Committee Reports > List of Committees > Dáil > 1979 > Committee of Public Accounts > Interim and Final Report - Appropriation Accounts 1977

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

Dé Céadaoin, 4 Iúil, 1979

Wednesday, 4th July, 1979

The Committee met at 11 a.m.

DEPUTY O’TOOLE in the chair.

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

VOTE 42—INDUSTRY, COMMERCE AND ENERGY

Mr. J. C. Holloway called and examined.

500. Chairman.—I would like to mention at this juncture that Mr. Holloway was unable to be with us last week as planned. I understand he was abroad on very important business and schedules got mixed up abroad, not due to any fault of Mr. Holloway, and he was unable to be here. You are welcome back, Mr. Holloway, and we appreciate your problems.

—Thank you for looking at it in such kindly terms. I regret my inability to attend last week but I was in an out of the way corner of the world and had some considerable difficulty getting back—what with lost baggage, missed flights and other things of that kind. I hope I did not inconvenience the Committee.

We are happy that you came back safely.

—Thank you.

501. Paragraph 30 of the Report of the Comptroller and Auditor General reads:

“Subhead V.—Grant to National Film Studios of Ireland Ltd.

Reference was made in paragraph 56 of my report on the Accounts for 1975 to a payment of £63,000 towards the administration expenses of the National Film Studios of Ireland Ltd. In 1976 a further grant of £250,000 was paid towards the general expenses of the company. As the company was still experiencing financial difficulties in 1977 provision was made by way of supplementary estimate for a grant of £300,000 towards its administration expenses. With the sanction of the Minister for Finance the grant was paid to meet the losses incurred in the period January to June 1977 as certified by the Company’s auditor and the losses incurred in the period July 1977 to December 1977 as indicated by its financial controller.”

Mr. Mac Gearailt.—This paragraph deals with payments totalling £300,000 made from voted moneys to the National Film Studios of Ireland Limited to meet losses incurred in 1977. Certified Accounts received since the date of my report indicate that the net loss in that year amounted to £343,000.

502. Mr. N. Andrews.—How was that sum made up?

Mr. Mac Gearailt.—These losses were shown up in the audited accounts of the film studios.

503. Chairman.—Perhaps Mr. Holloway might comment on this.

—The losses incurred by NFSI?

Mr. N. Andrews.—Yes.

—The position is that they depend very much upon the amount of business which they are able to procure for the studios, the number of film makers that they are able to entice to use the studios. Unfortunately, they have their ups and downs. They did have a rather happy experience at the beginning but, mainly because of competition from other countries which are able to offer facilities as good as, if not better than, ours, they have found it increasingly difficult to get a sufficient volume of business into the studios. This is a matter which we have been wrestling with now for a couple of years. We have some new plans which are under consideration, interdepartmentally, basically with the idea of introducing new mechanisms which will produce additional business for the studios. It is one thing to set up the studios, to spend money on the equipment and to fit them out properly. It is quite a different business to bring people into the country to use the facilities. That is the kernel of our problem at the moment. We have certain plans arising out of studies which were carried out by Arthur D. Little which, if put into execution, stand a good chance of producing valuable business for the studios. It is a business which is very, very competitive and most of the countries in the world seem to be happy to lose, for prestige reasons, very considerable amounts of money on providing facilities for film producers. It may well be that in the years to come we will have to look at a succession of losses but, hopefully, with some years in which profits are made as well.

504. Was there a loss incurred the following year also?

—There have been losses practically every year. These grants-in-aid are, by and large, intended to meet their trading losses. Ideally, of course, the legislation relating to this organisation should have been passed as soon as the company was created. If the legislation had been passed, we would have been able to provide them with share capital which would have been invested in the capital of the enterprise. It is not possible to provide funds through the medium of share capital without having legislation. Unfortunately, so far as the legislation is concerned, difficulties have arisen. Almost everybody who is involved in the film business has quite different ideas as to what the content of the legislation should be. We have had considerable difficulty in putting together a set of provisions that meets everybody’s requirements.

