Committee Reports > List of Committees > Dáil > 1988 > Committee of Public Accounts > Report - Appropriation Accounts 1984

APPENDIX 23

MINUTE OF THE MINISTER FOR FINANCE ON REPORT DATED 29 JANUARY 1988 OF THE COMMITTEE OF PUBLIC ACCOUNTS ON THE APPROPRIATION ACCOUNTS, 1982-1983

PART 1 — GENERAL OBSERVATIONS

SPECIAL REPORT DATED 16 JANUARY 1985

MINUTE OF THE MINISTER FOR FINANCE DATED 15 APRIL 1987

Paragraphs 1: Resources and Functions of the Comptroller and Auditor General. [Paras. 2 and 3].

The Minister for Finance appreciates the Committee’s concern regarding staffing levels in the Office of the Comptroller and Auditor General and accepts that the staffing problems averted to merit the most sympathetic consideration.

However, regard must also be had to the Government’s consistent policy of reducing the size and cost of the civil service. Effectively, this means that vacancies in the Office may only be filled by the redeployment of suitable staff from elsewhere in the service. While some staff have been redeployed to the Office on this basis, there are few suitable staff available from elsewhere within the service itself who can be redeployed from their present duties.

Nevertheless, suitable staff are now being sought from other areas of the wider public service where staffing levels surplus to requirements have been identified. Depending on the success of this initiative, it is hoped that additional assistance can be offered to the Comptroller and Auditor General.

Paragraph 2 — Revision of legislation. [Paras 4 and 5.]

The Department of Finance has completed a review of the role of the Comptroller and Auditor General, including the relevant legislation, and is now finalising proposals in this regard in consultation with Departments. The recommendation in the PAC’s Special Report dated 18 May, 1988, on “The Future Role of the Comptroller and Auditor General and the Committee of Public Accounts” have been taken into account and it is hoped to submit final proposals to Government at an early date.

Paragraph 3 does not appear to call for comment.

PART II — 1982/1983 ACCOUNTS

Paragraphs 19, 22, 41, 52

These paragraphs do not appear to call for comment.

Paragraph 4 — Office of the Comptroller and Auditor General — Staffing

(See comments at paragraph 1 above).

Paragraph 5: Finance — Contribution to the EEC Budget — VAT Own Resources

The Minister for Finance does not share the reservations expressed by the Committee. Under EEC regulations the Revenue Commissioners were obliged to use the CSO data referred to for calculcating the part of the base relating to zero-rated items rather than the data from traders returns, as the difference between the two was “not negligible”. Traders’ returns on zero-rated items are known to be incomplete, whereas the CSO data are authoriative, being based on official national accounts data and various statistical surveys.

The Minister wishes to point out that the particular question discussed by the Committee no longer arises as Ireland opted from 1986 onwards to calculate the VAT base in accordance with Method B, based on VAT receipts, instead of Method A which had been used up to then.

Paragraph 6: Letters of Comfort

As already indicated to the Committee, strict instructions on this subject were issued by the Department of Finance to all Accounting Officers in May, 1984. These instructions reflect the Minister’s insistence that under no circumstances should a letter be issued which gives a guarantee or undertaking not already authorised by legislation.

However, certain compelling circumstances (e.g.timing difficulties in processing legislation) may make it a practical necessity to issue, as an exceptional measure, a letter conveying a Minister’s intention to approach the Oireachtas for authority to enable him to give a financial guarantee. The instructions specify that any such letter, which requires the prior approval of the Minister for Finance, must specify the intended limit of the guarantee and any conditions which it is intended to attach thereto. It must be made clear that the letter is a statement of the intention only and that it can have no binding legal force. Where necessary advice as to the appropriate wording should be sought from the Attorney General’s Office. The instructions also specify that in all such cases the necessary legislation should be promoted with all possible speed.

Paragraph 7: Returning Officers’ Expenses

The case referred to was an isolated one and quite unrepresentative of the performance of Returning Officers generally in relation to clearance of advances. That case has since been satisfactorily resolved and all the outstanding advances involved have been accounted for.

There are now no pre-1987 advances unaccounted for by any Returning Officer, and only two accounts in respect of the 1987 Referendum are still outstanding. Accordingly, the Minister for Finance considers, and the Minister for the Environment agrees, that there is no need at this time to change the procedures associated with election accounts. The situation will, however, be kept under continuing review.

Paragraph 8: Ostlanna Iompair Eireann Teoranta

The Minister has been informed by the Revenue Commissioners that the company started to accumulate arrears of PAYE/PSRI and VAT in February, 1981. Normal collection routines were applied by the Revenue Commissioners in pursuing the liabilities due by O.I.E. Teoranta until August, 1981. Action was deferred at the request of the Department of Transport only when it was clear that proposals were being put forward to resolve the company’s financial difficulties. An assurance was received from the Department of Transport that provision would be made in finalising the company’s affairs to meet fully its obligation to the Revenue Commissioners. A continuation of legal action by the Revenue Commissioners at this point would have resulted in a forced liquidation and there would have been no guarantee that the Revenue’s interests would be safeguarded.

The debt was subsequently paid in full and all current payments are being made as due.

Paragraph 9: Arrears of Tax

There is a general acceptance that the system of tax assessment, collection and enforcement, particularly for the self-employed and companies, is unsatisfactory and in urgent need of radical change. There is justifiable disquiet at the excessive amounts of estimated tax and non-existent arrears which the system generates.

The Programme for National Recovery stated the Government’s commitment to the introduction of self-assessment for corporation tax and income tax for the self-employed and the transitional steps needed to move to such a system which were announced in the 1988 Budget Statement were given effect by means of provisions in the Finance Act, 1988.

In general, the new measures involve the introduction of—

(a)revised obligations for tax-liable persons in making returns of their incomes for tax purposes:

(b)new procedures governing the manner in which inspectors of taxes make estimates of tax; and

(c)an altered basis on which taxpayers can displace inspectors estimates and make appeals in matters of dispute.

These new arrangements should result in a substantial reduction in the levels of estimated tax and will lead to a significant reduction in the number of cases involving appeals — areas identified by the Committee as being in particular need of improvement.

