, I do not propose to recite the details of the specific instances of concern picked up by the audit. More generally, the report concludes that the board was unable to challenge the KWETB executive in an effective way during 2015. Underlying causes for this include incomplete information being provided to the board, delay in the establishment and functioning of statutory sub-committees and a lack of internal audit resources. An effective process for review of internal controls was not in place. Steps are being taken by KWETB to address these weaknesses.
It may also be useful to consider whether there are lessons to be learned generally for the ETB sector as a whole. For example, while a key function of the boards of ETBs is oversight of their executives, they are heavily dependent on the same executives in the exercise of that function. It may be worth considering whether, and to what extent, boards should have operational independence of the executives. The committee will recall in recent months noting that, in issuing their 2017 financial statements, boards across the sector were critical of the level of resources available for internal audit and of the adequacy of the financial management systems they inherited from their predecessor VECs and with which they continue to operate.
Mr. Seán Ó Foghlú:
I thank the committee for the invitation to attend. I will shorten my opening statement as I go. I am joined by colleagues who have already been introduced. My opening statement will focus on two areas, those being, the background to the circumstances of this audit report and the Thorn investigation, and the supports and oversight arrangements that the Department has put in place to support the sector in implementing good governance practices.
I advised the committee by way of correspondence in September 2018 that the Department was in receipt of the final report from Dr. Thorn, which was published last September. I also advised the committee of directions issued to the ETB.
When we received from the Comptroller and Auditor General the 2015 financial statements and this audit report on 15 January, we considered them and arranged for the laying of them before the Houses of the Oireachtas on 13 February. The Department intends to co-operate fully with the committee on issues contained with the report while also recognising, as the Chair has indicated, the ongoing investigation by An Garda Síochána. We trust that the committee understands that, while our commitment and willingness to be open and transparent on all matters relating to the issues, including the publication of the Dr. Thorn report in September, are clear, we are also required to give careful consideration to public engagement on the issues.
I wish to be clear - the issues that arise in KWETB are of serious concern to the Department. The responses that the Department received at the time of our initial engagement with the ETB in 2017 pointed to ineffective governance and accountability, particularly in respect of the use of public resources. For that reason, the Minister appointed an independent investigator under the Education and Training Boards Act 2013, signalling that this was something that we considered warranted a serious response from the Department and that, when conducted under the legislation that created the ETBs, also permitted the Minister to take necessary action and direct the ETB to take appropriate steps to rectify any issue of concern that may have been found.
The investigator was given terms of reference by the Department to investigate all matters relating to issues of concern. These broad terms of reference allowed the investigator to review any other matter that came to his attention in the course of the investigation.
Dr. Thorn made a number of findings. The committee will be aware that his report is included in an appendix to the Comptroller and Auditor General's report. In summary, Dr. Thorn found that, regarding the ETB's governance procedures, adequate arrangements to manage procurement and conflicts of interest were in place according to documented procedures. On an operative basis, however, the implementation of procurement processes and management of projects in several instances was found to be flawed or suboptimal. He further found that the board of the ETB should have been more proactive in ensuring oversight of its management of projects.
The Department issued his report to the board of the ETB. The board fully accepted the findings and set out an action plan. The Minister, acting under his powers by virtue of section 41 of the ETB Act, issued directions with which the board was required to comply. These directions included a request for the board to review the initial action plan presented to the Department in light of Dr. Thorn's findings and to implement a final action plan, to be agreed with the Department. The board was also required to review the measures in place in the ETB to prevent conflicts of interest and inappropriate interventions in processes relating to procurement, contract and project management, and to provide mandatory governance training to new and existing board members. The board was also required to conduct a self-evaluation with appropriately qualified external input and to provide regular updates to the Department.
Having actively engaged with KWETB since the Thorn report, the Department is aware that the board, the new chief executive and the executive staff are adopting a pro-active approach to improving governance arrangements and addressing matters of concern. The ETB has provided the Department and, I understand, the committee with an update on its corporate governance programme, which incorporates the updated action plan. This identifies a robust programme covering not just the directions issued by the Minister, but other governance matters considered by the board to support good governance. The ETB has indicated to the Department its intention to revise this plan further to take account of the recommendations of the Comptroller and Auditor General's report and the revised code of governance for the ETBs, which was updated and issued in January.
Regarding supports and oversight arrangements for the sector as a whole, the ETB sector has undergone significant reforms in recent years. The decisions to move from 33 VECs to 16 ETBs, to incorporate new responsibilities for training provision and to establish SOLAS have seen unprecedented change, with consequential structures and support mechanisms needed to support them. These changes include: a legislative reform programme; a governance reform programme; the placing of internal audit on a statutory basis; and the establishment of Education and Training Boards Ireland, ETBI, as the national representative body for the sector, which plays a critical role in the Department's reform programme for ETBs and the development and implementation of sectoral policies and arrangements for ETBs.
Another important change is the way in which the ETBs prepare financial statements. They are now on a calendar-year basis and use a common and agreed template to ensure consistency of reporting and layout in that presentation. The Department acknowledges that there had been delays in ETBs submitting their financial statements ahead of statutory deadlines, and significant progress has been made in recent years. In the case of ETBs the statutory deadline for accounts is 1 April. All ETBs submitted their draft statements for 2017 by that date in 2018. In respect of 2018, the Department has been engaging closely with the sector to continue to impress upon it the need for continued compliance regarding the submission and the monitoring of progress. The progress made since the establishment of the ETBs can also be assessed by the average time it took them to submit their accounts to the Comptroller and Auditor General, which has reduced significantly.
In more recent times the Department has focused on practical arrangements which support good governance in the sector, including the planned roll-out of shared payroll and financial services, the creation of a dedicated public service reform function in ETBI, putting in place a national procurement policy for the sector and enhancing supports on building and capital projects.
Regarding payroll and financial services, work is under way to move the ETB payroll and finance systems to a shared services model. When the VECs were first amalgamated, work was undertaken to merge and stabilise existing payroll and finance systems in the newly established ETBs and to implement some interim projects to support them in the introduction of shared services. In tandem, business cases were prepared and signed off to support the investment required in implementing new payroll and finance shared services systems in the sector. The procurement phase for the payroll project was completed in 2018. Procurement for the ETB finance project is under way. The roll-out of the payroll project will commence in the second quarter of 2019 and is to be completed over the next two years. It is envisaged that the roll-out of the finance project will commence in 2020 and conclude the following year.
A reform function was established in ETBI in September 2010 with procurement as one of its key initiatives. Furthermore, a legal services unit based in ETBI was established in 2016. The unit has developed a legal services framework for the ETB sector in conjunction with the Office of Government Procurement, OGP. The unit has resolved approximately 130 queries from ETBs and has developed a log of legal queries which enables the provision of management information.
The ETB sector continues to have high levels of participation in national contracts and frameworks. In addition to individual ETBs utilising OGP contracts and frameworks, the sector has developed ETB-specific frameworks.
As for governance and compliance, a national procurement policy for ETBs was put in place in 2018. In addition, this year will see the roll-out of a new corporate procurement plan template for ETBs and the development of a sectoral multi-annual procurement plan, which will help identify goods and services that require public procurement due to aggregation thresholds. Upskilling of staff across the ETB sector is also being supported.
Another key area is better governance in capital and building projects. Better lead-in periods are important in the context of ensuring projects are delivered in a manner that is fully compliant with Department requirements. The summer works scheme is one example of this, and better lead-in times are now being provided.
The Department has established supports for the sector. The Department's technical guidance documents and design team procedures provide ETBs with clear guidance on how school building projects should be designed and delivered, including in respect of procurement; the Department's planning and building unit provides designated contact points to provide support, guidance and advice to ETBs; and the Department is facilitating ETBs with access to project managers.
Regarding control procedures, prior to a major project being devolved to an ETB, a service level agreement is put in place between the Department and the ETB. This agreement sets out in detail the governance arrangements for the project. As part of these arrangements, at least two separate meetings must take place between the Department, the ETB and their design teams. Through these meetings, and at other key decision points, both administrative and technical staff within the Department review the progress of the project. Under the service level agreement, SLA, the ETB is required to submit monthly project progress reports to the Department which must bring to the Department's attention any issues that have arisen with the project. The Department also sets limits for the ETB and its design team in respect of change orders. The final account for the project must also be sent to the Department to ensure that the final cost is in line with the tender outcome.
As for smaller-scale projects, new enhanced project control procedures were introduced in May 2016. These procedures require two additional interactions with the Department during project delivery. The first is a requirement to seek approval to lodge planning permission, and the second is a requirement to seek approval to place a contract for construction. These additional interactions with the ETBs provide additional oversight and assurance that individual projects are delivered in accordance with the project brief. Further strengthening of these procedures took place from January 2018 with the submission of tender reports for smaller-scale projects together with itemised pricing documents.
The Department carries out an annual programme of compliance checks among schools and ETBs of around 120 devolved projects. This involves visits to schools and ETBs and the checking of supporting documentation. While these checks can identify issues with individual projects, the overall feedback on compliance is positive. The outcome from this is made available to the Comptroller and Auditor General.
Change is ongoing and will take a number of years to embed; the new ETBs continue to develop as single entities, adapting organisational structures and practices accordingly and developing their response to their new responsibility for training. There is a demanding reform programme that is bringing measurable benefits to the sector and at the end of which we expect to have robust structures that will enable ETBs and SOLAS to benefit from the economies of scale generated by the reform programme and to deliver top-class education and training services to the public.
We also have a robust governance regime, which helps to support ETBs to embed good governance practice in the sector. However, we are conscious that, notwithstanding having codes, policies and tools to support good governance, both the Thorn and Comptroller and Auditor General reports provide broader lessons for the sector and the Department, particularly in areas of procurement and governance. We remain open and willing to learn from these issues and to adapt and enhance our existing reform and governance measures.
I am happy to answer any questions from the committee on matters arising.