505. How many people are employed in the operation?

—It varies considerably depending upon the volume of business. If they have a couple of films going on at the same time they can have anything up to a couple of hundred people but most of them would be on short-term contracts. When the business then runs down, the residual employment could be as low as 50 people. I have not got precise figures on that. It is a rather volatile business in terms of employment.

506. I recognise that it is rather volatile but it is certainly costing the taxpayers a considerable amount of money. The losses incurred by the National Film Studios appear to me to be quite inordinate. The matter should be looked at. It appears to me to be more a public relations operation than a viable going concern. I, as a member of this Committee, view that loss with grave concern.

507. Mr. F. O’Brien.—I would like to say that, while the loss is rather high, the fact that a study has been done and Mr. Little’s study appears to show some light at the end of the tunnel, I would be very slow to do anything that would upset what might in the future be a viable and a prestigious industry. We should await the developments because this is a hazardous business. It is a loss situation in most countries but we have got to look at it in our context in the hope that it will develop. The Little report has some hope for the future. We should pursue that line and fund it until it has been fully tested.

508. Mr. N. Andrews.—If I may pass another remark. It is well known that film studios throughout the world of the kind that operates in Bray are closing down and the development has gone away from 35 millimetre feature films to providing films for television and so on. The same is happening in America, the home of the film industry. I am not exactly sure of the details of the kind of loss that the film studios have incurred. I would like to have more facts and figures about the kind of expenses that they incurred. I feel very concerned that that kind of money is being spent on a business that just simply would not survive in the private commercial field. I do not think it is fair that the taxpayers should be asked to foot the bill to that extent.

—If I may, I would like to say that we are equally concerned about the losses in this enterprise. There has been a very considerable amount of inter-departmental agonising about it. Indeed, it was for that reason that we commissioned this study from Arthur D. Little. One of the things which we are regularly confronted with when we are having this debate with NFSI and with the various people involved in the film industry, is that you can look at the net losses in terms of Exchequer finance and it presents a rather bleak picture. But they do interesting calculations on a cost-benefit analysis showing the effects of this business on the economy. Those kinds of figures present a rather better picture. I know that most of us are extremely suspicious of cost-benefit analysis because you can prove practically anything you want, but there is some substance in these presentations, though not a great deal, and we are not terribly influenced by them. However, it is one of the considerations which is in the mind of a substantial body of people who are lobbying so strongly for public attempts to strengthen the film industry in Ireland.

509. I would certainly support any investment to strengthen the film industry in Ireland, but, with the continuing losses in this operation, the agonising and the debate should come to a rapid conclusion. The kind of losses incurred here are quite severe and unjustified in my view. I do not believe the taxpayers can any longer look with favour on an operation of this kind. This Committee have an obligation to highlight that point. I feel very strongly that the debate should come to a conclusion and a decision be made because it is quite obvious what should be done. I hope that next year or the year after we will not have the same kind of loss figures for an operation of this kind.

510. Chairman.—To wind up this matter, the consensus of opinion seems to be that the concern revolves around the question of the degree to which we must pay public money for prestige and status. The accounting officer has mentioned cost-benefit analysis which, as he says, can prove anything. I fully agree with the Deputy that this industry would not survive in a commercial atmosphere or under private enterprise conditions. We have an obligation to ask fairly in-depth questions on the viability of this as a public concern and, hopefully, the Accounting Officer may be in a position in a year’s time to give us some answers to the continued viability of this as a public concern.

511. Mr. N. Andrews.—I hope that in the next accounts we will have a greater breakdown of the expenses and that if losses are incurred how they occurred, if that is possible. It is very important that we should have that.

—I will certainly take note of that.

512. Chairman.—Paragraphs 31 and 32 of the Report of the Comptroller and Auditor General read:

“Subhead U.—Appropriations in Aid

Section 8 of the Petroleum and other Minerals Development Act, 1960 confers on the Minister for Industry, Commerce and Energy power to grant petroleum exploration licences and provides that, on the granting of a licence, the licensee shall pay to the Minister such consideration therefor as the Minister, with the concurrence of the Minister for Finance, may determine. Section 58 of the Act provides that all moneys received by the Minister as consideration for any licence granted by him shall, as and when received, be paid into or disposed of for the benefit of the Exchequer in such manner as the Minister for Finance shall direct.