In order to improve the enforcement performance in the recovery of outstanding taxes, major developments in the facilities for the execution of certificates under Section 485 of the Income Tax Act, 1967 were commenced in 1986 and were fully in place in early 1987. The functions of the twenty-four County Registrars in relation to the execution of such certificates were taken over by twelve newlyappointed sheriffs who have exclusive responsibility for this work in the areas outside Dublin and Cork. The four independent sheriffs in Dublin and Cork retain responsibility for the execution of Section 485 certificates. The appointment of the new sheriffs has brought about a significant improvement in the enforcement process in the areas formerly serviced by the County Registrars.

The whole question of civil debt collection law and the powers of sheriffs was referred by the Government to the Law Reform Commission. The Commission has now produced a Report entitled Debt Collection: The Law relating to Sheriffs. Primary responsibility in relation to changes in sheriff law rests with the Department of Justice. The Report does not address a major weakness in sheriff law which is of concern to the Revenue — the retention of title device. The Commission has however indicated that it will be making a further Report to the Attorney General on this topic in the near future.

Paragraph 10: Non-payment of taxes by State-sponsored Bodies

The Minister has been informed by the Revenue Commissioners that, as a general rule, the collection procedures and practices employed in pursuit of tax and interest from state-sponsored bodies are the same as those applied to employers in the private sector. Estimates and interest charges are raised in respect of outstanding payments and are referred to enforcement agencies in the normal way. Apart from the special circumstances of Ostlanna Iompair Eireann Teoranta explained at paragraph 8, these procedures were followed in relation to the State-sponsored bodies.

Paragraph 11: Other unpaid taxes

The Minister understands that the present position is that the number of cases where it has not been possible to establish the addresses of companies and individuals for tax collection purposes and about which enquiries are being made is 1,748 for Income Tax and 305 for Corporation Tax, involving estimated equitable tax of less than £2 million. This shows a marked improvement on the position in 1984 when there was a total of 4,050 of such cases on hands. The existence of a pool of such cases must be accepted as inevitable since new cases constantly emerge as a result of business failures and cessation of trading, while existing ones are pursued and cleared. The operation of the relevant procedures is being kept under regular review.

In relation to the Committee’s point about the addresses of companies, the inspector normally deals with the registered office of a company. In many cases this is quite separate from where the company trades or carries on its business. Many companies have registered offices in Dublin while their manufacturing facilities are down-country, for instance Cement Roadstone Holdings, Bord na Mona and thousands of less well-known companies.

When a company changes its registered office, it notifies the Companies Registration Office which in turn informs the inspector. Up to 1985 this work had to be done manually which gave rise to some delays. However, the computerisation of the Companies Registration Office has speeded up the process considerably and there are now no such delays.

Paragraph 12: Computer errors in Revenue

The Minister understands that the test examination of Revenue computer records referred to revealed certain inadequacies in the control procedures relating to the inputting of employers’ declared liabilities to the computer record.

While this resulted in apparent underpayments being mistakenly pursued for collection, it is incorrect to state that “there was a possibility that the apparent overpayments would under normal procedures be refunded or offset against underpayments by the employers concerned for other years”. The procedures for refunding or offsetting overpayments require the establishment in the first instance that a genuine overpayment position exists.

Revised checking systems have been introduced in recent years to overcome the problems identified by the Comptroller and Auditor General in regard to the pursuit of incorrect underpayments. It is clear that inputting errors giving rise to such underpayments occur in as few as 1% approximately of all cases and the revised procedures for detecting and correcting this comparatively small number of errors have significantly reduced the likelihood of any such error not being corrected before collection activity commences.

Paragraph 13: P.A.Y.E. System

The Minister has been informed by the Revenue Commissioners that the programs and procedures for recording the P35 end-of-year details onto the computer record are under continuous critical evaluation. Various additional checks have been built into the computerised system in recent years to detect erros in punching. The result has been that the District Check Lists for the years 1982/83 to 1984/85 have revealed no cases of serious input error.

The District Check List for 1985/86 was produced in November, 1987, and is now being worked in the Tax Districts and no cases of serious input error have come to light.

Paragraph 14: Construction Industry Tax

Section 17 of the Finance Act, 1970 (as amended) and the regulations made thereunder are the statutory provisions which govern the issue of sub-contractors’ certificates and the deduction of tax from payments by principal contractors in the construction industry to sub-contractors.

A form C.2 is a certificate of authorisation which is issued by the inspector of taxes to a sub-contractor to enable him to receive construction payments without deduction of tax. A principal contractor, on production to him by a sub-contractor of the form C.2, should apply to the inspector to taxes for a construction payments card. The application form must be signed by both the principal contractor and the sub-contractor. Tax at 35 per cent must be deducted by the principal contractor from any payment which he makes to the sub-contractor unless, at the time of payment, he holds a valid construction payments card in respect of the sub-contractor.

The relevant legislation was introduced in 1970 to curb tax evasion in the construction industry but experience of the 1970 legislation showed that it was too easily circumvented and evasion continued on an extensive basis which included the fraudulent use of certificates (forms C.2). Amending legislation was introduced in 1976 which provided for a more effective scheme. The stringent conditions now in force for the issue of certificates of authorisation are designed to make it much more difficult for unscrupulous sub-contractors to abuse the scheme by forging certificates of authorisation or by the use of photocopies.

The present scheme in relation to deduction of tax from payments to sub-contractors had been in operation since 1976. Cases of fraud resulting in a loss of revenue and based on the acceptability of photocopies of certificates of authorisation were prevalent in the late 1970s and early 1980s. Investigation of these cases revealed that the acceptance of photocopies within the building industry had been growing considerably in those years but following insistence by the Revenue Commissioners that sub-contractors must produce the original certificate of authorisation to the principal contractor as required by section 17 (8) (a) of the Finance Act, 1970, the abuse abated.

During the past twelve months, out of a total of about 6,000 certificates issued, the Revenue Commissioners have knowledge of only five cases in which irregularities arose in the use of sub-contractors’ certificates. Investigations were initiated in those cases.

