Committee Reports > List of Committees > Dáil > 1978 > Committee of Public Accounts > Interim and Final Report - Appropriation Accounts 1975

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

Déardaoin, 16 Márta, 1978.

Thursday, 16th March, 1978.

The Committee met at 10.30 a.m.

DEPUTY O’TOOLE in the chair.

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

VOTE 5—COMPTROLLER AND AUDITOR GENERAL.

Mr. P. L. Mac Domhnaill called and examined.

417. Deputy V. de Valera.—On subhead A—Salaries, Wages and Allowances—you have less than granted and there is no note. Was there a deficiency of staff during that year?

—That is a very small saving.

I know it is. It is within the tolerance of the Estimate.

—The staff which we had during the year was in keeping with the staff which was authorised at that time. Since then, as the committee are probably aware, there has been an increase in the staff. The question of staff was discussed at the committee’s meeting last year. Following on that we got the sanction of the Minister for the Public Service for some increase in staff. In relation to the year with which we are dealing, 1975, the expenditure was commensurate with the staff which was authorised at that time.

418. How are you for staff at the moment?

—As I said, we got sanction for an increase in staff, not quite what we had sought. Of course, getting authorisation for an increase in staff does not solve one’s problems immediately. There is the question of filling the staff vacancies and this is going on at the moment.

How many additional staff did you estimate you required?

—We sought altogether 23 posts and out of that we were authorised 19.

How many of those are filled?

—We have at present seven posts remaining to be filled.

Chairman.—I presume they are in the process of being filled?

—They are but, of course, there is the difficulty of actually getting people to fill the posts. We recruit through the Civil Service Commission and there has been a delay in getting people to accept appointments in the Office. We recruit at the basic grade of executive officer and it takes a certain length of time. One must remember that when one fills the posts one is filling them with people who are short on experience, so the authorisation of extra posts does not solve one’s problems in the immediate short term.

419. Deputy V. de Valera.—Are the standards required for filling those posts general civil service standards or is any particular accounting or other qualification required?

—The practice has been that we recruit at the executive officer grade, which is a normal grade for general civil service. We encourage our staff, once we have recruited them, to pursue courses of study leading to qualification in accountancy.

Are they accepted on the general prescription?

—That is the position at present.

Is there no question then that the difficulty of obtaining staff arises in any way from a difficulty in obtaining a specific type of qualification initially?

—We have not sought to recruit them in any way other than through the Civil Service Commission.

How many jobs did you say?

—We have about seven still to be filled.

You have seven posts at executive officer grade to be filled. Is it not extraordinary, having regard to what one understands to be the availability of young people, that those posts have remained vacant for so long?

—We have to depend on the Civil Service Commission to send us the staff. We have notified the Commission of our requirements and we simply have to wait to be allocated the staff.

The fact remains that there are vacancies of a general nature suitable for applicants with the qualifications for the general civil service at executive level which are not yet filled although they have been available for some time. Is that the fact?

—Yes.

420. How is your work load? Is it increasing or decreasing?

—It never decreases. Our work load is increasing all the time.

Could you give some specific indications where your work load is increasing within the civil service?

—In many of the Departments there has been an expansion of activities. Last year I mentioned some of those Departments such as Education, Social Welfare, Revenue and so on where, because of the new activities of the Departments, the audit work load naturally increases. There is also the case of the Department of Agriculture and the EEC. That area is as big again as the Department of Agriculture. From the point of view of expenditure there is quite a lot of money involved.

421. Might we take it for granted that your original application for 23 posts did not take into account this present expansion?

—Our application for 23 posts was made in December 1976 and it took account of our work load at that time. We have not done a precise assessment of areas where there has been an increase since that time. In 1976 we did a comprehensive review of our work load and sought the extra staff on the basis of that review in December 1976.

If you were to continue that process in 1978 would you seek to increase that number?

—Our work load is constantly increasing and obviously it would be necessary to have periodic assessments of the work load and, based on such assessments, we would have to seek whatever extra staff we thought were needed to cope with such increases.

422. In general terms what effect has such an increase in the work load on the Department? If the staff remains static what is the effect on the audit of the increasing work load?

—With the same resources trying to cope with a larger work load obviously we will be spread more thinly. Auditing is based on test examinations in various areas and the auditor must do what he considers necessary in order to be reasonably satisfied in regard to the accounts. If the auditor has to cope with an increased work load, his tests will be much more restricted and he may reach the situation where he is being forced, because of lack of staff, to curtail tests which he might consider necessary.

In other words the coverage of spot tests is becoming thinner and the chances of irregularities escaping unnoticed greater.

—Yes, coverage is becoming thinner.

The chances of irregularities escaping unnoticed is greater?

—Yes.

423. These are important facts for this Committee, and the Committee should take note of them. The Court of Auditors of the EEC are now attempting to co-ordinate public expenditure in the member countries so far as the EEC funds are concerned. Will that entail some contact between the Department and Brussels?

—Yes. The treaty of July 1975 which provided for the setting up of the Court of Auditors also provided that, while they are responsible for the audit of EEC expenditure in the Member States, the audit will be carried out in liaison with the national audit authorities, which in this case is the Comptroller and Auditor General. Recently we had some contact with the Court of Auditors with a view to setting up that type of liaison.

That will require the allocation of staff in the Department to this function, is that so?

—Yes. As yet we have had exploratory talks only with the Court of Auditors on an informal basis but they suggested that we should have some kind of contact officer in order to be able to co-ordinate our work and see where we can effectively liaise with them and, very importantly, avoid duplication in so far as the Departments are concerned. It would obviously be undesirable from the Department’s point of view that they would have one body of auditors operating under the Comptroller and Auditor General and another body operating under the Court of Auditors coming one after the other to examine their operations. One of the ideas behind liaison is to avoid duplication.

424. Having regard to the fact that the Department did not get the full 1976 requirement and that even of what was granted posts have not yet been filled, and the fact that the work load is undoubtedly increasing which can lead to a dilution of the audit with a greater danger of irregularities passing unnoticed, and being faced with this correlation with the Court of Auditors of the Common Market, would the Accounting Officer agree or not that the staff estimate should be reassessed this year and considered in advance before the work load becomes too great, and the appropriate submissions should be made to the appropriate authority?

—I agree. We recently proposed to the Department of the Public Service that we should do this rather than wait for long periods to elapse and then be faced with a very large staff shortage, that we should have regular reviews of our work load and keep the staff up to strength in order to cope with the expanding work load as it comes on stream.

425. Chairman.—While we appreciate that the talks which are taking place with the Court of Auditors are informal, does the Accounting Officer envisage any change in the format of presentation of accounts as a result of the requirements that may be laid down by the Court of Auditors?

—I do not envisage any change in the presentation of the statutory accounts so far as it affects this Committee. I do not see any change arising in the presentation of the Appropriation Accounts.

426. Up to now, since we have been dealing with the EEC, it seems that moneys coming from the EEC have been put in under different subheads. Does the Accounting Officer envisage any requirements that might ask that these would be extracted under an EEC subhead which would change the format slightly?