I thank Mr. Ó Foghlú. I note that his opening statement deals with Kildare and Wicklow ETB and goes on in the second half to developments in the sector which have occupied a lot of time in the Committee of Public Accounts in previous years. Some of the issues to which we referred have been dealt with in the opening statement, so it is good to get the feedback on the broader issue.
At this stage I call Dr. Keyes to make her opening statement. I think it is her first time before the Committee of Public Accounts.
Dr. Deirdre Keyes:
I thank the Chairman and the members of the committee. Kildare and Wicklow Education and Training Board was established in 2013 under the provisions of the Education and Training Boards Act. Its primary function under this Act is the better co-ordination and delivery of education and training in counties Kildare and Wicklow. Equally, of no less importance is the regulation of that co-ordination and delivery in line with the statutory requirements of Government, in particular the Department of Education and Skills, SOLAS and the Department of Public Expenditure and Reform. The ETB Act of 2013, the code of practice for the governance of ETBs, formerly of 2015 but replaced by the current circular of January 2019, Department circulars and ministerial directions that apply from time to time provide the regulatory framework under which we are obliged to operate.
Regarding the co-ordination and delivery of our education and training services, KWETB in 2015 was in receipt of circa €111 million. In 2016 and 2017 the allocation to KWETB grew to €115 million and €130 million, respectively. In 2018 the total budget was €135 million. Almost 70% is allocated to salaries, with KWETB employing 2,572 staff, the majority of whom are teachers, tutors and support persons to our services and schools. Our learners are the centre of our work. We currently have 12,453 primary and post-primary students and circa 10,000 learners in further education and training. KWETB has been a leading and innovative provider of education and training and is integral to the fabric of the communities in Kildare and Wicklow, both rural and urban, through the presence of our 25 schools - primary and post-primary - and one institute of further education. Our further education and training is delivered in 25 centres and through various contracted training programmes, including apprenticeships. We are responsible for the provision of youth services and social inclusion projects in both counties, in addition to supporting many other initiatives and services - for example, music generation, school completion and outdoor education.
We also provide a range of services to our schools and centres in the areas of human resources, corporate services and finance. We manage 70 buildings and premises both for ourselves and other patrons. Our capital programme in 2015 was is in excess of €14.2 million and in 2018 this has increased to €15.7 million.
What we do is important and it is incumbent on us to take the responsibilities we have been given very seriously to ensure quality of delivery, support and progression for all our learners and importantly, value for money through propriety in our financial matters. It is therefore of regret that the Comptroller and Auditor General and Thorn reports which are before the committee today point to serious lapses and gaps in terms of our required regulatory, financial and propriety responsibilities. While the reports note there were arrangements and documented procedures to manage procurement and conflicts of interest in place, their findings highlight serious concerns and shortcomings on an operative basis in the implementation of procurement and other processes during the period of the investigation. We accept these findings.
I am here today as the Accounting Officer of KWETB to give account to the committee of its general administration, in particular to respond to the Comptroller and Auditor General 2015 audited accounts and supplementary report, and indeed any other matters the committee may wish to raise.
While it is my intention to fully engage with the committee, there are a number of matters that have been referred to the National Economic Crime Bureau. A criminal investigation of these matters is currently under way and as such, there might be topics that I and the other representatives from KWETB are not in a position to discuss. I can confirm that we are co-operating in full with An Garda Síochána to ensure that this investigation can reach its conclusion in as efficient and timely a manner as possible. Considerable resources and time have had to be diverted to this investigation. Despite this, our core work has continued and I am indebted to our teachers, tutors, leaders and support staff who are committed to the service of teaching and learning in our ETB.
While acknowledging and accepting the seriousness of the findings of both reports, I hope that I can provide assurances to the committee that KWETB has set out to build a robust culture of corporate governance, building on the policies and controls that had previously been in place but strengthening them in areas of oversight and internal control in, but not limited to, the key areas as identified in both reports. Our current corporate governance programme reflects the requirements of ETBs with regard to our internal practices and reporting to our board, our external oversight and reporting requirements to Government, committees of the Oireachtas, respective Departments, and the Minister, as well as other agencies and funders. Particular attention has been paid to procurement processes and oversight, document retention and control, risk management, management of conflicts of interest, and other matters of propriety. This programme now needs to be advanced in line with the additional requirements as set out in the new code of corporate governance for ETBs as issued in January 2019 by the Department of Education and Skills.
We are also working closely with the other statutory reporting and auditing authorities of the state as relevant to ETBs. The office of the Comptroller and Auditor General is currently conducting the 2016 audit. The ETB internal audit unit, IAU, has concluded its ICT and youthreach audit work. The ICT opinion report has been sent to the Department and we are currently working on the management response to the youthreach audit. The IAU have commenced a full internal audit of KWETB's procurement processes, procedures and internal controls. This audit is both timely and welcome. In line with any findings and recommendations of the IAU audit work and related reports we are committed to adapting our corporate governance programme, internal controls and risk registers.
The corrective and immediate actions that have taken place in the light of both the Thorn and Comptroller and Auditor General reports are of particular importance. While the final Thorn report, "Investigation into Certain Matters in Kildare and Wicklow Education and Training Board", was not issued for the attention of the board and executive of KWETB until 12 September, it was noted by Dr. Thorn that the response of KWETB had been both comprehensive and constructive in the manner in which the executive and board committed to dealing with its recommendations and findings. On the issuing of the report, the Minister, in accordance with section 41(3) of The Education and Training Board Act 2013, gave a number of directions to the board on the performance of its functions. The board accepted the directions in full. In addition to these directions, the Secretary General of the Department of Education and Skills also directed the chief executive, that is, myself, on a number of matters. Those matters related to a range of actions to which KWETB had committed as part of the recommendations made by Dr. Thorn, the expectations of the Department in terms of the delivery of these actions and the reporting and oversight arrangements that were to be put in place.
During the period from September to November 2018, the executive worked on its action plan for presentation and agreement of the board at its December meeting. A final corporate governance programme was presented and approved by the board on 13 December 2018. A full report was issued to the Department in January 2019. An updated report has been prepared for the Committee of Public Accounts by way of a briefing paper. A steering group comprising the chairperson, vice chairperson and members of the executive has been constituted to have oversight of this programme and to report to the board on its progress.
During what has been a very difficult period for KWETB, it is important to assure the committee that both the board and executive have worked hard to ensure that we continue to deliver on our legislative responsibilities. We achieve this by delivering a quality service for all our learners; this at all times remains at the core of what we do. All of our actions under our corporate governance programme are to ensure the best quality of experience for our learners, proper learning environments, physical spaces, adequate resources, both financial and human and ultimately value for money for the Exchequer. We are fully committed to this and are fully mindful of the governance responsibilities that go with that.
As chief executive of KWETB, I wish to formally confirm my commitment to the highest standards of propriety and good practice to the learners, staff, communities of Kildare and Wicklow, Minister for Education and Skills and the members of the Committee of Public Accounts.
I thank Dr. Keyes. I will call Deputy Peter Burke, who has 20 minutes, and then Deputy Aylward, who has 15 minutes. The subsequent speakers each have 10 minutes so that everyone gets in before the block of voting in the Dáil and I will call them in the following sequence: Deputies Connolly, Cullinane, Catherine Murphy, MacSharry and Jonathan O'Brien.
Once again, I remind everyone that a Garda investigation is ongoing. I do not want anyone trespassing on that. I will be obliged to stop them if they do. That also applies to the witnesses.
That is noted. I have some brief questions for the Comptroller and Auditor general to begin. First, he issued a supplementary report. Is that very unusual? Second, on the ETB structure, are they registered for PAYE? For what taxes are they registered? Do they have charitable status? The third question relates to properties that may have been on the register for ETBs. What work, if any, is undertaken by the Comptroller and Auditor General to ascertain value for money in relation to rental income to the ETBs and whether it stacks up with normal valuation standards for the annual rent roll in terms of what the property cost, and so on?
Mr. Seamus McCarthy:
The production of a supplementary report is very unusual. From memory, there have only been three or four in more than 20 years.
A point worth drawing to the attention of the committee is that there was a previous supplementary report in relation to Kildare Vocational Education Committee, again picking up on points in relation to difficulties with substantiating the procurement, the development of a school and the sale of property. I am sorry but I did not hear the beginning of the second question the Deputy asked.
Mr. Seamus McCarthy:
They would obviously have tax numbers. As to charitable status, I am not aware of the position but maybe the chief executive would be able to answer. I know that charitable status does arise in relation to third level bodies, where there would obviously be substantial philanthropic funding. It would not be that usual with-----
Mr. Seamus McCarthy:
The third matter was in relation to property, value for money and so on. We would not normally be doing as described as part of the financial audit. It is really a matter in the first instance for any State body to establish that it is acquiring, holding and using property in a way that delivers value for money.
Ms Catherine Doran:
It is the principal contractor for RCT purposes. When we engage contractors, we end up having to pay the VAT and the relevant contracts tax on behalf of those contractors. We get an invoice in from a contractor without the VAT. We pay the VAT over and then we pay the contractor tax at the relevant rate. When the contract is first signed, we register it on the Revenue Online Service site. When the payment is made, that is registered on the site as well. Then we pay over the tax at the end of each month, or bimonthly in some cases.
I understand. The witness stated that taxation heads are up to date. With regard to various references in some of these reports to subsistence payments being inaccurate and to potential BIK issues that may arise over no log regarding where vehicles were parked, etc., how can we be sure there is no additional PAYE liability on foot of those issues?
At the end of the day, however, someone has to check, presumably weekly or monthly, that it is filled in and up to date. Obviously, one cannot rely on the individual using the equipment or motor vehicles to do that. Someone has to oversee it and have responsibility to ensure it is carried out correctly.
How is subsistence paid? Normally sheets that are presented are signed or co-signed and safeguards are built in to ensure the correct rate is paid and that the details on each charge sheet stack up. Looking at the report, I believe there seems to be a suggestion that some of the subsistence payments made were not correct. Whose responsibility is it? What process does the ETB undergo when making subsistence payments to employees?
