Committee Reports > List of Committees > Dáil > 1958 > Committee of Public Accounts > Report - Appropriation Accounts 1955 - 1956

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

Dé Máirt, 21 Eanáir, 1958.

Tuesday, 21st January, 1958.

The Committee sat at 3 p.m.

DEPUTY DILLON in the chair.

Liam Ó Cadhla (An tArd-Reachtaire Cuntas agus Ciste) and Mr. D. J. Maher (An Roinn Airgeadais) called and examined.

VOTE 49—GAELTACHT SERVICES.

Mr. T. O’Brien called and examined.

473. Chairman.—This meeting is summoned, gentlemen, to consider certain aspects of the Gaeltacht Services Vote and Mr. O’Brien, the Accounting Officer, is here to help us. Mr. O’Brien, you may remember on the last occasion when we were looking at this Vote at Question 452, I asked you the following question: “It must be clear either the results of the stocktaking at 31st March, 1956, in respect of (1) raw materials and (2) finished goods have been delivered to the Comptroller and Auditor General or they have not,” and your reply was: “They have.” Your reply went on: “The audit query asked for raw materials and finished goods located at various centres, the Comptroller and Auditor General specifying different materials, wool at Kilcar, linen at Bruckless and Cliffoney, materials for toys at Elly Bay, Crolly and Spiddal. Replies were furnished to all three.” I have since received a letter from the Comptroller and Auditor General in which he said:—

“At the meeting on 31st October, 1957, I informed the Committee that the results of stocktaking at certain centres, as set out below, had not been made available but the Accounting Officer disagreed with me, stating that all information sought had been supplied.

I undertook to review the whole position re stocktaking and as a result of the re-examination carried out by my officers during the present month I find that I have no reason to alter my original statement that the stocktaking results for

had not been furnished to me.”

Now, Mr. O’Brien, could you help us?— Yes, sir. The report of the Auditor General is in fact correct. When I was before the Committee in October I was aware that a query had been addressed to us in regard to raw materials and finished goods at specified centres at 31st March, 1956, and I knew, too, that we had supplied figures in terms of value for such centres. I knew also that a supplementary audit query had been addressed to us later asking for particulars of discrepancies disclosed in the stocktaking. For myself I had thought that we supplied all the data sought in the supplementary query but—and this is the kernel of the thing—I was mistaken in so thinking. I have since supplied the outstanding particulars. If you will permit me, I will give the position for the year 1955-56; in sum it is this: Raw materials —for knitwear yarn, total weight in pounds, which should be in stock, 38,399 lbs.; total weight actually in stock, 38,590 lbs.; discrepancy, plus 191 lbs. That is less than ½ per cent. surplus and the internationally accepted standard moisture content is 15.433 per cent. Finished knitwear goods—what should be in stock, 3,097½ dozen, what was in stock, 3,105 dozen; surplus 7½ dozen, which is quite small. For industries other than knitwear the position is, taking raw materials first, wool at Kilcar, value in pounds money, £62,851; discrepancy, nil. Linen, at Bruckless and Cliffoney, was value for £5,586; discrepancy, minus £97 and that is due to cutting of the materials into fixed sizes for manufacture, cutting off the small edges, etc.

Deputy Booth.—Wastage?—Yes. That is allowed for in fixing the selling price. Toy materials at Elly Bay, Crolly and Spiddal, value £58,618, discrepancy plus £42, which is less than one-tenth of 1 per cent. Now, turning to finished goods: tweed at Kilcar and the Dublin Depot, value £98,516; discrepancy, Kilcar, nil; Dublin, plus 30,196 yards. I shall return to that in a few moments.

Chairman.—You do not give me that in values. You have not got that?—No.

