Committee Reports > List of Committees > Dáil > 1973 > Committee of Public Accounts > Report - Appropriation Accounts 1970 - 1971

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

Déardaoin, 18 Deireadh Fómhair, 1973.

Thursday, 18th October, 1973.

The Committee met at 11 a.m.

Mr. S. Mac Gearailt (An tArd-Reachtaire Cuntas agus Ciste) called and examined.

GENERAL REPORT.

Mr. C. H. Murray called and examined.

363. Chairman.—Paragraph 1 of the Report of the Comptroller and Auditor General reads:

“Appropriation Accounts of the public services are required by statute to be submitted to me by Accounting Officers not later than 30 November each year. To facilitate their earlier presentation to Dáil Éireann the Department of Finance approved administrative arrangements in 1957 which require the accounts to be submitted to me not later than 31 May. In the year under review these arrangements were not adhered to; no accounts were received by 31 May and thirty-four accounts were outstanding at the statutory date. I understand that this was due to delay by the Office of the Paymaster General, which acts as banker for Departments, in furnishing statements of receipts and payments necessary for the preparation of the Appropriation Accounts. The delay originated in the bank closure in 1970 which resulted in an accumulation of a very large number of paid orders for clearance. I have communicated with the Accounting Officer of the Department of Finance in the matter.

The date of my report, 31 January 1972, is later than normal due to the delay in furnishing Appropriation Accounts to me. In the case of the following Votes, accounts* had not been received at the date of my report.

Mr. Mac Gearailt.—This paragraph refers to the delay in the submission of Appropriation Accounts. Similar delays occurred in connection with the submission of the 1971-72 accounts. In reply to our inquiry as to the cause of the delay the Accounting Officer has informed us that the clearance of payable orders by the Paymaster General had fallen into arrear due to the unsatisfactory performance of machines supplied in 1968 for the initiation of computerisation, that these machines had been replaced and that arrangements had been made to have the arrears cleared.

364. Chairman.—I suppose this is part of the universal experience with computerisation?

—Yes. Also, I think we had trouble with machines supplied at the initiation of computerisation. In addition, the problem was aggravated by the bank strike in this particular year. We are very conscious of the importance of having these departmental monthly accounts supplied promptly by the Department and we regret very much the fact that there have been delays.

365. What is your present position?

—The present position is not as satisfactory as we would like. We did, I think, overtake most of the arrears but then we found that the total demands on the Revenue computer which was servicing us were such that the revenue computer could not be made available to us. Fortunately this coincided with the installation of the Central Civil Service computer in Kilmainham and the changeover was made to that computer early this year. But as you yourself remarked, Mr. Chairman, the start-up with a computer always gives problems and we changed over to another computer and there are start-up problems there. However, we have reduced the arrears very substantially and we are now about six weeks behindhand. I would like to assure the committee that in so far as human ingenuity can arrange this we shall overtake these arrears very quickly.

I assume your problem is the same as everybody else’s, the complexity of the demand makes a computer necessary, whereas it is beginning to be shown that, other things being equal, the human machine has still to be beaten by the computer, if you have the organisation for it?

—Yes.

366.—Paragraph 2 of the Report of the Comptroller and Auditor General reads:

“Outturn of the Year

The audited accounts are summarised on page xxxviii. The amount to be surrendered as shown in the summary is £5,872,822 arrived at as follows:—

This represents 1.3 per cent. of the supply grants, as compared with 1.6 per cent. in the previous year.

In no case has the provision made by Dáil Éireann been exceeded and no excess vote is, therefore, necessary.”

Mr. Mac Gearailt.—This paragraph gives the overall outturn in relation to the 51 Votes passed by Dáil Éireann to meet expenditure in 1970-71. The outturn for each Vote is shown in the statement on page xxxviii. As indicated, in no case was the provision made by Dáil Éireann exceeded.

367. Chairman.—Paragraph 3 of the Report of the Comptroller and Auditor General reads:

“Exchequer Extra Receipts

Extra receipts payable to the Exchequer as recorded in the Appropriation Accounts amounted to £3,051,956.”

Mr. Mac Gearailt.—This paragraph gives the total of the Extra Receipts payable to the Exchequer collected by Accounting Officers in the year under review. The breakdown of this total, Vote by Vote, is shown on page xxxviii. These receipts are brought to credit of the Exchequer under the head, Non-Tax Revenue—Miscellaneous Receipts.

368. Chairman.—Paragraph 4 of the Report of the Comptroller and Auditor General reads:

“Surrender of Balances on 1969-70 Votes

The balances due to be surrendered out of Votes for the public services for 1969-70 amounted to £6,118,605. I hereby certify that these balances have been duly surrendered. I further certify that the excess on Vote 22 referred to in paragraph 2 of my report for the year 1968-69, amounting to £3,846, has been made good by a vote of the Oireachtas granting a sum of £3,846.”