Mr. Joe Kelly:
The first responsibility is with the individuals who sign the form and put in a subsistence request. Second, it is signed off by a manager, who is also responsible for overseeing that the correct information is included. It then goes to the finance department, which is also responsible for ensuring the information-----
It will probably get to a stage when it is cited specifically in the report. Subsistence payments comprise one of many issues. If we are outlining the processes in place and that people are accountable at each link in the chain of command, how was it that the payments were made in 2015? I admit it was nearly four years ago.
Dr. Deirdre Keyes:
Obviously, the Comptroller and Auditor General's report has identified an issue around subsistence which we are currently pursuing. We have analysed those subsistence claims for 2016 and 2017. I assure the committee of that. We are pursuing those subsistence claims which were outside the subsistence bands as prescribed. We have prescribed travel and subsistence rates from the Department of Education and Skills in line with Department of Public Expenditure and Reform regulations for all public servants. Our travel and subsistence log is presented to the line manager. There are internal controls over that and internal checks are made by finance. They are only paid after that process has taken place.
Mr. Seamus McCarthy:
To clarify, we would normally do a test on a random basis of travel and subsistence claims. We did not find a general problem here. We also test travel and subsistence payments of senior managers in organisations specifically. In this case, our examination of the travel and subsistence claims of the chief executive found a specific problem.
Mr. Seamus McCarthy:
That is something that would obviously have to be examined. If the moneys cannot be recouped, there may be a liability on the part of the organisation. As I recall it, the difficulty here was that there was no counter-checking and no authorisation was done of the travel and subsistence of the chief executive. In many organisations, there is a process where the chief executive discusses his or her expenses with the chairman of the board, but that was not happening in this case.
To continue in that vein of discussing safeguards and ensuring adequate internal controls are in place, it is difficult to understand, against the backdrop of 2015, which I realise is going back four years and is not ideal, how a body with charitable status could authorise a trip, around which there is very little detail, to a five star hotel at a cost in excess of €10,000. How is something like that authorised? Surely, someone within the organisation would know about it. I am sure it was discussed widely within the organisation. What internal controls were in place? I would have thought something like that would have been stamped out decades ago.
This may just be the tip of the iceberg if matters had gone so far that expenses like that could be authorised without question. Is there anyone else who was around at that stage who could shed some light as to how the process worked?
Normally, there is a requisition or some document that is signed and co-signed if there is a trip away or where taxpayers' money is being spent under any heading. Usually, there is detailed paperwork that is checked and safeguards are in place to ensure money is not being misappropriated and the reason for a trip is clear and documented. I do not understand how this happened. Someone has to sign the cheque and someone has to press the button to pay the money. There must be checks along the way and I do not understand how something like this could happen in 2015.
Mr. Seamus McCarthy:
We had an invoice with just the name of the hotel and the amount to be paid. We did not have any details on it. The explanation we were given at the time was that the event was in a local five-star hotel and that it was a residential course of two days for a strategic planning meeting provided to the principals of the ETB schools, deputy principals and senior administrative staff to review the outcomes of the previous year.
I refer to the different buildings we lease or occupy. At page 23 of the financial statements at A, B and C, there is a list of the various buildings that are occupied. The rents on some of them seems very high. The further education centre in Arklow costs €250,000 in annual rent which seems like a huge sum. Can I have a bit of background to a sum of that magnitude? Are there independent valuations to certify that this is the market rate for such a building? From what entity is it being rented?
Dr. Deirdre Keyes:
I hope I have the full question on that. This is a very important question in relation to leases. Our finance committee is currently reviewing all our leases and the expenditure on them and hopes to present a report to our full board at its next meeting. It is a very significant area of expenditure and is primarily in the area of adult and further education and training where, unlike schools, we do not have permanent buildings and are in rented property situations. That is being reviewed by the board and it is a significant cost in rent terms.
Dr. Deirdre Keyes:
I could not commit to every one of them but it is something that is being reviewed. There was a very clear circular on licences and leases of premises. There is a very clear process on this in terms of what is required and with regard to the role of the board in the area of compliance and oversight. At this point, we are looking at a number of them and we hope to be able to provide a full report to our board with all of the accurate information and we will be happy to supply it to the Deputy once it is done. At this point, we could not say all of it is in place.
With regard to related party transactions, is it not basic common sense that they are disclosed in accounts with regard to buildings sublet to other parties? Why would accounts be produced in an ETB or any organisation in this day and age that do not disclose related party transactions?
Has the template model for these accounts changed since 2015 with regard to the presentation? It is very difficult to get information from the accounts. It is extraordinary to read them. They are absolutely-----
Issues such as related parties can get out through a vacuum. There seems to be no exact model such as there is for a company's set of accounts. In the corporate world there is an obligation to disclose all of these items. It is very hard to read these accounts. Tax is not mentioned and neither is PAYE. Basic items we would see in a normal set of accounts are not mentioned in this model. It seems extraordinary.
Would the Secretary General like to comment on this? Is he satisfied with the model in which the accounts are presented? With regard to disclosure of documents and board members disclosing their interests, does the Department follow up robustly to ensure this information is presented in a timely manner?
What I find extraordinary is that a number of individuals did not disclose exactly what they had. The Secretary General is paying all of this money to this entity and he says it is not his problem really.
Ms Martina Mannion:
The template for the accounts is updated yearly. The template is cumbersome, unfortunately, as a result of the financial management systems in use in the ETBs from which the data are collected. We are engaging with the ETBs and the Comptroller and Auditor General on making the template as user-friendly as possible. I hope the shared service for the financial management systems will allow better quality data which, in turn, we can use to update the template.
It is one of the first set of financial statements we have seen from the ETBs, and if this is the format of all of them, I do not know how members who do not have a financial qualification will understand them. I am saying to the Department and whoever is over the ETBs that this structure and presentation format is Victorian and we need a current up-to-date format. The witnesses can take the point. I will not labour it. We find them extraordinarily cumbersome.
Ms Murphy has indicated in respect of the property that Deputy Burke asked about and I now ask Mr. Merrick to speak on it.
Mr. Noel Merrick:
Leases, licences and property are ultimately the responsibility of the board. They are a reserved function of the board. The finance committee has taken a particular interest in all of these licences and leases and is systematically beginning to go through them. Particularly at renewal time or if there is a new lease, they are examined in detail by the finance committee, which makes a recommendation to the board. The board must then make its own decision because it is the ultimate authority.
Thinking back to that time, and I apologise for interrupting, but the period from 2008 to 2010 was a very tough time economically and €250,000 seems an extraordinary amount of rent to pay annually. If a commercial valuation basis was used to purchase it, and I know this is not a model that is often used-----
Ms Caitríona Murphy:
There were valuations and it is for 20 years. I wanted to clarify that there is a 21 year lease. I also want to state that hundreds of students are in the further education and training centre. We must go to our funding agency every time we need to look for a building or change a building.
I welcome the witnesses. For the public in general, the audit we are scrutinising today is for 2015. That is four years ago. Since then we have had 2016, 2017 and 2018 and we are now in 2019. Why are we scrutinising 2015? What is the status of 2016, 2017 and 2018? The public should know why we are four years behind. Who will answer the question?
Mr. Seamus McCarthy:
I will answer in part. I explained the audit of the 2015 financial statements in my opening statement. There were difficulties with the first sets of financial statements for the ETBs in settling the format of the financial statements for them, and there were a number of other issues. That caused a knock-on delay so we were starting the audit of this at the beginning of 2017. The difficulties that were uncovered in the course of the audit obviously delayed the completion of the 2015 financial statements and that has had a knock-on effect for 2016, 2017 and 2018. We are currently doing the audit of the financial statements for 2016. I expect we will do 2017 as well this year. We will have to do 2018 and 2019 next year. It is very unsatisfactory but the circumstances were quite unusual.
I read the Comptroller and Auditor General's report last night. There was complete dysfunction in governance and oversight control. Everybody was asleep at the wheel. We cannot talk about what happened as we have been warned it is not allowed, but there are issues and concerns. Where was everybody when this was happening? It seems to have been controlled by individuals and executives. Where was the Department of Education and Skills, the Secretary General, the governing board and the audit committee while all this was happening? Somebody has to answer questions. There was the Thorn report and the witnesses are telling us today that everything is hunky-dory, they have learned their lessons and nothing will ever happen again from now on. How can we assure the public that this is not happening elsewhere? There are many ETBs around the country. Can the Secretary General comment on that? The witnesses used lovely words, referring to robust governance, regime codes, policies and tools to support good governance, but where were those words in the last few years?
Mr. Seán Ó Foghlú:
That is for the future. That is what they have indicated they have put in place. We are obviously very concerned about the findings of the reports. We were concerned when the Comptroller and Auditor General approached us about issues arising in Kildare and Wicklow ETB. We also had a number of other issues ourselves. When we put those together we had a concern. We asked the ETB for responses and we were not satisfied with them. That is the reason we advised the Minister and the Minister decided to put the statutory review in place. Obviously the Comptroller and Auditor General paused his audit until that was complete and then took account of it. Clearly, there are matters of concern, as Dr. Thorn indicated, about the effective operation------
Mr. Seán Ó Foghlú:
We were aware of concerns about two major buildings and we were following up on those individually, but when the Comptroller and Auditor General approached us about other issues in another major building and across a number of other areas we immediately met with the chair and the then CEO of the ETB. We asked for responses to the issues and when we were not satisfied with the responses we instigated the review.
What is Mr. Ó Foghlú's conclusion about the procedures and what happened in Kildare and Wicklow ETB? What is his opinion now? Can it happen again and could it be happening somewhere else in the country?