In 1975 terms and conditions applicable to the grant of exclusive offshore exploration licences for oil and gas were approved by the Government and published by the Minister. These provide for the payment of an application fee in respect of each licence applied for and an annual rental during the life of each licence granted. Application fees and rentals are appropriated in aid of the Vote, the receipts in 1977 amounting to £533,711. The terms and conditions also provide that, in addition, an applicant may offer, inter alia,

(a)a commitment to establish industrial development projects,

(b)an agreement to State participation in excess of the maximum level set out in the licensing terms,

(c)a signature bonus.

Appropriations in Aid also include £20,000 in respect of signature bonus and £305,279 in respect of funds provided by licensees for petroleum-related training, consultancy and technical assistance projects. The expenditure on these projects is borne on Subhead W.

Offers made by licensees and accepted by the Minister under licensing Agreements concluded in 1976 included

(a)two to establish industrial undertakings within specified periods,

(b)one to undertake, at no cost to the State, a study regarding the establishment of an iron oxide manufacturing plant, and

(c)one to make an unsecured and interest-free loan to an existing mining company.

I sought information from the Accounting Officer as to how it was proposed to comply with the provisions of Section 8 of the Petroleum and other Minerals Development Act, 1960 in relation to these offers. He informed me that these offers did not constitute consideration for the grant of the relevant licences and were outside the scope of the provisions of that section. In reply to my inquiry as to whether legal advice to this effect had been obtained he informed me that, on the basis of informal legal advice obtained from an officer of the Attorney General’s Office who had been advising on the legal aspects of the licensing agreements, he was satisfied that none of these offers constituted consideration for the grant of the relevant licences within the meaning of Section 8 (3) of the Act.”

Mr. Mac Gearailt.—Paragraph 31 notes that the terms and conditions approved by the Government for the grant of exclusive offshore exploration licences provide for the payment of application fees and annual rentals and, as indicated, fees and rentals brought to the credit of the Vote in 1977 amounted to £534,000 approximately. The paragraph also lists some of the additional offers which applicants for licences may make. Sums brought to credit in 1977 in respect of such additional offers amounted to £325,000. As indicated in paragraph 31 applicants for petroleum licences or exploration licences may make additional offers and paragraph 32 indicates some of the offers made and accepted under licensing agreements made in 1976. As stated, the Accounting Officer informed me that such additional offers do not constitute consideration for the grant of the relevant licences and, therefore, do not fall to be accounted for in accordance with Section 8 of the 1960 Act. My concern here is to establish whether such additional offers fall to be accounted for to the Oireachtas and, if so, how they are to be so accounted for.

513. Chairman.—On paragraph 31, there are two subparagraphs within the paragraph. The first deals with Section 8 of the Petroleum and other Minerals Development Act, 1960. The second subparagraph then is a distinct section dealing with other matters which were approved by the Government and published by the Minister. There is an addendum to the Act. This is where the problem arises in so far as this Committee are concerned. While we appreciate the matter mentioned by me concerned the Government and the Minister at the time, these are extras. We are not trying to knock the fact that the Government succeeded in getting extras out of the granting of licences but the question of accountability arising out of moneys paid and services rendered causes some concern. If we look at paragraph 32 (c) it states: “one to make an unsecured and interest-free loan to an existing mining company”. This amounted to £½ million. If we continue to read the paragraph we find that the legal advice sought was sought in an informal way from the Attorney General’s Office. As things stand—I am just looking at it from my own point of view and from the Committee’s point of view—is there any way there can be a follow-up on the basis of what is in front of us in so far as we can find out what happened to this money? Has the Dáil or this Committee any way of finding out in the form of follow-up information, what became of this sum of money in this particular instance?