—I do not think so. The moneys which come into the Votes relate to things like refunds of travelling expenses to people who travel to Brussels, but the vast bulk of the EEC expenditure which arises, for instance through the Department of Agriculture on the Common Agricultural Policy, is accounted for separately outside of the Appropriation Accounts, in accounts which are furnished directly to Brussels which we audit and report on and it is in that area that the liaison arises.

I asked that question for the same reason that Deputy de Valera asked questions in relation to staff requirements. The Department might find itself with a backlog so far as staff is concerned because of the delay in filling vacancies through the Civil Service Commission. As the Accounting Officer says, it takes a long time for the staff to work through the system.

—I might add that, when we do get them —as I have touched on already—they are young, inexperienced staff and it takes quite some time before they are trained to a stage where they can be effective members of an audit team. There is that factor also.

That completes Vote No. 5. I should like to thank Mr. Mac Domhnaill for his co-operation and comprehensive replies to the questions put to him.

The witness withdrew.

VOTE 49—HEALTH.

Dr. B. J. Hensey called and examined.

427. Chairman.—I should like to welcome Dr. Hensey, the Accounting Officer for this Vote.

Paragraph 64 of the Report of the Comptroller and Auditor General reads:

“Subhead G.1.—Grants to Health Boards, etc.

Reference was made in paragraph 107 of the Report for 1971-72 to the provisions of the Health Act, 1970 for the payment to the eight Health Boards of grants at the rate of 50 per cent of their net authorised expenditure and of supplementary grants towards the reduction of the amount of health expendiure to be met from local rates. Payments on account are made to the Boards on the basis of 95 per cent of their estimated entitlement. A further 4½ per cent is paid when returns of actual expenditure are received and the final ½ per cent is paid when the audited accounts of the Boards are received.

In the course of the audit of grant payments in the year under review the accounts of the Health Boards for 1971-72 and 1972-73 and the reports of the Local Government auditors thereon were made available to me. In their reports some of the auditors referred, inter alia, to deficiencies in internal controls, to inadequate standards of accounting and recording, to incomplete records of lands and buildings, to the incorrect treatment of balances taken over from former Health Authorities and to the high levels of interest on bank overdraft. In one case it was stated that the documentation supporting a very high percentage of payments made in 1971-72 was less than that demanded to conform with the requirements of public accountability.

I understand that the matters raised by the auditors were referred by the Department of Health to the various Health Boards for their comments and that replies, which have been received from five Boards, are being considered by that Department. No replies have, apparently, been received in the other three cases at the date of this report.

I have inquired regarding the audit of the accounts of the Health Boards for 1973-74 and subsequent years.”

Mr. Mac Gearailt.—Paragraph 64 draws attention to shortcomings in the financial administration of the Health Boards as revealed in the reports of the Local Government auditors on the accounts for the years 1971-72 and 1972-73. I understand that these shortcomings were brought to the attention of the various Health Boards by the Department of Health. Information supplied to me by the Accounting Officer in May 1977 regarding the position of the audit of the Health Boards’ accounts for years subsequent to 1972-73 shows that the audit is very much in arrear. I understand that the position had not improved to any great extent by last January.

428. Chairman.—The degree of public accountability in relation to the health boards, to say the least, appears to be inadequate in respect of grant payments. What steps have been taken to remedy this most unsatisfactory situation?

—The period referred to in the report is the initial period of the Health Boards, the audit of the accounts for 1971-72 and the subsequent year. I would not dispute that there were difficulties then in relation to the financing of boards and the accounting arrangements. This was a transitional period and the Health Boards were set up to a rather quick timetable. The Act was passed in 1970. They were set up and commenced administering the services in April 1971. At that time the boards themselves had not recruited their own accounting staff. They were in course of recruitment but there were certain difficulties and much of the accounting work of the boards was being done on an agency basis by the local authorities who were formerly responsible.

We accept the criticisms of the Comptroller and Auditor General in relation to the lack of internal controls, the standards of accounting and records of lands and buildings at the time, and the other points he has made. Perhaps I might comment on these and mention what has been done since, which might be of assistance to the Committee. I should mention, however, that with all of the criticisms that came out of the Local Government auditors’ reports, there was only one surcharge in the whole of the country arising from the activities in those years. On the question of internal controls there are two points I should like to make. At the time the Health Boards were taking together the accounting arrangements in each case of a number of counties and, in some cases, cities also. The work was scattered. At the same time there was a considerable volume increase in the health services. We recognise that there were difficulties at the time. Since then each Health Board has introduced an internal audit system. The method of dealing with payments has been improved to a considerable extent by centralising them. We have been engaged with one Health Board in getting specialist consultants from the ESB to advise on the further improvement of these arrangements. We intend to extend this work to two other Health Boards in the present year. Therefore, we are fairly satisfied that at present the Health Boards are much better equipped to exercise internal controls on expenditure than they were in the times referred to in these reports.

On the question of standards of accounting and recording, at that time the Health Boards for some time operated a system of accounting which had existed within the local authorities. It was recognised as not being satisfactory. We set up a working party representative of the Department, the Health Boards and Local Government auditors. Since the beginning of 1977 we have introduced for all the Health Boards an agreed standardised form of accounts. This has not yet been formally prescribed by the Minister but it was brought in in 1977. In the light of experience we expect it will be prescribed in the present year, with possibly some modifications arising out of the experience in 1977. This standardised form of accounts will facilitate auditing and comparisons as between Health Boards.

I accept that there were difficulties in relation to the records of lands and buildings. Some of these difficulties arose out of the question of the ownership of certain lands. The Act provided that lands formerly owned by local authorities, which were solely for health purposes, would be transferred automatically, plus certain other lands designated by the local authorities. In some cases—not many—there has been some dispute about whether a particular property should or should not be transferred. But the standardised form of accounts I mentioned will include provision for a balance sheet which will, in turn, include a valuation of the lands and buildings owned by the Health Boards. From a practical point of view this is really only of great significance where a question arises of disposing of land or closing a hospital and selling the hospital. As the Committee know, that does not arise very often.

The question of the incorrect treatment of balances was mentioned also. I think this referred to one Health Board only in the North West. I should like to make it clear in that respect that it was a question of balances existing at the time the Health Board was set up in the books of the local authorities which formerly operated certain services, when the question arose about how these were treated. I should like to make it clear that there was no duplication of grant payments arising from the treatment of the balance at the time. It was really a question of a liability being taken by the Health Board in one year rather than another. Another criticism was of the excessive amount of the bank overdrafts of the Health Boards. Again, we accept this criticism. I think the point was not that there were excessively high rates of interest paid on bank overdrafts but rather, in relation to the total expenditure, that the overdrafts were too high. We accept that and, since the time when the Health Boards were set up, there have been considerable improvements. There were a great many balances taken over from the time the local authorities were responsible and, because of the arrangements for paying the grants referred to in the Comptroller and Auditor General’s Report, there is always a balance due at the end of the year to the Health Boards. Naturally, as health expenditure increased, the amount of this balance became greater. We have in the last few years endeavoured to get rid of old balances due to Health Boards, which were the cause of a considerable amount of this bank overdraft interest, by making term loan arrangements with the banks and paying off the amounts due out of the revenue grants given to the Health Boards.