Mr. Seán Ó Foghlú:
I am very concerned. We have sought to update governance arrangements to ensure it does not happen again. We have put a number of elements in the code of practice, in particular the code of governance, to deal with issues that have come up in this regard and we will continue to do so. We did that before the Comptroller and Auditor General's review was complete. We will listen to the views of this committee and we might seek to update the code of governance further. We have amended procedures on minor, small devolved projects and on big devolved building projects as a result of, among other things, the lessons we have learned in this regard. We have not seen anything that would cause concerns that there might be similar activities elsewhere in the ETB sector but that does not mean we can take absolute assurance from that. We are seeking to develop the role of the independent internal audit service for the ETBs further and we have a number of arrangements in the code of governance to examine issues. We will be considering different types of thematic reviews within the sector to see if we have learned from the lessons.
The biggest lessons for me are: how can we ensure that members of ETBs have an oversight, and how can we ensure that the culture within an ETB, both members and staff, allows for people to look at other people's behaviour and where there are difficulties in that behaviour there are arrangements in place for a culture of challenge? That is an overall governance challenge, and that is what we must examine. The training we are putting in place on the code of governance will hopefully assist in that regard. Obviously, however, the findings are very strong in both the Thorn report and the Comptroller and Auditor General's report.
Mr. Hubert Loftus:
To add to that, we have put a significant effort into enhanced supports for ETBI which helps to ensure a consistency of approach in terms of strengthened governance across the sector. In the buildings area we carry out compliance checks. We have an annual programme of compliance checks of 120 devolved projects across schools and ETBs. That is a programme where we get down to school level-----
I have two questions. Poor contract management practices contributed additional costs of €483,000 regarding the construction of Arklow community college. Given what the witness has said, why did the Comptroller and Auditor General include that comment? That is the opposite of what Mr. Loftus is saying. The €483,000 is almost €0.5 million. It is in the report in black and white. What the witnesses are saying and what is in the report are contradictory.
Dr. Deirdre Keyes:
This is one of the projects that is currently under investigation by the Garda.
We have had the Dr. Thorn report to ascertain the answers to those questions. The role of the employer representatives is relevant in terms of the acceleration of that project and the public works contract. We have tightened our internal controls in respect of that issue to ensure there can be no acceleration outside the contract without going through the employer representative. In turn, the employer representative will go to the Department and we get authorisation to do that.
Dr. Deirdre Keyes:
As the Secretary General has explained, the Department was not aware that the acceleration project had taken place. The Thorn report outlines the dispute and the difference of view in how that happened. That particular issue has been referred by Dr. Thorn to the Garda for further investigation.
There is €500,000 with a question mark over it.
There is another figure for national school costs to install modular classrooms at €206,000. These classrooms were relocated to a new post-primary school three months later at a cost of €73,000. Is that under investigation as well? This is big money.
Dr. Deirdre Keyes:
No, I think the appointment of the contractor is an issue but in our response to the report of the Comptroller and Auditor General we gave an explanation of how that happened in the context of the information available to us. Obviously, we have accepted the findings. Obviously, the committee will note from my statement that they are of regret. Deputy Aylward is correct about some of the expenditures incurred.
Why were the modular classrooms purchased in April 2015 at a cost of €206,000? Three months afterwards they were relocated at a cost of €73,000. Why were they put in place in April when three months later they were relocated?
I have got a message from the Oireachtas broadcasting system. Please put all devices on airplane mode. Silent mode is not enough. You cannot be sending text messages in the committee room. It is interfering with the recording system. That is across the board and applies to everyone in the room and those in the Visitors Gallery.
Mr. Seán Ó Foghlú:
Before Mr. Loftus comments I wish to say one thing. We do not think it is appropriate to comment on or indicate in respect of a matter that has arisen and that is under investigation. This is partly because we do not know. We have referred everything to the Garda. The full reports have gone to the Garda. I am not commenting in any sense.
I make no apology for raising this. It is about taxpayers' money. It is before us in black and white from the report of the Comptroller and Auditor General. I make no apology to anyone for raising the matter on behalf of the general public.
Mr. Seán Ó Foghlú:
I am not asking Deputy Aylward to apologise. I am simply saying that I am not commenting on what may or may not be under investigation. We are going to have a go at answering Deputy Aylward's question now as best we can. What I am saying is that we cannot comment on whether any particular matter is under investigation, because we do not know.
That is a matter for the Garda. Let us be clear. The Comptroller and Auditor General produced this report. In normal circumstances we would look at this situation. In the interim the matter has been referred to the Garda. One could make the case that we should not be discussing the matter because it is before the Garda, but we decided to discuss the matter within very limited strictures. In fact no one in this room can say what is or what is not being investigated by the Garda and we cannot presume anything. Some of the questions being asked at the committee today will not be answered today or should not be answered today. It will be up to the Garda to deal with the matter in due course. Some of the questions cannot and should not be answered today. I have to be strict on that point.
Mr. Hubert Loftus:
Deputy Aylward asked a question about Arklow. The Department was already aware of the issues and was following up with the education and training board on the matter prior to the issue coming to the attention of the Comptroller and Auditor General as part of the audit. We explained our position on the matter.
Reference was made to temporary accommodation for Naas community national school. This was a school in prefabs. It had demographic needs. Two additional prefabs were approved to cater for those needs. Separately, the original, older prefabs in the school incurred some damage in storms. Emergency approval was granted to make repairs but there were concerns among the parental group about the suitability of the full school to be in operation at that location. A decision was made at the time to temporarily locate the school at a vacant permanent building that the Department had built in Craddockstown. We had earmarked that as an advance building for Naas community college. That was a temporary move. The prefabs were provided in the original location for Naas community national school but because of parental concerns the school did not go back to the original prefabs. Those prefabs were then vacant and the education and training board had a demographic need for two prefabs in Maynooth. They were relocated there.
The overall context when looking at this issue is the scale and extent of demographic growth in the Kildare area at the time. During the past decade primary enrolments in Kildare have grown by approximately 20% while post-primary enrolments have grown by close enough to 35% or 40%. There were extraordinary demographic pressures and it was not easy to manage and cater for these at the time. That is the context.
The question of most pertinence in the report of the Comptroller and Auditor General was the procurement process for the removal of the prefabs from Naas to Maynooth.
Are there any consequences for the building projects while the investigation is going on? Will there be any problems for the education and training board in Wicklow and Kildare because of this? Will it hold up projects? Will it have any effect on teaching staff? Will there be effects across the board because of what is happening? Is everything okay in that sense? Is everything in order?
Mr. Seán Ó Foghlú:
We have not pulled back from allowing Kildare and Wicklow Education and Training Board to proceed with arrangements relating to advancing school building projects as a result of this. Obviously, we are working closely with the board. Clearly, a matter as big as this has an impact on KWETB as a whole and on the head office in particular. The board has to manage through all these issues and deal with the Thorn report and the report of the Comptroller and Auditor General as well as supplying information for the Garda investigation. That has an impact on the capacity of the organisation. We have supported the organisation by allowing for additional staff at head office to engage with that. That is a challenging issue for any organisation to work its way through.
From our point of view it is a question of devolving projects to the education and training board or advancing with the currently devolved projects that have proceeded.
Mr. Hubert Loftus:
We are conscious that the board is at the coalface of that. We have put in place additional controls for projects and service level agreements. We have made clear to the education and training board that we will be providing additional project management support to help the board during this difficult time, bearing in mind the urgent need within the county for additional accommodation.
I wish to go back to Dr. Keyes again. I want to come back to the question of governance within the system and what happened. What role does the board play now and what role did it play then? It needs to be defined.
Dr. Deirdre Keyes:
The role of the board is set out in the Act in terms of its statutory and reserved functions. There are particular decisions that can only be made by the board and that have to be referred to the board. Moreover, the code of governance and oversight arrangements of the board and the respective committees of the board are set out. The audit and finance committees are of particular importance but all the other committees are relevant too, including boards of management of schools and youth committees, etc. These are the structures in place to allow the board to have oversight. Perhaps I might talk to the chairperson about it.
Dr. Deirdre Keyes:
The board meets every two months. A given number of meetings is required. Again, that is set out in the Education and Training Boards Act. The required number of meetings is set out for the finance committee and the audit committee. Each of the committees has terms of reference. The finance committee reports to the board. The audit committee reports to the board. That reporting arrangement is set out.
I know that in our case the finance committee reports more regularly to our board. It is probably an area that we need to address in terms of the link between the audit committee and the reporting relationship to the board.
Dr. Deirdre Keyes:
I was not there so I cannot confirm that for definite. I know that since I came in, the board has met its statutory requirements by way of meeting, in addition to which it has had a number of special meetings. It is worth saying that during the course of this investigation, the board had a number of additional and special meetings and worked really hard in terms of co-operating with the various investigations and also in terms of working with the executive on the delivery of the roadmap for the future which is our action plan.
Mr. Noel Merrick:
We are required to meet four times per year but we usually meet more often than that. We have met 16 or 17 times since we were set up in late 2015. The audit and finance committees were appointed in May 2015 but they did not start meeting until October 2015, which was two thirds of the way through the year in question in these accounts. I gather we have had 16 full meetings and we have made 15 reports. Typically, after each meeting we make a chairperson's report back to the main board on the work we have been doing and our findings, etc.
Mr. Noel Merrick:
If the Deputy looks at the Comptroller and Auditor General's supplementary report, it talks about incomplete information being provided. Part of information gathering is that the information should be tested. There should be a very strict internal control and then that goes to the audit committee to be checked and the audit committee reports to the main board. The finance committee has done its work on the finances. I do not think the Comptroller and Auditor General has found any want in the actual finances, as distinct from the procurement procedures and all of these matters. As well as that, there is an internal audit unit, IAU. My best information is that the audit committee did ask the internal audit unit to test the procurement procedures back as far as 2016 or 2017, but the IAU had other needs at that stage and that did not happen. It is happening now.
Cuirim fáilte roimh na finnéithe a bhí anseo cheana agus go n-éirí leis na finnéithe nua. I have limited time. I have read the documentation and it does not make for good reading. I am addressing the chief executive officer, CEO, and the chairperson.