Have you any idea of what the surplus of 30,196 yards would represent in money? —About £15,000. Lace and embroidery at Dublin, Bruckless and Cliffoney was valued at £17,559, discrepancy plus £2,627. I shall also come back to that later. Toys—Elly Bay and Crolly, value £34,453, discrepancy, nil. Knitwear— Tourmakeady, value £5,123, discrepancy, nil. Now, to go back, Mr. Chairman, to the items in which there are significant discrepancies. I shall take first the lace and embroidery at Bruckless and Cliffoney where there is a surplus in terms of money of £2,627. As there are 217 different kinds of article involved it is more convenient to give the results in value form—the valuation in all cases being based on the same price lists. To ensure uniformity, the selling prices of first quality goods were adopted to obtain the valuation figures for output, sales and stock in hands at the beginning and end of the year. This, of course, gives a much higher value for stock in hands than the value adopted for the purpose of the trading accounts where the value of stock on hands does not include market overheads. For example the figure already supplied for the end of March, 1956— £17,559 was the reduced figure. The valuation on these goods costed at the full selling price of first-rate goods amounted to £19,304 15s. 4d. A serious difficulty occurred in compiling the account for the year 1955-56. The Works Orders for that year were not retained in the Bruckless centre and the true production figures could not consequently be determined. The Works Orders had been disposed of because of lack of space, and this will be appreciated from the following figures representing the development of the industry in recent years. The sales in 1952-53 were £9,938. Four years later in 1956-57 they were £21,016. There was no corresponding development in accommodation at the centres and affairs had reached such a state that the finishing stages in production had become a bottleneck. There is not sufficient accommodation in the Bruckless centre to handle the production there. In the circumstances, we had to depend on other records of production in the centre. namely, the details supplied to the Accounts Branch for the checking of the wages of the workers. The workers are paid by piece rate. The exact production figure cannot be obtained from these details because of the multiplicity of stages in the manufacture of each item. The workers who carry out the initial stages may be occasionally paid for their work some weeks before the articles on which they were engaged are finished. Some are paid in March for work on goods which may not be completed until April. There is, therefore, overlapping at the beginning and end of the year and consequently the figure given in the following account for the value of production is uncertain and what evidence we have would seem to indicate that it should be somewhat greater. The total value of goods on hands on the 1st April, 1955, was £16,770 3s. 9d. The total value of production during 1955-56, as ascertained in the manner described, was £15,426 11s. 5d., giving a total of £32,196 15s. 2d. The total value of goods sold during 1955-56 was £15,519 6s. 8d., meaning that the value of goods that should have been in stock at the end of March, 1956, was £16,677 8s. 6d. The total value of goods on hands at the 31st March, 1956, was ascertained as £19,304 15s. 4d., leaving an excess of £2,627 6s. 10d.

If I may move from that on to tweed at Dublin, Sir, it discloses a surplus of 30,196 yards. Evidently there was an error in stocktaking. There was no halt to the movement of stock during stocktaking and the stocktaking itself took about three weeks in May, 1956. Adjustments had to be made back to March, 1956. Pieces of tweed were being shifted. Some were sold to customers and some more were received from Donegal. In fact, the receipts from Donegal during April and May, 1956, were 84,037 yards, while issues from Gaeltarra Éireann during the same period were 85,549 yards. In other words there was a movement of 169,586 yards all told during that period. I suspect that some of the pieces were counted twice. The following year’s stocktaking appears to confirm that the 1956 stocktaking was faulty, the surplus in 1957 being reduced to 8,134 yards. The main trouble is that there was no complete close down during stocktaking. Seemingly it was not favoured. There was a phobia about loss of business and also some danger of repercussions through loss of employment for workers who are paid by piece rate.

Chairman.—I think I should comment on that by saying that I know of no business house which closes down business for stocktaking.

Deputy Booth.—Some do, but most do not.