—We got an inquiry from the Comptroller and Auditor General about all of the offers that had been received and specifically we were asked had the moneys been paid or the services been rendered. We replied to that in considerable detail. All of the commitments which were entered into by the petroleum licensees were honoured in so far as the time for discharging these obligations has actually passed. In some cases, like the obligation to establish industrial undertakings, the time by which they have to be done has not yet arrived. As far as the accounting is concerned, it is right to say that all of the accounting arrangements that we have adopted for these funds which were paid by the licensees were the subject of discussion with the Department of Finance and the Department of the Public Service who were involved to some extent. My understanding was that anything that we have done met the requirements that were specified.

514. You may have misunderstood my question because it was a long meandering one. I am not suggesting that you did not follow up the additional commitments undertaken by the licensees to ensure that they were honoured. Is there a format by which this Committee or Members of the House can have access to information in respect of this kind of expenditure? It is outside the ambit of the Act.

—All I can say in reply to that is that we would be very happy to comply with whatever requirements may be specified by the Committee. There is a fundamental point here which I would like to make. There is a debate as to what is meant by “consideration” under Section 8 of the 1960 Act. The words used in that section speak about consideration being “determined”. In the licensing terms we set out what we would regard as the consideration for the grant of licences, basically items like rental fees and area fees. Those fees were determined in advance and were approved not only by the Department of Finance but by the Government. So far as we were concerned that satisfied the requirements of Section 8. The licensing terms went on to provide, and this was also with the approval of the Government, that people applying for licences were entitled to make offers over and above what we had specified in the licence terms. Although we did set out certain indicative headings under which these extra offers might be made, it was clear from the expressions which were used in the licensing terms that they were not to be regarded as limited to the headings we indicated. We would listen to anything they had to say. We would be prepared to consider any offer that they would make. It would be most unfortunate if we were now to decide that, because of some difficulties in accounting for offers of that kind, we must say to petroleum companies, “please do not make us any offers because we have an accounting problem.” One should understand that there is a considerable amount of negotiation involved in the grant of licences. Our primary objective is to get as many wells drilled as we possibly can. That is what the initial debate is usually about. Our views about the number of wells that ought to be drilled would not necessarily be matched by the views of the petroleum companies. There is a tendency throughout the world for people applying for licences to say, “we will commit to so many contractual wells but we will also make you the following cash offer or an offer to set up an industrial undertaking or an offer to associate it with some enterprise which is in difficulty”. In the process of negotiation one has to make up one’s mind whether these offers ought to be accepted or not. As regards the one to which you referred, that is to make an interest-free loan to an existing mining company, it is the case that practically all of the major oil companies are involved in exploring not simply for petroleum but for other minerals also, including uranium, copper, lead and zinc. One sees this in their annual reports and indeed they are diversifying more and more into non-petroleum activities. We had this mining company in Avoca which for practical purposes was a State company. It was a State liability, it was being kept alive by us at considerable expense to the taxpayer. Therefore, it was a matter of considerable interest to us to find that one of the applicants for a petroleum licence was interested in that particular area. Apart altogether from the actual mine itself, the surrounding area is regarded as being quite prospective for copper. Our arrangement with them was that we would hold that territory available for them for some time because they had an interest in it and for their part they would invest money in the mine to keep it alive. The investment of that money in the mine saved the Exchequer a corresponding amount of money. I think it was a very good deal as far as the State and the taxpayer were concerned.

515. I wish to reiterate again that I am not suggesting that we ask you to terminate the offers of extras. It is a question of following them up and seeing what becomes of them. You mentioned Avoca being a State liability. We feel that if an outside body puts money into Avoca thereby relieving the State of some of its commitments, or at least saving it money, this Committee and the House should be in a position to follow up that investment in that State company. You mentioned the fact that the Departments of Finance and the Public Service were involved. Perhaps Mr. Kennan or Mr. Corrigan might give their views on the handling of these extras and the format of accountability which might result in this Committee and the House being able to inform themselves with regard to these extras?

Mr. Kennan.—On behalf of the Department of Finance, all I can say now is that the question of accountability has been under consideration—which is not yet completed. We would intend that the Committee be made aware of the outcome in due course.