The witnesses do not have any choice but to except that. When I see that sentence or hear about reassurance it does not help me in any way because what really jumps out from all of the reports was the confirmation in the Secretary General's opening statement that Dr. Thorn found that governance procedures were adequate and that adequate arrangements were in place. That is deeply troubling. Much of the opening statements from the Kildare and Wicklow Education and Training Board and the Department are about the recent changes. While these are very welcome, they were in place and this happened. I have never seen this in the almost two and a half years I have been a member of the committee. Page 9 of the Comptroller and Auditor General's supplementary report sets out key audit concerns. I will not read them out but I counted 11. It refers to incomplete documentation, documentation being held off site, inadequate information being provided to the audit team when it asked questions, including when it returned with further questions. Before I ask my questions, the Comptroller and Auditor General said this is one of four special reports in the past 20 years.
How many times have meetings been held in hotels at short notice because I am interested in governance and accountability? That is what we are here for so this is a very practical application of it. If Mr. Merrick does not have the information, I ask him to revert to me before the end of the meeting with the details of how many times the board has met in hotels, the reasons therefor and what notice was given to members. Are the minutes being published online and how many sets of minutes have been published online?
These are just very quick practical questions. We are here as a result of a special report which followed a previous special report, as well as Dr. Thorn's report and a current Garda investigation. The scope of our questions has been limited and I am just asking practical questions on governance. I am a great admirer of what I still call the vocational education committees. I served ten years on one of them and they do wonderful work. The whole principle and ethos behind them is wonderful. I place them right up there with the universities. They do tremendous work and I know many people, including in my family, who have benefitted from the VEC system. Today is about governance, how something so shocking could happen and how it will be prevented in the future. How many times have meetings been held in hotels?
Mr. Noel Merrick:
I should explain that we would typically have six meetings per year but in the last year and since December 2017, we have had 12 meetings. We have had many special meetings to deal with various reports and directions from the Minister, etc. On occasion, where it was not possible because the chambers were not available in Kildare or Wicklow-----
Mr. Noel Merrick:
No, we do not. Very often, I would have preferred a particular room. I do not know if council chambers are the best place as there is space for 40 or 50 people and the meeting only has 12 people and people have microphones, etc. Under standing orders, Áras Chill Dara is the main meeting place. We agreed that we would rotate the meetings between Wicklow and Kildare-----
I asked a question to which I did not get a satisfactory reply. I will wait for that information to be provided through the Chairman. I will now move onto the next matter, namely, the resignation of the chairperson of the audit committee. That occurred in September 2018. Is that correct?
Mr. Noel Merrick:
No risk has been identified by the finance committee. As I said earlier, we are looking at the leases and being very careful about those. In law, our job is to look at the service plan for the year, which is the budget for the year. We work on the budget through the finance people and present that to the main board. Our job is to monitor the service plan, which we do at every meeting-----
Mr. Merrick should listen to me for a second. We had the former chair and vice chair before us. We had all these investigations. I have looked at all of this and the lovely language but it does not take away from the fact that that language was in place at the time and all of this still happened. One thing that jumps out is that the board was passive. I am not sure if I agree with that but that is what Dr. Thorn said. How does Mr. Merrick feel about that as chair of the board? He was a member of the board at the time. Can he help us with that conclusion and finding from Dr. Thorn?
I was on a board. It is extremely difficult for ordinary members to query things. Passiveness is somewhat mitigated by saying that the board was not getting enough information. Would Mr. Merrick accept that the board was passive?
As chair, has Mr. Merrick gone back to ordinary board members in a meeting and said "look at what has happened under our watch"? What prevented this from coming out at board level? Has he gone back and carried out such an exercise?
Some people tried to raise issues but such a culture was created that they just could not persist with their queries or, if they did, they did so at great cost. Would Mr. Merrick accept that some people tried to raise issues on that board?
I agree with Mr. Merrick totally. It is very difficult for ordinary members on a board. They are there voluntarily. There is no backup or training. I agree with all of that. That is a failure on the part of the system and the Department of Education and Skills in not ensuring that. I appreciate that the amalgamation went through too quickly, without any backup. I know the shared services, which I probably will not have time to get to, are probably not up to scratch yet. It has been brought to our attention that in Athenry, in Galway, it is extremely difficult and the staff are working under significant pressure. I want to get back to the board because I cannot get away from the fact that everything was in place to stop this from happening and it did not stop it. That is the kernel of it for me.
The board got legal advice. Was it clear to Mr. Merrick as an ordinary member, and is it clear to him now, how legal advice works? Who gets that? I understand the chairperson got the legal advice. Was that brought to the board's attention? Did the board sanction that? What would happen now if the board needed legal advice?
I have sympathy for the current chair and the current chief executive officer, CEO. The CEO has a difficult job and I wish him well. He has done a good job in difficult circumstances since he took over, given the history of some of the issues. He cannot be held to account for the actions of any predecessors who held different roles and we all accept that.
I want to first come to Mr. McCarthy because he said earlier that it is quite unusual that there would be a supplementary report to audited accounts. There were maybe two or three of them over the course of the past-----
Would it be fair to say that the genesis of some of these issues goes back much further? Mr. McCarthy has done this supplementary report on the back of the 2015 accounts and an audit he was doing which was suspended at one point which I will get to later.
Mr. Seamus McCarthy:
Kildare VEC, yes. My predecessor issued a report about that.
Mr. Seamus McCarthy:
The outgoing CEO of the VEC-----
The Department signed off. So, notwithstanding issues and concerns that had been raised about the VEC which led to a supplementary report which the Comptroller and Auditor General says was quite unusual, the individual came through an interview process that was signed off on by the Department?
Mr. Seán Ó Foghlú:
I think we are entering into territory about an individual here and that is a concern. The process was an appropriate one to put in place for the ETB sector as a whole. All of the CEOs had rights and entitlements to continue at their salaries. We had a surplus of CEOs and we had to put in place a process to assign them elsewhere. There were approximately 19 or 20 CEOs for 15 spots because one was continuing-----
In terms of the 2012 supplementary report based on the 2010 accounts of the Kildare VEC, Mr. McCarthy examined the 2015 accounts of the Kildare-Wicklow ETB. He carried out an audit, found that there were issues and had to suspend the audit in June of 2017. Is that right?
How could they be surprised and shocked if some of these issues overlapped with issues of procurement that happened in 2010? That brings me to Mr. Merrick who sat on the finance committee for a time. The Office of the Comptroller and Auditor General contacted the chair of board. Mr. Merrick said he first became aware of this in July or August 2017 and all of this was a surprise. How was it a surprise? It strikes me that the external State auditor identified the weaknesses and not the internal controls within Kildare-Wicklow ETB. The audit committee was surprised, the finance committee and the board were surprised and knew nothing, and yet the Comptroller and Auditor General's office identified these weaknesses. How did that happen?
Who signs off on spending? We heard of meetings in the K Club and concerns were raised in the Comptroller and Auditor General's report. There were issues about the incurring of significant expenditure with certain hotels without a competitive procurement process. There were subsistence claims by the then chief executive that did not comply with regulations. Who signed off on those claims and that spending? Was that Mr. O'Toole, or his office, or whose office would that be?
Did Mr. O'Toole not hear the two points I raised earlier? The Kildare-Wicklow ETB incurred significant expenditure with certain hotels without a competitive procurement process and subsistence claims by the then chief executive did not comply with regulations. If that was the case and there were issues about a chief executive's spending, there has to be somebody other than the chief executive watching how that money is spent. In Mr. McCarthy's view, who should have been watching it? We cannot get a clear answer as to who was watching it. Other than the chief executive, who should have been doing it?
Mr. Seamus McCarthy:
I make a distinction between claims made by the chief executive and the authorisation of expenditure on behalf of the VEC where, effectively, the chief executive is fully empowered to authorise any payment that is lawful and proper. One would not expect that anybody would oversee an authorisation of payment by the chief executive for, let us say, payment to a supplier. He or she is the chief officer and that would be normal.
They would obviously be subject to subsequent checking by, let us say, an internal audit or if my office carries out an audit. In the normal way, if there is a supply of service-----
I am looking at Mr. McCarthy's supplementary report which shows there are governance and financial control weaknesses that were uncovered by his work. Almost none of those issues were uncovered by either the finance committee, the audit committee or the board. Is that fair?
That brings me to the role and responsibility of the board and the CEO and how ETBs are governed. We talked about how unusual it is to have two supplementary reports.
We also have the Thorn report and a Garda investigation and the committee has examined the matter. All of these issues are highly unusual when one considers the totality of all of that. It is the Education and Training Boards Act that underpins the ETBs. Is that correct?
Why was this provision never applied? The board, in my view, never sought to remove any individual. I am not naming anybody specifically. The board never sought to remove any individual despite all of the issues that have been raised. The legislation is meant to ensure there are checks and balances and provides powers to the board. Where issues emerge, the board has the authority to deal with them. Perhaps the Comptroller and Auditor General will enlighten me based on his examination of this matter but, as far as I am aware, the board did not once make an effort to use its powers under the Act to suspend or remove the chief executive?
Is Mr. McCarthy satisfied that the provisions of the relevant section of the Act are robust enough in the first instance? Is he satisfied with the internal audit controls in ETBs? We have heard that internal audit committees are also in place. Is he satisfied that their powers, resources, capacity of the board and the provisions of the Bill are sufficient to ensure that we have a robust oversight of the activities of the ETBs?
Mr. Seamus McCarthy:
In general, I am reluctant to comment on legislation. I would say that this is a complex process. In any situation where there is discussion of taking an action against an official it has to be done with legal advice. It is a very tricky situation.
Audit committees and internal audit capacity in an organisation are absolutely vital to the effective control of the organisation. It is something that many of the boards have now, if one likes, come to see that for 2017 they were insufficiently supported in terms of internal audit and capacity.
Given that the Comptroller and Auditor General compiled a supplementary report on this matter, one of the things that struck me was the relationship between the executive and the board. To be fair to the board, a board can only work, as far as I can see, on information that it is given. If information is withheld from or not given to a board or any of its subcommittees, the board does not work. Was it the case that the board was not able to do its job sufficiently because it was not given sufficient information on many of the issues that the Comptroller and Auditor General dealt with in his report?