We have been doing that and we are satisfied that at present we are taking sufficient steps in relation to the money we get every year to keep the overdrafts down. Another arrangement made is that we are now paying bi-monthly grants to Health Boards. Instead of paying once a month we pay twice a month and that also helps to keep overdraft accommodation down. Generally speaking, I am satisfied the overdraft levels are now reasonable but, of course, in the ultimate, if we were to get more money entirely to eliminate the overdrafts, that money would have to be obtained by the Exchequer either by raising taxes or by raising its level of indebtedness so that it is all out of the one pocket anyway. There is also criticism of the North Western Health Board’s documentation in relation to receipts not being up to the standard required for public accounting in the initial stages. This criticism is also accepted. At the time that board had particular difficulties in relation to accounting and had particular difficulties too in relation to office accommodation. Its headquarters had not been properly established in Manorhamilton. I would point out that initially there were 2,000 vouchers missing. Ultimately all these vouchers were recovered and cleared except for 130 and we are satisfied there is no question of fraud involved and that the administration of the board at present is up to the standards required.

429. Paragraph 65 of the Report of the Comptroller and Auditor General reads:

“Subhead G.2—Payments to Health Bodies other than Health Boards.

The General Medical Services (Payments) Board was set up in July 1972 by the Minister for Health under section 11 of the Health Act, 1970 for the purpose of enabling the Health Boards to arrange jointly for the calculation and making of payments in respect of some of their functions viz., the making available without charge, for persons with full eligibility, of a general practitioner medical and surgical service and the supply, without charge, of drugs, medicines and surgical and medical appliances. Prior to 1 April 1974 the Payments Board was funded by contributions made by the Health Boards but as from that date it is funded by direct payments from the Vote and these are based on returns setting out the cost of services provided. The charge to the subhead in the year under review includes £21,500,000 in respect of these payments.

The accounts of the Payments Board are audited by Local Government auditors and are made available to me, the most recent audited accounts being in respect of the period 28 July to 31 December 1972. I have inquired regarding the audit of the accounts for later years.

The balance of the charge to the subhead, £59,193,000, represents payments made on behalf of Health Boards in respect of services provided by Voluntary Hospitals, Homes for Mentally Handicapped, etc. The accounts of these institutions are audited by other auditors and are examined by officers of the Department of Health whose reports, together with the audited accounts, are available to me. Of the 51 accounts relating to 1972-73, 49 have been examined by departmental officers. Of the 49 accounts relating to 1973-74, 36 have been examined, 10 are under examination and the remaining 3 are outstanding. I understand that 42 accounts have been received for 1974 and will shortly be examined by the Department. No accounts for 1975 have been received at the date of this report.”

Mr. Mac Gearailt.—As indicated in this paragraph the charge to the subhead, £80.5 million approximately comprises £21.5 million paid to the General Medical Services (Payments) Board and £59 million paid on behalf of the Health Boards in respect of services provided by Voluntary Hospitals, Homes for Mentally Handicapped, etc.

Subsequent to the publication of my Report for 1975 the audit of the accounts of the Payments Board for 1973, 1974 and 1975 was completed and the report of the Local Government auditor was made available to me. Certain matters raised therein have been referred to in my Report for 1976. I understand that progress is being made in the examination of the accounts of the Voluntary Hospitals for years up to 1976 by officers of the Department of Health.

430. Deputy V. de Valera.—No accounts were received for 1975 at the date of this report and this is the report for 1975. What is the present position?

—The main issue is the non-availability or the delay in submitting the accounts of the General Medical Services (Payments) Board. The up-to-date position is that the accounts for 1976 are available for audit and the accounts for 1977 should be available for audit by the end of the present month. I am informed that the audit for these two years is likely to commence in June and to be completed possibly by September. That is a considerable improvement on the situation that existed in 1975.

431. What was the position for 1975? The paragraph ends by saying that no accounts for 1975 had been received at the date of this report and we are dealing with this account?

—The Auditor’s reports for 1973, 1974 and 1975 were received in May 1977.

Mr. Mac Gearailt.—We are at cross purposes. That sentence deals with the accounts of voluntary hospitals.

—In regard to the accounts of voluntary hospitals, the position as respects the examination of these for 1975 is that there are 48 hospitals and 47 of the accounts have been examined by now. The accounts for 1976 are under examination at present.

432. Chairman.—Paragraph 66 of the Report of the Comptroller and Auditor General reads:

“Subhead P—Appropriations in Aid

The reports of the Local Government auditors on their audit of the accounts of the Health Boards for 1971-72 and 1972-73 indicated that health contributions payable by certain categories of farmers under the terms of the Health Contributions Act, 1971 had not been audited by them in some regions. The reports also indicated that in some of the regions where these contributions had been audited the accounting arrangements for their assessment and collection were unsatisfactory.

I asked the Accounting Officer for information regarding the checks carried out by the Department of Health on the assessment and collection of these contributions. He has informed me that under the Health Act, 1970 the assessment of liability for health contributions is a matter for the Chief Executive Officer of the appropriate Health Board in each case but that the Department, nevertheless, maintains an overall supervision of the situation in regard to general levels of assessment, etc. Arrangements have been made with the Health Boards to have the health contributions received by them remitted to the Department on a regular basis and individual cases of delay in making these remittances or seeming short-falls in the amounts actually collected are taken up with the Health Board concerned. The Accounting Officer also informed me that the Department monitors on an overall basis the collection rate vis-à-vis estimated yields and that one Health Board, at least, had taken legal action against defaulters.

In regard to the question of audit the Accounting Officer informed me that health contribution transactions were included in the audit of five of the eight Health Boards’ accounts for 1971-72 and 1972-73 and that discussions were to be held regarding the audit of these transactions in the case of the other three Boards. In relation to those cases where the Local Government auditors had expressed dissatisfaction with the accounting arrangements, he stated that the matter had been brought to the notice of the Boards and that it was the intention, as part of a general review of the accounting and internal audit systems of the Health Boards, that deficiencies of this type would be remedied as soon as possible. A working party was set up in 1975 to prepare a form of accounts which could be prescribed for Health Boards and it was hoped that a suitable form of accounts would be prescribed with effect from 1977. The Accounting Officer added that, in order to ensure that health contribution transactions would be duly audited, it was intended that this form of accounts would include these transactions.”

Mr. Mac Gearailt.—This paragraph deals with health contributions payable by certain categories of farmers under the terms of the Health Contributions Act, 1971 and collectible by the Health Boards. At the date of my Report these contributions had not been audited by the Local Government auditors in three regions and the accounting arrangements for dealing with them appeared to be less than satisfactory in a few other regions. I understand that these contributions have since been audited in two of the three regions concerned by external auditors and that a standardised form of accounts which has been recommended to the Health Boards will include an account of health contribution transactions. This should ensure their audit by Local Government auditors in future.

—There was difficulty in relation to the question whether the Local Government auditors in doing their accounts had liability to cover these but this has been overcome by bringing in external auditors in the case of the three boards concerned. There has also been difficulty in relation to the level of collection of these contributions from farmers by the Health Boards. This has improved considerably in recent years. In the year up to October 1975—the contribution year ends in October—the level of contribution was about 45 per cent, but in the year up to October 1977 the amount collected from the farmers is estimated to be about 80 per cent of what should come in. In some cases Health Boards have actually prosecuted farmers. In other cases they have issued solicitors’ letters. It is quite difficult to make the administrative arrangements to get 100 per cent collection in this case as I think the Committee will understand. We are endeavouring with the Health Boards to improve the rate of contributions from the farmers.