If an abuse of the construction industry legislation is detected by an Inspector of Taxes in any particular case, the sub-contractor’s certificate is withdrawn immediately and, if the circumstances warrant it. the sub-contractor or the principal contractor or both can be prosecuted.

It is considered, therefore, that while the potential for abuse within the construction industry may always be there, especially where collusion between the principal contractor and sub-contractor exists, further legislative provision is not necessary at present. Strict enforcement of the existing legislation is seen as the best means of continuing to curb the incidence of tax abuse within the industry.

Paragraph 15: Value Added Tax

The Minister understands that the new computer system introduced in December, 1983 provided for automatic pursuit of underpayments i.e. instances where the tax declared on a return was greater than the remittance (if any) which accompanied it. This had hitherto been a clerical operation. All underpayments are now subjected to the full range of collection procedures up to the enforcement stage. This process ensures that spurious underpayments of the kind mentioned in earlier reports are brought to attention quickly and are generally eliminated from the record as an ongoing matter. It also ensures that pursuit of genuine underpayments is not delayed.

The backlog of recorded underpayments which accumulated under the old procedures and which the Committee commented upon has now been examined and largely accounted for. Items remaining under enquiry total 1,673 (out of 31,413 previously) with a potential value of £2.8 million (as against £64.2 million previously). Examination of the residue is being actively pursued.

Paragraph 16: Customs and Excise Duties

The Minister agrees with the Committee that there has been some cause for concern in this area and sets out below notes on the issues raised:

(a)The prescribed level of examination in respect of the goods concerned which was in force in 1982/83 had been introduced during the period of protective tariffs, prior to Ireland’s entry to the EEC. The revenue content of such goods in 1982/83 was relatively much lower than the pre-EEC period and the Revenue Commissioners consider that examination at less than the prescribed level did not endanger the revenue. This prescribed level was revised and reduced considerably in 1984, attention being focussed mainly on consignments over a certain value. This value was increased in 1986, thus reducing the level further. The prescribed levels have been adhered to generally since 1984.

(b)The arrears of work which led to the delays were due to the large increase of duty entries occasioned by the imposition of VAT at point of entry in 1982. The arrears were reduced gradually and eventually eliminated.

(c)These delays in processing documentation also resulted from the imposition of VAT at point of entry. In 1984 processing procedures were revised and the delays were gradually eliminated and in 1987 computerisation of entry processing at the Custom House, Dublin, further speeded up the operation.

(d)The failure to reconcile this account on a regular basis until 5 June, 1984 was again due to the unprecedented number of duty entries following from the imposition of the point of entry, which put considerable extra pressure on staff at the Custom House.

In relation to certain irregularities at Dublin port during 1982 and 1983, this matter was fully investigated and as a result two members of the Customs and Excise staff employed in this area were suspended from duty in 1983 and were subsequently dismissed by Government decision with effect from 9 May, 1985. Procedures have been set in place to guard against such irregularities in the future.

Paragraph 17: Agriculture — Bovine Tuberculosis Eradication

The Minister considers that significant improvements have been made to the bovine T.B. scheme since the committee discussed the 1982/83 Accounts in January 1985 and that a new degree of discipline and urgency has been introduced. This extends to veterinary practitioners engaged for testing, to herdowners and to the managers of the scheme.

Practitioners are now required to observe a very tight schedule as regards notifying their plans for testing in advance, testing herds within the period prescribed and reporting test results. Herdowners are obliged to facilitate the testing of their herds and to dispose of diseased animals without delay. Local managers have to ensure that the testing programmes planned for their areas are carried out effectively, within strict budgetary guidelines. Substantial progress has also been made in modernising the scheme. Many important functions have been computerised and the rapid availability of essential data has made for greater financial control and better management decisions. The recent introduction of a new system of herd categorisation should bring about a more streamlined and effective scheme.

The full benefits of these improvements are expected to be realised in the course of the Government’s new four-year plan (1988-1992), with a target of reducing bovine T.B. by half. By guaranteeing adequate funding for the scheme over the period of the plan, the arrangements are designed to ensure that a comprehensive and consistent programme can be undertaken annually over the next four years, thereby creating the optimum conditions for significant progress against the disease.

The new arrangement involved the establishment of an Executive Office for disease eradication. This Office, which was set up in April, 1988, is headed by a national Director who has authority to take the necessary operational decisions in relation to the scheme. The Director works under the guidance of a management board comprising nominees of the main bodies concerned.

The amounts paid to veterinary surgeons are determined by reference to a scale of fees negotiated between the Department of Agriculture and Food and the Irish Veterinary Union and approved by the Minister of Finance.

Paragraph 18: Defence — Stores Accounts

The Minister agrees that regular audits/inspections of stores and records are essential to maintaining an effective internal control and has notified the Department of Defence that this must be achieved within existing resources.

Paragraph 20: Environment — Motor Tax Duties

The Minister shares the Committee’s concern that the level of motor tax evasion should be reduced. This area has been under active review and steps are being taken to deal with evasion.

The Minister has been informed by the Department of the Environment that the Garda Síochána carried out a comprehensive roadside survey of motor tax and motor insurance evasion in April and May, 1987. The survey covered a representative sample of some 24,000 vehicles. The detailed survey report was published by the Minister for the Environment on 25 March, 1988. The survey results estimate motor tax evasion at between 10% and 14% — i.e. lower than previous estimates of between 15% and 20%. The survey also pinpoints areas where roadside tax checks by the Gardai need to be stepped up.

The computerised National Vehicle File maintained by the Department of the Environment Vehicle Registration Unit is being used to generate the issue of advance reminders to motorists to renew tax. The advance reminder can be used as a renewal form and can be returned to the local motor tax office using a preaddressed, post-paid envelope. The advance reminder has speeded up tax renewals and improved cash flow by an estimated £1 million per annum. The advance reminder process has been in operation nationwide since March, 1987.