Mr. Mac Gearailt.—As moneys are voted by Dáil Éireann for the service of a particular year it follows that any money remaining unspent at the 31st March falls to be surrendered. This paragraph certifies that the moneys due to be surrendered in respect of 1969-70 balances have, in fact, been so surrendered.

369. Chairman.—The proportion of moneys unspent to the total Vote over the years has not been deteriorating?

—If you go back ten years you will find that as a percentage it has diminished.

I suppose inflation makes it impossible to compare actual figures?

—Yes, but I think if you take it as a percentage of the amount voted by the Dáil it has diminished.

370. Paragraph 5 of the Report of the Comptroller and Auditor General reads:

“Stock and Store Accounts

The stock and store accounts of the Departments have been examined with satisfactory results.”

Mr. Mac Gearailt.—The Exchequer and Audit Departments Act, 1921—section 4— requires that the stock and store accounts kept by Government Departments shall be examined on behalf of Dáil Éireann by the Comptroller and Auditor General who shall report the result of any such examination to An Dáil. This paragraph confirms that the requirements of section 4 of the 1921 Act have been complied with in relation to 1970-71.

371. Chairman.—Paragraph 6 of the Report of the Comptroller and Auditor General reads:

“Statement of Receipts into the Central Fund for the Year ended 31 March, 1971.

Revenue:—

Repayments in respect of Issues under the following Acts:—

Money Raised by Creation of Debt:—

Statement of Issues from the Central Fund for the Year ended 31 March, 1971

Issues under the following Acts:—

Issues for the Redemption of Public Debt:—

Mr. Mac Gearailt.—This paragraph shows the breakdown under various heads of monies received into and paid out of the Central Fund in the year under review.

372. Chairman.—Paragraph 7 of the Report of the Comptroller and Auditor General reads:

“In addition to those shown in the previous paragraph, issues of £425,000 and £175,000 were made from the Capital Fund to An Bord Iascaigh Mhara and Gaeltarra Éireann, respectively.”

Mr. Mac Gearailt.—The Capital Fund, referred to in this paragraph, was set up under the Central Fund Act, 1956, its income being originally derived from a special import levy imposed that year. In recent years the income of the fund consisted of repayments of advances made in prior years and of interest on advances outstanding. The fund was wound up in 1972-73 under the Finance Act, 1972 and the assets of the fund were transferred to the Exchequer.

373. Chairman.—Paragraph 8 of the Report of the Comptroller and Auditor General reads:

“Reference was made in paragraph 9 of my previous report to the Turf Development Act, 1968 which enabled the Minister for Finance, by Order, to waive interest due on moneys advanced to Bord na Móna under section 53 of the Turf Development Act, 1946. Interest amounting to £1,128,392 due in the year under review was waived, bringing the total amount waived to £4,788,006. The statutory period for the waiver of interest ended on 31 March, 1971.”

Mr. Mac Gearailt.—This paragraph refers to a special concession made to Bord na Móna regarding waiver of interest on advances. The concession related to the period April, 1967 to March, 1971. The total interest waived, £4,788,006, includes £983,027 on advances from the Capital Fund mentioned in paragraph 7.

374. Chairman.—In effect, this works out as a grant to Bord na Móna?

—It was a form in which support was given to them—the waiving of interest. As the paragraph points out, the statutory period of waiver has ended and Bord na Móna are now paying us interest in the normal course.

This can only be done under statutory authority?

—Yes.

375. Chairman.—It is a good safeguard. Paragraph 9 of the Report of the Comptroller and Auditor General reads:

“Under the Nítrigin Éireann Teoranta Act, 1970 the authorised share capital of Nítrigin Éireann, Teo. was increased from 100 to 7,500,000 shares of £1 each and the issued share capital was increased from £97 to £4,712,097 by the issue to the Minister for Finance of 4,712,000 fully paid up shares. Of these, 3,500,000 represented a conversion into share capital of £3,500,000 of the loan capital of £6 million already provided from Exchequer sources. The balance of the loan capital, £2,500,000 falls to be repaid to the Exchequer by way of an annuity, payable half-yearly, over a period of 25 years which commenced on 1 July, 1970. The remaining 1,212,000 shares issued to the Minister were in lieu of interest amounting to £1,212,000 due on the loan capital for the period up to 30 June, 1967. Interest on £2,500,000 for the period 1 July 1967 to 30 June 1970 amounting to £468,750 was received in the year under review but, in accordance with section 3 of the Nítrigin Éireann Teoranta Act, 1970 interest for the same period was not charged on the loan capital, £3,500,000, which was converted into share capital.

A sum of £400,000 was issued from the Exchequer in the year under review in respect of additional shares taken up by the Minister for Finance in order to provide the company with working capital and £250,000 was issued in June 1971 in respect of further shares taken up by the Minister for the same purpose. The total issued share capital at 30 June 1971 was £5,362,097.”