433. Chairman.—You mentioned 45 per cent in the year ending October 1975. What prospects are there of having the outstanding moneys paid?

—In some cases the Health Boards take legal action and we encourage them to do so, but whether it would be an economic proposition to take legal action against everybody who does not pay is rather doubtful. We hope we can continue to improve these arrangements. In the Seanad yesterday the Minister of State when dealing with the Health Contributions Bill mentioned this issue and said that in connection with the change proposed next year to a different system of contribution the method and efficiency of collection would be examined again.

434. Deputy C. Murphy.—I do not know if this falls within the realms of policy but I should like to inquire about the working party set up by the Minister to inquire into limited eligibility. Was there anything in the terms of reference of that working party regarding the accounts and methods of collection?

—No. That was a working party to look at the anomalies in the definition of limited eligibility as between manual and non-manual workers and self-employed and insured workers. It is a very complex matter. It was simply to look at these anomalies and to see to what extent there could be agreement on how to remove them. It was not involved in any way in the collection of health contributions.

435. Health contributions are collected by the Revenue Commissioners and by the Health Boards?

—Most of them are collected with the social welfare stamp by the Department of Social Welfare from the insured workers. The Revenue Commissioners collect from the self-employed other than farmers and the Health Boards collect from farmers.

436. It appears there are three agencies involved and that is not very satisfactory. Will the proposed legislation tidy this up?

—I cannot say what that legislation will provide but I think it likely that the Revenue Commissioners will become the collecting agents for workers and the self-employed, together with PAYE. With regard to the farmers, we are not sure at the moment what will be done.

437. Deputy Kerrigan.—Is there any assessment available of the cost of collecting from farmers?

—I could not give that figure but I would estimate that if a 100 per cent effort were made to ensure that everyone paid, the legal and administrative costs involved would be very high.

438. Deputy C. Murphy.—It should be relatively simple for the Department of Social Welfare to collect their portion?

—It is. They collect it with the stamp and they transfer it to us every month.

439. The transaction by the Revenue Commissioners should be relatively straight-forward also, apart from those who are discovered to have gone over the guideline and where refunds have to be made. Following what Deputy Kerrigan said, would they have any idea of their precise costs for collecting in any one year?

—No, I do not think so. I do not think it is quite a separate operation even with the Revenue Commissioners. It is tied in with what they are doing in assessing income tax.

440. Chairman.—The reason behind Deputy Kerrigan’s and Deputy Murphy’s questions is that there was a 45 per cent return in 1975. The law of diminishing returns might enter into it at some stage. From what you say, it appears we are now at a figure of 80 per cent. I presume things will improve?

—There is also the point that the rate of contribution from 1 April will be going up to £24 so that there is much better value out of the administrative costs than when the amount was £7 or £12 in the old days.

441. Deputy C. Murphy.—With regard to the working party, it does not directly refer to accounts. I think that it is more or less bogged down?

—It has been overtaken by the decision to change to a pay-related scheme of contributions that will affect the whole definition of eligibility by insurance stamps. At this stage we cannot say exactly what will happen.

In a sense you are engaged in a holding operation until the new legislation is introduced. I gather the working party found many anomalies.

442. Chairman.—Paragraph 67 of the Report of the Comptroller and Auditor General reads:

“In previous reports I drew attention to Regulations made by the Council of the EEC which prescribe that a Member State shall refund social security benefits provided on its behalf by another Member State. I referred to an agreement under negotiation between this country and the United Kingdom for such refunds on a lump-sum basis and to payments on account of £1,500,000 and £1,300,000 made by the United Kingdom in respect of its liability to 31 December 1974 pending completion of the agreement. The agreement was concluded in July 1975 and provides that refunds will be effected by lump-sum payments representing the difference between the separate liabilities of the two Member States. The agreement also provides for the making of payments on account pending final settlement of the refunds to be made. The final refunds due for 1973-74 and for the period April to December 1974 have not yet been determined but further payments on account, totalling £2,000,000, were received from the United Kingdom in the year under review.”

Mr. Mac Gearailt.—This paragraph is for information. It deals with the reciprocal arrangement arising out of EEC membership, between Ireland and the UK in regard to the refund of social security benefits. I understand that a final settlement of the refunds has not yet been reached for any of the years referred to in the paragraph.

443. Chairman.—How much is outstanding by way of refunds in respect of 1973-74 and April 1974 to December 1974?

—I do not think a substantial sum is outstanding. The estimates are agreed with the United Kingdom authorities and the figure reached in each case is an agreed estimate of 100 per cent of what we think at the time. The actual complete audit, and making calculations to produce an exact figure has not been finally agreed with the United Kingdom authorities. In 1977 an amount of £3.3 million was involved. The amounts are calculated on the best estimates available of the liability of the United Kingdom authorities under these regulations.

You are happy that the agreed amount represents roughly 100 per cent of the amount?

—Yes.

444. Deputy N. Andrews.—On subhead D—Expenses in connection with the World Health Organisation and other International Bodies—do I understand that the EEC refund expenses of this kind? In some cases they appear to do so but in other cases they do not refund expenses.

—That is correct. Depending on the nature of the meeting, the EEC will refund either the travelling and subsistence expenses or the travelling expenses only. Usually they will limit the number of people for whom they will refund. There might be a situation where some people would be paid for by the EEC and some would not but, generally speaking, most people from the Department who go to EEC meetings are refunded their expenses from EEC funds.

445. On subhead G.3—Payment in respect of Disablement caused by Thalidomide— has the scheme to provide facilities for thalidomide children been completed? There appears to be a saving here.

—These are cash grants paid to supplement the awards made by the German foundation. Each year they are based on estimates of the numbers of children who will still be drawing the grants. The saving occurred in this case because the proposed scheme to provide facilities in the homes of the children, which was recommended by the Irish Thalidomide Medical Board, was not completed within the year.

Is it complete now?

—Yes, but there were some delays.

The witness withdrew.

VOTE 48—SOCIAL WELFARE.

Mr. C. Collins called and examined.

446. Chairman.—Mr. Collins, you are very welcome.

—Thank you.

Paragraph 63 of the Report of the Comptroller and Auditor General reads:

“Social Assistance and Social Insurance

Sums recovered in respect of overpayments of social assistance charged in prior years’ accounts were £37,645 in cash, credited to appropriations in aid, and £45,890 withheld from current entitlements. Overpayments amounting to £30,972 were treated as irrecoverable. Assistance overpayments not disposed of at 31 December 1975 amounted to £243,639 as compared with £178,692 at 31 December 1974. Overpayments of benefits from the Social Insurance Fund outstanding at 31 December 1975 were of the order of £640,000 as compared with £430,000 at 31 December 1974. 14 individuals were prosecuted for irregularly obtaining or attempting to obtain assistance or benefits. Convictions were secured in 12 cases.