474. Chairman. — I am struck by the fact to which you refer that at the end of 1956-57 an apparent surplus of 30,196 yards had been reduced to 8,134 yards by a stocktaking carried out in the same circumstances and by the same procedure. By that fact 22,000 yards approximately had vanished. As you say, Mr. O’Brien, that may be due to an error in stocktaking at the end of 1956, or it may be due to an error in stocktaking at the end of 1957, but the fact is that 22,000 yards have vanished either in the stock books or physically. I know you will understand the Committee is bound to have regard to that fact and raise the query: “What has become of it?” It was no more difficult to carry out stocktaking at the end of 1956 than at the end of 1957. If one stocktaking is to be depended on, the other is to be depended on too, but between the pair of them 22,000 yards of cloth have disappeared, and I think that is a matter which calls for comment. Have you any comment to make on that beyond envisaging the possibility of a clerical error in stocktaking?—I have not really. I suspect, from all the inquiries I have been able to make, that what happened was that some pieces were counted twice, there probably was double counting of some pieces through the prolonged stocktaking for March, 1956.

Chairman. — Mr. Ó Cadhla, have you any comment?

Mr. Ó Cadhla. — My only comment is that before and up to October, 1957, there was not an adequate system of store records. The system that was in operation for knitwear, I think up to some period in 1955, was allowed to lapse and there was no book record of receipts and issues.

475. Deputy Carty.—What caused the disruption in the stocktaking methods that the Comptroller and Auditor General has referred to—that they ceased to have effect from 1955?

Mr. O’Brien.—So far as I can gather, there were no such records kept in the place since 1935 from the time the industries were set up.

Mr. Ó Cadhla. — The original stocks were small. The valuation of finished goods in 1940 was about £14,000. The figure had risen to £213,000 in 1956.

Chairman.—There seems to be a conflict. You refer to a system of book records of issues and receipts that obtained up to 1955 and the Deputy inquired why did it stop in 1955. Mr. O’Brien, the Accounting Officer, says that so far as he is aware no such system of book records existed after 1935. Either they existed or did not exist.

Mr. O’Brien. — I am told that they existed for knitwear and not for tweed.

Chairman.—Does that correspond with your view, Mr. Ó Cadhla, that there was this book record for knitwear but not for tweeds?

Mr. Ó Cadhla.—I think so. My officers approached the departmental officers time and time again to point out the absolute necessity of having book records for tweeds. But there was no response until it became necessary to report the whole matter to the Public Accounts Committee. Then, in October, 1957, action was taken, but not until then.

476. Mr. O’Brien. — As the issue is a complicated one I took the liberty of bringing along with me to-day the Director of the Division and the Accountant, and if you will give me permission, Sir, I would like to have them address the Committee.

Chairman.—Certainly.

Mr. O’Brien.—Mr. Ó Baoighealláin is the Director of the Division and Mr. Déiseach is the Accountant.

Mr. A. Ó Baoighealláin (Director, Gaeltacht Services) called and examined.

477. Chairman. — The net point at present is that there does not seem to have been a book record in respect of the issue and receipt of tweeds on a basis similar to that which obtained in respect of knitwear. Perhaps the Accountant or the Director could inform us as to why it was thought expedient not to have such a book record in respect of tweeds when in their joint wisdom they thought it desirable to have it in respect of knitwear.

Mr. Ó Baoighealláin.—Receipts of all finished goods including tweed were recorded on consignment notes signed for by the officers receiving the goods and issues were similarly recorded on inaddition, a physical stocktaking was made voices. In addition, a physical stocktaking was made every year. There was not a running book record kept of the tweed but there were other records kept from which the book record could have been compiled if the staff were available to do so. That has been done now that staff is available to do it. It was the lack of staff that prevented us from compiling these running book records.

478. Chairman.—You would say that it would have been desirable to have a running book record in regard to tweed similar to that which obtained in regard to knitwear but you were prevented from keeping it owing to a shortage of staff?

Mr. Ó Baoighealláin.—Yes, Sir, that is correct, but I would not like to leave you under any misapprehension in the matter. We did not advert particularly to this aspect of stock records until, as the Comptroller and Auditor General says, the matter was raised by him.

479. Chairman.—So that, in fact, the Division itself had not ever attempted to keep these running book records in respect of tweeds. Frankly, I find some difficulty in understanding why it was thought necessary and even essential to keep this record in respect of knitwear and not in respect of tweed. There may be a good reason for the decision to keep it in the one case and not in the other, but I do not know what that reason is.