Mr. Mac Gearailt.—This paragraph relates to the capital re-structuring of Nítrigin Éireann Teo, and indicates the means by which the company’s issued share-capital was increased from £97 to £5,362,097 by 30 June, 1971. In brief, shares amounting to £4,712,000 were substituted for £3,500,000 of the £6 million Central Fund advances already issued and for £1,212,000 interest due on these advances. Further shares were issued to the Minister for Finance in respect of additional advances, £400,000, made in the year under review and £250,000 issued by him in June, 1971.

376. Chairman.—There is still a developing industry there?

—Yes. Briefly, what was involved was a restructuring of the capital of the company and an acknowledgment that a substantially greater share of capital as compared with loan capital was more appropriate to a commercial company like this.

377. Paragraph 10 of the Report of the Comptroller and Auditor-General reads:

“In paragraph 11 of my previous report I referred to the appointment in 1969 by Irish Steel Holdings, Ltd., with the approval of the Minister for Finance, of a firm of commercial auditors in place of the Comptroller and Auditor General who had been auditor to the company since it was set up in 1947.

In 1971 a Board whose capital moneys have been provided almost entirely out of the Central Fund made an unsuccessful application to the responsible Minister to appoint a firm of commercial auditors in place of the Comptroller and Auditor General who has acted as auditor to the Board since it was set up nearly thirty years ago.

Article 33 of the Constitution provides for the appointment of a Comptroller and Auditor General to audit all accounts of moneys administered by or under the authority of the Oireachtas. In my opinion these include the accounts of any state-sponsored body, irrespective of its legal form, whose share capital is provided partly or wholly from State funds, whose loan capital is provided or guaranteed by the Government or by a Minister of State or which is in receipt of annual or periodic grants or advances from State funds to enable it to perform its functions. The exclusion of the accounts of any such body from my audit prevents me from carrying out a constitutional function in relation to the State funds administered by that body. In addition such exclusion can only be regarded as a retrograde step which is not in line with the best State audit practice in most modern democracies.

In view of the importance of the principle involved and having regard to the ever increasing volume of State funds administered by State-sponsored bodies I have deemed it desirable to bring this matter to the notice of Dáil Éireann again.”

Mr. Mac Gearailt.—This paragraph relates to the audit of the accounts of State-sponsored bodies and puts forward the point of view that such audits should be entrusted to the Comptroller and Auditor General. This matter was considered by the committee in connection with their examination of the 1969-70 accounts and they expressed the view in their report that proposals by State-sponsored bodies to dispense with the audit by the Comptroller and Auditor General were to be deprecated.

378. Chairman.—We anticipate this subject will be discussed in detail on the next occasion. Paragraph 11 of the Report of the Comptroller and Auditor-General reads:

“Savings Bank Fund Deposit Account

The Savings Bank Fund Deposit Account which is managed by the Department of Finance reflects transactions relating to the investment of savings bank moneys paid over to that Department by the Department of Posts and Telegraphs. In the course of my audit of the Account for the year ended 31 December 1969 I noted a transaction involving an exchange of Government stocks between an Assurance Company and the Deposit Account at prices agreed between the Company and the Department of Finance, which resulted in a loss of earnings to the Account of about £86,000 per annum. I also noted that the prices settled for the stocks compared unfavourably with the Stock Exchange prices of the day. I have asked to be informed as to the considerations involved in the transaction.”

Mr. Mac Gearailt.—This paragraph deals with a direct exchange of Government stocks between the Savings Bank Fund Deposit Account and an assurance company. In the course of his reply to our query the Accounting officer states:

“It became necessary some years ago for this Department to intervene in the market in such securities in order to ensure an active market and so encourage investors to utilise it, rather than the British gilt edge market, and so facilitate the raising of resources for the financing of the public capital programme. For this purpose it was necessary that ample supplies of each stock should be available for sale. In August, 1969, preliminary preparations were in train for the issue of a national loan in the autumn. At that time it was apparent that the trend of interest rates was such that it would be necessary to issue a loan with an interest rate of 9% or higher. It was also apparent that with this possibility the prices of the 7½% Development Stock 1988-93 and 7½% National Loan 1981-86 (both of which carried conversion options into the new stock at their issue price) were altogether too low and that persons who acquired the stock with a view to conversion stood to make a handsome profit. The relatively low holdings of these stocks in departmental funds at the time made it difficult to activate the market with a view to raising the price to a more realistic level. It was, accordingly, decided to take steps to acquire supplies of these stocks and as the assurance company was known to be a large holder arrangements were made to acquire some stock from that company. The price negotiated took account of the conversion factor mentioned.”