189 employers were prosecuted for failure to comply with the provisions of the Social Welfare Acts and convictions were secured in all cases. Civil proceedings for recovery of arrears were completed during the year in 147 cases. Decrees in favour of the Minister for Social Welfare were obtained in all cases, the total amount being £30,604.”

Mr. Mac Gearailt.—This paragraph is for information. In addition to overpayments and prosecutions in relation to claimants of assistance and benefits the paragraph gives details of recovery action undertaken against employers who failed to comply with the provisions of the Social Welfare Acts.

447. Chairman.—Have you any comment on the Report of the Comptroller and Auditor General?

—No. This is a regular feature. It is for the information of the Members of the Committee.

448. Do you find the problem of overpayments is increasing?

—It is on the increase, yes, for two reasons possibly. The amount is increasing in keeping with the increased rates. There is increased pressure in the employment exchanges because of the higher unemployment registered. The result is that it is not always easy to get adequate staff to deal with the increased traffic. That in itself can tend to lead to overpayments— undue pressure of work from time to time.

449. Are you implying that due to increased pressure of work the staff is not increased to handle the increased pressure which, in turn, leads to people slipping through the net?

—That can occur. There are also accommodation problems. For example, we have had to reduce the frequency of signing in some of the bigger exchanges in some cases to just one day a week. Obviously that means we have not the same checks on claimants. That is largely an accommodation problem. We hope it will be temporary.

450. Deputy C. Murphy.—Are we moving into the realm of the inspection division of the Department of Social Welfare? Is that division fully staffed?

—At the moment I think we have got our requirements. We are in the process of recruiting additional staff. We had vacancies in that grade but, because of pressure of work on the investigation of means and that type of thing, due to reductions in pension age and matters of that kind, we had to use our investigation staff very considerably on that type of work. You may not always be able to use them to the extent you would like to on other aspects of the work. At present we have got an increase in the staff of the inspection branch which is up to what we think is required. It is possible that we did not have that in the year we are discussing.

451. Chairman.—To what extent did the bringing forward of Budgetary provisions to April—prior to that they were implemented in October—affect your checking facility within the Department?

—It would of course have increased the pressure and we would have to deal with the implementation of the Budget arrangements largely through overtime. Anything that reduces the time between the enactment of the legislation and the implementation of a Budget matter would compress the work very considerably. We then have to do it the best way we can by means of overtime and by getting whatever extra staff we require.

452. Deputy V. de Valera.—I see that 14 individuals were prosecuted, convictions were secured in 12 cases, and 189 employers were prosecuted. If I read the report correctly the recovery amounted to £30,604. I should like to know the amount that has not been recovered.

—Assistance overpayments not disposed of at 31 December 1975 amounted to £243,639 and £640,000 in the case of social insurance. We do not regard those at a particular time as irrecoverable. We would pursue recovery.

453. I do not think it would be right to ask the witness to tell us what percentage he would reckon as irrecoverable but does the witness regard a recovery of £30,604, in the light of his own assessment of good and bad debts, as satisfactory or not?

—It is small in relation to the outstanding amount but we have to have regard to costs and the question of possible hardship. If one is trying to recover a particular overpayment, even by withholding something from a current benefit that is being paid, one must always have regard to the fact that if one tries to recover too quickly one could create undue hardship.

Undue, underlined in this case?

—Yes.

Chairman.—Do you apply an instalment system in a case like that as against a lump sum withdrawal?

—Yes.

454. Deputy C. Murphy.—I am confused about one thing. Does the fact that the Minister for Social Welfare obtains a decree in court—the total amount in this instance is £30,604—automatically mean that the Department will obtain that money?

—Is this in the case of the prosecution of employers?

I am talking about the sentence in the report which states that decrees in favour of the Minister for Social Welfare were obtained in all cases, the total amount being £30,604. It is one thing to obtain a decree but I should like to know if all this money was secured by the Department.

—Not necessarily within the year but my experience is that we would recover practically all of that, except in the case where an employer would have become bankrupt or a firm goes into liquidation. Otherwise we would pursue recovery. In the vast majority of cases the money would be recovered.

455. Deputy N. Andrews.—How much of this money would be deliberate fraud as against mistakes by staff or misunderstandings by recipients?

—In the case of the last item we have been discussing, where decrees were obtained, that relates to the failure of an employer to stamp insurance cards. We would regard that as deliberate. It may be an oversight but if it is only an oversight we would expect the employer to pay it up when we approach him. In regard to the other overpayments, I have not the figures of how much would be fraud on the part of claimants and how many could be regarded as mistakes.

Would it be considerable or small, relatively speaking?

—The amount attributable to over-issues, as we call them, where the mistake would be on the part of the staff, would be a small percentage of the total. That is a guess.

And deliberate misrepresentations on behalf of recipients is small also?

—It is fairly extensive. The question of whether it is deliberate or not is not always easy to answer.

456. Deputy C. Murphy.—Is there not also a problem involved in this with regard to the loss, theft, fire and so on of insurance cards which makes the situation complicated? I am referring to cards which have been lodged at a local exchange. How does the Department deal with the situation if a claim is made that the cards were lodged at a branch exchange which was subject to theft or fire? I presume this could lead to all sorts of problems in the Department.

—It does lead to problems. It is a difficult problem because, firstly we would have to establish that the cards were lodged, how many stamps were on the cards and so on. It is difficult to establish that when the cards have been either stolen or destroyed by fire. In discussions with employers, using the best methods we can, we have to arrive at what was the amount involved. In a case like that we would credit that amount to the insured person’s record. We would not pursue the employer for it a second time.

I will not pursue that line any further.

457. Deputy N. Andrews.—There seems to have been a small number of convictions for such a large amount of money, which is surprising.

—In the case of the failure to stamp cards the number of our proceedings dropped considerably because of the pressure referred to by the Chairman earlier on the staff of the inspection branch. That is taking up again. In regard to the other prosecutions in 1975 we had a total of about 15 or 16 but the figure in 1977 has grown to 107. That is exclusive of employers. There is an attempt to keep up with this.

458. There is great public unease about the overpayments and the amount of money that appears to be paid to people who are working doing “nixers”.

—As far as I can see from the situation that exists in other countries this is a general problem. The most any country can do is to assign staff, within limits, to try to reduce the incidence of this type of fraud.

Chairman.—All we can do is impress on the Accounting Officer, if he feels that the problem is on the increase, which it seems to be, that he gets adequate staff. That is his responsibility. We are hopeful that his request for adequate staff will be sanctioned.

Deputy N. Andrews.—New ground rules for the inspectors might help also, but that is another day’s work.

459. Deputy C. Murphy.—On subhead A—Salaries, Wages and Allowances—I had in mind a question as to the numbers employed in various sections within the Department of Social Welfare and especially in the inspectorate. The expenditure was £71,179 less than granted in the year. That would constitute a good few jobs which might have helped in the situation, rather than see it snowball; it might have been stopped in time. Were applications made for extra employees in that year?