516. Deputy F. O’Brien.—It seems to me that there should be no great problem here. It concerns companies who sign contracts with us and who want to give us additional benefits and apparently this is not expressly provided for in the relevant legislation. Surely an appropriate accounting arrangement could be devised to reflect transactions relating to offers over and above the strict licensing conditions, by promoting amending legislation, if necessary. It should not present insuperable difficulties to come up with a reasonable formula to meet the Committee’s wish. Indeed, we should encourage any additional bonus offered by private enterprise because they are not, by and large and by their very nature, benevolent enterprises. When they offer something additional we should seriously consider it and be very slow to put obstacles in the way. Bureaucrats can put obstacles in the way of enterprise and I would be very slow to do that. We should examine this carefully.

—Let me repeat that we would be very glad to provide and comply with any accounting requirements that you may specify. I think that underlying this debate there is a question which may raise some difficulty for us. The origin of this debate goes back to Section 8 which speaks about “consideration being determined with the approval of the Minister for Finance”. I think it has been contended that as far as some of these offers were concerned, the specific approval of the Minister for Finance was not obtained. As I said in my written reply to the Comptroller and Auditor General, there were all kinds of legal questions arising in preparing these licences. During the negotiations quite often these petroleum consortia would come in in groups of ten or 15 people with perhaps three or four lawyers and we were fortunate to have permanently with us an officer from the Attorney General’s Office who dealt with legal questions as they arose. When we came to consider the status of some of these offers, we had to ask ourselves, “is this consideration coming within the meaning of Section 8?” His advice was that it was not. I was extremely glad to hear him expressing that view. These negotiations for the grant of licences are often very complicated and very protracted. What they are prepared to offer and what we are prepared to give them by way of numbers of blocks, etc., vary as the negotiations go along. Obviously we are trying to extract the best possible deal for the State. If we were obliged to consult the Department of Finance at every hand’s turn during those negotiations, I think it would be impossible to do business. Our interpretation is that the legislature in passing the Act of 1960 entrusted this business to the Minister for Industry and Commerce. It not only gave him the function of granting licences but vested in him the actual ownership of the petroleum. It went on to provide that the consideration, and most of us have an idea as to what was involved in that expression, for the grant of licences would be determined by the Minister with the concurrence of the Minister for Finance. When one can determine something in advance, then obviously there is no great problem about inter-departmental consultations and getting agreement. It is a different matter altogether when you come down to the negotiations, where people are making offers to you over and above the predetermined consideration. I feel very strongly that the more administrative overhead that is imposed upon us in seeking inter-departmental approval for those kinds of things the less we will be able to do this work. It is an area in which one has to behave as a businessman, extract the best possible deal and get business done.

517. Chairman.—I think it is accepted that you are dealing with hard-headed business people who will insist on striking the best bargain for themselves commercially. Am I right in suggesting to you that in the accepted meaning of the word “consideration” in the legal sense, in the absence of consideration there can be no form of contract in any binding way?

—Yes. By and large that is so.

518. This may be an unfair question and you need not reply if you do not wish. In your own opinion, do you think that what we are suggesting, that there might be some format through which accountability to the House and to the Committee would come forth, might cause the companies with whom you are dealing to look on this suggestion with a jaundiced eye? In other words, would they object seeing that these are concessions above and beyond what you expect? Would they object to our laying down any formula through which accountability to the House and the Committee might be forthcoming?

—I could not imagine any difficulty arising under that heading.

519. If the answer was in the affirmative it would cast very serious doubt on the whole negotiating procedure adopted in coming to any form of agreement in these matters. I would hope there would not be any objection by them.

—I do not think there would be. In any event, these people recognise full well that whereas they do business with the Department of Industry, Commerce and Energy, there are other institutions in the State which have their role to play, including Parliament and the Public Accounts Committee. They could not, in my view, have any objection to arrangements which might be adopted for reporting or accounting on the offers that they might make. My only worry is the idea that before we could accept the offers we would have to go through some inter-departmental mill and by the time we would come back to them they would have gone elsewhere.