Normally the sale or purchase of Government stocks on behalf of State Fund accounts is carried out by the Government broker. This is the first occasion that a direct swop of stocks between a fund account and an outside body has come to my notice.

379. Deputy MacSharry.—Could the witness throw some light on the last sentence of the paragraph which reads:

“I have asked to be informed as to the considerations involved in the transaction”.

—Perhaps it would be helpful if I supplemented that information because I can see that there might be a possibility of some misunderstanding here. First, I would emphasise that this transaction did not in any way prejudice the Savings Bank Fund Deposit Account. It did not prejudice either the capital assets of the fund or the income of the fund in so far as depositors in the Post Office Savings Bank were concerned. This loss of income to the fund of about £86,000 did not mean that the interest due to depositors in the Post Office Savings Bank was in any way prejudiced. This is primarily because of two factors: the rate of interest payable to depositors in the Post Office Savings Bank is not determined by the income accruing to that savings bank. It is determined by broad general considerations. Of course, the income of the Post Office Savings Bank is normally substantially greater than the interest payable to depositors but apart from that factor the fund is guaranteed by the Minister so that even if the factors I mentioned had not applied and if there were a shortfall the Minister would have to make up that shortfall.

380. Chairman.—That may be accepted but am I right in saying there was a short-circuit?

—No.

Was there not a short-circuit between the Department and the assurance company in the dealing in stocks?

—I would not accept that fully. This is not the first occasion on which direct dealings have taken place although I concede that it may have been the first time that such dealings have come to the notice of the Comptroller and Auditor General. Also, having regard to the amounts involved in the transaction it would not be unusual for any transactor to deal direct outside the Stock Exchange with the other person. The amount involved is such that dealings outside the market would not have been unusual. One could say that prior to 1969 there would have been extreme difficulty in regard to private individuals dealing in these large amounts. The second point I wish to make is that what made this item unusual was that it took place at the beginning of a very active policy by the Department to re-activate the market in Government securities. Our purpose in doing this was to supplement the capital resources of the Exchequer. Many people think that a public capital programme is financed by an annual national loan. At the moment the annual national loan finances approximately one-fifteenth, or between 6 and 7 per cent. of the public capital programme. We must look elsewhere for other sources and what we were aiming at was a situation in which, in so far as we were borrowing from the public, we would not be relying so much on the once-a-year national loan. We have reached the stage where confidence in the market for Government securities is such that in the normal year we raise a substantial amount by way of dealings throughout the year in Government securities in addition to what we raise through the national loan. By being ready to buy and sell we have created a situation in which people are buying substantially more from us than we sell to them. This process has developed in the last few years. It was as a result of a recommendation in a report of a group that were set up in 1967 by the Central Bank and in which my Department were involved. Among other matters, the group were set up to explore the ways in which the market for Government securities could be more active. In the four years 1968-69 to 1972-73 the overall sales of Government securities have doubled. The turnover has gone up from £38 million to over £300 million, so this was, as I said, a particular process which was entered into very deliberately and, I think, with very satisfactory results. If one is dealing in the markets one must have stocks to deal in, to supply the would-be buyers. Our problem in 1969 was that we were short of this particular security. In addition, as the Comptroller and Auditor General brings out, because the market in Government securities was not an active one at this time, you could have situations in which prices of particular stocks did not reflect the general underlying trends, and this is what happened in regard to this stock. If we had not bought it up, all holders of that stock, which was due for conversion shortly, would have made a very substantial capital profit and I think we were able to obviate that by the transaction we entered into. The only other point I would make on this is that it is true that if one compares the price at which we bought this stock with the price listed on the Stock Exchange on that particular day, it would seem we were paying too much for it, but, in fact, transactions of this order normally would not, as I mentioned earlier, have gone through the Stock Exchange; the price would not have been reflected in the normal Stock Exchange price and for the moment that we were looking for I think a normal investor would have to pay more than the listed price on the Stock Exchange. Therefore, I think the straightforward comparison between the price at which we purchased and the quoted price on the Stock Exchange may not reflect the full position. Furthermore, I think we can show that the Post Office Savings Bank Fund Deposit Account made a capital profit on this transaction.

381. Deputy MacSharry.—How soon after would the rating be reflected on the Stock Exchange?

—It might take up to a month.

382. What was the difference between the price paid and the price quoted on the Stock Exchange?

—I am advised it was a 1 percentage point in each case.

383. Deputy Crotty.—As regards the substantial profit the holders of the stock would make, would these people not be entitled to make it?

—This is a fair enough point; but what actuated us in particular was that we were about to issue a national loan and we had to have a conversion operation for this particular stock. Because the apparent price of conversion stock was too low and because the stock had a right of conversion into the forthcoming national loan, the Exchequer would have found two things would have happened: it would have been paying too high a price for the national loan and too many people would have been converting from a low-priced conversion stock into an unduly highly priced national loan. Therefore, we would submit this action was justified, looking at it from the Exchequer point of view.