—I would think that the actual saving shown there, which proportionately is rather small in relation to the size of the subhead, is not really a reflection of vacancies because we did take a Supplementary Estimate for over £1 million for this subhead in the course of the year. That would be to cover wage agreements and such things. Generally we have some savings during the year because of replacement of retiring senior staff by junior staff at a lower point in the scale. That type of thing occurs very frequently. It is not possible to get an absolutely exact outturn at the end of the year. In that year we had a certain amount of the saving, about £18,000 of it in respect of vacancies in employment exchanges, the filling of which we had not got sanction for but we got it in the following year.

460. I see from the figures that in 1974-75 an extra 143 employees were taken on in the Department. May I ask a general question regarding exchanges? Have the Department taken over many exchanges and turned them into departmental exchanges rather than branch exchanges?

—No. I can only recall two, Bray and Arklow. These are the only two I can recall where we changed from a branch manager type, who is a contractor, to a departmentally staffed office.

Are there many of these branch managers left at present?

—Yes, we have about 87—or 84 I think it is now—branch managers.

I wonder about the return, or value for money, shall we say, of some of them.

—You are talking about branch managers or local agents?

Perhaps I am talking about local exchanges and branch managers. I think we know the one I mean.

461. Deputy V. de Valera.—Leaving out the problems of County Wicklow with which the Deputy is obviously au fait, in order to keep our accounts in perspective here would it not be a fair interpretation of the discrepancy between the grant and the expenditure to say that it is a normal budgetary tolerance and that there is nothing extraordinary about it since it is less than 1 per cent?

—Yes.

From an accounting point of view it would be better to regard it in that sense?

—I should say so.

I imagine if one were to take all factors into account including those mentioned in regard to Wicklow, the exchanges at Arklow and Bray, the truer picture would be that this is just a normal discrepancy between Estimate and expenditure?

—That is so.

Would the Comptroller and Auditor General agree with that?

Mr. Mac Gearailt.—Oh, yes.

Deputy V. de Valera.—I merely say that —I hope Deputy Murphy does not take exception to it—from the accounting point of view.

Chairman.—It is less than 1 per cent.

Deputy C. Murphy.—I only wondered if we were getting value for money in all the branch exchanges.

462. Chairman.—On subhead E—Payment to the Social Insurance Fund—there is an explanatory note explaining the variation which is acceptable.

463. Deputy N. Andrews.—On Extra Remuneration, the total seems to be a colossal amount. I do not want to harp on overtime expenditure but I feel strongly that if overtime has to be worked it is poor management to a large degree. In this period when there is so much unemployment I think that where possible people should be employed to do the work on a full-time basis rather than have people working anti-social hours on overtime.

Chairman.—We have come up against this already and we have made the same point in respect of what we would regard as exorbitant sums, for example, in the case here of staff, including a temporary messenger, receiving sums ranging from £201 to £1,768 for overtime, the £1,768 would seem to be exorbitant when one takes into account a messenger’s basic salary. In other words, creation of an extra job would be a better way out of that situation if it were possible in the framework of the system. What is the basic salary for a messenger in the category referred to?

—The basic salary would probably be in the £2,000—£2,500 range. I say that as a guess.

The extra sum then is approaching 100 cent?

—Yes. The reason is the reflection of very substantial overtime in the Department in that year. The messenger really has to stay; it is not so much that he is occupied but he must remain physically on the premises. In the year 1975 overtime extended through Saturdays and Sundays and so on because we had an age reduction on the pension side. We had a children’s allowances increase and the increase had to be got out to about 420,000 families. It is one of these cost-benefit issues: is it better to employ more staff for work which may be only for a short period? It may not recur every year. It is quite a problem. We do feel that the amount of overtime was excessive. Nowadays we tend to try to get more staff. There was always, in the Department of Social Welfare, a degree of seasonal overtime, for example, requalification of claims for unemployment and disability benefit which I think it is more economical to do on overtime. But that is not the full answer to the rather excessive overtime in that year. I take the point that we should, where overtime is likely to be recurring, try to meet it to the utmost extent by adequate staffing.

464. Deputy C. Murphy.—The Accounting Officer mentioned the reduction in age for qualification in the old age pension and along with that is a matter of policy, that people entitled to hold two different pensions prior to reaching old age pension age suffered a loss of income through the age being reduced by one year and subsequently by another year. Would the Accounting Officer be able to give me any idea or estimate of what the savings were to the Department of Social Welfare arising out of this situation of the age being lowered in successive years?

—I am afraid I could not give it here and now but again when you reduce pension age it is very much a question of the greatest good for the greatest number. Somebody who had two payments and who under the legislation is not entitled to continue those after pension age obviously has to drop one of them, but I certainly could not give the Committee any estimate of what the saving would be. I doubt if I could even undertake to give any estimate that would be of much value by way of note, but if the Committee would like me to try that I will certainly see if we can work out something on that basis. However, I do not think it would be very useful.

The Accounting Officer mentioned a cost-benefit analysis which I did try to have changed by means of a Dáil question, but considerable savings must accrue to the Department when individuals who held retirement pensions-cum-blind pensions in many cases take a drop of £5 to £6 per week in their income at an earlier age.

—My difficulty would be to identify cases for the purpose of making any estimate, but if you wish I will undertake to have it examined.

If it were possible to discover the number of social welfare recipients who were in receipt of two pensions which would lapse automatically when they reach old age pension age, then it might be possible to do some form of analysis on the actual loss of income to these people and the amount of savings which would accrue to the Department. We should take the blind pension and the retirement pension in 1975 and add the two together. We know what the old age pension was then. If we knew the number of social welfare recipients who were in receipt of two such pensions, as was possible under legislation, then we would find what the difference was. There are probably accounting difficulties in this, but I am trying to figure out what the situation is. It is terrible to find that where people used to suffer this drop in income at 70 years of age they now have to take it at 66. I am trying to find out what moneys accrue to the Department of Social Welfare as a result of this.

Chairman.—Would this procedure extract a global figure?

—Yes, Mr. Chairman. I can hardly see how we could identify how many people had the two payments in 1975, for example, who by virtue of reduction of pension age lost one of those even though he gained on something else. We would not have those records. I would be prepared to examine it but I am not optimistic as to whether we could frame any estimate.*

Then you will do your best and if you cannot do it we will have to accept this. Are there any further comments? That completes Vote 48 and I would like to thank you, Mr. Collins, for your indulgence.

—Thank you, Mr. Chairman.

The witness withdrew.

VOTE 43—POSTS AND TELEGRAPHS.

Mr. P. L. Ó Réagáin called and examined.

465. Chairman.—Mr. Ó Réagáin, I understand this is your first appearance here. You are very welcome to this Committee.

—Thank you.

Paragraph 57 of the Report of the Comptroller and Auditor General reads as follows:

“Stores

A test examination of the store accounts was carried out with generally satisfactory results.

In addition to the engineering stores shown in Appendix II as valued at £8,338,023 at 31 December 1975, engineering stores to the value of £88,620 were held on behalf of other Government Departments. Stores other than engineering stores were valued at £1,740,104 including £749,477 in respect of stores held for other Government Departments.

Including works in progress at 31 December 1975 the expenditure on manufacturing jobs in the factory during the year amounted to £138,098, expenditure on repair work (other than repairs to mechanical transport) to £293,281 and expenditure on mechanical transport repairs to £49,571.”