Mr. Seamus McCarthy:
There are references throughout the report to places where the board did not appear to have relevant information. Obviously, there is an expectation that boards can ask questions. Boards have an obligation to identify what information they need and to specifically seek information. The fact that there had been difficulties throughout the years in respect of internal audit and, if one likes, the functioning of audit committees is systemically important and something that we must increasingly have an eye to.
Mr. Seamus McCarthy:
Yes. Because we saw the settlement and the arbitration agreement resulting in additional expenditure, we wanted an explanation for the additional expenditure on that specific project. It is worth making the point that, according to the board minutes, there was discussion of the speeding up but there is no evidence that anyone considered that this could result in additional cost. That is an example of where, if information was not forthcoming that speeding it up will result in an additional cost, it would be perfectly reasonable for a board member to ask the board before agreeing to it whether the speeding up would have a cost implication. There are learning points on both sides.
I thank Mr. McCarthy. My final question is to Mr. Ó Foghlú and relates to the Act, which underpins the work of the ETBs. I imagine he would agree with the observations made by the Comptroller and Auditor General and me in this matter. There were two supplementary reports, one of which related to the VECs, although there was some crossover with the issues that emerged at the Kildare and Wicklow ETB in 2015. Dr. Thorn, who was appointed by the Department, published a report that made findings that were of considerable concern to the Department and the Committee of Public Accounts. There was also the Comptroller and Auditor General’s report and a criminal investigation, which we obviously cannot discuss. Through all of that process, how did an individual get redeployed and why were the powers of suspension and removal never acted on? Notwithstanding the criminal investigation that is ongoing, is that a reasonable question to ask given that the Act was designed to ensure that power was available?
Mr. Seán Ó Foghlú:
Let us take the first Comptroller and Auditor General report and the hearing of the Committee of Public Accounts in early 2012. It was a matter for the VEC at the time to consider any disciplinary process for the CEO. I am not aware that a disciplinary process was considered and the Department certainly did not raise a disciplinary process with the VEC at the time.
There are some parallels between the issues but it is not an exact continuation. It is important to note that there was follow-up after 2012. There was an internal audit review of procurement in the VEC that was subsequently given to the ETB when it was established. That was one of the reasons the ETB's internal audit service decided not to have a further procurement audit. It had effectively just done a procurement audit. There were management findings which would be considered by the audit committee in terms of their effective implementation. The Department did not conclude a view on this matter until the Thorn report was completed. That report was completed and published after the former CEO had retired. There was no necessity for the ETB or the Department to consider, nor would it have been possible, to consider. I do not think there was enough of an outcome. I think it was only after the Thorn report and the follow-on Comptroller and Auditor General report that the issue could possibly have been considered, whatever that consideration might have been but that is a matter for the ETB.
I welcome the witnesses. I have not met the new CEO. We have been in correspondence but we have not formally met. I wish him well. I realise he is accounting for things that happened before his time. I acknowledge the huge demographic pressures in both Kildare and Wicklow. A very sizeable staff is employed by the Kildare and Wicklow Education and Training Board, KWETB, and the education value of what it does is not in question. In fact some exemplary work is being done and I acknowledge that.
The witnesses are essentially answering for the previous board and previous chairpersons. Would Mr. Merrick accept that when any inkling of these issues came to light, there was a circling of the wagons with respect to how they were handled? Mr. Merrick was there at the time.
Mr. Noel Merrick:
I would not accept that at all. We were very shocked by it. It all happened very quickly. By October 2017 Dr. Thorn had been formally appointed to his position, so an investigation was ongoing very quickly. We awaited his draft report, which we got at Christmas, and we acted on it immediately.
One of the big changes that must be demonstrated is a change in culture. Being very open to criticism of the organisation itself is part of that. It certainly seemed that there were efforts by some members of the board to raise issues. These issues were calmed down or the wagons were circled. That appeared to me to be the case. I hope very much that there is now a very open culture in regard to receiving points of concern. Is that the situation?
That has to be part of the culture. I know we are going to be very short of time. I want to go back to some of the points that have been made on the 2012 report and expand on them. Was Mr. Ó Foghlú in the Department in 2012 when that report was issued by the Comptroller and Auditor General?
Mr. Seán Ó Foghlú:
The redeployment was arranged for CEOs in the knowledge of the history of the VECs, including that report, which had identified some shortcomings. We have to be very careful here. Shortcomings in governance do not necessarily mean there were shortcomings in the performance of the chief executive officer. That is an important distinction. I do not want that understanding to come from me. We must be careful on that point.
I will mention a couple of things from that report. There was €1.9 million of expenditure on ICT equipment. Somebody who had previously worked on the VEC on a short-term basis got that contract. A second issue I want to pick up comes under the report's statement of the views of the Department of Education and Skills. The report stated that the Department would continue to insist on adherence to proper procurement practices in VECs. It went on to remind the VECs of this.
There was a code of governance and an understanding that proper procurement practices would have to be in place. Special attention was to be given to Kildare VEC. Some of the same points and some of the same language appeared in the 2012 report as appears in the report that has just recently been issued. How does Mr. Ó Foghlú account for that? Where is this code of governance? It is only as good as its implementation.
Mr. Seán Ó Foghlú:
Following the report prior to the 2012 appearance before the Committee on Public Accounts, there was a follow-up report on the part of what was then called the vocational support services unit, VSSU, the internal audit unit for the VECs at the time. That went into detail on the initial establishment of the ETB and the procurement arrangements in place. There was a management response. We encouraged the internal audit unit to undertake that follow-up review. It was very important. There was a management response to that. I assume that was considered by the internal audit committee of the ETB. That is where the most disappointment has arisen. We have also undertaken a follow-up audit of devolved programmes, which we also talked about. We put a code of governance in place, which was not in place in 2010, and we have updated the code of governance in 2019.
Did it make any difference? Some of the same issues have emerged around procurement and the code of governance. Would Mr. Ó Foghlú accept that it did not make a difference? The most recent report has resulted in some of the issues not being open to discussion by the committee, by virtue of the fact a Garda investigation is ongoing.
Mr. Seán Ó Foghlú:
I do not think the difference is in the Garda investigation. Practice has developed significantly in the sector as a whole as a result of the various elements we have put in place, including working under procurement with Education and Training Boards Ireland, ETBI, and so on. However, there are clearly severe shortcomings in this particular ETB, which have given rise to the Thorn report and that of the Comptroller and Auditor General.
Should we have confidence in the Department's ability not only to issue codes of practice, but follow up on them? When we look at this example, what should give us confidence that any new code of practice will be adhered to any better?
Mr. Seán Ó Foghlú:
I am trying to go through the range of supports and come round to answering the Deputy's question on whether the committee should have confidence. I will answer it in steps, if that is all right. The Department is supported by an internal audit service that has had challenges. It has engaged staff, but staff have moved on to other careers in the buoyant labour market for accountants. It is engaging external supports at the moment and seeking to recruit further. It is supported by the role of ETBI in procurement and training. Should that be an absolute assurance? I do not think so. As the Accounting Officer I am equally concerned.
I have to work further to ensure that the governance is in place and is tested appropriately and we are still looking at ways of doing that. I have talked through, in the background statement and the opening statement, a range of additional changes we put in place. The question is, when we do all of those, are they still going to add to it.
The internal audit service is, again, following up on procurement in the ETB. Would I have absolute confidence?
There were amalgamations which bring their own issues in terms of the bedding in. I refer to the amount of training that is given to board members on understanding their role in terms of them being there to not-----
Ms Martina Mannion:
I might assist the Deputy. The ETBI is the body recognised in the legislation which has a role in supporting the sector. They are really a critical piece of infrastructure in the sector to support the 16 ETBs.
There are two other points the Deputy had raised that I might just assist on. The first relates to the roll-out of the training. There is training available on the new code through ETBI which will be in existence for the existing boards in the knowledge that the boards will be refreshed following the local elections later on this year and there will be further, more robust, training rolled out in the autumn in relation to board chairs, audit committees, executives. This is part of the lessons learned and the additional supports that we are making available.
The other issue which might assist the Deputy is on the internal audit unit. The Secretary General has already explained regarding the resourcing issue but, separately, since 2015, of 75 audit opinions from the internal audit unit, only nine indicated inadequacies in controls, and of those, many related to the ICT issues.
Dr. Deirdre Keyes:
It is available to the board. It is public, is it not? We have a risk policy which is public and then we have our risk registers. Currently, we have three risk registers. Our organisation support and development, OSD, which is our operational administrative register, is complete. We are working on our schools risk register and we have commenced work, and are progressing, on our further education and training risk register.
I can understand that there are different matters that would present as a risk in terms of the educational aspect and the internal governance of schools, etc. Specifically, on the administration of the ETB, what would typically crop up as a risk?
Mr. Joe Kelly:
Okay. First, we have 31 risks there altogether. Seven of those are red, 24 are amber. There are a number of areas that we have identified as risk areas, for example, professional-managerial, contractual, business continuity, legislative, physical, legal, social, and financial, and underneath each of those headings we would have a number of risks identified.
Mr. Joe Kelly:
It absolutely is a working document. It has to be a working document because we are working on some of those areas and we have plans in place to mitigate against those risks. There are other things that we will come across or will be brought to our attention that will be put into this plan as well and will be organised in terms of ensuring that somebody is accountable for putting a mitigating plan against each one of those as well.
Reputational risk has been the biggest risk to the ETB. I would have thought that was almost top of the agenda. In 2010, the accounts led to a special report on what I accept is a different organisation, but a constituent part of this. There is now a special report on the 2015 accounts. We are talking about 2015 accounts in 2019 and we do not know what has happened and how the organisation has functioned in the interim. The last thing this ETB can sustain is yet another shortcoming in the accounts and the running of the board. In terms of risk, I would have thought that would be something both the Department and the ETB would have as top of the agenda. Is it something that appears on the agenda every month? Is it something for a special meeting? How is it handled?