384. Deputy Bermingham.—The amount you would have had to pay in converting stock would have been too high?

—Yes.

In comparison with the other stock, is that the position?

—Yes, that is it.

385. Deputy Crotty.—I am suggesting that the people who held the stock should have had the benefit. There are people holding 3 per cent stock and they have no comeback.

—This is a rather complex issue and one would want full discussion on it. In so far as we did anything we raised the price.

386. Deputy MacSharry.—You raised the level of interest of Government stock?

—Even apart from that general aspect, the immediate issue that arises in this is, did we pay more for this stock than we should have, and we say “Yes”. We paid more than the apparent ruling Stock Exchange price. I have attempted to explain why we did that, but the short position is that the price of the stock rose.

387. Chairman.—There is a danger that we shall wander into policy matters. Let us get certain things straight. First of all, there is a policy matter for which you are not accountable, which is the question as to whether the manipulation by the State of funds in that way is acceptable. As it is a policy matter, there is a limit to the extent to which we can discuss it. You have said two things here. First of all, you mentioned earlier that the amounts were small. Will you not agree that the size of the amount is irrelevant where it is a question of departing from accepted procedures? If there is any departure the size of the amount is no excuse for irregularity. You will accept that principle?

—I would have no hesitation in accepting that as a general principle. First of all, I am not excusing anything in this instance, because of the particular size of the transaction, so in accepting the general principle I would not like to be taken as saying——

388. I just want to get this clear. You also referred to transactions between two private people. This is not a transaction between two private people: this involves the State, which is the community. May I ask was this a transaction between the State and a particular commercial interest?

—It was a State-sponsored body, who, of course, have commercial obligations and who in the past have always fought their own corner and will do so in the future. By the way, could I just explain that I was not trying to suggest that, because the State was involved, there are different considerations than if two private parties were concerned? All I was saying was that in the circumstances of 1969, even if two private parties had been involved and even if they could have arranged a deal like this, it would not necessarily have been at the price recorded by the Stock Exchange for that day because of the very small dealings that were the norm at that time.

389. The Comptroller and Auditor General has said:

“… The sale or purchase of Government stocks on behalf of State Fund accounts is carried out by the Government broker. This is the first occasion that a direct swop of stocks between a fund account and an outside body has come to my notice.”

Mr. Murray, you have said that this is not the first time and therefore the Committee can only conclude that there have been occasions when this kind of transaction occurred and it has evaded the Comptroller and Auditor General. Is that the position? It is better to clear up these points.

—I do not like the word “evade”.

Then perhaps “did not come to the notice of”?

—I would not necessarily accept that. I am not fully informed about what happened in the years prior to 1969 beyond being told by my advisers that this particular sort of transaction took place before then. If the committee are interested in this, I should prefer to have an opportunity of looking up the papers and perhaps when I appear before you in connection with next year’s accounts I could go into this again.

We can do that by agreement. Would the committee like to pursue this further when the 1972 accounts come before us? There is a question of policy involved also, as well as a question of administration.

390. Deputy MacSharry.—Could this have been done through the normal Government brokers?

—No, I am advised not.

391. Deputy Bermingham.—For the reason that the amount of stock you wanted would not be available?

—Yes, that is so. Also the price had to be fixed, party to party.

392. Chairman.—I take it you are not disputing that this should come before this committee, that it is a Public Accounts matter?

—Not in the slightest.

393. If you are not disputing that matter, is it not an administrative consideration to ask if such procedures would not tend to undermine public confidence in Government stocks and loans?

—Generally I would prefer to point to the facts——

This would be a fact of administration.

—I would point to the fact that if confidence had been undermined we would not have had such active dealings in Government securities in the past few years. We have no hesitation in asking the people directly concerned for an answer on this. In other words, we are satisfied from the Stock Exchange that there is no question in their minds in regard to confidence in Government securities. Also, the volume of transactions, the purchases and sales, and the fact that we have been able to induce people to invest heavily in Government securities, apart from the national loan, is testimony of the fact that confidence rather than having been weakened has, in fact, been strengthened.

394. Deputy Crotty.—Do you think it was this type of operation that created this confidence? Were there other factors such as more money in circulation or higher interest rates which would bring money to these institutions?

—I would concede that to a substantial extent. I do not want to exaggerate my case. I think higher rates in themselves are not the determining factor here. It is how the rates compare with other rates or other types of investment. Our experience in the past has been that at any given level of interest rates the demand for Irish Government securities was substantially less than would have been justified by the then prevailing economic factors. It is entirely a question of the market, of one institution being ready to buy and sell.

395. Deputy Bermingham.—Would you say it took a month to show any effect on the Stock Exchange?

—That is a very rough guess.

That would be without the issue of a new loan?