Mr. Mac Gearailt.—This paragraph is for information. It reports to Dáil Éireann that the store accounts kept by the Department of Posts and Telegraphs were duly audited by my office in 1975 as required by statute.

The paragraph also gives the value of engineering and other stores on hands at 31 December 1975 including stores held on behalf of other Government Departments.

466. Chairman.—It is generally an accounting note. What articles do you manufacture in the factory?

—They are mainly articles required for the Post Office. For ourselves we manufacture mailbags, small switchboards, badges, telephone kiosk fittings. We also do certain articles for other Government Departments such as leather fittings, web straps, flags, bunting, canvas items, buttons, badges and so on. Then we do repair work on telephone instruments, coin-boxes and similar items.

467. Paragraph 58 of the Report of the Comptroller and Auditor General reads:

“Revenue

A test examination of accounts of postal, telegraph, and telephone services was carried out with satisfactory results. The net yield of revenue for the year 1975 and for the period 1 April 1974 to 31 December 1974 is shown in the following statement.

£69,050,000 was paid into the Exchequer during the year leaving a balance of £1,779,615 at 31 December 1975. Sums amounting to £57,678 due for telephone services and £3,535 for telegraph (telex) services provided in previous years were written off during the year as irrecoverable.”

Mr. Mac Gearailt.—This paragraph reports to Dáil Éireann that accounts of the revenue from Post Office Services have been examined with satisfactory results. This paragraph also gives the net yield of revenue from each of the three services in the year under review and the comparative figures for nine months up to 31 December 1974.

468. Chairman.—Do you submit your applicants to a check to ensure that they are not listed among your bad debtors?

—Yes, we do. If there had been a bad debt we would have a record of that.

Would you proceed in that case?

—We would require repayment and a larger deposit or some other assurance.

469. Paragraph 59 of the Report of the Comptroller and Auditor General reads:

“Post Office Savings Bank

The accounts of the Post Office Savings Bank for the year ended 31 December 1975 were submitted to a test examination with satisfactory results. The balance due to depositors, inclusive of interest, amounted to £265,843,706 (including £85,376,207 in respect of liability to Trustee Savings Banks) at 31 December 1975 as compared with £233,272,254 at the close of the previous year. Interest accrued during the year on securities standing to the credit of the Post Office Savings Bank Fund amounted to £20,824,144. Of this sum £18,695,779 was applied as interest paid and credited to depositors, management expenses absorbed £1,597,146 and the balance £531,219 remained as a provision against depreciation in the value of securities.

I am in communication with the Accounting Officer regarding some year-end adjustments.”

Mr. Mac Gearailt.—This paragraph gives information on the operations of the Post Office Savings Bank accounts for the year 1975. It will be noticed that the balance including interest due to depositors shows an increase of £32,571,452 approximately on the previous year. The year-end adjustments mentioned in the last sentence were necessary because of wrong treatment of interest due to defects in the relevant computer programme. I have been informed by the Accounting Officer that these defects have since been remedied. I should say that as my query to the Accounting Officer did not issue until this report was almost ready for printing he had little opportunity of having his reply included in this report.

470. Chairman.—Do you regard management expenses as a percentage of accrued interest as reasonable? How does it compare with previous years?

—We are very much in the hands of the Department of Finance in regard to management expenses. We think the amount is reasonable but it is a matter for the Department of Finance to take a decision on it. We operate the bank on behalf of that Department and they exercise overall control over what we do in relation to it.

471. Paragraph 60 of the Report of the Comptroller and Auditor General reads:

“Subhead F—Engineering Stores and Equipment

In 1972 a Bulk Supply Agreement for the supply and installation of a specified quantity of telephone exchange equipment was entered into with a company which also supplies and instals such equipment under normal open competition tender contracts. In accordance with a condition of the Agreement the contractor has established a factory in Ireland for the manufacture of telephone exchange equipment. The Agreement provides that the equipment shall be supplied and installed over a five-year period upon indents issued by the Department for works to be carried out and based on quotations and specifications for such works submitted by the company. The Agreement contains a schedule of unit price rates for materials and provides that this schedule may be extended to include further items.

In the course of audit it was noted that payments under this Agreement, which were made against the company’s invoices, included considerable sums in respect of items which were neither listed in the schedule of unit price rates nor priced in the company’s specifications and I inquired regarding the control exercised by the Department over the quantities and prices of these items. The Accounting Officer informed me that for the more expensive of the items a check is placed on the quantities proposed by reference to the quantities supplied for recent similar projects under the Bulk Supply Agreement and under open competition tender contracts. The unit prices are compared with those quoted by this and other contractors in recent tenders. Regarding the less expensive miscellaneous items and cable, the needs of each individual project are considered and reference is made to previous experience of comparable projects to ensure that the value quoted for such material is fair and reasonable.

I also inquired regarding the control exercised over installation costs. The Accounting Officer informed me that prices for each separate exchange or extension are agreed in advance with the contractor and that regard is had to prices quoted previously for installations under this Agreement and under open competition tender contracts.

The Agreement requires that proper wages books and time sheets be kept by the contractor and be produced whenever requested for the inspection of the Minister for Posts and Telegraphs, and I asked the Accounting Officer for information regarding the extent to which this right of inspection had been exercised. He informed me that such a right is usually exercised in connection with a price variation claim made by a contractor because of increased labour costs. The Accounting Officer stated that since the price adjustment formula for installations under this Agreement is based on published figures of hourly earnings in specified related industries, there was no need to inspect the wages books and time-sheets in connection with price variation claims for installation work and that in the circumstances the right of inspection had not been exercised.”

Mr. Mac Gearailt.—The agreement referred to in this paragraph is somewhat outside the normal open competition tender procedures and because of this I was concerned about the controls exercised over prices of unlisted items of equipment and over installation costs.

In regard to the decision of the Department not to exercise its right of inspection of the contractor’s wages books and time sheets I would have thought that such inspection might be of value not only in cases of price variation claims because of increased labour costs, as stated by the Accounting Officer, but in other cases with a view of ascertaining whether the numbers and categories of workers on a particular project, the rates of wages paid and the time spent on the project were reasonable and therefore that the project represented value for money for the Department.

472. Chairman.—Has this bulk supply agreement led to economies in relation to the provision and extension of exchanges as compared with the open tendering system?