Mr. Joe Kelly:
We would not have a general risk like that because it is too broad for us to be able to manage but there would be specifics underneath it that would be relevant. What I can help the Deputy with is that one of the 21 projects that we have as part of the KWETB corporate governance programme is the new code of governance, and that is very much part and parcel of that governance programme that we are trying to drive within the organisation itself.
Dr. Keyes committed, as CEO, to address issues in relation to matters such as conflicts of interest and protected disclosures. Is that work ongoing? It is complete? Where are we at with that?
Dr. Deirdre Keyes:
As part of our roadmap forward, the whole area of procurement, internal controls around procurement, conflicts of interest vis-à-visprocurement and disclosures are all part of one very important picture. We have prioritised the area of procurement in terms of our responses to the Thorn report and also as part of, as the director of schools has referred to, our corporate governance programme.
On our procurement process, we have adopted, since 2018, the ETB sectoral policy on procurement which is very, very robust. Within that there are internal controls about a number of things that relate to procurement. There would be procurement authority, financial authority, etc., and then the conflict of interest management is integral to the internal control around the procurement process and other processes.
We have our conflict of interest management procedure and I suppose that is in line with the ethics of public office where people declare. We are very mindful of the fact that, in the context of the history and in the context of creating a culture of corporate governance, we must have a system for emerging conflicts of interest. Therefore, that is inserted at various stages of the procurement process, and also the opportunity to disclose. Staff are mindful of that.
Dr. Deirdre Keyes:
Mr. Kelly might comment as he oversees it. We have 21 particular areas and a roadmap. There are timeframes and deliverables. We provide that report to the board on a regular basis, as one will see in the submission I gave to the committee. While the code of governance is operational, it is equally important that it is embedded in the organisation, that there is an understanding of what is good practice and that there is a support programme for all staff at all levels, not just in head office but in schools and centres, etc. There are still objectives to be met within our code of governance programme but we have commenced considerable work and achieved a lot underneath it to date, particularly in the nine or ten areas of concern that the Comptroller and Auditor General's report highlighted. We have prioritised those actions. We are monitoring it. The project very much focuses on deliverables. Mr. Kelly might confirm if that is correct.
Mr. Joe Kelly:
Yes. We are determined not to just tick boxes and do things for the sake of it. We are focused on the things that have real impact. We have started by trying to identify what exactly we are trying to achieve and we work backwards from that on the plan itself. There are a number of important items that are relevant to project governance to try to ensure that we deliver on the plan and that it is not just something nice that we put forward in front of people. The first thing is that we have a steering group that is made up of executives, the chair and the vice chair of the board. They will provide leadership, direction and project management governance for us. We are working closely in collaboration with the Department to develop the programme in the first place and we will have quarterly review meetings with it in respect of progress. We will also appear before the audit and risk committee for regular reviews of where we are and seek some input and value-add on areas on which the committee believes we might need to focus. The board itself will be given regular updates and will have been very much involved in the creation and development of the programme. We also use best project management methodology, which includes an internal project manager within our team, we have a sponsor from the executive team, we have weekly project meetings and we have a process that is important to manage the core and secondary project deliverables. We also have a sign-off process to ensure we do what we said we would.
Mr. Noel Merrick:
The chair has a particular interest in the conflicts of interests of members, etc. Item 1 of all of our meetings relates to conflicts of interest. If there is any issue, it will come up at that meeting. I take a particular interest in all the declarations of interest that come in at this time of the year. I have been in the head office twice since January checking how many declarations have come in and how many more I have to chase.
Mr. Kelly referred to the audit. As we know, the internal audit function is facing challenges and there is external support based in County Cavan. It is a nationwide service although Dublin has yet to be included. Who decides what particular aspect of the organisation an internal audit should examine? If the team travels from County Cavan, how does it know what it is coming to do? What is the mechanism if an internal audit report is needed on a particular item?
That is my point exactly. If an issue that emerges in an ETB does not emerge across the board, there does not seem to be a mechanism for that to be identified. We need to examine these three issues nationally but there might be specific issues in an ETB that are not captured by the national audit. If the group does an internal audit in an ETB, there could be a significant problem but it might not be subject to the audit. When the audit committee makes a suggestion at local level, that is based on the flow of information. The committee is discussing the matter, however, because there was not a flow of information into the audit committee. I do not know how the Department can know if the audit committee does not receive the information about what it should be auditing.
Ms Martina Mannion:
There were a number of themed issues running across the reports on the 2017 accounts that were received over the last period, as has been noted at the committee. The issues included the adequacy of the internal audit service, in respect of, for example, ICT and procurement. Those are examples where the centralised internal audit unit has the capacity, because the issues were common across the ETBs, to bring that sectoral learning to ensure that what is learned in one ETB is carried across for other ETBs. The terms of reference of the internal audit unit allow it to do specific audits of ETBs where specific issues have arisen. To date, one of the potential challenges has been capacity, as we have spoken about. At the moment, however, the audit committee with the five additional external auditors has nine members of staff between audit and support staff. Even when its recruitment process has finished, it will have nine. The challenges with capacity that were faced in the previous years will, hopefully, see an improvement following the recruitment process of the additional auditors. Notwithstanding parts of the issues and the reason that it had to seek external support was the challenging environment of securing auditors, the internal audit unit has identified the recruitment difficulties, including the length of time it has had to advertise without getting responses. The Department has given over €300,000 to the internal audit unit in support.
I can see the value of the national internal audit unit. The problem, however, is the issue that may emerge in an individual ETB due to something going wrong. If the audit committee does not receive the flow of information from an ETB, how does it know something is going on? If it spots something for which it would like internal support, I am sure it would take two years before somebody has the opportunity to address it. If the internal audit committee believes there is an issue with an aspect of what is happening in an ETB, is there a facility for it to inform the chief executive or the board and commission its own external audit at whatever cost on an area of activity within the organisation? If not, the Department has taken the ETBs' ability to respond to local programmes entirely out of their hands. Does that facility exist and has such a situation ever happened in an ETB?
Dr. Rory O'Toole:
We can confirm that there are some school buildings that are being used by Gaelscoileanna. I do not know the details of the leasing arrangements, but, for example, the old building at St. Patrick's vocational school is being used by a Gaelscoil and we may have another such example. I will clarify what the leasing arrangements are.
While they are trying to figure out if there are buildings or lands which the board previously owned which it sold and then leased back, perhaps I might move to my other questions because I do not want to waste time.
I believe it was said legal advice had been obtained by individual board members but without the sanction of the board. Will Mr. Merrick confirm if that is correct?
Mr. Seamus McCarthy:
I was not at the meeting, but I understand we brought the concerns to the attention of t he chairman, the vice chairman and the chairman of the audit committee and they asked what they should do next. We said we could not advise them, that we were not legal advisers and that they needed to seek their own advice on the matter. That was the extent of our suggestion.
Mr. Noel Merrick:
It took some time. A particular company was employed to provide ongoing legal advice at the time. The Dr. Thorn investigation then commenced. That piece of legal advice ended at that stage and the firm was stood down. The ETB was then entitled to seek another set of legal advice because an investigation had been started and under its insurance policy, the board was entitled to draw down the advice of a different company. It took a while before all of the advice was available. We asked for it early on and it was subsequently released in six or seven big folders.
I will try to be a little clearer. With regard to the legal advice the former chairman obtained, I am going to say it was in a personal capacity, even though in his opinion he was seeking it on behalf of the board but without its approval. When I say "in a personal capacity," I am not suggesting he went off and just obtained legal advice for himself.
Mr. Noel Merrick:
The main recommendations were that the board be informed of the situation and that advice be given on how it might deal with the issue. However, this was before Dr. Richard Thorn was appointed as an investigator. When that step was taken, the general advice was that at that stage the board could not set up its own investigation and that the important thing was to let Dr. Thorn get on with it. The initial advice had been that the board be informed and that the best way forward was to set up a sub-committee of the board to investigate on behalf of the board.
Mr. Seán Ó Foghlú:
On legal advice in general, there may be times when a chairman needs to seek several advices on his or her role. The
Office of the Comptroller and Auditor Generalapproached the chairman. I am not aware of the details of the case, but there was an issue for a chairman in seeking advice on his or her role as chairman of an ETB, given that the Office of the Comptroller and Auditor General had made an approach. That is different from the advice that may be sought for the board as a whole.
While I know that the witnesses are trying to get the information on lease contracts for which I asked previously, are they aware of any contract entered into without board approval in respect of property or land?
Does the Secretary General want to come in? I am trying to get to the legal difficulties that may present where a contract is signed on behalf of the education and training board which has not been approved by the board. Did the lease receive board approval subsequently? Was it presented to the board?
How is it being allowed to happen? I note to the Accounting Officer for the Department that we have just been told that we are paying out €286,000, plus VAT. I do not know how much that comes to, but it is approximately €350,000 a year under a contract which did not receive prior approval from the board and which has still not received approval. Nevertheless, we are paying out that sum. Has anyone sought legal advice on whether we can get out of the contract? It is a lot of money. For how long is the lease?
If it was me, I would seek legal advice. I would not simply take it as read that I was going to pay out €7 million of taxpayers' money under a contract which had not even been approved by the board. Do the witnesses know whether there are other leases where contracts have been signed by individuals; perhaps even the same individuals?
Dr. Keyes can come back to me with it. I believe it is in excess of €2 million. As such, we are talking about nearly €10 million of taxpayers' money under a contract that has not received board approval.
Mr. Seán Ó Foghlú:
We were getting this checked, but my understanding is the ETB approached us and that we approved the lease. It may not be that there is a value for money or an appropriate use question. We also understand there is a buy-out option included in the lease. That is my understanding, but I am checking because I was not aware of this detail. We can come back to the committee on the matter, but, obviously, the ETB needs the approval of the Department to enter into a lease. Whether it is an issue of value for money having worked it through with the Department and the board, we will come back with the information.