—I only gave that as a very rough estimate. In view of the interest expressed by the committee we will have to look into this and get more information extending over a longer period. I shall look into the points that have been raised.

396. The point I want to make is that the small investor who might have to sell during that period would be fooled to the extent that he would not know of this increase in price.

—When we talk about a month we have in mind the period at the end of which the full effect of this had worked its way through the market. During that period the price would have been moving up and anybody who sold during that time would certainly have got more for his stock than if he had sold before that time.

397. It would have been knowledge in certain areas that the stock was worth more?

—Knowledge available to whom?

To the assurance company.

Deputy Mac Sharry.—The amount of dealing in stocks at the time was negligible.

Deputy Bermingham.—I am sure that is right but it could happen?

—Yes, but we have no reason to think it did. Certainly as a general principle I should like to emphasise that in all our dealings in Government securities we are anxious to ensure that the small investor is not prejudiced.

398. That is the point I am making. There is a risk of that in that kind of dealing?

—There could be. Let me say that this was a very exceptional arrangement because the problem with which we were faced in 1969 was a problem, among other things, of non-availability of stock to deal in. We had to go out into the market to get stock in trade. Since then, to cope with this particular problem we have an arrangement under which the Minister, if he is short of any particular quoted stock, can issue further tranches to the departmental funds so that this problem should not arise again. This has been done very frequently. In fact, it is a sign of success when we have to issue further tranches because there is a demand for that particular stock.

399. Chairman.—The paragraph in the report refers to an assurance company. You have pointed out that the particular body with which this transaction was made was a State-controlled assurance company.

—It was a State body who in their commercial transactions are completely independent.

400. You will agree that if there was not that link here this type of procedure would be totally undesirable?

—I am not altogether sure.

401. Would it not have been preferential treatment for one commercial concern?

—That might have been so had this stock not been due for conversion. It was due shortly for conversion into a forthcoming national loan. If we had done nothing in this area, all that would have happened would have been that the national loan would have had to be issued at higher prices than was considered desirable or justifiable by reference to market conditions and holders of the stock would have made the capital profit I referred to earlier, so that it was not a transaction that was selective in the respect of giving benefit to some and denying it to others.

402. Perhaps it was because the company were State-controlled?

—No. It happens to be a convenience that the transaction was made in this way but it was done very much at arms’ length.

What do you mean by that?

—The mere fact that this was a State-company would not ensure preferential terms. On the contrary we have to pay more than appears to be justified and I stress the term “appears to be justified”.

403. We shall probably return to this matter later. Getting back to the question of whether such a transaction occurred before —how did this come to the notice of the Comptroller and Auditor General while prior transactions of the same nature had not come to his notice?

—Perhaps I could deal with this question when next I appear before you. I have concentrated on the point that was raised.

This matter is an important one.

Mr. Mac Gearailt.—I discussed this matter with my staff as well as with my predecessor and it was on the basis of these discussions that the report was written.

—What I am advised is that dealings direct with the holders of a particular stock, as distinct from sending a Government broker to the market, took place before this transaction occurred. On the information available at the moment we are not saying that the transaction was precisely the same as this one in which the dealings apparently involved paying a price above the going market price.

404. Chairman—Are we to take it that the State would make a private transaction with somebody to pay more than the market price?

—Perhaps I am not making myself clear. What happened in 1969 was a transaction which (a) involved dealing directly with the owner and (b) paying a price higher than the quoted price. I am advised that the 1969 transaction was not unique in so far as the first part of it was concerned, that was, the involvement of direct dealings. I am not clear as to whether any pre-1969 transactions involved paying a price that was different from the quoted price.

405. So that the 1969 transaction was at a higher price?

—Yes.

And you bought from this assurance company?

—Yes.

406. This company had the stock and what was to prevent them making a profit on the transaction as distinct from the normal market procedure?

—I could not answer for them.

407. What is causing us anxiety is the possibility of private deals involving large sums of money. We are concerned with the mechanics of the situation and as to how it came to the notice of the Comptroller and Auditor General.

Mr. Mac Gearailt.—I should imagine that it came to the notice of my Office when the Savings Bank Investment Fund was being audited. We audit that fund each year. If a direct swap came to the notice of my staff in previous years I should think they would have reported on it.

Chairman.—It is a matter that we shall deal with later.

408. Deputy Crotty.—It would appear to me that this transfer was made, not primarily to create dealings in stock but for the issue of new stock and the conversion rates of this stock into it was the primary concern of the Department. Am I right in that?

—I would not wish to apportion the objective but there were two aspects of the matter.

409. I would like to know what was the overall amount involved in the conversion loan and how much of it was held by the factor. Were they not likely to make a “kill” on this.

—I would not necessarily agree with that. In any event we must remember that the net result of this was that the stocks ended up at a higher price than before.