In June, 1988, the Vehicle Registration Unit began issuing reminders to those who failed to renew theit tax despite receiving an advance reminder. The Garda Síochána in each licensing authority area are being given a list showing the number and percentage of motorists who ignore reminders and are in arrears. This list can be used by the Gardai in planning roadside checks.

Following the publication of the National Survey, additional measures aimed at reducing the rate of evasion are being urgently considered by the interdepartmental committee on the enforcment of roads-related legislation under the chairmanship of the Department of the Environment.

Paragraph 21: Environment — Group Water Schemes

The Minister has been advised that procedures for processing group scheme grants were amended in October, 1984, with a view to speeding up payments while maintaining a necessary level of control. The effectiveness of the revised procedures is illustrated by the following statistics:

Paragraph 23: Justice — Tender and Contracts Procedures

Normally, adoption of a single-tendering procedure would require the prior approval of the Government Contacts Committee. Such approval was not sought in this case. However, there is no specific obligation to invite competitive tenders as such. Unlike the supply of goods, the procurement of services, particularly those with a creative element such as in this case, requires presentations and consultations before a price can be settled. Competitive tenders are not normally sought for advertising campaigns. Nevertheless, competition is usually ensured by seeking presentations from more than one suitable firm even if price is not the main initial consideration.

The Minister endorses the committee’s concern at the failure to observe approved procedures in this instance. At the time, he stressed to the Minister for Justice the necessity, from the perspective of effectiveness and equity, of adhering to the approved procedures both in relation to tendering and obtaining sanction. However, he accepts that there were particular circumstances which militated against the following of correct procedures by the Department of Justice in this instance and the expenditure was therefore sanctioned on the understanding that correct procedures would be followed in future.

The procedures to be followed in awarding all Government contacts have been set out in “An Outline of Government Contracts Procedures” which issued to all Departments in 1986.

Paragraph 24: Justice — Prisons Buildings

The Minister notes the comments of the Committee in relation to the fees paid in respect of design works for four proposed prison projects. He accepts that there were weaknesses in the preliminary planning for these projects that would probably not have arisen if the procedures since established in respect of planning for public construction projects and the engagement of consultants in that regard had been in place and observed in the cases of the projects in question.

He also accepts, however, that the fees concerned were committed by the issuing of commission of the design works necessary before definitive decisions on the commencement of construction could be taken and that the resulting plans will be of use in any future proposal to proceed with these or similar projects.

It is expected that the procedures referred to, set out in Department of Finance Circulars 1/83 (on monitoring and control of capital expenditure) and 11/87 (on the engagement of consultants and settlement of fees), will prevent such problems arising in the future.

Circular 1/83, which was issued to all departments and agencies whose capital spending is included in the Public Capital Programme, sets guidelines aimed at:

—improving decision-making, by improving the quality of the information on which decisions are based through the use of systematic appraisal techniques; and

—improving management control once projects are initiated.

Subsequently, the Department of Finance has been assessing the degree of implementation of the guidelines and encouraging their more widespread use. The guidelines have brought about a more cost-conscious approach to the planning and implementation of public capital projects. However, there is still scope for further improvement and the Department of Finance is currently reviewing the guidelines in the light of the experience to date, with a view to making them more sharply focussed.

Circular 11/87 (Public Construction Contracts) issued by the Department of Finance covers the procedures for the engagement of consultants and the settlement of fees. This provides for the consultant’s fee to be split between the preliminary report stage, the design stage, and the construction stage. If the project is abandoned at any time the fees for the subsequent stages are not payable.

Paragraph 25: Justice — Loughan House, Co. Cavan

While acknowledging that this project went seriously wrong the Minister is satisfied that observance of the new procedures for the planning and control of capital projects should prevent any recurrence of the problem that occurred. A separate note on this project has been provided by the Department of Finance, as requested by the Committee.

Paragraph 26: Justice — Prison Stores Depot

The Minister shares the committee’s concern about the piecemeal way in which this project was presented, thereby preventing a full assessment of the overall cost of the project before the State was committed to it. As requested by the Committee, a separate note on this project has been provided by the Department of Finance.

Paragraph 27: Justice — Garda Stores System

The Minister is informed that the stores operations of the Garda Síochána are at present being reviewed in consultation with the Garda authorities, with a view to ensuring that adequate controls and procedures are applied in relation to physical control of stock, record-keeping and regular stocktaking. Sanction for the creation of a new post of Fleet Manager in the garage at Garda Headquarters was given and the post has been filled. It is the intention to computerise the stores area at Garda Headquarters as soon as possible now that the new post has been filled. The Fleet Manager will have a significant role to play in relation to the introduction of a computerised stores management system for the garage and it was not, accordingly, considered feasible to proceed with the introduction of computerisation in the stores area until the new appointment had been made. The Minister is also informed that the question of securing improved accommodation for the miscellaneous stores, to facilitate better record-keeping and stocktaking, is also being followed up.

Paragraph 28: Justice — Garda Vehicles

The Minister agrees that it is not acceptable that moneys should be spent on vehicle purchase in a particular year solely to avoid the consequences of a reduced allocation in the following year.

The Department of Finance, with the Department of Justice, has been endeavouring to arrive at a more acceptable pattern of Garda Vehicle purchase. It is acknowledged that the operation of, and purchasing for, a large fleet of vehicles such as that run by the Garda is a complex task and in recognition of this the Minister sanctioned the creation of a new post of Fleet Manager for the Garda fleet. The new post has recently been filled. It is intended that the task of developing a more acceptable procedure for vehicle purchase should be a primary objective for the new manager.

Paragraph 29: Justice — Parking Fines

The Minister has been informed by the Department of Justice that there has been an improvement in the position since the Committee reported on this issue and that the available information suggests that the level of cases where fines had not been paid and summonses not issued had been reduced from 48% in 1983 to approximately 39% in 1987. This is due in part to the improved operation of the central computerised vehicle registration unit and to the new Regulations made by the Minister for the Environment governing the notification of changes in vehicle ownership which came into operation in 1983.

The Minister has been assured that the Department of Justice is taking measures to further improve the situation.