Following on from that question, a break clause was mentioned, which is normal in a lease. What is the penalty? Has Dr. Keyes looked at the break clause in this lease and, if so, what is the penalty in a 20-year lease which is costing the taxpayer €7 million, plus VAT? Following on from Deputy Jonathan O'Brien's questions, we are not even sure about the legal standing of the lease technically. What would be the payout if the lease was stopped prematurely? Can we have that figure, please? What would be the percentage of the total cost of the €7 million? It is not a difficult question.
It is the same idea. If one takes a lease for 20 years, it is worth €7 million, give or take, plus VAT. If one was to stop the lease prematurely, there would be a price of doing so. What would it be? It is not a difficult question, or is it? I ask the Comptroller and Auditor General that question.
Perhaps Dr. Keyes can answer. At what point does a lease that was worth €7 million provide a payout of €3.2 million for a building that is no longer being occupied? When does that clause kick in? This is a very simple question. If the lease of 20 years is stopped after five years, is the €3.2 million paid then? Is it after six or seven years? Is it six months or 15 years? This is not complicated.
Perhaps the committee could be furnished with the directorship of this company. It would be very useful if we received it in a timely fashion so that we could have a look at it. From the knowledge of the witnesses to date, is there any suggestion that there may be a conflict of interest with the ownership of that building and anyone else involved?
That is fine. Dr. Keyes has no knowledge of it. Does anybody in the room have knowledge of any conflict of interest between the company that holds the lease for the €7 million and anybody else involved with this? No.
Following on from Deputy Jonathan O'Brien's questions on the legal standing of the lease if the procedure was breached, if a contract was signed for this amount of money without board approval, what would the result be? This is a very difficult situation to be in. Taxpayer moneys have been committed without due process, as far as I can see. We have heard Ms Mannion refer to lessons learned, which is a new term that must have arisen from a think tank or focus group somewhere. I have looked at a lot of retrospective governance at this committee recently. Mr. Kelly mentioned that he was very focused on ensuring that this did not become a box-ticking exercise. Is it his opinion that most of our corporate governance structures until now have been box-ticking exercises? For all the governance structures, rules and boards in place, at the end of the day we have a problem in front of us. I take from Mr. Kelly's commentary that it would be his opinion that up to now most things have been box-ticking exercises and that he is trying to change things.
Mr. Joe Kelly:
Since joining the organisation, I have concluded that we have very committed and honourable employees working in the organisation. We are working very hard to try to fix those weaknesses and enhance some of the processes, procedures and practices we have had in the past. I would not say that this has been a box-ticking exercise up to now. I would admit that there have been weaknesses.
Does Mr. Kelly believe the governance structures have been fit for purpose up to now? The reason for governance structures is so that there can be accountability, but if the structures are in place and nobody is adhering to them, then to my mind they are box-ticking exercises.
Mr. Joe Kelly:
It is always important to drive the culture of governance within an organisation. There can be many practices, procedures and policies, but it has to be ensured that they are embedded within the organisation and become part and parcel of how we do business. It is fair to say, from what we have heard today and previously, some of those areas have not been as strong as we would like them to be. The cultural piece is very important to us, and it is at the top of our list in terms of our governance programme.
Do we know if any key money was paid on the lease? In 2010 a commercial property could not be given away. Do we know the rent-free period for this €2 million fit-out? This committee has seen the issue of large rent-free periods arise with other organisations.
Mr. Ó Foghlú was just about to speak to his absolute confidence in response to Deputy Catherine Murphy's question before he got sidetracked. Does he have absolute confidence in the situation here today-----
Mr. Ó Foghlú was aware of that report. What mechanism was in place to bring it to the attention of the new board shortly afterwards so that it could be discussed and lessons could be learned from it?
Mr. Seán Ó Foghlú:
It is quite obvious that the report was in the public domain and was well known, and board members would have been well aware of it. Notwithstanding that, the internal audit service carried out a follow-up audit and brought it to the attention of the internal audit committee of the ETB.
Mr. Seán Ó Foghlú:
There was widespread public awareness of that report. It did not have to be formally brought to the board's attention by the Department. Notwithstanding that, the internal audit service carried out a follow-up procurement audit in the VEC, which it brought to the attention of the internal audit committee of the ETB.
I will pick up on that point. Mr. Ó Foghlú told me earlier that the because the report was done, the Department was paying particular attention. How was that the case? The Department was relying on it being in the media, it was relying on it being in the public -----
I asked about confidence earlier. I was referring to confidence in the Department in relation to the 2010 accounts and the 2012 special report. The Thorn report after that repeated some of the failures and shortcomings from the 2010 report. I was asking about confidence in the Department's role regarding this. It is not a disinterested party. There is a lot of money channelled through the Department. It issues codes of governance. It issues circulars to say how things should be done. It would be a great difficulty for me to say that I have confidence in the Department in the context of that sequence of events. It should not have repeated itself. The meeting has heard some additional information. We have not had sight of the 2016, 2017 or 2018 accounts. We are still in trouble on this as a consequence of that.
Yes it is about confidence. Can Mr. Ó Foghlú say that he can express confidence in his role as Accounting Officer? Is he confident that he did everything that he could possibly have done to avoid this? Is he confident that the special observation that was happening did occur and, if so, and it was the case that a special eye was being kept on an area where there had been failings in the past, how did the events which transpired occur?
Mr. Seán Ó Foghlú:
We all have shortcomings in the approaches that we took. It is unfortunate that there was not a fully functioning expanded internal audit unit for the sector. It is unfortunate that the governance of the ETB did not manage the work of the ETB, notwithstanding the likes of the internal audit follow-up report on the 2012 audit be completed. We have a series of detailed follow ups with the ETB on major projects and minor projects. We followed up on the major projects and we spotted a number of the things that arose here before they were brought to the attention of Comptroller and Auditor General and brought them to the attention of the Comptroller and Auditor General.
My question which my colleagues picked up on was how was it not discussed at the new board of 2013. I asked Mr. Ó Foghlú and he gave his answer. Can Mr. Merrick tell me how this report was not discussed? The Secretary General of the Department of Education and Skills said that everybody knew about it and that it was being followed up. How did it not land on the agenda of the board in 2013?
In case anyone leaves, the meeting will stop at 2 p.m. and the question arises as to when we will resume. There are other witnesses coming before the committee but there are quite a few votes in the Dáil. It may have to resume at 3.30 p.m.
I want to be clear about the two things that I am looking for. First, is a list of all properties and lands which the ETB is currently leasing which the ETB had owned and sold. Second is a list of all leases and contracts which have been signed which have not been approved by the board or which may have been approved subsequently after the fact.
Mr. Ó Foghlú said that the Department had signed off on the contract.
Some of the reason may be a conflict of interest or it might be a cost issue. I do not know. Was any analysis done on whether it was good value for money? I do not know because none of this came before the board.
We will cut to the chase. Can Mr. Ó Foghlú send the Department of Education and Skills' file in which it examines the ETB's case and gives approval? That is, will the Department send the committee the file containing both sides?
We will conclude. The meeting will resume on the housing issue at 3.30 p.m. rather than 2.30 p.m.
I have one question. There were various issues including the Comptroller and Auditor General being unable to complete the 2015 audit. We had the Thorn report. I have a simple question that this committee asks. Has anyone quantified the loss or potential loss to the taxpayer as a result of all these issues? It is one of the first meetings of the Committee of Public Accounts where no one has tossed out a figure for a potential loss. Has it been quantified? I will ask the three witnesses individually.
Mr. Seán Ó Foghlú:
Sorry, I was getting there. We are following up on each of the three major building projects with the ETB where they are not completed to complete out. Whether there is a loss as a result of anything that has arisen will emerge then. The work which is being undertaken by the Garda would be necessary before we would know whether there was a loss in the other areas.
The ETB, the Department of Education and Skills and the Comptroller and Auditor General are here about a big issue. I have asked the three organisations if there was a loss to the taxpayer and they are saying that maybe the Garda can answer that.
That is interesting. The ETB, the Department of Education and Skills and the Comptroller and Auditor General are saying that they do not know if there is an actual loss. Nobody is saying there is a loss. I am just asking the question.
Mr. Seán Ó Foghlú:
We have asked that question in relation to the three major projects. Bearing in mind the Thorn report, the appointment of a facilitator to come to a conclusion in relation to demands of contractors regarding buildings has not come through yet. We do not know yet what it will result in. When it concludes, we-----
It is now 2019 and maybe in 2020 we might get an answer to this question about something that happened. It will be so historic. From the perspective of a Chairman of a Committee of Public Accounts, justice delayed is justice denied. The taxpayer will be denied if there is a loss. It has already taken six years and nobody has been able to put a figure on the loss, if there is a figure. In another few years, we might have a figure, or we might not. I believe there is something wrong with the whole process if, six years after an issue arises, we do not even know if there is a loss. The witnesses can understand my position. They do not have an answer. I suppose they will say to me it is a rhetorical question but they get where I am coming from. I am surprised at the position we are in if these issues were so serious as to take up so much time. Even when Mr. Thorn was sent in, why did somebody not try to deal with this? Why did the finance committee not check whether we were out of pocket? If the organisation is out of pocket, it is the front-line services, including the youth services and all the other great services provided, that are affected. If there was less money in the organisation and something else got cut, that is what we are here to know about. Six years after some of these issues arising, people are just beginning to ask the question. The answer is that we will wait until the Garda completes its work and look at it at that stage. I find that delay-----
More than frustrating. It is frustrating but not good enough that it has taken so long. I am not even talking about the old VEC, just this one. I will leave it at that. I thank the witnesses for attending. It is a difficult kind of meeting when there is a report that has gone to the Garda but I am satisfied the meeting was conducted properly. Nothing was said there that could compromise any investigation by the Garda or any case, if it arises in due course. That was the important concern I had. We have probably asked questions to which we have not got answers so we ask that the information sought be sent on to the committee as soon as possible. We look forward to receiving the accounts for 2016, 2017 and 2018 in due course. That is a little bit away yet but we will wait and see.