Chairman.—The end does not always justify the means.

—I am not suggesting that. We are being told on the one hand that other holders were being prejudiced while on the other we are accused almost of paying too high a price. These two accusations are not compatible.

Chairman.—Perhaps Mr. Murray will look further into the matter and we can go back to it again.*

VOTE 1—PRESIDENT’S ESTABLISHMENT.

Mr. C. H. Murray called.

No question.

VOTE 2—HOUSES OF THE OIREACHTAS.

Mr. C. H. Murray called.

No question.

VOTE 3—DEPARTMENT OF THE TAOISEACH.

Mr. C. H. Murray further examined.

410. Chairman.—There is a tendency for Post Office services to show an increase, but increased costs are shown here.

—I think in some cases there are arrears relating to previous years. This, of course, is a very labour-intensive activity and the general increases in salaries and wages are pushing up the costs all the time.

VOTE 4—CENTRAL STATISTICS OFFICE.

Mr. C. H. Murray called.

No question.

VOTE 6—OFFICE OF THE MINISTER FOR FINANCE.

Mr. C. H. Murray further examined.

411. Chairman.—Paragraph 12 of the Report of the Comptroller and Auditor General reads:

“Subhead L.—Payment to Special Regional Development Fund (Grant-in-Aid)

Reference was made in previous reports to payments into the above Fund from which grants or advances are issued to assist economic projects in western counties. A further £400,000 was provided in the year and, as indicated in the account of the Fund appended to the appropriation account, grants totalling £160,515 and repayable advances amounting to £77,050 were issued. Repayments of principal and interest totalled £23,494, and refunds of unexpended grants amounted to £4,400.”

Mr. Mac Gearailt.—This paragraph is for the information of the committee.

412. Chairman.—On subhead A.—Salaries, Wages and Allowances—there is an increase of £5,000. Was that due to an increase in remuneration or to an increase in staff?

—I cannot say offhand. It is a rather small increase, as you can see, of a half per cent or thereabouts. I would suspect that it is primarily an increase in staff.

Because it is so small.

—That is right.

413. Deputy MacSharry.—On subhead B —Travelling and Incidental Expenses— there is a note about expenditure on computer rental.

—That is an incidental expense. It relates to the second part of the subhead rather than to travelling.

414. Chairman.—On subhead C—Post Office Services—there is a note which says: “The excess was due to payment of arrears on postal and telephone services.” How would arrears like that occur?

—This could be, in principle, for example, payments for periods close to the end of the previous year that were not received until the following year.

In other words, it is an accounting matter?

—Yes, that is right.

415. These were rentals paid to the Post Office. How did that affect the account of the previous year?

—In principle again, stressing that aspect of it, it would mean that the previous year did not reflect the full year’s payments. This is normal.

416. In this case are you satisfied it is as up-to-date as you can be?

—I suppose in this respect we can only be as up-to-date as the Post Office will enable us to be in furnishing their demands.

417. Deputy MacSharry.—Is there any way this can be corrected, because every Department is exactly the same?

—I would not say “every Department”. It is not unusual; I would agree on that.

It comes up on every Department.

—Again in fairness to my colleagues I would not like to convey the impression that the fault is necessarily that of the Department of Posts and Telegraphs. Perhaps I could again have a look at that and when we come to 1971-72 we can deal with it.

It has been coming up over the years in various Departments and it would be an advantage if something could be devised to correct it.

VOTE 9—STATE LABORATORY.

Mr. C. H. Murray further examined.

418. Chairman.—On subhead A.— Salaries, Wages and Allowances—there is a considerable percentage not expended. It is stated the saving was mainly due to unfilled posts. What is the position with regard to the State Laboratory? Is it mainly concerned with the Revenue Commissioners?

—Very largely, and with the Department of Agriculture and Fisheries.

419. Do the unfilled posts mean less work?

—No, not necessarily. This is a unit where there is a considerable turnover of staff. Trained chemists come and go—more often they go. Also, in that particular year, there was a question of regrading one type of staff with a view to recruiting better qualified people. There was the problem of a changeover in that year. I am advised the position is substantially better this year.

VOTE 10—CIVIL SERVICE COMMISSION.

Mr. C. H. Murray further examined.

420. Chairman.—On subhead B.—Travelling and Incidental Expenses—and Note, what are the expenses?

—I should explain that as a general rule it is only candidates coming from abroad for specialised posts who are paid travelling expenses. As is pointed out in the Note, it is difficult to estimate the number.

VOTE 11—AN CHOMHAIRLE EALAÍON.

Mr. C. H. Murray called.

No question.

VOTE 12—SUPERANNUATION AND RETIRED ALLOWANCES.

Mr. C. H. Murray further examined.