Paragraph 30: Justice — Courts. Warrants for Unpaid Fines

The Minister has noted the views of the Committee in regard to the provision of additional staff in connection with the more rapid collection of moneys due to the State through unpaid fines and otherwise. He wishes it to be understood that Government policy requires reductions in the numbers of civil servants and that in consequence improvements in the arrangements for collecting outstanding revenues have to be effected through more efficient utilisation of existing resources. The Minister regards it as an important function of management in each Department to deploy their staff in the manner best calculated to meet their essential tasks, of which the regards the prompt collection of public moneys as among the highest priorities, and to explore and develop mechanisms which would allow this task to be performed in a less staff-intensive manner. In the latter context he would point out that computerisation had already contributed to reductions in the number of warrants outstanding.

Paragraph 31: Education — Post-Primary Education. Annual Grants to Vocational Education Committees

Defects in a Vocational Education Committee’s system of internal control are basically a matter for the Chief Executive Officer in accordance with the duties attaching to the post. All the monies misappropriated were received by post and were in discharge of accounts either furnished by the Committee or of which the Committee had prior knowledge. Consequently, all the items were capable of being controlled had adequate controls been established over the receipt and processing of postal remittances. This defect has now been remedied by the VEC by the maintenance of a recoupment ledger and revised internal control procedures. A review of the system of internal control has been carried out and all the audit recommendations in regard to the controls over receipts and recordkeeping have been implemented. Some of these recommendations had already been acted upon by the latter part of 1982.

It is a matter for the Local Government Auditor, in accordance with section 58 of the Vocational Education Act, 1930, to audit the annual accounts of a VEC and to furnish a report thereon to the Minister for the Environment. A copy of this report is forwarded to the Minister for Education. Action is taken promptly by the Department of Education on appropriate issues raised in the audit. There is provision for the Local Government Auditor to make an interim or extraordinary audit report if a serious problem emerges during the course of an audit which requires urgent attention. Such a report would receive immediate action in the Department.

The Department of Education has issued a Circular Letter to VECs requesting Chief Executive Officers to appraise the Department of any significant weaknesses identified by the Local Government Auditor together with an indication of the measures being taken or planned to rectify the position.

The question of who should audit the accounts of the VECs, together with the problem of delays in the availability of audited accounts, are being considered in the context of the proposals being finalised in regard to the future role of the Comptroller and Auditor General referred to in paragraph 2 above and of the review of the Local Government Audit Service.

Paragraph 32: Education — Irregular Use of RTC Equipment etc.

The Minister has been informed by the Department of Education that the conditions of service of the teaching staff specifically preclude extern work without the sanction of the VEC. The VEC involved has strengthened the internal management procedures of the college, particularly those procedures relating to the purchase and control of equipment. A Circular Letter was issued to all Vocational Education Committees in 1985 drawing attention to their responsibilities with regard to the control of the use of official equipment.

Paragraph 33: Education — Higher Education. Building Grants

Paragraph 34: Education — Microelectronics Research Centre

The Minister is informed that since the 1970s third-level building projects were required to conform to the procedures of the Department’s Building Unit. When Finance Circular 1/83 — Capital Expenditure in the Public Sector — was issued, these procedures were modified to the extent required and the revised procedures have been applied since. However, in 1985 there were further discussions with the HEA to ensure that, in future, the procedures of the Building Unit would be strictly adhered to in all cases.

The Minister has been assured by the Department that Exchequer expenditure of a capital nature by third level institutions is being adequately controlled.

Paragraph 35: OPW — Public Works and Buildings, Rents, Rates etc.

The Minister is advised that only in exceptional circumstances does the Office of Public Works now lease accommodation for use by Government Departments. When the necessity to do so arises, revised procedures are in operation to minimise the payment of rent before occupation.

Paragraph 36: OPW — Decentralisation of Government Offices

The Minister is advised that new arrangements whereby fees payable to consultants are negotiated before any commission is awarded are now successfully in operation.

Paragraph 37: OPW — Royal Hospital Kilmainham

The Minister shares the Committee’s view that the cost estimate of a capital project should forecast as accurately as possible the final cost of the project. The Minister is advised that revised procedures are now in operation aimed at achieving that objective. In addition the procedures set down in Circular 1/83 — Capital Expenditure in the Public Sector — are being implemented.

Paragraph 38: Foreign Affairs — Embassy in Riyadh, Saudi Arabia

The Minister has noted the Committee’s criticism that excessive fees were paid to consultants in respect of plans for building an Irish Embassy in Riyadh which, in the event, did not proceed when it was decided to opt for a much smaller project.

The Minister understands that some elements of the original plans were used in the reduced scheme and that a proportionate reduction in the fees incurred in respect of the latter was negotiated to take account of this.

In August, 1984, the Department of Finance reviewed the administrative procedures in respect of expenditure by OPW on Department of Foreign Affairs’ properities. The sanction in principle of the Department of Finance is now required in advance of any work being undertaken in relation to the construction or purchase of premises, or site acquisition, outside Ireland. Expenditure on consultants’ fees cannot, therefore, be incurred unless a project has been approved.

The Government subsequently decided that, with effect from 1 January, 1989, responsibility for all premises abroad used by the Department of Foreign Affairs will be transferred to that Department. The system of sanctioning is being reviewed, but it will continue to be the case that all works of this nature will require the prior sanction of the Department of Finance.

These new arrangements, together with the improved procedures, set out in Finance Circular 1/83 and 11/87 (see paragraph 24 for details) should ensure a more cost-conscious approach to the planning and implementation of such projects.

Paragraph 39: O.P.W. — Maintenance and Supplies

The Minister is advised that deficiencies in the existing manual recording system in the Central Building Maintenance Workshop (CBMW) have been corrected. In addition, the CBMW stores accounting system is in the process of being computerised and this will enable management to further improve stock control.

The system of bulk purchasing will be examined in the context of a management accounting system which is being introduced early in 1989, as approved by the Department of Finance.

Paragraph 40: O.P.W. — Purchasing Procedures

The Minister is advised that all officers in the Central Building Maintenance Workshop are under strict instructions to comply with standard purchasing procedures.