520. There is no suggestion of that. It is a question of having gone through the negotiations and getting the best bargain you can get, that you would be able to account to the Committee.

Mr. Mac Gearailt.—May I just say a few words? The Accounting Officer has been talking about the need for getting Finance sanction for these additional offers. I have no doubt that that was the original approach of my staff when they saw these offers being made and accepted. Knowing that we were dealing with hard-headed businessmen, as you call them, we would say “these fellows are not giving anything away for nothing so they must be getting something for a consideration”. The only thing we saw they were getting was a licence. The Accounting Officer has assured me that these offers are not consideration. If that is accepted then the next question is how are they to be accounted for. If Departments, not necessarily the Department of Industry, Commerce and Energy, are at liberty to make arrangements like this involving the transfer of money or money’s worth, independent of the Exchequer requirements, then I would be in a rather impossible position when wearing my other hat as the man responsible to see that the Exchequer gets its pound of flesh. All I am concerned with is whether or not these offers are to be accounted for. If the answer is “no”, I will be quite happy then. If the answer is “yes” then it is only a question of coming to a proper formula.

521. Mr. F. O’Brien.—I do not see any great conflict here. The Accounting Officer made it quite clear that as long as there are no impediments put in their way when the negotiations are taking place, he does not mind. That is very important. We should not be falling over ourselves imposing rules, but when a good deal is done it should be accounted for. It is a question of devising a formula for accounting for any deal that is done so that this Committee and the House can take cognisance of it. That is a normal procedure. I do not think anybody would cavil at that situation.

—It certainly does not pose any problems for me. I would be quite happy to comply with whatever rules the Committee or the Comptroller and Auditor General wishes to specify.

Mr. Mac Gearailt.—With respect, it is not a question of the rules which the Comptroller and Auditor General will specify, it is a question of the rules which the Department of Finance and this Committee——

Mr. F. O’Brien.—What we are seeking is an adequate accounting formula. The important thing is that it is not an impediment, that it is not some stumbling block that will tie the hands of the Department of Industry, Commerce and Energy in coming up with a favourable deal and having to refer everything back. These are additional bonuses and there is no obligation on the part of the licensees to offer them. We should be very slow to adopt a too restricted approach because this is an area in which a lot of benefits could accrue to us. We should be doing what we can to extract as much as possible from these companies. It is only when the Department have done their business that accountability arises. Up to that the Department should be facilitated to do all the negotiations and get the best possible deal. That is normal accounting procedure anyway.

522. Chairman.—Could I ask the Department of Finance representative if what is suggested by the Accounting Officer is acceptable to them? The Accounting Officer said that if he had to go to the Department of Finance for sanction of every stage of negotiation with a particular company, in respect of a deal for the granting of exploration licences, they would never get anything done, and that until the whole package has been bound and tied up they should not have to go to the Department of Finance. Is that arrangement acceptable to the Department of Finance? The Committee are now asking, at the end of the day, that accountability be rendered to this Committee and the House. I presume it would be up to the Departments of Finance and Industry, Commerce and Energy to draw up a formula under which this would come about. Is the procedure suggested by the Accounting Officer acceptable to you?

Mr. Kennan.—I could not give an affirmative. The whole matter has been under consideration which is not concluded. I doubt if the requirement to get Finance sanction would in any circumstances necessarily hinder business dealing. Where Finance sanction is required there are flexible arrangements whereby the Department can be enabled to carry out negotiations in a business-like manner. There should really be no problem there. The matter is still under consideration.

523. Chairman.—At the end of the day you feel that you should be informed of what has taken place and that sanction should be sought for the whole package in toto, including extras?

Mr. Kennan.—That is one of the points on which we still have to complete our deliberations.

524. Chairman.—The point made by the Comptroller and Auditor General is that he, as the one responsible for vetting Exchequer transactions, is placed in an invidious position if Departments, not necessarily the Accounting Officer’s Department, are permitted to make arrangements involving the transfer of money or money’s worth, such as could arise in the case of offers from companies seeking oil and other minerals’ prospecting licences.

Mr. Mac Gearailt.—Yes.