—That is a rather difficult question to answer briefly. The main purpose behind the bulk supply agreement was to encourage the manufacture of telephone exchange equipment in Ireland. Prior to the negotiation of the bulk supply agreement our practice was to go on the world market for competitive tenders. For quite a while it was felt that, in view of the big investment being made by the State in telecommunications, it would be desirable to have exchange equipment manufactured in the State, particularly if the manufacture could be the basis for the development of an export industry. The Government decided in 1968 that the Industrial Development Authority and our Department should endeavour to produce a scheme whereby the purchasing power of the Department in relation to the telecommunications development programme could be used to ensure the establishment of an Irish industry for the manufacture of a major proportion of the equipment required by the Department. The Industrial Development Authority and our Department approached a number of large firms which had been supplying exchange equipment and asked them to come forward with proposals for setting up a factory in Ireland in return for guaranteed shares in the orders of the Department. Some firms expressed interest and finally one firm came forward with a proposal which was acceptable to the Industrial Development Authority and ourselves. The general idea was that we would give them a commitment to order a certain amount of equipment from them for a period of years and they in turn would set up a factory in Ireland. The factory was set up and has been working to the satisfaction of the IDA; an IDA grant was payable in three stages and I understand two of these stages have been satisfactorily completed. So far as the Department was concerned the basis of the bulk supply agreement was that various items of equipment required in an exchange were listed, and the firm concerned proposed certain prices plus certain price variation clauses to operate thereafter. It is fair to say that our view was that the agreement would increase the cost of the exchange equipment somewhat above what could be got by open competitive tendering; in effect that differential is the price paid for getting the factory in Ireland. Accordingly, I would find it very hard to say that the agreement resulted in measurable economies. There are economies incidental to it because a large quantity of exchange equipment is now of a uniform nature, being supplied by one supplier. That makes training of staff and maintenance somewhat easier and means less inspection and checking work by our engineers in checking over installations by the firm as we have more experience of that type of equipment. But so far as the actual price of the exchange equipment is concerned this has probably pushed it up.

Are your orders creating employment? Is it satisfactory from that point of view?

—Yes.

473. Would you comment on the reference made by the Comptroller and Auditor General to a lack of scrutiny in regard to contractors?

—I do not think there is a lack of scrutiny.

Perhaps that was the wrong word to use.

—When we give an order to this firm they come back with specifications and an estimate of the cost. That usually covers three main items. The exchange equipment proper—telephonic equipment is the major portion—would be priced on the basis already agreed under the bulk supply agreement. There would be, in addition, a certain amount of power equipment involved but not covered by the agreement that the firm does not manufacture but has to supply to us. We would look at that and see how the prices proposed compare with those in other tenders by the firm under the bulk supply agreement and with the prices we had paid under recent open competitive tenders. If we were not satisfied we would negotiate further with the firm. Then there is a certain amount of miscellaneous equipment required for exchanges which similarly is not priced in the agreement. We would also compare the cost of that with what was charged in similar contracts both under the bulk supply agreement and open competitive tendering. Then there is the final item of installation costs. The firm not merely supply the equipment for an exchange but instal it in the exchange building. There again we apply a similar check. We look at what it cost under previous contracts to put in approximately the same amount of equipment and so on and see if the firm’s figures are reasonable. So far as price variations are concerned there is a formula in the agreement itself which relates price and wage variations to wage movements as notified in published statistics. On the whole we think we do a fairly good scrutiny. There is provision for inspection of the books of the company and if we thought it essential to get a better scrutiny we would use that power. So far we have only used the power of inspection as normally used in connection with the fair wages clause in contracts. We carried out one inspection of the firm’s books on that basis and were satisfied. We would avail of the clause for other inspections if necessary.

Do you have the facility to spot check?

—Yes.

474. On Losses——Classified Schedule— would you comment on the possibility of recouping losses? What system do you employ? I am referring to losses due to theft and so on.

—Where theft occurs we are dependent on the process of law. If the police succeed in apprehending the people who are guilty of the theft we may succeed in recovering part of what was stolen but it is very much a matter of luck.

475. Deputy V. Brady.—In view of the increasing incidence of robberies are the Department taking any steps to improve security?

—Yes. It is given a great deal of thought and we are in constant contact with the Garda Síochána in relation to this matter. We also have continuous discussions with the Postmasters’ Union because they are the people who are most often the victims of robberies. We have devised various schemes for improving protective devices in offices. The Department of Social Welfare have introduced a system of numbering for social welfare stamps and that will contribute very considerably towards reducing the temptation to rob sub-offices.

476. Chairman.—Under Extra Remuneration, I note that 8,934 officers received sums ranging from £201 to £3,593 in respect of extra attendance and other duties and the total amount paid in respect of overtime was £6,213,113. This is a very substantial sum. The view of this Committee is that where possible, especially when a sum in the region of £3,500 is paid to an individual, it would be preferable to create an extra post, provided that this is feasible. In our present circumstances this would be more appropriate than paying that kind of money to an individual who is already in employment. Have you any comment on that or would it be possible for you to seek extra staff?

—The general policy is to keep overtime to a minimum and wherever possible to take on extra staff rather than to employ people on overtime. Unfortunately the nature of post office work is such that it is difficult to avoid the payment of quite considerable sums by way of overtime. Overtime covers bank holiday attendance and Sunday attendance and this is paid for at quite high rates. In most cases where bank holiday and Sunday attendances are involved it is not possible to take on extra staff. We require skilled people in exchanges to carry on exchange maintenance and similarly for telephone operating duties. The telephone service keeps going 24 hours, seven days a week and we have to pay for attendances. There is not very much scope for extra employment but we watch at all times for opportunities to reduce overtime and take on extra staff.

Deputy V. Brady.—The sum of £3,593 seems an extraordinarily high amount to pay to any individual for overtime. Is there more than one individual concerned in sums of that kind?

—The number who received over £3,000 was three. Of these, two were engaged on registered letter work on Sundays—Sunday duty was the main portion of the overtime. It is not feasible to employ other than experienced clerks for this work. The third person was an exchange technician. The sums involved in the three cases were mainly in respect of Sunday attendance rather than overtime in the normal sense.

477. Deputy C. Murphy.—I note that in the postal section the deficit has been increasing and for the year 1973-74 the provisional figure was £1.5 million. What was the actual figure and has this trend of deficit continued?

—The actual figure in 1975 was £1.2 million approximately.

It would appear that 1973-74 had been a peak period in relation to deficit and that now the deficit is dropping.

—That is so. Of course the deficit depends a great deal on the level of charges and we have increased charges since then. The deficit has been decreasing and we would expect over recent years to show a small surplus.

I see that there has not been a surplus since 1969.

—That is quite correct.

Have we had any surplus in the last decade? Is it likely in a few years that we will reach a break-even figure?

—A break-even figure is the goal. We expect so.

478. Might the same be said of the telephone and telegraph sections?

—The telegraph service proper has not at any stage come anywhere near breaking even and we have no expectation that it will. It loses almost everywhere in western Europe. On the telephone side we are working towards a break-even point. The matter was considered in 1976 by the Prices Commission following on a reference to them by the Government and a special report was prepared by consultants on an appropriate financial strategy for the Department and they recommended that the Department should work over a number of years towards a break-even point. On the telephone side there is a very heavy investment in capital and it takes some time for such capital to remunerate itself adequately.

479. You have a provisional figure for a deficit. Is that figure being contained or has it subsided?

—It has continued to grow.

What did it reach in 1975?

—Slightly more than £14 million.

Of a deficit?

—Yes.

So, from a surplus situation in 1969, nearly 10 years later it has gone to a deficit of £14 million?

—That is right. The financial position is reported on by the Minister to the Dáil every year and there have been statements of policy in the Dáil by Ministers. There is a massive capital investment and it will take some years to get a break-even return on it.

480. The last figure here in regard to telegraph services is £½ million deficit. What is the figure for 1975?

—Slightly more than £1 million.

The witness withdrew.

The Committee deliberated.

The Committee adjourned.

*See Appendix 13.