Paragraph 42: Transport — Suspense Account

The Minister has received an assurance from the Department of Tourism and Transport that the necessary measures are being taken to prevent any recurrence of this situation by the strict application in all cases of the correct detailed accounting practices and procedures concerning the acceptance, examination, certification and payment in respect of goods, equipment and services rendered.

Paragraph 43: Trade, Commerce and Tourism — Córas Trachtála

The Minister shares the committee’s views as to the seriousness of this matter. However, he understands from the Department of Industry and Commerce that a new control system has been instituted which monitors expenditure on a monthly basis and revises budgets throughout the year to reflect actual performance. This control system is regularly reviewed and monitored by officials of the Department of Industry and Commerce and Córas Trachtála.

Paragraph 44: Forestry — Sales of Timber

The Minister notes the committee’s comments and has brought them to the attention of the Department of Energy.

Paragraph 45: Forestry — Unsecured Credit

The Minister has been informed by the Department of Energy that the legal proceedings are still in progress in this case.

Paragraph 46: Fisheries — Howth Harbour

The Minister shares the committee’s concern about the manner in which this major project was planned and executed. He wishes to point out that the final cost of the project has been sanctioned by his Department. He would add that since the overrun of expenditure on the Howth Harbour Development Scheme revised arrangements have been introduced to avoid a recurrence.

The Government has announced its intention to commission an enquiry into the Office of Public Works to examine its present operations in all its aspects and to recommend whatever changes are necessary to ensure an efficient and cost effective service to the State. Consultants have been appointed to carry out this study.

Paragraph 47: Labour — Youth Employment Levy

The Committee may wish to note that since 1988 there has no longer been a single subhead in the Labour Vote as a counterpart of the Youth Employment Levy (now the Employment and Training Levy). Expenditure of levy funds is now included in appropriate subheads, mainly in the Labour and Education Votes.

Paragraph 48: Labour — Work Experience Programme

The Minister has been informed by the Department of Labour that the officer involved was subsequently convicted and that all of the money involved was recovered. The Department introduced new detailed procedures to ensure that such irregularities did not recur. This programme has subsequently been closed.

Paragraph 49: Labour — Employment Incentive Scheme

The Minister shares the committee’s concern about how these irregularities arose and also about the lack of urgency in following them up. The Minister has been informed by the Department of Labour that a major revision of the scheme took place in 1984, involving a tightening up of the control and monitoring procedures. These measures were designed to ensure, inter alia, that there would be no recurrence of this type of problem.

Paragraph 50: Posts and Telegraphs — Leasing of Accommodation

The Minister agrees with the Committee that every effort should be made to avoid situations where accommodation paid for by the Exchequer is left unoccupied for long periods. All Departments and public agencies are being reminded of the need for vigilance in this matter.

The Minister is advised that only in exceptional circumstances does the Office of Public Works now lease accommodation for use by Government Departments. When the necessity to do so arises revised procedures are in operation to minimise the payment of rent before occupation.

In this particular case, the Minister is informed by the Department of Communications that all reasonable steps were taken to minimise delays in occupying buildings. However, the large and complex programme to be carried out together with the legal and administrative complications of setting up Bord Telecom and the conditions in the property market at the time presented difficulties. Unavoidably, delays occurred in occupying a small number of buildings out of the 500 approximately embraced by the accelerated programme of telecommunications development.

Paragraph 51: Posts and Telegraphs — Purchase of Sites in Limerick

The Minister agrees with the Committee that the handling of this matter was unsatisfactory. However, the Accounting Officer for Communications has pointed out that this was part of the very large programme of development being carried out at the time, most of which was completed satisfactorily.

Paragraph 53: Posts and Telegraphs — Overpayments on Contracts

The Minister agrees with the Committee on the need for proper monitoring and internal control procedures where financial matters are concerned. Revised public contracts procedures were published in 1986 and it is expected that these will contribute to greater efficiency in the administration of public contracts.

In the case referred to, the Minister is informed by the Department of Communications that the overpayment occurred because of failure to follow authorised procedures coupled with an erosion of work standards due to staff inexperience but that the Department’s own vetting procedures detected the overpayments and a subsequent examination by internal audit staff of all State contracts placed over the previous three years was fully reassuring.

Paragraph 54: Industry and Energy — Cost Overrun by the Institute for Industrial Research and Standards

The Minister agrees that there were major deficiencies in the planning and monitoring of this project. This was established by the in-depth inquiry undertaken by the Minister for State at the Department of Industry, Trade, Commerce and Tourism in 1983. The inquiry report laid down a set of procedures to be followed by the Department and the State-sponsored bodies under its aegis in relation to future building projects with a view to avoiding a similar occurrence in the future. The Minister has been informed by the Department of Industry and Commerce that these procedures were adopted and remain in force. The procedures laid down in the 1983 Finance Circular on monitoring and control of capital expenditure also apply to such projects.

Paragraph 55: Industry and Energy — Irish National Petroleum Corporation Limited

The general question of “Letters of Comfort” and the Minister’s views thereon are set out in the response to paragraph 6 of the Committee’s Report.

Concerning the case of the INPC, the advice of the Attorney General in the matter was that the correspondence in question in no way constituted a State guarantee and could not be construed as such by the banks. This advice has been reiterated in relation to other similar cases in which it was argued by third parties that Ministerial consent constituted a commitment by the State to honour the borrowing in question as a last resort.

On the more general question raised by the Committee as to the propriety of establishing a State-sponsored body as a company under the Companies Acts, without specific legislative authority, this matter has been pursued with the Attorney General’s Office, in consultation with relevant Department. A definitive ruling on the subject is awaited.

Paragraphs 56-58: Health — Grants to Health Boards

Regarding the audit comments on the Eastern Health Board 1979 and 1980 accounts and the North Eastern Health Board 1979 accounts, the Minister is assured by the Department of Health that adequate accounting and control procedures are in place in all the health boards to cover the points raised and that these are monitored by the Health Boards staffs. However, while operational procedures in the health services can be regarded as being generally satisfactory. there are areas where improvements are required to meet audit standards. The introduction of procedures to satisfy fully the criticism by auditors, in such areas as Pharmacy Stock Control, can only be achieved by sophisticated computer systems and these will be provided as financial resources permit.