Mr. Ó Baoighealláin.—The book running record in respect of knitwear was started by the Accounts Branch some time in 1948 as a trial, if you like, to see in what respects the stock record system could be improved and to see what results could be achieved. That was continued down to the year 1955-56. Of course, it would have been desirable to have the same running record for tweed but again due to lack of staff it was not possible to extend the system to include tweed.

Chairman.—I understand that it has now been extended?

Mr. Ó Baoighealláin.—Yes.

480. Deputy Carty.—It is difficult to reconcile Mr. Boylan’s statement if his staff has not been augmented. Has the staff been augmented?

Mr. Ó Baoighealláin.—Very recently, which had been outstanding were filled.

Deputy Carty.—That explains that.

Chairman.—Do you wish to make any further comment, Mr. Ó Cadhla?

Mr. Ó Cadhla.—No, Mr. Chairman. I have no comment really. The evidence is in accordance with our view. The only point of difficulty was the Dublin Depot. We found in the course of the survey carried out this month that the position elsewhere was generally satisfactory. In regard to tweed, we found it was scarcely possible to measure the accuracy of the stocks. You may have a stocktaking but you want to measure the accuracy of the physical stock by reference to book records. But there were no book records. Therefore, it would be very difficult to verify the accuracy of the stock figures. We do not know whether in fact the stocks were adequately safeguarded during the particular period. There may have been leakages but they would not have been disclosed under the system in operation.

481. Deputy Carty.—Would the Comptroller and Auditor General not agree that taking stock on the value of goods on supplied figures rather than, in the case of tweed, taking it on the number of yards of material is a rather dangerous expedient? If, for instance, there should be 20,000 yards of material and you have only 15,000 yards, you can quite easily inflate the value of the material to offset any loss in the physical stocktaking.

Mr. Ó Cadhla.—That is quite so. I do not think that the annual valuation of stock provides an adequate safeguard.

Mr. Ó Baoighealláin.—The stock sheets compiled each year give both the yardage and the value.

Deputy Carty.—If that is so, it is a different matter. I think we would prefer, as far as tweeds are concerned, to get the stock in yards.

482. Chairman.—The present position is that at the end of 1955-56 there was a surplus of 30,196 yards and at the end of 1956-57 there was a surplus of 8,134¾ yards which, having made allowances for issues, reveals a discrepancy of approximately 22,000 yards. That may have been due to a mistake in the physical measurement of stock at the beginning of the year or at the end of the year or it may have been due to physical disappearances of stock. As the Accounting Officer points out, it is difficult to say at this stage what is the true explanation of it. From the inquiries he has made he advises us that he believes it is probably due to a mistake in the stocktaking at the end of 1956.

Mr. O’Brien.—Yes.

Deputy Haughey.—It could not be disappearances; it must be something being put into the stock.

Chairman.—If you have a surplus at the beginning of the year of 30,000 yards and it shrinks to 8,000 yards—

Deputy Haughey.—I was taking both years together. If you take the two years together there was a surplus of 8,000 yards. It seems to me quite clear that the 30,000 yards was a mistake in stocktaking. Over two years you had a surplus of 8,000 yards.

Chairman.—That is one explanation, that it resulted from counting pieces twice at the end of 1956 and counting them once at the end of 1957.

Deputy Haughey.—And over two years somebody put in 8,000 yards.

483. Chairman.—But stocktaking no longer has any significance if you count it twice at the end of 1956 and only once at the end of 1957. Two points emerge. One is that Mr. O’Brien’s view and that of the Comptroller and Auditor General are now reconciled that there was a misunderstanding on the last occasion and that the Comptroller and Auditor General’s belief that he had not received the records which he had requisitioned was correct.

Mr. O’Brien.—That is right and in so far as I have inconvenienced the Committee I wish to apologise to them.