Mr. Kennan.—The particular circumstances in this case are still under consideration. In general, where there is a requirement for Department of Finance sanction, this need not inhibit business dealings.

525. Chairman.—There is no suggestion about that. We place trust in our public servants at top level to negotiate a deal which is favourable and to the benefit of the country as a whole. It is a question of tidying up the loose ends. It is a paper exercise, if you like, and an informative one for this Committee and the House.

—May I make a comment there? On the question of getting Department of Finance sanction, obviously one always tries to streamline these inter-departmental exchanges as much as possible. But you can imagine a situation where we have been offered, let us say, three wells for four blocks plus £300,000 cash plus the use of the latest seismic ship for a period of six months and we get approval to accept that offer from the Department of Finance. We go back to the company and they say: “Well we are interested also in two other blocks, and we would like to see what can be done about them. If you can accommodate us on those two extra blocks we would like to vary our offer accordingly”. We would then have to say: “That is interesting, but we cannot talk to you, we must now go back to the Department of Finance”. In that way the business can be absolutely stymied.

Mr. N. Andrews.—I do not think that arises. Does it arise out of what we have been talking about?

Chairman.—It does not arise out of what we have been talking about.

Mr. N. Andrews.—Your hands are not being tied in the negotiations.

Mr. F. O’Brien.—We are anxious to facilitate the Accounting Officer and his staff. When the deal is done accountability then arises.

Mr. N. Andrews.—We are not talking about how you deal with the companies, but rather the accounting procedures from the Committee’s point of view.

Mr. F. O’Brien.—We would not want any undue restrictions placed on the Accounting Officer and the negotiators. That would be my wish.

Chairman.—That, in my opinion, is the wish of the Committee.

526. On subhead D—Geological Survey —Equipment, Stores and Maintenance— the original estimate was £400,000, less supplementary of £250,000, and total expenditure was £151,086. It looks a very small sum of money for geological survey. Would you comment on the situation that less than half the sum granted was spent?

—The original figure was £400,000 and included in that was a sum of about £250,000 for an aeromagnetic survey which is something that we have been working on for six or seven years past. It is regarded by us as being a very important thing from the point of view of mineral exploration in Ireland because these aeromagnetic surveys done from aeroplanes can reveal very interesting geological information which, when added to the returns that we get from the mining companies and also supplemented by the efforts in the field of the Geological Survey Office, can present quite a new picture for people who are searching for particular minerals. We have been very anxious to get it off the ground for quite some time past but we wanted to do it in the cheapest possible way. There was a possibility that we would be able to get half of the cost from EEC funds. We had a bit of an uphill struggle on this thing in Brussels but we have recently achieved the right decision on it. In this particular year, 1977, the Council decision providing for the expenditure of Community funds on this project was not passed in time so we could not spend our money in the absence of an assurance of EEC money. For that reason a very substantial amount of the original £400,000 provided under Subhead D just was not spent. The remainder which was spent—£151,000—consisted of normal expenditure by the Geological Survey Office on equipment and replacement of trucks and laboratory machines of various kinds. It would have been spent if we had got the EEC decision in time. We expect that this year we will be able to procure EEC funds and will be able to make a start on the survey.

527. Deputy F. O’Brien.—You will have Community funds at your disposal for geological surveys this year?

—It is almost a certainty this year.

528. On subhead X—Town Gas Subsidy —the expenditure was £1,600,000. What is the reason for the underspending there given that there was a subsidy?

—The underexpenditure arose because there was delay on the part of the companies in submitting claims for subsidy, and I expect it was reflected in the accounts for the following year. There was £1.3 million in respect of which the undertakings were unable to furnish claims. This was the closing period of 1977. They had to be paid in the following year, 1978.

529. Chairman.—The total surplus to be surrendered amounts to over £2¼ million. This is a very large sum, but having regard to the amount granted it does not appear to exceed the normal tolerance limits for grants and expenditure?

—I would think there is nothing unusual about that. It is the total figure.

The witness withdrew.

The Committee deliberated.

The Committee adjourned.