Action has now been taken to bring the audit reports on the Health Boards up-to-date and the progress achieved in this regard is very satisfactory.

Paragraph 59: Health — General Medical Services (Payments) Board

The Minister understands from the Department of Health that the Payments Board makes every effort to control costs within the General Medical Services Scheme, largely by constantly monitoring the activities of participating practitioners.

Doctors with visiting or prescribing rates out of line with national averages are subject to investigation in the first instance by the Board’s Medical Officer and, if necessary, by referral to an Investigation Group which has power to sanction monetary deductions.

In addition, the Department of Health, being acutely aware of the increasing costs within the scheme over recent years, has taken a number of initiatives in this area including:

(a)an agreement with the IMO for the introduction of a capitation-based remuneration scheme for general practitioners which came into effect on 1 March 1989;

(b)discussions with the Federation of Irish Chemical Industries leading to agreements on the terms of supply of drugs to the health services, which have achieved significant levels of savings since 1983; and

(c)the introduction of a drug formulary at the same time as the capitation scheme of payment for GPs becomes operative.

Paragraph 60: Social Welfare — Irregularities

The Minister is informed by the Department of Social Welfare that seven inspections were carried out in 1981 in the area concerned and three in 1982. The reason for these low numbers was the pressure arising from the huge increase in the Live Register. Given the Department’s priority of making payments to claimants, this pressure resulted in staff from the investigation section frequently having to do relief work in smaller branch offices in cases where large numbers of employees in the area were laid off. Unfilled vacancies in local offices or staff of such offices on sick or maternity leave also meant that relief had to be provided from the investigation staff.

However, since 1982 — despite continuing pressures — it has been possible to increase the number of inspections as follows:

[* During 1986 the section was also engaged in major investigations of two Exchanges involving internal fraud by Departmental officials (referred to in the 1985 Report of the Comptroller and Auditor-General).]

Prior to 1987 general inspections were normally of one week’s duration but this has since been expanded to 2-3 weeks and with the larger Exchanges the period involved can be up to 6 weeks.

Since the periods reported on, the Department has taken a number of measures to improve financial control procedures. In addition to the recruitment of a professional accountant who was appointed in 1987, the role of both the Internal Audit Unit and the Internal Administration Section has been strengthened.

Since 1985, the Internal Audit function has been considerably enhanced and now has a staff of 10 headed by a Principal Officer.

The Internal Administration Section, with a staff of 13, is responsible for the general inspection of local offices referred to above. The inspections include both general inspections and random spot checks and the staff are also involved in monitoring the adequacy of internal office procedures at local offices.

Paragraph 61: Social Welfare — Duplication of Payments

The Minister has been informed by the Department of Social Welfare that great care is taken at the award state of Disability Benefit claims to check their validity and to ensure that no duplication with other payments arises.

The Department of Social Welfare believes that computerisation across the board of all benefit schemes and the use of RSI numbers for all claims is the key to eliminating duplication. This is progressively coming about. However, the unemployment payment schemes are still mainly manual and until there is an interface between the Central Records System and the unemployment payments schemes, with further computer development, it will not be possible to have the up-to-date position in relation to all claims recorded by that system.

The Department has commenced the computerisation of unemployment payments. Dublin employment exchanges have already been computerised and Cork employment exchange was recently added to the computer system. It is expected that in the next three years most remaining rural exchanges will also be computerised.

In the medium term it is intended to introduce a more localised delivery of services and this should be particularly effective in dealing with the problem of duplication.

Paragraph 62: Social Welfare — Question of Benefit Recipients being Genuinely Available for Work

The Minister is informed that staff assigned to the Special Investigation Unit (which looks into the problems giving rise to the Committee’s concern) has more than doubled since it was set up in 1978. In addition, there have been significant developments in relation to anti-abuse work on the employment exchange side, namely, the establishment of the External Control Unit and the operation of the Jobsearch programme.

The Special Investigation Unit (SIU) was set up in July, 1978. Initially it had a staff of 18. The numbers serving increased to 36 by mid-1983 and to 41 by end-February 1989. Much of these increases in staffing occured at a time when staffing levels were being reduced significantly elsewhere in the Civil Service.

Although the SIU is a specialist anti-fraud body within the Inspection Branch, all officers within that Branch are to some extent engaged in control work. In fact, all officers of the Department engaged in the administration of payments schemes are required to be on the alert for possible abuses of the Social Welfare system. In recent years greater attention has been given to fostering such an awareness of fraud among the general service staff in the Department — particularly in the employment exchanges.

Another group who play a key role in relation to fraud — although outside of the Inspection Branch and the exchanges — is the Medical Referee cadre, where the numbers serving have been increased from 15 in mid-1982 to 26 at end-February 1989.

There are other control systems also in place. In 1986 the External Control Unit (ECU) was set up for the purpose of vetting suspect Unemployment Benefit and Assistance claims. The ECU comprises 13 Staff Officers based in the larger Employment Exchanges and a small HQ controlling section. A further 10 Staff Officers have since been added to the Unit. The control officers interview claimants at the Exchanges, Branch Offices and signing centres about their availability for and efforts to get work. The control officers report directly to the HQ Section and are exclusively engaged in control work.

In April, 1987, an additional 120 staff were made available to the Department to launch the nationwide Jobsearch programme which was established with the stated aim of remotivating the long-term unemployed and providing courses to help them acquire interview and job-seeking techniques. There is a control measure inherent in the scheme in that persons who — without just cause — refuse to accept course offers or attend Jobsearch interviews render their claims suspect and have their entitlements reviewed.

It will be seen, therefore, that the SIU is but one element in a comprehensive and sustained programme aimed at tackling fraud and abuse of the welfare system and that this task is accorded a high priority, with every effort being made to ensure that the relevant staffing resources are adequate to the task.