421. Chairman.—Paragraph 32 of the Report of the Comptroller and Auditor General reads:

“Subhead B.—Pensions for Widows and Children of certain Officers

Subhead C.—Ex-Gratia pensions for Widows and Children of certain former Officers

As mentioned in previous reports a contributory scheme was introduced in the year 1968-69 to provide pensions for widows and children of certain public servants who died on or after 23 July, 1968. Ex-gratia pensions were granted to widows and children of public servants who died or retired prior to that date. I understand that the legislative authority for these pensions is in course of preparation.”

Mr. Mac Gearailt.—This paragraph refers to the contributory scheme which was introduced in the year 1968-69 to provide pensions for the widows and children of certain public servants and to the ex-gratia pensions payable to widows and children not eligible for the contributory scheme benefits. I understand that no further progress has been made in the preparation of the necessary legislation.

—May I comment on the last statement? But for a particular development this legislation would have been introduced because its preparation had been practically completed. The development was that some time ago the Staff Side put in a comprehensive claim for revision of the superannuation code. Since then a joint working party of the Official and Staff Sides have been examining this matter and a report is expected within a matter of weeks. It was decided to hold over the amendment of the superannuation code with regard to widows and orphans since it was clear that the widows’ and orphans’ code was among the matters being considered by the joint working party. The aim is to deal with any legislation in one go.

422. Chairman.—It is not usual to anticipate statutory authority?

—I think it is not but in this case, having regard to the type of payment involved and the beneficiaries, on balance it was considered best to make payment under Dáil authority.

VOTE 13—SECRET SERVICE.

Mr. C. H. Murray called.

No question.

VOTE 14—AGRICULTURAL GRANTS.

Mr. C. H. Murray called.

No question.

VOTE 15—LAW CHARGES.

Mr. C. H. Murray further examined.

423. Chairman.—On subhead C—Post Office services—with Note, it is stated some telephone bills relating to the previous year were not received until the year of account.

—That is the same point we mentioned earlier.

Except that it is stated here.

—Yes.

424. Subhead G refers to Appropriations in Aid; what is referred to in detail No. 3?

—This is in respect of legal work done by the Department and by the Attorney General’s staff.

425. What about other Departments?

—In general the Department of Posts and Telegraphs are accounted on a commercial basis. They charge Departments and receive cash payments for services provided. Also, they pay Departments for services provided by other Departments. For example, if we look at the Vote for the Civil Service Commission we find that the Department pay the Commission for examination work done on behalf of the Department.

VOTE 16—MISCELLANEOUS EXPENSES.

Mr. C. H. Murray further examined.

426. Chairman.—Paragraph 33 of the Report of the Comptroller and Auditor-General reads:

“Subhead F—The Racing Board—Grant-in-Aid for Capital Purposes

In paragraph 27 of my previous report I referred to the decision that funds would be made available over a number of years to the Racing Board to assist it in carrying out improvements at racecourses. In the year 1969-70 a first grant of £100,000 was made to the Board. A further grant of £100,000 was made to the Board in the year under review.”

Mr. Mac Gearailt.—The accounts of the Racing Board for 1970 have been sent to the members of the Committee. They will see from the Board’s Annual Report published with the accounts that the grant-in-aid has been credited to the Capital Reserve in these accounts.

427. Chairman.—Paragraph 34 of the Report of the Comptroller and Auditor-General reads:

“Subhead G.—British Special Import Deposit Scheme.

Reference was made in previous reports to the special arrangements made to assist exporters following the introduction in November 1968 of the British Special Import Deposit Scheme. Interest paid to banks under the arrangements in the year amounted to £1,124,820, bringing the total amount paid to 31 March 1971 to £2,623,487. The British Scheme was terminated in December 1970 but some claims in respect of interest will fall to be met in the year 1971-72”.

Mr. Mac Gearailt.—As stated in the paragraph this scheme was introduced in November, 1968 to assist Irish exporters following the introduction of the British Special Import Deposits. Further payments amounting to £85,000, approximately, were provided in 1971-72. I understand that it is unlikely that any further claims for interest will fall to be met.

428. Chairman.—On subhead B—Additional Aid to the Theatre—perhaps we could have some explanation?

—This covers the support given to the Gate Theatre in respect of its renovation. When this work was being carried out dry rot was discovered so that the repair work cost substantially more than was expected.

VOTE 50—INCREASES IN PENSIONS AND GRATUITIES AND PENSIONS FOR UNESTABLISHED STAFF.

Mr. C. H. Murray called.

No question.

VOTE 51—REMUNERATION.

Mr. C. H. Murray further examined.

429. Chairman.—These are simply salary increases?

—Yes, increases payable under the national round. The round in this case was the 12th.

430. Chairman.—I note that there were no transactions under the Contingency Fund Deposit Account.

The witness withdrew.

The Committee adjourned.

* These accounts have since been received and are included in this volume.”

* See Appendix 8.