484. Chairman.—You have not inconvenienced the Committee. It is a very understandable mistake. In regard to the second factor—the differential, we will call it, of 22,000 yards between the surpluses at the end of 1956 and 1957—I think that must be commented upon. Of course, Mr. O’Brien’s view as to the source of that differential will, I have no doubt, be given weight to by the Committee and they will refer to it. I think the Committee will be glad that running stock records are now maintained in book form as suggested by the Comptroller and Auditor General. But I am bound to add that some of our discussion is in a sense academic because under recent legislation I understand the whole administration of this business will be handed over to a Board which will fix its own procedures, and recommendations we may make from this Committee could only apply in respect of events which are about to cease. We have to-day to examine these accounts and make such comments as we consider to be our duty to make on them.

Mr. O’Brien.—There is no doubt that the Civil Service was rather an imperfect organisation to be handling industries of this kind. In fact, we tried to get a secretary-accountant and a system of commercial clerks for this purpose so that we would not have to have the ponderous machinery of the Civil Service Regulation Acts for recruitment of staff. We did not get that. Meanwhile, the whole subject of these industries was under constant examination and the fact that the Civil Service system was not appropriate for them has been recognised by the formation of the Board by the Oireachtas.

485. Chairman.—Is there anything you would like to add, Mr. Ó Cadhla?

Mr. Ó Cadhla.—My complaint is a very simple one. With regard to tweed in the Depot there were no book records and I certainly cannot understand how any business could be run on efficient lines without some system of stock records.

486. Chairman.—Are you certain that the book records now established are adequate?

Mr. Ó Cadhla.—We have not yet had the opportunity of examining them.

Deputy Carty.—A good answer.

Mr. Ó Cadhla.—I do not think the system is completely installed yet.

Mr. O’Brien.—It is there almost three months now. Would it be in order for me to say that though book records did not exist the means to compile them were in fact there? They were in fact compiled when we were asked to do so.

Deputy Haughey.—Obviously.

Mr. Ó Cadhla.—There were receipt vouchers and issue vouchers and the auditor would have to ensure that all these were available. It would be a very difficult job in view of the thousands of transactions in the course of a particular year. He would have to rely entirely upon issue vouchers and receipt vouchers, get them all together, tot them, and subtract one total from the other.

487. Deputy Haughey.—The raw material was there.

Mr. Ó Cadhla.—Yes.

488. Deputy Haughey.—If you wanted to make a stock account at any given moment you could do so. The primary information was available in these documents.

Mr. Ó Cadhla.—Yes, if you could be sure that all the information was available. I cannot see how any auditor could certify a statement of stock compiled on that basis.

489. Deputy Booth.—I cannot see how any Department could possibly work on that basis at all in view of the fact that the stock records were non-existent. I will amend that for Deputy Haughey and say that there was a record from which a stock record could be compiled but the information in regard to a complete stock record which could be readily read or analysed was not there. How you could run a business on that basis just beats me. This, as Mr. O’Brien says rightly, is essentially a business proposition, not a matter of Civil Service procedure but it was run strictly on Civil Service lines maybe through the parsimony of the Oireachtas but inevitably it seems to me that chaos was bound to result. I cannot see how anyone could decide on policy as to how that was to be ordered or delivered if you did not know at any given moment what you had.

Chairman.—I think “chaos” is too strong a word. These matters will come up for our consideration when the draft report is under discussion amongst us. In the meantime, I am not unduly delaying the Accounting Officer and his colleagues who have been good enough to come along and help us to-day unless there is some other question of fact upon which we would wish to elicit information from them. Is there any further question, Deputy Booth, you would like to ask to clarify the position?

490. Deputy Booth.—I do not know whether this comes into our purview, Mr. Chairman, but who is in charge of ordering the raw materials or delivering raw material to the craftsman for manufacture into knitwear, finished tweed and so on? Who is the responsible person?

Chairman.—Deputy Booth would like to know who is actually responsible for delivering the raw materials to the individual cottage craftsmen?

Mr. Ó Baoighealláin. — Supplies are ordered and bought on the recommendation of technical staff employed specially for the purpose, who are familiar with the business.

491. Deputy Booth.—They are familiar with the market for the finished material? —Correct.

The witnesses withdrew.

The Committee adjourned.