Paragraph 63: Social Welfare — Children’s Allowances

The Minister is informed that the Child Benefit Section now has in place a wide range of measures designed to prevent the type of fraud referred to and abuse of the scheme generally.

A number of measures have been taken specifically in relation to cases involving accommodation addresses, viz.

(1) — The need for constant vigilance has been impressed on all Deciding Officers and there is a standing instruction that in the event of the remotest possibility of a fraud senior officers must be informed immediately.

(2) — In general, only long birth certificates are accepted from clients with accommodation addresses.

(3) — The authenticity of birth certificates must be checked with the local Registrar of Births or with the Superintending Registrar’s Office before the claim is authorised for payment. (In relation to cases involving accommodation addresses which arose before this procedure came into operation, a systematic programme of verifying the authenticity of the details with the Registrar-General’s Office is being undertaken.)

(4) — Close liaison exists with the other paying sections, particularly the Employment Exchanges, to confirm the details of claims made.

(5) — In the case of families returning from the United Kingdom, the Department of Social Security is contacted to verify details of the claims and to confirm that the UK payment has been terminated.

Further checks aimed at detecting fraud in general include:

—A number of claims in payment are referred to Social Welfare Officers each week so that they may visit the homes of claimants to verify that the details are still correct.

—In the case of children over 16 years and under 18 years of age (where entitlement depends on their being in full-time education), a fixed number of claims are referred each week to schools to confirm that children are still attending.

—The new Personalised Payable Order system currently being introduced for the payment of child benefit and pensions had made alteration of payment books virtually impossible.

Paragraph 64: Social Welfare — Follow-up Action in cases of Abuse of the Social Welfare System

The Minister has been informed by the Department of Social Welfare that consolidation of insurance records generates, on average, some 35,000 exceptional reporting items per year including cases where there is an apparent overlap of contributions and credits.

The Department have pointed out that the sample survey of 54 cases was merely a step in the process of developing an effective system of dealing with cases of overlap. In fact, in each of the 36 cases for which replies were received the record was incorrect. The Department is satisfied that there was no fraud involved in any of these 36 cases and that recorded overlaps of paid and credited contributions in the past do not in general signify concurrent working and signing. However, in the light of this initial survey, new procedures were established (in May 1984) to check out overlap cases.

The employment exchanges and local offices of the Department of Social Welfare have not yet all been computerised. Completion of the programme will take a few more years. In the meantime, they must rely heavily on clerical input and some clerical errors will inevitably occur. Employers also continue to make errors in regard to number of weeks of insurable employment for which they employed particular workers.

Experience gained since the revision of procedures in 1984 has shown that overlaps resulting in an excess of paid and credited contributions of less than 59 invariably result from administrative errors in recording the Weeks of Insurable Employment or the Credits or for legitimate reasons (where the person is in receipt of wages while on sick leave). Limited resources are, therefore, best employed in examining cases which have in excess of 59 contributions and all of these cases are given priority in follow-up action.

About 7,000-8,000 cases arise every year where there is an excess arising from credits awarded with UA/UB. This very large number of cases recorded annually is reduced enormously on examination. This reduction is the result of the discovery at checking stage of clerical errors in returns on the part of employers, clerical errors in Local Offices, incorrect RSI numbers quoted, etc.

Investigation procedures involve contacting the employer and the relevant Employment Exchange and, where irregularities are suspected, processing the case concerned through the Inspection Branch, the Special Investigation Unit and ultimately, when apparent fraud has been established, to the fraud Control Section for calculation of overpayment and decision on disallowance and prosecution.

Cases resulting in disallowance following investigation numbered 191 in 1987 and 245 in 1988 with referrals to the Chief State Solicitor for prosecution being made in 20 and 15 cases in 1987 and 1988, respectively. The difference in the number of cases disallowed and the number eventually notified to the Chief State Solicitor is due mainly to the fact that many cases become “time-barred” under Section 20 of the Social Welfare Act, 1988 before investigations are concluded.

It should be explained that the Revenue Commissioners transfer data to Social Welfare some 3 to 6 months after the end of the contribution (i.e. tax) year. Thus, it is possible for 15 to 18 months to elapse before overlaps are identified in the first place by the Department of Social Welfare (e.g. if the overlap occurred at the start of the contribution/tax year). The processing and investigation of overlap cases by the Department of Social Welfare also takes time. With a two-year time limit on proceedings, many cases can thus be pushed into a time-bar situation. The question of extending the time limit for proceedings from 2 to 3 years is under consideration.

In the case of the Disability Benefit scheme, an overlap of Weeks of Insurable Employment and Credits awarded with DB can legitimately occur i.e. if the employer operates a sick pay scheme and pays the employee while he is out sick.

Approximately 200 overlap cases arise each week and questionnaires are sent to Employers in these cases. The vast bulk are cases of legitimate contributions and credits where the person was on sick leave and paid under an occupational sick pay scheme. Any potential fraud cases are followed up. These cases are processed with other fraud cases arising under the DB scheme and separate figures are not available as to the number of prosecutions in overlap cases. For the scheme as a whole the number of cases sent to the Chief State Solicitor since 1984 is as follows:

With regard to the allocation of resources for anti-fraud work and the use by the Department of such resources the comments at paragraph 62 above show the steps taken in this area.

With regard to the question of overtime by the Department of Social Welfare this matter was also raised when the Committee was examining the 1985/86 accounts and is being pursued. In considering replacing overtime with full-time jobs the following points are relevant:

—many of the tasks performed on overtime are of a seasonal nature, or are once-off tasks in response to a change in legislation or a Government decision, e.g. budget changes, issue of pension books.

—some tasks can only be performed on overtime, particularly tasks associated with reprogramming or maintenance of computers. If a computer system were taken down during normal working hours, the Department could not conduct its business.

—new schemes or procedures require overtime in their initial stages only, when they are being developed. Such new schemes and procedures also require experienced staff. Once they are in place, the assigned staff can generally deal with the on-going work without recourse to regular overtime.

—overtime spending in the Department of Social Welfare has been relatively stable in recent years in spite of increases in pay levels which occured in the meantime.